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THE LAW ON TRANSPORTATION AND PUBLIC UTILITIES

SWU LAW- PHINMA


Atty. Jandel V. Ondangan
Instructor
COURSE SYLLABUS
PART I - COMMON CARRIERS ..................................................................................................................................... 7

Definition of Contract of Transportation.................................................................................................................... 7

Laws and Jurisprudence: ............................................................................................................................ 7

R.A 4136: land Transportation and Traffic Code ................................................................................................ 7

Unsworth Transportation International v. CA ............................................. Error! Bookmark not defined.

Agustin Dela Torre v. CA ........................................................................................................................... 27

Parties ............................................................................................................................................................... 32

1.1 Carriage of Passengers / Contract to Carry Passenger ....................................................................... 32

1.2 Carriage of Goods/ Contract to carry Goods ...................................................................................... 32

Laws and Jurisprudence: .................................................................................................................................. 32

Baliwag Transit Corporation v CA ............................................................................................................. 32

Everett Steamship Corp. v. CA ................................................................................................................ 35

British Airways v. CA ............................................................................................................................... 38

Perfection - ....................................................................................................................................................... 41

1. Contract to Carry - Consensual Contract (meeting of the minds) ................................................................ 41

2. Carriage Contract - Real Contract ................................................................................................................. 41

a) Carriage of Goods - Consensual....................................................................... Error! Bookmark not defined.

Buses, Jeepneys, and Street cars- Once the passenger steps foot If the BJS slows down, there is
already a continuous offer and reasonable time ........................................ Error! Bookmark not defined.

Trains- .......................................................................................................... Error! Bookmark not defined.

Laws and Jurisprudence: .................................................................................................................................. 41

British Airways v. CA February 9, 1993, 218 SCRA 699 - XXX XXX .................................................................... 41

Mauro Ganzon v. CA No. L-48757, May 30, 1988 .................................................................................... 41

Korean Airlines Co. ltd v. CA August 3, 1994 234 SCRA 717 ..................................................................... 44

Dangwa Transportation Co., Inc. v CA October 7, 1991, 202 SCRA 574 ................................................... 48

Common carrier -........................................................................................................................................... 52

Public service - .......................................................................................................................................... 52

Laws and Jurisprudence: .......................................................................................................................... 52

Article 1732 of the New Civil Code ........................................................................................................... 52

Commonwealth Act No. 146 section 13 par. b as amended .................................................................... 52

De Guzman v. CA ...................................................................................................................................... 52

Test: .................................................................................................................................................................. 56

1.3 First Philippine Industrial Corporation v. CA .................................................................................... 56


1.4 Estrellita M. Bascos v. CA .................................................................................................................. 60

1.5 FGU Insurance Corporation v. G. P. Sarmiento Trucking Corporations ........................................... 65

1.6 Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas, et al. ............................................. 69

1.7 National Steel Corporation v. CA ...................................................................................................... 79

1.8 Sps Cruz v. Holiday ............................................................................................................................ 93

Characteristics .................................................................................................................................................. 99

Broader concept ....................................................................................................................................... 99

Ancillary business ..................................................................................................................................... 99

Limited clientele ....................................................................................................................................... 99

Means of transportation .......................................................................................................................... 99

Laws and Jurisprudence: .................................................................................................................................. 99

Article 1732 of the New Civil Code ........................................................................................................... 99

National Steel Corporation v. CA .............................................................................................................. 99

a. Asia Lighterage and Shipping, Inc. v. CA ............................................................................................... 99

b. Fabre, Jr. v. CA .................................................................................................................................... 104

c. Phil. American general insurance Company v. PKS Shipping Co ......................................................... 111

d. Virgines Calvo v. UCPB General Insurance Co .................................................................................... 115

e. Caltex(phil) v. Sulpicio Lines ............................................................................................................... 120

f. Loadstar Shipping Co. v. Pioneer Asia Insurance .............................................................................. 126

g. Home Assurance Corp ........................................................................................................................ 133

h. Planters v. CA .................................................................................................................................... 135

i. A.F Sanchez Brokerage Inc. v. CA ......................................................................................................... 139

2. Effect of Charter Party ........................................................................................................................................ 145

3. Common carrier v. Private Carrier ...................................................................................................................... 145

Laws and Jurisprudence: ................................................................................................................................ 145

a. Cebu Salvage Corporation v. Philippine Home Assurance Corp ......................................................... 145

b. Valenzuela Hardwood and Industrial Supply, Inc. v. CA ................................................................... 147

c. Loadmasters Customs Services, Inc. Glodel Brokerage Corporation .................................................. 156

4. Common carrier v. Other contracts .................................................................................................................... 164

4.1 Distinguish from ....................................................................................................................................... 164

a. Towage................................................................................................................................................ 164

b. Arrastre ............................................................................................................................................... 164

c. Stevedoring ......................................................................................................................................... 164

d. Travel Agency ..................................................................................................................................... 164

Laws and Jurisprudence.................................................................................................................................. 164

a. Cargolift Shipping Inc. V. L. Actuario Marketing Co. and Skyland Brokerage ................................... 164

b. Mindanao Terminal and Brokerage services v. Phoenix Assurance Co .............................................. 170


c. Cebu Arrastre Services v. Collector of Internal Revenue .................................................................. 175

d. Crisostomo v. CA ............................................................................................................................... 178

5. Governing Laws .................................................................................................................................................. 183

5.1 Article 1766 of the New Civil Code(NCC) .......................................................................................... 183

5.2 Article 1753 NCC ............................................................................................................................... 183

5.3 Article 1732-1766 NCC...................................................................................................................... 183

5.4 National Dev. Company v. CA ......................................................................................................... 183

5.5 Mapa v. CA ...................................................................................................................................... 188

5.6 Alitalia v. Intermediate Appellate Court ......................................................................................... 196

5.7 Philippine Charter Insurance Corpo v. Neptune Orient Lines ........................................................ 199

5.8 Warsaw convetion ............................................................................................................................ 205

5.9 COGSA............................................................................................................................................... 205

5.10 RA 4136........................................................................................................................................... 205

5.11 RA 9497........................................................................................................................................... 205

6. Nature of business .............................................................................................................................................. 205

7. Registered owner rule and Kabit System ........................................................................................................... 205

7.1 Registration laws ...................................................................................................................................... 205

Compulsory registration of motor vehicles .................................................................................... 205

7.2 Registered owner rule .............................................................................................................................. 205

7.3 Kabit system ............................................................................................................................................. 205

7.4 Pari Delicto Rule ....................................................................................................................................... 205

7.5 Aircrafts and vessels ................................................................................................................................. 205

Laws and Jurisprudence.................................................................................................................................. 206

a. PCI leasing and finance, Inc. v. UCPB General Insurance Co .............................................................. 206

b. Equitable Leasing Corporation v. Lucita Suyon .................................................................................. 210

c. Aguilar v. Commercial Savings Bank ................................................................................................. 215

d. Perez v. Gutierrez ............................................................................................................................. 225

e. Aberlardo Lim ..................................................................................................................................... 227

f. Teja Marketing v. Intermediate Appellate Court ................................................................................ 231

g. Lita Enterprises, Inc. v. IAC ............................................................................................................... 233

h. Mariano C Mendoza and Lim v. SPS Gomez and Gomez .................................................................. 235

i. Estela Crisostomo v. CA and Caravan Travel and Tours .................................................................... 243

8. Boundary System ................................................................................................................................................ 248

Laws and Jurisprudence.................................................................................................................................. 248

a. Gregorio George Amante and Vicente Amante vs. Bibiano Serwelas ....................................... 249

b. Oscar Villarama Jr v. CA ...................................................................................................................... 251

c. Martin Lantaco et al. v. City Judge Francisco R. Llamas .................................................................... 264


d. Isabelo Doce v. WCC and Dadao Jadao ............................................................................................ 269

e. Rodolfo J. Serrano v. Severino Santos Transit and/or Severino Santos ............................................. 270

Obligation of the Carrier......................................................................................................................................... 273

Philam Insurance Co. v. Chartis Phil Insurance July 23, 2014 ........................................................... 273

Gregorio Anuran, Maria Maligaya v. Buno et al May 20 1966 ......................................................... 281

Duty to accept ........................................................................................................................................................ 283

FC Fisher v. Yangco Steamship Co. G.R. No. 8095 November 5 1914 31 Phil 1 ............................... 283

Valid grounds for non- acceptance......................................................................................................................... 291

Article 356-357-358 of the Code of Commerce(COC) ...................................................................... 291

Article 1742 of the NCC .................................................................................................................... 291

Duty to deliver goods ............................................................................................................................................. 291

Consequences of delay ........................................................................................................................................... 291

Article 1740 NCC ............................................................................................................................... 291

Article 1747 NCC ............................................................................................................................... 291

A. 370 COC ........................................................................................................................................ 291

A. 371 COC ........................................................................................................................................ 292

A. 372 COC ........................................................................................................................................ 292

A. 373 COC ........................................................................................................................................ 292

A. 374 COC ........................................................................................................................................ 292

Rights of passengers in case of delay ..................................................................................................................... 292

Article 698 COC ................................................................................................................................. 292

Trans-asia Shipping Lines, Inc. v. CA .................................................................................................... 292

Marina regulation Mem. Circular no. 112 ........................................................................................ 297

Place of delivery ..................................................................................................................................................... 297

A. 360 COC ........................................................................................................................................ 298

A. 368 COC ........................................................................................................................................ 298

A. 369 COC ........................................................................................................................................ 298

To whom delivered ................................................................................................................................................. 298

Delay to transport Passengers ................................................................................................................................ 298

Marina Memorandum Circular no. 112 December 15, 1995 ................................................................. 298

Duty to Exercise Extra-ordinary Diligence .............................................................................................................. 299

1.1 Code of commerce provisions .......................................................................................................... 299

1.2 Presumption of negligence ............................................................................................................... 299

1.3 Duration of Duty in Carriage of Goods ............................................................................................. 299

1.4 Commencement of Duty in Carriage of Passengers ......................................................................... 299

Laws and jurisprudence: ......................................................................................................................................... 299

a. Article 1733 of the NCC ...................................................................................................................... 299


b. Artilc 1755 of the NCC ........................................................................................................................ 299

c. Article 1736 of the NCC ....................................................................................................................... 299

d. Article of 1737 of the NCC .................................................................................................................. 299

e. Article of 1738 of the NCC .................................................................................................................. 299

Mariano v. Calleja July 31, 2009 ............................................................................................................. 299

Belgian Overseas Chartering and Shipping v. Phil. First Ins. Co., June 5, 2002 ...................................... 301

Ganzon v. CA G.R. No. L-48757 May 30, 1998 ........................................................................................ 306

Saludo v. CA ............................................................................................................................................ 307

Republic of the Philippines v. Lorenzo Shipping February 7, 2005 ........................................................ 324

Regional Container Lines v. Netherlands Insurance Co. September 4, 2009 ......................................... 327

Defenses of Common Carriers ................................................................................................................................ 329

Proximate Causation ........................................................................................................................ 329

New Civil Code Provisions ................................................................................................................ 329

Defense in Carriage of Passengers ................................................................................................... 329

Fortuitous event ............................................................................................................................... 330

Public enemy .................................................................................................................................... 330

Improper Packing.............................................................................................................................. 330

Order of Public Authority ................................................................................................................. 330

Defenses of Carriage of Passengers.................................................................................................. 330

Acts of Employees ............................................................................................................................ 330

Sabena Belgian World Airlines vs. CA ..................................................................................................... 330

Leopoldo Poblete vs. Donato Fabros ...................................................................................................... 334

Collin A. Morris vs. CA............................................................................................................................. 335

Antonia Maranan vs. Pascual Perez, et al,.............................................................................................. 339

Act of Other Passengers and 3rd persons .............................................................................................................. 341

Jose Pilapil vs. CA .................................................................................................................................... 341

Passengers baggages ............................................................................................................................................. 344

1.5 Define baggage ................................................................................................................................. 344

1.6 Checked-in-Baggage ......................................................................................................................... 344

1.7 Hand Carried baggage ...................................................................................................................... 344

Philippine Airlines Inc. vs. CA .................................................................................................................. 344

British Airways vs. CA ............................................................................................................................. 357

Philippine Airlines Inc. vs. Hon. Adriano Savillo, et. al.,.......................................................................... 362

Obligations of Shipper, Consignee and Passenger ................................................................................................. 365

1.8 Negligence of Shipper or Passenger ................................................................................................. 365

1.9 Payment of Freight ........................................................................................................................... 365

1.10 Who will pay the freight ................................................................................................................. 365


1.11 Time to pay the freight ................................................................................................................... 365

1.12 Carriers lien.................................................................................................................................... 365

1.13 Payment of Demurrage .................................................................................................................. 365


PART I - COMMON CARRIERS
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.

Common Carrier one that holds itself out as ready to engage in the transportation of goods for hire as a public
employment and not as a casual occupation. (De Guzman v. CA, G.R. No. L-47822, 22 December 1988)

Definition of Contract of Transportation

The movement of persons or things from one place to another, by a carrier.


(Blacks Law Dictionary)

A contract of transportation is whereby a certain person or association of persons obligate


themselves to transport persons, things, news from one place to another for a fixed price. It is the
removal of goods or persons from one place to another.

Does not presume that the carrier is a common carrier.

Laws and Jurisprudence:

R.A 4136: land Transportation and Traffic Code

AN ACT TO COMPILE THE LAWS RELATIVE TO LAND TRANSPORTATION AND TRAFFIC RULES, TO CREATE A LAND
TRANSPORTATION COMMISSION AND FOR OTHER PURPOSES

Section 1. Title of Act. - This Act shall be known as the "Land Transportation and Traffic Code."

Section 2. Scope of Act. - The provisions of this Act shall control, as far as they apply, the registration and operation of
motor vehicles and the licensing of owners, dealers, conductors, drivers, and similar matters.

Section 3. Words and phrases defined. - As used in this Act:

(a) "Motor Vehicle" shall mean any vehicle propelled by any power other than muscular power using the public
highways, but excepting road rollers, trolley cars, street-sweepers, sprinklers, lawn mowers, bulldozers, graders,
fork-lifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and
tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes.

Trailers having any number of wheels, when propelled or intended to be propelled by attachment to a motor vehicle,
shall be classified as separate motor vehicle with no power rating.

(b) "Passenger automobiles" shall mean all pneumatic-tire vehicles of types similar to those usually known under the
following terms: touring car, command car, speedster, sports car, roadster, jeep, cycle, car (except motor wheel and
similar small outfits which are classified with motorcycles), coupe, landaulet, closed car, limousine, cabriolet, and sedan.

Motor vehicles with changed or rebuilt bodies, such as jeepneys, jitneys, or station wagons, using a chassis of the usual
pneumatic-tire passenger automobile type, shall also be classified as passenger automobile, if their net allowable
carrying capacity, as determined by the Commissioner of Land Transportation, does not exceed nine passengers and if
they are not used primarily for carrying freight or merchandise.

The distinction between "passenger truck" and "passenger automobile" shall be that of common usage: Provided, That
a motor vehicle registered for more than nine passengers shall be classified as "truck": And Provided, further, That a
"truck with seating compartments at the back not used for hire shall be registered under special "S" classifications. In
case of dispute, the Commissioner of Land Transportation shall determine the classification to which any special type of
motor vehicle belongs.

(c) "Articulated vehicle" shall mean any motor vehicle with a trailer having no front axle and so attached that part of the
trailer rests upon motor vehicle and a substantial part of the weight of the trailer and of its load is borne by the motor
vehicle. Such a trailer shall be called as "semi-trailer."

(d) "Driver" shall mean every and any licensed operator of a motor vehicle.

