CASES FOR TRANSPORTATION (1ST BATCH)
but shall be liable only up to the amount of Y100,000.00.
1. G.R. No. 122494 October 8, 1998
EVERETT STEAMSHIP CORPORATION, Petitioner, vs. COURT OF
APPEALS and HERNANDEZ TRADING CO. INC., Respondents.
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for
review, seeks the reversal of the decision 1 of the Court of Appeals,
dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the
decision of the Regional Trial Court of Kalookan City, Branch 126, in
Civil Case No. C-15532, finding petitioner liable to private
respondent Hernandez Trading Co., Inc. for the value of the lost
cargo.
Private respondent imported three crates of bus spare parts
marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No.
14, from its supplier, Maruman Trading Company, Ltd. (Maruman
Trading), a foreign corporation based in Inazawa, Aichi, Japan. The
crates were shipped from Nagoya, Japan to Manila on board
"ADELFAEVERETTE," a vessel owned by petitioner's principal,
Everett Orient Lines. The said crates were covered by Bill of Lading
No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate
marked MARCO C/No. 14 was missing. This was confirmed and
admitted by petitioner in its letter of January 13, 1992 addressed to
private respondent, which thereafter made a formal claim upon
petitioner for the value of the lost cargo amounting to One Million
Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00)
Yen, the amount shown in an Invoice No. MTM-941, dated
November 14, 1991. However, petitioner offered to pay only One
Hundred Thousand (Y100,000.00) Yen, the maximum amount
stipulated under Clause 18 of the covering bill of lading which limits
the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a
suit for collection docketed as Civil Case No. C-15532, against
petitioner before the Regional Trial Court of Caloocan City, Branch
126.
At the pre-trial conference, both parties manifested that they have
no testimonial evidence to offer and agreed instead to file their
respective memoranda.
On July 16, 1993, the trial court rendered judgment 2 in favor of
private respondent, ordering petitioner to pay: (a) Y1,552,500.00;
(b) Y20,000.00 or its peso equivalent representing the actual value
of the lost cargo and the material and packaging cost; (c) 10% of
the total amount as an award for and as contingent attorney's fees;
and (d) to pay the cost of the suit. The trial court ruled:
Considering defendant's categorical admission of loss and its failure
to overcome the presumption of negligence and fault, the Court
conclusively finds defendant liable to the plaintiff. The next point of
inquiry the Court wants to resolve is the extent of the liability of
the defendant. As stated earlier, plaintiff contends that defendant
should be held liable for the whole value for the loss of the goods
in the amount of Y1,552,500.00 because the terms appearing at the
back of the bill of lading was so written in fine prints and that the
same was not signed by plaintiff or shipper thus, they are not
bound by clause stated in paragraph 18 of the bill of lading. On the
other hand, defendant merely admitted that it lost the shipment
The Court subscribes to the provisions of Article 1750 of the New
Civil Code -
Art. 1750. "A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been fairly and freely agreed upon."
It is required, however, that the contract must be reasonable and
just under the circumstances and has been fairly and freely agreed
upon. The requirements provided in Art. 1750 of the New Civil
Code must be complied with before a common carrier can claim a
limitation of its pecuniary liability in case of loss, destruction or
deterioration of the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of
said article have not been met. The fact that those conditions are
printed at the back of the bill of lading in letters so small that they
are hard to read would not warrant the presumption that the
plaintiff or its supplier was aware of these conditions such that he
had "fairly and freely agreed" to these conditions. It can not be said
that the plaintiff had actually entered into a contract with the
defendant, embodying the conditions as printed at the back of the
bill of lading that was issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorney's
fees but affirmed the trial court's findings with the additional
observation that private respondent can not be bound by the terms
and conditions of the bill of lading because it was not privy to the
contract of carriage. It said:
As to the amount of liability, no evidence appears on record to
show that the appellee (Hernandez Trading Co.) consented to the
terms of the Bill of Lading. The shipper named in the Bill of Lading is
Maruman Trading Co., Ltd. whom the appellant (Everett Steamship
Corp.) contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co.,
Ltd. accepted the terms of the bill of lading when it delivered the
cargo to the appellant, still it does not necessarily follow that
appellee Hernandez Trading, Company as consignee is bound
thereby considering that the latter was never privy to the shipping
contract.
xxx xxx xxx
Never having entered into a contract with the appellant, appellee
should therefore not be bound by any of the terms and conditions
in the bill of lading.
Hence, it follows that the appellee may recover the full value of the
shipment lost, the basis of which is not the breach of contract as
appellee was never a privy to the any contract with the appellant,
but is based on Article 1735 of the New Civil Code, there being no
evidence to prove satisfactorily that the appellant has overcome
the presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred
(1) in ruling that the consent of the consignee to the terms and
conditions of the bill of lading is necessary to make such
stipulations binding upon it; (2) in holding that the carrier's limited
package liability as stipulated in the bill of lading does not apply in
the instant case; and (3) in allowing private respondent to fully
recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the
bill of lading.
A stipulation in the bill of lading limiting the common carrier's
liability for loss or destruction of a cargo to a certain sum, unless
the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which provide:
Art. 1749. A stipulation that the common carrier's liability is limited
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by
this Court in a number of cases. 3 Thus, in Sea Land Service, Inc. vs.
Intermediate Appellate Court 4, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of
Goods by Sea Act did not exist, the validity and binding effect of the
liability limitation clause in the bill of lading here are nevertheless
fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable
from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in
the bill of lading. To hold otherwise would amount to questioning
the justness and fairness of the law itself, and this the private
respondent does not pretend to do. But over and above that
consideration, the just and reasonable character of such stipulation
is implicit in it giving the shipper or owner the option of avoiding
accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the
shipment in the bill of lading.
Pursuant to the afore-quoted provisions of law, it is required that
the stipulation limiting the common carrier's liability for loss must
be "reasonable and just under the circumstances, and has been
freely and fairly agreed upon."
The bill of lading subject of the present controversy specifically
provides, among others:
18. All claims for which the carrier may be liable shall be adjusted
and settled on the basis of the shipper's net invoice cost plus
freight and insurance premiums, if paid, and in no event shall the
carrier be liable for any loss of possible profits or any consequential
loss.
The carrier shall not be liable for any loss of or any damage to or in
any connection with, goods in an amount exceeding One Hundred
thousand Yen in Japanese Currency (Y100,000.00) or its equivalent
in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this
amount is declared in writing by the shipper before receipt of the
goods by the carrier and inserted in the Bill of Lading and extra
freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the
bill of lading, the carrier made it clear that its liability would only be
up to One Hundred Thousand (Y100,000.00) Yen. However, the
shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited
liability of the carrier. Considering that the shipper did not declare
a higher valuation, it had itself to blame for not complying with the
stipulations.
The trial court's ratiocination that private respondent could not
have "fairly and freely" agreed to the limited liability clause in the
bill of lading because the said conditions were printed in small
letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals 5 that the "jurisprudence
on the matter reveals the consistent holding of the court that
contracts of adhesion are not invalid per se and that it has on
numerous occasions upheld the binding effect thereof." Also,
in Philippine American General Insurance Co., Inc. vs. Sweet Lines,
Inc. 6 this Court, speaking through the learned Justice Florenz D.
Regalado, held:
. . . Ong Yiu vs. Court of Appeals, et. al., instructs us that "contracts
of adhesion wherein one party imposes a ready-made form of
contract on the other . . . are contracts not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely;
if the adheres he gives his consent." In the present case, not even an
allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage devolves
not on the carrier but on the owner, shipper, or consignee as the
case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs. Court of Appeals 7 that
stipulations in contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the plane
ticket . . ., he is nevertheless bound by the provisions thereof.
"Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of
the latter's lack of knowledge or assent to the regulation." It is
what is known as a contract of "adhesion," in regards which it has
been said that contracts of adhesion wherein one party imposes a
ready-made form of contract on the other, as the plane ticket in
the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. . . ., a contract limiting liability upon
an agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence.
(Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing
with contracts of adhesion in that the said contracts must be
carefully scrutinized "in order to shield the unwary (or weaker
party) from deceptive schemes contained in ready-made
covenants," 8 such as the bill of lading in question. The stringent
requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that "(i)n
all contractual, property or other relations, when one of the parties
is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection."
The shipper, Maruman Trading, we assume, has been extensively
engaged in the trading business. It can not be said to be ignorant of
the business transactions it entered into involving the shipment of
its goods to its customers. The shipper could not have known, or
should know the stipulations in the bill of lading and there it should
have declared a higher valuation of the goods shipped. Moreover,
Maruman Trading has not been heard to complain that it has been
deceived or rushed into agreeing to ship the cargo in petitioner's
vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent,
as consignee, who is not a signatory to the bill of lading is bound by
the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate
Court (supra), we held that even if the consignee was not a
signatory to the contract of carriage between the shipper and the
carrier, the consignee can still be bound by the contract. Speaking
through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of
a consignee in a bill of lading to recover from the carrier or shipper
for loss of, or damage to goods being transported under said bill,
although that document may have been-as in practice it oftentimes
is-drawn up only by the consignor and the carrier without the
intervention of the
onsignee. . . . .
consisted of three pre-packed crates described in Bill of Lading No.
NGO-53MN merely as '3 CASES SPARE PARTS.'" 11
The bill of lading in question confirms petitioner's contention. To
defeat the carrier's limited liability, the aforecited Clause 18 of the
bill of lading requires that the shipper should have declared in
writing a higher valuation of its goods before receipt thereof by the
carrier and insert the said declaration in the bill of lading, with
extra freight paid. These requirements in the bill of lading were
never complied with by the shipper, hence, the liability of the
carrier under the limited liability clause stands. The commercial
Invoice No. MTM-941 does not in itself sufficiently and convincingly
show that petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was proffered
by private respondent to support is contention. Thus, we are
convinced that petitioner should be liable for the full value of the
lost cargo.

. . . the right of a party in the same situation as respondent here, to In fine, the liability of petitioner for the loss of the cargo is limited
recover for loss of a shipment consigned to him under a bill of to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause
lading drawn up only by and between the shipper and the carrier, 18 of the bill of lading.
springs from either a relation of agency that may exist between
him and the shipper or consignor, or his status as stranger in whose WHEREFORE, the decision of the Court of Appeals dated June 14,
favor some stipulation is made in said contract, and who becomes a 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE.
party thereto when he demands fulfillment of that stipulation, in
this case the delivery of the goods or cargo shipped. In neither SO ORDERED.
capacity can he assert personally, in bar to any provision of the bill
of lading, the alleged circumstance that fair and free agreement to
such provision was vitiated by its being in such fine print as to be
hardly readable. Parenthetically, it may be observed that in one
comparatively recent case (Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15) where this Court found that a
similar package limitation clause was "printed in the smallest type
on the back of the bill of lading," it nonetheless ruled that the
consignee was bound thereby on the strength of authority holding
that such provisions on liability limitation are as much a part of a
bill of lading as through physically in it and as though placed
therein by agreement of the parties.

There can, therefore, be no doubt or equivocation about the

validity and enforceability of freely-agreed-upon stipulations in a
contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher
value and inserts it into said contract or bill. This proposition,
moreover, rests upon an almost uniform weight of authority.
(Emphasis supplied).

When private respondent formally claimed reimbursement for the

missing goods from petitioner and subsequently filed a case against
the latter based on the very same bill of lading, it (private
respondent) accepted the provisions of the contract and thereby
made itself a party thereto, or at least has come to court to enforce
it. 9 Thus, private respondent cannot now reject or disregard the
carrier's limited liability stipulation in the bill of lading. In other
words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.

Private respondent, however, insists that the carrier should be

liable for the full value of the lost cargo in the amount of
Y1,552,500.00, considering that the shipper, Maruman Trading, had
"fully declared the shipment . . ., the contents of each crate, the
dimensions, weight and value of the contents," 10 as shown in the
commercial Invoice No. MTM-941.

This claim was denied by petitioner, contending that it did not

know of the contents, quantity and value of "the shipment which
 2. [G.R. NO. 172822 : December18, 2009]
MOF COMPANY, INC., Petitioner, v. SHIN YANG BROKERAGE
CORPORATION Respondent.
DECISION
DEL CASTILLO, J.:
The necessity of proving lies with the person who sues.
The refusal of the consignee named in the bill of lading to pay the
freightage on the claim that it is not privy to the contract of
affreightment propelled the shipper to sue for collection of money,
stressing that its sole evidence, the bill of lading, suffices to prove
that the consignee is bound to pay. Petitioner now comes to us by
way of Petition for Review on Certiorari1 under Rule 45 praying for
the reversal of the Court of Appeals' (CA) judgment that dismissed
its action for sum of money for insufficiency of evidence.
Factual Antecedents
On October 25, 2001, Halla Trading Co., a company based in Korea,
shipped to Manila secondhand cars and other articles on board the
vessel Hanjin Busan 0238W. The bill of lading covering the
shipment, i.e., Bill of Lading No. HJSCPUSI14168303,2 which was
prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin), named
respondent Shin Yang Brokerage Corp. (Shin Yang) as the consignee
and indicated that payment was on a "Freight Collect" basis, i.e.,
that the consignee/receiver of the goods would be the one to pay
for the freight and other charges in the total amount
of P57,646.00.3
The shipment arrived in Manila on October 29, 2001. Thereafter,
petitioner MOF Company, Inc. (MOF), Hanjin's exclusive general
agent in the Philippines, repeatedly demanded the payment of
ocean freight, documentation fee and terminal handling charges
from Shin Yang. The latter, however, failed and refused to pay
contending that it did not cause the importation of the goods, that
it is only the Consolidator of the said shipment, that the ultimate
consignee did not endorse in its favor the original bill of lading and
that the bill of lading was prepared without its consent.
Thus, on March 19, 2003, MOF filed a case for sum of money
before the Metropolitan Trial Court of Pasay City (MeTC Pasay)
which was docketed as Civil Case No. 206-03 and raffled to Branch
48. MOF alleged that Shin Yang, a regular client, caused the
importation and shipment of the goods and assured it that ocean
freight and other charges would be paid upon arrival of the goods
in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly
breached its obligation to pay. MOF argued that Shin Yang, as the
named consignee in the bill of lading, entered itself as a party to
the contract and bound itself to the "Freight Collect" arrangement.
MOF thus prayed for the payment of P57,646.00 representing
ocean freight, documentation fee and terminal handling charges as
well as damages and attorney's fees.
Claiming that it is merely a consolidator/forwarder and that Bill of
Lading No. HJSCPUSI14168303 was not endorsed to it by the
ultimate consignee, Shin Yang denied any involvement in shipping
the goods or in promising to shoulder the freightage. It asserted
that it never authorized Halla Trading Co. to ship the articles or to
have its name included in the bill of lading. Shin Yang also alleged
that MOF failed to present supporting documents to prove that it
was Shin Yang that caused the importation or the one that assured
payment of the shipping charges upon arrival of the goods in
Manila.
Ruling of the Metropolitan Trial Court
On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its
Decision4 in favor of MOF. It ruled that Shin Yang cannot disclaim
being a party to the contract of affreightment because:
x x x it would appear that defendant has business transactions with
plaintiff. This is evident from defendant's letters dated 09 May
2002 and 13 May 2002 (Exhibits "1" and "2", defendant's Position
Paper) where it requested for the release of refund of container
deposits x x x. [In] the mind of the Court, by analogy, a written
contract need not be necessary; a mutual understanding [would
suffice]. Further, plaintiff would have not included the name of the
defendant in the bill of lading, had there been no prior agreement
to that effect.
In sum, plaintiff has sufficiently proved its cause of action against
the defendant and the latter is obliged to honor its agreement with
plaintiff despite the absence of a written contract.5
The dispositive portion of the MeTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of plaintiff and against the defendant, ordering the latter to
pay plaintiff as follows:
1. P57,646.00 plus legal interest from the date of demand until fully
paid,
2. P10,000.00 as and for attorney's fees and
3. the cost of suit.
SO ORDERED.6
Ruling of the Regional Trial Court
The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in
toto the Decision of the MeTC. It held that:
MOF and Shin Yang entered into a contract of affreightment which
Black's Law Dictionary defined as a contract with the ship owner to
hire his ship or part of it, for the carriage of goods and generally
take the form either of a charter party or a bill of lading.
The bill of lading contain[s] the information embodied in the
contract.
Article 652 of the Code of Commerce provides that the charter
party must be in writing; however, Article 653 says: "If the cargo
should be received without charter party having been signed, the
contract shall be understood as executed in accordance with what
appears in the bill of lading, the sole evidence of title with regard to
the cargo for determining the rights and obligations of the ship
agent, of the captain and of the charterer". Thus, the Supreme
Court opined in the Market Developers, Inc. (MADE) v. Honorable
Intermediate Appellate Court and Gaudioso Uy, G.R. No. 74978,
September 8, 1989, this kind of contract may be oral. In another
case, Compania Maritima v. Insurance Company of North America,
12 SCRA 213 the contract of affreightment by telephone was
recognized where the oral agreement was later confirmed by a
formal booking.
xxx
Defendant is liable to pay the sum of P57,646.00, with interest until
fully paid, attorney's fees of P10,000.00 [and] cost of suit.
Considering all the foregoing, this Court affirms in toto the decision
of the Court a quo.
SO ORDERED.7
Ruling of the Court of Appeals
Seeing the matter in a different light, the CA dismissed MOF's
complaint and refused to award any form of damages or attorney's
fees. It opined that MOF failed to substantiate its claim that Shin
Yang had a hand in the importation of the articles to the Philippines
or that it gave its consent to be a consignee of the subject goods. In
its March 22, 2006 Decision,8 the CA said:
This Court is persuaded [that except] for the Bill of Lading,
respondent has not presented any other evidence to bolster its
claim that petitioner has entered [into] an agreement of
affreightment with respondent, be it verbal or written. It is noted
that the Bill of Lading was prepared by Hanjin Shipping, not the
petitioner. Hanjin is the principal while respondent is the former's
agent. (p. 43, rollo)
The conclusion of the court a quo, which was upheld by the RTC
Pasay City, Branch 108 xxx is purely speculative and conjectural. A
court cannot rely on speculations, conjectures or guesswork, but
must depend upon competent proof and on the basis of the best
evidence obtainable under the circumstances. Litigation cannot be
properly resolved by suppositions, deductions or even
presumptions, with no basis in evidence, for the truth must have to
be determined by the hard rules of admissibility and proof (Lagon
v. Hooven Comalco Industries, Inc. 349 SCRA 363).
While it is true that a bill of lading serves two (2) functions: first, it
is a receipt for the goods shipped; second, it is a contract by which
three parties, namely, the shipper, the carrier and the consignee
who undertake specific responsibilities and assume stipulated
obligations (Belgian Overseas Chartering and Shipping N.V. v. Phil.
First Insurance Co., Inc., 383 SCRA 23), x x x if the same is not
accepted, it is as if one party does not accept the contract. Said the
Supreme Court:
"A bill of lading delivered and accepted constitutes the contract of
carriage[,] even though not signed, because the acceptance of a
paper containing the terms of a proposed contract generally
constitutes an acceptance of the contract and of all its terms and
conditions of which the acceptor has actual or constructive notice"
(Keng Hua Paper Products Co., Inc. v. CA, 286 SCRA 257).
In the present case, petitioner did not only [refuse to] accept the
bill of lading, but it likewise disown[ed] the shipment x x x. [Neither
did it] authorize Halla Trading Company or anyone to ship or export
the same on its behalf.
It is settled that a contract is upheld as long as there is proof of
consent, subject matter and cause (Sta. Clara Homeowner's
Association v. Gaston, 374 SCRA 396). In the case at bar, there is
not even any iota of evidence to show that petitioner had given its
consent.
"He who alleges a fact has the burden of proving it and a mere
allegation is not evidence" (Luxuria Homes Inc. v. CA, 302 SCRA
315).
The 40-footer van contains goods of substantial value. It is highly
improbable for petitioner not to pay the charges, which is very
minimal compared with the value of the goods, in order that it
could work on the release thereof.
For failure to substantiate its claim by preponderance of evidence,
respondent has not established its case against petitioner. 9
Petitionersfiled a motion for reconsideration but it was denied in a
Resolution10 dated May 25, 2006. Hence, this Petition for Review
on Certiorari .
Petitioner's Arguments
In assailing the CA's Decision, MOF argues that the factual findings
of both the MeTC and RTC are entitled to great weight and respect
and should have bound the CA. It stresses that the appellate court
has no justifiable reason to disturb the lower courts' judgments
because their conclusions are well-supported by the evidence on
record.
MOF further argues that the CA erred in labeling the findings of the
lower courts as purely 'speculative and conjectural'. According to
MOF, the bill of lading, which expressly stated Shin Yang as the
consignee, is the best evidence of the latter's actual participation in
the transportation of the goods. Such document, validly entered,
stands as the law among the shipper, carrier and the consignee,
who are all bound by the terms stated therein. Besides, a carrier's
valid claim after it fulfilled its obligation cannot just be rejected by
the named consignee upon a simple denial that it ever consented
to be a party in a contract of affreightment, or that it ever
participated in the preparation of the bill of lading. As against Shin
Yang's bare denials, the bill of lading is the sufficient
preponderance of evidence required to prove MOF's claim. MOF
maintains that Shin Yang was the one that supplied all the details in
the bill of lading and acquiesced to be named consignee of the
shipment on a 'Freight Collect' basis.
Lastly, MOF claims that even if Shin Yang never gave its consent, it
cannot avoid its obligation to pay, because it never objected to
being named as the consignee in the bill of lading and that it only
protested when the shipment arrived in the Philippines,
presumably due to a botched transaction between it and Halla
Trading Co. Furthermore, Shin Yang's letters asking for the refund
of container deposits highlight the fact that it was aware of the
shipment and that it undertook preparations for the intended
release of the shipment.
Respondent's Arguments
Echoing the CA decision, Shin Yang insists that MOF has no
evidence to prove that it consented to take part in the contract of
affreightment. Shin Yang argues that MOF miserably failed to
present any evidence to prove that it was the one that made
preparations for the subject shipment, or that it is an 'actual
shipping practice' that forwarders/consolidators as consignees are
the ones that provide carriers details and information on the bills of
lading.
Shin Yang contends that a bill of lading is essentially a contract
between the shipper and the carrier and ordinarily, the shipper is
the one liable for the freight charges. A consignee, on the other
hand, is initially a stranger to the bill of lading and can be liable only
when the bill of lading specifies that the charges are to be paid by
the consignee. This liability arises from either a) the contract of
agency between the shipper/consignor and the consignee; or b) the
consignee's availment of the stipulation pour autrui drawn up by
and between the shipper/ consignor and carrier upon the
consignee's demand that the goods be delivered to it. Shin Yang
contends that the fact that its name was mentioned as the
consignee of the cargoes did not make it automatically liable for
the freightage because it never benefited from the shipment. It
never claimed or accepted the goods, it was not the shipper's
agent, it was not aware of its designation as consignee and the
original bill of lading was never endorsed to it.

Issue

The issue for resolution is whether a consignee, who is not a

signatory to the bill of lading, is bound by the stipulations thereof.
Corollarily, whether respondent who was not an agent of the
shipper and who did not make any demand for the fulfillment of
the stipulations of the bill of lading drawn in its favor is liable to pay
the corresponding freight and handling charges.

