COMMON CARRIERS rate from January 22, 1996, exemplary damages, attorney's fees and issue of ASTI's lack
ry damages, attorney's fees and issue of ASTI's lack of license to do business in the Philippines as
G.R. No. 184513, March 09, 2016
DESIGNER BASKETS, INC., Petitioner, v. AIR SEA TRANSPORT,
INC. AND ASIA CARGO CONTAINER LINES, INC., Respondents.
D E C I S I O N JARDELEZA, J.:
This is a Petition for Review on Certiorari1 of the August 16, 2007
Decision2 and September 2, 2008 Resolution3 of the Court of Appeals
(CA) in CA-G.R. CV No. 79790, absolving respondents Air Sea
Transport, Inc. (ASTI) and Asia Cargo Container Lines, Inc. (ACCLI)
from liability in the complaint for sum of money and damages filed by
petitioner Designer Baskets, Inc. (DBI).
The Facts
DBI is a domestic corporation engaged in the production of
housewares and handicraft items for export.4Sometime in October
1995, Ambiente, a foreign-based company, ordered from DBI5 223
cartons of assorted wooden items (the shipment).6 The shipment was
worth Twelve Thousand Five Hundred Ninety and Eighty-Seven
Dollars (US$12,590.87) and payable through telegraphic
transfer.7 Ambiente designated ACCLI as the forwarding agent that
will ship out its order from the Philippines to the United States (US).
ACCLI is a domestic corporation acting as agent of ASTI, a US based
corporation engaged in carrier transport business, in the Philippines.8
On January 7, 1996, DBI delivered the shipment to ACCLI for sea
transport from Manila and delivery to Ambiente at 8306 Wilshire Blvd.,
Suite 1239, Beverly Hills, California. To acknowledge receipt and to
serve as the contract of sea carriage, ACCLI issued to DBI triplicate
copies of ASTI Bill of Lading No. AC/MLLA601317.9 DBI retained
possession of the originals of the bills of lading pending the payment
of the goods by Ambiente.10
On January 23, 1996, Ambiente and ASTI entered into an Indemnity
Agreement (Agreement).11 Under the Agreement, Ambiente obligated
ASTI to deliver the shipment to it or to its order "without the surrender
of the relevant bill(s) of lading due to the non-arrival or loss
thereof."12 In exchange, Ambiente undertook to indemnify and hold
ASTI and its agent free from any liability as a result of the release of
the shipment.13 Thereafter, ASTI released the shipment to Ambiente
without the knowledge of DBI, and without it receiving payment for the
total cost of the shipment.14
DBI then made several demands to Ambiente for the payment of the
shipment, but to no avail. Thus, on October 7, 1996, DBI filed the
Original Complaint against ASTI, ACCLI and ACCLFs incorporators-
stockholders15 for the payment of the value of the shipment in the
amount of US$12,590.87 or Three Hundred Thirty-Three and Six
Flundred Fifty-Eight Pesos (P333,658.00), plus interest at the legal
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
cost of suit.16
In its Original Complaint, DBI claimed that under Bill of Lading Number
AC/MLLA601317, ASTI and/or ACCLI is "to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or
copies of [the] Bill of Lading is or are surrendered to them; otherwise,
they become liable to the shipper for the value of the shipment."17 DBI
also averred that ACCLI should be jointly and severally liable with its
co-defendants because ACCLI failed to register ASTI as a foreign
corporation doing business in the Philippines. In addition, ACCLI failed
to secure a license to act as agent of ASTI.18
On February 20, 1997, ASTI, ACCLI, and ACCLI's incorporators-
stockholders filed a Motion to Dismiss.19They argued that: (a) they are
not the real parties-in-interest in the action because the cargo was
delivered and accepted by Ambiente. The case, therefore, was a
simple case of non�payment of the buyer; (b) relative to the
incorporators-stockholders of ACCLI, piercing the corporate veil is
misplaced; (c) contrary to the allegation of DBI, the bill of lading
covering the shipment does not contain a proviso exposing ASTI to
liability in case the shipment is released without the surrender of the
bill of lading; and (d) the Original Complaint did not attach a certificate
of non-forum shopping.20
DBI filed an Opposition to the Motion to Dismiss,21 asserting that ASTI
and ACCLI failed to exercise the required extraordinary diligence
when they allowed the cargoes to be withdrawn by the consignee
without the surrender of the original bill of lading. ASTI, ACCLI, and
ACCLI's incorporators-stockholders countered that it is DBI who failed
to exercise extraordinary diligence in protecting its own interest. They
averred that whether or not the buyer-consignee pays the seller is
already outside of their concern.22
Before the trial court could resolve the motion to dismiss, DBI filed an
Amended Complaint23 impleading Ambiente as a new defendant and
praying that it be held solidarity liable with ASTI, ACCLI, and ACCLFs
incorporators-stockholders for the payment of the value of the
shipment. DBI alleged that it received reliable information that the
shipment was released merely on the basis of a company guaranty of
Ambiente.24 Further, DBI asserted that ACCLI's incorporators-
stockholders have not yet fully paid their stock subscriptions; thus,
"under the circumstance of [the] case," they should be held liable to
the extent of the balance of their subscriptions.25cralawred
In their Answer,26 ASTI, ACCLI, and ACCLI's incorporators-
stockholders countered that DBI has no cause of action against
ACCLI and its incorporators-stockholders because the Amended
Complaint, on its face, is for collection of sum of money by an unpaid
seller against a buyer. DBI did not allege any act of the incorporators-
stockholders which would constitute as a ground for piercing the veil
of corporate fiction.27ACCLI also reiterated that there is no stipulation
in the bill of lading restrictively subjecting the release of the cargo only
upon the presentation of the original bill of lading.28 It regarded the
"entirely foreign and irrelevant to the issue of liability for breach of
contract" between DBI and Ambiente. It stated that the purpose of
requiring a license (to do business in the Philippines) is to subject the
foreign corporation to the jurisdiction of Philippine courts.29
On July 22, 1997, the trial court directed the service of summons to
Ambiente through the Department of Trade and Industry.30 The
summons was served on October 6, 199731 and December 18,
1997.32Ambiente failed to file an Answer. Hence, DBI moved to
declare Ambiente in default, which the trial court granted in its Order
dated September 15, 1998.33
The Ruling of the Trial Court
In a Decision34 dated July 25, 2003, the trial court found ASTI, ACCLI,
and Ambiente solidarity liable to DBI for the value of the shipment. It
awarded DBI the following:
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1. US$12,590.87, or the equivalent of [P]333,658.00 at the
time of the shipment, plus 12% interest per annum from 07
January 1996 until the same is fully paid;
2. [P]50,000.00 in exemplary damages;
3. [P]47,000.00 as and for attorney's fees; and,
4. [P]10,000.00 as cost of suit.35
The trial court declared that the liability of Ambiente is "very clear." As
the buyer, it has an obligation to pay for the value of the shipment.
The trial court noted that "[the case] is a simple sale transaction which
had been perfected especially since delivery had already been
effected and with only the payment for the shipment remaining left to
be done."36
With respect to ASTI, the trial court held that as a common carrier,
ASTI is bound to observe extraordinary diligence in the vigilance over
the goods. However, ASTI was remiss in its duty when it allowed the
unwarranted release of the shipment to Ambiente.37 The trial court
found that the damages suffered by DBI was due to ASTI's release of
the merchandise despite the non-presentation of the bill of lading.
That ASTI entered into an Agreement with Ambiente to release the
shipment without the surrender of the bill of lading is of no
moment.38 The Agreement cannot save ASTI from liability because in
entering into such, it violated the law, the terms of the bill of lading and
the right of DBI over the goods.39
The trial court also added that the Agreement only involved Ambiente
and ASTI. Since DBI is not privy to the Agreement, it is not bound by
its terms.40cralawred
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The trial court found that ACCLI "has not done enough to prevent the
defendants Ambiente and [ASTI] from agreeing among themselves
the release of the goods in total disregard of [DBFs] rights and in
contravention of the country's civil and commercial laws."41 As the
forwarding agent, ACCLI was "well aware that the goods cannot be
delivered to the defendant Ambiente since [DBI] retained possession
of the originals of the bill of lading."42 Consequently, the trial court held
ACCLI solidarily liable with ASTI.
As regards ACCLFs incorporators-stockholders, the trial court
absolved them from liability. The trial court ruled that the participation
of ACCLFs incorporators-stockholders in the release of the cargo is
not as direct as that of ACCLI.43
DBI, ASTI and ACCLI appealed to the CA. On one hand, DBI took
issue with the order of the trial court awarding the value of the
shipment in Philippine Pesos instead of US Dollars. It also alleged that
even assuming that the shipment may be paid in Philippine Pesos, the
trial court erred in pegging its value at the exchange rate prevailing at
the time of the shipment, rather than at the exchange rate prevailing at
the time of payment.44
On the other hand, ASTI and ACCLI questioned the trial court's
decision finding them solidarily liable with DBI for the value of the
shipment. They also assailed the trial court's award of interest,
exemplary damages, attorney's fees and cost of suit in DBFs favor.45
The Ruling of the Court of Appeals
The CA affirmed the trial court's finding that Ambiente is liable to DBI,
but absolved ASTI and ACCLI from liability. The CA found that the
pivotal issue is whether the law requires that the bill of lading be
surrendered by the buyer/consignee before the carrier can release the
goods to the former. It then answered the question in the negative,
thus:
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There is nothing in the applicable laws that require the surrender
of bills of lading before the goods may be released to the
buyer/consignee. In fact, Article 353 of the Code of Commerce
suggests a contrary conclusion, viz �
"Art. 353. After the contract has been complied with, the bill of lading
which the carrier has issued shall be returned to him, and by virtue of
the exchange of this title with the thing transported, the respective
obligations shall be considered canceled xxx In case the consignee,
upon receiving the goods, cannot return the bill of lading subscribed
by the carrier because of its loss or of any other cause, he must give
the latter a receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading."
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
The clear import of the above article is that the surrender of the bill of
lading is not an absolute and mandatory requirement for the release of
the goods to the consignee. The fact that the carrier is given the
alternative option to simply require a receipt for the goods
delivered suggests that the surrender of the bill of lading may be
dispensed with when it cannot be produced by the consignee for
whatever cause.46 (Emphasis supplied.)
The CA stressed that DBI failed to present evidence to prove its
assertion that the surrender of the bill of lading upon delivery of the
goods is a common mercantile practice.47 Further, even assuming that
such practice exists, it cannot prevail over law and jurisprudence.48
As for ASTI, the CA explained that its only obligation as a common
carrier was to deliver the shipment in good condition. It did not include
looking beyond the details of the transaction between the seller and
the consignee, or more particularly, ascertaining the payment of the
goods by the buyer Ambiente.49
Since the agency between ASTI and ACCLI was established and not
disputed by any of the parties, neither can ACCLI, as a mere agent of
ASTI, be held liable. This must be so in the absence of evidence that
the agent exceeded its authority.50
The CA, thus, ruled:
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WHEREFORE, in view of the foregoing, the Decision dated July 25,
2003 of Branch 255 of the Regional Trial court of Las [Pi�as] City in
Civil Case No. LP-96-0235 is hereby AFFIRMED with the
following MODIFICATIONS:
1. Defendants-appellants Air Sea Transport, Inc. and Asia
Cargo Container Lines, Inc. are hereby ABSOLVED from
all liabilities;
2. The actual damages to be paid by defendant Ambiente
shall be in the amount of US$12,590.87. Defendant
Ambiente's liability may be paid in Philippine currency,
computed at the exchange rate prevailing at the time of
payment;51 and
3. The rate of interest to be imposed on the total amount of
US$12,590.87 shall be 6% per annum computed from the
filing of the complaint on October 7, 1996 until the finality of
this decision. After this decision becomes final and
executory, the applicable rate shall be 12% per annum until
its full satisfaction.
SO ORDERED.52
Hence, this petition for review, which raises the sole issue of whether
ASTI and ACCLI may be held solidarily liable to DBI for the value of
the shipment.
Our Ruling
We deny the petition.
A common carrier may release the goods to the consignee even
without the surrender of the hill of lading.
This case presents an instance where an unpaid seller sues not only
the buyer, but the carrier and the carrier's agent as well, for the
payment of the value of the goods sold. The basis for ASTI and
ACCLI's liability, as pleaded by DBI, is the bill of lading covering the
shipment.