(e) "Professional driver" shall mean every and any driver hired or paid for driving or operating a motor vehicle, whether
for private use or for hire to the public.

Any person driving his own motor vehicle for hire is a professional driver.

(f) "Owner" shall mean the actual legal owner of a motor vehicle, in whose name such vehicle is duly registered with
the Land Transportation Commission.

The "owner" of a government-owned motor vehicle is the head of the office or the chief of the Bureau to which the
said motor vehicle belongs.

(g) "Dealer" shall mean every person, association, partnership, or corporation making, manufacturing, constructing,
assembling, remodeling, rebuilding, or setting up motor vehicles; and every such entity acting as agent for the sale of
one or more makes, styles, or kinds of motor vehicles, dealing in motor vehicles, keeping the same in stock or selling
same or handling with a view to trading same.

(h) "Garage" shall mean any building in which two or more motor vehicles, either with or without drivers, are kept
ready for hire to the public, but shall not include street stands, public service stations, or other public places designated
by proper authority as parking spaces for motor vehicles for hire while awaiting or soliciting business.

(i) "Gross weight" shall mean the measured weight of a motor vehicle plus the maximum allowable carrying capacity in
merchandise, freight and/or passenger, as determined by the Commissioner of Land Transportation.

(j) "Highways" shall mean every public thoroughfare, public boulevard, driveway, avenue, park, alley and callejon, but
shall not include roadway upon grounds owned by private persons, colleges, universities, or other similar institutions.

(k) "The Commissioner of Land Transportation or his deputies" shall mean the actual or acting chief of the Land
Transportation Commission or such representatives, deputies, or assistants as he may, with the approval of the
Secretary of Public Works and Communications, appoint or designate in writing for the purpose contemplated by this
Act.

(l) "Parking or parked", for the purposes of this Act, shall mean that a motor vehicle is "parked" or "parking" if it has
been brought to a stop on the shoulder or proper edge of a highway, and remains inactive in that place or close thereto
for an appreciable period of time. A motor vehicle which properly stops merely to discharge a passenger or to take in a
waiting passenger, or to load or unload a small quantity of freight with reasonable dispatch shall not be considered as
"parked", if the motor vehicle again moves away without delay.

(m) "Tourist" shall mean a foreigner who travels from place to place for pleasure or culture.

ARTICLE III
Administration of Act

Section 4. Creation of the Commission. -

(a) There is created under the Department of Public Works and Communications an office which shall be designated
and known as the Land Transportation Commission, composed of one Commissioner and one Deputy Commissioner,
who shall be vested with the powers and duties hereafter specified. Whenever the word "Commission" is used in this
Act, it shall be deemed to mean the Land Transportation Commission, and whenever the word "Commissioner" is used
in this Act, it shall be taken to mean the Commissioner or Deputy Commissioner.

The Commissioner and the Deputy Commissioner shall be natural-born citizens and residents of the Philippines, and
they shall be appointed by the President of the Philippines, with the consent of the Commission on Appointments of
the Congress of the Philippines: Provided, however, That the present Administrator, Assistant Administrator and the
personnel of the Motor Vehicles Office shall continue in office without the necessity of reappointment.

(b) The Commissioner and Deputy Commissioner shall hold office until removed in accordance with the provisions of
the Revised Administrative Code.

(c) The Commissioner shall receive an annual compensation of twelve thousand pesos and the Deputy Commissioner,
an annual compensation of ten thousand four hundred pesos. The Commissioner shall be assisted by one head
executive assistant (MV regulation adviser or chief), one administrative officer, one registration regulation chief, one
inspection, examination and licensing regulation chief, one law and traffic enforcement regulation chief, one provincial
regulation chief, one utility and property regulation chief, one accounting officer, one internal chief auditor, and one
personnel officer, who shall receive an annual compensation of nine thousand pesos each; eight land transportation
regional directors who shall receive an annual compensation of eight thousand four hundred pesos each and eight land
transportation assistant regional directors, who shall receive an annual compensation of seven thousand pesos each
and ten assistant regulation chiefs, who shall receive an annual compensation of seven thousand pesos each.

(d) The Commission shall have its offices in Quezon City where the present Motor Vehicle Office is located, and shall
establish a regional branch office each in Tuguegarao (Cagayan), Baguio City, Pasig (Rizal), Lipa City, San Fernando (La
Union), Naga City, Cebu City, Iloilo City, Cagayan de Oro City, and Davao City, to be headed by a regional director who
will have immediate administration, supervision and control over activities and administration of the Commission in the
respective regions.

The Commissioner shall be responsible for the administration of this Act and shall have, in connection therewith, the
following powers and duties, in addition to those mentioned elsewhere in this Act:

(1) With the approval of the Secretary of Public Works and Communications, to issue rules and regulations not in
conflict with the provisions of this Act, prescribing the procedure for the examination, licensing and bonding of drivers;
the registration and re-registration of motor vehicles, transfer of ownership, change of status; the replacement of lost
certificates, licenses, badges, permits or number plates; and to prescribe the minimum standards and specifications
including allowable gross weight, allowable length, width and height or motor vehicles, distribution of loads, allowable
loads on tires, change of tire sizes, body design or carrying capacity subsequent to registration and all other special
cases which may arise for which no specific provision is otherwise made in this Act.

(2) To compile and arrange all applications, certificates, permits, licenses, and to enter, note and record thereon
transfers, notifications, suspensions, revocations, or judgments of conviction rendered by competent courts concerning
violations of this Act, with the end in view of preserving and making easily available such documents and records to
public officers and private persons properly and legitimately interested therein.

(3) To give public notice of the certificates, permits, licenses and badges issued, suspended or revoked and/or motor
vehicles transferred and/or drivers bonded under the provisions of this Act.

(4) The Commissioner of Land Transportation, with the approval of the Secretary of Public Works and Communications,
may designate as his deputy and agent any employee of the Land Transportation Commission, or such other
government employees as he may deem expedient to assist in the carrying out the provisions of this Act.

(5) The Commissioner of Land Transportation and his deputies are hereby authorized to make arrest for violations of
the provisions of this Act in so far as motor vehicles are concerned; to issue subpoena and subpoena duces tecum to
compel the appearance of motor vehicle operators and divers and/or other persons or conductors; and to use all
reasonable means within their powers to secure enforcement of the provisions of this Act.

(6) The Commissioner of Land Transportation or his deputies may at any time examine and inspect any motor vehicle to
determine whether such motor vehicle is registered, or is unsightly, unsafe, overloaded, improperly marked or
equipped, or otherwise unfit to be operated because of possible excessive damage to highways, bridges and/or
culverts.

(7) The Philippine Constabulary and the city and municipal police forces are hereby given the authority and the primary
responsibility and duty to prevent violations of this Act, and to carry out the police provisions hereof within their
respective jurisdiction: Provided, That all apprehensions made shall be submitted for final disposition to the
Commissioner and his deputies within twenty-four hours from the date of apprehension.

(8) All cases involving violations of this Act shall be endorsed immediately by the apprehending officer to the Land
Transportation Commission. Where such violations necessitate immediate action, the same shall be endorsed to the
traffic court, city or municipal court for summary investigation, hearing and disposition, but in all such cases,
appropriate notices of the apprehensions and the dispositions thereof shall be given to the Commissioner of Land
Transportation by the law-enforcement agency and the court concerned.

Notation of all such dispositions shall be entered in the records, and copy shall be mailed to the owner and to the driver
concerned.

CHAPTER II
REGISTRATION OF MOTOR VEHICLES

ARTICLE I
Duty to Register, Reports, Applications, Classifications

Section 5. All motor vehicles and other vehicles must be registered.

(a) No motor vehicle shall be used or operated on or upon any public highway of the Philippines unless the same is
properly registered for the current year in accordance with the provisions of this Act.

(b) Any registration of motor vehicles not renewed on or before the date fixed for different classifications, as provided
hereunder shall become delinquent and invalid:

1. For hire motor vehicles - on or before the last working day of February.

2. Privately-owned motor vehicles - from March one to the last working day of May.

3. All other motor vehicles - from June one to the last working day of June; except when the plates of such motor
vehicles are returned to the Commission in Quezon City or to the Office of the Motor Vehicles Registrar in the provincial
or city agency of the Commission on or before the last working day of December of the year of issue.

(c) Dealer's reports - The Commissioner of Land Transportation shall require dealers to furnish him with such
information and reports concerning the sale, importation, manufacture, number of stocks, transfer or other
transactions affecting motor vehicles as may be necessary for the effective enforcement of the provisions of this Act.

(d) Change of motor number prohibited. - No repair or change in the motor vehicle involving the exchange, elimination,
effacing, or replacing of the original or registered serial or motor number as stamped or imprinted, shall be allowed,
and any motor vehicle with a trace of having its motor number altered or tampered with shall be refused registration or
re-registration, unless such is satisfactorily explained and approved by the Commissioner.

(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor vehicles, in order to
be valid, must be recorded in the Land Transportation Commission and must be properly recorded on the face of all
outstanding copies of the certificates of registration of the vehicle concerned.

Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be recorded, and in
the absence of such cancellation, no certificate of registration shall be issued without the corresponding notation of
mortgage, attachment and/or other encumbrances.

Records of encumbrances of motor vehicles shall be kept by the Land Transportation Commission in chronological
sequence and shall contain, among other things, the time, date and number of the entry in a "Book of Motor Vehicles"
referring to the creation, cancellation or foreclosure of the aforesaid mortgages, attachments or to other
encumbrances.

The Land Transportation Commission shall collect a fee of five pesos for every annotation of a mortgage, attachment
and/or other encumbrances, or cancellation thereof.

Section 6. Application and payments for registration. - Applications and payments for registration shall be made either
personally or by registered mail, and the date of the cancellation of the postage stamps of envelopes containing money
order or check shall be taken as the date of the application and/or payment for registration: Provided, That the
application is properly prepared and the payment for registration is sufficient as required by law.

Section 7. Registration Classification. - Every motor vehicle shall be registered under one of the following described
classifications:
(a) private passenger automobiles; (b) private trucks; and (c) private motorcycles, scooters, or motor wheel
attachments. Motor vehicles registered under these classifications shall not be used for hire under any circumstances
and shall not be used to solicit, accept, or be used to transport passengers or freight for pay.

Laborers necessary to handle freight on board private trucks may ride on such trucks: Provided, That seats shall not be
installed in the rear compartment thereof and that only such number of laborers, not exceeding ten, as may be needed
to handle the kind of freight carried, shall ride on the truck: Provided, further, That the combined weight of cargo and
passengers does not exceed the registered net capacity of the truck.

For the purpose of this section, a vehicle habitually used to carry freight not belonging to the registered owner thereof,
or passengers not related by consanguinity or affinity within the fourth civil degree to such owner, shall be conclusively
presumed to be "for hire."

No person shall be allowed to register as private truck any truck not actually and reasonably necessary to carry out his
duly licensed business or legitimate occupation or industry regularly paying taxes.

(d) Public utility automobiles; e) public utility trucks; (f) taxis and auto-calesas; (g) garage automobiles; (h) garage
trucks; (i) hire trucks: and (j) trucks owned by contractors and customs brokers and customs agents. Application for
registration under these classifications shall be accompanied by a certificate of public convenience or a special permit
issued by the Public Service Commission, and motor vehicles registered under these classifications shall be subject to
the Public Service Law, rules and regulations, as well as the provisions of this Act.

(k) Undertakes

(l) Dealers - Registrations under this classification are intended to cover generally and successively all the motor vehicles
imported or handled by dealers for sale. Motor vehicles registered under the dealer's classification shall, under no
circumstances, be employed to carry passengers or freight in the dealer's business, or for hire. Such vehicles shall be
operated under this classification only for the purpose of transporting the vehicle itself from the pier or factory to the
warehouse or sales room or for delivery to a prospective purchaser or for test or demonstration.

(m) Government automobiles; (n) government trucks; and (o) government motorcycles. Motor vehicles owned by the
Government of the Philippines or any of its political subdivisions shall be registered under these classifications. Motor
vehicles owned by government corporations, by government employees or by foreign governments shall not be
registered under this classification.

(p) Tourists bringing their own motor vehicles to the Philippines may, without registering such motor vehicles, use the
same during but not after ninety days of their sojourn: Provided, That the motor vehicle displays the number plates for
the current year of some other country or state, and said number plates as well as the name and address (permanent
and temporary) of the owner thereof are registered in the Land Transportation Commission prior to the operation of
the motor vehicle.

If such tourist remain in the Philippines longer than ninety days, the motor vehicle shall not be operated unless
registered in accordance with this Act and the corresponding registration fees paid.

(q) Special. The Commissioner of Land Transportation may, in his discretion, allow the registration under this
classification of motor vehicles which do not conform to the foregoing described regular classification.

ARTICLE II
Registration Fees

Section 8. Schedule of registration fees. - Except as otherwise specifically provided in this Act, each application for
renewal of registration of motor vehicles shall be accompanied by an annual registration fee in accordance with the
following schedule:

(a) Private automobiles with pneumatic rubber tires, an amount based on their respective shipping weight or factory
weight as indicated in the following schedule:

1,000 kilos or less P75.00

1,000 to 1,500 kilos 100.00


1,501 to 2,000 kilos 135.00

2,001 kilos and above 180.00

The factory or shipping weight of a private automobile shall be obtained from the Red Book edited by the National
Market Report, Inc., of the United States of America: Provided, further, That in the case of automobiles with altered,
changed or rebuilt bodies, the weight as obtained: by actual weighing shall be considered the vehicles weight:
Provided, furthermore, That the increase registration fees herein prescribed shall not apply to jeeps and jeepneys for
private use or for hire and the fees hereof shall be those prescribed for them before the approval of this Act.

The registered passenger capacity of passenger automobiles operated for hire or for private use shall be determined as
follows:

1. For each adult passenger, a horizontal rectangular area, including seat and feet space, not less than thirty-five
centimeters wide and sixty centimeters long, except in the front seat, which shall allow an area fifty centimeters wide
for the operator.

2. For each half passenger, a horizontal rectangular area, including seat and feet spaces, not less that seventeen and a
half centimeters wide by sixty centimeters long, provided, that each continuous row of seats shall not be allowed to
have more that one-half passenger.

(b) Private motor trucks, passenger buses and trailers with pneumatic rubber tires, the sum of five pesos for every
hundred kilograms of maximum allowable gross weight or fraction thereof.

(c) Private motor trucks, passenger buses and trailers with solid rubber tires or with part-solid and part-pneumatic
rubber tires, the sum of seven pesos for every hundred kilograms of maximum allowable gross weight or fraction
thereof.

(d) Private motorcycles and scooters of two or three wheels and bicycles with motor attachments, the sum of thirty
pesos.

(e) The fee for registration of motor vehicles for hire shall be sixty percent more than the fee prescribed for private
motor vehicles of the same category.

(f) The fee for registration of diesel-consuming vehicles shall be fifty percent more than that of vehicles using motor
fuel other than diesel oil. The fee for registration of motor vehicles for hire shall be sixty percent more than the fees
prescribed for private motor vehicles.

(g) No regular registration fees shall be charged for the general registration of motor vehicles contemplated under the
dealer's classification: Provided, That the Commissioner of Land Transportation shall provide appropriate dealer's
number plates corresponding to the classification of vehicles hereinbelow described, and registration fee for every set
of such dealer's number plates shall be in accordance with the following schedule of rates;

Two hundred pesos for each truck or trailer;

One hundred pesos for each passenger automobile; and

Twenty pesos for each motorcycle and the like.

(h) Registration under the "Government Motor Vehicle" classification shall be free of charge, upon request of the chief
of bureau or office concerned.