Our Ruling

Since the CA and the trial courts arrived at different conclusions,

we are constrained to depart from the general rule that only errors
of law may be raised in a Petition for Review on Certiorari under
Rule 45 of the Rules of Court and will review the evidence
presented.11

The bill of lading is oftentimes drawn up by the shipper/consignor

and the carrier without the intervention of the consignee.
However, the latter can be bound by the stipulations of the bill of
lading when a) there is a relation of agency between the shipper or
consignor and the consignee or b) when the consignee demands
fulfillment of the stipulation of the bill of lading which was drawn
up in its favor.12

In Keng Hua Paper Products Co., Inc. v. Court of Appeals, 13 we held

that once the bill of lading is received by the consignee who does
not object to any terms or stipulations contained therein, it
constitutes as an acceptance of the contract and of all of its terms
and conditions, of which the acceptor has actual or constructive
notice.
 3. [G.R. No. 95582. October 7, 1991.]
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL
y MALECDAN, Petitioners, v. COURT OF APPEALS, INOCENCIA
CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDIAMAT,
MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT,
SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late
Pedrito Cudiamat represented by Inocencia
Cudiamat, Respondents.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE COURT OF APPEALS;
RULE AND EXCEPTION. — It is an established principle that the factual findings
of the Court of Appeals as a rule are final and may not be reviewed by this
Court on appeal. However, this is subject to settle exceptions, one which is
when the findings of the appellate court are contrary to those of the trial court,
in which case a reexamination of the facts and evidence may be undertaken.
2. CIVIL LAW; COMMON CARRIERS; LIABLE FOR INJURIES SUFFERED BY
BOARDING PASSENGERS RESULTING FROM THE PREMATURE ACCELERATION
OF THEIR CONVEYANCES. — The contention of petitioners that the driver and
the conductor had no knowledge that the victim would ride on the bus, since
the latter had supposedly not manifested his intention to board the same, does
not merit consideration. When the bus is not motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A public
utility bus, once it stops, is in effect making a continuous offer to bus riders.
Hence, it becomes the duty of the driver and the conductor, every time the bus
stops, to do no act that would have the effect of increasing the peril to a
passenger while he was attempting to board the same. The premature
acceleration of the bus in this case was a breach of such duty. It is the duty of
common carriers of passengers, including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a reasonable length of time
in order to afford passengers an opportunity to board and enter, and they are
liable for injuries suffered by boarding passengers resulting from the sudden
starting up or jerking of their conveyances while they are doing so.
3. ID.; ID.; ID.; BOARDING AND ALIGHTING FROM A SLOWLY MOVING VEHICLE;
NOT A NEGLIGENCE PER SE. — It is not negligence per se, or as a matter of law,
for one to attempt to board a train or streetcar which is moving slowly. An
ordinarily prudent person would have made the attempt to board the moving
conveyance under the same or similar circumstances. The fact that passengers
board and alight from a slowly moving vehicle is a matter of common
experience and both the driver and conductor in this case could not have been
unaware of such an ordinary practice.
4. ID.; ID.; ID.; LIABILITY THEREOF; EXTENDS TO PERSONS BOARDING THE
VEHICLE AS WELL AS THOSE ALIGHTING THEREFROM. — The victim herein, by
stepping and standing on the platform of the bus, is already considered a
passenger and is entitled to all the rights and protection pertaining to such a
contractual relation. Hence, it has been held that the duty which the carrier of
passengers owes to its patrons extends to persons boarding the cars as well as
to those alighting therefrom. (Del Prado v. Manila Electric Co., supra.)
5. ID.; ID.; ID.; BOUND TO OBSERVE EXTRAORDINARY DILIGENCE FOR THE
SAFETY OF THE PASSENGERS TRANSPORTED BY THEM. — Common carriers,
from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence for the safety of the passengers transported by
them, according to all the circumstances of each case. A common carrier is
bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard
for all the circumstances. (Art. 1755, Civil Code.)
6. ID.; DAMAGES; ACTION BASED ON A CONTRACT OF CARRIAGE; FINDING OF
FAULT OR NEGLIGENCE ON THE PART OF CARRIER NEED NOT BE EXPRESS. — It
has also been repeatedly held that in an action based on a contract of carriage,
the court need not make an express finding of fault or negligence on the part of
the carrier in order to hold it responsible to pay the damages sought by the
passenger. By the contract of carriage, the carrier assumes the express
obligation to transport the passenger to destination safety and to observe
extraordinary diligence with a cure regard for all the circumstances, and any
injury that might be suffered by the passenger is right away attributable to the
fault or negligence of the carrier. This is an exception to the general rule that
negligence must be proved, and it is therefore incumbent upon the carrier to
prove that it has exercised extraordinary diligence as prescribed in Articles
1733 and 1755 of the Civil Code.
7. ID.; ID.; ID.; ACTUAL OR COMPENSATORY DAMAGES; RULE IN DETERMINING
THE AMOUNT THEREOF. — With respect to the award of damages, an oversight
was, however, committed by respondent Court of Appeals in computing the
actual damages based on the gross income of the victim. The rule is that the
amount recoverable by the heirs of a victim of a tort is not the loss of the entire
earnings, but rather the loss of that portion of the earnings which the
beneficiary would have received. In other words, only net earnings, not gross
earnings, are to be considered, that is, the total of the earnings less expenses
necessary in the creation of such earnings or income and minus living and other
incidental expenses.
DECISION
REGALADO, J.:
On May 13, 1985, private respondents filed a complaint 1 for damages against
petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident
which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet.
Among others, it was alleged that on said date, while petitioner Theodore M.
Lardizabal was driving a passenger bus belonging to petitioner corporation in a
reckless and imprudent manner and without due regard to traffic rules and
regulations and safety to persons and property, it ran over its passenger,
Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the
nearest hospital, the said driver, in utter bad faith and without regard to the
welfare of the victim, first brought his other passengers and cargo to their
respective destinations before bringing said victim to the Lepanto Hospital
where he expired.
On the other hand, petitioners alleged that they had observed and continued
to observe the extraordinary diligence required in the operation of the
transportation company and the supervision of the employees, even as they
add that they are not absolute insurers of the safety of the public at large.
Further, it was alleged that it was the victim’s own carelessness and negligence
which gave rise to the subject incident, hence they prayed for the dismissal of
the complaint plus an award of damages in their favor by way of a
counterclaim. cha nroble s.com: cralaw:red
On July 29, 1988, the trial court rendered a decision, effectively in favor of
petitioners, with this decretal portion: jgc: chanr obles .com. ph
"IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito
Cudiamat was negligent, which negligence was the proximate cause of his
death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs
of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount
defendants initially offered said heirs for the amicable settlement of the case.
No costs.
"SO ORDERED." 2
Not satisfied therewith, private respondents appealed to the Court of Appeals
which, in a decision 3 in CA-G.R CV No. 19504 promulgated on August 14, 1990,
set aside the decision of the lower court, and ordered petitioners to pay private
respondents: jgc: chanr obles .com. ph
"1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for
death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as
actual and compensatory damages;
4. The costs of this suit." 4
Petitioners’ motion for reconsideration was denied by the Court of Appeals in
its resolution dated October 4, 1990, 5 hence this petition with the central
issue herein being whether respondent court erred in reversing the decision of
the trial court and in finding petitioners negligent and liable for the damages
claimed.
It is an established principle that the factual findings of the Court of Appeals as
a rule are final and may not be reviewed by this Court on appeal. However, this
is subject to settled exceptions, one of which is when the findings of the
appellate court are contrary to those of the trial court, in which case a
reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeals have discordant
positions as to who between the petitioners and the victim is guilty of
negligence. Perforce, we have had to conduct an evaluation of the evidence in
this case for the proper calibration of their conflicting factual findings and legal
conclusions.
The lower court, in declaring that the victim was negligent, made the following
findings: jgc: cha nroble s.com.ph
"This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a
moving vehicle, especially with one of his hands holding an umbrella. And,
without having given the driver or the conductor any indication that he wishes
to board the bus. But defendants can also be found wanting of the necessary
diligence. In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants’ bus, the vehicle’s door was open
instead of being closed. This should be so, for it is hard to believe that one
would even attempt to board a vehicle (i)n motion if the door of said vehicle is
closed. Here lies the defendant’s lack of diligence. Under such circumstances,
equity demands that there must be something given to the heirs of the victim
to assuage their feelings. This, also considering that initially, defendant
common carrier had made overtures to amicably settle the case. It did offer a
certain monetary consideration to the victim’s heirs." 7
However, respondent court, in arriving at a different opinion, declares that:
"From the testimony of appellees’ own witness in the person of Vitaliano
Safarita, it is evident that the subject bus was at full stop when the victim
Pedrito Cudiamat boarded the same as it was precisely on this instance where a
certain Miss Abenoja alighted from the bus. Moreover, contrary to the
assertion of the appellees, the victim did indicate his intention to board the bus
as can be seen from the testimony of the said witness when he declared that
Pedrito Cudiamat was no longer walking and made a sign to board the bus
when the latter was still at a distance from him. It was at the instance when
Pedrito Cudiamat was closing his umbrella at the platform of the bus when the
latter made a sudden jerk movement (as) the driver commenced to accelerate
the bus.cha nroble s.com. ph : virtual law library
"Evidently, the incident took place due to the gross negligence of the appellee-
driver in prematurely stepping on the accelerator and in not waiting for the
passenger to first secure his seat especially so when we take into account that
the platform of the bus was at the time slippery and wet because of a drizzle.
The defendants-appellees utterly failed to observe their duty and obligation as
common carrier to the end that they should observe extra-ordinary diligence in
the vigilance over the goods and for the safety of the passengers transported
by them according to the circumstances of each case (Article 1733, New Civil
Code)." 8
After a careful review of the evidence on record, we find no reason to disturb
the above holding of the Court of Appeals. Its aforesaid findings are supported
by the testimony of petitioners own witnesses. One of them, Virginia Abalos,
testified on cross-examination as follows: jgc: chanr obles .com. ph
"Q It is not a fact Madam witness, that at bunkhouse 54, that is before the
place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses." 9
The bus conductor, Martin Anglog, also declared: jgc:chanrobles. com.ph
"Q When you arrived at Lepanto on March 25, 1985, will you please inform this
Honorable Court if there was any unusual incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there
between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in
Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver.
When we stopped we went out because I saw an umbrella about a split second
and I signalled again the driver, so the driver stopped and we went down and
we saw Pedrito Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him
lying down — from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus,
was it at the front or at the back?
A At the back, sir." 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place
where one of the passengers alighted were both between Bunkhouses 53 and
54, hence the finding of the Court of Appeals that the bus was at full stop when
the victim boarded the same is correct. They further confirm the conclusion
that the victim fell from the platform of the bus when it suddenly accelerated
forward and was run over by the rear right tires of the vehicle, as shown by the
physical evidence on where he was thereafter found in relation to the bus
when it stopped. Under such circumstances, it cannot be said that the
deceased was guilty of negligence. chanr obl es law library
The contention of petitioners that the driver and the conductor had no
knowledge that the victim would ride on the bus, since the latter had
supposedly not manifested his intention to board the same, does not merit
consideration. When the bus is not in motion there is no necessity for a person
who wants to ride the same to signal his intention to board. A public utility bus,
once it stops, is in effect making a continuous offer to bus riders. Hence, it
becomes the duty of the driver and the conductor, every time the bus stops, to
jgc:cha nroble s.com. ph do no act that would have the effect of increasing the peril to a passenger while
he was attempting to board the same. The premature acceleration of the bus in
this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by
railroad train, streetcar, or motorbus, to stop their conveyances a reasonable
length of time in order to afford passengers an opportunity to board and enter,
and they are liable for injuries suffered by boarding passengers resulting from
the sudden starting up or jerking of their conveyances while they are doing so.
12
Further, even assuming that the bus was moving, the act of the victim in
boarding the same cannot be considered negligent under the circumstances. As
clearly explained in the testimony of the aforestated witness for petitioners,
Virginia Abalos, the bus had "just started" and "was still in slow motion" at the
point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one to attempt to board a
train or streetcar which is moving slowly. 14 An ordinarily prudent person
would have made the attempt to board the moving conveyance under the
same or similar circumstances. The fact that passengers board and alight from a
slowly moving vehicle is a matter of common experience and both the driver
and conductor in this case could not have been unaware of such an ordinary
practice.
The victim herein, by stepping and standing on the platform of the bus, is
already considered a passenger and is entitled to all the rights and protection
pertaining to such a contractual relation. Hence, it has been held that the duty
which the carrier of passengers owes to its patrons extends to persons
boarding the cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence for the safety of the
passengers transported by them, according to all the circumstances of each
case. 16 A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of
carriage, the court need not make an express finding of fault or negligence on
the part of the carrier in order to hold it responsible to pay the damages sought
by the passenger. By the contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely and to observe
extraordinary diligence with a due regard for all the circumstances, and any
injury that might be suffered by the passenger is right away attributable to the
fault or negligence of the carrier. This is an exception to the general rule that
negligence must be proved, and it is therefore incumbent upon the carrier to
prove that it has exercised extraordinary diligence as prescribed in Articles
1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed
to bring the gravely injured victim immediately to the hospital for medical
treatment is a patent and incontrovertible proof of their negligence. It defies
understanding and can even be stigmatized as callous indifference. The
evidence shows that after the accident the bus could have forthwith turned at
Bunk 56 and thence to the hospital, but its driver instead opted to first proceed
to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite
the serious condition of the victim. The vacuous reason given by petitioners
that it was the wife of the deceased who caused the delay was tersely and
correctly confuted by respondent court: jgc:chanrobles. com.ph

". . . The pretension of the appellees that the delay was due to the fact that
they had to wait for about twenty minutes for Inocencia Cudiamat to get
dressed deserves scant consideration. It is rather scandalous and deplorable for
a wife whose husband is at the verge of dying to have the luxury of dressing
herself up for about twenty minutes before attending to help her distressed
and helpless husband." 19

Further, it cannot be said that the main intention of petitioner Lardizabal in

going to Bunk 70 was to inform the victim’s family of the mishap, since it was
4. [G.R. No. 114061. August 3, 1994.]
not said bus driver nor the conductor but the companion of the victim who
informed his family thereof. 20 In fact, it was only after the refrigerator was
KOREAN AIRLINES CO., LTD., Petitioner, v. COURT OF APPEALS and JUANITO
unloaded that one of the passengers thought of sending somebody to the
C. LAPUZ, Respondents.
house of the victim, as shown by the testimony of Virginia Abalos again, to
wit:jgc:cha nroble s.com. ph

[G.R. No. 113842. August 3, 1994.]

"Q Why, what happened to your refrigerator at that particular time?
JUANITO C. LAPUZ, Petitioner, v. COURT OF APPEALS and KOREAN AIRLINES
CO., LTD., Respondents.
A I asked them to bring it down because that is the nearest place to our house
and when I went down and asked somebody to bring down the refrigerator, I
also asked somebody to call the family of Mr. Cudiamat. chanrobles virtualawlibrary cha nroble s.com: cha nroble s.com.ph

SYLLABUS
COURT: chanrob1e s virtual 1aw library

Q Why did you ask somebody to call the family of Mr. Cudiamat? 1. REMEDIAL LAW; EVIDENCE; CREDIBILITY; FINDINGS OF FACTS OF THE COURT
OF APPEALS, GENERALLY BINDING ON APPEAL. — It is evident that the issues
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the raised in these petitions relate mainly to the correctness of the factual findings
family of Mr. Cudiamat. of the Court of Appeals and the award of damages. The Court has consistently
affirmed that the findings of fact of the Court of Appeals and the other lower
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
courts are as a rule binding upon it, subject to certain exceptions. As nothing in
the record indicates any of such exceptions, the factual conclusions of the
A No sir." 21
appellate court must be affirmed.
With respect to the award of damages, an oversight was, however, committed
2. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF MANIFEST WHERE
by respondent Court of Appeals in computing the actual damages based on the CONFIRMED PASSENGER WAS NOT ALLOWED TO BOARD THE AIRLINE; CASE AT
gross income of the victim. The rule is that the amount recoverable by the heirs BAR. — The status of Lapuz as standby passenger was changed to that of a
of a victim of a tort is not the loss of the entire earnings, but rather the loss of confirmed passenger when his name was entered in the passenger manifest of
that portion of the earnings which the beneficiary would have received. In KAL for its Flight No. KE 903. His clearance through immigration and customs
other words, only net earnings, not gross earnings, are to be considered, that clearly shows that he had indeed been confirmed as a passenger of KAL in that
is, the total of the earnings less expenses necessary in the creation of such flight. KAL thus committed a breach of the contract of carriage between them
earnings or income and minus living and other incidental expenses. 22 when it failed to bring Lapuz to his destination. The evidence presented by
Lapuz shows that he had indeed checked in at the departure counter, passed
We are of the opinion that the deductible living and other expense of the through customs and immigration, boarded the shuttle bus and proceeded to
deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a the ramp of KAL’s aircraft. In fact, his baggage had already been loaded in KAL’s
year. In adjudicating the actual or compensatory damages, respondent court
aircraft, to be flown with him to Jeddah. The contract to carriage between him
found that the deceased was 48 years old, in good health with a remaining and KAL had already been perfected when he was summarily and insolently
productive life expectancy of 12 years, and then earning P24,000.00 a year.
prevented from boarding the aircraft.
Using the gross annual income as the basis, and multiplying the same by 12
years, it accordingly awarded P288,000. Applying the aforestated rule on
3. ID.; MORAL DAMAGES; PASSENGER; SUBJECTED TO DISCOURTEOUS
computation based on the net earnings, said award must be, as it hereby is, CONDUCT BY AIRLINE OFFICER ENTITLED THERETO. — This Court has held that
rectified and reduced to P216,000.00. However, in accordance with prevailing a contract to transport passengers is different in kind and degree from any
jurisprudence, the death indemnity is hereby increased to P50,000.00. 23 other contractual relation. The business of the carrier is mainly with the
traveling public. It invites people to avail themselves of the comforts and
WHEREFORE, subject to the above modifications, the challenged judgment and advantages it offers. The contract of air carriage generates a relation attended
resolution of respondent Court of Appeals are hereby AFFIRMED in all other with a public duty. Passengers have the right to be treated by the carrier’s
respects. chanroble s law library : red

employees with kindness, respect, courtesy and due consideration. They are
entitled to be protected against personal misconduct, injurious language,
SO ORDERED. indignities and abuses from such employees So it is that any discourteous
conduct on the part of these employees toward a passenger gives the latter an
action for damages against the carrier. The breach of contract was aggravated
in this case when, instead of courteously informing Lapuz of his being a "wait-
listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing
at him, thus causing him embarrassment and public humiliation.