A bill of lading is defined as "a written acknowledgment 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 order."53 It may also be
defined as an instrument in writing, signed by a carrier or his agent,
describing the freight so as to identify it, stating the name of the
consignor, the terms of the contract of carriage, and agreeing or
directing that the freight be delivered to bearer, to order or to a
specified person at a specified place.54
Under Article 350 of the Code of Commerce, "the shipper as well as
the carrier of the merchandise or goods may mutually demand that a
bill of lading be made." A bill of lading, when issued by the carrier to
the shipper, is the legal evidence of the contract of carriage between
the former and the latter. It defines the rights and liabilities of the
parties in reference to the contract of carriage. The stipulations in the
bill of lading are valid and binding unless they are contrary to law,
morals, customs, public order or public policy.55
Here, ACCLI, as agent of ASTI, issued Bill of Lading No.
AC/MLLA601317 to DBI. This bill of lading governs the rights,
obligations and liabilities of DBI and ASTI. DBI claims that Bill of
Lading No. AC/MLLA601317 contains a provision stating that ASTI
and ACCLI are "to release and deliver the cargo/shipment to the
consignee, x x x, only after the original copy or copies of the said Bill
of Lading is or are surrendered to them; otherwise they become liable
to [DBI] for the value of the shipment."56Quite tellingly, however, DBI
does not point or refer to any specific clause or provision on the bill of
lading supporting this claim. The language of the bill of lading shows
no such requirement. What the bill of lading provides on its face is:
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Received by the Carrier in apparent good order and condition unless
otherwise indicated hereon, the Container(s) and/or goods hereinafter
mentioned to be transported and/or otherwise forwarded from the
Place of Receipt to the intended Place of Delivery upon and [subject]
to all the terms and conditions appearing on the face and back of this
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Bill of Lading. If required by the Carrier this Bill of Lading duly
endorsed must be surrendered in exchange for the Goods of
delivery order.57 (Emphasis supplied.)
There is no obligation, therefore, on the part of ASTI and ACCLI to
release the goods only upon the surrender of the original bill of lading.
Further, a carrier is allowed by law to release the goods to the
consignee even without the latter's surrender of the bill of lading. The
third paragraph of Article 353 of the Code of Commerce is
enlightening:
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Article 353. The legal evidence of the contract between the shipper
and the carrier shall be the bills of lading, by the contents of which the
disputes which may arise regarding their execution and performance
shall be decided, no exceptions being admissible other than those of
falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the
carrier has issued shall be returned to him, and by virtue of the
exchange of this title with the thing transported, the respective
obligations and actions shall be considered cancelled, unless in the
same act the claim which the parties may wish to reserve be reduced
to writing, with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return
the bill of lading subscribed by the carrier, because of its loss or
any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of
the bill of lading. (Emphasis supplied.)
The general rule is that upon receipt of the goods, the consignee
surrenders the bill of lading to the carrier and their respective
obligations are considered canceled. The law, however, provides two
exceptions where the goods may be released without the surrender of
the bill of lading because the consignee can no longer return it. These
exceptions are when the bill of lading gets lost or for other cause. In
either case, the consignee must issue a receipt to the carrier upon the
release of the goods. Such receipt shall produce the same effect as
the surrender of the bill of lading.
We have already ruled that the non-surrender of the original bill of
lading does not violate the carrier's duty of extraordinary diligence
over the goods.58 In Republic v. Lorenzo Shipping Corporation,59 we
found that the carrier exercised extraordinary diligence when it
released the shipment to the consignee, not upon the surrender of the
original bill of lading, but upon signing the delivery receipts and
surrender of the certified true copies of the bills of lading. Thus, we
held that the surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its contractual
obligation.
Under special circumstances, we did not even require presentation of
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
any form of receipt by the consignee, in lieu of the original bill of
lading, for the release of the goods. In Macam v. Court of
Appeals,60 we absolved the carrier from liability for releasing the
goods to the consignee without the bills of lading despite this provision
on the bills of lading:
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"One of the Bills of Lading must be surrendered duly endorsed in
exchange for the goods or delivery order."61 (Citations omitted.)
In clearing the carrier from liability, we took into consideration that the
shipper sent a telex to the carrier after the goods were shipped. The
telex instructed the carrier to deliver the goods without need of
presenting the bill of lading and bank guarantee per the shipper's
request since "for prepaid shipt ofrt charges already fully paid our end
x x x."62 We also noted the usual practice of the shipper to request the
shipping lines to immediately release perishable cargoes through
telephone calls.
Also, in Eastern Shipping Lines v. Court of Appeals,63 we absolved the
carrier from liability for releasing the goods to the supposed
consignee, Consolidated Mines, Inc. (CMI), on the basis of an
Undertaking for Delivery of Cargo but without the surrender of the
original bill of lading presented by CMI. Similar to the factual
circumstance in this case, the Undertaking in Eastern Shipping
Lines guaranteed to hold the carrier "harmless from all demands,
claiming liabilities, actions and expenses."64 Though the central issue
in that case was who the consignee was in the bill of lading, it is
noteworthy how we gave weight to the Undertaking in ruling in favor of
the carrier:
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But assuming that CMI may not be considered consignee, the
petitioner cannot be faulted for releasing the goods to CMI under the
circumstances, due to its lack of knowledge as to who was the real
consignee in view of CMI's strong representations and letter of
undertaking wherein it stated that the bill of lading would be presented
later. This is precisely the situation covered by the last paragraph of
Art. 353 of the [Code of Commerce] to wit:
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"If in case of loss or for any other reason whatsoever, the consignee
cannot return upon receiving the merchandise the bill of lading
subscribed by the carrier, he shall give said carrier a receipt of the
goods delivered this receipt producing the same effects as the return
of the bill of lading."65ChanRoblesVirtualawlibrary
Clearly, law and jurisprudence is settled that the surrender of the
original bill of lading is not absolute; that in case of loss or any other
cause, a common carrier may release the goods to the consignee
even without it.
Here, Ambiente could not produce the bill of lading covering the
shipment not because it was lost, but for another cause: the bill of
lading was retained by DBI pending Ambiente's full payment of the
shipment. Ambiente and ASTI then entered into an Indemnity
Agreement, wherein the former asked the latter to release the
shipment even without the surrender of the bill of lading. The
execution of this Agreement, and the undisputed fact that the
shipment was released to Ambiente pursuant to it, to our mind,
operates as a receipt in substantial compliance with the last paragraph
of Article 353 of the Code of Commerce.
Articles 1733, 1734, and 1735 of the Civil Code are not applicable.
DBI, however, challenges the Agreement, arguing that the carrier
released the goods pursuant to it, notwithstanding the carrier's
knowledge that the bill of lading should first be surrendered. As such,
DBI claims that ASTI and ACCLI are liable for damages because they
failed to exercise extraordinary diligence in the vigilance over the
goods pursuant to Articles 1733, 1734, and 1735 of the Civil Code.66
DBI is mistaken.
Articles 1733, 1734, and 1735 of the Civil Code are not applicable in
this case. The Articles state:
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Article 1733. 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.
Such extraordinary diligence in vigilance over the goods is further
expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while
the extraordinary diligence for the safety of the passengers is further
set forth in Articles 1755 and 1756.
Article 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:
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(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.
Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4,
and 5 of the preceding article, if the goods are lost, destroyed or
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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.
Articles 1733, 1734, and 1735 speak of the common carrier's
responsibility over the goods. They refer to the general liability of
common carriers in case of loss, destruction or deterioration of
goods and the presumption of negligence against them. This
responsibility or duty of the common carrier 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 a right to receive them.67 It is, in fact, undisputed that the goods
were timely delivered to the proper consignee or to the one who was
authorized to receive them. DBFs only cause of action against ASTI
and ACCLI is the release of the goods to Ambiente without the
surrender of the bill of lading, purportedly in violation of the terms of
the bill of lading. We have already found that Bill of Lading No.
AC/MLLA601317 does not contain such express prohibition. Without
any prohibition, therefore, the carrier had no obligation to withhold
release of the goods. Articles 1733, 1734, and 1735 do not give ASTI
any such obligation.
The applicable provision instead is Article 353 of the Code of
Commerce, which we have previously discussed. To reiterate, the
Article allows the release of the goods to the consignee even without
his surrender of the original bill of lading. In such case, the duty of the
carrier to exercise extraordinary diligence is not violated. Nothing,
therefore, prevented the consignee and the carrier to enter into an
indemnity agreement of the same nature as the one they entered
here. No law or public policy is contravened upon its execution.
Article 1503 of the Civil Code does not apply to contracts for
carriage of goods.
In its petition, DBI continues to assert the wrong application of Article
353 of the Code of Commerce to its Amended Complaint. It alleges
that the third paragraph of Article 1503 of the Civil Code is the
applicable provision because: (a) Article 1503 is a special provision
that deals particularly with the situation of the seller retaining the bill of
lading; and (b) Article 1503 is a law which is later in point of time to
Article 353 of the Code of Commerce.68 DBI posits that being a
special provision, Article 1503 of the Civil Code should prevail over
Article 353 of the Code of Commerce, a general provision that makes
no reference to the seller retaining the bill of lading.69
DBFs assertion is untenable. Article 1503 is an exception to the
general presumption provided in the first paragraph of Article 1523,
which reads:
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Article 1523. Where, in pursuance of a contract of sale, the seller
is authorized or required to send the goods to the buyer, delivery
of the goods to a carrier, whether named by the buyer or not, for
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
the purpose of transmission to the buyer is deemed to be a
delivery of the goods to the buyer, except in the cases provided
for in Articles 1503, first, second and third paragraphs, or unless
a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must make such
contract with the carrier on behalf of the buyer as may be reasonable,
having regard to the nature of the goods and the other circumstances
of the case. If the seller omit so to do, and the goods are lost or
damaged in the course of transit, the buyer may decline to treat the
delivery to the carrier as a delivery to himself, or may hold the seller
responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the
buyer under circumstances in which the seller knows or ought to know
that it is usual to insure, the seller must give such notice to the buyer
as may enable him to insure them during their transit, and, if the seller
fails to do so, the goods shall be deemed to be at his risk during such
transit. (Emphasis supplied.)
Article 1503, on the other hand, provides:
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Article 1503. When there is a contract of sale of specific
goods, the seller may, by the terms of the contract, reserve the right
of possession or ownership in the goods until certain conditions have
been fulfilled. The right of possession or ownership may be thus
reserved notwithstanding the delivery of the goods to the buyer or to a
carrier or other bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are
deliverable to the seller or his agent, or to the order of the seller or of
his agent, the seller thereby reserves the ownership in the goods. But,
if except for the form of the bill of lading, the ownership would have
passed to the buyer on shipment of the goods, the seller's property in
the goods shall be deemed to be only for the purpose of securing
performance by the buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are
deliverable to order of the buyer or of his agent, but possession
of the bill of lading is retained by the seller or his agent, the seller
thereby reserves a right to the possession of the goods as
against the buyer.
Where the seller of goods draws on the buyer for the price and
transmits the bill of exchange and bill of lading together to the buyer to
secure acceptance or payment of the bill of exchange, the buyer is
bound to return the bill of lading if he does not honor the bill of
exchange, and if he wrongfully retains the bill of lading he acquires no
added right thereby. If, however, the bill of lading provides that the
goods are deliverable to the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the consignee named therein,
one who purchases in good faith, for value, the bill of lading, or goods
from the buyer will obtain the ownership in the goods, although the bill
of exchange has not been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the transfer
wrongful. (Emphasis supplied.)
Articles 1523 and 1503, therefore, refer to a contract of sale between
a seller and a buyer. In particular, they refer to who between the seller
and the buyer has the right of possession or ownership over the goods
subject of the sale. Articles 1523 and 1503 do not apply to a contract
of carriage between the shipper and the common carrier. The third
paragraph of Article 1503, upon which DBI relies, does not oblige the
common carrier to withhold delivery of the goods in the event that the
bill of lading is retained by the seller. Rather, it only gives the seller a
better right to the possession of the goods as against the mere
inchoate right of the buyer. Thus, Articles 1523 and 1503 find no
application here. The case before us does not involve an action where
the seller asserts ownership over the goods as against the buyer.
Instead, we are confronted with a complaint for sum of money and
damages filed by the seller against the buyer and the common carrier
due to the non-payment of the goods by the buyer, and the release of
the goods by the carrier despite non-surrender of the bill of lading. A
contract of sale is separate and distinct from a contract of carriage.