(i) Motor vehicles not intended to be operated or used upon any public highway, or which are operated on highways
not constructed or maintained by the Government, or are intended not to be used or operated at all, shall be exempt
from payment of the registration fees provided in this Act, but shall each pay an annual recording and service fee of
fifteen pesos: Provided, however, That no refund, credit for, or reimbursement of registration fees or part thereof shall
be made to any owner on account of the discontinuance of the use or operation of a motor vehicle subsequent to the
payment of such registration fees: Provided, further, That in the event motor vehicles exempted under this section shall
be found operated on any public highways, the regular registration fees and surcharges shall be collected in addition to
whatever penalties may be imposed for violation of this Act. The Commissioner of Land Transportation shall provide
distinctive number plates for vehicles exempted from payment of regular registration fees, and the owner of the
vehicles concerned shall pay four pesos for each set of such number plates.

(j) The maximum allowable gross weight of a motor truck, passenger bus, or trailer, upon which to compute the
registration fee thereof, shall be determined by the Commissioner of Land Transportation. He shall, from time to time
as the need of the service may require, prepare, subject to the approval of the Secretary of Public Works and
Communications, suitable tables of maximum allowable loads per wheel for different sizes kinds of tires.

(k) The registration fees provided in this Act for trucks may be payable in two equal installment, the first to be paid on
or before the last working day of February if for hire, and in March if private; and the second to be paid on or before the
last working day of August: Provided, That the fifty per cent penalty shall apply only to the unpaid balance of the
remaining period of delinquency.

Section 9. Permissible weights and dimensions of vehicles in highways traffic.

(a) The maximum gross weight and measurement of motor vehicles, unladen or with load, permissible on public
highways shall be as specified hereunder, subject to such regulations as the Commissioner with the approval of the
Secretary of Public Works and Communications, may promulgate, from time to time, as the conditions of the public
highways may warrant and the needs of the service may require.

Permissible maximum weights:

1. Per most heavily loaded wheel three thousand six hundred kilograms;

2. Per most heavily loaded axle eight thousand kilograms;

3. Per most heavily loaded axle group


(the two axles of the group being at
fourteen thousand five hundred kilograms.
least one meter and less than two
meters apart)

An axle weight shall be the total weight transmitted to the road by all the wheels the centers of which can be included
between the parallel transverse vertical planes one meter apart extending across the full width of the vehicles.

No provincial, city or municipal authority shall enact or enforce any ordinance or resolution regulating or prescribing the
maximum gross weight of any motor vehicle.

(b) No motor vehicle operating as a single unit shall exceed the following dimensions:
Overall width two and five-tenths meters
Overall height four meters
Overall length:
Freight vehicles with two axles ten meters
Passenger vehicles with two axles eleven meters
Vehicles with three or more axles fourteen meters

(c) No motor vehicle and/or trailer combination shall exceed eighteen meters in overall projected length, including any
load carried on such vehicle and trailer.

(d) No articulated vehicles shall be allowed to draw or pull a trailer and no vehicle already drawing a trailer shall draw
another.

Section 10. Special permits, fees for. - The Commissioner with the approval of the Secretary of Public Works and
Communications, shall issue regulations and schedules of additional fees under which special permits may be issued in
the discretion of the Commissioner or his deputies for each of the following special cases, without which special permit
no vehicles shall be operated on the public highways:

(a) To operate a motor vehicle or trailer outfit with wheel, axle, or axle group loads in excess of the limits fixed in
subsection (a) of Section nine hereof or in any regulation issued by the Commissioner.

(b) To operate a motor vehicle the size of which exceeds the limit of permissible dimensions specified in paragraph (b)
of Section nine hereof.
(c) To operate a motor vehicle with any part of the load extending beyond the projected width of the vehicle.

(d) To pull two trailers behind a motor vehicle.

(e) For any other special authority relating to the use of vehicles, not otherwise specifically provided herein.

Section 11. Additional fees. - In addition to the fees elsewhere provided in this Act, for each change of registration, from
private to for hire or vice-versa; revision of gross weight rating, change of tire size; transfer of ownership; replacement
of a lost registration certificate, number plate, driver's license or permit; badge; preparation of affidavit or certified
copy of records, or for any similar circumstances requiring the issue, revision, or reissue of a certificate of registration,
driver's license, badge, permit, or other document, a fee of two pesos shall be collected.

The replacement of a lost or utterly spoiled certificate, number plate, license, badge or permit shall render the original
invalid.

In case of request in writing for certification of data or facts involving two or more vehicles, a fee of five pesos a page or
part thereof shall be collected for each certification.

Section 12. Fee for original registration for part of year. - If any application for the original registration is made during
the first quarter of a calendar year, the total annual fee for the year shall be paid, if made during the second quarter,
three-fourths of the annual fee for that year shall be paid, if made during the third quarter, one half of the annual fee
shall be paid, and if made during the fourth quarter, one-fourth of the annual fee shall be paid.

Nothing in this section shall be construed as allowing quarterly renewals of registrations in order to avoid payment of
fees in advance for the entire year.

Section 13. Payment of taxes upon registration. - No original registration of motor vehicles subject to payment of taxes,
customs duties or other charges shall be accepted unless proof of payment of the taxes due thereon has been
presented to the Commission.

ARTICLE III
Registration Certificates, Records, Number Plates

Section 14. Issuance of certificates of registration. - A properly numbered certificate of registration shall be issued for
each separate motor vehicle after due inspection and payment of corresponding registration fees.

Section 15. Use and authority of certificate of registration.

(a) The said certificate shall be preserved and carried in the car by the owner as evidence of the registration of the
motor vehicle described therein, and shall be presented with subsequent applications for re-registration, transfer of
ownership, or recording of encumbrances: Provided, That in lieu of the certificate of registration a true copy or
photostat thereof may be carried in the motor vehicle.

(b) The certificate of registration issued under the provisions of this Act for any motor vehicle shall, while the same is
valid and effective and has not been suspended or revoked, be the authority for the operation of such motor vehicle.

(c) No motor vehicle shall be operated on the public highways in a manner which would place it under a classification
requiring the payment of a larger registration fee than that stated in the certificate of registration.

Section 16. Suspension of registration certificate. - If on inspection, as provided in paragraph (6) of Section four hereof,
any motor vehicle is found to be unsightly, unsafe, overloaded, improperly marked or equipped, or otherwise unfit to
be operated, or capable of causing excessive damage to the highways, or not conforming to minimum standards and
specifications, the Commissioner may refuse to register the said motor vehicle, or if already registered, may require the
number plates thereof to be surrendered to him, and upon seventy-two hours notice to the owner of the motor vehicle,
suspend such registration until the defects of the vehicle are corrected and/or the minimum standards and
specifications fully complied with.
Whenever it shall appear from the records of the Commission that during any twelve-month period more than three
warnings for violations of this Act have been given to the owner of a motor vehicle, or that the said owner has been
convicted by a competent court more than once for violation of such laws, the Commissioner may, in his discretion,
suspend the certificate of registration for a period not exceeding ninety days and, thereupon, shall require the
immediate surrender of the number plates.

Whenever a motor vehicle is found to be underweight the owner thereof shall pay the difference in the registration
fees corresponding to the shortage in weight plus a fifty per cent surcharge, and until such payment is made, the
certificate of registration of the motor vehicle concerned shall be suspended by the Commissioner.

After two such suspension, re-registration of the vehicle concerned for one year may be denied.

The Commissioner shall notify the owner of the motor vehicle of any action taken by him under this section.

Section 17. Number plates, preparation, preparation and issuance of . -

(a) The Commissioner shall cause number plates to be prepared and issued to owners of motor vehicles and trailers
registered under this Act, charging a fee of four pesos for each pair including the numerals indicating the year of
registry: Provided, however, That in case no number plates are available, the Commissioner or his deputies may issue,
without charge, a written permit temporarily authorizing the operation of any motor vehicles with other means of
identification: Provided, further, That all motor vehicles exempted from payment of registration fees, motor vehicles
for hire, and privately-owned motor vehicles shall bear plates so designed and painted with different colors to
distinguish one class from another: Provided, furthermore, That the plates of motor vehicles exempted from payment
of registration fees shall be permanently assigned to such motor vehicles during their entire lifetime while exempted
from payment of the fees: And, provided, finally, That the owner thereof shall return such plates to the Land
Transportation Commission within a period of seven working days after such owner has lost his exemption privilege or
has transferred the vehicle to a non-exempt owner.

(b) In case the design of the number plate is such that the numerals indicating the year of registry are on a detachable
tag, the Commissioner or his deputies may, in their discretion, issue the said tag only for subsequent re-registration
charging a fee of one peso for each tag issued.

Section 18. Use of number plates. - At all times, every motor vehicle shall display in conspicuous places, one in front and
one in the rear thereof, the said number plates.

The number plates shall be kept clean and cared for, and shall be firmly affixed to the motor vehicle in such a manner as
will make it entirely visible and always legible.

Except in the case of dealer's number plates which may be used successively on various motor vehicles in stock, no
person shall transfer number plates from motor vehicle to another.

No dealer's number plate shall be used on any motor vehicle after said vehicle has been sold and delivered to a
purchaser, and no dealer shall allow such dealer's number plates to be used on any motor vehicle after its sale and
delivery to a purchaser.

CHAPTER III
OPERATION OF MOTOR VEHICLE

ARTICLE I
License to Drive Motor Vehicles

Section 19. Duty to procure license. - Except as otherwise specifically provided in this Act, no person shall operate any
motor vehicle without first procuring a license to drive a motor vehicle for the current year, nor while such license is
delinquent, invalid, suspended or revoked.

The license shall be carried by the driver at all times when operating a motor vehicle, and shall be shown and/or
surrendered for cause and upon demand to any person with authority under this Act to confiscate the same.

Section 20. License for enlisted men operating Government motor vehicles. - Enlisted men operating a motor vehicle
owned by the Government of the Philippines shall be licensed in accordance with the provisions of this Act, but no
license or delinquency fees shall be collected therefrom. All licenses so issued shall bear the words "For Government
Vehicles Only" plainly marked or stamped in red ink across the face thereof.
A license so marked or stamped shall authorize the holder thereof to operate a private-owned motor vehicle.

Section 21. Operation of motor vehicles by tourists. - Bona fide tourist and similar transients who are duly licensed to
operate motor vehicles in their respective countries may be allowed to operate motor vehicles during but not after
ninety days of their sojourn in the Philippines.

If any accident involving such tourist or transient occurs, which upon investigation by the Commissioner or his deputies
indicates that the said tourist or transient is incompetent to operate motor vehicles, the Commissioner shall
immediately inform the said tourist or transient in writing that he shall no longer be permitted to operate a motor
vehicle.

After ninety days, any tourist or transient desiring to operate motor vehicles shall pay fees and obtain and carry a
license as hereinafter provided.

Section 22. Driver's license, fees, examination. - Every person who desires personally to operate any motor vehicle shall
file an application to the Commissioner or his deputies for a license to drive motor vehicles: Provided, however, That no
person shall be issued a professional driver's license who is suffering from highly contagious diseases, such as,
advanced tuberculosis, gonorrhea, syphilis, and the like.

Each such application except in the case of enlisted men operating government-owned vehicles, shall be accompanied
by a fee of five pesos, and shall contain such information respecting the applicant and his ability to operate motor
vehicles, as may be required by the Commission.

The Commissioner or his deputies shall also ascertain that the applicant's sight and hearing are normal, and may in their
discretion, require a certificate to that effect, signed by a reputable physician.

An examination or demonstration to show any applicant's ability to operate motor vehicles may also be required in the
discretion of the Commissioner or his deputies.

Section 23. Issuance of driver's license. - If, after such examination, the Commissioner or his deputy believes that the
applicant possesses the necessary qualifications and is proficient in the operation of motor vehicles, a license shall be
issued to such applicant upon payment of five pesos, but prior to the issuance of said license, the applicant shall furnish
three copies of his recent photograph to be securely attached to the license, and two copies to be filed and kept as
provided by this Act. All driver's licenses shall bear the signature and right-hand thumb print of the licensee.

Section 24. Use of driver's license and badge. - Every license issued under the provisions of this Act to any driver shall
entitle the holder thereof, while the same is valid and effective and not suspended or revoked, to operate the motor
vehicles described in such license: Provided, however, That every licensed professional driver, before operating a public
service motor vehicle registered under classifications (d) to (j) inclusive of Section seven hereof, shall secure from the
Commissioner, upon payment of the sum of one peso, a driver's badge which he shall, at all times while so operating a
motor vehicle, display in plain sight on the band of his cap or on his coat or shirt. Such driver's badge shall be of metal
with a plainly readable number assigned to the licensee stamped thereon.

It shall be unlawful for any duly licensed driver to transfer, lend or otherwise allow any person to use his license for the
purpose of enabling such person to operate a motor vehicle.

No owner of a motor vehicle shall engage, employ, or hire any person to operate such motor vehicle, unless the person
sought to be employed is a duly licensed professional driver.

Section 25. Driver's records. - Any driver who changes his address shall, within fifteen days, notify the Commissioner in
writing of his new address, name and address of his new employer, the number of the motor vehicle he is employed to
operate, and such other information as the Commissioner may require.

Section 26. Renewal of license. - Any license not renewed on or before the last working day of the month when the
applicant was born shall become delinquent and invalid, except when the license is surrendered to the Commissioner or
his deputies before the last working day of the month of his birth in order to avoid payment of the delinquency fees.

The fee for renewal of delinquent license shall be five pesos in addition to the basic fee as hereinabove prescribed.

Every applicant for renewal of license to operate any motor vehicle shall present to the Commissioner, in person or by
mail or messenger, the license issued to the applicant for the previous year, together with the proper fee of five pesos
and, in the case of professional chauffeurs, three copies of a readily-recognized photograph of the applicant, which
photograph shall have been taken not exceeding three years prior to the date of applicant for renewal.

Lost license. - In case the license for the previous year has been lost or cannot be produced, the applicant shall obtain a
duplicate in accord with Section eleven of this Act, on penalty of refusal, by the Commissioner or his deputies, to renew
the license: Provided, however, That the Commissioner or his deputies may, in their discretion accept in lieu of the
previous years license, the duly signed and sworn statement of an operator to the effect that he has not operated any
motor vehicle in the Philippines during the year or years to which no license was issued in his name.

The Commissioner and his deputies are hereby authorized to administer the oath in connection with such affidavit.

Section 27. Suspension, revocation of driver's license.

(a) The Commissioner may suspend for a period not exceeding three months or, after hearing, revoke any driver's
license issued under the provisions of this Act, and may order any such license to be delivered to him whenever he has
reason to believe that the holder thereof is an improper person to operate motor vehicles, or in operating or using a
motor vehicle in, or as an accessory to, the commission of any crime or act which endangers the public. Any deputy of
the Commissioner may, for the same cause, suspend for a period not exceeding three months any driver's license issued
under the provisions of this Act: Provided, That such suspension may be appealed to the Commissioner who may, after
reviewing the case, confirm, reverse or modify the action taken by such deputy.

(b) Whenever during any twelve-month period a driver shall have been convicted at least three times for the violations
of any provisions of this Act or of any regulation issued by the Commissioner or any municipal or city ordinance relating
to motor vehicle traffic not in conflict with any of the provisions of this Act, the Commissioner may, in his discretion,
revoke or suspend the license of such driver for a period not exceeding two years.

(c) The license suspended or revoked under the provisions of subsections (a) and (b) of this section shall not be
reinstated unless the driver has furnished a bond in accordance with Section twenty-nine of this Act and only after the
Commissioner has satisfied himself that such driver may again safely be permitted to operate a motor vehicle.

(d) A decision of the Commissioner revoking or refusing the reinstatement of a license under the provisions of this
Section may be appealed to the Secretary of Public Works and Communications.