4. ID.; ID.; DEPEND UPON THE DISCRETION OF THE COURT; AWARD OF

P100,000 AS MORAL AND EXEMPLARY DAMAGES IN A BREACH OF CONTRACT,
REASONABLE AND REALISTIC; CASE AT BAR. —The well-entrenched principle is
that moral damages depend upon the discretion of the court based on the
circumstances of each case. This discretion is limited by the principle that the
"amount awarded should not be palpably and scandalously excessive" as to
indicate that it was the result of prejudice or corruption on the part of the trial
court. Damages are not intended to enrich the complainant at the expense of
the defendant. They are awarded only to alleviate the moral suffering that the
injured party had undergone by reason of the defendant’s culpable action.
There is no hard-and-fast rule in the determination of what would be a fair
amount damages since each case must be governed by its own peculiar facts. A
review of the record of this case shows that the injury suffered by Lapuz is not
so serious or extensive as to warrant an award of P1.5 million. The assessment
of P100,000 as moral and exemplary damages in his favor is, in our view,
reasonable and realistic.
5. REMEDIAL LAW; COURTS; CLOTHED WITH AMPLE AUTHORITY TO REVIEW
MATTERS EVEN IF THEY ARE NOT ASSIGNED AS ERROS IN THEIR APPEAL;
PROPRIETY OF AWARD OF ACTUAL DAMAGES, JUSTIFIED. — Lapuz likewise
claims that the respondent court could not rule upon the propriety of the
award of actual damages because it had not been assigned as an error by KAL.
Not so. The rule is that only errors specifically assigned and properly argued in
the brief will be considered except errors affecting jurisdiction over the subject
matter and plain as well as clerical errors. But this is not without qualification
for, as the Court held in Vda. de Javellana v. Court of Appeals: . . . [T]he Court is
clothed with ample authority to review matters, even if they are not assigned
as errors in their appeal, if it finds that their consideration is necessary in
arriving at a just decision of the case. A similar pronouncement was made in
Baquiran v. Court of Appeals in this wise: Issues, though not specifically raised
in the pleading in the appellate court, may, in the interest of justice, be
properly considered by said court in deciding a case, if they are questions
raised in the trial court and are matters of record having some bearing on the
issue submitted which the parties failed to raise or the lower court ignored. The
Court of Appeals was therefore justified in decreasing the award of actual
damages even if the issue was not assigned as an error by KAL Consideration of
this question was necessary for the just and complete resolution of the present
case. Furthermore, there was enough evidence to warrant the reduction of the
original award,
6. ID.; ACTIONS; JUDGMENT; LEGAL INTEREST ADJUDGED IN FAVOR OF PARTY
ACCRUES FROM THE DATE OF RENDITION OF JUDGMENT. — We disagree with
the respondent court, however, on the date when the legal interest should
commence to run. The rule is that the legal interest of six percent (6%) on the
amounts adjudged in favor of Lapuz should resume from the time of rendition
of the trial court’s decision instead of November 28, 1980, the date of the filing
of the complaint.
DECISION
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted
for employment is Jeddah, Saudi Arabia, for a period of one year through Pan
Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on
November 8, 1980, via Korean Airlines. Initially, he was "waitlisted," which
meant that he could only be accommodated if any of the confirmed passengers
failed to show up at the airport before departure. When two of such
passengers did not appear, Lapuz and another person by the name of Perico
were given the two unclaimed seats. chanroblesvirtualawlibrary
According to Lapuz, he was allowed to check in with one suitcase and one
shoulder bag at the check-in counter of KAL. He passed through the customs
and immigration sections for routine check-up and was cleared for departure as
Passenger No. 157 of KAL Flight No. KE 903. Together with the other
passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL
aircraft for boarding. However, when he was at the third or fourth rung of the
stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus
barred from taking the flight. When he later asked for another booking, his
ticket was canceled by KAL. Consequently, he was unable to report for his work
in Saudi Arabia within the stipulated 2-week period and so lost his
employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific
Recruiting Services Inc. coordinated with KAL for the departure of 30 contract
workers, of whom only 21 were confirmed and 9 were wait-listed passengers.
The agent of Pan Pacific, Jimmie Joseph, after being informed that there was a
possibility of having one or two seats becoming available, gave priority to
Perico, who was one of the supervisors of the hiring company in Saudi Arabia.
The other seat was won through lottery by Lapuz. However, only one seat
became available and so, pursuant to the earlier agreement that Perico was to
be given priority, he alone was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable
for damages, disposing as follows: cha nrob1es virtual 1aw library
WHEREFORE, in view of the foregoing consideration, judgment is hereby
rendered sentencing the defendant Korean Air Lines to pay plaintiff Juanito C.
Lapuz the following: chanrob1es virtual 1aw library
1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED
SIXTY (P272,160.00) PESOS as actual/compensatory damages, will legal interest
thereon from the date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for
attorney’s fees; and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas
Recruiting Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are
likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows: chanrob1es virtual 1aw library
WHEREFORE, in view of all the foregoing, the appealed judgment is hereby
AFFIRMED with the following modifications: the amount of actual damages and
compensatory damages is reduced to P60,000.00 and defendant-appellant is
hereby ordered to pay plaintiff-appellant the sum of One Hundred Thousand
Pesos (P100,000.00) by way of moral and exemplary damages, at 6% interest
per annum from the date of filing of the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration, which were
both denied for lack of merit. Hence, the present petitions for review which
have been consolidated because of the identity of the parties and the similarity
of the issues. cralawnad
In G.R. No. 114061, KAL assails the decision of the appellant court on the
following grounds: chanr ob1e s virtual 1aw library
1. That the Court of Appeals erred in concluding that petitioner committed a
breach of contract of carriage notwithstanding lack of proper, competent and
sufficient evidence of the existence of such contract.
2. That the Court of Appeals erred in not according the proper evidentiary
weight to some evidence presented and the fact that private respondent did
not have any boarding pass to prove that he was allowed to board and to prove
CRUZ, J.: that this airline ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby passenger
status of private respondent Lapuz was changed to a confirmed status when his
name was entered into the passenger manifest.
4. That the Court of Appeals abused its discretion in awarding moral and
exemplary damages in the amount of P100,000.00 in favor of private
respondent notwithstanding its lack of basis and private respondent did not
state such amount in his complaint nor had private respondent proven the said
damages. cralawnad
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of petitioner
against Pan Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal
interest on the judgment shall be computed from the filing of the complaint.
In G.R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the
Court of Appeals insofar as it modifies the award of damages; b) actual and
compensatory damages in the sum equivalent to 5 years’ loss of earnings based
on the petitioner’s month salary of 1,600 Saudi rials at the current conversion
rate plus the cost of baggage and personal belongings worth P2,000 and the
service fee of P3,000 paid to the recruiting agency, all with legal interest from
the filing of the complaint until fully paid; c) moral damages of not less than P1
million and exemplary damages of not less than P500,000.00, both with
interest at 6% per annum from the filing of the complaint; and d) attorney’s
fees in the sum equivalent to 30% of the award of damages.
It is evident that the issues raised in these petitions relate mainly to the
cha nrobl es law library : red
correctness of the factual findings of the Court of Appeals and the award of
damages. The Court has consistently affirmed that the findings of fact of the
Court of Appeals and the other lower courts are as a rule binding upon it,
subject to certain exceptions. As nothing in the record indicates any of such
exceptions, the factual conclusions of the appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed
passenger when his name was entered in the passenger manifest of KAL for its
Flight No. KE 903. His clearance through immigration and customs clearly
shows that he had indeed been confirmed as a passenger of KAL in that flight.
KAL thus committed a breach of the contract of carriage between them when it
failed to bring Lapuz to his destination. chanrobles. com:cralaw:re d
This Court has held that a contract to transport passengers is different in kind
and degree from any other contractual relation. 3 The business of the carrier is
mainly with the traveling public. It invites people to avail themselves of the
comforts and advantages it offers. The contract of air carriage generates a
relation attended with a public duty. Passengers have the right to be treated by
the carrier’s employees with kindness, respect, courtesy and due consideration.
They are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees. 4 So it is that any
discourteous conduct on the part of these employees toward a passenger gives
the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of
courteously informing Lapuz of his being a "wait-listed" passenger, a KAL officer
rudely shouted "Down! Down!" while pointing at him, thus causing him
embarrassment and public humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is
not through the entry of the name of a chance passenger in the passenger
manifest nor the clearance from the Commission on Immigration and
Deportation, because they are merely means of facilitating the boarding of the
chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the
departure counter, passed through customs and immigration, boarded the
shuttle bus and proceeded to the ramp of KAL’s aircraft. In fact, his baggage
had already been loaded in KAL’s aircraft, to be flown with him to Jeddah. The
contract to carriage between him and KAL had already been perfected when he
was summarily and insolently prevented from boarding the aircraft.
KAL’s allegation that the respondent court abused its discretion in awarding
moral and exemplary damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the defendant-appellant has committed
breach of contract of carriage in bad faith and in wanton, disregard of plaintiff-
appellant’s rights as passenger laid the basis and justification of an award for
moral damages.
x x
In the instant case, we find that defendant-appellant Korean Air Lines acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner when it
"bumped off" plaintiff-appellant on November 8, 1980, and in addition treated
him rudely and arrogantly as a "patay gutom na contract worker fighting
Korean Air Lines," which clearly malice and bad faith, thus entitling plaintiff-
appellant to moral damages.
x x
Considering that the plaintiff-appellant’s entitlement to moral damages has
been fully established by oral and documentary evidence, exemplary damages
may be awarded. In fact, exemplary damages may be awarded, even though
not so expressly pleaded in the complaint (Kapoe v. Masa, 134 SCRA 231). By
the same token, to provide an example for the public good, an award of
exemplary damages is also proper (Armovit v. Court of Appeals, supra).
On the other hand, Lapuz’s claim that the award of P100,000.00 as moral and
exemplary damages is inadequate is not acceptable either. His prayer for moral
damages of not less than P1 million and exemplary of not less than
P500,000.00 is overblown. cha nroble s virtual lawlibrary
The well-entrenched principle is that moral damages depend upon the
discretion of the court based on the circumstances of each case. 5 This
discretion is limited by the principle that the "amount awarded should not be
palpably and scandalously excessive" as to indicate that it was the result of
prejudice or corruption on the part of the trial court. 6 Damages are not
intended to enrich the complainant at the expense of the defendant. They are
awarded only to alleviate the moral suffering that the injured party had
undergone by reason of the defendant’s culpable action. 7 There is no hard-
and-fast rule in the determination of what would be a fair amount damages
since each case must be governed by its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is
not so serious or extensive as to warrant an award of P1.5 million. The
chanrobles. com: cral aw:red
chanr ob1es virtual 1aw library
x actual damages, representing lost earnings for five years prayed for in the
x percent (6%) on the amounts adjudged in favor of Lapuz should resume from
assessment of P100,000 as moral and exemplary damages in his favor is, in our
view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the
propriety of the award of actual damages because it had not been assigned as
an error by KAL. Not so. The rule is that only errors specifically assigned and
properly argued in the brief will be considered except errors affecting
jurisdiction over the subject matter and plain as well as clerical errors. 8 But
this is not without qualification for, as the Court held in Vda. de Javellana v.
Court of Appeals: 9
. . . [T]he Court is clothed with ample authority to review matters, even if they
are not assigned as errors in their appeal, if it finds that their consideration is
necessary in arriving at a just decision of the case.
A similar pronouncement was made in Baquiran v. Court of Appeals 10 in this
wise:chanrobles law library : red
Issues, though not specifically raised in the pleading in the appellate court,
may, in the interest of justice, be properly considered by said court in deciding
a case, if they are questions raised in the trial court and are matters of record
having some bearing on the issue submitted which the parties failed to raise or
the lower court ignored.
The Court of Appeals was therefore justified in decreasing the award of actual
damages even if the issue was not assigned as an error by KAL Consideration of
this question was necessary for the just and complete resolution of the present
case. Furthermore, there was enough evidence to warrant the reduction of the
original award, as the challenged decision correctly observed: chanrob1es virtual 1aw library
A perusal of the plaintiff-appellant’s contract of employment shows that the
effectivity of the contract is for only one year, renewable every year for five
years. Although plaintiff-appellant intends to renew his contract, such renewal
will still be subject to his foreign employer. Plaintiff-appellant had not yet
started working with his foreign employer, hence, there can be no basis as to
whether his contract will be renewed by his foreign employer or not. Thus, the
damages representing the loss of earnings of plaintiff-appellant in the renewal
of the contract of employment is at most speculative. Damages may not be
awarded on the basis of speculation or conjecture (Gachalian v. Delim, 203
SCRA 126). Hence, Defendant-Appellant’s liability is limited to the one year
contract only. Plaintiff-appellant is, therefore, entitled only to his lost earnings
for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of
Complaint.
Plaintiff-appellant’s contention that in computing his lost earnings, the current
rate of Saudi Rial to the Philippine Peso at the time of payment should be used,
is untenable, considering that in his Complaint, plaintiff-appellant has
quantified in Philippine Pesos his lost earnings for five years. chanroble s virtualawlibrary chanrobles. com: chanr obles. com.ph
We disagree with the respondent court, however, on the date when the legal
interest should commence to run. The rule is that the legal interest of six
the time of rendition of the trial court’s decision instead of November 28, 1980,
the date of the filing of the complaint.
On this matter, the Court has held: cha nr ob1es virtual 1aw library
If suit were for payment of a definite sum of money, the contention might be
tenable. However, if it is for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof,
interest should be from the date of the decision. 11
x x x
The obligation to pay interest on a sum of filed in a judgment exists from the
date of the sentence, when so declared; for until the net amount of the
debtor’s liability has been determined, he cannot he considered delinquent in
the fulfillment of his obligation to pay the debt with interest thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial
court’s dismissal of KAL’s counterclaim against Pan Pacific Overseas Recruiting
Recruiting Services Inc., whose responsibility ended with the confirmation by
KAL of Lapuz as its passenger in its Flight No. 903. chanr obles. com.ph : virtual law library
This is still another case of the maltreatment of our overseas contract workers,
this time by the airline supposed to bring the passenger of his foreign
assignment. Our OCWs sacrifice much in seeking employment abroad, where
they are deprived of the company of their loved ones, the direct protection of
our laws, and the comfort of our own native culture and way of life. This Court
shall exert every effort to vindicate their rights when they are abused and shall Escartin ordering the latter to pay jointly and severally the plaintiffs
accord them the commensurate reparation of their injuries consistent with the following:jgc:chanrobles.com.ph
their dignity and worth as members of the working class.

WHEREFORE, the appealed judgment is AFFIRMED, but with the modification "a) 1) Actual damages of P44,830.00;
that the legal interest on the damages awarded to private respondent should
commence from the date of the decision of the trial court on November 14, 2) Compensatory damages of P443,520.00;
1990. The parties shall bear their own costs.
3) Indemnity for the death of Nicanor Navidad in the sum of
SO ORDERED.
P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

"d) Costs of suit.

5. [G.R. No. 145804. February 6, 2003.]

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO "The complaint against defendants LRTA and Rodolfo Roman are
dismissed for lack of merit.
ROMAN, Petitioners, v. MARJORIE NAVIDAD, Heirs of the
Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, Respondents. "The compulsory counterclaim of LRTA and Roman are likewise
dismissed." 1
DECISION
VITUG, J.: Prudent appealed to the Court of Appeals. On 27 August 2000, the
appellate court promulgated its now assailed decision exonerating
Prudent from any liability for the death of Nicanor Navidad and,
instead, holding the LRTA and Roman jointly and severally liable
The case before the Court is an appeal from the decision and
resolution of the Court of Appeals, promulgated on 27 April 2000 thusly:jgc:chanrobles.com.ph
and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
"WHEREFORE, the assailed judgment is hereby MODIFIED, by
entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad v.
Rodolfo Roman, et. al.," which has modified the decision of 11 exonerating the appellants from any liability for the death of
August 1998 of the Regional Trial Court, Branch 266, Pasig City, Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the
Light Rail Transit Authority (LRTA) are held liable for his death and
exonerating Prudent Security Agency (Prudent) from liability and
are hereby directed to pay jointly and severally to the plaintiffs-
finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable
for damages on account of the death of Nicanor appellees, the following amounts:chanrob1es virtual 1aw library
Navidad.chanrob1es virtua1 1aw 1ibrary
a) P44,830.00 as actual damages;
On 14 October 1993, about half an hour past seven o’clock in the
evening, Nicanor Navidad, then drunk, entered the EDSA LRT b) P50,000.00 as nominal damages;
station after purchasing a "token" (representing payment of the
c) P50,000.00 as moral damages;
fare). While Navidad was standing on the platform near the LRT
tracks, Junelito Escartin, the security guard assigned to the area
approached Navidad. A misunderstanding or an altercation d) P50,000.00 as indemnity for the death of the deceased; and
between the two apparently ensued that led to a fist fight. No
e) P20,000.00 as and for attorney’s fees." 2
evidence, however, was adduced to indicate how the fight started
or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, The appellate court ratiocinated that while the deceased might not
have then as yet boarded the train, a contract of carriage
an LRT train, operated by petitioner Rodolfo Roman, was coming in.
theretofore had already existed when the victim entered the place
Navidad was struck by the moving train, and he was killed
instantaneously. where passengers were supposed to be after paying the fare and
getting the corresponding token therefor. In exempting Prudent
from liability, the court stressed that there was nothing to link the
On 08 December 1994, the widow of Nicanor, herein respondent
Marjorie Navidad, along with her children, filed a complaint for security agency to the death of Navidad. It said that Navidad failed
damages against Junelito Escartin, Rodolfo Roman, the LRTA, the to show that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad by reason
Metro Transit Organization, Inc. (Metro Transit), and Prudent for
of his having been hit by the train owned and managed by the LRTA
the death of her husband. LRTA and Roman filed a counterclaim
against Navidad and a cross-claim against Escartin and Prudent. and operated at the time by Roman. The appellate court faulted
Prudent, in its answer, denied liability and averred that it had petitioners for their failure to present expert evidence to establish
the fact that the application of emergency brakes could not have
exercised due diligence in the selection and supervision of its
stopped the train.
security guards.

The LRTA and Roman presented their evidence while Prudent and The appellate court denied petitioners’ motion for reconsideration
in its resolution of 10 October 2000.
Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was
negligent in his assigned task. On 11 August 1998, the trial court In their present recourse, petitioners recite alleged errors on the
part of the appellate court; viz:chanrob1es virtual 1aw library
rendered its decision; it adjudged:jgc:chanrobles.com.ph
"I.
"WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendants Prudent Security and Junelito
 THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY
DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR
NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA." 3
Petitioners would contend that the appellate court ignored the
evidence and the factual findings of the trial court by holding them
liable on the basis of a sweeping conclusion that the presumption
of negligence on the part of a common carrier was not overcome.
Petitioners would insist that Escartin’s assault upon Navidad, which
caused the latter to fall on the tracks, was an act of a stranger that
could not have been foreseen or prevented. The LRTA would add
that the appellate court’s conclusion on the existence of an
employer-employee relationship between Roman and LRTA lacked
basis because Roman himself had testified being an employee of
Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court,
contended that a contract of carriage was deemed created from
the moment Navidad paid the fare at the LRT station and entered
the premises of the latter, entitling Navidad to all the rights and
protection under a contractual relation, and that the appellate
court had correctly held LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary diligence imposed upon
a common carrier.
Law and jurisprudence dictate that a common carrier, both from
the nature of its business and for reasons of public policy, is
burdened with the duty of exercising utmost diligence in ensuring
the safety of passengers. 4 The Civil Code, governing the liability of
a common carrier for death of or injury to its passengers,
provides:jgc:chanrobles.com.ph
"Article 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all
the circumstances.
"Article 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755."cralaw virtua1aw
library
"Article 1759. Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts of the
former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of
the common carriers.
"This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees."cralaw virtua1aw
library
"Article 1763. A common carrier is responsible for injuries suffered
by a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier’s employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission."cralaw
virtua1aw library
The law requires common carriers to carry passengers safely using
the utmost diligence of very cautious persons with due regard for
all circumstances. 5 Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of
the trip but for so long as the passengers are within its premises
and where they ought to be in pursuance to the contract of
carriage. 6 The statutory provisions render a common carrier liable
for death of or injury to passengers (a) through the negligence or
wilful acts of its employees or b) on account of wilful acts or
negligence of other passengers or of strangers if the common
carrier’s employees through the exercise of due diligence could
have prevented or stopped the act or omission. 7 In case of such
death or injury, a carrier is presumed to have been at fault or been
negligent, and 8 by simple proof of injury, the passenger is relieved
of the duty to still establish the fault or negligence of the carrier or
of its employees and the burden shifts upon the carrier to prove
that the injury is due to an unforeseen event or to force majeure. 9
In the absence of satisfactory explanation by the carrier on how the
accident occurred, which petitioners, according to the appellate
court, have failed to show, the presumption would be that it has
been at fault, 10 an exception from the general rule that negligence
must be proved. 11
The foundation of LRTA’s 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 12 and related
provisions, in conjunction with Article 2180, 13 of the Civil Code.
The premise, however, for the employer’s liability is negligence or
fault on the part of the employee. Once such fault is established,
the employer can then be made liable on the basis of the
presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its
employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the
employee, a factual matter that has not been shown. Absent such a
showing, one might ask further, how then must the liability of the
common carrier, on the 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 14 of the Civil Code
can well apply. 15 In fine, a liability for tort may arise even under a
contract, where tort is that which breaches the contract. 16 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. 17
Regrettably for LRT, as well as perhaps the surviving spouse and
heirs of the late Nicanor Navidad, this Court is concluded by the
factual finding of the Court of Appeals that "there is nothing to link
(Prudent) to the death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly proven . . .
." This finding of the appellate court is not without substantial
justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman
himself is guilty of any culpable act or omission, he must also be
absolved from liability. Needless to say, the contractual tie
 between the LRT and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable
only for his own fault or negligence.
The award of nominal damages in addition to actual damages is
untenable. Nominal damages are adjudicated in order that a right
of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.
18 It is an established rule that nominal damages cannot co-exist
with compensatory damages. 19
WHEREFORE, the assailed decision of the appellate court is
AFFIRMED with MODIFICATION but only in that (a) the award of
nominal damages is DELETED and (b) petitioner Rodolfo Roman is
absolved from liability. No costs.
6. [G.R. No. L-47822. December 22, 1988.]
PEDRO DE GUZMAN, Petitioner, v. COURT OF APPEALS
and ERNESTO CENDAÑA, Respondents.
SYLLABUS
1. CIVIL CODE; COMMON CARRIERS; ARTICLE 1732, DEFINITION
UNDER ARTICLE 1732 OF THE CODE. — The Civil Code defines
"common carriers" in the following terms: "Article 1732. Common
carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their
services to the public." The above article makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as "a sideline"). Article 1732 also
carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population.
We think that Article 1733 deliberately refrained from making such
distinctions.
2. ID.; ID.; ID.; LAW ON COMMON CARRIERS SUPPLEMENTED BY
THE PUBLIC SERVICE ACT; SCOPE OF PUBLIC SERVICE. — 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) 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 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.
3. ID.; ID.; ID.; ID.; CERTIFICATE OF PUBLIC CONVENIENCE; NOT A
REQUISITE FOR INCURRING LIABILITY AS A COMMON CARRIER;
NATURE OF THE BUSINESS OF A COMMON CARRIER. — 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.
4. ID.; ID.; DEGREE OF DILIGENCE REQUIRED OF, COMMON
CARRIERS. — Common carriers, "by the nature of their business
and for reasons of public policy," are held to a very high degree of
care and diligence ("extraordinary diligence") in the carriage of
goods as well as of passengers. The specific import of extraordinary
diligence in the care of goods transported by a common carrier is,
according to Article 1733, "further expressed in Articles 1734, 1735
and 1745, numbers 5, 6 and 7" of the Civil Code.
5. ID.; ID.; ID.; LIABILITY OF COMMON CARRIERS. — 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)
6. ID.; ID.; ID.; ID.; COMMON CARRIER’S ARE NOT ABSOLUTE
INSURERS AGAINST ALL RISKS; NO LIABILITY ATTACHES IN CASE OF
FORTUITOUS EVENTS. — Under Article 1745 (6) above, a common
carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We
believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where
the goods are lost as a result of a robbery which is attended by
"grave or irresistible threat, violence or force." In 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.
DECISION
FELICIANO, J.:
Respondent Ernesto Cendaña, 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.chanrobles lawlibrary : rednad
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 P22,150.00, 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’ finding
private respondent to be a common carrier and holding him liable
for the value of the undelivered goods (P22,150.00) as well as for
P4,000.00 as damages and P2,000.00 as attorney’s fees.chanrobles
virtual lawlibrary
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:chanrob1es virtual 1aw library
1. that private respondent was not a common carrier;
2. that the hijacking of respondent’s truck was force majeure; and
3. that respondent was not liable for the value of the undelivered
cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent
Ernesto Cendaña may, under the facts earlier set forth, be properly
characterized as a common carrier.
The Civil Code defines "common carriers" in the following
terms:jgc:chanrobles.com.ph
"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."cralaw
virtua1aw library
The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity
(in local idiom, as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population.
We think that Article 1733 deliberately refrained from making such
distinctions.
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:jgc:chanrobles.com.ph
". . . 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 backhauling 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.chanrobles
virtual lawlibrary
We turn then to the liability of private respondent as a common
carrier.
Common carriers, "by the nature of their business and for reasons
of public policy," 2 are held to a very high degree of care and
diligence ("extraordinary diligence") in the carriage of goods as well
as of passengers. The specific import of extraordinary diligence in
the care of goods transported by a common carrier is, according to
Article 1733, "further expressed in Articles 1734, 1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods
which they carry, "unless the same is due to any of the following
causes only:chanrob1es virtual 1aw library
(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."cralaw virtua1aw
library
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:jgc:chanrobles.com.ph
"In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5
of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733." (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly
that the specific cause alleged in the instant case - the hijacking of
the carrier’s truck - does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would
follow, therefore, that the hijacking of the carrier’s vehicle must be
dealt with under the provisions of Article 1735, in other words, that
the private respondent as common carrier is presumed to have
been at fault or to have acted negligently. This presumption,
however, may be overthrown by proof of extraordinary diligence
on the part of private Respondent.chanroblesvirtualawlibrary
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
fire fight 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:jgc:chanrobles.com.ph
"Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:chanrob1es
virtual 1aw library
x x x
(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 do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment
used in the contract of carriage." (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible
— and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that
the limits of the duty of extraordinary diligence in the vigilance
over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible
threat, violence or force."cralaw virtua1aw library

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.chanrobles.com.ph : virtual law library

We, therefore, agree with the result reached by the Court of

Appeals that private respondent Cendaña is not liable for the value
of the undelivered merchandise which was lost because of an event
entirely beyond private respondent’s control.

ACCORDINGLY, the Petition for Review on Certiorari is hereby

DENIED and the Decision of the Court of Appeals dated 3 August
1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

7. [G.R. No. 101503. September 15, 1993.]
PLANTERS PRODUCTS, INC., Petitioner, v. COURT OF
APPEALS, SORIAMONT STEAMSHIP AGENCIES AND
KYOSEI KISEN KABUSHIKI KAISHA, Respondents.
DECISION
BELLOSILLO, J.:
Does a charter-party 1 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 Charter 2
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 holds
4 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:jgc:chanrobles.com.ph
"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 steel-
bodied dump trucks which were parked alongside the berth, using
metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-party (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
fertilizer. 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). 10 A 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 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 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 shifted 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" (Italics 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 charter-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 obligations . . ." 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 caused by want of due diligence 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 be 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 the 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 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
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 shipowner 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 collussion occur; and the same
difficulty in discovering the truth as to what has taken place arises .
. ."cralaw virtua1aw library
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 facie presumption 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 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)" (Italics 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 re-examined 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 character of the goods or defects in the
packaging or in the containers. The Code of Commerce also
provides that all losses and deteriorations 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 deterioration 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 "bad 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, 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 remiss 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.