They involve different parties, different rights, different obligations and
liabilities. Thus, we quote with approval the ruling of the CA, to wit:
chanRoblesvirtualLawlibrary
On the third assigned error, [w]e rule for the defendants-appellants
[ASTI and ACCLI]. They are correct in arguing that the nature of
their obligation with plaintiff [DBI] is separate and distinct from
the transaction of the latter with defendant Ambiente. As carrier
of the goods transported by plaintiff, its obligation is simply to
ensure that such goods are delivered on time and in good
condition. In the case [Macam v. Court of Appeals], the Supreme
Court emphasized that "the extraordinary responsibility of the common
carriers lasts until actual or constructive delivery of the cargoes to the
consignee or to the person who has the right to receive them." x x x
It is therefore clear that the moment the carrier has delivered the
subject goods, its responsibility ceases to exist and it is thereby
freed from all the liabilities arising from the transaction. Any
question regarding the payment of the buyer to the seller is no
longer the concern of the carrier. This easily debunks plaintiffs
theory of joint liability.70 x x x (Emphasis supplied; citations omitted.)
The contract between DBI and ASTI is a contract of carriage of goods;
hence, ASTI's liability should be pursuant to that contract and the law
on transportation of goods. Not being a party to the contract of sale
between DBI and Ambiente, ASTI cannot be held liable for the
payment of the value of the goods sold. In this regard, we
cite Loadstar Shipping Company, Incorporated v. Malayan Insurance
Company, Incorporated,71 thus:
chanRoblesvirtualLawlibrary
Page 4
Malayan opposed the petitioners' invocation of the Philex-PASAR
purchase agreement, stating that the contract involved in this case is a
contract of affreightment between the petitioners and PASAR, not the
agreement between Philex and PASAR, which was a contract for the
sale of copper concentrates.
On this score, the Court agrees with Malayan that contrary to the trial
court's disquisition, the petitioners cannot validly invoke the penalty
clause under the Philex-PASAR purchase agreement, where penalties
are to be imposed by the buyer PASAR against the seller Philex if
some elements exceeding the agreed limitations are found on the
copper concentrates upon delivery. The petitioners are not privy to
the contract of sale of the copper concentrates. The contract
between PASAR and the petitioners is a contract of carriage of
goods and not a contract of sale. Therefore, the petitioners and
PASAR are bound by the laws on transportation of goods and
their contract of affreightment. Since the Contract of Affreightment
between the petitioners and PASAR is silent as regards the
computation of damages, whereas the bill of lading presented before
the trial court is undecipherable, the New Civil Code and the Code of
Commerce shall govern the contract between the parties.72 (Emphasis
supplied; citations omitted.)
In view of the foregoing, we hold that under Bill of Lading No.
AC/MLLA601317 and the pertinent law and jurisprudence, ASTI and
ACCLI are not liable to DBI. We sustain the finding of the CA that only
Ambiente, as the buyer of the goods, has the obligation to pay for the
value of the shipment. However, in view of our ruling in Nacar v.
Gallery Frames,73 we modify the legal rate of interest imposed by the
CA. Instead of 12% per annum from the finality of this judgment until
its full satisfaction, the rate of interest shall only be 6% per
annum.chanrobleslaw
WHEREFORE, the petition is DENIED for lack of merit. The August
16, 2007 Decision and the September 2, 2008 Resolution of the Court
of Appeals in CA-G.R. CV No. 79790 are hereby AFFIRMEDwith
the MODIFICATION that from the finality of this decision until its full
satisfaction, the applicable rate of interest shall be 6% per annum.
TORRES-MADRID BRIKERAGE INC VS FEB MITSUI MARUNE
INSURANCE CO GR NO 194121 JULY 11, 2016
BRION, J.:
We resolve the petition for review on certiorari challenging the Court of
Appeals' (CA) October 14, 2010 decision in CA-G.R. CV No. 91829. [1]
The CA affirmed the Regional Trial Court's (RTC) decision
in Civil Case No. 01-1596, and found petitioner Torres-Madrid
Brokerage, Inc. (TMBI) and respondent Benjamin P. Manalastas
jointly and solidarily liable to respondent FEB Mitsui Marine Insurance
Co., Inc. (Mitsui) for damages from the loss of transported cargo.
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
Antecedents
On October 7, 2000, a shipment of various electronic goods from
Thailand and Malaysia arrived at the Port of Manila for Sony
Philippines, Inc. (Sony). Previous to the arrival, Sony had engaged the
services of TMBI to facilitate, process, withdraw, and deliver the
shipment from the port to its warehouse in Binan, Laguna.[2]
TMBI - who did not own any delivery trucks - subcontracted the
services of Benjamin Manalastas' company, BMT Trucking
Services (BMT), to transport the shipment from the port to the Binan
warehouse.[3] Incidentally, TMBI notified Sony who had no objections
to the arrangement.[4]
Four BMT trucks picked up the shipment from the port at about 11:00
a.m. of October 7, 2000. However, BMT could not immediately
undertake the delivery because of the truck ban and because the
following day was a Sunday. Thus, BMT scheduled the delivery on
October 9, 2000.
In the early morning of October 9, 2000, the four trucks left BMT's
garage for Laguna.[5] However, only three trucks arrived at Sony's
Binan warehouse.
At around 12:00 noon, the truck driven by Rufo Reynaldo
Lapesura (NSF-391) was found abandoned along the Diversion Road
in Filinvest, Alabang, Muntinlupa City.[6] Both the driver and the
shipment were missing.
Later that evening, BMT's Operations Manager Melchor Manalastas
informed Victor Torres, TMBI's General Manager, of the
development.[7] They went to Muntinlupa together to inspect the truck
and to report the matter to the police.[8]
Victor Torres also filed a complaint with the National Bureau of
Investigation (NBI) against Lapesura for "hijacking." [9] The complaint
resulted in a recommendation by the NBI to the Manila City
Prosecutor's Office to prosecute Lapesura for qualified theft.[10]
TMBI notified Sony of the loss through a letter dated October 10,
2000,[11] It also sent BMT a letter dated March 29, 2001, demanding
payment for the lost shipment. BMT refused to pay, insisting that the
goods were "hijacked."
In the meantime, Sony filed an insurance claim with the Mitsui, the
insurer of the goods. After evaluating the merits of the claim, Mitsui
paid Sony PHP7,293,386.23 corresponding to the value of the lost
goods.[12]
After being subrogated to Sony's rights, Mitsui sent TMBI a demand
letter dated August 30, 2001 for payment of the lost goods. TMBI
refused to pay Mitsui's claim. As a result, Mitsui filed a complaint
against TMBI on November 6, 2001,
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT,
as a third-party defendant. TMBI alleged that BMT's driver, Lapesura,
was responsible for the theft/hijacking of the lost cargo and claimed
BMT's negligence as the proximate cause of the loss. TMBI prayed
that in the event it is held liable to Mitsui for the loss, it should be
reimbursed by BMT,
At the trial, it was revealed that BMT and TMBI have been doing
business with each other since the early 80's. It also came out that
there had been a previous hijacking incident involving Sony's cargo in
1997, but neither Sony nor its insurer filed a complaint against BMT or
TMBI.[13]
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas
jointly and solidarity liable to pay Mitsui PHP 7,293,386.23 as actual
damages, attorney's fees equivalent to 25% of the amount claimed,
and the costs of the suit.[14] The RTC held that TMBI and Manalastas
were common carriers and had acted negligently.
Both TMBI and BMT appealed the RTC's verdict.
TMBI denied that it was a common carrier required to
exercise extraordinary diligence. It maintains that it exercised the
diligence of a good father of a family and should be absolved of
liability because the truck was "hijacked" and this was a fortuitous
event.
BMT claimed that it had exercised extraordinary diligence over the lost
shipment, and argued as well that the loss resulted from a fortuitous
event.
On October 14, 2010, the CA affirmed the RTC's decision but reduced
the award of attorney's fees to PHP 200,000.
The CA held: (1) that "hijacking" is not necessarily a fortuitous event
because the term refers to the general stealing of cargo during
transit;[15] (2) that TMBI is a common carrier engaged in the business
of transporting goods for the general public for a fee; [16] (3) even if
the "hijacking" were a fortuitous event, TMBI's failure to observe
extraordinary diligence in overseeing the cargo and adopting security
measures rendered it liable for the loss; [17] and (4) even if TMBI had
not been negligent in the handling, transport and the delivery of the
shipment, TMBI still breached its contractual obligation to Sony when
it failed to deliver the shipment.[18]
TMBI disagreed with the CA's ruling and filed the present petition on
December 3, 2010.
Page 5
The Arguments
TMBI's Petition
TMBI insists that the hijacking of the truck was a fortuitous event. It
contests the CA's finding that neither force nor intimidation was used
in the taking of the cargo. Considering Lapesura was never found, the
Court should not discount the possibility that he was a victim rather
than a perpetrator.[19]
TMBI denies being a common carrier because it does not own a single
truck to transport its shipment and it does not offer transport services
to the public for compensation.[20] It emphasizes that Sony knew TMBI
did not have its own vehicles and would subcontract the delivery to a
third-party.
Further, TMBI now insists that the service it offered was limited to the
processing of paperwork attendant to the entry of Sony's goods. It
denies that delivery of the shipment was a part of its obligation.[21]
TMBI solely blames BMT as it had full control and custody of the
cargo when it was lost.[22] BMT, as a common carrier, is presumed
negligent and should be responsible for the loss.
BhtT's Comment
BMT insists that it observed the required standard of care.[23] Like the
petitioner, BMT maintains that the hijacking was a fortuitous event -
a force majeure - that exonerates it from liability.[24] It points out that
Lapesura has never been seen again and his fate remains a mystery.
BMT likewise argues that the loss of the cargo necessarily showed
that the taking was with the use of force or intimidation.[25]
If there was any attendant negligence, BMT points the finger on TMBI
who failed to send a representative to accompany the
shipment.[26]BMT further blamed TMBI for the latter's failure to adopt
security measures to protect Sony's cargo.[27]
Mitsui's Comment
Mitsui counters that neither TMBI nor BMT alleged or proved during
the trial that the taking of the cargo was accompanied with grave or
irresistible threat, violence, or force.[28] Hence, the incident cannot be
considered "force majeure" and TMBI remains liable for breach of
contract.
Mitsui emphasizes that TMBI's theory - that force or intimidation must
have been used because Lapesura was never found - was only raised
for the first time before this Court.[29] It also discredits the theory as a
mere conjecture for lack of supporting evidence.
Mitsui adopts the CA's reasons to conclude that TMBI is a common
carrier. It also points out Victor Torres' admission during the trial that
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
TMBI's brokerage service includes the eventual delivery of the cargo
to the consignee.[30]
Mitsui invokes as well the legal presumption of negligence against
TMBI, pointing out that TMBI simply entrusted the cargo to BMT
without adopting any security measures despite: (1) a previous
hijacking incident, when TMBI lost Sony's cargo; and (2) TMBI's
knowledge that the cargo was worth more than 10 million pesos.[31]
Mitsui affirms that TMBI breached the contract of carriage through its
negligent handling of the cargo, resulting in its loss.
The Court's Ruling
A brokerage may be considered a common
carrier if it also undertakes to deliver the
goods for its customers
Common carriers are persons, corporations, firms or associations
engaged in the business of transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the
public.[32] By the nature of their business and for reasons of public
policy, they are bound to observe extraordinary diligence in the
vigilance over the goods and in the safety of their passengers.[33]
In A.F. Sanchez Brokerage Inc. v. Court of Appeals,[34]we held that a
customs broker - whose principal business is the preparation of the
correct customs declaration and the proper shipping documents - is
still considered a common carrier if it also undertakes to deliver the
goods for its customers. The law does not distinguish between one
whose principal business activity is the carrying of goods and one who
undertakes this task only as an ancillary activity.[35] This ruling has
been reiterated in Schmitz Transport & Brokerage Corp. v. Transport
Venture, Inc.,[36] Loadmasters Customs Services, Inc. v. Glodel
Brokerage Corporation,[37] and Wesrwind
ShippingCorporation v. UCPB General Insurance Co., Inc.[38]
Despite TMBI's present denials, we find that the delivery of the goods
is an integral, albeit ancillary, part of its brokerage services. TMBI
admitted that it was contracted to facilitate, process, and clear the
shipments from the customs authorities, withdraw them from the pier,
then transport and deliver them to Sony's warehouse in Laguna.[39]
Further, TMBI's General Manager Victor Torres described the nature
of its services as follows:
ATTY. VIRTUDAZO: Could you please tell the court what is the nature
of the business of [TMBI]?