Section 28. Driver's bond. - The Commissioner before reinstating any driver's license which has been suspended or
revoked under the provisions of the preceding section or of any provisions of this Act, may require such driver to post a
bond in the sum of one thousand pesos conditioned upon the satisfaction and payment of any claim which may be filed
or of any execution which may be issued against such driver in any case wherein said driver may be held answerable
while operating motor vehicles. The bond required in this section shall be in such form as to render sureties liable at
least for a period of not less than one year nor more than three years: Provided, however, That upon written application
to the Commissioner for release from such a bond, the Commissioner may after revoking or suspending the driver's
license, authorize the release of the bondsmen from further responsibility thereunder: Provided, further, That should
the Commissioner decide not to revoke the license of a driver who has been convicted of homicide through reckless
imprudence, or of the violation of the speed limit or of reckless driving at least three times within a twelve-month
period, the said driver shall post a bond in the sum of not less than two thousand pesos, conditioned upon the payment
of any claim which may be filed or any execution which may be issued against him in any case wherein said driver may
be held answerable while operating motor vehicles.

Section 29. Confiscation of driver's licenses. - Law enforcement and peace officers duly designated by the Commissioner
shall, in apprehending any driver for violations of this Act or of any regulations issued pursuant thereto, or of local
traffic rules and regulations, confiscate the license of the driver concerned and issue a receipt prescribed and issued by
the Commission therefor which shall authorize the driver to operate a motor vehicle for a period not exceeding
seventy-two hours from the time and date of issue of said receipt. The period so fixed in the receipt shall not be
extended, and shall become invalid thereafter. Failure of the driver to settle his case within fifteen days from the date
of apprehension will cause suspension and revocation of his license.

Section 30. Student-driver's permit. - Upon proper application and the payment of three pesos, the Commissioner or his
deputy may issue student-driver's permits, valid for six months to persons not under eighteen years of age, who desire
to learn to operate motor vehicles. No application for driver's license shall be received unless the applicant has
undergone instruction in the operation of motor vehicles for at least a month and has a valid student-driver's permit:
Provided, however, That any person who has a license to operate vehicles in other countries may, upon presentation of
appropriate evidence of such license, be allowed to pay for a driver's license without presenting a student driver's
permit.
A student driver who fails in the examination shall continue as a student driver for at least one additional month. No
student driver shall operate a motor vehicle unless accompanied by a duly licensed driver.

The licensed driver acting as instructor to the student driver shall likewise be responsible and liable for any violation of
the provisions of this Act and for any injury or damage done by the motor vehicle on account or as a result of its
operation by a student under his direction.

ARTICLE II
Illegal Use of Licenses, Number Plates, Etc.

Section 31. Imitation and false representations. - No person shall make or use attempt to make or use a driver's license,
badge, certificate of registration, number plate, tag, or permit in imitation or similitude of those issued under this Act,
or intended to be used as or for a legal license, badge, certificate, plate, tag or permit, or with intent to sell or otherwise
dispose of the same to another. No person shall falsely or fraudulently represent as valid and in force any driver's
license, badge, certificate, plate, tag or permit issued under this Act which is delinquent or which has been revoked or
suspended.

No person shall, knowingly and with intent to deceive, make one or more false or fraudulent statements in an
application for the registration of vehicles, or for a driver's license.

ARTICLE III
Passenger and Freight

Section 32. Exceeding registered capacity. - No person operating any vehicle shall allow more passenger or more freight
or cargo in his vehicle than its registered carrying capacity. In the case of public utility trucks or buses, the conductor
shall be exclusively liable for violations of this section or of Section thirty-two, letter (c) hereof: Provided, That the
conductor, before being employed by any public service operator, shall get a permit or license from the Commission
and pay five pesos annually for said license or permit issued in his favor, and the same is renewable on or before the last
working day of the month of his birth, attaching a readily recognizable photograph and after presentation of a medical
certificate of fitness of applicant.

Passenger trucks may be allowed to construct any cargo carrying device at the rear or at the side of the truck, subject
to the approval of the Commissioner: Provided, however, That the total weight of the device, including the cargo, shall
not exceed one hundred kilos.

(b) Carrying of passengers and freight on top of vehicles. - No person operating a motor vehicle shall allow any
passenger to ride on the cover or top of such vehicles: Provided, however, That subject to such conditions as may be
contained in permits that may be issued by the Commissioner, baggage or freight may be carried on the top of a truck
provided the weight thereof does not exceed twenty kilos per square meter and is distributed in such a manner as not
to endanger the passengers or stability of the truck.

(c) Riding on running boards. - No driver shall permit any person to ride on the running board, step board, or mudguard
of his motor vehicle for any purpose except to make repair or adjustment in the motor or to collect fares.

Section 33. Passenger or freight capacity marked on vehicle. - All passengers automobiles for hire shall have the
registered passenger capacity plainly and conspicuously marked on both sides thereof, in letters and numerals not less
than five centimeters in height.

All motor trucks, whether for passenger or freight, private, or for hire, shall have the registered passenger gross and
net weight capacities plainly and conspicuously marked on both sides thereof, in letters and numerals not less than five
centimeters in height.

ARTICLE IV
Accessories of Motor Vehicles

Section 34.

(a) Tires of motor vehicles. - No motor vehicle with metallic tires shall be operated upon any public highway, and solid
tires whenever used shall be of sufficient thickness to prevent the metal rims thereof from coming in direct contact
with the road.
(b) Brakes - Every motor vehicle with four or more wheels shall be provided with dual hydraulic brake system so that in
case of hydraulic line failure affecting the braking efficiency of any of the four wheels at least either the front or rear
wheels shall retain normal braking capabilities. In the absence of such dual braking system every motor vehicle with
four or more wheels shall be provided with safety valve devices of such design and make so that failure of the hydraulic
braking system of the vehicle because of leakage in the line of other parts of the system will not affect all wheels but
rather render at all times effective the braking power of either the two front wheels or the two rear wheels when
brakes are applied. This requirement, however, does not apply to motor vehicles equipped with pneumatic braking
system.

(b-1) Horns. - Every motor vehicle shall be provided with a horn or signalling devise in good working order: Provided,
however, That no horn or signalling device emitting an exceptionally loud, startling, or disagreeable sound shall be
installed or used on any motor vehicle.

All authorized emergency vehicles, such as ambulance and police cars and fire wagons used for emergency calls shall be
equipped with a bell, siren, or exhaust whistle of a type approved by the Commissioner, and no such device shall be
installed or used in any other vehicle.

No vehicle not classified as a motor vehicle under this Act shall be equipped with a horn or signaling device similar to
the horn customarily used on motor vehicles.

(c) Headlights. - Every motor vehicle of more than one meter of projected width, while in use on any public highway
shall bear two headlights, one on each side, with white or yellowish light visible from the front, which, not later than
one-half hour after sunset and until at least one-half four before sunrise and whenever weather conditions so require,
shall both be lighted.

Additional lamps and light may be carried, but no red lights shall be visible forward or ahead of the vehicle. Trucks,
buses, trailers, and other similar vehicles must carry, while in use on any public highway during night-time, colored
riding lights on each of the four corners not more than ten centimeters from the top.

All motor vehicles shall be equipped with devices for varying the intensity of light, and the driver must dim the
headlights or tilt the beams downward whenever the vehicle is being operated on well-lighted streets within the limits
of cities, municipalities, and thickly populated barrios or districts, or whenever such vehicle meets another vehicle on
any public highway.

(d) Taillights. - Every motor vehicle and trailer shall, during the above-mentioned hours, also bear on each side in the
rear a lamp showing a red light visible at least one hundred meters from the rear of the vehicle and a lamp throwing a
white light upon the number plate issued for such vehicle.

(e) Stop lights. - Every motor vehicle shall be equipped at the rear with at least one lamp which shall throw a sustained
bright red light visible under all conditions, even under bright sunlight, when the brakes are applied. Each bus, truck,
trailer or similar vehicle shall be equipped, as its stop light at or near its rear center, with a lamp at least twelve
centimeters in diameter with the word "stop" inscribed in the center.

(f) Motorcycle and other vehicle lights. - Every motor vehicle of less than one meter of projected width shall be subject
to the preceding provisions of this section, except that one headlight and one taillight shall be required. No signal light
shall be necessary.

Additional lamps may be carried provided they comply with the preceding provisions of this section.

Every motor vehicle, or whatever style, kind, make, character, or nature, when upon a highway during the hours
above-mentioned, whether in motion or not, shall have one or more lights so arranged that the same shall be visible at
least fifty meters from the front and the rear of such vehicle.

(g) Lights when parked or disabled. - Appropriate parking lights or flares visible one hundred meters away shall be
displayed at a corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted
or is placed in such manner as to endanger passing traffic.

(h) Windshield wiper. - Every motor vehicle shall be equipped with a mechanically or electrically operated device for
wiping off raindrops or other moisture from its front windshield.

(i) Use of red flag. - Whenever the load of any vehicle extends more than one meter beyond the bed or body thereof,
there shall be displayed at every projecting end of such load a red flag not less than thirty centimeters both in length
and width, except that during the hours fixed under subsection (c), there shall be displayed, in lieu of the required red
flags, red lights visible at least fifty meters away.

(j) Mufflers. - Every motor vehicle propelled by an internal combustion engine shall be equipped with a muffler, and
whenever said motor vehicle passes through a street of any city, municipality, or thickly populated district or barrio, the
muffler shall not be cut out or disconnected. No motor vehicle shall be operated in such a manner as to cause it to emit
or make any unnecessary or disagreeable odor, smoke or noise.

CHAPTER IV
TRAFFIC RULES

ARTICLE I
Speed Limit and Keeping to the Right

Section 35. Restriction as to speed. -

(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater
nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other
condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to
endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a
stop within the assured clear distance ahead.

(b) Subject to the provisions of the preceding paragraph, the rate of speed of any motor vehicle shall not exceed the
following:

Passengers
MAXIMUM ALLOWABLE SPEEDS Motor trucks and buses
Cars and Motorcycle

1. On open country roads, with no "blinds


corners" not closely bordered by 80 km. per hour 50 km. per hour
habitations.

2. On "through streets" or boulevards,


clear of traffic, with no " blind corners," 40 km. per hour 30 km. per hour
when so designated.

3. On city and municipal streets, with light


traffic, when not designated "through 30 km. per hour 30 km. per hour
streets".

4. Through crowded streets, approaching


intersections at "blind corners," passing
school zones, passing other vehicles which 20 km. per hour 20 km. per hour
are stationery, or for similar dangerous
circumstances.

(c) The rates of speed hereinabove prescribed shall not apply to the following:

(1) A physician or his driver when the former responds to emergency calls;

(2) The driver of a hospital ambulance on the way to and from the place of accident or other emergency;

(3) Any driver bringing a wounded or sick person for emergency treatment to a hospital, clinic, or any other similar
place;
(4) The driver of a motor vehicle belonging to the Armed Forces while in use for official purposes in times of riot,
insurrection or invasion;

(5) The driver of a vehicle, when he or his passengers are in pursuit of a criminal;

(6) A law-enforcement officer who is trying to overtake a violator of traffic laws; and

(7) The driver officially operating a motor vehicle of any fire department, provided that exemption shall not be
construed to allow unless or unnecessary fast driving of drivers aforementioned.

Section 36. Speed limits uniform throughout the Philippines. - No provincial, city or municipal authority shall enact or
enforce any ordinance or resolution specifying maximum allowable speeds other than those provided in this Act.

Section 37. Driving on right side of highway. - Unless a different course of action is required in the interest of the safety
and the security of life, person or property, or because of unreasonable difficulty of operation in compliance herewith,
every person operating a motor vehicle or an animal-drawn vehicle on a highway shall pass to the right when meeting
persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction,
and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the
center of the intersection of the highway.

Section 38. Classification of highways. - Public highways shall be properly classified for traffic purposes by the provincial
board, municipal board or city council having jurisdiction over them, and said provincial board, municipal board or city
council shall provide appropriate signs therefor, subject to the approval of the Commissioner. It shall be the duty of
every provincial, city and municipal secretary to certify to the Commissioner the names, locations, and limits of all
"through streets" designated as such by the provincial board, municipal board or council.

ARTICLE II
Overtaking and Passing a Vehicle, and Turning at Intersections

Section 39. Overtaking a vehicle. - The driver of any motor vehicle overtaking another vehicle proceeding in the same
direction shall pass at a safe distance to the left thereof, and shall not again drive to the right side of the highway until
safety clear of such overtaken vehicle except that on a highway, within a business or residential district, having two or
more lanes for the movement of traffic in one direction, the driver of a vehicle may overtake and pass another vehicle
on the right. Nothing in this section shall be construed to prohibit a driver overtaking and passing, upon the right,
another vehicle which is making or about to make a left turn.

Section 40. Driver to give way to overtaking vehicle. - The driver of a vehicle about to be overtaken and passed by
another vehicle approaching from the rear shall give way to the overtaking vehicle on suitable and audible signal being
given by the driver of the overtaking vehicle, and shall not increase the speed of his vehicle until completely passed by
the overtaking vehicle.

Section 41. Restrictions on overtaking and passing.

(a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another
vehicle proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traffic for a
sufficient distance ahead to permit such overtaking or passing to be made in safety.

(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction, when
approaching the crest of a grade, not upon a curve in the highway, where the driver's view along the highway is
obstructed within a distance of five hundred feet ahead, except on a highway having two or more lanes for movement
of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle: Provided, That on a
highway within a business or residential district, having two or more lanes for movement of traffic in one direction, the
driver of a vehicle may overtake or pass another vehicle on the right.

(c) The driver of a vehicle shall not overtake or pass any other vehicle proceeding in the same direction, at any railway
grade crossing, not at any intersection of highways unless such intersection or crossing is controlled by traffic signal, or
unless permitted to do so by a watchman or a peace officer, except on a highway having two or more lanes for
movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on the right.
Nothing in this section shall be construed to prohibit a driver overtaking or passing upon the right another vehicle
which is making or about to make a left turn.
(d) The driver of a vehicle shall not overtake or pass, or attempt to pass, any other vehicle, proceeding in the same
direction, between any points indicated by the placing of official temporary warning or caution signs indicating that
men are working on the highway.

(e) The driver of a vehicle shall not overtake or pass, or attempt to overtake or pass, any other vehicle proceeding in the
same direction in any "no-passing or overtaking zone."

ARTICLE III
Right of Way and Signals

Section 42. Right of way.

(a) When two vehicles approach or enter an intersection at approximately the same time, the driver of the vehicle on
the left shall yield the right of way to the vehicle on the right, except as otherwise hereinafter provided. The driver of
any vehicle traveling at an unlawful speed shall forfeit any right of way which he might otherwise have hereunder.

(b) The driver of a vehicle approaching but not having entered an intersection, shall yield the right of way to a vehicle
within such intersection or turning therein to the left across the line of travel of such first-mentioned vehicle, provided
the driver of the vehicle turning left has given a plainly visible signal of intention to turn as required in this Act.

(c) The driver of any vehicle upon a highway within a business or residential district shall yield the right of way to a
pedestrian crossing such highway within a crosswalk, except at intersections where the movement of traffic is being
regulated by a peace officer or by traffic signal. Every pedestrian crossing a highway within a business or residential
district, at any point other than a crosswalk shall yield the right of way to vehicles upon the highway.

(d) The driver of a vehicle upon a highway shall bring to a full stop such vehicle before traversing any "through
highway" or railroad crossing: Provided, That when it is apparent that no hazard exists, the vehicle may be slowed
down to five miles per hour instead of bringing it to a full stop.

Section 43. Exception to the right of way rule.

(a) The driver of a vehicle entering a highway from a private road or drive shall yield the right of way to all vehicles
approaching on such highway.