8. [G.R. No. 101089. April 7, 1993.]
ESTRELLITA M. BASCOS, Petitioners, v. COURT OF
APPEALS and RODOLFO A. CIPRIANO, Respondents.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE
COMMON CARRIER. — Article 1732 of the Civil Code defines a
common carrier as" (a) person, corporation or 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 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.." . . The holding of the Court in De Guzman v.
Court of Appeals is instructive. In referring to Article 1732 of the
Civil Code, it held thus: "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 distinguished
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."cralaw virtua1aw library
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS
TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
ABSOLUTE. — Common carriers are obliged to observe
extraordinary diligence in the vigilance over the goods transported
by them. Accordingly, they are presumed to have been at fault or
to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption
of negligence does not attach and these instances are enumerated
in Article 1734. In those cases where the presumption is applied,
the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption . . . The
presumption of negligence was raised against petitioner. It was
petitioner’s burden to overcome it. Thus, contrary to her assertion,
private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against
her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT;
HOW CARRIER ABSOLVED FROM LIABILITY. — In De Guzman v.
Court of Appeals, the Court held that hijacking, not being included
in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is
presumed to have been at fault or negligent. To exculpate the
carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat,
violence, or force. This is in accordance with Article 1745 of the
Civil Code which provides: "Art. 1745. Any of the following or
similar stipulations shall be considered unreasonable, unjust and
contrary to public policy . . . (6) That the common carrier’s liability
for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violences or force, is dispensed with or
diminished" ; In the same case, the Supreme Court also held that:
"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 of
irresistible threat, violence of force," We believe and so hold that
the limits of the duty of extraordinary diligence in the vigilance
over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible
threat, violence or force."cralaw virtua1aw library
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE.
— In this case, petitioner herself has made the admission that she
was in the trucking business, offering her trucks to those with cargo
to move. Judicial admissions are conclusive and no evidence is
required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A
FACT. — Petitioner presented no other proof of the existence of
the contract of lease. He who alleges a fact has the burden of
proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF
AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of
Juanito Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a witness as could
be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as
witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT
LAW DEFINES IT TO BE. — Granting that the said evidence were not
self-serving, the same were not sufficient to prove that the contract
was one of lease. It must be understood that a contract is what the
law defines it to be and not what it is called by the contracting
parties.
DECISION
CAMPOS, JR., J.:
This is a petition for review on certiorari of the decision ** of the
Court of Appeals in "RODOLFO A. CIPRIANO, doing business under
the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, v.
ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, Defendant-Appellant," C.A.-G.R. CV No. 25216, the
dispositive portion of which is quoted
hereunder:jgc:chanrobles.com.ph
"PREMISES considered, We find no reversible error in the decision
appealed from, which is hereby affirmed in toto. Costs against
appellant." 1
The facts, as gathered by this Court, are as follows:chanrob1es
virtual 1aw library
Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE for short) entered into a hauling contract 2 with Jibfair
Shipping Agency Corporation whereby the former bound itself to
haul the latter’s 2,000 m/tons of soya bean meal from Magallanes
Drive, Del Pan, Manila to the warehouse of Purefoods Corporation
in Calamba, Laguna. To carry out its obligation, CIPTRADE, through
Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner)
to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the
rate of P50.00 per metric ton. Petitioner failed to deliver the said
cargo. As a consequence of that failure, Cipriano paid Jibfair
Shipping Agency the amount of the lost goods in accordance with
the contract which stated that:jgc:chanrobles.com.ph
"1. CIPTRADE shall be held liable and answerable for any loss in
bags due to theft, hijacking and non-delivery or damages to the
cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter
refused to pay. Eventually, Cipriano filed a complaint for a sum of
money and damages with writ of preliminary attachment 4 for
breach of a contract of carriage. The prayer for a Writ of
Preliminary Attachment was supported by an affidavit 5 which
contained the following allegations:jgc:chanrobles.com.ph
"4. That this action is one of those specifically mentioned in Sec. 1,
Rule 57 the Rules of Court, whereby a writ of preliminary
attachment may lawfully issue, namely:jgc:chanrobles.com.ph
"(e) in an action against a party who has removed or disposed of his
property, or is about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be
enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is
above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on
February 17, 1987.
In her answer, petitioner interposed the following defenses: that
there was no contract of carriage since CIPTRADE leased her cargo
truck to load the cargo from Manila Port Area to Laguna; that
CIPTRADE was liable to petitioner in the amount of P11,000.00 for
loading the cargo; that the truck carrying the cargo was hijacked
along Canonigo St., Paco, Manila on the night of October 21, 1988;
that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked
properties; that after preliminary investigation, an information for
robbery and carnapping were filed against Jose Opriano, Et. Al.; and
that hijacking, being a force majeure, exculpated petitioner from
any liability to CIPTRADE.chanrobles.com.ph : virtual law library
After trial, the trial court rendered a decision *** the dispositive
portion of which reads as follows:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendant ordering the latter to pay the former:chanrob1es
virtual 1aw library
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR
HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual
damages with legal interest of 12% per cent per annum to be
counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for
attorney’s fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment"
dated March 10, 1987 filed by defendant is DENIED for being moot
and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court
affirmed the trial court’s judgment.
Consequently, petitioner filed this petition where she makes the
following assignment of errors; to wit:jgc:chanrobles.com.ph
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF
CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE
RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE
OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING
PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE
CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF
THE TRIAL COURT THAT PETITIONER’S MOTION TO DISSOLVE/LIFT
THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED
MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE
CASE." 7
The petition presents the following issues for resolution: (1) was
petitioner a common carrier?; and (2) was the hijacking referred to
a force majeure?
The Court of Appeals, in holding that petitioner was a common
carrier, found that she admitted in her answer that she did
business under the name A.M. Bascos Trucking and that said
admission dispensed with the presentation by private respondent,
Rodolfo Cipriano, of proofs that petitioner was a common carrier.
The respondent Court also adopted in toto the trial court’s decision
that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that
petitioner was a common carrier: the fact that the truck driver of
petitioner, Maximo Sanglay, received the cargo consisting of 400
bags of soya bean meal as evidenced by a cargo receipt signed by
Maximo Sanglay; the fact that the truck helper, Juanito Morden,
was also an employee of petitioner; and the fact that control of the
cargo was placed in petitioner’s care.chanrobles virtual lawlibrary
In disputing the conclusion of the trial and appellate courts that
petitioner was a common carrier, she alleged in this petition that
the contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain
affidavits which referred to the contract as "lease." These affidavits
were made by Jesus Bascos 8 and by petitioner herself. 9 She
further averred that Jesus Bascos confirmed in his testimony his
statement that the contract was a lease contract. 10 She also
stated that: she was not catering to the general public. Thus, in her
answer to the amended complaint, she said that she does business
under the same style of A.M. Bascos Trucking, offering her trucks
for lease to those who have cargo to move, not to the general
public but to a few customers only in view of the fact that it is only
a small business. 11

We agree with the respondent Court in its finding that petitioner is
a common carrier.
Article 1732 of the Civil Code defines a common carrier as" (a)
person, corporation or 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 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." 12 In this
case, petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to move.
Judicial admissions are conclusive and no evidence is required to
prove the same. 13
But petitioner argues that there was only a contract of lease
because they offer their services only to a select group of people
and because the private respondents, plaintiffs in the lower court,
did not object to the presentation of affidavits by petitioner where
the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De
Guzman v. Court of Appeals 14 is instructive. In referring to Article
1732 of the Civil Code, it held thus:jgc:chanrobles.com.ph
"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."cralaw virtua1aw library
Regarding the affidavits presented by petitioner to the court, both
the trial and appellate courts have dismissed them as self-serving
and petitioner contests the conclusion. We are bound by the
appellate court’s factual conclusions. Yet, granting that the said
evidence were not self-serving, the same were not sufficient to
prove that the contract was one of lease. It must be understood
that a contract is what the law defines it to be and not what it is
called by the contracting parties. 15 Furthermore, petitioner
presented no other proof of the existence of the contract of lease.
He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the
loss of the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in
the vigilance over the goods transported by them. 17 Accordingly,
they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. 18
There are very few instances when the presumption of negligence
does not attach and these instances are enumerated in Article
1734. 19 In those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.chanrobles virtual
lawlibrary
In this case, petitioner alleged that hijacking constituted force
majeure which exculpated her from liability for the loss of the
cargo. In De Guzman v. Court of Appeals, 20 the Court held that
hijacking, not being included in the provisions of Article 1734, must
be dealt with under the provisions of Article 1735 and thus, the
common carrier is presumed to have been at fault or negligent. To
exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or
irresistible threat, violence, or force. This is in accordance with
Article 1745 of the Civil Code which
provides:jgc:chanrobles.com.ph
"Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy;
x x x
(6) That the common carrier’s liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held
that:jgc:chanrobles.com.ph
"Under Article 1745 (6) above, a common carrier is held
responsible — and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or robbers
except where such thieves or robbers in fact acted with grave or
irresistible threat, violence or force. We believe and so hold that
the limits of the duty of extraordinary diligence in the vigilance
over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible
threat, violence or force."cralaw virtua1aw library
To establish grave and irresistible force, petitioner presented her
accusatory affidavit, 22 Jesus Bascos’ affidavit, 23 and Juanito
Morden’s 24 "Salaysay." However, both the trial court and the
Court of Appeals have concluded that these affidavits were not
enough to overcome the presumption. Petitioner’s affidavit about
the hijacking was based on what had been told her by Juanito
Morden. It was not a first-hand account. While it had been
admitted in court for lack of objection on the part of private
respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the
appellate court. In a petition for review on certiorari, We are not to
determine the probative value of evidence but to resolve questions
of law. Secondly, the affidavit of Jesus Bascos did not dwell on how
the hijacking took place. Thirdly, while the affidavit of Juanito
Morden, the truck helper in the hijacked truck, was presented as
evidence in court, he himself was a witness as could be gleaned
from the contents of the petition. Affidavits are not considered the
best evidence if the affiants are available as witnesses. 25 The
subsequent filing of the information for carnapping and robbery
against the accused named in said affidavits did not necessarily
mean that the contents of the affidavits were true because they
were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was
petitioner’s burden to overcome it. Thus, contrary to her assertion,
private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against
her.
Having affirmed the findings of the respondent Court on the
substantial issues involved, We find no reason to disturb the
conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision
on the merits.chanrobles lawlibrary : rednad
In the light of the foregoing analysis, it is Our opinion that the
petitioner’s claim cannot be sustained. The petition is DISMISSED
and the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
9. [G.R. No. 111127. July 26, 1996.]
MR. & MRS. ENGRACIO FABRE, JR. * and PORFIRIO
CABIL, Petitioners, v. COURT OF APPEALS, THE WORD
FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES,
VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCO,
ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE,
EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN,
FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA,
ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE
SENIEL, ROSARIO MARAMARA, TERESITA REGALA,
MELINDA TORRES, MARELLA MIJARES, JOSEFA
CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA,
MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO,
CARLOS RANARIO, ROSAMARIA T. RADOC and
BERNADETTE FERRER, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the
Court of Appeals 1 in CA-GR No. 28245, dated September 30, 1992,
which affirmed with modification the decision of the Regional Trial
Court of Makati, Branch 58, ordering petitioners jointly and
severally to pay damages to private respondent Amyline Antonio,
and its resolution which denied petitioners’ motion for
reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982
model Mazda minibus. They used the bus principally in connection
with a bus service for school children which they operated in
Manila. The couple had a driver, Porfirio J. Cabil, whom they hired
in 1981, after trying him out for two weeks. His job was to take
school children to and from the St. Scholastica’s College in Malate,
Manila.
On November 2, 1984 private respondent Word for the World
Christian Fellowship Inc. (WWCF) arranged with petitioners for the
transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private
respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00
o’clock in the afternoon. However, as several members of the party
were late, the bus did not leave the Tropical Hut at the corner of
Ortigas Avenue and EDSA until 8:00 o’clock in the evening.
Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under repair, so
that petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town
of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner
Cabil came upon a sharp curve on the highway, running on a south
to east direction, which he described as "siete." The road was
slippery because it was raining, causing the bus, which was running
at the speed of 50 kilometers per hour, to skid to the left road
shoulder. The bus hit the left traffic steel brace and sign along the
road and rammed the fence of one Jesus Escano, then turned over
and landed on its left side, coming to a full stop only after a series
of impacts. The bus came to rest off the road. A coconut tree which
it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline
Antonio was thrown on the floor of the bus and pinned down by a
wooden seat which came off after being unscrewed. It took three
persons to safely remove her from this position. She was in great
pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it
was too late. He said he was not familiar with the area and he could
not have seen the curve despite the care he took in driving the bus,
because it was dark and there was no sign on the road. He said that
he saw the curve when he was already within 15 to 30 meters of it.
He allegedly slowed down to 30 kilometers per hour, but it was too
late.
The Lingayen police investigated the incident the next day,
November 3, 1984. On the basis of their finding they filed a criminal
complaint against the driver, Porfirio Cabil. The case was later filed
with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus
Escano P1,500.00 for the damage to the latter’s fence. On the basis
of Escano’s affidavit of desistance the case against petitioners
Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in
the RTC of Makati, Metro Manila. As a result of the accident, she is
now suffering from paraplegia and is permanently paralyzed from
the waist down. During the trial she described the operations she
underwent and adduced evidence regarding the cost of her
treatment and therapy. Immediately after the accident, she was
taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital
was not adequately equipped, she was transferred to the Sto. Niño
Hospital, also in the town of Ba-ay, where she was given sedatives.
An x-ray was taken and the damage to her spine was determined to
be too severe to be treated there. She was therefore brought to
Manila, first to the Philippine General Hospital and later to the
Makati Medical Center where she underwent an operation to
correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found
that:chanrob1es virtual 1aw library
No convincing evidence was shown that the minibus was properly
checked for travel to a long distance trip and that the driver was
properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the
negligent act of the defendants which ultimately resulted to the
accident subject of this case.
Accordingly, it gave judgment for private respondents
holding:chanrob1es virtual 1aw library
Considering that plaintiffs Word for the World Christian Fellowship,
Inc. and Ms. Amyline Antonio were the only ones who adduced
evidence in support of their claim for damages, the Court is
therefore not in a position to award damages to the other
plaintiffs.
WHEREFORE, premises considered, the Court hereby renders
judgment against defendants Mr. & Mrs. Engracio Fabre, Jr. and
Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil
Code of the Philippines and said defendants are ordered to pay
jointly and severally to the plaintiffs the following
amount:chanrob1es virtual 1aw library
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of earning
capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorney’s fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with
respect to Amyline Antonio but dismissed it with respect to the
other plaintiffs on the ground that they failed to prove their
respective claims. The Court of Appeals modified damages as
follows:chanrob1es virtual 1aw library
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney’s fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court’s finding that
petitioner Cabil failed to exercise due care and precaution in the
operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were
themselves presumptively negligent. Hence, this petition.
Petitioners raise the following issues:chanrob1es virtual 1aw library
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES
SUFFERED BY PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE
POSITIVE, UP TO WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory
damages in the amount of P600,000.00. It is insisted that, on the
assumption that petitioners are liable, an award of P600,000.00 is
unconscionable and highly speculative. Amyline Antonio testified
that she was a casual employee of a company called "Suaco,"
earning P1,650.00 a month, and a dealer of Avon products, earning
an average of P1,000.00 monthly. Petitioners contend that as
casual employees do not have security of tenure, the award of
P600,000.00, considering Amyline Antonio’s earnings, is without
factual basis as there is no assurance that she would be regularly
earning these amounts.
With the exception of the award of damages, the petition is devoid
of merit.
First, it is unnecessary for our purpose to determine whether to
decide this case on the theory that petitioners are liable for breach
of contract of carriage or culpa contractual or on the theory of
quasi delict or culpa aquiliana as both the Regional Trial Court and
the Court of Appeals held, for although the relation of passenger
and carrier is "contractual both in origin and nature," nevertheless
"the act that breaks the contract may be also a tort." 2 In either
case, the question is whether the bus driver, petitioner Porfirio
Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer,
the Fabres, who owned the bus, failed to exercise the diligence of a
good father of the family in the selection and supervision of their
employee is fully supported by the evidence on record. These
factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by
Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark. He averred
these facts to justify his failure to see that there lay a sharp curve
ahead. However, it is undisputed that Cabil drove his bus at the
speed of 50 kilometers per hour and only slowed down when he
noticed the curve some 15 to 30 meters ahead. 3 By then it was too
late for him to avoid falling off the road. Given the conditions of the
road and considering that the trip was Cabil’s first one outside of
Manila, Cabil should have driven his vehicle at a moderate speed.
There is testimony 4 that the vehicles passing on that portion of the
road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing — the fact that it was raining and the
road was slippery, that it was dark, that he drove his bus at 50
kilometers an hour when even on a good day the normal speed was
only 20 kilometers an hour, and that he was unfamiliar with the
terrain, Cabil was grossly negligent and should be held liable for the
injuries suffered by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence
gave rise to the presumption that his employers, the Fabres, were
themselves negligent in the selection and supervision of their
employee.
Due diligence in selection of employees is not satisfied by finding
that the applicant possessed a professional driver’s license. The
employer should also examine the applicant for his qualifications,
experience and record of service. 5 Due diligence in supervision, on
the other hand, requires the formulation of rules and regulations
for the guidance of employees and the issuance of proper
instructions as well as actual implementation and monitoring of
consistent compliance with the rules. 6
In the case at bar, the Fabres, in allowing Cabil to drive the bus to
La Union, apparently did not consider the fact that Cabil had been
driving for school children only, from their homes to the St.
Scholastica’s College in Metro Manila. 7 They had hired him only
after a two-week apprenticeship. They had tested him for certain
matters, such as whether he could remember the names of the
children he would be taking to school, which were irrelevant to his
qualification to drive on a long distance travel, especially
considering that the trip to La Union was his first. The existence of
hiring procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on the part of
an employer. 8
Petitioners argue that they are not liable because (1) an earlier
departure (made impossible by the congregation’s delayed
meeting) could have averted the mishap and (2) under the
contract, the WWCF was directly responsible for the conduct of the
trip. Neither of these contentions hold water. The hour of
departure had not been fixed. Even if it had been, the delay did not
bear directly on the cause of the accident. With respect to the
second contention, it was held in an early case that:chanrob1es
virtual 1aw library
[A] person who hires a public automobile and gives the driver
directions as to the place to which he wishes to be conveyed, but
exercises no other control over the conduct of the driver, is not
responsible for acts of negligence of the latter or prevented from
recovering for injuries suffered from a collision between the
automobile and a train, caused by the negligence either of the
locomotive engineer or the automobile driver. 9
As already stated, this case actually involves a contract of carriage.
Petitioners, the Fabres, did not have to be engaged in the business
of public transportation for the provisions of the Civil Code on
common carriers to apply to them. As this Court has held: 10
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.
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.
As common carriers, the Fabres were bound to exercise
"extraordinary diligence" for the safe transportation of the
passengers to their destination. This duty of care is not excused by
proof that they exercised the diligence of a good father of the
family in the selection and supervision of their employee. As Art.
1759 of the Code provides:chanrob1es virtual 1aw library
Common carriers are liable for the death of or injuries to
passengers through the negligence or wilful acts of the former’s
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of
the trial court and of the appellate court that petitioners are liable
under Arts. 2176 and 2180 for quasi delict, fully justify finding them
guilty of breach of contract of carriage under Arts. 1733, 1755 and
1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline
Antonio. However, we think the Court of Appeals erred in
increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. 11 To the
contrary, the award of P500,000.00 for compensatory damages
which the Regional Trial Court made is reasonable considering the
contingent nature of her income as a casual employee of a
company and as distributor of beauty products and the fact that
the possibility that she might be able to work again has not been
foreclosed. In fact she testified that one of her previous employers
had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial
court and the Court of Appeals do not sufficiently indicate the
factual and legal basis for them, we find that they are nevertheless
supported by evidence in the records of this case. Viewed as an
action for quasi delict, this case falls squarely within the purview of
Art. 2219(2) providing for the payment of moral damages in cases
of quasi delict. On the theory that petitioners are liable for breach
of contract of carriage, the award of moral damages is authorized
by Art. 1764, in relation to Art. 2220, since Cabil’s gross negligence
amounted to bad faith. 12 Amyline Antonio’s testimony as well as
the testimonies of her father and co-passengers, fully establish the
physical suffering and mental anguish she endured as a result of
the injuries caused by petitioners’ negligence.
The award of exemplary damages and attorney’s fees was also
properly made. However, for the same reason that it was error for
the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award
of moral damages and reduce the award of attorney’s fees,
inasmuch as private respondents, in whose favor the awards were
made, have not appealed. 13
As above stated, the decision of the Court of Appeals can be
sustained either on the theory of quasi delict or on that of breach
of contract. The question is whether, as the two courts below
held, Petitioners, who are the owners and driver of the bus, may be
made to respond jointly and severally to private Respondent. We
hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals, 14 on facts similar to those in this case, this Court held the
bus company and the driver jointly and severally liable for damages
for injuries suffered by a passenger. Again, in Bachelor Express, Inc.
v. Court of Appeals 15 a driver found negligent in failing to stop the
bus in order to let off passengers when a fellow passenger ran
amuck, as a result of which the passengers jumped out of the
speeding bus and suffered injuries, was held also jointly and
severally liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the
negligence of the driver of the bus on which plaintiff was riding
concurred with the negligence of a third party who was the driver
of another vehicle, thus causing an accident. In Anuran v. Buño, 16
Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,
17 and Metro Manila Transit Corporation v. Court of Appeals, 18
the bus company, its driver, the operator of the other vehicle and
the driver of the vehicle were jointly and severally held liable to the
injured passenger or the latter’s heirs. The basis of this allocation of
liability was explained in Viluan v. Court of Appeals, 19
thus:chanrob1es virtual 1aw library
Nor should it make any difference that the liability of petitioner
[bus owner] springs from contract while that of respondents
[owner and driver of other vehicle] arises from quasi-delict. As
early as 1913, we already ruled in Gutierrez v. Gutierrez, 56 Phil.
177, that in case of injury to a passenger due to the negligence of
the driver of the bus on which he was riding and of the driver of
another vehicle, the drivers as well as the owners of the two
vehicles are jointly and severally liable for damages. Some
members of the Court, though, are of the view that under the
circumstances they are liable on quasi-delict. 20
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals
21 this Court exonerated the jeepney driver from liability to the
injured passengers and their families while holding the owners of
the jeepney jointly and severally liable, but that is because that
case was expressly tried and decided exclusively on the theory of
culpa contractual. As this Court there explained:chanrob1es virtual
1aw library

The trial court was therefore right in finding that Manalo [the
driver] and spouses Mangune and Carreon [the jeepney owners]
were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous.
The driver cannot be held jointly and severally liable with the
carrier in case of breach of the contract of carriage. The rationale
behind this is readily discernible. Firstly, the contract of carriage is
between the carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively responsible therefore
to the passenger, even if such breach be due to the negligence of
his driver (see Viluan v. The Court of Appeals, Et Al., G.R. Nos. L-
21477-81, April 29, 1966, 16 SCRA 742) . . . 22

As in the case of BLTB, private respondents in this case and her co-
plaintiffs did not stake out their claim against the carrier and the
driver exclusively on one theory, much less on that of breach of
contract alone. After all, it was permitted for them to allege
alternative causes of action and join as many parties as may be
liable on such causes of action 23 so long as private respondent and
her co-plaintiffs do not recover twice for the same injury. What is
clear from the cases the plaintiff there to recover from both the
carrier and the driver, thus justifying the holding that the carrier
and the driver were jointly and severally liable because their
separate and distinct acts concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED

with MODIFICATION as to the award of damages. Petitioners are
ORDERED to PAY jointly and severally the private respondent
Amyline Antonio the following amounts:chanrob1es virtual 1aw
library

1) P93, 657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning

capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorney’s fees; and

6) costs of suit.

SO ORDERED.

10. [G.R. No. 125948. December 29, 1998.]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, Petitioner,
v. 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.chanroblesvirtualawlibrary
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:jgc:chanrobles.com.ph
"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 . . .
"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 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
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:jgc:chanrobles.com.ph
". . . Plaintiff is either a contractor or other independent contractor.
. . . 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:chanrob1es virtual 1aw library

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."cralaw virtua1aw
library
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, . . .
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 22, 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."cralaw virtua1aw library
The test for determining whether a party is a common carrier of
goods is:chanrob1es virtual 1aw library
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 v. Court of
Appeals 16 we ruled that:jgc:chanrobles.com.ph
"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 . . .
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:chanrobles virtual
lawlibrary
‘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)
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:jgc:chanrobles.com.ph
"Art. 86. Pipe line concessionaire as common carrier. — A pipe line
shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obliged 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 change without discrimination such
rates as may have been approved by the Secretary of Agriculture
and Natural Resources."cralaw virtua1aw library
Republic Act 387 also regards petroleum operation as a public
utility. Pertinent portion of Article 7 thereof
provides:jgc:chanrobles.com.ph
"that everything relating to the exploration for and exploitation of
petroleum . . . and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is
hereby declared to be a public utility." (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a
"common carrier." In BIR Ruling No. 069-83, it
declared:jgc:chanrobles.com.ph
". . . since (petitioner) is a pipeline concessionaire that is engaged
only in transporting petroleum products, it is considered a common
carrier under Republic Act No. 387 . . . Such being the case, it is not
subject to withholding tax prescribed by Revenue Regulations No.
13-78, as amended."cralaw virtua1aw library
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:jgc:chanrobles.com.ph
"Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the
following:chanrob1es virtual 1aw library
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
Section 137) that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . .
.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."cralaw virtua1aw library
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.
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.chanroblesvirtual|awlibrary

x x x

(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."cralaw virtua1aw library

The deliberations conducted in the House of Representatives on

the Local Government Code of 1991 are
illuminating:jgc:chanrobles.com.ph

"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.." . .