Witness MR. Victor Torres of Torres Madrid: We are engaged in
customs brokerage business. We acquire the release documents from
the Bureau of Customs and eventually deliver the cargoes to
the consignee's warehouse and we are engaged in that kind of
business, sir. [40]
That TMBI does not own trucks and has to subcontract the delivery of
its clients' goods, is immaterial. As long as an entity holds itself to the
public for the transport of goods as a business, it is considered a
common carrier regardless of whether it owns the vehicle used or has
to actually hire one.[41]
Lastly, TMBI's customs brokerage services - including the
transport/delivery of the cargo - are available to anyone willing to pay
its fees. Given these circumstances, we find it undeniable that TMBI is
a common carrier.
Consequently, TMBI should be held responsible for the loss,
destruction, or deterioration of the goods it transports unless it results
from:
(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 of 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.[42]
For all other cases - such as theft or robbery - a common carrier is
presumed to have been at fault or to have acted negligently, unless it
can prove that it observed extraordinary diligence.[43]
Simply put, the theft or the robbery of the goods is not considered a
fortuitous event or a force majeure. Nevertheless, a common carrier
may absolve itself of liability for a resulting loss: (1) if it proves that it
exercised extraordinary diligence in transporting and safekeeping the
goods;[44] or (2) if it stipulated with the shipper/owner of the goods to
limit its liability for the loss, destruction, or deterioration of the goods to
a degree less than extraordinary diligence.[45]
However, a stipulation diminishing or dispensing with the common
carrier's liability for acts committed by thieves or robbers who do not
act with grave or irresistible threat, violence, or force is void under
Article 1745 of the Civil Code for being contrary to public
policy. [46]Jurisprudence, too, has expanded Article 1734's five
Page 6
exemptions. De Guzman v. Court of Appeals[47] interpreted Article
1745 to mean that a robbery attended by "grave or irresistible threat,
violence or force" is a fortuitous event that absolves the common
carrier from liability.
In the present case, the shipper, Sony, engaged the services of TMBI,
a common carrier, to facilitate the release of its shipment and deliver
the goods to its warehouse. In turn, TMBI subcontracted a portion of
its obligation - the delivery of the cargo - to another common carrier,
BMT.
Despite the subcontract, TMBI remained responsible for the cargo.
Under Article 1736, a common carrier's extraordinary responsibility
over the shipper's goods lasts from the time these goods are
unconditionally placed in the possession of, and received by, the
carrier for transportation, until they are delivered, actually or
constructively, by the carrier to the consignee. [48]
That the cargo disappeared during transit while under the custody of
BMT - TMBI's subcontractor - did not diminish nor terminate TMBFs
responsibility over the cargo. Article 1735 of the Civil Code presumes
that it was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI
simply argued that it was not a common carrier bound to observe
extraordinary diligence. Its failure to successfully establish this
premise carries with it the presumption of fault or negligence, thus
rendering it liable to Sony/Mitsui for breach of contract.
Specifically, TMBI's current theory - that the hijacking was attended by
force or intimidation - is untenable.
First, TMBI alleged in its Third Party Complaint against BMT that
Lapesura was responsible for hijacking the shipment.[49] Further,
Victor Torres filed a criminal complaint against Lapesura with the
NBI.[50] These actions constitute direct and binding admissions that
Lapesura stole the cargo. Justice and fair play dictate that TMBI
should not be allowed to change its legal theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this
theory through evidence. Thus, the theory remained an unsupported
allegation no better than speculations and conjectures. The CA
therefore correctly disregarded the defense of force majeure.
TMBI and BMT are not solidarity liable
to Mitsui
We disagree with the lower courts" ruling that TMBI and BMT are
solidarity liable to Mitsui for the loss as joint tortfeasors. The ruling
was based on Article 2194 of the Civil Code:
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
Art. 2194. The responsibility of two or more persons who are liable
for quasi-delict is solidary.
Notably, TMBI's liability to Mitsui does not stem from a quasi-
delict (culpa aquiliana) but from its breach of contract (culpa
contractual). The tie that binds TMBI with Mitsui is contractual, albeit
one that passed on to Mitsui as a result of TMBI's contract of carriage
with Sony to which Mitsui had been subrogated as an insurer who had
paid Sony's insurance claim. The legal reality that results from this
contractual tie precludes the application of quasi-delict based Article
2194.
A third party may recover from a
common carrier for quasi-delict
but must prove actual n egligence
We likewise disagree with the finding that BMT is directly liable to
Sony/Mitsui for the loss of the cargo. While it is undisputed that the
cargo was lost under the actual custody of BMT (whose employee is
the primary suspect in the hijacking or robbery of the shipment), no
direct contractual relationship existed between Sony/Mitsui and BMT.
If at all, Sony/Mitsui's cause of action against BMT could only arise
from quasi-delict, as a third party suffering damage from the action of
another due to the latter's fault or negligence, pursuant to Article 2176
of the Civil Code.[51]
We have repeatedly distinguished between an action for breach of
contract {culpa contractual) and an action for quasi-delict (culpa
aquiliana).
In culpa contractual, the plaintiff only needs to establish the existence
of the contract and the obligor's failure to perform his obligation. It is
not necessary for the plaintiff to prove or even allege that the obligor's
non- compliance was due to fault or negligence because Article 1735
already presumes that the common carrier is negligent. The common
carrier can only free itself from liability by proving that it
observed extraordinary diligence. It cannot discharge this liability by
shifting the blame on its agents or servants.[52]
On the other hand, the plaintiff in culpa aquiliana must clearly
establish the defendant's fault or negligence because this is the very
basis of the action.[53] Moreover, if the injury to the plaintiff resulted
from the act or omission of the defendant's employee or servant, the
defendant may absolve himself by proving that he observed the
diligence of a good father of a family to prevent the damage,[54]
In the present case, Mitsui's action is solely premised on TMBl's
breach of contract. Mitsui did not even sue BMT, much less prove
anynegligence on its part. If BMT has entered the picture at all, it 'is
because TMBI sued it for reimbursement for the liability that TMBI
might incur from its contract of carriage with Sony/Mitsui. Accordingly,
there is no basis to directly hold BMT liable to Mitsui for quasi-delict.
BMT is liable to TMBI for breach
of their contract of carriage
We do not hereby say that TMBI must absorb the loss. By
subcontracting the cargo delivery to BMT, TMBI entered into its own
contract of carriage with a fellow common carrier.
The cargo was lost after its transfer to BMT's custody based on its
contract of carriage with TMBI. Following Article 1735, BMT is
presumed to be at fault. Since BMT failed to prove that it
observed extraordinary diligence in the performance of its obligation to
TMBI, it is liable to TMBI for breach of their contract of carriage.
In these lights, TMBI is liable to Sony (subrogated by Mitsui) for
breaching the contract of carriage. In turn, TMBI is entitled to
reimbursement from BMT due to the latter's own breach of its contract
of carriage with TMBI. The proverbial buck stops with BMT who may
either: (a) absorb the loss, or (b) proceed after its missing driver, the
suspected culprit, pursuant to Article 2181,[55]
WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid
Brokerage, Inc. to pay the respondent FEB Mitsui Marine Insurance
Co., Inc. the following:
a. Actual damages in the amount of PHP 7,293,386.23 plus
legal interest from the time the complaint was filed until it is
fully paid;
b. Attorney's fees in the amount of PHP 200,000.00; and
c. Costs of suit.
Respondent Benjamin P. Manalastas is in
turn ORDERED to REIMBURSE Torres-Madrid Brokerage, Inc. of the
above-mentioned amounts.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner, vs.COURT OF APPEALS and
ERNESTO CENDANA, respondents.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying
up used bottles and scrap metal in Pangasinan. Upon gathering
sufficient quantities of such scrap material, respondent would bring
such material to Manila for resale. He utilized two (2) six-wheeler
trucks which he owned for hauling the material to Manila. On the
Page 7
return trip to Pangasinan, respondent would load his vehicles with
cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged
freight rates which were commonly lower than regular commercial
rates.
Sometime in November 1970, petitioner Pedro de Guzman a
merchant and authorized dealer of General Milk Company
(Philippines), Inc. in Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck
driven by respondent himself, while 600 cartons were placed on board
the other truck which was driven by Manuel Estrada, respondent's
driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The
other 600 boxes never reached petitioner, since the truck which
carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private
respondent in the Court of First Instance of Pangasinan, demanding
payment of P 22,150.00, the claimed value of the lost merchandise,
plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the
extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common
carrier and argued that he could not be held responsible for the value
of the lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding
private respondent to be a common carrier and holding him liable for
the value of the undelivered goods (P 22,150.00) as well as for P
4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial
court had erred in considering him a common carrier; in finding that he
had habitually offered trucking services to the public; in not exempting
him from liability on the ground of force majeure; and in ordering him
to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held
that respondent had been engaged in transporting return loads of
freight "as a casual
occupation — a sideline to his scrap iron business" and not as a
common carrier. Petitioner came to this Court by way of a Petition for
Review assigning as errors the following conclusions of the Court of
Appeals:
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered
cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent
Ernesto Cendana may, under the facts earlier set forth, be properly
characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
(in local Idiom as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article
1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. ... (Emphasis
supplied)
It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely "back-
hauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional
rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for
others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held
no certificate of public convenience, and concluded he was not a
common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability arises
the moment a person or firm acts as a common carrier, without regard
to whether or not such carrier has also complied with the requirements
of the applicable regulatory statute and implementing regulations and
has been granted a certificate of public convenience or other
franchise. To exempt private respondent from the liabilities of a
common carrier because he has not secured the necessary certificate
of public convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to comply
with applicable statutory requirements. The business of a common
carrier impinges directly and intimately upon the safety and well being
and property of those members of the general community who happen
to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the
necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of
public policy" 2 are held to a very high degree of care and diligence
("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care
of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745, numbers 5,
6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods
which they carry, "unless the same is due to any of the following
causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
Page 8
It is important to point out that the above list of causes of loss,
destruction or deterioration which exempt the common carrier for
responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force
majeure fall within the scope of Article 1735, which provides as
follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of
the preceding article, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that
the specific cause alleged in the instant case — the hijacking of the
carrier's truck — does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. It would follow, therefore, that
the hijacking of the carrier's vehicle must be dealt with under the
provisions of Article 1735, in other words, that the private respondent
as common carrier is presumed to have been at fault or to have acted
negligently. This presumption, however, may be overthrown by proof
of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed
extraordinary diligence in the care of petitioner's goods. Petitioner
argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck
carrying the 600 cartons of Liberty filled milk. We do not believe,
however, that in the instant case, the standard of extraordinary
diligence required private respondent to retain a security guard to ride
with the truck and to engage brigands in a firelight at the risk of his
own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific
requirements of the duty of extraordinary diligence in the vigilance
over the goods carried in the specific context of hijacking or armed
robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance
over goods is, under Article 1733, given additional specification not
only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5
and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or
of robbers who donot act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment used in
the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible —
and will not be allowed to divest or to diminish such responsibility —
even for acts of strangers like thieves or robbers, except where such
thieves or robbers in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by
private respondent which carried petitioner's cargo. The record shows
that an information for robbery in band was filed in the Court of First
Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled
"People of the Philippines v. Felipe Boncorno, Napoleon Presno,
Armando Mesina, Oscar Oria and one John Doe." There, the accused
were charged with willfully and unlawfully taking and carrying away
with them the second truck, driven by Manuel Estrada and loaded with
the 600 cartons of Liberty filled milk destined for delivery at petitioner's
store in Urdaneta, Pangasinan. The decision of the trial court shows
that the accused acted with grave, if not irresistible, threat, violence or
force.3 Three (3) of the five (5) hold-uppers were armed with firearms.
The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days
and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City.