(b) The driver of a vehicle upon a highway shall yield the right of way to police or fire department vehicles and
ambulances when such vehicles are operated on official business and the drivers thereof sound audible signal of their
approach.

(c) The driver of a vehicle entering a "through highway" or a "stop intersection" shall yield the right of way to all
vehicles approaching to either direction on such "through highway": Provided, That nothing in this subsection shall be
construed as relieving the driver of any vehicle being operated on a "through highway" from the duty of driving with
due regard for the safety of vehicles entering such "through highway" nor as protecting the said driver from the
consequence of an arbitrary exercise off such right of way.

Section 44. Signals on starting, stopping or turning. -

(a) The driver of any vehicle upon a highway, before starting, stopping or turning from a direct line, shall first see that
such movement can be made in safety, and if any pedestrian may be affected by such movement, shall give a clearly
audible signal by sounding the horn, and whenever the operation of any other vehicle approaching or following may be
affected by such movement, shall give a signal plainly visible to the driver of such other vehicles of the intention to
make such movement.

(b) The signal herein required shall be given by means of extending the hand and arm beyond the left side of the
vehicle, or by an approved mechanical or electrical signal device.

ARTICLE IV
Turning and Parking

Section 45. Turning at intersections. -


(a) The drive of a vehicle intending to run to the right at an intersection shall approach such intersection in the lane for
traffic nearest to the right-hand side of the highway and, in turning, shall keep as close as possible to the right-hand
curb or edge of the highway.

(b) The driver of a vehicle intending to turn to the left shall approach such intersection in the lane for traffic to the right
of and nearest to the center line of the highway, and, in turning, shall pass to the left of the center of the intersection,
except that, upon highways laned for traffic and upon one-way highways, a left turn shall be made from the left lane of
traffic in the direction in which the vehicle is proceeding.

(c) For the purpose of this section, the center of the intersection shall mean the meeting point of the medial lines of the
highways intersecting one another, except when it is occupied by a monument, grass plot or any permanent structure,
other than traffic control device.

Section 46. Parking prohibited in specified places. - No driver shall park a vehicle, or permit it to stand, whether
attended or unattended, upon a highway in any of the following places:

(a) Within an intersection

(b) On a crosswalk

(c) Within six meters of the intersection of curb lines.

(d) Within four meters of the driveway entrance to and fire station.

(e) Within four meters of fire hydrant

(f) In front of a private driveway

(g) On the roadway side of any vehicle stopped or parked at the curb or edge of the highway

(h) At any place where official signs have been erected prohibiting parking.

Section 47. Parked vehicle. - Whenever a motor vehicle is parked unattended on any highway, the driver thereof must
turn off the ignition switch and stop the motor and notch effectively the hand brake.

ARTICLE V
Miscellaneous Traffic Rules

Section 48. Reckless driving. - No person shall operate a motor vehicle on any highway recklessly or without reasonable
caution considering the width, traffic, grades, crossing, curvatures, visibility and other conditions of the highway and
the conditions of the atmosphere and weather, or so as to endanger the property or the safety or rights of any person
or so as to cause excessive or unreasonable damage to the highway.

Section 49. Right of way for police and other emergency vehicles. - Upon the approach of any police or fire department
vehicle, or of an ambulance giving audible signal, the driver of every other vehicle shall immediately drive the same to a
position as near as possible and parallel to the right-hand edge or curb of the highway, clear of any intersection of
highways, and shall stop and remain in such position, unless otherwise directed by a peace officer, until such vehicle
shall have passed.

Section 50. Tampering with vehicles. - No unauthorized person shall sound the horn, handle the levers or set in motion
or in any way tamper with a damage or deface any motor vehicle.

Section 51. Hitching to a vehicle. - No person shall hang on to, ride on, the outside or the rear end of any vehicle, and no
person on a bicycle, roller skate or other similar device, shall hold fast to or hitch on to any moving vehicle, and no
driver shall knowingly permit any person to hang on to or ride, the outside or rear end of his vehicle or allow any person
on a bicycle, roller skate or other similar device to hold fast or hitch to his vehicle.

Section 52. Driving or parking on sidewalk. - No person shall drive or park a motor vehicle upon or along any sidewalk,
path or alley not intended for vehicular traffic or parking.
Section 53. Driving while under the influence of liquor or narcotic drug. - No person shall drive a motor vehicle while
under the influence of liquor or narcotic drug.

Section 54. Obstruction of traffic. - No person shall drive his motor vehicle in such a manner as to obstruct or impede
the passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the
free passage of other vehicles on the highway.

Section 55. Duty of driver in case of accident. - In the event that any accident should occur as a result of the operation of
a motor vehicle upon a highway, the driver present, shall show his driver's license, give his true name and address and
also the true name and address of the owner of the motor vehicle.

No driver of a motor vehicle concerned in a vehicular accident shall leave the scene of the accident without aiding the
victim, except under any of the following circumstances:

1. If he is in imminent danger of being seriously harmed by any person or persons by reason of the accident;

2. If he reports the accident to the nearest officer of the law; or

3. If he has to summon a physician or nurse to aid the victim.

CHAPTER V
PENAL AND OTHER PROVISIONS

ARTICLE I
Penalties

Section 56. Penalty for violation. - The following penalties shall be imposed for violations of this Act:

(a) For registering later than seven days after acquiring title to an unregistered motor vehicle or after conversion of a
registered motor vehicle requiring larger registration fee than that for which it was originally registered, or for renewal
of a delinquent registration, the penalty shall be a fine fifty per cent of the registration fees corresponding to the
portion of the year for which the vehicle is registered for use.

(b) For failure to sign driver's license or to carry same while driving, twenty pesos fine.

(c) Driving a vehicle with a delinquent or invalid driver's license, fifty pesos fine.

(d) Driving a motor vehicle with delinquent, suspended or invalid registration, or without registration or without the
proper license plate for the current year, three hundred pesos fine.

(e) Driving a motor vehicle without first securing a driver's license, three hundred pesos fine.

(f) Driving a motor vehicle while under the influence of liquor or narcotic drug, a fine of not less than two hundred
pesos nor more than five hundred pesos, or imprisonment of not more than three months, or both, at the discretion of
the Court.

(g) Violation of Section thirty-two, thirty-four (a), (b) and (b-1), thirty-five and forty-six a fine not exceeding one hundred
pesos: Provided, however, That in the case of violation of Section 34 (b) the vehicle or vehicles affected may not be
allowed to operate unless the requirements provided in this section are complied with.

(h) Violations of Sections forty-nine, fifty and fifty-two, a fine not exceeding fifty pesos.

(i) For making, using or attempting to make or use a driver's license, badge, certificate or registration, number plate,
tag or permit in imitation or similitude of those issued under this Act, or intended to be used as or for a legal license,
badge, certificate, plate, tag or permit or with intent to sell or otherwise dispose of the same to another, or false or
fraudulently represent as valid and in force any driver's license, badge, certificate, plate, tag or permit issued under this
Act which is delinquent or which has been suspended or revoked, a fine of not exceeding three hundred pesos.

(j) For using private passenger automobiles, private trucks, private motorcycles, and motor wheel attachments for hire,
in violation of Section seven, subsections (a), (b), and (c), of this Act, a fine of two hundred pesos and suspension of
driver's license for a period of three months for the first conviction; a fine of three hundred pesos and six months
imprisonment for the second conviction; and an imprisonment of one year and permanent revocation of the driver's
license for the third conviction.

(k) For permitting, allowing, consenting to, or tolerating the use of a privately-owned motor vehicle for hire in violation
of Section seven, subsections (a), (b), and (c), of this Act, there shall be imposed upon the owner of the vehicle a fine of
five hundred pesos and the certificate of registration shall be suspended for a period of three months for the first
conviction, and an increase of one hundred pesos in the fine and one month's suspension of the registration for each
subsequent conviction.

(l) For violation of any provisions of this Act or regulations promulgated pursuant hereto, not hereinbefore specifically
punished, a fine of not less than ten or more than fifty pesos shall be imposed.

(m) In the event an offender cannot pay any fine imposed pursuant to the provisions of this Act, he shall be made to
undergo subsidiary imprisonment as provided for in the Revised Penal Code.

(n) If, as the result of negligence or reckless or unreasonable fast driving, any accident occurs resulting in death or injury
of any person, the motor vehicle operator at fault shall, upon conviction, be punished under the provisions of the
Revised Penal Code.

Section 57. Punishment for other offenses. - The conviction of any person for any offense under this Act shall not bar his
prosecution for any other offense which may have been committed by such person concurrently with the commission
of the offense of which he was convicted or in doing the act or series of acts which constituted the offense of which he
was convicted.

Section 58. Duty of clerks of court. - It is hereby made the duty of clerks of the Court of First Instance, the City Court of
Municipal Court trying traffic violation cases to certify to the Commission the result of any case, whether criminal or
civil, involving violations of any provision of this Act or of other laws and ordinances relating to motor vehicles. Said
certificate shall specifically contain the name of the driver or owner of the vehicle involved, his address, the number of
his license and/or of the certificate or registration of his vehicle, and the date thereof, and the offense of which he was
convicted or acquitted.

ARTICLE II
Collection of Fees, Taxes and Fines, Liens, Allotment of Funds

Section 59. (a) Collection of fees; national and local taxes; toll fees. - The collection of all fees, taxes, and fines, under
the provisions of this Act shall be made in accordance with regulations to be prescribed by the Commissioner and
approved jointly by the Auditor General.

(b) No taxes or fees other than those prescribed in this Act shall be imposed for the registration or operation or on the
ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the
provisions of any city charter to the contrary notwithstanding: Provided, however, That any provincial board, city or
municipal council or board or other competent authority may enact and collect such reasonable and equitable toll fees
for the use of such bridges and ferries, within their respective jurisdiction, as may be authorized and approved by the
Secretary of Public Works and Communications, and also for the use of such public roads, as may be authorized by the
President of the Philippines upon recommendation of the Secretary of Public Works and Communications, but in none
of these cases shall any toll fees be charged or collected until and unless the approved schedule of tolls has been
posted legibly in a conspicuous place at such toll station.

Section 60. The lien upon motor vehicles. - Any balance of fees for registration, re-registration or delinquent registration
of a motor vehicle, remaining unpaid and all fines imposed upon any vehicle owner, shall constitute a first lien upon the
motor vehicle concerned.

The Commission is hereby vested with authority to issue a warrant of constructive or actual distraint or and levy to any
owner of motor vehicle who has any balance of fees for registration, re-registration or delinquent registration of a
motor vehicle remaining unpaid, which upon demand by the Commissioner of the Land Transportation Commission or
any of his deputies executing such warrant, the owner of the said vehicle shall surrender same at the time demanded,
except when the attachment or execution is under any judicial process. Any owner who fails or refuses to surrender any
of such property or vehicle not so surrendered shall be punished by a fine not exceeding the amount of the fees
(including penalties and interests, if any) for the collection of which such warrant has been issued, together with the
costs and interests, if any, from the time of such surrender. In addition, such owner shall punished by a fine of not more
than three hundred pesos or an imprisonment not more than six months, or both.
Section 61. Disposal of monies collected. - Monies collected under the provisions of this Act shall be deposited in a
special trust account in the National Treasury to constitute the Highway Special Fund, which shall be apportioned and
expended in accordance with the provisions of the "Philippine Highway Act of 1953": Provided, however, That the
amount necessary to maintain and equip the Land Transportation Commission but not to exceed fifteen per cent of the
total collections during any one year, shall be set aside for the purpose.

ARTICLE III
Final Provisions

Section 62. No provincial board, city or municipal board or council shall enact or enforce any ordinance or resolution in
conflict with the provisions of this Act, or prohibiting any deputy or agent of the Commission to enforce this Act within
their respective territorial jurisdiction and the provisions of any charter to the contrary notwithstanding.

Section 63. Repeal of laws and ordinances. - Act Numbered Thirty-nine hundred ninety-two, as amended, and all laws,
executive orders, ordinances, resolutions, regulations, or parts thereof in conflict with the provisions of this Act are
repealed: Provided, however, That nothing contained in this Act shall be construed as limiting or superseding any
provisions of the Public Service Act, as amended, with respect to the control by the Public Service Commission of motor
vehicles operating as public service, nor shall any provision of this Act be construed as limiting or abridging the powers
conferred upon and exercised by the Public Service Commission with regards to the control and supervision of the
operation of such motor vehicles as public service.

Section 64. Appropriation. - To carry out effectively the provisions of this Act, the amount of two hundred fifty
thousand pesos is hereby appropriated out of the fees collected under this Act, in addition to the appropriations
provided in the General Appropriations Act, for the expense of this Commission for the fiscal year beginning July first,
nineteen hundred and sixty-four, to June thirtieth, nineteen hundred and sixty-five: Provided, however, That any
savings in the appropriations of the Motor Vehicles Office for the fiscal year beginning July first, nineteen hundred and
sixty-three, to June thirtieth, nineteen hundred and sixty-four shall likewise be available for this purpose.

Freight Forwarders
A "freight forwarder" refers to a firm holding itself out to the general public (other than as a pipeline, rail,
motor, or water carrier) to provide transportation of property for compensation and, in the ordinary course
of its business,

(1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform
or provide for break-bulk and distribution operations of the shipments;
(2) to assume responsibility for the transportation of goods from the place of receipt to the place of
destination; and
(3) to use for any part of the transportation a carrier subject to the federal law pertaining to common
carriers.

Is a Freight Forwarder a Common Carrier?

A freight forwarder's liability is limited to damages arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead
of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to
goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport,
even though the forwarder does not carry the merchandise itself.

Unsworth Transportation International v. CA

Petitioner as a freight forwarder, received the shipment of Shipper Sylvex Purchasing Corpration in its
warehouse after it stamped the Permit to Deliver Imported Goods. Oceanica Cargo Marine Surveyors
Corporation (OCMSC) conducted a stripping survey of the shipment located in petitioner's warehouse. The
survey results stated the goods were in good condition. The arrastre issued the Gate Pass for delivery to
Unilab's warehouse. The materials were noted to be complete and in good order in the gate pass. the
shipment arrived in Unilab's warehouse and was immediately surveyed by an independent surveyor, and
found damages on the goods.
Unilab filed a formal claim for the damages. Petitioner denied liability on the basis of the gate pass issued
by the arrastre that the goods were in complete and good condition. The RTC and CA decided in favor of
private respondent and against petitioner.

Petitioner admits that it is a forwarder but disagrees with the CA's conclusion that it is a common carrier.

Admittedly, petitioner is a freight forwarder. The term "freight forwarder" refers to a firm holding itself
out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation
of property for compensation and, in the ordinary course of its business, (1) to assemble and consolidate,
or to provide for assembling and consolidating, shipments, and to perform or provide for break-bulk and
distribution operations of the shipments; (2) to assume responsibility for the transportation of goods from
the place of receipt to the place of destination; and (3) to use for any part of the transportation a carrier
subject to the federal law pertaining to common carriers.

A freight forwarder's liability is limited to damages arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead
of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to
goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport,
even though the forwarder does not carry the merchandise itself.

Real and Hypothecary or Limited Liability Rule -

A doctrine in maritime law where the shipowner or ship agents liability is held as merely co-extensive with his
interest in the vessel such that a total loss thereof results in its extinction. In this jurisdiction, this rule is
provided in three articles of the Code of Commerce. These are:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have
earned during the voyage.
---
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the
common fund for the results of the acts of the captain referred to in Art. 587.

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the
part of the vessel belonging to him.
---
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage served during the
voyage.