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


11. [G.R. No. 131621. September 28, 1999.]
LOADSTAR SHIPPING CO., INC., Petitioner, v. 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 certiorariunder 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
attorney’s fees, and the costs of the suit; and (b) its resolution of 19
November 1997, 3 denying LOADSTAR’s motion for reconsideration
of said decision.
The facts are undisputed.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
On 19 November 1984, LOADSTAR received on board its M/V
"Cherokee" (hereafter, the vessel) the following goods for
shipment:chanrob1es virtual 1aw library
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 MIC’s
claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the
shipper’s 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 LOADSTAR’s appeal, the appellate court made the
following observations:chanrob1es virtual 1aw library
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. LOADSTAR’S allegation that the sinking was probably
due to the "convergence of the winds," as stated by a PAG-ASA
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 latter’s rights as against
the carrier, LOADSTAR. 6
5) There was a clear breach of the contract of carriage when the
shipper’s goods never reached their destination. LOADSTAR’s
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.chanroblesvirtualawlibrary
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:chanrob1es virtual 1aw library
(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."cralaw virtua1aw library
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 vessel’s 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. MIC’s witness, Graceli 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.chanrobles.com:cralaw:red
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 "owner’s 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 Court’s 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 MIC’s 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 LOADSTAR’s 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.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
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.:chanrob1es virtual 1aw library
The Civil Code defines "common carriers" in the following
terms:jgc:chanrobles.com.ph
"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."cralaw
virtua1aw library
The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity
(in local idiom, as "a sideline" ‘. Article 1732 also carefully avoids
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population.
We think that Article 1733 deliberately refrained from making such
distinctions.
x x x the goods is limited or restricted by the provisions in the bills of
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
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 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.chanroblesvirtuallawlibrary
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 LOADSTAR’s 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 Court’s
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
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
carrier’s 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
carrier’s 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 "owner’s
risk." Such stipulation is obviously null and void for being contrary
to public policy. 20 It has been said:chanrob1es virtual 1aw library
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. MIC’s 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 goods. 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

12. [G.R. No. 148496. March 19, 2002.]
VIRGINES CALVO doing business under the name and
style TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., Petitioner, v. 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 attorney’s fees, and the cost of the
suit.chanrob1es virtua1 law library
The facts are as follows:chanrob1es virtual 1aw library
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 SMC’s 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 SMC’s
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:chanrob1es virtual 1aw library
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:jgc:chanrobles.com.ph
". . . we opine that damages sustained by shipment is attributable
to improper handling in transit presumably whilst in the custody of
the broker . . . ."cralaw virtua1aw library
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 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 lawyer’s 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:chanrob1es virtual 1aw library
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:jgc:chanrobles.com.ph
"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."cralaw
virtua1aw library
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:jgc:chanrobles.com.ph
". . . 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. . ." 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 petitioner’s 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 petitioner’s business.
Now, as to petitioner’s liability, Art. 1733 of the Civil Code
provides:chanrob1es virtual 1aw library
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:chanrob1es virtual 1aw library
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."cralaw virtua1aw
library
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:chanrob1es virtual 1aw library
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 petitioner’s 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 SMC’s
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
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 —

Contrary to petitioner’s 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 petitioner’s 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 —
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:chanrob1es virtual 1aw library
....
(4) The character of the goods or defects in the packing or in the
containers.

Details of Discharge:chanrob1es virtual 1aw library ....

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:chanrob1es virtual 1aw library
On July 23, 1990, shipment housed onto 30’ x 20’ cargo containers
was [withdrawn] by Transorient Container Services, Inc.... without
exception.
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 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.chanrob1es virtua1 1aw 1ibrary

[The cargo] was finally delivered to the consignee’s storage SO ORDERED.

warehouse located at Tabacalera Compound, Romualdez Street,
Ermita, Manila from July 23/25, 1990. 12

As found by the Court of Appeals:chanrob1es virtual 1aw library

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 petitioner’s insistence that the cargo could not have been
damaged while in her custody as she immediately delivered the
containers to SMC’s compound, suffice it to say that to prove the

13. [G.R. No. 147246. August 19, 2003.]
ASIA LIGHTERAGE AND SHIPPING, INC., Petitioner, v.
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.chanrob1es virtua1 1aw 1ibrary
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:chanrob1es virtual
1aw library
WHEREFORE, premises considered, judgment is hereby rendered
ordering defendant Asia Lighterage & Shipping, Inc. liable to pay
plaintiff Prudential Guarantee & Assurance Co., Inc. the sum of
P4,104,654.22 with interest from the date complaint was filed on
July 3, 1991 until fully satisfied plus 10% of the amount awarded as
and for attorney’s fees. Defendant’s counterclaim is hereby
DISMISSED. With costs against defendant. 18
Petitioner appealed to the Court of Appeals insisting that it is not a
common carrier. The appellate court affirmed the decision of the
trial court with modification. The dispositive portion of its decision
reads:chanrob1es virtual 1aw library
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.
Petitioner’s 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."cralaw virtua1aw library
(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
CONSIGNEE’S CARGO.
The issues to be resolved are:chanrob1es virtual 1aw library
(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
consignee’s 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 v. 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 Cendaña 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 v. 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 consignee’s 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:chanrob1es
virtual 1aw library
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:chanrob1es virtual 1aw library
(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:chanrob1es virtual 1aw library
CROSS-EXAMINATION BY ATTY. DONN LEE: 31
x x x
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
consignee’s warehouse, now while on route another accident q And yet as a standard operating procedure of your Company, you
occurred, now this time the barge totally hitting something in the have to secure a sort of Certification to determine the weather
course. condition, am I correct?

q You said there was another accident, can court the nature of the a Yes, sir.
second accident?
q So, more or less, you had the knowledge of the incoming
a The sinking, sir. typhoon, right?

q Can you tell the nature . . . can you tell the court, if you know a Yes, sir.
what caused the sinking?
q And yet you proceeded to the premises of the GMC?
a Mostly it was related to the first accident because there was
already a whole (sic) on the bottom part of the barge. a ISLOFF Terminal is far from Manila Bay and anytime even with the
typhoon if you are already inside the vicinity or inside Pasig
x x x entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the

This is not all. Petitioner still headed to the consignee’s 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:chanrob1es virtual 1aw library
DIRECT-EXAMINATION BY ATTY. LEE: 33
typhoon as force majeure to escape liability for the loss sustained
by the private Respondent. Surely, meeting a typhoon head-on falls
short of due diligence required from a common carrier. More
importantly, the officers/employees themselves of petitioner
admitted that when the towing bits of the vessel broke that caused
its sinking and the total loss of the cargo upon reaching the Pasig
River, it was no longer affected by the typhoon. The typhoon then
is not the proximate cause of the loss of the cargo; a human factor,
i.e., negligence had intervened.

x x x 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
q Now, Mr. Witness, did it not occur to you it might be safer to just against petitioner.chanrob1es virtua1 1aw 1ibrary
allow the Barge to lie where she was instead of towing it?
SO ORDERED.
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.

x x x

CROSS-EXAMINATION BY ATTY. IGNACIO: 34

x x x

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.

14. [G.R. NO. 147079 : December 21, 2004]
A.F. SANCHEZ BROKERAGE INC., Petitioners, v. 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 court's
Decision1 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 cargoes13 which were thereupon stripped from the
aluminum containers14 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 report21 dated July 31, 1992 stating that 41 cartons of
Femenal tablets and 3 cartons of Nordiol tablets were "wetted"
(sic). 22
The Elite Surveyors later issued Certificate No. CS-0731-
1538/9223 attached to which was an "Annexed Schedule" whereon
it was indicated that prior to the loading of the cargoes to the
broker's 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
Report26 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
Rejection27 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 letter29 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 Receipt30 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
letter31 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, 32prompting its (Sanchez
Brokerage's) 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 Decision34 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 attorney's fees;
andcralawlibrary
3. The counterclaims of the Appellee are DISMISSED.38
Sanchez Brokerage's Motion for Reconsideration having been
denied by the appellate court's 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 court's 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 court's 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?chanroblesvirtualawlibrary
WITNESS:
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 173345 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 Receipt50 issued by petitioner, and
as indicated in the Survey Report of Elite Surveyors51 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 goods53; 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 173455 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 petitioner's
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 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 PAGASA61 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?chanroblesvirtualawlibrary
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?chanroblesvirtualawlibrary
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.
15. [G.R. NO. 150255. April 22, 2005]
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, Petitioners, v. 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 Decision1 of the Court
of Appeals, as well as its Resolution2dated 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. 92-631323 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 consignee's) warehouse at Cainta,
Rizal,7in turn engaged the services of TVI to send a barge and
tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVI's 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 receipt15 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, attorney's 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 attorney's 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 court's 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 attorney's
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 other's
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 Resolution27 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.
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 Sea's
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 morning39 is, however, a
material fact which the appellate court failed to properly consider
and appreciate40 - 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?chanroblesvirtualawlibrary
Contrary to petitioner's 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 consignee's 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."42That
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?chanroblesvirtualawlibrary
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?chanroblesvirtualawlibrary
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?chanroblesvirtualawlibrary
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?chanroblesvirtualawlibrary
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?chanroblesvirtualawlibrary
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?chanroblesvirtualawlibrary
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 consignee's
warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the
consignee's warehouse?chanroblesvirtualawlibrary
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?chanroblesvirtualawlibrary
A: Firstly, we don't 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
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 petitioner's business."47
As for petitioner's 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 Giant's 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 handler48 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.
TVI's 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 173953 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 checkers54 and a supervisor55 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
liable56 for the loss of the cargoes. The following pronouncement of
the Supreme Court is instructive:
The foundation of LRTA's 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 attorney's 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 attorney's fees under Article 2208 of the Civil Code.
For no sufficient showing of bad faith would be reflected in a
party's persistence in a case other than an erroneous conviction of
the righteousness of his cause.61 To award attorney's fees to a
party just because the judgment is rendered in its favor would be
tantamount to imposing a premium on one's 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 quo's award of interest on the amount claimed,
the same calls for modification following the ruling in Eastern
Shipping Lines, Inc. v. Court of Appeals64 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.

16. [G.R. NO. 161833. July 8, 2005]
PHILIPPINE CHARTER INSURANCE
CORPORATION, Petitioners, v. UNKNOWN OWNER OF THE VESSEL
M/V "NATIONAL HONOR," NATIONAL SHIPPING CORPORATION
OF THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES,
INC., Respondents.
DECISION
CALLEJO, SR., J.:
This is a Petition for Review under Rule 45 of the 1997 Revised
Rules of Civil Procedure assailing the Decision1 dated January 19,
2004 of the Court of Appeals (CA) in CA-G.R. CV No. 57357 which
affirmed the Decision dated February 17, 1997 of the Regional Trial
Court (RTC) of Manila, Branch 37, in Civil Case No. 95-73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a
shipment of four units of parts and accessories in the port of Pusan,
Korea, on board the vessel M/V "National Honor," represented in
the Philippines by its agent, National Shipping Corporation of the
Philippines (NSCP). The shipment was for delivery to Manila,
Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued
Bill of Lading No. SH94103062 in the name of the shipper consigned
to the order of Metropolitan Bank and Trust Company with arrival
notice in Manila to ultimate consignee Blue Mono International
Company, Incorporated (BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No. NSGPBSML5125653 in
the name of the freight forwarder, as shipper, consigned to the
order of Stamm International Inc., Makati, Philippines. It is
provided therein that:
12. This Bill of Lading shall be prima facie evidence of the receipt of
the Carrier in apparent good order and condition except as,
otherwise, noted of the total number of Containers or other
packages or units enumerated overleaf. Proof to the contrary shall
be admissible when this Bill of Lading has been transferred to a
third party acting in good faith. No representation is made by the
Carrier as to the weight, contents, measure, quantity, quality,
description, condition, marks, numbers, or value of the Goods and
the Carrier shall be under no responsibility whatsoever in respect
of such description or particulars.
13. The shipper, whether principal or agent, represents and
warrants that the goods are properly described, marked, secured,
and packed and may be handled in ordinary course without
damage to the goods, ship, or property or persons and guarantees
the correctness of the particulars, weight or each piece or package
and description of the goods and agrees to ascertain and to
disclose in writing on shipment, any condition, nature, quality,
ingredient or characteristic that may cause damage, injury or
detriment to the goods, other property, the ship or to persons, and
for the failure to do so the shipper agrees to be liable for and fully
indemnify the carrier and hold it harmless in respect of any injury
or death of any person and loss or damage to cargo or property.
The carrier shall be responsible as to the correctness of any such
mark, descriptions or representations.4
The shipment was contained in two wooden crates, namely, Crate
No. 1 and Crate No. 2, complete and in good order condition,
covered by Commercial Invoice No. YJ-73564 DTD5 and a Packing
List.6 There were no markings on the outer portion of the crates
except the name of the consignee.7 Crate No. 1 measured 24 cubic
meters and weighed 3,620 kgs. It contained the following articles:
one (1) unit Lathe Machine complete with parts and accessories;
one (1) unit Surface Grinder complete with parts and accessories;
and one (1) unit Milling Machine complete with parts and
accessories. On the flooring of the wooden crates were three
wooden battens placed side by side to support the weight of the
cargo. Crate No. 2, on the other hand, measured 10 cubic meters
and weighed 2,060 kgs. The Lathe Machine was stuffed in the crate.
The shipment had a total invoice value of US$90,000.00 C&F
Manila.8 It was insured for P2,547,270.00 with the Philippine
Charter Insurance Corporation (PCIC) thru its general agent, Family
Insurance and Investment Corporation,9 under Marine Risk Note
No. 68043 dated October 24, 1994.10
The M/V "National Honor" arrived at the Manila International
Container Terminal (MICT) on November 14, 1995. The
International Container Terminal Services, Incorporated (ICTSI) was
furnished with a copy of the crate cargo list and bill of lading, and it
knew the contents of the crate.11 The following day, the vessel
started discharging its cargoes using its winch crane. The crane was
operated by Olegario Balsa, a winchman from the ICTSI,12 the
exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with
the crew and the surveyor of the ICTSI, conducted an inspection of
the cargo.13 They inspected the hatches, checked the cargo and
found it in apparent good condition.14 Claudio Cansino, the
stevedore of the ICTSI, placed two sling cables on each end of Crate
No. 1.15 No sling cable was fastened on the mid-portion of the
crate. In Dauz's experience, this was a normal procedure. 16 As the
crate was being hoisted from the vessel's hatch, the mid-portion of
the wooden flooring suddenly snapped in the air, about five feet
high from the vessel's twin deck, sending all its contents crashing
down hard,17 resulting in extensive damage to the shipment.
BMICI's customs broker, JRM Incorporated, took delivery of the
cargo in such damaged condition.18Upon receipt of the damaged
shipment, BMICI found that the same could no longer be used for
the intended purpose. The Mariners' Adjustment Corporation hired
by PCIC conducted a survey and declared that the packing of the
shipment was considered insufficient. It ruled out the possibility of
taxes due to insufficiency of packing. It opined that three to four
pieces of cable or wire rope slings, held in all equal setting, never
by-passing the center of the crate, should have been used,
considering that the crate contained heavy machinery.19
BMICI subsequently filed separate claims against the NSCP,20 the
ICTSI,21 and its insurer, the PCIC,22for US$61,500.00. When the
other companies denied liability, PCIC paid the claim and was
issued a Subrogation Receipt23 for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila,
Branch 35, a Complaint for Damages24 against the "Unknown
owner of the vessel M/V National Honor," NSCP and ICTSI, as
defendants.
PCIC alleged that the loss was due to the fault and negligence of
the defendants. It prayed, among others'
WHEREFORE, it is respectfully prayed of this Honorable Court that
judgment be rendered ordering defendants to pay plaintiff, jointly
or in the alternative, the following:
1. Actual damages in the amount of P1,740,634.50 plus legal
interest at the time of the filing of this complaint until fully paid;
2. Attorney's fees in the amount of P100,000.00;
3. Cost of suit.25
ICTSI, for its part, filed its Answer with Counterclaim and Cross-
claim against its co-defendant NSCP, claiming that the loss/damage
of the shipment was caused exclusively by the defective material of
the wooden battens of the shipment, insufficient packing or acts of
the shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI,
testified that the wooden battens placed on the wooden flooring of
the crate was of good material but was not strong enough to
support the weight of the machines inside the crate. He averred
that most stevedores did not know how to read and write; hence,
he placed the sling cables only on those portions of the crate where
the arrow signs were placed, as in the case of fragile cargo. He said
that unless otherwise indicated by arrow signs, the ICTSI used only
two cable slings on each side of the crate and would not place a
sling cable in the mid-section.26 He declared that the crate fell from
the cranes because the wooden batten in the mid-portion was
broken as it was being lifted.27 He concluded that the loss/damage
was caused by the failure of the shipper or its packer to place
wooden battens of strong materials under the flooring of the crate,
and to place a sign in its mid-term section where the sling cables
would be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co.,
Inc. that the damage to the cargo could be attributed to insufficient
packing and unbalanced weight distribution of the cargo inside the
crate as evidenced by the types and shapes of items found. 28
The trial court rendered judgment for PCIC and ordered the
complaint dismissed, thus:
WHEREFORE, the complaint of the plaintiff, and the respective
counterclaims of the two defendants are dismissed, with costs
against the plaintiff.
SO ORDERED.29
According to the trial court, the loss of the shipment contained in
Crate No. 1 was due to the internal defect and weakness of the
materials used in the fabrication of the crates. The middle wooden
batten had a hole (bukong-bukong). The trial court rejected the
certification30 of the shipper, stating that the shipment was
properly packed and secured, as mere hearsay and devoid of any
evidentiary weight, the affiant not having testified.
Not satisfied, PCIC appealed31 to the CA which rendered judgment
on January 19, 2004 affirming in totothe appealed decision, with
this fallo'
WHEREFORE, the decision of the Regional Trial Court of Manila,
Branch 35, dated February 17, 1997, is AFFIRMED.
SO ORDERED.32
The appellate court held, inter alia, that it was bound by the finding
of facts of the RTC, especially so where the evidence in support
thereof is more than substantial. It ratiocinated that the loss of the
shipment was due to an excepted cause - "[t]he character of the
goods or defects in the packing or in the containers" and the failure
of the shipper to indicate signs to notify the stevedores that extra
care should be employed in handling the shipment.33 It blamed the
shipper for its failure to use materials of stronger quality to support
the heavy machines and to indicate an arrow in the middle portion
of the cargo where additional slings should be attached.34 The CA
concluded that common carriers are not absolute insurers against
all risks in the transport of the goods.35
Hence, this petition by the PCIC, where it alleges that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN
NOT HOLDING THAT RESPONDENT COMMON CARRIER IS LIABLE
FOR THE DAMAGE SUSTAINED BY THE SHIPMENT IN THE
POSSESSION OF THE ARRASTRE OPERATOR.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN
NOT APPLYING THE STATUTORY PRESUMPTION OF FAULT AND
NEGLIGENCE IN THE CASE AT BAR.
III.
THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE FACTS
IN FINDING THAT THE DAMAGE SUSTAINED BY THE [SHIPMENT]
WAS DUE TO ITS DEFECTIVE PACKING AND NOT TO THE FAULT AND
NEGLIGENCE OF THE RESPONDENTS.36
The petitioner asserts that the mere proof of receipt of the
shipment by the common carrier (to the carrier) in good order, and
their arrival at the place of destination in bad order makes out
a prima faciecase against it; in such case, it is liable for the loss or
damage to the cargo absent satisfactory explanation given by the
carrier as to the exercise of extraordinary diligence. The petitioner
avers that the shipment was sufficiently packed in wooden boxes,
as shown by the fact that it was accepted on board the vessel and
arrived in Manila safely. It emphasizes that the respondents did not
contest the contents of the bill of lading, and that the respondents
knew that the manner and condition of the packing of the cargo
was normal and barren of defects. It maintains that it behooved the
respondent ICTSI to place three to four cables or wire slings in
equal settings, including the center portion of the crate to prevent
damage to the cargo:
'[A] simple look at the manifesto of the cargo and the bill of lading
would have alerted respondents of the nature of the cargo
consisting of thick and heavy machinery. Extra-care should have
been made and extended in the discharge of the subject shipment.
Had the respondent only bothered to check the list of its contents,
they would have been nervous enough to place additional slings
and cables to support those massive machines, which were
composed almost entirely of thick steel, clearly intended for heavy
industries. As indicated in the list, the boxes contained one lat[h]e
machine, one milling machine and one grinding machine-all coming
with complete parts and accessories. Yet, not one among the
respondents were cautious enough. Here lies the utter failure of
the respondents to observed extraordinary diligence in the
handling of the cargo in their custody and possession, which the
Court of Appeals should have readily observed in its appreciation of
the pertinent facts.37
The petitioner posits that the loss/damage was caused by the
mishandling of the shipment by therein respondent ICTSI, the
arrastre operator, and not by its negligence.
The petitioner insists that the respondents did not observe
extraordinary diligence in the care of the goods. It argues that in
the performance of its obligations, the respondent ICTSI should
observe the same degree of diligence as that required of a common
carrier under the New Civil Code of the Philippines. Citing Eastern
Shipping Lines, Inc. v. Court of Appeals,38 it posits that respondents
are liable in solidum to it, inasmuch as both are charged with the
obligation to deliver the goods in good condition to its consignee,
BMICI.
Respondent NSCP counters that if ever respondent ICTSI is
adjudged liable, it is not solidarily liable with it. It further avers that
the "carrier cannot discharge directly to the consignee because
cargo discharging is the monopoly of the arrastre." Liability,
therefore, falls solely upon the shoulder of respondent ICTSI,
inasmuch as the discharging of cargoes from the vessel was its
exclusive responsibility. Besides, the petitioner is raising questions
of facts, improper in a Petition for Review on Certiorari .39
Respondent ICTSI avers that the issues raised are factual, hence,
improper under Rule 45 of the Rules of Court. It claims that it is
merely a depository and not a common carrier; hence, it is not
obliged to exercise extraordinary diligence. It reiterates that the
loss/damage was caused by the failure of the shipper or his packer
to place a sign on the sides and middle portion of the crate that
extra care should be employed in handling the shipment, and that
the middle wooden batten on the flooring of the crate had a hole.
The respondent asserts that the testimony of Anthony Abarquez,
who conducted his investigation at the site of the incident, should
prevail over that of Rolando Balatbat. As an alternative, it argues
that if ever adjudged liable, its liability is limited only to P3,500.00
as expressed in the liability clause of Gate Pass CFS-BR-GP No.
319773.
The petition has no merit.
The well-entrenched rule in our jurisdiction is that only questions of
law may be entertained by this Court in a Petition for Review
on Certiorari . This rule, however, is not ironclad and admits certain
exceptions, such as when (1) the conclusion is grounded on
speculations, surmises or conjectures; (2) the inference is
manifestly mistaken, absurd or impossible; (3) there is grave abuse
of discretion; (4) the judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6) there is no citation
of specific evidence on which the factual findings are based; (7) the
findings of absence of facts are contradicted by the presence of
evidence on record; (8) the findings of the Court of Appeals are
contrary to those of the trial court; (9) the Court of Appeals
manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different conclusion; (10) the
findings of the Court of Appeals are beyond the issues of the case;
and (11) such findings are contrary to the admissions of both
parties.40
We have reviewed the records and find no justification to warrant
the application of any exception to the general rule.
We agree with the contention of the petitioner that common
carriers, from the nature of their business and for reasons of public
policy, are mandated 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.41 The Court has defined extraordinary diligence in the
vigilance over the goods as follows:
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."42
The common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered
to or unconditionally placed in the possession of, and received by,
the carrier for transportation until delivered to, or until the lapse of
a reasonable time for their acceptance, by the person entitled to
receive them.43 When the goods shipped are either lost or arrive in
damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable.44 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.45
However, under Article 1734 of the New Civil Code, the
presumption of negligence does not apply 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;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New
Civil Code which exempts the common carrier for the loss or
damage to the cargo is a closed list.46 To exculpate itself from
liability for the loss/damage to the cargo under any of the causes,
the common carrier is burdened to prove any of the aforecited
causes claimed by it by a preponderance of evidence. If the carrier
succeeds, the burden of evidence is shifted to the shipper to prove
that the carrier is negligent.47
"Defect" is the want or absence of something necessary for
completeness or perfection; a lack or absence of something
essential to completeness; a deficiency in something essential to
the proper use for the purpose for which a thing is to be used. 48 On
the other hand, inferior means of poor quality, mediocre, or second
rate.49 A thing may be of inferior quality but not necessarily
defective. In other words, "defectiveness" is not synonymous with
"inferiority."
In the present case, the trial court declared that based on the
record, the loss of the shipment was caused by the negligence of
the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The
breakage and collapse of Crate No. 1 and the total destruction of its
contents were not imputable to any fault or negligence on the part
of said defendant in handling the unloading of the cargoes from the
carrying vessel, but was due solely to the inherent defect and
weakness of the materials used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed
side by side underneath or on the flooring of the crate to support
the weight of its contents. However, in the case of the crate in
dispute, although there were three wooden battens placed side by
side on its flooring, the middle wooden batten, which carried
substantial volume of the weight of the crate's contents, had a knot
hole or "bukong-bukong," which considerably affected, reduced
and weakened its strength. Because of the enormous weight of the
machineries inside this crate, the middle wooden batten gave way
and collapsed. As the combined strength of the other two wooden
battens were not sufficient to hold and carry the load, they too
simultaneously with the middle wooden battens gave way and
collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the machineries in
Seoul, Korea. There is nothing in the record which would indicate
that defendant ICTSI had any role in the choice of the materials
used in fabricating this crate. Said defendant, therefore, cannot be
held as blame worthy for the loss of the machineries contained in
Crate No. 1.50
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions mentioned in
Article 1734 of the Civil Code, particularly number (4) thereof, i.e.,
the character of the goods or defects in the packing or in the
containers. The trial court found that the breakage of the crate was
not due to the fault or negligence of ICTSI, but to the inherent
defect and weakness of the materials used in the fabrication of the
said crate.
Upon examination of the records, We find no compelling reason to
depart from the factual findings of the trial court.
It appears that the wooden batten used as support for the flooring
was not made of good materials, which caused the middle portion
thereof to give way when it was lifted. The shipper also failed to
indicate signs to notify the stevedores that extra care should be
employed in handling the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court
their duties and responsibilities:
"Q: With regard to crates, what do you do with the
crates?chanroblesvirtualawlibrary
A: Everyday with the crates, there is an arrow drawn where the
sling is placed, Ma'am.
Q: When the crates have arrows drawn and where you placed the
slings, what do you do with these
crates?chanroblesvirtualawlibrary
A: A sling is placed on it, Ma'am.
Q: After you placed the slings, what do you do with the
crates?chanroblesvirtualawlibrary
A: After I have placed a sling properly, I ask the crane (sic) to haul it,
Ma'am.
Q: Now, what, if any, were written or were marked on the
crate?chanroblesvirtualawlibrary
A: The thing that was marked on the cargo is an arrow just like of a
chain, Ma'am.
Q: And where did you see or what parts of the crate did you see
those arrows?chanroblesvirtualawlibrary
A: At the corner of the crate, Ma'am.
Q: How many arrows did you see?chanroblesvirtualawlibrary
A: Four (4) on both sides, Ma'am.
Q: What did you do with the arrows?chanroblesvirtualawlibrary
A: When I saw the arrows, that's where I placed the slings, Ma'am.
Q: Now, did you find any other marks on the
crate?chanroblesvirtualawlibrary
A: Nothing more, Ma'am.
Q: Now, Mr. Witness, if there are no arrows, would you place slings
on the parts where there are no arrows?chanroblesvirtualawlibrary
A: You can not place slings if there are no arrows, Ma'am."
Appellant's allegation that since the cargo arrived safely from the
port of [P]usan, Korea without defect, the fault should be
attributed to the arrastre operator who mishandled the cargo, is
without merit. The cargo fell while it was being carried only at
about five (5) feet high above the ground. It would not have so
easily collapsed had the cargo been properly packed. The shipper
should have used materials of stronger quality to support the heavy
machines. Not only did the shipper fail to properly pack the cargo,
it also failed to indicate an arrow in the middle portion of the cargo
where additional slings should be attached. At any rate, the issue of
negligence is factual in nature and in this regard, it is settled that
factual findings of the lower courts are entitled to great weight and
respect on appeal, and, in fact, accorded finality when supported
by substantial evidence.51
We agree with the trial and appellate courts.
The petitioner failed to adduce any evidence to counter that of
respondent ICTSI. The petitioner failed to rebut the testimony of
Dauz, that the crates were sealed and that the contents thereof
could not be seen from the outside.52 While it is true that the crate
contained machineries and spare parts, it cannot thereby be
concluded that the respondents knew or should have known that
the middle wooden batten had a hole, or that it was not strong
enough to bear the weight of the shipment.
There is no showing in the Bill of Lading that the shipment was in
good order or condition when the carrier received the cargo, or
that the three wooden battens under the flooring of the cargo
were not defective or insufficient or inadequate. On the other
hand, under Bill of Lading No. NSGPBSML512565 issued by the
respondent NSCP and accepted by the petitioner, the latter
represented and warranted that the goods were properly packed,
and disclosed in writing the "condition, nature, quality or
characteristic that may cause damage, injury or detriment to the
goods." Absent any signs on the shipment requiring the placement
of a sling cable in the mid-portion of the crate, the respondent
ICTSI was not obliged to do so.