The Court of First Instance convicted all the accused of robbery,
though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to
recall that even common carriers are not made absolute insurers
against all risks of travel and of transport of goods, and are not held
liable for acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous standard of
extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals
that private respondent Cendana is not liable for the value of the
undelivered merchandise which was lost because of an event entirely
beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby
DENIED and the Decision of the Court of Appeals dated 3 August
1977 is AFFIRMED. No pronouncement as to costs.
[G.R. No. 125948. December 29, 1998]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her official
capacity as City Treasurer of Batangas, respondents.
D E C I S I O N MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court
of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801,
affirming the decision of the Regional Trial Court of Batangas City,
Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act
No. 387, as amended, to contract, install and operate oil
pipelines. The original pipeline concession was granted in 1967[1] and
renewed by the Energy Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit
with the Office of the Mayor of Batangas City. However, before the
mayor's permit could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its gross receipts for the
fiscal year 1993 pursuant to the Local Government Code.[3] The
respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on the
gross receipts for products pumped at GPS-1 for the fiscal year 1993
which amounted to P181,681,151.00. In order not to hamper its
operations, petitioner paid the tax under protest in the amount
of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the
respondent City Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is
engaged in the business of transporting petroleum products from the
Batangas refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, our Company is exempt from paying tax on gross
receipts under Section 133 of the Local Government Code of 1991 x x
xx
"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,
Page 9
inspection, and licensing. Hence, assuming arguendo that FPIC is
liable for the license fee, the imposition thereof based on gross
receipts is violative of the aforecited provision. The amount
of P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a
revenue raising measure, and not a mere regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied the protest
contending that petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption under Section
133 (j) of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of
Batangas City a complaint[6] for tax refund with prayer for a writ of
preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of
the business tax on its gross receipts violates Section 133 of the Local
Government Code; (2) the authority of cities to impose and collect a
tax on the gross receipts of "contractors and independent contractors"
under Sec. 141 (e) and 151 does not include the authority to collect
such taxes on transportation contractors for, as defined under Sec.
131 (h), the term "contractors" excludes transportation contractors;
and, (3) the City Treasurer illegally and erroneously imposed and
collected the said tax, thus meriting the immediate refund of the tax
paid.[7]
Traversing the complaint, the respondents argued that petitioner
cannot be exempt from taxes under Section 133 (j) of the Local
Government Code as said exemption applies only to "transportation
contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that
pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the
like. Respondents further posit that the term "common carrier" under
the said code pertains to the mode or manner by which a product is
delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the
complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become
unclear. It is a rule that tax exemptions are to be strictly construed
against the taxpayer, taxes being the lifeblood of the
government. Exemption may therefore be granted only by clear and
unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under
Republic Act 387, (Exhibit A) whose concession was lately renewed
by the Energy Regulatory Board (Exhibit B). Yet neither said law nor
the deed of concession grant any tax exemption upon the plaintiff.
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
"Even the Local Government Code imposes a tax on franchise holders
under Sec. 137 of the Local Tax Code. Such being the situation
obtained in this case (exemption being unclear and equivocal) resort
to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses
only common carriers so as not to overburden the riding public or
commuters with taxes. Plaintiff is not a common carrier, but a special
carrier extending its services and facilities to a single specific or
"special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more
and effective local autonomy to local governments than the previous
enactments, to make them economically and financially viable to serve
the people and discharge their functions with a concomitant obligation
to accept certain devolution of powers, x x x So, consistent with this
policy even franchise grantees are taxed (Sec. 137) and contractors
are also taxed under Sec. 143 (e) and 151 of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a
petition for review. On February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration and adjudication.[10] On
November 29, 1995, the respondent court rendered a
decision[11] affirming the trial court's dismissal of petitioner's
complaint. Petitioner's motion for reconsideration was denied on July
18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a
Resolution dated November 11, 1996.[13] Petitioner moved for a
reconsideration which was granted by this Court in a Resolution[14]of
January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding
that (1) the petitioner is not a common carrier or a transportation
contractor, and (2) the exemption sought for by petitioner is not clear
under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds
himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his
services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any
person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods
is:
1. He must be engaged in the business of carrying goods for others as
a public employment, and must hold himself out as ready to engage in
the transportation of goods for person generally as a business and not
as a casual occupation;
2. He must undertake to carry goods of the kind to which his business
is confined;
3. He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt
that petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a
public employment. It undertakes to carry for all persons indifferently,
that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it from the definition
of a common carrier. In De Guzman vs. Court of Appeals[16] we ruled
that:
"The above article (Art. 1732, Civil Code) makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x
x avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the 'general public,' i.e.,
the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1877 deliberately
refrained from making such distinctions.
So understood, the concept of 'common carrier' under Article 1732
may be seen to coincide neatly with the notion of 'public service,'
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, 'public service' includes:
'every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system gas, electric light heat and power, water
supply and power petroleum, sewerage system, wire or wireless
Page 10
communications systems, wire or wireless broadcasting stations and
other similar public services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used
in Section 133 (j) of the Local Government Code refers only to
common carriers transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common
carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide
that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are
considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387),
petitioner is considered a "common carrier." Thus, Article 86 thereof
provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe
line shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to utilize
the remaining transportation capacity pro rata for the transportation of
such other petroleum as may be offered by others for transport, and to
charge without discrimination such rates as may have been approved
by the Secretary of Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public
utility. Pertinent portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of
petroleum x x and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is
hereby declared to be a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a
"common carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged
only in transporting petroleum products, it is considered a common
carrier under Republic Act No. 387 x x x. Such being the case, it is not
subject to withholding tax prescribed by Revenue Regulations No. 13-
78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following :
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight by hire
and common carriers by air, land or water, except as provided in this
Code."
The deliberations conducted in the House of Representatives on the
Local Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states :
"SEC.121 [now Sec. 131]. Common Limitations on the Taxing Powers
of Local Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed to be
exempted from the taxing powers of the local government units. May
we know the reason why the transportation business is being
excluded from the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in
Section 121 (now Sec. 131), line 16, paragraph 5. It states that local
government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of
Book II, one can see there that provinces have the power to impose a
tax on business enjoying a franchise at the rate of not more than one-
half of 1 percent of the gross annual receipts. So, transportation
contractors who are enjoying a franchise would be subject to tax by
the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the
imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of what is
already being imposed by the National Internal Revenue Code which
is the so-called "common carriers tax." We do not want a duplication
of this tax, so we just provided for an exception under Section 125
[now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x
x[18]
It is clear that the legislative intent in excluding from the taxing power
of the local government unit the imposition of business tax against
common carriers is to prevent a duplication of the so-called "common
carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax
on its gross sales/earnings under the National Internal Revenue
Code.[19] To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the
Local Government Code.
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.
[G.R. No. 148496. March 19, 2002]
VIRGINES CALVO doing business under the name and style
TRANSORIENT CONTAINER TERMINAL SERVICES, INC.,
petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly
Allied Guarantee Ins. Co., Inc.) respondent.
D E C I S I O N MENDOZA, J.:
This is a petition for review of the decision,[1] dated May 31, 2001, of
the Court of Appeals, affirming the decision[2] of the Regional Trial
Court, Makati City, Branch 148, which ordered petitioner to pay
respondent, as subrogee, the amount of P93,112.00 with legal
interest, representing the value of damaged cargo handled by
petitioner, 25% thereof as attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container
Terminal Services, Inc. (TCTSI), a sole proprietorship customs
broker. At the time material to this case, petitioner entered into a
contract with San Miguel Corporation (SMC) for the transfer of 114
reels of semi-chemical fluting paper and 124 reels of kraft liner board
from the Port Area in Manila to SMCs warehouse at the Tabacalera
Compound, Romualdez St., Ermita, Manila. The cargo was insured by
respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal
vans, arrived in Manila on board M/V Hayakawa Maru and, after 24
hours, were unloaded from the vessel to the custody of the arrastre
operator, Manila Port Services, Inc. From July 23 to July 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo from
the arrastre operator and delivered it to SMCs warehouse in Ermita,
Manila. On July 25, 1990, the goods were inspected by Marine Cargo
Surveyors, who found that 15 reels of the semi-chemical fluting paper
were wet/stained/torn and 3 reels of kraft liner board were likewise
torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance
contract for the aforementioned amount. In turn, respondent, as
subrogee of SMC, brought suit against petitioner in the Regional Trial
Court, Branch 148, Makati City, which, on December 20, 1995,
Page 11
rendered judgment finding petitioner liable to respondent for the
damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage
while in the custody of defendants. Evidence such as the Warehouse
Entry Slip (Exh. E); the Damage Report (Exh. F) with entries
appearing therein, classified as TED and TSN, which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end
and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh. H -
H-4-A) confirms the fact of the damaged condition of the subject
cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which
provides among others that:
. . . we opine that damages sustained by shipment is attributable to
improper handling in transit presumably whilst in the custody of the
broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain
[her] defense that [she is] are not liable. Defendant by reason of the
nature of [her] business should have devised ways and means in
order to prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to the consignee.
Defendant did not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the presumption is that
the moment the defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods
are proved to have been lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the
extraordinary diligence required by law. The 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
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
from the time the goods are unconditionally placed in the possession
of and received by the carrier for transportation until the same are
delivered actually or constructively by the carrier to the consignee or
to the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following
amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence
this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE
EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A
COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse
order, for if petitioner is not a common carrier, although both the trial
court and the Court of Appeals held otherwise, then she is indeed not
liable beyond what ordinary diligence in the vigilance over the goods
transported by her, would require.[6] Consequently, any damage to the
cargo she agrees to transport cannot be presumed to have been due
to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and
the Court of Appeals, she is not a common carrier but a private carrier
because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the
same to select parties with whom she may contract in the conduct of
her business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the
Court dismissed a similar contention and held the party to be a
common carrier, thus
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
. . . Article 1732 also carefully avoids making any distinction between
a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the general public, i.e., the
general community or population, and one who offers services or
solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from
making such distinctions.
So understood, the concept of common carrier under Article 1732 may
be seen to coincide neatly with the notion of public service, under the
Public Service Act (Commonwealth Act No. 1416, as amended) which
at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service
Act, public service includes:
x x x every person that now or hereafter may own, operate, manage,
or control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and
other similar public services. x x x [8]
There is greater reason for holding petitioner to be a common carrier
because the transportation of goods is an integral part of her
business. To uphold petitioners contention would be to deprive those
with whom she contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioners
business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each
case. . . .
Page 12
In Compania Maritima v. Court of Appeals,[9] the meaning of
extraordinary diligence in the vigilance over goods was explained
thus:
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight
and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires.
In the case at bar, petitioner denies liability for the damage to the
cargo. She claims that the spoilage or wettage took place while the
goods were in the custody of either the carrying vessel M/V Hayakawa
Maru, which transported the cargo to Manila, or the arrastre operator,
to whom the goods were unloaded and who allegedly kept them in
open air for nine days from July 14 to July 23, 1998 notwithstanding
the fact that some of the containers were deformed, cracked, or
otherwise damaged, as noted in the Marine Survey Report (Exh. H), to
wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water
soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached
loosened.[10]
In addition, petitioner claims that Marine Cargo Surveyor Ernesto
Tolentino testified that he has no personal knowledge on whether the
container vans were first stored in petitioners warehouse prior to their
delivery to the consignee. She likewise claims that after withdrawing
the container vans from the arrastre operator, her driver, Ricardo
Nazarro, immediately delivered the cargo to SMCs warehouse in
Ermita, Manila, which is a mere thirty-minute drive from the Port Area
where the cargo came from. Thus, the damage to the cargo could not
have taken place while these were in her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the
Marine Cargo Surveyors indicates that when the shipper transferred
the cargo in question to the arrastre operator, these were covered by
clean Equipment Interchange Report (EIR) and, when petitioners
employees withdrew the cargo from the arrastre operator, they did so
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
without exception or protest either with regard to the condition of
container vans or their contents. The Survey Report pertinently reads
Details of Discharge:
Shipment, provided with our protective supervision was noted
discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14
July 1990, containerized onto 30 x 20 secure metal vans, covered by
clean EIRs. Except for slight dents and paint scratches on side and
roof panels, these containers were deemed to have [been] received in
good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo containers
was [withdrawn] by Transorient Container Services, Inc. . . . without
exception.