Agustin Dela Torre v. CA


Facts:
Respondent Concepcion owned LCT-Josephine, a vessel registered with the Philippine Coast Guard.
Concepcion entered into a Preliminary Agreement with Roland for the dry-docking and repairs of the said
vessel as well as for its charter afterwards. Under this agreement, Concepcion agreed that after the
dry-docking and repair of LCT-Josephine, it should be chartered for 10,000.00 per month with the following
conditions:
1. The CHARTERER will be the one to pay the insurance premium of the vessel
2. The vessel will be used once every three (3) months for a maximum period of two (2)
weeks
3. The SECOND PARTY (referring to Concepcion) agreed that LCT-Josephine should be
used by the FIRST PARTY (referring to Roland) for the maximum period of two (2) years
4. The FIRST PARTY (Roland) will take charge[x] of maintenance cost of the said
vessel. [Underscoring Supplied]
Concepcion and the Philippine Trigon Shipyard Corporation(PTSC), represented by Roland, entered
into a Contract of Agreement, wherein the latter would charter LCT-Josephine retroactive to May 1, 1984,
under the following conditions:

a. Chartered amount of the vessel 20,000.00 per month effective May 1, 1984;

j. The owner (Concepcion) shall pay 50% downpayment for the dry-docking and repair of the vessel and
the balance shall be paid every month in the amount of 10,000.00, to be deducted from the
rental amount of the vessel;

k. In the event that a THIRD PARTY is interested to purchase the said vessel, the SECOND PARTY
(PTSC/ Roland) has the option for first priority to purchase the vessel. If the SECOND PARTY
(PTSC/Roland) refuses the offer of the FIRST PARTY (Concepcion), shall give the SECOND PARTY
(PTSC/Roland) enough time to turn over the vessel so as not to disrupt previous commitments;

l. That the SECOND PARTY (PTSC/Roland) has the option to terminate the contract in the event of the
SECOND PARTY (PTSC/Roland) decide to stop operating;

m. The SECOND PARTY (PTSC/Roland) shall give 90 days notice of such termination of contract;

n. Next x x year of dry-docking and repair of vessel shall be shouldered by the SECOND PARTY
(PTSC/Roland); (Underscoring Supplied]

PTSC/Roland sub-chartered LCT-Josephine to Trigon Shipping Lines (TSL), a single proprietorship owned by
Rolands father, Agustin de la Torre (Agustin).

TSL, this time by Roland per Agustins Special Power of Attorney, sub-chartered LCT-Josephine to Ramon
Larrazabal (Larrazabal) for the transport of cargo consisting of sand and gravel to Leyte. On November 23,
1984, the LCT-Josephine with its cargo of sand and gravel arrived at Philpos, Isabel, Leyte. The vessel was
beached near the NDC Wharf. With the vessels ramp already lowered, the unloading of the vessels cargo
began with the use of Larrazabals payloader.

While the payloader was on the deck of the LCT-Josephine scooping a load of the cargo, the vessels ramp
started to move downward, the vessel tilted and sea water rushed in. Shortly thereafter,
LCT-Josephine sank.

Concepcion demanded that PTSC/ Roland refloat LCT-Josephine. The latter assured Concepcion that
negotiations were underway for the refloating of his vessel. Unfortunately, this did not materialize.

For this reason, Concepcion was constrained to institute a complaint for Sum of Money and Damages against
PTSC and Roland before the RTC. The RTC declared that the efficient cause of the sinking of
the LCT-JOSEPHINE was the improper lowering or positioning of the ramp, which was well within the charge
or responsibility of the captain and crew of the vessel.

Agustin, PTSC and Roland went to the CA on appeal. The appellate court, in agreement with the findings of
the RTC, affirmed its decision in toto.

Held:

From the foregoing, the issues raised in the two petitions can be categorized as: (1) those referring
to the factual milieu of the case; (2) those concerning the applicability of the Code of Commerce, more
specifically, the Limited Liability Rule; and (3) the question on the solidary liability of the petitioners.

As regards the issues requiring a review of the factual findings of the trial court, the Court finds no
compelling reason to deviate from the rule that findings of fact of a trial judge, especially when affirmed by
the appellate court, are binding before this Court.[22] The CA, in reviewing the findings of the RTC, made
these observations:

We are not persuaded that the trial Court finding should be set aside. The Court a quo sifted through
the records and arrived at the fact that clearly, there was improper lowering or positioning of the ramp,
which was not at peak, according to de la Torre and moving down according to Sungayan when the
payloader entered and scooped up a load of sand and gravel. Because of this, the payloader was in danger of
being lost (submerged) and caused Larrazabal to order the operator to go back into the vessel, according to
de la Torres version, or back off to the shore, per Sungayan. Whichever it was, the fact remains that the
ramp was unsteady (moving) and compelled action to save the payloader from submerging, especially
because of the conformation of the sea and the shore.

xxx

The contract executed on June 20, 1984, between plaintiff-appellee and defendants-appellants showed that
the services of the crew of the owner of the vessel were terminated. This allowed the charterer,
defendants-appellants, to employ their own. The sub-charter contract between defendants-appellants
Philippine Trigon Shipyard Corp. and third-party defendant-appellant Trigon Shipping Lines showed similar
provision where the crew of Philippine Trigon had to be terminated or rehired by Trigon Shipping Lines. As to
the agreement with fourth-party Larrazabal, it is silent on who would hire the crew of the vessel. Clearly,
the crew manning the vessel when it sunk belonged to third-party defendant-appellant. Hubart Sungayan,
the acting Chief Mate, testified that he was hired by Agustin de la Torre, who in turn admitted to hiring the
crew. The actions of fourth-party defendant, Larrazabal and his payloader operator did not include the
operation of docking where the problem arose. [Underscoring supplied]

Similarly, the Court has examined the records at hand and completely agree with the CA that the
factual findings of the RTC are in order.

With respect to petitioners position that the Limited Liability Rule under the Code of Commerce
should be applied to them, the argument is misplaced. The said rule has been explained to be that of the real
and hypothecary doctrine in maritime law where the shipowner or ship agents liability is held as merely
co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. In this
jurisdiction, this rule is provided in three articles of the Code of Commerce. These are:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel;
but he may exempt himself therefrom by abandoning the vessel with all her equipment and the
freight it may have earned during the voyage.
---
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the
common fund for the results of the acts of the captain referred to in Art. 587.

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the
part of the vessel belonging to him.
---
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage served
during the voyage.

Article 837 specifically applies to cases involving collision which is a necessary consequence of the
right to abandon the vessel given to the shipowner or ship agent under the first provision Article 587.
Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned
by several persons. Obviously, the forerunner of the Limited Liability Rule under the Code of Commerce is
Article 587. Now, the latter is quite clear on which indemnities may be confined or restricted to the value of
the vessel pursuant to the said Rule, and these are the indemnities in favor of third persons which may arise
from the conduct of the captain in the care of the goods which he loaded on the vessel. Thus, what is
contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the
charterer in case of demise or bareboat charter.

The only person who could avail of this is the shipowner, Concepcion. He is the very person whom
the Limited Liability Rule has been conceived to protect. The petitioners cannot invoke this as a
defense. In Yangco v. Laserna,[26] this Court, through Justice Moran, wrote:

The policy which the rule is designed to promote is the encouragement of


shipbuilding and investment in maritime commerce.

x x x.
Grotius, in his law of War and Peace, says that men would be deterred
from investing in ships if they thereby incurred the apprehension of being
rendered liable to an indefinite amount by the acts of the master, x x x.[27]

Later, in the case of Monarch Insurance Co., Inc. v. CA,[28] this Court, this time through Justice
Sabino R. De Leon, Jr., again explained:

No vessel, no liability, expresses in a nutshell the limited liability rule. The shipowners
or agents liability is merely coextensive with his interest in the vessel such that a total loss
thereof results in its extinction. The total destruction of the vessel extinguishes maritime
liens because there is no longer any res to which it can attach. This doctrine is based on the
real and hypothecary nature of maritime law which has its origin in the prevailing conditions
of the maritime trade and sea voyages during the medieval ages, attended by innumerable
hazards and perils. To offset against these adverse conditions and to encourage shipbuilding
and maritime commerce, it was deemed necessary to confine the liability of the owner or
agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance,
if any.[29]

In view of the foregoing, Concepcion as the real shipowner is the one who is supposed to be
supported and encouraged to pursue maritime commerce. Thus, it would be absurd to apply the Limited
Liability Rule against him who, in the first place, should be the one benefitting from the said rule. In
distinguishing the rights between the charterer and the shipowner, the case of Yueng Sheng Exchange and
Trading Co. v. Urrutia & Co.[30] is most enlightening. In that case, no less than Chief Justice Arellano wrote:

The whole ground of this assignment of errors rests on the proposition advanced by
the appellant company that the charterer of a vessel, under the conditions stipulated in the
charter party in question, is the owner pro hac vice of the ship and takes upon himself the
responsibilities of the owner.
xxx

If G. Urrutia & Co., by virtue of the above-mentioned contract, became the agents of
the Cebu, then they must respond for the damages claimed, because the owner and the
agent are civilly responsible for the acts of the captain.

But G. Urrutia & Co. could not in any way exercise the powers or rights of an
agent. They could not represent the ownership of the vessel, nor could they, in their own
name and in such capacity, take judicial or extrajudicial steps in all that relates to commerce;
thus if the Cebu were attached, they would have no legal capacity to proceed to secure its
release; speaking generally, not even the fines could or ought to be paid by them, unless such
fines were occasioned by their orders. x x x.

The contract executed by Smith, Bell & Co., as agents for the Cebu, and G. Urrutia &
Co., as charterers of the vessel, did not put the latter in the place of the former, nor make
them agents of the owner or owners of the vessel. With relation to those agents, they
retained opposing rights derived from the charter party of the vessel, and at no time could
they be regarded by the third parties, or by the authorities, or by the courts, as being in the
place of the owners or the agents in matters relating to the responsibilities pertaining to the
ownership and possession of the vessel. x x x.[31]

In Yueng Sheng, it was further stressed that the charterer does not completely and absolutely step
into the shoes of the shipowner or even the ship agent because there remains conflicting rights between the
former and the real shipowner as derived from their charter agreement. The Court again quotes Chief Justice
Arellano:

Their (the charterers) possession was, therefore, the uncertain title of lease, not a
possession of the owner, such as is that of the agent, who is fully subrogated to the place of
the owner in regard to the dominion, possession, free administration, and navigation of the
vessel.[32]
Therefore, even if the contract is for a bareboat or demise charter where possession, free
administration and even navigation are temporarily surrendered to the charterer, dominion over the vessel
remains with the shipowner. Ergo, the charterer or the sub-charterer, whose rights cannot rise above that of
the former, can never set up the Limited Liability Rule against the very owner of the vessel. Borrowing the
words of Chief Justice Artemio V. Panganiban, Indeed, where the reason for the rule ceases, the rule itself
does not apply.[33]

The Court now comes to the issue of the liability of the charterer and the sub-charterer.

In the present case, the charterer and the sub-charterer through their respective contracts of
agreement/charter parties, obtained the use and service of the entire LCT-Josephine. The vessel was likewise
manned by the charterer and later by the sub-charterers people. With the complete and exclusive
relinquishment of possession, command and navigation of the vessel, the charterer and later the
sub-charterer became the vessels owner pro hac vice. Now, and in the absence of any showing that
the vessel or any part thereof was commercially offered for use to the public, the above agreements/charter
parties are that of a private carriage where the rights of the contracting parties are primarily defined and
governed by the stipulations in their contract.[34]

Although certain statutory rights and obligations of charter parties are found in the Code of
Commerce, these provisions as correctly pointed out by the RTC, are not applicable in the present case.
Indeed, none of the provisions found in the Code of Commerce deals with the specific rights and obligations
between the real shipowner and the charterer obtaining in this case. Necessarily, the Court looks to the New
Civil Code to supply the deficiency.[35] Thus, the RTC and the CA were both correct in applying the statutory
provisions of the New Civil Code in order to define the respective rights and obligations of the opposing
parties.

Thus, Roland, who, in his personal capacity, entered into the Preliminary Agreement with Concepcion
for the dry-docking and repair of LCT-Josephine, is liable under Article 1189[36] of the New Civil Code. There
is no denying that the vessel was not returned to Concepcion after the repairs because of the provision in
the Preliminary Agreement that the same should be used by Roland for the first two years. Before the vessel
could be returned, it was lost due to the negligence of Agustin to whom Roland chose to sub-charter or
sublet the vessel.

PTSC is liable to Concepcion under Articles 1665[37] and 1667[38] of the New Civil Code. As the
charterer or lessee under the Contract of Agreement dated June 20, 1984, PTSC was contract-bound to
return the thing leased and it was liable for the deterioration or loss of the same.

Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-Josephine, is liable under
Article 1651 of the New Civil Code.[39] Although he was never privy to the contract between PTSC and
Concepcion, he remained bound to preserve the chartered vessel for the latter. Despite his non-inclusion in
the complaint of Concepcion, it was deemed amended so as to include him because, despite or in the
absence of that formality of amending the complaint to include him, he still had his day in court[40] as he
was in fact impleaded as a third-party defendant by his own son, Roland the very same person who
represented him in the Contract of Agreement with Larrazabal.

(S)ince the purpose of formally impleading a party is to assure him a day in court,
once the protective mantle of due process of law has in fact been accorded a litigant,
whatever the imperfection in form, the real litigant may be held liable as a party.[41]

In any case, all three petitioners are liable under Article 1170 of the New Civil Code.[42] The necessity
of insuring the LCT-Josephine, regardless of who will share in the payment of the premium, is very clear
under the Preliminary Agreement and the subsequent Contracts of Agreement dated June 20, 1984 and
August 1, 1984, respectively. The August 17, 1984 letter of Concepcions representative, Rogelio L. Martinez,
addressed to Roland in his capacity as the president of PTSC inquiring about the insurance of
the LCT-Josephine as well as reiterating the importance of insuring the said vessel is quite telling.

August 17, 1984


Mr. Roland de la Torre
President
Phil. Trigon Shipyard Corp.
Cebu City

Dear Sir:
In connection with your chartering of LCT JOSEPHINE effect[ive] May 1, 1984, I wish
to inquire regarding the insurance of said vessel to wit:

1. Name of Insurance Company


2. Policy No.
3. Amount of Premiums
4. Duration of coverage already paid

Please send a Xerox copy of policy to the undersigned as soon as possible.

In no case shall LCT JOSEPHINE sail without any insurance coverage.

Hoping for your (prompt) action on this regard.

Truly yours,
(sgd)ROGELIO L. MARTINEZ
Owners representative[43]

Clearly, the petitioners, to whom the possession of LCT Josephine had been entrusted as early as the
time when it was dry-docked for repairs, were obliged to insure the same. Unfortunately, they failed to do so
in clear contravention of their respective agreements. Certainly, they should now all answer for the loss of
the vessel.

Parties

1.1 Carriage of Passengers / Contract to Carry Passenger


Passenger - one who travels in a public conveyance by virtue of contract, express or implied, with
the carrier as to the payment of fare or that which is accepted as an equivalent thereof.
(Nueca v. Manila Railroad Co., G.R. No. 31731-R, 30 January 1968)
Common Carrier - one that holds itself out as ready to engage in the transportation of goods for hire as a
public employment and not as a casual occupation. (De Guzman v. CA, G.R. No. L-47822, 22 December 1988)

1.2 Carriage of Goods/ Contract to carry Goods


Shipper is the person who delivers the goods to the carrier for transportation. He is the person who pays
the consideration or on whose behalf payment is made.
Consignee is the person to whom the goods are to be delivered.
May be the shipper himself where the goods will be delivered to one of the branch offices of the
shipper, or
May be a third person who is not actually a party to the contract.
Carrier

Laws and Jurisprudence:

Baliwag Transit Corporation v CA


Facts: Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of legal age, against
petitioner Baliwag Transit (Baliwag, for brevity) Complaint for damages arising from breach of
contract of carriage was filed by private respondents, the Spouses. The Complaint alleged that
George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple
serious physical injuries when he was thrown off said bus driven in a careless and negligent manner
by the bus driver. As a result, he was confined in the hospital for treatment, incurring medical
expenses, which were borne by his parents, the respondent Spouses, in the sum of about
P200,000.00 plus other incidental expenses of about P10,000.00.
An Answer was filed by petitioner alleging that the cause of the injuries sustained by George was
solely attributable to his own voluntary act in that, without warning and provocation, he suddenly
stood up from his seat and headed for the door of the bus as if in a daze, opened it and jumped off
while said bus was in motion, in spite of the protestations by the driver and without the knowledge
of the conductor.

Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its
third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance claimed
limited liability, the coverage being subject to a Schedule of Indemnities forming part of the
insurance policy.

On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each
filed Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50 had
executed a "Release of Claims" dated 16 May 1985. These Motions were denied by the Trial Court in
an Order dated 13 January 1986 as they were filed beyond the time for pleading and after the
Answer were already filed.

On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the
Trial Court. The Amended Answer incorporated the affirmative defense in the Motion to Dismiss to
the effect that on 16 May 1985, George bad been paid all his claims for damages arising from the
incident subject matter of the complaint when he executed the following "Release of Claims":

For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND TWENTY and
50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby acknowledged, I/we, being of lawful
age, do hereby release, acquit and forever discharge Fortune Insurance and/or Baliwag transit, Inc.
his/her heirs, executors and assigns, from any and all liability now accrued or hereafter to accrue on
account of any and all claims or causes of action which I/we now or may here after have for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any
and every kind or nature whatsoever, now known or what may hereafter develop by me/us
sustained or received on or about 17th day of December, 1984 through Reckless Imprudence
Resulting to Physical Injuries, and I/we hereby declare that I/we fully understand the terms of this
settlement and voluntarily accept said sum for the purpose of making a full and final compromise
adjustment and settlement of the injuries and damages, expenses and inconvenience above
mentioned. (Rollo, p. 11)

During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the
presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of Claims"
signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.

By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified
that he is the father of George, who at the time of the incident was a student, living with his parents
and totally dependent on them for their support; that the expenses for his hospitalization were
shouldered by his parents; and that they had not signed the "Release of Claims."

In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed the
Complaint and Third-party Complaint, ruling that since the contract of carriage is between Baliwag
and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute the Release
of Claims despite the fact that he is still a student and dependent on his parents for support.
Consequently, the execution by George of the Release of Claims discharges Baliwag and Fortune
Insurance.

Aggrieved, the Spouses appealed to respondent Court of Appeals. The Appellate Court rendered a
Decision setting aside the appealed Order and holding that the "Release of Claims" cannot operate
as a valid ground for the dismissal of the case because it does not have the conformity of all the
parties, particularly George's parents, who have a substantial interest in the case as they stand to
be prejudiced by the judgment because they spent a sizeable amount for the medical bills of their
son; that the Release of Claims was secured by Fortune Insurance for the consideration of
P8,020.50 as the full and final settlement of its liability under the insurance policy and not for the
purpose of releasing Baliwag from its liability as a carrier in this suit for breach of contract. The
Appellate Court also ordered the remand of the case to the lower Court for trial on the merits and
for George to return the amount of P8,020.50 to Fortune Insurance.

Held: Release of Claims executed by him, as the injured party, discharging Fortune Insurance and
Baliwag from any and all liability is valid. He was then of legal age, a graduating student of
Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to
Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying passenger, and
Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its passengers safely
as far as human care and foresight could provide, and is liable for injuries to them through the
negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had the
right to be safely brought to his destination and Baliwag had the correlative obligation to do so.
Since a contract may be violated only by the parties thereto, as against each other, in an action
upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to
said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14,
1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real
party-in-interest-defendant is one who has a correlative legal obligation whose act or omission
violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the
absence of any contract of carriage between Baliwag and George's parents, the latter are not real
parties-in-interest in an action for breach of that contract.

The general rule of the common law is that every action must be brought in the name of the party
whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the immediate wrong
and damage the person injured is the only one who can maintain the action." Id. p. 578. The person
who sustains an injury is the person to bring an action for the injury against the wrongdoer." Dicey
parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).

There is no question regarding the genuineness and due execution of the Release of Claims. It is a
duly notarized public document. It clearly stipulates that the consideration of P8,020.50 received by
George was "to release and forever discharge Fortune Insurance and/or Baliwag from any and all
liabilities now accrued or to accrue on account of any and all claims or causes of action ... for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any
and every kind or nature whatsoever, sustained by him on 17 December 1984 thru Reckless
Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent Appellate Court
that the "Release of Claims" was intended only as the full and final settlement of a third-party
liability for bodily injury claim and not for the purpose of releasing Baliwag from its liability, if any, in
a breach of a contract of carriage, has to be rejected for being contrary to the very terms thereof. If
the terms of a contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology "any
and all claims or causes of action" is broad enough to include all damages that may accrue to the
injured party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered into for the
purpose of making a full and final compromise adjustment and settlement of the cause of action
involved. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid
a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of
Claims executed by the injured party himself wrote finish to this litigation.

Everett Steamship Corp. v. CA October 8, 1998


MARTINEZ, J.:

Private respondent imported three crates of bus spare part from its supplier, Maruman Trading Company,
Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from
Nagoya to Manila on board ADELFA EVERETTE, a vessel owned by petitioners principal, Everett Orient
Lines. The said crates were covered by Bill of Lading No. NGO53MN.

Upon arrival at the port of Manila, it was discovered that one of the crates was missing which was
confirmed and admitted by petitioner in its letter to private respondent, which thereafter made a formal
claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two
Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated
November 14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the
maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of
petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil
Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.
The trial court ruled:
1. Considering defendants categorical admission of loss and its failure to overcome the presumption
of negligence and fault, the Court conclusively finds defendant liable to the plaintiff.
2. As for the extent of the liability, the Court subscribes to the provisions of Article 1750 of the New
Civil Code -
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
It is required, however, that the contract must be reasonable and just under the circumstances and
has been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil
Code must be complied with before a common carrier can claim a limitation of its pecuniary liability
in case of loss, destruction or deterioration of the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not been met. The
fact that those conditions are printed at the back of the bill of lading in letters so small that they are hard to
read would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such
that he had fairly and freely agreed to these conditions.
CA affirmed
Issues: (1) in ruling that the consent of the consignee to the terms and conditions of the bill of lading is
necessary to make such stipulations binding upon it;
(2) in holding that the carriers limited package liability as stipulated in the bill of lading does not apply in
the instant case; and
(3) (3) in allowing private respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo
to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly
Articles 1749 and 1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.

Such limited-liability clause has also been consistently upheld by this Court in a number of cases.

Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common
carriers liability for loss must be reasonable and just under the circumstances, and has been freely and fairly
agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier
be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an
amount exceeding One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in
any other currency per package or customary freight unit (whichever is least) unless the value of the
goods higher than this amount is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)
the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was
higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation,
it had itself to blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely agreed to the
limited liability clause in the bill of lading because the said conditions were printed in small letters does not
make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals that the jurisprudence on the matter reveals the consistent
holding of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions
upheld the binding effect thereof. Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines ,
Inc.[6] this Court , speaking through the learned Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other x x x are contracts not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his
consent. In the present case, not even an allegation of ignorance of a party excuses non-compliance
with the contractual stipulations since the responsibility for ensuring full comprehension of the
provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals that stipulations in contracts of adhesion are
valid and binding.

While it may be true that petitioner had not signed the plane ticket x x, he is nevertheless bound by
the provisions thereof. Such provisions have been held to be a part of the contract of carriage, and
valid and binding upon the passenger regardless of the latters lack of knowledge or assent to the
regulation. It is what is known as a contract of adhesion, in regards which it has been said that
contracts of adhesion wherein one party imposes a ready-made form of contract on the other, as
the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his consent. x x x , a contract
limiting liability upon an agreed valuation does not offend against the policy of the law forbidding
one from contracting against his own negligence. (Emphasis supplied)
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can
not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to
its customers.The shipper could not have known, or should know the stipulations in the bill of lading and
there it should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not
been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioners
vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a
signatory to the bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the
consignee was not a signatory to the contract of carriage between the shipper and the carrier, the
consignee can still be bound by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to
recover from the carrier or shipper for loss of, or damage to goods being transported under said
bill, although that document may have been- as in practice it oftentimes is-drawn up only by
the consignor and the carrier without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only by and between the shipper and the carrier,
springs from either a relation of agency that may exist between him and the shipper or consignor,
or his status as stranger in whose favor some stipulation is made in said contract, and who becomes
a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the
goods or cargo shipped. In neither capacity can he assert personally, in bar to any provision of the
bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated
by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in
one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15)
where this Court found that a similar package limitation clause was printed in the smallest type on
the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the
strength of authority holding that such provisions on liability limitation are as much a part of a bill of
lading as though physically in it and as though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of
freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said
contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority.
(Underscoring supplied)
When private respondent formally claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very same bill of lading, it (private respondent)
accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to
court to enforce it. Thus, private respondent cannot now reject or disregard the carriers limited liability
stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo
in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the
shipment x x x, the contents of each crate, the dimensions, weight and value of the contents,"[10] as shown
in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value
of "the shipment which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN
merely as 3 CASES SPARE PARTS.[11]
The bill of lading in question confirms petitioners contention. To defeat the carriers limited liability, the
aforecited Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher
valuation of its goods before receipt thereof by the carrier and insert the said declaration in the bill of lading,
with the extra freight paid. These requirements in the bill of lading were never complied with by the shipper,
hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice No.
MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of
the cargo as contended by private respondent. No other evidence was proffered by private respondent to
support is contention. Thus, we are convinced that petitioner should be liable for the full value of the lost
cargo.
British Airways v. CA February 9, 1993, 218 SCRA 699
Facts: Mahtani who wants to go to India asked Mr. Gumar to prepare his travelplans. Mr. Gumar purchased a
ticket from British Airways (BA).Since BA had no direct flights from Manila to Bombay, Mahtani had to take a
flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on
board BA. Before departure, Mahtani checked in at PAL counter his two pieces of luggage containing his
clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to
the BA flight bound for Bombay.

when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from
the BA representatives, he was told that the same might have been diverted to London. After waiting for 1
week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report. In the
Philippines, on June 11, 1990 Mahtani filed his complaint for damages and attorney's fees against BA and
Mr.Gumar before the RTC.

alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong,
thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for
Bombay.

The RTC rendered its decision in favor of Mahtani. BA is ordered to pay Mahtani P7,000 for the value of the 2
suitcases$400 for the value of the contents of the luggageP50,000 for moral and exemplary damages and 20%
for attorneys fees and cost of the action.
This decision was affirmed by CA.
Before we resolve the issues raised by BA, it is needful to state that the nature of an airlines contract of
carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and
a contract to transport passengers to their destination. A business intended to serve the travelling public
primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting
standard. Neglect or malfeasance by the carriers employees could predictably furnish bases for an action for
damages.
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover,
it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of cases we
have assessed the airlines culpability in the form of damages for breach of contract involving misplaced
luggage.
In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant
satisfactorily prove during the trial the existence of the factual basis of the damages and its causal
connection to defendants acts.
In this regard, the trial court granted the following award as compensatory damages:
Since plaintiff did not declare the value of the contents in his luggage and even failed to show
receipts of the alleged gifts for the members of his family in Bombay, the most that can be expected
for compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or a
combined value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing the contents
plus Seven Thousand (P7,000.00) Pesos representing the purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that there should have been no separate award for the
luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the
luggage,[18] and therefore, its liability is limited, at most, only to the amount stated in the ticket.
Considering the facts of the case, we cannot assent to such specious argument.
Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to
recover a greater amount. Article 22(1) of the Warsaw Convention,[19] provides as follows:

xxxxxxxxx

(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a
sum of 250 francs per kilogram, unless the consignor has made, at the time the package was
handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary
sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the
declared sum, unless he proves that the sum is greater than the actual value to the consignor at
delivery.

American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in
excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being
binding on the passenger regardless of the passengers lack of knowledge thereof or assent thereto.[20] This
doctrine is recognized in this jurisdiction.[21]
Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion
contracts where the facts and circumstances justify that they should be disregarded.[22]
In addition, we have held that benefits of limited liability are subject to waiver such as when the air
carrier failed to raise timely objections during the trial when questions and answers regarding the actual
claims and damages sustained by the passenger were asked.[23]
It is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse
party to be inadmissible for any reason, the latter has the right to object. However, such right is a mere
privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity, lest
silence when there is opportunity to speak may operate as a waiver of objections.[25] BA has precisely failed
in this regard.
To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even
conducted his own cross-examination as well.[26] In the early case of Abrenica v. Gonda,[27] we ruled that:
x x x (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the
admission of any evidence must be made at the proper time, and that if not so made it will be understood
to have been waived. The proper time to make a protest or objection is when, from the question
addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility
of evidence is, or may be inferred.

Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to
great respect.[28] Since the actual value of the luggage involved appreciation of evidence, a task within the
competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a
finding not reviewable by this Court.[29]
As to the issue of the dismissal of BAs third-party complaint against PAL, the Court of Appeals justified
its ruling in this wise, and we quote:[30]
Lastly, we sustain the trial courts ruling dismissing appellants third-party complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by appellant to
plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant BA. When
plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a subcontractor or
agent of BA. This is shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is
specifically provided on the Conditions of Contract, paragraph 4 thereof that:
4. x x x carriage to be performed hereunder by several successive carriers is regarded
as a single operation.
The rule that carriage by plane although performed by successive carriers is regarded as a single
operation and that the carrier issuing the passengers ticket is considered the principal party and the other
carrier merely subcontractors or agent, is a settled issue.

We cannot agree with the dismissal of the third-complaint.


In Firestone Tire and Rubber Company of the Philippines v. Tempengko,[31] we expounded on the
nature of a third-party complaint thus:
The third-party complaint is, therefore, a procedural device whereby a third party who is neither a
party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with
leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party
defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the
plaintiffs claim.The third-party complaint is actually independent of and separate and distinct from
the plaintiffs complaint. Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant against the
third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to
litigate his separate cause of action in respect of plaintiffs claim against a third-party in the original
and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law
suits and of disposing expeditiously in one litigation the entire subject matter arising from one
particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract
of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally
denies. In other words, BA and PAL are blaming each other for the incident.
In resolving this issue, it is worth observing that the contract of air transportation was exclusively
between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the formers journey to
PAL, as its subcontractor or agent. In fact, the fourth paragraph of the Conditions of Contracts of the
ticket[32] issued by BA to Mahtani confirms that the contract was one of continuous air transportation from
Manila to Bombay.