The statement in the Bill of Lading, that the shipment was in

apparent good condition, is sufficient to sustain a finding of
absence of defects in the merchandise. Case law has it that such
statement will create a prima facie presumption only as to the
external condition and not to that not open to inspection. 53

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of

merit. SO ORDERED.
 17. [G.R. NO. 161745. September 30, 2005]
LEA MER INDUSTRIES, INC., Petitioners, v. MALAYAN INSURANCE
CO., INC.,*Respondent.
DECISION
PANGANIBAN, J.:
ommon carriers are bound to observe extraordinary diligence in
their vigilance over the goods entrusted to them, as required by the
nature of their business and for reasons of public policy.
Consequently, the law presumes that common carriers are at fault
or negligent for any loss or damage to the goods that they
transport. In the present case, the evidence submitted by
petitioner to overcome this presumption was sorely insufficient.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of
Court, assailing the October 9, 2002 Decision2 and the December
29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR CV No.
66028. The challenged Decision disposed as follows:
"WHEREFORE, the appeal is GRANTED. The December 7, 1999
decision of the Regional Trial Court of Manila, Branch 42 in Civil
Case No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner]
is ordered to pay the [herein respondent] the value of the lost
cargo in the amount of P565,000.00. Costs against the [herein
petitioner]."4
The assailed Resolution denied reconsideration.
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer
Industries, Inc., for the shipment of 900 metric tons of silica sand
valued at P565,000.5 Consigned to Vulcan Industrial and Mining
Corporation, the cargo was to be transported from Palawan to
Manila. On October 25, 1991, the silica sand was placed on
board Judy VII, a barge leased by Lea Mer.6 During the voyage, the
vessel sank, resulting in the loss of the cargo.7
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the
lost cargo.8 To recover the amount paid and in the exercise of its
right of subrogation, Malayan demanded reimbursement from Lea
Mer, which refused to comply. Consequently, Malayan instituted a
Complaint with the Regional Trial Court (RTC) of Manila on
September 4, 1992, for the collection of P565,000 representing the
amount that respondent had paid Vulcan.9
On October 7, 1999, the trial court dismissed the Complaint, upon
finding that the cause of the loss was a fortuitous event. 10 The RTC
noted that the vessel had sunk because of the bad weather
condition brought about by Typhoon Trining. The court ruled that
petitioner had no advance knowledge of the incoming typhoon,
and that the vessel had been cleared by the Philippine Coast Guard
to travel from Palawan to Manila.11
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not
seaworthy when it sailed for Manila. Thus, the loss of the cargo was
occasioned by petitioner's fault, not by a fortuitous event. 12
Hence, this recourse.13
The Issues
Petitioner states the issues in this wise:
"A. Whether or not the survey report of the cargo surveyor, Jesus
Cortez, who had not been presented as a witness of the said report
during the trial of this case before the lower court can be admitted
in evidence to prove the alleged facts cited in the said report.
"B. Whether or not the respondent, Court of Appeals, had validly or
legally reversed the finding of fact of the Regional Trial Court which
clearly and unequivocally held that the loss of the cargo subject of
this case was caused by fortuitous event for which herein
petitioner could not be held liable.
"C. Whether or not the respondent, Court of Appeals, had
committed serious error and grave abuse of discretion in
disregarding the testimony of the witness from the MARINA, Engr.
Jacinto Lazo y Villegal, to the effect that the vessel 'Judy VII' was
seaworthy at the time of incident and further in disregarding the
testimony of the PAG-ASA weather specialist, Ms. Rosa Barba y
Saliente, to the effect that typhoon 'Trining' did not hit Metro
Manila or Palawan."14
In the main, the issues are as follows: (1) whether petitioner is
liable for the loss of the cargo, and (2) whether the survey report of
Jesus Cortez is admissible in evidence.
The Court's Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of
the cargo was due to a fortuitous event. This issue involves
primarily a question of fact, notwithstanding petitioner's claim that
it pertains only to a question of law. As a general rule, questions of
fact may not be raised in a Petition for Review . 15 The present case
serves as an exception to this rule, because the factual findings of
the appellate and the trial courts vary.16 This Court meticulously
reviewed the records, but found no reason to reverse the CA.
Rule on Common Carriers
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 - - when this service is
offered to the public for compensation.17 Petitioner is clearly a
common carrier, because it offers to the public its business of
transporting goods through its vessels.18
Thus, the Court corrects the trial court's finding that petitioner
became a private carrier when Vulcan chartered it.19 Charter
parties are classified as contracts of demise (or bareboat) and
affreightment, which are distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer
will generally be considered as owner for the voyage or service
stipulated. The charterer mans the vessel with his own people and
becomes, in effect, 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."20
The distinction is significant, because a demise or bareboat charter
indicates a business undertaking that is private in
character.21 Consequently, the rights and obligations of the parties
to a contract of private carriage are governed principally by their
stipulations, not by the law on common carriers. 22
The Contract in the present case was one of affreightment, as
shown by the fact that it was petitioner's crew that manned the
tugboat M/V Ayalit and controlled the barge Judy VII.23 Necessarily,
petitioner was a common carrier, and the pertinent law governs
the present factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in
their vigilance over the goods and the safety of the passengers they
transport, as required by the nature of their business and for
reasons of public policy.24 Extraordinary diligence requires
rendering service with the greatest skill and foresight to avoid
damage and destruction to the goods entrusted for carriage and
delivery.25
Common carriers are presumed to have been at fault or to have
acted negligently for loss or damage to the goods that they have
transported.26 This presumption can be rebutted only by proof that
they observed extraordinary diligence, or that the loss or damage
was occasioned by any of the following causes:27
"(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."28
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that "no person shall be
responsible for a fortuitous event which could not be foreseen, or
which, though foreseen, was inevitable." Thus, if the loss or
damage was due to such an event, a common carrier is exempted
from liability.
Jurisprudence defines the elements of a "fortuitous event" as
follows: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the
event that constituted the caso fortuito must have been impossible
to foresee or, if foreseeable, impossible to avoid; (c) the occurrence
must have been such as to render it impossible for the debtors to
fulfill their obligation in a normal manner; and (d) the obligor must
have been free from any participation in the aggravation of the
resulting injury to the creditor.29
To excuse the common carrier fully of any liability, the fortuitous
event must have been the proximate and only cause of the
loss.30 Moreover, it should have exercised due diligence to prevent
or minimize the loss before, during and after the occurrence of the
fortuitous event.31
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the
present case. As the common carrier, petitioner bore the burden of
proving that it had exercised extraordinary diligence to avoid the
loss, or that the loss had been occasioned by a fortuitous event - -
an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape
liability. Lea Mer claimed that the loss of the cargo was due to the
bad weather condition brought about by Typhoon
Trining.32 Evidence was presented to show that petitioner had not
been informed of the incoming typhoon, and that the Philippine
Coast Guard had given it clearance to begin the voyage. 33 On
October 25, 1991, the date on which the voyage commenced and
the barge sank, Typhoon Trining was allegedly far from Palawan,
where the storm warning was only "Signal No. 1."34
The evidence presented by petitioner in support of its defense of
fortuitous event was sorely insufficient. As required by the
pertinent law, it was not enough for the common carrier to show
that there was an unforeseen or unexpected occurrence. It had to
show that it was free from any fault - - a fact it miserably failed to
prove.
First, petitioner presented no evidence that it had attempted to
minimize or prevent the loss before, during or after the alleged
fortuitous event.35 Its witness, Joey A. Draper, testified that he
could no longer remember whether anything had been done to
minimize loss when water started entering the barge. 36 This fact
was confirmed during his cross-examination, as shown by the
following brief exchange:
"Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other
precautionary measure[s] exercised by you and the crew of Judy VII
so as to prevent the los[s] or sinking of barge Judy VII?
xxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the
officers and crew of tugboat Ayalit and barge Judy VII x x x to
prevent the sinking of barge Judy VII?
xxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on
how to save the barge Judy VII?cralawlibrary
Joey Draper:
I can no longer remember sir, because that happened [a] long time
ago."37
Second, the alleged fortuitous event was not the sole and
proximate cause of the loss. There is a preponderance of evidence
that the barge was not seaworthy when it sailed for
Manila.38 Respondent was able to prove that, in the hull of the
barge, there were holes that might have caused or aggravated the
sinking.39 Because the presumption of negligence or fault applied to
petitioner, it was incumbent upon it to show that there were no
holes; or, if there were, that they did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes.
Its witness, Domingo A. Luna, testified that the barge was in "tip-
top" or excellent condition,40 but that he had not personally
inspected it when it left Palawan.41
The submission of the Philippine Coast Guard's Certificate of
Inspection of Judy VII, dated July 31, 1991, did not conclusively
prove that the barge was seaworthy.42 The regularity of the
issuance of the Certificate is disputably presumed.43 It could be
contradicted by competent evidence, which respondent offered.
Moreover, this evidence did not necessarily take into account the
actual condition of
the vessel at the time of the commencement of the voyage. 44
Second Issue:
evidence.52 Well-settled is the rule that, unless the affiant is
presented as a witness, an affidavit is considered hearsay.53
An exception to the foregoing rule is that on "independently
relevant statements." A report made by a person is admissible if it
is intended to prove the tenor, not the truth, of the
statements.54 Independent of the truth or the falsity of the
statement given in the report, the fact that it has been made is
relevant. Here, the hearsay rule does not apply.55
In the instant case, the challenged Survey Report prepared by
Cortez was admitted only as part of the testimonies of
respondent's witnesses. The referral to Cortez's Report was in
relation to Manlapig's final Adjustment Report. Evidently, it was the
existence of the Survey Report that was testified to. The
admissibility of that Report as part of the testimonies of the
witnesses was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already
failed to overcome the presumption of fault that applies to
common carriers.
WHEREFORE, the Petition is DENIEDand the assailed Decision and
Resolution are AFFIRMED. Costs against petitioner.

Admissibility of the Survey Report SO ORDERED.

Petitioner claims that the Survey Report45 prepared by Jesus

Cortez, the cargo surveyor, should not have been admitted in
evidence. The Court partly agrees. Because he did not testify during
the trial,46then the Report that he had prepared was hearsay and
therefore inadmissible for the purpose of proving the truth of its
contents.

The Survey Report Not the Sole Evidence

The facts reveal that Cortez's Survey Report was used in the
testimonies of respondent's witnesses - - Charlie M. Soriano; and
Federico S. Manlapig, a cargo marine surveyor and the vice-
president of Toplis and Harding Company.47 Soriano testified that
the Survey Report had been used in preparing the final Adjustment
Report conducted by their company.48 The final Report showed
that the barge was not seaworthy because of the existence of the
holes. Manlapig testified that he had prepared that Report after
taking into account the findings of the surveyor, as well as the
pictures and the sketches of the place where the sinking
occurred.49 Evidently, the existence of the holes was proved by the
testimonies of the witnesses, not merely by Cortez' Survey Report.

Rule on Independently

Relevant Statement

That witnesses must be examined and presented during the

trial,50 and that their testimonies must be confined to personal
knowledge is required by the rules on evidence, from which we
quote:

"Section 36. Testimony generally confined to personal knowledge;

hearsay excluded. 'A witness can testify only to those facts which
he knows of his personal knowledge; that is, which are derived
from his own perception, except as otherwise provided in these
rules."51

On this basis, the trial court correctly refused to admit Jesus

Cortez's Affidavit, which respondent had offered as
 18. [G.R. NO. 157481 - January 24, 2006]
LOADSTAR SHIPPING CO., INC., Petitioner, v. PIONEER ASIA
INSURANCE CORP., Respondent.
DECISION
QUISUMBING, J.:
1 respondent, to wit:
For review on certiorari are (1) the Decision dated October 15,
2002 and (2) the Resolution2 dated February 27, 2003, of the Court
of Appeals in CA-G.R. CV No. 40999, which affirmed with
modification the Decision3 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 petitioner's Bill of
Lading4 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.
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 latter's 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
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 attorney's
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.
Petitioner's 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 attorney's 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 attorney's fees and litigation
expenses. Costs against the appellant.
SO ORDERED.7
Petitioner's 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 ATTORNEY'S 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 carrier's 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 attorney's 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 petitioner's failure to exercise extraordinary diligence; and (2)
whether respondent is entitled to recover attorney's 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
conclusionsderived 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?cralawlibrary
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?cralawlibrary
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 Appeals11 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 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; andcralawlibrary

(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 attorney's 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, attorney's 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.
 19. [G.R. NO. 150403 : January 25, 2007] the loss of the shipment caused by the sinking of a ship it did not
own.
CEBU SALVAGE CORPORATION, Petitioner, v. PHILIPPINE HOME
ASSURANCE CORPORATION,Respondent. We disagree.

DECISION Based on the agreement signed by the parties and the testimony of
petitioner's operations manager, it is clear that it was a contract of
CORONA, J.: carriage petitioner signed with MCCII. It actively negotiated and
solicited MCCII's account, offered its services to ship the silica
May a carrier be held liable for the loss of cargo resulting from the quartz and proposed to utilize the M/T Espiritu Santo in lieu of the
sinking of a ship it does not own?cralaw library M/T Seebees or the M/T Shirley (as previously agreed upon in the
voyage charter) since these vessels had broken down.20
This is the issue presented for the Court's resolution in this Petition
for Review on Certiorari 1 assailing the March 16, 2001 There is no dispute that petitioner was a common carrier. At the
decision2 and September 17, 2001 resolution3 of the Court of time of the loss of the cargo, it was engaged in the business of
Appeals (CA) in CA-G.R. CV No. 40473 which in turn affirmed the carrying and transporting goods by water, for compensation, and
December 27, 1989 decision4 of the Regional Trial Court (RTC), offered its services to the public.21
Branch 145, Makati, Metro Manila.5
From the nature of their business and for reasons of public policy,
The pertinent facts follow. common carriers are bound to observe extraordinary diligence over
the goods they transport according to the circumstances of each
case.22 In the event of loss of the goods, common carriers are
On November 12, 1984, petitioner Cebu Salvage Corporation (as
responsible, unless they can prove that this was brought about by
carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as
the causes specified in Article 1734 of the Civil Code.23 In all other
charterer) entered into a voyage charter6 wherein petitioner was to
cases, common carriers are presumed to be at fault or to have
load 800 to 1,100 metric tons of silica quartz on board the M/T
acted negligently, unless they prove that they observed
Espiritu Santo7 at Ayungon, Negros Occidental for transport to and
extraordinary diligence.24
discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome
Phils., Inc.8
Petitioner was the one which contracted with MCCII for the
transport of the cargo. It had control over what vessel it would use.
Pursuant to the contract, on December 23, 1984, petitioner
All throughout its dealings with MCCII, it represented itself as a
received and loaded 1,100 metric tons of silica quartz on board the
common carrier. The fact that it did not own the vessel it decided
M/T Espiritu Santo which left Ayungon for Tagoloan the next
to use to consummate the contract of carriage did not negate its
day.9 The shipment never reached its destination, however,
character and duties as a common carrier. The MCCII (respondent's
because the M/T Espiritu Santo sank in the afternoon of December
subrogor) could not be reasonably expected to inquire about the
24, 1984 off the beach of Opol, Misamis Oriental, resulting in the
ownership of the vessels which petitioner carrier offered to utilize.
total loss of the cargo.10
As a practical matter, it is very difficult and often impossible for the
general public to enforce its rights of action under a contract of
MCCII filed a claim for the loss of the shipment with its insurer,
carriage if it should be required to know who the actual owner of
respondent Philippine Home Assurance Corporation. 11 Respondent
the vessel is.25 In fact, in this case, the voyage charter itself
paid the claim in the amount of P211,500 and was subrogated to
denominated petitioner as the "owner/operator" of the vessel.26
the rights of MCCII.12 Thereafter, it filed a case in the RTC13 against
petitioner for reimbursement of the amount it paid MCCII.
Petitioner next contends that if there was a contract of carriage,
then it was between MCCII and ALS as evidenced by the bill of
After trial, the RTC rendered judgment in favor of respondent. It
lading ALS issued.27
ordered petitioner to pay respondent P211,500 plus legal interest,
attorney's fees equivalent to 25% of the award and costs of suit.
Again, we disagree.
On appeal, the CA affirmed the decision of the RTC. Hence, this
The bill of lading was merely a receipt issued by ALS to evidence
petition.
the fact that the goods had been received for transportation. It was
not signed by MCCII, as in fact it was simply signed by the
Petitioner and MCCII entered into a "voyage charter," also known
supercargo of ALS.28 This is consistent with the fact that MCCII did
as a contract of affreightment wherein the ship was leased for a
not contract directly with ALS. While it is true that a bill of lading
single voyage for the conveyance of goods, in consideration of the
may serve as the contract of carriage between the parties,29 it
payment of freight.14 Under a voyage charter, the shipowner
cannot prevail over the express provision of the voyage charter
retains the possession, command and navigation of the ship, the
that MCCII and petitioner executed:
charterer or freighter merely having use of the space in the vessel
in return for his payment of freight.15 An owner who retains
[I]n cases where a Bill of Lading has been issued by a carrier
possession of the ship remains liable as carrier and must answer for
covering goods shipped aboard a vessel under a charter party, and
loss or non-delivery of the goods received for transportation.16
the charterer is also the holder of the bill of lading, "the bill of
lading operates as the receipt for the goods, and as document of
Petitioner argues that the CA erred when it affirmed the RTC
title passing the property of the goods, but not as varying the
finding that the voyage charter it entered into with MCCII was a
contract between the charterer and the shipowner." The Bill of
contract of carriage.17 It insists that the agreement was merely a
Lading becomes, therefore, only a receipt and not the contract of
contract of hire wherein MCCII hired the vessel from its owner, ALS
carriage in a charter of the entire vessel, for the contract is the
Timber Enterprises (ALS).18 Not being the owner of the M/T Espiritu
Charter Party, and is the law between the parties who are bound
Santo, petitioner did not have control and supervision over the
vessel, its master and crew.19 Thus, it could not be held liable for
by its terms and condition provided that these are not contrary to
law, morals, good customs, public order and public policy.30

Finally, petitioner asserts that MCCII should be held liable for its
own loss since the voyage charter stipulated that cargo insurance
was for the charterer's account.31 This deserves scant
consideration. This simply meant that the charterer would take
care of having the goods insured. It could not exculpate the carrier
from liability for the breach of its contract of carriage. The law, in
fact, prohibits it and condemns it as unjust and contrary to public
policy.32

To summarize, a contract of carriage of goods was shown to exist;

the cargo was loaded on board the vessel; loss or non-delivery of
the cargo was proven; and petitioner failed to prove that it
exercised extraordinary diligence to prevent such loss or that it was
due to some casualty or force majeure. The voyage charter here
being a contract of affreightment, the carrier was answerable for
the loss of the goods received for transportation.33