[The cargo] was finally delivered to the consignees storage warehouse
located at Tabacalera Compound, Romualdez Street, Ermita,
Manila from July 23/25, 1990.[12]
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port Services Inc.,
in good order and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-
appellant from the arrastre still in good order and condition as the
same were received by the former without exception, that is, without
any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant would
report it immediately to the consignee or make an exception on the
delivery receipt or note the same in the Warehouse Entry Slip
(WES). None of these took place. To put it simply, the defendant-
appellant received the shipment in good order and condition and
delivered the same to the consignee damaged. We can only conclude
that the damages to the cargo occurred while it was in the possession
of the defendant-appellant. Whenever the thing is lost (or damaged) in
the possession of the debtor (or obligor), it shall be presumed that the
loss (or damage) was due to his fault, unless there is proof to the
contrary. No proof was proffered to rebut this legal presumption and
the presumption of negligence attached to a common carrier in case
of loss or damage to the goods.[13]
Anent petitioners insistence that the cargo could not have been
damaged while in her custody as she immediately delivered the
containers to SMCs compound, suffice it to say that to prove the
exercise of extraordinary diligence, petitioner must do more than
merely show the possibility that some other party could be responsible
for the damage. It must prove that it used all reasonable means to
ascertain the nature and characteristic of goods tendered for
[transport] and that [it] exercise[d] due care in the handling
[thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
....
(4) The character of the goods or defects in the packing or in the
containers.
....
For this provision to apply, the rule is that if the improper packing or, in
this case, the defect/s in the container, is/are known to the carrier or
his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom.[14] In this case, petitioner accepted
the cargo without 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.
[G.R. No. 147079. December 21, 2004]
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON.
COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents.
D E C I S I O N CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate courts
Decision[1] of August 10, 2000 reversing and setting aside the
judgment of Branch 133, Regional Trial Court of Makati City, in Civil
Case No. 93-76B which dismissed the complaint of respondent FGU
Insurance Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft
of KLM Royal Dutch Airlines at Dusseldorf, Germany oral
contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000
Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for
Page 13
delivery to Manila in favor of the consignee, Wyeth-Suaco
Laboratories, Inc.[2] The Femenal tablets were placed in 124 cartons
and the Nordiol tablets were placed in 20 cartons which were packed
together in one (1) LD3 aluminum container, while the Trinordial
tablets were packed in two pallets, each of which contained 30
cartons.[3]
Wyeth-Suaco insured the shipment against all risks with FGU
Insurance which issued Marine Risk Note No. 4995 pursuant to
Marine Open Policy No. 138.[4]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino
International Airport (NAIA),[5] it was discharged without
exception[6] and delivered to the warehouse of the Philippine
Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.[7]
In order to secure the release of the cargoes from the PSI and the
Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez
Brokerage which had been its licensed broker since 1984.[8] As its
customs broker, Sanchez Brokerage calculates and pays the customs
duties, taxes and storage fees for the cargo and thereafter delivers it
to Wyeth-Suaco.[9]
On July 29, 1992, Mitzi Morales and Ernesto Mendoza,
representatives of Sanchez Brokerage, paid PSI storage fee
amounting to P8,572.35 a receipt for which, Official Receipt No.
016992,[10] was issued. On the receipt, another representative of
Sanchez Brokerage, M. Sison,[11] acknowledged that he received the
cargoes consisting of three pieces in good condition.[12]
Wyeth-Suaco being a regular importer, the customs examiner did not
inspect the cargoes[13] which were thereupon stripped from the
aluminum containers[14] and loaded inside two transport vehicles hired
by Sanchez Brokerage.[15]
Among those who witnessed the release of the cargoes from the PSI
warehouse were Ruben Alonso and Tony Akas,[16] employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo
surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco
on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to
Hizon Laboratories Inc. in Antipolo City for quality control
check.[17] The delivery receipt, bearing No. 07037 dated July 29, 1992,
indicated that the delivery consisted of one container with 144 cartons
of Femenal and Nordiol and 1 pallet containing Trinordiol.[18]
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco,
acknowledged the delivery of the cargoes by affixing his signature on
the delivery receipt.[19] Upon inspection, however, he, together with
Ruben Alonzo of Elite Surveyors, discovered that 44 cartons
containing Femenal and Nordiol tablets were in bad order.[20] He thus
placed a note above his signature on the delivery receipt stating that
44 cartons of oral contraceptives were in bad order. The remaining
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
160 cartons of oral contraceptives were accepted as complete and in
good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a
survey report[21] dated July 31, 1992 stating that 41 cartons of
Femenal tablets and 3 cartons of Nordiol tablets were wetted (sic).[22]
The Elite Surveyors later issued Certificate No. CS-0731-
1538/92[23] attached to which was an Annexed Schedule whereon it
was indicated that prior to the loading of the cargoes to the brokers
trucks at the NAIA, they were inspected and found to be in apparent
good condition.[24] Also noted was that at the time of delivery to the
warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which
could account for the wetting of the 44 cartons of Femenal and Nordiol
tablets.[25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction
Report[26] confirming that 38 x 700 blister packs of Femenal tablets, 3
x 700 blister packs of Femenal tablets and 3 x 700 blister packs of
Nordiol tablets were heavily damaged with water and emitted foul
smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials
Rejection[27] of 38 cartons of Femenal and 3 cartons of Nordiol on the
ground that they were delivered to Hizon Laboratories with heavy
water damaged (sic) causing the cartons to sagged (sic) emitting a
foul order and easily attracted flies.[28]
Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from
Sanchez Brokerage the payment of P191,384.25 representing the
value of its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-
Suaco filed an insurance claim against FGU Insurance which paid
Wyeth-Suaco the amount of P181,431.49 in settlement of its claim
under Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU
Insurance.
On demand by FGU Insurance for payment of the amount
of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by
letter[31] of January 7, 1993, disclaimed liability for the damaged
goods, positing that the damage was due to improper and insufficient
export packaging; that when the sealed containers were opened
outside the PSI warehouse, it was discovered that some of the loose
cartons were wet,[32] prompting its (Sanchez Brokerages)
representative Morales to inform the Import-Export Assistant of
Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but
that the latter advised to still deliver them to Hizon Laboratories where
an adjuster would assess the damage.[33]
Hence, the filing by FGU Insurance of a complaint for damages before
the Regional Trial Court of Makati City against the Sanchez
Brokerage.
The trial court, by Decision[34] of July 29, 1996, dismissed the
complaint, holding that the Survey Report prepared by the Elite
Surveyors is bereft of any evidentiary support and a mere product of
pure guesswork.[35]
On appeal, the appellate court reversed the decision of the trial court,
it holding that the Sanchez Brokerage engaged not only in the
business of customs brokerage but also in the transportation and
delivery of the cargo of its clients, hence, a common carrier within the
context of Article 1732 of the New Civil Code.[36]
Noting that Wyeth-Suaco adduced evidence that the cargoes were
delivered to petitioner in good order and condition but were in a
damaged state when delivered to Wyeth-Suaco, the appellate court
held that Sanchez Brokerage is presumed negligent and upon it
rested the burden of proving that it exercised extraordinary negligence
not only in instances when negligence is directly proven but also in
those cases when the cause of the damage is not known or
unknown.[37]
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the
Appellant is GRANTED. The Decision of the Court a quo is
REVERSED. Another Decision is hereby rendered in favor of the
Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal
amount of P181, 431.49, with interest thereupon at the rate of 6% per
annum, from the date of the Decision of the Court, until the said
amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount
of P20,000.00 as and by way of attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED.[38]
Sanchez Brokerages Motion for Reconsideration having been denied
by the appellate courts Resolution of December 8, 2000 which was
received by petitioner on January 5, 2001, it comes to this Court on
petition for certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed
grave and reversible error tantamount to abuse of discretion when it
found petitioner a common carrier within the context of Article 1732 of
the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper
course of action which petitioner should have taken was to file a
Page 14
petition for review on certiorari since the sole office of a writ of
certiorari is the correction of errors of jurisdiction including the
commission of grave abuse of discretion amounting to lack or excess
of jurisdiction and does not include correction of the appellate courts
evaluation of the evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as
a common carrier, failed to overcome the presumption of negligence,
it being documented that petitioner withdrew from the warehouse of
PSI the subject shipment entirely in good order and condition.[39]
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court
of Appeals in any case, i.e., regardless of the nature of the action or
proceedings involved, may be appealed to this Court by filing a
petition for review, which would be but a continuation of the appellate
process over the original case.[40]
The Resolution of the Court of Appeals dated December 8, 2000
denying the motion for reconsideration of its Decision of August 10,
2000 was received by petitioner on January 5, 2001. Since petitioner
failed to appeal within 15 days or on or before January 20, 2001, the
appellate courts decision had become final and executory. The filing
by petitioner of a petition for certiorari on March 6, 2001 cannot serve
as a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari,
the petitioner must prove not merely reversible error but also grave
abuse of discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and
setting aside the decision of the trial court based on its finding that
petitioner is liable for the damage to the cargo as a common
carrier. What petitioner is ascribing is an error of judgment, not of
jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal
soundness of the decision not the jurisdiction of the court to render
said decision the same is beyond the province of a petition
for certiorari.[41] The supervisory jurisdiction of this Court to issue
a cert writ cannot be exercised in order to review the judgment of
lower courts as to its intrinsic correctness, either upon the law or the
facts of the case.[42]
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker,
to be also a common carrier, as defined under Article 1732 of the Civil
Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of
Sanchez Brokerage, himself testified that the services the firm offers
include the delivery of goods to the warehouse of the consignee or
importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs
broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in
cargos, and those upon approval of the importer, we prepare the entry
together for processing and claims from customs and finally deliver
the goods to the warehouse of the importer.[43]
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity.[44] The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose
principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.
In this light, petitioner as a common carrier is mandated to observe,
under Article 1733[45] of the Civil Code, extraordinary diligence in the
vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed
extraordinary diligence.[46]
The concept of extra-ordinary diligence was explained in Compania
Maritima v. Court of Appeals:[47]
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight
and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires.[48]
In the case at bar, it was established that petitioner received the
cargoes from the PSI warehouse in NAIA in good order and
condition;[49] and that upon delivery by petitioner to Hizon Laboratories
Inc., some of the cargoes were found to be in bad order, as noted in
the Delivery Receipt[50] issued by petitioner, and as indicated in the
Survey Report of Elite Surveyors[51]and the Destruction Report of
Hizon Laboratories, Inc.[52]
In an attempt to free itself from responsibility for the damage to the
goods, petitioner posits that they were damaged due to the fault or
negligence of the shipper for failing to properly pack them and to the
inherent characteristics of the goods[53]; and that it should not be
faulted for following the instructions of Calicdan of Wyeth-Suaco to
proceed with the delivery despite information conveyed to the latter
that some of the cartons, on examination outside the PSI warehouse,
were found to be wet.[54]
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a
common carrier from liability if the loss or damage is due to the
character of the goods or defects in the packing or in the containers,
the rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the
resulting damage.[56]
If the claim of petitioner that some of the cartons were already
damaged upon delivery to it were true, then it should naturally have
received the cargo under protest or with reservations duly noted on
the receipt issued by PSI. But it made no such protest or
reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners
employees only examined the cargoes outside the PSI warehouse
and found some to be wet, they would certainly have gone back to
PSI, showed to the warehouseman the damage, and demanded then
and there for Bad Order documents or a certification confirming the
damage.[58] Or, petitioner would have presented, as witness, the
employees of the PSI from whom Morales and Domingo took delivery
of the cargo to prove that, indeed, part of the cargoes was already
damaged when the container was allegedly opened outside the
warehouse.[59]
Petitioner goes on to posit that contrary to the report of Elite
Surveyors, no rain fell that day. Instead, it asserts that some of the
cargoes were already wet on delivery by PSI outside the PSI
warehouse but such notwithstanding Calicdan directed Morales to
proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call
of Morales on July 29, 1992, he failed to specifically declare what time
he received the call. As to whether the call was made at the PSI
warehouse when the shipment was stripped from the airport
containers, or when the cargoes were already in transit to Antipolo, it
is not determinable. Aside from that phone call, petitioner admitted
that it had no documentary evidence to prove that at the time it
received the cargoes, a part of it was wet, damaged or in bad
condition.[60]
Page 15
The 4-page weather data furnished by PAGASA[61] on request of
Sanchez Brokerage hardly impresses, no witness having identified it
and interpreted the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories,
Inc., the oral contraceptives were damaged by rainwater while in
transit to Antipolo City is more likely then. Sanchez himself testified
that in the past, there was a similar instance when the shipment of
Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral
contraceptives, that arrived at the NAIA were damaged and claimed
by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted
(sic) but Wyeth-Suaco did not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there
was a cartoon (sic) wetted (sic) up to the bottom are wet specially
during rainy season.[62]
Since petitioner received all the cargoes in good order and condition
at the time they were turned over by the PSI warehouseman, and
upon their delivery to Hizon Laboratories, Inc. a portion thereof was
found to be in bad order, it was incumbent on petitioner to prove that it
exercised extraordinary diligence in the carriage of the goods. It did
not, however. Hence, its presumed negligence under Article 1735 of
the Civil Code remains unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals
is hereby AFFIRMED.