The idea proposed by petitioner is not only preposterous, it is also

dangerous. It says that a carrier that enters into a contract of
carriage is not liable to the charterer or shipper if it does not own
the vessel it chooses to use. MCCII never dealt with ALS and yet
petitioner insists that MCCII should sue ALS for reimbursement for
its loss. Certainly, to permit a common carrier to escape its
responsibility for the goods it agreed to transport (by the expedient
of alleging non-ownership of the vessel it employed) would
radically derogate from the carrier's duty of extraordinary
diligence. It would also open the door to collusion between the
carrier and the supposed owner and to the possible shifting of
liability from the carrier to one without any financial capability to
answer for the resulting damages.34

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

SO ORDERED.
 20. [G.R. No. 186312 : June 29, 2010]
SPOUSES DANTE CRUZ AND LEONORA CRUZ,
PETITIONERS, VS. SUN HOLIDAYS, INC., RESPONDENT.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint
on January 25, 2001[1] against Sun Holidays, Inc. (respondent) with
the Regional Trial Court (RTC) of Pasig City for damages arising from
the death of their son Ruelito C. Cruz (Ruelito) who perished with
his wife on September 11, 2000 on board the boat M/B Coco Beach
III that capsized en route to Batangas from Puerto Galera, Oriental
Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from
September 9 to 11, 2000 was by virtue of a tour package-contract
with respondent that included transportation to and from the
Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),[2] a scuba diving instructor and one of
the survivors, gave his account of the incident that led to the filing
of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was
originally scheduled to leave the Resort in the afternoon of
September 10, 2000, but was advised to stay for another night
because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other
Resort guests including petitioners' son and his wife trekked to the
other side of the Coco Beach mountain that was sheltered from the
wind where they boarded M/B Coco Beach III, which was to ferry
them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther
away from Puerto Galera and into the open seas, the rain and wind
got stronger, causing the boat to tilt from side to side and the
captain to step forward to the front, leaving the wheel to one of
the crew members.
The waves got more unwieldy. After getting hit by two big waves
which came one after the other, M/B Coco Beach III capsized
putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get
out of the boat. Upon seeing the captain, Matute and the other
passengers who reached the surface asked him what they could do
to save the people who were still trapped under the boat. The
captain replied "Iligtas niyo na lang ang sarili niyo" (Just save
yourselves).
Help came after about 45 minutes when two boats owned by Asia
Divers in Sabang, Puerto Galera passed by the capsized M/B Coco
Beach III. Boarded on those two boats were 22 persons, consisting
of 18 passengers and four crew members, who were brought to
Pisa Island. Eight passengers, including petitioners' son and his
wife, died during the incident.
At the time of Ruelito's death, he was 28 years old and employed as
a contractual worker for Mitsui Engineering & Shipbuilding Arabia,
Ltd. in Saudi Arabia, with a basic monthly salary of $900.[3]
Petitioners, by letter of October 26, 2000,[4] demanded
indemnification from respondent for the death of their son in the
amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,[5] denied
any responsibility for the incident which it considered to be a
fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their
signing of a waiver.
As petitioners declined respondent's offer, they filed the
Complaint, as earlier reflected, alleging that respondent, as a
common carrier, was guilty of negligence in allowing M/B Coco
Beach III to sail notwithstanding storm warning bulletins issued by
the Philippine Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA) as early as 5:00 a.m. of September 11,
2000.[6]
In its Answer,[7] respondent denied being a common carrier,
alleging that its boats are not available to the general public as they
only ferry Resort guests and crew members. Nonetheless, it
claimed that it exercised the utmost diligence in ensuring the safety
of its passengers; contrary to petitioners' allegation, there was no
storm on September 11, 2000 as the Coast Guard in fact cleared
the voyage; and M/B Coco Beach III was not filled to capacity and
had sufficient life jackets for its passengers. By way of
Counterclaim, respondent alleged that it is entitled to an award for
attorney's fees and litigation expenses amounting to not less than
P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the
Resort customarily requires four conditions to be met before a boat
is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance
from the Coast Guard, (3) there is clearance from the captain and
(4) there is clearance from the Resort's assistant manager.[8] He
added that M/B Coco Beach III met all four conditions on
September 11, 2000,[9] but a subasco or squall, characterized by
strong winds and big waves, suddenly occurred, causing the boat to
capsize.[10]
By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC
dismissed petitioners' Complaint and respondent's Counterclaim.
Petitioners' Motion for Reconsideration having been denied by
Order dated September 2, 2005,[12] they appealed to the Court of
Appeals.
By Decision of August 19, 2008,[13] the appellate court denied
petitioners' appeal, holding, among other things, that the trial court
correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact
observed extraordinary diligence in transporting its guests on
board M/B Coco Beach III; and that the proximate cause of the
incident was a squall, a fortuitous event.
Petitioners' Motion for Reconsideration having been denied by
Resolution dated January 16, 2009,[14]they filed the present Petition
for Review.[15]
Petitioners maintain the position they took before the trial court,
adding that respondent is a common carrier since by its tour
package, the transporting of its guests is an integral part of its
resort business. They inform that another division of the appellate
court in fact held respondent liable for damages to the other
survivors of the incident.
Upon the other hand, respondent contends that petitioners failed
to present evidence to prove that it is a common carrier; that the
Resort's ferry services for guests cannot be considered as ancillary
to its business as no income is derived therefrom; that it exercised
extraordinary diligence as shown by the conditions it had imposed
before allowing M/B Coco Beach III to sail; that the incident was
caused by a fortuitous event without any contributory negligence
on its part; and that the other case wherein the appellate court
held it liable for damages involved different plaintiffs, issues and
evidence.[16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals[17] in
characterizing respondent 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 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 .
. .[18] (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so
intertwined with its main business as to be properly considered
ancillary thereto. The constancy of respondent's ferry services in
its resort operations is underscored by its having its
own Coco Beach boats. And the tour packages it offers, which
include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the
public.
That respondent does not charge a separate fee or fare for its ferry
services is of no moment. It would be imprudent to suppose that it
provides said services at a loss. The Court is aware of the practice
of beach resort operators offering tour packages to factor the
transportation fee in arriving at the tour package price. That guests
who opt not to avail of respondent's ferry services pay the same
amount is likewise inconsequential. These guests may only be
deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining
"common carriers" has deliberately refrained from making
distinctions on whether the carrying of persons or goods is the
carrier's principal business, whether it is offered on a regular basis,
or whether it is offered to the general public. The intent of the law
is thus to not consider such distinctions. Otherwise, there is no
telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of persons or
goods in order to avoid the legal obligations and liabilities of
common carriers.
Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported
by them, according to all the circumstances of each case.[19] They
are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.[20]
When a passenger dies or is injured in the discharge of a contract
of carriage, it is presumed that the common carrier is at fault or
negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary diligence.[21]
Respondent nevertheless harps on its strict compliance with the
earlier mentioned conditions of voyage before it allowed M/B Coco
Beach III to sail on September 11, 2000. Respondent's position
does not impress.
The evidence shows that PAGASA issued 24-hour public weather
forecasts and tropical cyclone warnings for shipping on September
10 and 11, 2000 advising of tropical depressions in Northern Luzon
which would also affect the province of Mindoro.[22] By the
testimony of Dr. Frisco Nilo, supervising weather specialist of
PAGASA, squalls are to be expected under such weather
condition.[23]
A very cautious person exercising the utmost diligence would thus
not brave such stormy weather and put other people's lives at risk.
The extraordinary diligence required of common carriers demands
that they take care of the goods or lives entrusted to their hands as
if they were their own. This respondent failed to do.
Respondent's insistence that the incident was caused by a
fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the
debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso
fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any
participation in the aggravation of the resulting injury to the
creditor.[24]
To fully free a common carrier from any liability, the fortuitous
event must have been the proximate and only cause of the loss.
And it should have exercised due diligence to prevent or minimize
the loss before, during and after the occurrence of the fortuitous
event.[25]
Respondent cites the squall that occurred during the voyage as the
fortuitous event that overturned M/B Coco Beach III. As reflected
 above, however, the occurrence of squalls was expected under the
weather condition of September 11, 2000. Moreover, evidence
shows that M/B Coco Beach III suffered engine trouble before it
capsized and sank.[26] The incident was, therefore, not completely
free from human intervention.
The Court need not belabor how respondent's evidence likewise
fails to demonstrate that it exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
squall.
Article 1764[27] vis-ו-vis Article 2206[28] of the Civil Code holds the
common carrier in breach of its contract of carriage that results in
the death of a passenger liable to pay the following: (1) indemnity
for death, (2) indemnity for loss of earning capacity and (3) moral
damages.
Petitioners are entitled to indemnity for the death of Ruelito which
is fixed at P50,000.[29]
As for damages representing unearned income, the formula for its
computation is:
g = life expectancy x (gross annual income - reasonable and necessary respondent
expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 -- age of deceased at the time of death][30]
The first factor, i.e., life expectancy, is computed by applying the
formula (2/3 x [80 -- age at death]) adopted in the American
Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.[31]
The second factor is computed by multiplying the life expectancy
by the net earnings of the deceased, i.e., the total earnings less
expenses necessary in the creation of such earnings or income and
less living and other incidental expenses.[32] The loss is not
equivalent to the entire earnings of the deceased, but only such
portion as he would have used to support his dependents or heirs.
Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own
needs.[33]
In computing the third factor - necessary living expense, Smith Bell
Dodwell Shipping Agency Corp. v. Borja[34] teaches that when, as in
this case, there is no showing that the living expenses constituted
the smaller percentage of the gross income, the living expenses are
fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life
expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic
monthly salary of $900[35] which, when converted to Philippine
peso applying the annual average exchange rate of $1 = P44 in
2000,[36]amounts to P39,600. Ruelito's net earning capacity is thus
computed as follows:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent
common carrier's breach of contract of carriage resulted in the
death of petitioners' son, following Article 1764 vis-ו-vis Article
2206 of the Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary
diligence required of common carriers, it is presumed to have acted
recklessly, thus warranting the award too of exemplary damages,
which are granted in contractual obligations if the defendant acted
in a wanton, fraudulent, reckless, oppressive or malevolent
manner.[37]
Under the circumstances, it is reasonable to award petitioners the
amount of P100,000 as moral damages and P100,000 as exemplary
damages.[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's fees may
also be awarded where exemplary damages are awarded. The
Court finds that 10% of the total amount adjudged against
living is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals[40] teaches
that when an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for payment of interest in the
concept of actual and compensatory damages, subject to the
following rules, to wit --
1. When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance
of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined
with certainty only in the present petition, the interest due shall be
computed upon the finality of this decision at the rate of 12% per
annum until satisfaction, in accordance with paragraph number 3
of the immediately cited guideline in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008

is REVERSED and SET ASIDE. Judgment is rendered in favor of
petitioners ordering respondent to pay petitioners the following:
(1) P50,000 as indemnity for the death of Ruelito Cruz; (2)
P8,316,000 as indemnity for Ruelito's loss of earning capacity; (3)
P100,000 as moral damages; (4) P100,000 as exemplary damages;
(5) 10% of the total amount adjudged against respondent as
attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest

at the rate of 12% per annum computed from the finality of this
decision until full payment.

SO ORDERED.
 21. [G.R. No. 166250 : July 26, 2010]
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC.,
PETITIONER, VS. COURT OF APPEALS AND PIONEER
INSURANCE AND SURETY CORPORATION, RESPONDENTS.
DECISION
NACHURA, J.:
For review is the Court of Appeals (CA) Decision[1] dated April 29,
2004 and Resolution[2] dated November 26, 2004. The assailed
Decision affirmed the Regional Trial Court (RTC) decision[3] dated
February 22, 2001; while the assailed Resolution denied petitioner
Unsworth Transport International (Philippines), Inc., American
President Lines, Ltd. (APL), and Unsworth Transport International,
Inc.'s (UTI's) motion for reconsideration.
The facts of the case are:
On August 31, 1992, the shipper Sylvex Purchasing Corporation
delivered to UTI a shipment of 27 drums of various raw materials
for pharmaceutical manufacturing, consisting of: "1) 3 drums (of)
extracts, flavoring liquid, flammable liquid x x x banana flavoring; 2)
2 drums (of) flammable liquids x x x turpentine oil; 2 pallets. STC:
40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B
Complex Extract."[4] UTI issued Bill of Lading No. C320/C15991-
2,[5] covering the aforesaid shipment. The subject shipment was
insured with private respondent Pioneer Insurance and Surety
Corporation in favor of Unilab against all risks in the amount of
P1,779,664.77 under and by virtue of Marine Risk Note Number MC
RM UL 0627 92[6] and Open Cargo Policy No. HO-022-RIU.[7]
On the same day that the bill of lading was issued, the shipment
was loaded in a sealed 1x40 container van, with no. APLU-982012,
boarded on APL's vessel M/V "Pres. Jackson," Voyage 42, and
transshipped to APL's M/V "Pres. Taft"[8] for delivery to petitioner
in favor of the consignee United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of
Manila. On October 6, 1992, petitioner received the said shipment
in its warehouse after it stamped the Permit to Deliver Imported
Goods[9]procured by the Champs Customs Brokerage.[10] Three
days thereafter, or on October 9, 1992, Oceanica Cargo Marine
Surveyors Corporation (OCMSC) conducted a stripping survey of
the shipment located in petitioner's warehouse. The survey results
stated:
2-pallets STC 40 bags Dried Yeast, both in good order condition and
properly sealed
19- steel drums STC Vitamin B Complex Extract, all in good order
condition and properly sealed
1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side,
with approx. spilling of 1%[11]
On October 15, 1992, the arrastre Jardine Davies Transport
Services, Inc. (Jardine) issued Gate Pass No. 7614[12] which stated
that "22 drums[13] Raw Materials for Pharmaceutical Mfg." were
loaded on a truck with Plate No. PCK-434 facilitated by Champs for
delivery to Unilab's warehouse. The materials were noted to be
complete and in good order in the gate pass.[14] On the same day,
the shipment arrived in Unilab's warehouse and was immediately
surveyed by an independent surveyor, J.G. Bernas Adjusters &
Surveyors, Inc. (J.G. Bernas). The Report stated:
1-p/bag torn on side contents partly spilled
1-s/drum #7 punctured and retaped on bottom side content lacking
5-drums shortship/short delivery[15]
On October 23 and 28, 1992, the same independent surveyor
conducted final inspection surveys which yielded the same results.
Consequently, Unilab's quality control representative rejected one
paper bag containing dried yeast and one steel drum containing
Vitamin B Complex as unfit for the intended purpose.[16]
On November 7, 1992, Unilab filed a formal claim[17] for the
damage against private respondent and UTI. On November 20,
1992, UTI denied liability on the basis of the gate pass issued by
Jardine that the goods were in complete and good condition; while
private respondent paid the claimed amount on March 23, 1993. By
virtue of the Loss and Subrogation Receipt[18] issued by Unilab in
favor of private respondent, the latter filed a complaint
for Damages against APL, UTI and petitioner with the RTC of
Makati.[19] The case was docketed as Civil Case No. 93-3473 and
was raffled to Branch 134.
After the termination of the pre-trial conference, trial on the merits
ensued. On February 22, 2001, the RTC decided in favor of private
respondent and against APL, UTI and petitioner, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintif
PIONEER INSURANCE & SURETY CORPORATION and against the
defendants AMERICAN PRESIDENT LINES and UNSWORTH
TRANSPORT INTERNATIONAL (PHILS.), INC. (now known as JUGRO
TRANSPORT INT'L., PHILS.), ordering the latter to pay, jointly and
severally, the former the following amounts:
1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED
THIRTY ONE and 27/100 (Php76,231.27) with interest at
the legal rate of 6% per annum to be computed starting
from September 30, 1993 until fully paid, for and as actual
damages;
2. The amount equivalent to 25% of the total sum as
attorney's fees;
3. Cost of this litigation.
SO ORDERED.[20]
On appeal, the CA affirmed the RTC decision on April 29, 2004. The
CA rejected UTI's defense that it was merely a forwarder, declaring
instead that it was a common carrier. The appellate court added
that by issuing the Bill of Lading, UTI acknowledged receipt of the
goods and agreed to transport and deliver them at a specific place
to a person named or his order. The court further concluded that
upon the delivery of the subject shipment to petitioner's
warehouse, its liability became similar to that of a depositary. As
such, it ought to have exercised ordinary diligence in the care of
the goods. And as found by the RTC, the CA agreed that petitioner
failed to exercise the required diligence. The CA also rejected
petitioner's claim that its liability should be limited to $500 per
package pursuant to the Carriage of Goods by Sea Act (COGSA)
considering that the value of the shipment was declared pursuant
to the letter of credit and the pro forma invoice. As to APL, the
court considered it as a common carrier notwithstanding the non-
issuance of a bill of lading inasmuch as a bill of lading is not
indispensable for the execution of a contract of carriage.[21]
Unsatisfied, petitioner comes to us in this petition for review
on certiorari, raising the following issues:
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN UPHOLDING THE DECISION OF THE
REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001, AWARDING
THE SUM OF SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE
AND 27/100 PESOS (PHP76,231.27) WITH LEGAL INTEREST AT 6%
PER ANNUM AS ACTUAL DAMAGES AND 25% AS ATTORNEY'S FEES.
2. WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.
3. WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED
ORDINARY DILIGENCE.
4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY
ESTABLISHED THE ALLEGED DAMAGE TO ITS CARGO.[22]
Petitioner admits that it is a forwarder but disagrees with the CA's
conclusion that it is a common carrier. It also questions the
appellate court's findings that it failed to establish that it exercised
extraordinary or ordinary diligence in the vigilance over the subject
shipment. As to the damages allegedly suffered by private
respondent, petitioner counters that they were not sufficiently
proven. Lastly, it insists that its liability, in any event, should be
limited to $500 pursuant to the package limitation rule. Indeed,
petitioner wants us to review the factual findings of the RTC and
the CA and to evaluate anew the evidence presented by the
parties.
The petition is partly meritorious.
Well established is the rule that factual questions may not be raised
in a petition for review on certiorarias clearly stated in Section 1,
Rule 45 of the Rules of Court, viz.:
Section 1. Filing of petition with Supreme Court. - A party desiring
to appeal by certiorarifrom a judgment or final order or resolution
of the Court of Appeals, the Sandiganbayan, the Regional Trial
Court or other courts whenever authorized by law, may file with
the Supreme Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be distinctly
set forth.
Admittedly, petitioner is a freight forwarder. The term "freight
forwarder" refers to a firm holding itself out to the general public
(other than as a pipeline, rail, motor, or water carrier) to provide
transportation of property for compensation and, in the ordinary
course of its business, (1) to
assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for break-bulk
and distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of
receipt to the place of destination; and (3) to use for any part of the
transportation a carrier subject to the federal law pertaining to
common carriers.[23]
A freight forwarder's liability is limited to damages arising from its
own negligence, including negligence in choosing the carrier;
however, where the forwarder contracts to deliver goods to their
destination instead of merely arranging for their transportation, it
becomes liable as a common carrier for loss or damage to goods. A
freight forwarder assumes the responsibility of a carrier, which
actually executes the transport, even though the forwarder does
not carry the merchandise itself.[24]
It is undisputed that UTI issued a bill of lading in favor of Unilab.
Pursuant thereto, petitioner undertook to transport, ship, and
deliver the 27 drums of raw materials for pharmaceutical
manufacturing to the consignee.
A bill of lading is a written acknowledgement of the receipt of
goods and an agreement to transport and to deliver them at a
specified place to a person named or on his or her order.[25] It
operates both as a receipt and as a contract. It is a receipt for the
goods shipped and a contract to transport and
deliver the same as therein stipulated. As a receipt, it recites the
date and place of shipment, describes the goods as to quantity,
weight, dimensions, identification marks, condition, quality, and
value. As a contract, it names the contracting parties, which include
the consignee; fixes the route, destination, and freight rate or
charges; and stipulates the rights and obligations assumed by the
parties.[26]
Undoubtedly, UTI is liable as a common carrier. Common carriers,
as a general rule, are presumed to have been at fault or negligent if
the goods they transported deteriorated or got lost or destroyed.
That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid responsibility
for any loss or damage, therefore, they have the burden of proving
that they observed such diligence.[27] Mere proof of delivery of the
goods in good order to a common carrier and of their arrival in bad
order at their destination constitutes a prima facie case of fault or
negligence against the carrier. If no adequate explanation is given
as to how the deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible.[28]
Though it is not our function to evaluate anew the evidence
presented, we refer to the records of the case to show that, as
correctly found by the RTC and the CA, petitioner failed to rebut
the prima facie presumption of negligence in the carriage of the
subject shipment.
First, as stated in the bill of lading, the subject shipment was
received by UTI in apparent good order and condition in New York,
United States of America. Second, the OCMSC Survey Report stated
that one steel drum STC Vitamin B Complex Extract was discovered
to be with a cut/hole on the side, with approximate spilling of
1%. Third, though Gate Pass No. 7614, issued by Jardine, noted that
the subject shipment was in good order and condition, it was
specifically stated that there were 22 (should be 27 drums per Bill
of Lading No. C320/C15991-2) drums of raw materials for
pharmaceutical manufacturing. Last, J.G. Bernas' Survey Report
stated that "1-s/drum was punctured and retaped on the bottom
side and the content was lacking, and there was a short delivery of
5-drums."
All these conclusively prove the fact of shipment in good order and
condition, and the consequent damage to one steel drum of
Vitamin B Complex Extract while in the possession of petitioner
which failed to explain the reason for the damage. Further,
petitioner failed to prove that it observed the extraordinary
diligence and precaution which the law requires a common carrier
to exercise and to follow in order to avoid damage to or destruction
of the goods entrusted to it for safe carriage and delivery.[29]
However, we affirm the applicability of the Package Limitation Rule
under the COGSA, contrary to the RTC and the CA's findings.
It is to be noted that the Civil Code does not limit the liability of the
common carrier to a fixed amount per package. In all matters not
regulated by the Civil Code, the rights and obligations of common
carriers are governed by the Code of Commerce and special laws.
Thus, the COGSA supplements the Civil Code by establishing a
provision limiting the carrier's liability in the absence of a shipper's
declaration of a higher value in the bill of lading.[30] Section 4(5) of
the COGSA provides:
(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
of 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 the bill of lading. This declaration, if embodied in the bill
of lading, shall be prima facie evidence, but shall not be conclusive
on the carrier.

In the present case, the shipper did not declare a higher valuation
of the goods to be shipped. Contrary to the CA's conclusion, the
insertion of the words "L/C No. LC No. 1-187-008394/ NY 69867
covering shipment of raw materials for pharmaceutical Mfg. x x x"
cannot be the basis of petitioner's liability.[31] Furthermore, the
insertion of an invoice number does not in itself sufficiently and
convincingly show that petitioner had knowledge of the value of
the cargo.[32]

In light of the foregoing, petitioner's liability should be limited to

$500 per steel drum. In this case, as there was only one drum lost,
private respondent is entitled to receive only $500 as damages for
the loss. In addition to said amount, as aptly held by the trial court,
an interest rate of 6% per annumshould also be imposed, plus 25%
of the total sum as attorney's fees.

WHEREFORE, premises considered, the petition is PARTIALLY

GRANTED. The Court of Appeals Decision dated April 29, 2004 and
Resolution dated November 26, 2004
are AFFIRMED with MODIFICATION by reducing the principal
amount due private respondent Pioneer Insurance and Surety
Corporation from P76,231.27 to $500, with interest of 6% per
annum from date of demand, and 25% of the amount due as
attorney's fees.

The other aspects of the assailed Decision and Resolution STAND.