Costs against petitioner.
[G.R. No. 150255. April 22, 2005]
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, petitioner, vs. TRANSPORT VENTURE, INC.,
INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA
SHIPPING AND DODWELL now INCHCAPE SHIPPING
SERVICES, respondents.
D E C I S I O N CARPIO-MORALES, J.:
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
On petition for review is the June 27, 2001 Decision[1] of the Court of
Appeals, as well as its Resolution[2] dated September 28, 2001
denying the motion for reconsideration, which affirmed that of Branch
21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-
63132[3] holding petitioner Schmitz Transport Brokerage Corporation
(Schmitz Transport), together with Black Sea Shipping Corporation
(Black Sea), represented by its ship agent Inchcape Shipping Inc.
(Inchcape), and Transport Venture (TVI), solidarily liable for the loss of
37 hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the
port of Ilyichevsk, Russia on board M/V Alexander Saveliev (a vessel
of Russian registry and owned by Black Sea) 545 hot rolled steel
sheets in coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in
favor of the consignee, Little Giant Steel Pipe Corporation (Little
Giant),[4] were insured against all risks with Industrial Insurance
Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-
3747-TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the
Philippine Ports Authority (PPA) assigned it a place of berth at the
outside breakwater at the Manila South Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure
the requisite clearances, to receive the cargoes from the shipside, and
to deliver them to its (the consignees) warehouse at Cainta, Rizal,[7] in
turn engaged the services of TVI to send a barge and tugboat at
shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed
the barge Erika V to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning
the barge alongside the vessel, left and returned to the port
terminal.[9] At 9:00 p.m., arrastre operator Ocean Terminal Services
Inc. commenced to unload 37 of the 545 coils from the vessel unto the
barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition
had become inclement due to an approaching storm, the unloading
unto the barge of the 37 coils was accomplished.[10]No tugboat pulled
the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the
crew of the barge abandoned it and transferred to the vessel. The
barge pitched and rolled with the waves and eventually capsized,
washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally
arrived to pull the already empty and damaged barge back to the
pier.[13]
Earnest efforts on the part of both the consignee Little Giant and
Industrial Insurance to recover the lost cargoes proved futile.[14]
Little Giant thus filed a formal claim against Industrial Insurance which
paid it the amount of P5,246,113.11. Little Giant thereupon executed a
subrogation receipt[15] in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport,
TVI, and Black Sea through its representative Inchcape (the
defendants) before the RTC of Manila, for the recovery of the amount
it paid to Little Giant plus adjustment fees, attorneys fees, and
litigation expenses.[16]
Industrial Insurance faulted the defendants for undertaking the
unloading of the cargoes while typhoon signal No. 1 was raised in
Metro Manila.[17]
By Decision of November 24, 1997, Branch 21 of the RTC held all the
defendants negligent for unloading the cargoes outside of the
breakwater notwithstanding the storm signal.[18] The dispositive portion
of the decision reads:
WHEREFORE, premises considered, the Court renders judgment in
favor of the plaintiff, ordering the defendants to pay plaintiff jointly and
severally the sum of P5,246,113.11 with interest from the date the
complaint was filed until fully satisfied, as well as the sum
of P5,000.00 representing the adjustment fee plus the sum of 20% of
the amount recoverable from the defendants as attorneys fees plus
the costs of suit. The counterclaims and cross claims of defendants
are hereby DISMISSED for lack of [m]erit.[19]
To the trial courts decision, the defendants Schmitz Transport and TVI
filed a joint motion for reconsideration assailing the finding that they
are common carriers and the award of excessive attorneys fees of
more than P1,000,000. And they argued that they were not motivated
by gross or evident bad faith and that the incident was caused by a
fortuitous event. [20]
By resolution of February 4, 1998, the trial court denied the motion for
reconsideration. [21]
All the defendants appealed to the Court of Appeals which, by
decision of June 27, 2001, affirmed in toto the decision of the trial
court, [22] it finding that all the defendants were common carriers Black
Sea and TVI for engaging in the transport of goods and cargoes over
the seas as a regular business and not as an isolated
transaction,[23] and Schmitz Transport for entering into a contract with
Little Giant to transport the cargoes from ship to port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court ruled
that each one was essential such that without each others contributory
negligence the incident would not have happened and so much so
that the person principally liable cannot be distinguished with sufficient
accuracy.[25]
In discrediting the defense of fortuitous event, the appellate court held
that although defendants obviously had nothing to do with the force of
Page 16
nature, they however had control of where to anchor the vessel, where
discharge will take place and even when the discharging will
commence.[26]
The defendants respective motions for reconsideration having been
denied by Resolution[27] of September 28, 2001, Schmitz Transport
(hereinafter referred to as petitioner) filed the present petition against
TVI, Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it
was acting for its principal, consignee Little Giant, hence, the
transportation contract was by and between Little Giant and TVI.[28]
By Resolution of January 23, 2002, herein respondents Industrial
Insurance, Black Sea, and TVI were required to file their respective
Comments.[29]
By its Comment, Black Sea argued that the cargoes were received by
the consignee through petitioner in good order, hence, it cannot be
faulted, it having had no control and supervision thereover.[30]
For its part, TVI maintained that it acted as a passive party as it
merely received the cargoes and transferred them unto the barge
upon the instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event,
independent of any act of negligence on the part of petitioner Black
Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to
Black Sea, petitioner and TVI.
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]
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
[T]he principle embodied in the act of God doctrine strictly requires
that the act must be occasioned solely by the violence of nature.
Human intervention is to be excluded from creating or entering into the
cause of the mischief. When the effect is found to be in part the result
of the participation of man, whether due to his active intervention or
neglect or failure to act, the whole occurrence is then humanized and
removed from the rules applicable to the acts of God.[33]
The appellate court, in affirming the finding of the trial court that
human intervention in the form of contributory negligence by all the
defendants resulted to the loss of the cargoes,[34] held that unloading
outside the breakwater, instead of inside the breakwater, while a
storm signal was up constitutes negligence.[35] It thus concluded that
the proximate cause of the loss was Black Seas negligence in
deciding to unload the cargoes at an unsafe place and while a
typhoon was approaching.[36]
From a review of the records of the case, there is no indication that
there was greater risk in loading the cargoes outside the breakwater.
As the defendants proffered, the weather on October 26, 1991
remained normal with moderate sea condition such that port
operations continued and proceeded normally.[37]
The weather data report,[38] furnished and verified by the Chief of the
Climate Data Section of PAG-ASA and marked as a common exhibit
of the parties, states that while typhoon signal No. 1 was hoisted over
Metro Manila on October 23-31, 1991, the sea condition at the port of
Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. It
cannot, therefore, be said that the defendants were negligent in not
unloading the cargoes upon the barge on October 26, 1991 inside the
breakwater.
That no tugboat towed back the barge to the pier after the cargoes
were completely loaded by 12:30 in the morning[39] is, however, a
material fact which the appellate court failed to properly consider and
appreciate[40] the proximate cause of the loss of the cargoes. Had the
barge been towed back promptly to the pier, the deteriorating sea
conditions notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at 5:30 a.m.,
causing it to sink along with the cargoes.[41] The loss thus falls outside
the act of God doctrine.
The proximate cause of the loss having been determined, who among
the parties is/are responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate
court, finds that petitioner is a common carrier. For it undertook to
transport the cargoes from the shipside of M/V Alexander Saveliev to
the consignees warehouse at Cainta, Rizal. As the appellate court put
it, as long as a person or corporation holds [itself] to the public for the
purpose of transporting goods as [a] business, [it] is already
considered a common carrier regardless if [it] owns the vehicle to be
used or has to hire one.[42] That petitioner is a common carrier, the
testimony of its own Vice-President and General Manager Noel Aro
that part of the services it offers to its clients as a brokerage firm
includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as
Executive Vice-President and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and
transport business of the company. I also handle the various division
heads of the company for operation matters, and all other related
functions that the President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you
mentioned, will you please tell the Honorable Court if you came to
know the company by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that
company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company.
What work or duty did you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of
Customs. We [are] also in-charged of the delivery of the goods to their
warehouses. We also handled the clearances of their shipment at the
Bureau of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant
Steel Pipe Corporation with regards to this shipment? What work did
you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter
and then the delivery of [the] cargo[es] from lighter to BASECO then to
the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr.
Witness, you are supposed to perform, what equipment do (sic) you
require or did you use in order to effect this unloading, transfer and
delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this
unloading [from] vessel to lighter, and on this we hired or we sub-
contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic)
of the barges. Also, in BASECO compound we are leasing cranes to
have the cargo unloaded from the barge to trucks, [and] then we used
trucks to deliver [the cargoes] to the consignees warehouse, Sir.
Page 17
Q: And whose trucks do you use from BASECO compound to the
consignees warehouse?
A: We utilized of (sic) our own trucks and we have some other
contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court
why is it you have to contract for the barges of Transport Ventures
Incorporated in this particular operation?
A: Firstly, we dont own any barges. That is why we hired the services
of another firm whom we know [al]ready for quite sometime, which is
Transport Ventures, Inc. (Emphasis supplied)[43]
It is settled that under a given set of facts, a customs broker may be
regarded as a common carrier. Thus, this Court, in A.F. Sanchez
Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:
The appellate court did not err in finding petitioner, a customs broker,
to be also a common carrier, as defined under Article 1732 of the Civil
Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose
principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.[45]
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held
that as the transportation of goods is an integral part of a customs
broker, the customs broker is also a common carrier. For to declare
otherwise would be to deprive those with whom [it] contracts the
protection which the law affords them notwithstanding the fact that the
obligation to carry goods for [its] customers, is part and parcel of
petitioners business.[47]
As for petitioners argument that being the agent of Little Giant, any
negligence it committed was deemed the negligence of its principal, it
does not persuade.
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
True, petitioner was the broker-agent of Little Giant in securing the
release of the cargoes. In effecting the transportation of the cargoes
from the shipside and into Little Giants warehouse, however, petitioner
was discharging its own personal obligation under a contact of
carriage.
Petitioner, which did not have any barge or tugboat, engaged the
services of TVI as handler[48] to provide the barge and the tugboat. In
their Service Contract,[49] while Little Giant was named as the
consignee, petitioner did not disclose that it was acting on commission
and was chartering the vessel for Little Giant.[50] Little Giant did not
thus automatically become a party to the Service Contract and was
not, therefore, bound by the terms and conditions therein.
Not being a party to the service contract, Little Giant cannot directly
sue TVI based thereon but it can maintain a cause of action for
negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was
under no duty to observe extraordinary diligence, it was still required
to observe ordinary diligence to ensure the proper and careful
handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good father
of a family shall be required.
Was the reasonable care and caution which an ordinarily prudent
person would have used in the same situation exercised by TVI?[52]
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the
risk that might have been reasonably anticipated during the shipside
operation, but was the proximate cause of the loss. A man of
ordinary prudence would not leave a heavily loaded barge floating for
a considerable number of hours, at such a precarious time, and in the
open sea, knowing that the barge does not have any power of its own
and is totally defenseless from the ravages of the sea. That it was
nighttime and, therefore, the members of the crew of a tugboat would
be charging overtime pay did not excuse TVI from calling for one such
tugboat.
As for petitioner, for it to be relieved of liability, it should, following
Article 1739[53] of the Civil Code, prove that it exercised due diligence
to prevent or minimize the loss, before, during and after the
occurrence of the storm in order that it may be exempted from liability
for the loss of the goods.