SO ORDERED.
 22. [G.R. NO. 157917 - August 29, 2012]
SPOUSES TEODORO1 and NANETTE
PERENA, Petitioners, v. SPOUSES TERESITA PHILIPPINE NICOLAS
and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the
eyes of the law. He is bound to observe extraordinary diligence in
the conduct of his business. He is presumed to be negligent when
death occurs to a passenger. His liability may include indemnity for
loss of earning capacity even if the deceased passenger may only
be an unemployed high school student at the time of the accident.
The Case
By Petition for Review on Certiorari, Spouses Teodoro and Nanette
Perefia (Perefias) appeal the adverse decision promulgated on
November 13, 2002, by which the Court of Appeals (CA) affirmed
with modification the decision rendered on December 3, 1999 by
the Regional Trial Court (RTC), Branch 260, in Parañaque City that
had decreed them jointly and severally liable with Philippine
National Railways (PNR), their co-defendant, to Spouses Nicolas
and Teresita Zarate (Zarates) for the death of their 15-year old son,
Aaron John L. Zarate (Aaron), then a high school student of Don
Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting
students from their respective residences in Parañaque City to
Don Bosco in Pasong Tamo, Makati City, and back. In their business,
the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896,
which had the capacity to transport 14 students at a time, two of
whom would be seated in the front beside the driver, and the
others in the rear, with six students on either side. They employed
Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport
Aaron to and from Don Bosco. On August 22, 1996, as on previous
school days, the van picked Aaron up around 6:00 a.m. from the
Zarates residence. Aaron took his place on the left side of the van
near the rear door. The van, with its air-conditioning unit turned on
and the stereo playing loudly, ultimately carried all the 14 student
riders on their way to Don Bosco. Considering that the students
were due at Don Bosco by 7:15 a.m., and that they were already
running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about
6:45 a.m. by traversing the narrow path underneath the
Magallanes Interchange that was then commonly used by Makati-
bound vehicles as a short cut into Makati. At the time, the narrow
path was marked by piles of construction materials and parked
passenger jeepneys, and the railroad crossing in the narrow path
had no railroad warning signs, or watchmen, or other responsible
persons manning the crossing. In fact, the bamboo barandilla was
up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing,
PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano),
was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove
the van eastward across the railroad tracks, closely tailing a large
passenger bus. His view of the oncoming train was blocked because
he overtook the passenger bus on its left side. The train blew its
horn to warn motorists of its approach. When the train was about
50 meters away from the passenger bus and the van, Alano applied
the ordinary brakes of the train. He applied the emergency brakes
only when he saw that a collision was imminent. The passenger bus
successfully crossed the railroad tracks, but the van driven by
Alfaro did not. The train hit the rear end of the van, and the impact
threw nine of the 12 students in the rear, including Aaron, out of
the van. Aaron landed in the path of the train, which dragged his
body and severed his head, instantaneously killing him. Alano fled
the scene on board the train, and did not wait for the police
investigator to arrive.
Devastated by the early and unexpected death of Aaron, the
Zarates commenced this action for damages against Alfaro, the
Pereñas, PNR and Alano. The Pereñas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro
could not be served with summons.ςηαñrοblεš νιr†υαl
lαω lιbrαrÿ
At the pre-trial, the parties stipulated on the facts and issues,
viz:ςrαlαω
A. FACTS:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
(1) That spouses Zarate were the legitimate parents of Aaron
John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereña for
the adequate and safe transportation carriage of the former
spouses' son from their residence in Parañaque to his school at
the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the
implementation thereof, Aaron, the minor son of spouses Zarate
died in connection with a vehicular/train collision which occurred
while Aaron was riding the contracted carrier Kia Ceres van of
spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided
with the train of PNR, at around 6:45 A.M. of August 22, 1996,
within the vicinity of the Magallanes Interchange in Makati City,
Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site
of the vehicular/train collision was a railroad crossing used by
motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there
were no appropriate and safety warning signs and railings at the
site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound
public utility and private vehicles used on a daily basis the site of
the collision as an alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on
board the commuter train involved without waiting for the police
investigator;
(8) The site commonly used for railroad crossing by motorists
was not in fact intended by the railroad operator for railroad
crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the
vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by
PNR was an internal arrangement between the former and its
project contractor; andcralawlibrary
(12) The site of the vehicular/train collision was within the
vicinity or less than 100 meters from the Magallanes station of
PNR.
chanrobles virtual law library
B. ISSUESςηαñrοblεš νιr†υαl lαω lιbrαrÿ
(1) Whether or not defendant-driver of the van is, in the
performance of his functions, liable for negligence constituting the
proximate cause of the vehicular collision, which resulted in the
death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the
employer of defendant Alfaro are liable for any negligence which
may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being
the operator of the railroad system is liable for negligence in failing
to provide adequate safety warning signs and railings in the area
commonly used by motorists for railroad crossings, constituting the
proximate cause of the vehicular collision which resulted in the
death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for
breach of the contract of carriage with plaintiff-spouses in failing to
provide adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral
damages, exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette
Pereña observed the diligence of employers and school bus
operators;
(7) Whether or not defendant-spouses are civilly liable for the
accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in
operating the commuter train involved in the accident, in allowing
or tolerating the motoring public to cross, and its failure to install
safety devices or equipment at the site of the accident for the
protection of the public;
(9) Whether or not defendant PNR should be made to reimburse
defendant spouses for any and whatever amount the latter may be
held answerable or which they may be ordered to pay in favor of
plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly
and fully on the amounts claimed by the latter in their Complaint
by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses
for actual, moral and exemplary damages and attorney's
fees.2ςrνll
chanrobles virtual law library
The Zarates claim against the Pereñas was upon breach of the
contract of carriage for the safe transport of Aaron; but that against
PNR was based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they
had exercised the diligence of a good father of the family in the
selection and supervision of Alfaro, by making sure that Alfaro had
been issued a driver s license and had not been involved in any
vehicular accident prior to the collision; that their own son had
taken the van daily; and that Teodoro Pereña had sometimes
accompanied Alfaro in the van s trips transporting the students to
school.
For its part, PNR tended to show that the proximate cause of the
collision had been the reckless crossing of the van whose driver had
not first stopped, looked and listened; and that the narrow path
traversed by the van had not been intended to be a railroad
crossing for motorists.
Ruling of the RTCςηαñrοblεš νιr†υαl lαω lιbrαrÿ
On December 3, 1999, the RTC rendered its
decision,3 disposing:ςrαlαω
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendants ordering them to
jointly and severally pay the plaintiffs as follows:ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
chanrobles virtual law library
On June 29, 2000, the RTC denied the Pereñas motion for
reconsideration,4 reiterating that the cooperative gross negligence
of the Pereñas and PNR had caused the collision that led to the
death of Aaron; and that the damages awarded to the Zarates were
not excessive, but based on the established circumstances.
The CA s Rulingςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5ςrνll
The Court a quo erred in:ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
1. In finding the defendant-appellant Philippine National Railways
jointly and severally liable together with defendant-appellants
spouses Teodorico and Nanette Pereña and defendant-appellant
Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron
Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-
appellees witnesses despite overwhelming documentary evidence
on record, supporting the case of defendants-appellants Philippine
National Railways.
chanrobles virtual law library
The Pereñas ascribed the following errors to the RTC,
namely:ςrαlαω
The trial court erred in finding defendants-appellants jointly and
severally liable for actual, moral and exemplary damages and
attorney s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants
Pereñas against the Philippine National Railways and in not
holding the latter and its train driver primarily responsible for the
incident.
The trial court erred in awarding excessive damages and attorney s
fees.
The trial court erred in awarding damages in the form of deceased s
loss of earning capacity in the absence of sufficient basis for such
an award.
chanrobles virtual law library
On November 13, 2002, the CA promulgated its decision, affirming
the findings of the RTC, but limited the moral damages
to P 2,500,000.00; and deleted the attorney s fees because the RTC
did not state the factual and legal bases, to wit: 6ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
WHEREFORE, premises considered, the assailed Decision of the
Regional Trial Court, Branch 260 of Parañaque City is AFFIRMED
with the modification that the award of Actual Damages is reduced
to P 59,502.76; Moral Damages is reduced to P 2,500,000.00; and
the award for Attorney s Fees is Deleted.ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
SO ORDERED.
chanrobles virtual law library
The CA upheld the award for the loss of Aaron s earning capacity,
taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,7 wherein the Court gave
the heirs of Cariaga a sum representing the loss of the deceased s
earning capacity despite Cariaga being only a medical student at
the time of the fatal incident. Applying the formula adopted in the
American Expectancy Table of Mortality:
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years
upon reckoning his life expectancy from age of 21 (the age when he
would have graduated from college and started working for his
own livelihood) instead of 15 years (his age when he died).
Considering that the nature of his work and his salary at the time of
Aaron s death were unknown, it used the prevailing minimum wage
of P280.00/day to compute Aaron s gross annual salary to
be P 110,716.65, inclusive of the thirteenth month pay. Multiplying
this annual salary by Aaron s life expectancy of 39.3 years, his gross
income would aggregate to P 4,351,164.30, from which his
estimated expenses in the sum of P 2,189,664.30 was deducted to
finally arrive at P 2,161,500.00 as net income. Due to Aaron s
computed net income turning out to be higher than the amount
claimed by the Zarates, only P 2,109,071.00, the amount expressly
prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereñas motion for
reconsideration.8ςrνll
Issues
In this appeal, the Pereñas list the following as the errors
committed by the CA, to wit:ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
I. The lower court erred when it upheld the trial court s decision
holding the petitioners jointly and severally liable to pay damages
with Philippine National Railways and dismissing their cross-claim
against the latter.
II. The lower court erred in affirming the trial court s decision
awarding damages for loss of earning capacity of a minor who was
only a high school student at the time of his death in the absence of
sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of
damages awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
chanrobles virtual law library
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against
both the Pereñas and the PNR, basing their claim against the
Pereñas on breach of contract of carriage and against the PNR on
quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA
affirmed the findings.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
We concur with the CA.
chanrobles virtual law library
To start with, the Pereñas defense was that they exercised the
diligence of a good father of the family in the selection and
supervision of Alfaro, the van driver, by seeing to it that Alfaro had
a driver s license and that he had not been involved in any
vehicular accident prior to the fatal collision with the train; that
they even had their own son travel to and from school on a daily
basis; and that Teodoro Pereña himself sometimes accompanied
Alfaro in transporting the passengers to and from school. The RTC
gave scant consideration to such defense by regarding such
defense as inappropriate in an action for breach of contract of
carriage.
We find no adequate cause to differ from the conclusions of the
lower courts that the Pereñas operated as a common carrier; and
that their standard of care was extraordinary diligence, not the
ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has
been usually regarded as a private carrier,9 primarily because he
only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use,
the exact nature of the operation of a school bus service has not
been finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or
convey goods or persons from one place to another, gratuitously or
for hire. The carrier is classified either as a private/special carrier or
as a common/public carrier.10 A private carrier is one who, without
making the activity a vocation, or without holding himself or itself
out to the public as ready to act for all who may desire his or its
services, undertakes, by special agreement in a particular instance
only, to transport goods or persons from one place to another
either gratuitously or for hire.11 The provisions on ordinary
contracts of the Civil Code govern the contract of private
carriage.The diligence required of a private carrier is only ordinary,
that is, the diligence of a good father of the family. In contrast, a
common carrier is a 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
such services to the public.12 Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code,
the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have
acted negligently in case of the loss of the effects of passengers, or
the death or injuries to passengers.14ςrνll
In relation to common carriers, the Court defined public use in the
following terms in United States v. Tan Piaco,15 viz:ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
"Public use" is the same as "use by the public". The essential
feature of the public use is not confined to privileged individuals,
but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining
whether a use is public, we must look not only to the character of
the business to be done, but also to the proposed mode of doing it.
If the use is merely optional with the owners, or the public benefit
is merely incidental, it is not a public use, authorizing the exercise
of the jurisdiction of the public utility commission. There must be,
in general, a right which the law compels the owner to give to the
general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public
interest. The true criterion by which to judge the character of the
use is whether the public may enjoy it by right or only by
permission.
chanrobles virtual law library
In De Guzman v. Court of Appeals,16 the Court noted that Article
1732 of the Civil Code avoided any distinction between a person or
an enterprise offering transportation on a regular or an isolated
basis; and has not distinguished a carrier offering his services to the
general public, that is, the general community or population, from
one offering his services only to a narrow segment of the general
population.
Nonetheless, the concept of a common carrier embodied in Article
1732 of the Civil Code coincides neatly with the notion of public
service under the Public Service Act, which supplements the law on
common carriers found in the Civil Code. Public service, according
to Section 13, paragraph (b) of the Public Service Act,
includes:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
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 clientèle, whether permanent or
occasional, and done for the 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, 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 broasting stations and other similar public services. x x
x.17ςrνll
chanrobles virtual law library
Given the breadth of the aforequoted characterization of a
common carrier, the Court has considered as common carriers
pipeline operators,18 custom brokers and warehousemen,19 and
barge operators20even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is
not the quantity or extent of the business actually transacted, or
the number and character of the conveyances used in the activity,
but whether the undertaking is a part of the activity engaged in by
the carrier that he has held out to the general public as his business
or occupation. If the undertaking is a single transaction, not a part
of the general business or occupation engaged in, as advertised and
held out to the general public, the individual or the entity rendering
such service is a private, not a common, carrier. The question must
be determined by the character of the business actually carried on
by the carrier, not by any secret intention or mental reservation it
may entertain or assert when charged with the duties and
obligations that the law imposes.21ςrνll
Applying these considerations to the case before us, there is no
question that the Pereñas as the operators of a school bus service
were: (a) engaged in transporting passengers generally as a
business, not just as a casual occupation; (b) undertaking to carry
passengers over established roads by the method by which the
business was conducted; and (c) transporting students for a fee.
Despite catering to a limited clientèle, the Pereñas operated as a
common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular
school living within or near where they operated the service and
for a fee.
The common carrier s standard of care and vigilance as to the
safety of the passengers is defined by law. Given the nature of the
business and for reasons of public policy, the common carrier is
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."22 Article 1755 of
the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due
regard for all the circumstances." To successfully fend off liability in
an action upon the death or injury to a passenger, the common
carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at
fault or acted negligently would stand.23 No device, whether by
stipulation, posting of notices, statements on tickets, or otherwise,
may dispense with or lessen the responsibility of the common
carrier as defined under Article 1755 of the Civil Code. 24ςrνll
And, secondly, the Pereñas have not presented any compelling
defense or reason by which the Court might now reverse the CA s
findings on their liability. On the contrary, an examination of the
records shows that the evidence fully supported the findings of the
CA.
As earlier stated, the Pereñas, acting as a common carrier, were
already presumed to be negligent at the time of the accident
because death had occurred to their passenger.25 The presumption
of negligence, being a presumption of law, laid the burden of
evidence on their shoulders to establish that they had not been
negligent.26 It was the law no less that required them to prove their
observance of extraordinary diligence in seeing to the safe and
secure carriage of the passengers to their destination. Until they
did so in a credible manner, they stood to be held legally
responsible for the death of Aaron and thus to be held liable for all
the natural consequences of such death.
There is no question that the Pereñas did not overturn the
presumption of their negligence by credible evidence. Their
defense of having observed the diligence of a good father of a
family in the selection and supervision of their driver was not
legally sufficient. According to Article 1759 of the Civil Code, their
liability as a common carrier did not cease upon proof that they
exercised all the diligence of a good father of a family in the
selection and supervision of their employee. This was the reason
why the RTC treated this defense of the Pereñas as inappropriate
in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact
that their driver might have acted beyond the scope of his
authority or even in violation of the orders of the common
carrier.27 In this connection, the records showed their driver s
actual negligence. There was a showing, to begin with, that their
driver traversed the railroad tracks at a point at which the PNR did
not permit motorists going into the Makati area to cross the
railroad tracks. Although that point had been used by motorists as
a shortcut into the Makati area, that fact alone did not excuse their
driver into taking that route. On the other hand, with his familiarity
with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack
of care was that loud music was playing inside the air-conditioned
van at the time of the accident. The loudness most probably
reduced his ability to hear the warning horns of the oncoming train
to allow him to correctly appreciate the lurking dangers on the
railroad tracks. Also, he sought to overtake a passenger bus on the
left side as both vehicles traversed the railroad tracks. In so doing,
he lost his view of the train that was then coming from the
opposite side of the passenger bus, leading him to miscalculate his
chances of beating the bus in their race, and of getting clear of the
train. As a result, the bus avoided a collision with the train but the
van got slammed at its rear, causing the fatality. Lastly, he did not
slow down or go to a full stop before traversing the railroad tracks
despite knowing that his slackening of speed and going to a full
stop were in observance of the right of way at railroad tracks as
defined by the traffic laws and regulations.28 He thereby violated a
specific traffic regulation on right of way, by virtue of which he was
immediately presumed to be negligent. 29ςrνll
The omissions of care on the part of the van driver constituted
negligence,30 which, according to Layugan v. Intermediate
Appellate Court,31 is "the omission to do something which a
reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do, 32 or
as Judge Cooley defines it, (t)he failure to observe for the
protection of the interests of another person, that degree of care,
precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury. "33ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
The test by which to determine the existence of negligence in a
particular case has been aptly stated in the leading case of Picart v.
Smith,34 thuswise:ςrαlαω
The test by which to determine the existence of negligence in a
particular case may be stated as follows: 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. The law here
in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law.
The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent
man in a given situation must of course be always determined in
the light of human experience and in view of the facts involved in
the particular case. Abstract speculation cannot here be of much
value but this much can be profitably said: Reasonable men govern
their conduct by the circumstances which are before them or
known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care
only when there is something before them to suggest or warn of
danger. Could a prudent man, in the case under consideration,
foresee harm as a result of the course actually pursued? If so, it
was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by the ignoring of
the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper
criterion for determining the existence of negligence in a given case
is this: Conduct is said to be negligent when a prudent man in the
position of the tortfeasor would have foreseen that an effect
harmful to another was sufficiently probable to warrant his
foregoing the conduct or guarding against its consequences.
(Emphasis supplied)cralawlibrary
chanrobles virtual law library
Pursuant to the Picart v. Smith test of negligence, the Pereñas
driver was entirely negligent when he traversed the railroad tracks
at a point not allowed for a motorist s crossing despite being fully
aware of the grave harm to be thereby caused to his passengers;
and when he disregarded the foresight of harm to his passengers
by overtaking the bus on the left side as to leave himself blind to
the approach of the oncoming train that he knew was on the
opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v.
Intermediate Appellate Court,35 where the Court held the PNR
solely liable for the damages caused to a passenger bus and its
passengers when its train hit the rear end of the bus that was then
traversing the railroad crossing. But the circumstances of that case
and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory
negligence was adduced against the owner of the bus. Instead, it
was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete
with the showing of negligence on the part of both the Pereñas
and the PNR. Another distinction is that the passenger bus in
Philippine National Railways v. Intermediate Appellate Court was
traversing the dedicated railroad crossing when it was hit by the
train, but the Pereñas school van traversed the railroad tracks at a
point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas and
the PNR "jointly and severally" liable for damages arising from the
death of Aaron. They had been impleaded in the same complaint as
defendants against whom the Zarates had the right to relief,
whether jointly, severally, or in the alternative, in respect to or
arising out of the accident, and questions of fact and of law were
common as to the Zarates.36 Although the basis of the right to relief
of the Zarates (i.e., breach of contract of carriage) against the
Pereñas was distinct from the basis of the Zarates right to relief
against the PNR (i.e., quasi-delict under Article 2176, Civil Code),
they nonetheless could be held jointly and severally liable by virtue
of their respective negligence combining to cause the death of
Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
negligence despite the school van of the Pereñas traversing the
railroad tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR did not
ensure the safety of others through the placing of crossbars, signal
lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The RTC
observed that the fact that a crossing guard had been assigned to
man that point from 7 a.m. to 5 p.m. was a good indicium that the
PNR was aware of the risks to others as well as the need to control
the vehicular and other traffic there. Verily, the Pereñas and the
PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron s earning capacity proper?
The RTC awarded indemnity for loss of Aaron s earning capacity.
Although agreeing with the RTC on the liability, the CA modified the
amount. Both lower courts took into consideration that Aaron,
while only a high school student, had been enrolled in one of the
reputable schools in the Philippines and that he had been a normal
and able-bodied child prior to his death. The basis for the
computation of Aaron s earning capacity was not what he would
have become or what he would have wanted to be if not for his
untimely death, but the minimum wage in effect at the time of his
death. Moreover, the RTC s computation of Aaron s life expectancy
rate was not reckoned from his age of 15 years at the time of his
death, but on 21 years, his age when he would have graduated
from college.
We find the considerations taken into account by the lower courts
to be reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning
capacity was speculative and unfounded. They cited People v.
Teehankee, Jr.,37 where the Court deleted the indemnity for victim
Jussi Leino s loss of earning capacity as a pilot for being speculative
due to his having graduated from high school at the International
School in Manila only two years before the shooting, and was at
the time of the shooting only enrolled in the first semester at the
Manila Aero Club to pursue his ambition to become a professional
pilot. That meant, according to the Court, that he was for all intents
and purposes only a high school graduate.ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
We reject the Pereñas submission.
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First of all, a careful perusal of the Teehankee, Jr. case shows that
the situation there of Jussi Leino was not akin to that of Aaron
here. The CA and the RTC were not speculating that Aaron would
be some highly-paid professional, like a pilot (or, for that matter, an
engineer, a physician, or a lawyer). Instead, the computation of
Aaron s earning capacity was premised on him being a lowly
minimum wage earner despite his being then enrolled at a
prestigious high school like Don Bosco in Makati, a fact that would
have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of
earnings should not be taken against his parents and in favor of the
defendants whose negligence not only cost Aaron his life and his
right to work and earn money, but also deprived his parents of
their right to his presence and his services as well. Our law itself
states that the loss of the earning capacity of the deceased shall be
the liability of the guilty party in favor of the heirs of the deceased,
and shall in every case be assessed and awarded by the court
"unless the deceased on account of permanent physical disability
not caused by the defendant, had no earning capacity at the time
of his death."38 Accordingly, we emphatically hold in favor of the
indemnification for Aaron s loss of earning capacity despite him
having been unemployed, because compensation of this nature is
awarded not for loss of time or earnings but for loss of the
deceased s power or ability to earn money.39ςrνll
This favorable treatment of the Zarates claim is not unprecedented.
In Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
Company,40 fourth-year medical student Edgardo Carriaga s earning
capacity, although he survived the accident but his injuries
rendered him permanently incapacitated, was computed to be that
of the physician that he dreamed to become. The Court considered
his scholastic record sufficient to justify the assumption that he
could have finished the medical course and would have passed the
medical board examinations in due time, and that he could have
possibly earned a modest income as a medical practitioner. Also, in
People v. Sanchez,41 the Court opined that murder and rape victim
Eileen Sarmienta and murder victim Allan Gomez could have easily
landed good-paying jobs had they graduated in due time, and that
their jobs would probably pay them high monthly salaries
from P 10,000.00 to P 15,000.00 upon their graduation. Their
earning capacities were computed at rates higher than the
minimum wage at the time of their deaths due to their being
already senior agriculture students of the University of the
Philippines in Los Baños, the country s leading educational
institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and exemplary
damages awarded to the Zarates in the respective amounts
of P 2,500,000.00 and P 1,000,000.00 on the ground that such
amounts were excessive.ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
The plea is unwarranted.
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The moral damages of P 2,500,000.00 were really just and
reasonable under the established circumstances of this case
because they were intended by the law to assuage the Zarates
deep mental anguish over their son s unexpected and violent
death, and their moral shock over the senseless accident. That
amount would not be too much, considering that it would help the
Zarates obtain the means, diversions or amusements that would
alleviate their suffering for the loss of their child. At any rate,
reducing the amount as excessive might prove to be an injustice,
given the passage of a long time from when their mental anguish
was inflicted on them on August 22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we
should not reduce the amount if only to render effective the
desired example for the public good. As a common carrier, the
Pereñas needed to be vigorously reminded to observe their duty
to exercise extraordinary diligence to prevent a similarly senseless
accident from happening again. Only by an award of exemplary
damages in that amount would suffice to instill in them and others
similarly situated like them the ever-present need for greater and
constant vigilance in the conduct of a business imbued with public
interest.

WHEREFORE, we DENY the Petition for Review

on Certiorari; AFFIRM the decision promulgated on November 13,
2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.