While petitioner sent checkers[54] and a supervisor[55] on board the
vessel to counter-check the operations of TVI, it failed to take all
available and reasonable precautions to avoid the loss. After noting
that TVI failed to arrange for the prompt towage of the barge despite
the deteriorating sea conditions, it should have summoned the same
or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable[56] for
the loss of the cargoes. The following pronouncement of the Supreme
Court is instructive:
The foundation of LRTAs liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that
contract by reason of its failure to exercise the high diligence required
of the common carrier. In the discharge of its commitment to ensure
the safety of passengers, a carrier may choose to hire its own
employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at all, that liability could
only be for tort under the provisions of Article 2176 and related
provisions, in conjunction with Article 2180 of the Civil Code. x x
x [O]ne might ask further, how then must the liability of the common
carrier, on one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation can
be breached by tort and when the same act or omission causes the
injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194 of the Civil Code can well apply. In fine, a
liability for tort may arise even under a contract, where tort is that
which breaches the contract. Stated differently, when an act which
constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between
the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.[57]
As for Black Sea, its duty as a common carrier extended only from the
time the goods were surrendered or unconditionally placed in its
possession and received for transportation until they were delivered
actually or constructively to consignee Little Giant.[58]
Parties to a contract of carriage may, however, agree upon a definition
of delivery that extends the services rendered by the carrier. In the
case at bar, Bill of Lading No. 2 covering the shipment provides that
delivery be made to the port of discharge or so near thereto as she
may safely get, always afloat.[59] The delivery of the goods to the
consignee was not from pier to pier but from the shipside of M/V
Page 18
Alexander Saveliev and into barges, for which reason the consignee
contracted the services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant, through petitioner,
it had discharged its duty.[60]
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorneys fees in an amount
over P1,000,000.00 to Industrial Insurance, for lack of factual and
legal basis, this Court sets it aside. While Industrial Insurance was
compelled to litigate its rights, such fact by itself does not justify the
award of attorneys fees under Article 2208 of the Civil Code. For no
sufficient showing of bad faith would be reflected in a partys
persistence in a case other than an erroneous conviction of the
righteousness of his cause.[61] To award attorneys fees to a party just
because the judgment is rendered in its favor would be tantamount to
imposing a premium on ones right to litigate or seek judicial redress of
legitimate grievances.[62]
On the award of adjustment fees: The adjustment fees and expense of
divers were incurred by Industrial Insurance in its voluntary but
unsuccessful efforts to locate and retrieve the lost cargo. They do not
constitute actual damages.[63]
As for the court a quos award of interest on the amount claimed, the
same calls for modification following the ruling in Eastern Shipping
Lines, Inc. v. Court of Appeals[64] that when the demand cannot be
reasonably established at the time the demand is made, the interest
shall begin to run not from the time the claim is made judicially or
extrajudicially but from the date the judgment of the court is made (at
which the time the quantification of damages may be deemed to have
been reasonably ascertained).[65]
WHEREFORE, judgment is hereby rendered ordering petitioner
Schmitz Transport & Brokerage Corporation, and Transport Venture
Incorporation jointly and severally liable for the amount
of P5,246,113.11 with the MODIFICATION that interest at SIX
PERCENT per annum of the amount due should be computed from
the promulgation on November 24, 1997 of the decision of the trial
court.
Costs against petitioner.
[G.R. No. 161833. July 8, 2005]
PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,
vs. UNKNOWN OWNER OF THE VESSEL M/V NATIONAL HONOR,
NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC., respondents.
D E C I S I O N CALLEJO, SR., J.:
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
This is a petition for review under Rule 45 of the 1997 Revised Rules
of Civil Procedure assailing the Decision[1] 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. SH9410306[2] 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. NSGPBSML512565[3] 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 DTD[5]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 Dauzs
experience, this was a normal procedure.[16] As the crate was being
hoisted from the vessels hatch, the mid-portion of the wooden flooring
suddenly snapped in the air, about five feet high from the vessels twin
deck, sending all its contents crashing down hard,[17] resulting in
extensive damage to the shipment.
BMICIs customs broker, JRM Incorporated, took delivery of the cargo
in such damaged condition.[18] Upon 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,[22] for US$61,500.00. When the
other companies denied liability, PCIC paid the claim and was issued
a Subrogation Receipt[23] for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila,
Branch 35, a Complaint for Damages[24] against the Unknown owner
of the vessel M/V National Honor, NSCP and ICTSI, as defendants.
Page 19
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. Attorneys 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
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
hole (bukong-bukong). The trial court rejected the certification[30] 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 appealed[31] to the CA which rendered judgment
on January 19, 2004 affirming in toto the 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 facie case
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
Page 20
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 carriers 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
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
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 crates 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?
A: Everyday with the crates, there is an arrow drawn where the sling
is placed, Maam.
Q: When the crates have arrows drawn and where you placed the
slings, what do you do with these crates?
A: A sling is placed on it, Maam.
Q: After you placed the slings, what do you do with the crates?
Page 21
A: After I have placed a sling properly, I ask the crane (sic) to haul it,
Maam.
Q: Now, what, if any, were written or were marked on the crate?
A: The thing that was marked on the cargo is an arrow just like of a
chain, Maam.
Q: And where did you see or what parts of the crate did you see
those arrows?
A: At the corner of the crate, Maam.
Q: How many arrows did you see?
A: Four (4) on both sides, Maam.
Q: What did you do with the arrows?
A: When I saw the arrows, thats where I placed the slings, Maam.
Q: Now, did you find any other marks on the crate?
A: Nothing more, Maam.
Q: Now, Mr. Witness, if there are no arrows, would you place slings
on the parts where there are no arrows?
A: You can not place slings if there are no arrows, Maam.
Appellants 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
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
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.
LEA MER INDUSTRIES, INC., G.R. No. 161745Petitioner,
- versus - :MALAYAN INSURANCE CO., INC.,* Respondent.
September 30, 2005
DECISION PANGANIBAN, J.:
C 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 Review[1] under Rule 45 of the Rules of
Court, assailing the October 9, 2002 Decision[2] and the December 29,
2003 Resolution[3] 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 petitioners 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
Page 22
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 Courts 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 petitioners 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
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
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 courts 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 petitioners 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]
Page 23
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?
xxxxxxxxx
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?
xxxxxxxxx
Court:
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
Mr. witness, did the captain of that tugboat give any instruction on how
to save the barge Judy VII?
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 Guards 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:
Admissibility of the Survey Report
Petitioner claims that the Survey Report[45] 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,[46] then
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 Cortezs Survey Report was used in the
testimonies of respondents 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 Cortezs
Affidavit, which respondent had offered as 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 respondents
Page 24
witnesses. The referral to Cortezs Report was in relation to Manlapigs
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 DENIED and the assailed Decision and
Resolution are AFFIRMED. Costs against petitioner.
G.R. No. 150403 January 25, 2007
CEBU SALVAGE CORPORATION, Petitioner, vs.
PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.
D E C I S I O N CORONA, J.:
May a carrier be held liable for the loss of cargo resulting from the
sinking of a ship it does not own?
This is the issue presented for the Court’s resolution in this petition for
review on certiorari1 assailing the March 16, 2001 decision2 and
September 17, 2001 resolution3 of the Court of Appeals (CA) in CA-
G.R. CV No. 40473 which in turn affirmed the December 27, 1989
decision4 of the Regional Trial Court (RTC), Branch 145, Makati,
Metro Manila.5
The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as
carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as
charterer) entered into a voyage charter6 wherein petitioner was to
load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu
Santo7 at Ayungon, Negros Occidental for transport to and discharge
at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc.8
Pursuant to the contract, on December 23, 1984, petitioner received
and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu
Santo which left Ayungon for Tagoloan the next day.9 The shipment
never reached its destination, however, because the M/T Espiritu
Santo sank in the afternoon of December 24, 1984 off the beach of
Opol, Misamis Oriental, resulting in the total loss of the cargo.10
MCCII filed a claim for the loss of the shipment with its insurer,
respondent Philippine Home Assurance Corporation.11 Respondent
paid the claim in the amount of P211,500 and was subrogated to the
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
rights of MCCII.12Thereafter, it filed a case in the RTC13 against
petitioner for reimbursement of the amount it paid MCCII.
After trial, the RTC rendered judgment in favor of respondent. It
ordered petitioner to pay respondent P211,500 plus legal interest,
attorney’s fees equivalent to 25% of the award and costs of suit.
On appeal, the CA affirmed the decision of the RTC. Hence, this
petition.
Petitioner and MCCII entered into a "voyage charter," also known as a
contract of affreightment wherein the ship was leased for a single
voyage for the conveyance of goods, in consideration of the payment
of freight.14 Under a voyage charter, the shipowner retains the
possession, command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his
payment of freight.15 An owner who retains possession of the ship
remains liable as carrier and must answer for loss or non-delivery of
the goods received for transportation.16
Petitioner argues that the CA erred when it affirmed the RTC finding
that the voyage charter it entered into with MCCII was a contract of
carriage.17 It insists that the agreement was merely a contract of hire
wherein MCCII hired the vessel from its owner, ALS Timber
Enterprises (ALS).18 Not being the owner of the M/T Espiritu Santo,
petitioner did not have control and supervision over the vessel, its
master and crew.19 Thus, it could not be held liable for the loss of the
shipment caused by the sinking of a ship it did not own.
We disagree.
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
carriage petitioner signed with MCCII. It actively negotiated and
solicited MCCII’s account, offered its services to ship the silica quartz
and proposed to utilize the M/T Espiritu Santo in lieu of the M/T
Seebees or the M/T Shirley (as previously agreed upon in the voyage
charter) since these vessels had broken down.20
There is no dispute that petitioner was a common carrier. At the time
of the loss of the cargo, it was engaged in the business of carrying
and transporting goods by water, for compensation, and offered its
services to the public.21
From the nature of their business and for reasons of public policy,
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
responsible, unless they can prove that this was brought about by the
causes specified in Article 1734 of the Civil Code.23 In all other cases,
common carriers are presumed to be at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence.24
Petitioner was the one which contracted with MCCII for the transport
of the cargo. It had control over what vessel it would use. All
throughout its dealings with MCCII, it represented itself as a common
carrier. The fact that it did not own the vessel it decided to use to
consummate the contract of carriage did not negate its character and
duties as a common carrier. The MCCII (respondent’s subrogor) could
not be reasonably expected to inquire about the ownership of the
vessels which petitioner carrier offered to utilize. 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 carriage if it should be required
to know who the actual owner of the vessel is.25 In fact, in this case,
the voyage charter itself denominated petitioner as the
"owner/operator" of the vessel.26
Petitioner next contends that if there was a contract of carriage, then it
was between MCCII and ALS as evidenced by the bill of lading ALS
issued.27
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence 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 supercargo of
ALS.28 This is consistent with the fact that MCCII did not contract
directly with ALS. While it is true that a bill of lading may serve as the
contract of carriage between the parties,29 it cannot prevail over the
express provision of the voyage charter that MCCII and petitioner
executed:
[I]n cases where a Bill of Lading has been issued by a carrier covering
goods shipped aboard a vessel under a charter party, and 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 title passing
the property of the goods, but not as varying the contract between the
charterer and the shipowner." The Bill of Lading becomes, therefore,
only a receipt and not the contract of carriage in a charter of the entire
vessel, for the contract is the Charter Party, and is the law between
the parties who are bound 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
Page 25
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.
SPOUSES DANTE CRUZ andLEONORA CRUZ,Petitioners,-
versus -SUN HOLIDAYS, INC.,Respondent.
D E C I S I O N 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.
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
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 Ruelitos 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 respondents 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 attorneys 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 Resorts 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 respondents 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.
Page 26
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 Resorts
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
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
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 respondents 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 respondents 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 carriers 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.Respondents 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]
Page 27
A very cautious person exercising the utmost diligence would thus not
brave such stormy weather and put other peoples 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.
Respondents 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 respondents 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.
MARCELO. MA. COSTA RICA|TRANSPORTATION LAW|Atty. Alcaraz
Article 1764[27] vis--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:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living 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. Ruelitos 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
carriers breach of contract of carriage resulted in the death of
petitioners son, following Article 1764 vis--vis Article 2206 of the Civil
Code, petitioners are entitled to moral damages.
Page 28

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]
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

Under the circumstances, it is reasonable to award petitioners the
amount of P100,000 as moral damages and P100,000 as exemplary
damages.[38]
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).

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 respondent 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.
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 Ruelitos 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.

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

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