4. x x x carriage to be performed hereunder by several successive carriers is regarded


as a single operation.
Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from
Manila to Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that
an agent is also responsible for any negligence in the performance of its function[33] and is liable for
damages which the principal may suffer by reason of its negligent act. [34] Hence, the Court of Appeals
erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or
sub-contractor.
Also, it is worth mentioning that both BA and PAL are members of the International Air Transport
Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the
tickets and other matters pertaining to their relationship.[35] Therefore, in the instant case, the contractual
relationship between BA and PAL is one of agency, the former being the principal, since it was the one
which issued the confirmed ticket, and the latter the agent.
Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa
German Airlines v. Court of Appeals.[36] In that case, Lufthansa issued a confirmed ticket to Tirso
Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines
which was to carry Antiporda to a specific destination bumped him off.
An action for damages was filed against Lufthansa which, however, denied any liability, contending
that its responsibility towards its passenger is limited to the occurrence of a mishap on its own
line.Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in the contract of
carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya.
In rejecting Lufthansas argument, we ruled:
In the very nature of their contract, Lufthansa is clearly the principal in the contract of
carriage with Antiporda and remains to be so, regardless of those instances when
actual carriage was to be performed by various carriers. The issuance of confirmed
Lufthansa ticket in favor of Antiporda covering his entire five-leg trip aboard successive
carriers concretely attest to this.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA
alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL
is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of
Appeals,[37] while not exactly in point, the case, however, illustrates the principle which governs this
particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier,
is also liable for its own negligent acts or omission in the performance of its duties.
Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the
purpose of ultimately determining who was primarily at fault as between them, is without legal
basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases which would
entail receiving the same or similar evidence for both cases and enforcing separate judgments
therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay
and circuity of action and to enable the controversy to be disposed of in one suit.[38] It is but logical, fair
and equitable to allow BA to sue PAL for indemnification, if it is proven that the latters negligence was
the proximate cause of Mahtanis unfortunate experience, instead of totally absolving PAL from any
liability.
Perfection -

Passengers
1st Type: CONTRACT TO CARRY an agreement to carry the passenger at some future date.
(CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT.
2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE
(A REAL CONTRACT for not until the facilities of the carrier are actually used can the carrier be said to
have already assumed the obligation as a carrier)
1st Type: CONTRACT TO CARRY an agreement to carry and transport goods at some future date.
CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT.
2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE
By the act of delivery of the goods, that is, when the goods are unconditionally placed in the possession
and control of the carrier, and upon their receipt by the carrier for transportation, the contract of
carriage is perfected.

1. AIRCRAFT
a) If contract to carry passengers, there is perfection even if no tickets have been issued to said
passengers so long as there was already a meeting of minds with respect to the subject matter and the
consideration. (British Airways, Inc. vs. CA, G. R. No. 92288, 9 February 1993)
b) If contract of carriage, there is perfection if it can be established that the passenger had checked
in at the departure counter, passed through customs and immigration, boarded the shuttle bus and
proceeded to the ramp of the aircraft and that his baggage had already been loaded in the aircraft to be
flown with the passenger to his destination.
(KAL Co. Ltd. Vs. CA, G.R. No. 114061, 3 August 1994, 234 SCRA 717, 723)

2. BUSES, JEEPNEYS, STREET CARS


a) Once a public utility bus or jeepney stops, it is in effect making a continuous offer to the
passengers. Hence, it is the duty of the drivers to stop their conveyances for a reasonable length of time in
order to afford passengers an opportunity to board and enter.
b) Passenger is deemed to be accepting the offer if he is already attempting to board the
conveyances and the contract of carriage is perfected from that point.
c) Any injury suffered by the passenger resulting from the sudden starting up of the carrier is already
based on contract.

3. TRAINS
a) There is perfection when a person with a bona fide intention to use the facilities of the carrier and
possessing sufficient fare with which to pay for his passage, has presented himself to the carrier for
transportation in the place and manner provided.
b) Where a person has already purchased a LRT token and while waiting on the platform designated
for boarding fell thereon and hit by the train, he was deemed a passenger.
(LRTA, et.al. Vs. Marjorie Navidad, et.al., G.R. No. 145804, 06 February 2003)

Laws and Jurisprudence:

British Airways v. CA February 9, 1993, 218 SCRA 699 - XXX XXX

Mauro Ganzon v. CA No. L-48757, May 30, 1988

Facts: Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of
scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman".
Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles
where it docked in three feet of water. Gelacio Tumambing delivered the scrap iron to
defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the
same date by the crew of the lighter under the captain's supervision. When about half of the
scrap iron was already loaded, Mayor Advincula of Mariveles, Bataan, arrived and demanded
P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated
argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing.
The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for
treatment.
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956,
Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza
and his crew to dump the scrap iron where the lighter was docketed. The rest was brought to
the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron. On the basis of the above findings,
the respondent Court rendered a decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new
one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E.
Tumambimg the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary
damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-appellee
Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of
Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH
OF THE CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM
COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND
CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS
OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS
ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP
WAS DUE TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE
FOR LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However, he
completely agrees with the respondent Court's finding that on December 1, 1956, the private
respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman,"
That the petitioner, thru his employees, actually received the scraps is freely admitted.
Significantly, there is not the slightest allegation or showing of any condition, qualification, or
restriction accompanying the delivery by the private respondent-shipper of the scraps, or the
receipt of the same by the petitioner. On the contrary, soon after the scraps were delivered to,
and received by the petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and
control of the common carrier, and upon their receipt by the carrier for transportation, the
contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary
responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art.
1736, such extraordinary responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person who has a right to receive
them. 5 The fact that part of the shipment had not been loaded on board the lighter did not
impair the said contract of transportation as the goods remained in the custody and control of
the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the following
causes enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By
reason of this presumption, the court is not even required to make an express finding of fault or
negligence before it could hold the petitioner answerable for the breach of the contract of
carriage. Still, the petitioner could have been exempted from any liability had he been able to
prove that he observed extraordinary diligence in the vigilance over the goods in his custody,
according to all the circumstances of the case, or that the loss was due to an unforeseen event
or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove
that he exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he is
exempt from any liability because the loss of the scraps was due mainly to the intervention of
the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of
the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense
was that the loss of the scraps was due to an "order or act of competent public authority," and
this contention was correctly passed upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from responsibility
on the ground that he was ordered by competent public authority to unload the scrap iron, it
must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that
it was lawful, or that it was issued under legal process of authority. The appellee failed to
establish this. Indeed, no authority or power of the acting mayor to issue such an order was
given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the
Municipality of Mariveles. What we have in the record is the stipulation of the parties that the
cargo of scrap iron was accilmillated by the appellant through separate purchases here and
there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the order
given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied
by Mayor Jose Advincula to shakedown the appellant for P5,000.00. The order of the acting
mayor did not constitute valid authority for appellee Mauro Ganzon and his representatives to
carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on
appeal we cannot, however, allow. In any case, the intervention of the municipal officials was
not In any case, of a character that would render impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the
scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order
was attended with such force or intimidation as to completely overpower the will of the
petitioner's employees. The mere difficulty in the fullfilment of the obligation is not
considered force majeure. We agree with the private respondent that the scraps could have
been properly unloaded at the shore or at the NASSCO compound, so that after the dispute
with the local officials concerned was settled, the scraps could then be delivered in accordance
with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and
Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this Court's ruling
in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes
in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will
suffer the losses and deterioration arising from the causes enumerated in Art. 1734; and in
these instances, the burden of proving that damages were caused by the fault or negligence of
the carrier rests upon him. However, the carrier must first establish that the loss or deterioration
was occasioned by one of the excepted causes or was due to an unforeseen event or to force
majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.
Korean Airlines Co. ltd v. CA August 3, 1994 234 SCRA 717

Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah,


Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services,
Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was
"wait-listed," which meant that he could only be accommodated if any of the confirmed
passengers failed to show up at the airport before departure. When two of such passengers did
not appear, Lapuz and another person by the name of Perico were given the two unclaimed
seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder
bag at the check-in counter of KAL. He passed through the customs and immigration
sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL
Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and
proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or
fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He
was thus barred from taking the flight. When he later asked for another booking, his
ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi
Arabia within the stipulated 2-week period and so lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services
Inc. coordinated with KAL for the departure of 30 contract workers, of whom only 21 were
confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph,
after being informed that there was a possibility of having one or two seats becoming available,
gave priority to Perico, who was one of the supervisors of the hiring company in Saudi
Arabia. The other seat was won through lottery by Lapuz. However, only one seat became
available and so, pursuant to the earlier agreement that Perico was to be given priority, he
alone was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for
damages, disposing as follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered
sentencing the defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the following:
1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY
(P272,160.00) PESOS as actual/compensatory damages, with legal interest thereon from the
date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's fees;
and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting
Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise
dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:
WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED
with the following modifications: the amount of actual damages and compensatory damages is
reduced to P60,000.00 and defendant-appellant is hereby ordered to pay plaintiff-appellant the
sum of One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages,
at 6% interest per annum from the date of the filing of the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration, which were both denied
for lack of merit. Hence, the present petitions for review which have been consolidated because
of the identity of the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate court on the following
grounds:
1. That the Court of Appeals erred in concluding that petitioner committed a breach of
contract of carriage notwithstanding lack of proper, competent and sufficient evidence of the
existence of such contract.
2. That the Court of Appeals erred in not according the proper evidentiary weight to some
evidence presented and the fact that private respondent did not have any boarding pass to
prove that he was allowed to board and to prove that his airline ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby passenger status of
private respondent Lapuz was changed to a confirmed status when his name was entered into
the passenger manifest.
4. That the Court of Appeals abused its discretion in awarding moral and exemplary
damages in the amount of P100,000.00 in favor of private respondent notwithstanding its lack of
basis and private respondent did not state such amount in his complaint nor had private
respondent proven the said damages.
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan
Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the
judgment shall be computed from the filing of the complaint.

In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of
Appeals insofar as it modifies the award of damages; b) actual and compensatory damages in
the sum equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600
Saudi rials at the current conversion rate plus the cost of baggage and personal belongings
worth P2,000 and the service fee of P3,000 paid to the recruiting agency, all with legal interest
from the filing of the complaint until fully paid; c) moral damages of not less than P1 million and
exemplary damages of not less than P500,000.00, both with interest at 6% per annum from the
filing of the complaint; and d) attorney's fees in the sum equivalent to 30% of the award of
damages.
It is evident that the issues raised in these petitions relate mainly to the correctness of the
factual findings of the Court of Appeals and the award of damages. The Court has consistently
affirmed that the findings of fact of the Court of Appeals and the other lower courts are as a rule
binding upon it, subject to certain exceptions. As nothing in the record indicates any of such
exceptions, the factual conclusions of the appellate court must be affirmed.

The status of Lapuz as standby passenger was changed to that of a confirmed


passenger when his name was entered in the passenger manifest of KAL for its Flight No.
KE 903. His clearance through immigration and customs clearly shows that he had indeed been
confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract
of carriage between them when it failed to bring Lapuz to his destination.

This Court has held that a contract to transport passengers is different in kind and degree
from any other contractual relation. The business of the carrier is mainly with the traveling public.
It invites people to avail themselves of the comforts and advantages it offers. The contract of air
carriage generates a relation attended with a public duty. Passengers have the right to be
treated by the carrier's employees with kindness, respect, courtesy and due consideration.
They are entitled to be protected against personal misconduct, injurious language, indignities
and abuses from such employees. So it is that any discourteous conduct on the part of these
employees toward a passenger gives the latter an action for damages against the carrier.

The breach of contract was aggravated in this case when, instead of courteously
informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted
"Down! Down!" while pointing at him, thus causing him embarrassment and public humiliation.

KAL argues that "the evidence of confirmation of a chance passenger status is not through
the entry of the name of a chance passenger in the passenger manifest nor the clearance from
the Commission on Immigration and Deportation, because they are merely means of facilitating
the boarding of a chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the
departure counter, passed through customs and immigration, boarded the shuttle bus
and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded
in KAL's aircraft, to be flown with him to Jeddah. The contract of carriage between him and
KAL had already been perfected when he was summarily and insolently prevented from
boarding the aircraft.

KAL's allegation that the respondent court abused its discretion in awarding moral and
exemplary damages is also not tenable.

The Court of Appeals granted moral and exemplary damages because:

The findings of the court a quo that the defendant-appellant has committed breach of
contract of carriage in bad faith and in wanton, disregard of plaintiff-appellant's rights as
passenger laid the basis and justification of an award for moral damages.

xxxx

In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner when it "bumped off" plaintiff-appellant
on November 8, 1980, and in addition treated him rudely and arrogantly as a "patay gutom na
contract worker fighting Korean Air Lines," which clearly shows malice and bad faith, thus
entitling plaintiff-appellant to moral damages.

xxxx

Considering that the plaintiff-appellant's entitlement to moral damages has been fully
established by oral and documentary evidence, exemplary damages may be awarded. In fact,
exemplary damages may be awarded, even though not so expressly pleaded in the complaint
(Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an example for the public
good, an award of exemplary damages is also proper (Armovit vs. Court of Appeals, supra).

The well-entrenched principle is that moral damages depend upon the discretion of the court
based on the circumstances of each case. This discretion is limited by the principle that the
"amount awarded should not be palpably and scandalously excessive" as to indicate that it was
the result of prejudice or corruption on the part of the trial court. 6 Damages are not intended
to enrich the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason of the defendant's
culpable action. 7 There is no hard-and-fast rule in the determination of what would be a
fair amount of moral damages since each case must be governed by its own peculiar
facts.

A review of the record of this case shows that the injury suffered by Lapuz is not so serious
or extensive as to warrant an award of P1.5 million. The assessment of P100,000 as moral and
exemplary damages in his favor is, in our view, reasonable and realistic.

Lapuz likewise claims that the respondent court could not rule upon the propriety of the
award of actual damages because it had not been assigned as an error by KAL. Not so. The
rule is that only errors specifically assigned and properly argued in the brief will be considered
except errors affecting jurisdiction over the subject matter and plain as well as clerical
errors. 8 But this is not without qualification for, as the Court held in Vda. de Javellana vs. Court
of Appeals: 9
. . . [T]he Court is clothed with ample authority to review matters, even if they are not
assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a
just decision of the case.

A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:

Issues, though not specifically raised in the pleading in the appellate court, may, in
the interest of justice, be properly considered by said court in deciding a case, if they are
questions raised in the trial court and are matters of record having some bearing on the
issue submitted which the parties failed to raise or the lower court ignored.

The Court of Appeals was therefore justified in decreasing the award of actual damages
even if the issue was not assigned as an error by KAL. Consideration of this question was
necessary for the just and complete resolution of the present case. Furthermore, there was
enough evidence to warrant the reduction of the original award, as the challenged decision
correctly observed:

A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the
contract is for only one year, renewable every year for five years. Although plaintiff-appellant
intends to renew his contract, such renewal will still be subject to his foreign employer.
Plaintiff-appellant had not yet started working with his foreign employer, hence, there can be no
basis as to whether his contract will be renewed by his foreign employer or not. Thus, the
damages representing the loss of earnings of plaintiff-appellant in the renewal of the contract of
employment is at most speculative. Damages may not be awarded on the basis of speculation
or conjecture (Gachalian vs. Delim, 203 SCRA 126). Hence, defendant-appellant's liability is
limited to the one year contract only. Plaintiff-appellant is, therefore, entitled only to his lost
earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of actual
damages, representing lost earnings for five years prayed for in the Complaint.
Plaintiff-appellant's contention that in computing his lost earnings, the current rate of the
Saudi Rial to the Philippine Peso at the time of payment should be used, is untenable,
considering that in his Complaint, plaintiff-appellant has quantified in Philippine Peso his lost
earnings for five years.
We disagree with the respondent court, however, on the date when the legal interest should
commence to run. The rule is that the legal interest of six percent (6%) on the amounts
adjudged in favor of Lapuz should resume from the time of the rendition of the trial court's
decision instead of November 28, 1980, the date of the filing of the complaint.

On this matter, the Court has held:

If suit were for payment of a definite sum of money, the contention might be tenable.
However, if it is for damages, unliquidated and not known until definitely ascertained, assessed
and determined by the courts after proof, interest should be from the date of the decision. 11
xxxx
The obligation to pay interest on a sum filed in a judgment exists from the date of the
sentence, when so declared; for until the net amount of the debtor's liability has been
determined, he cannot he considered delinquent in the fulfillment of his obligation to pay the
debt with interest thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial court's dismissal
of KAL's counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose
responsibility ended with the confirmation by KAL of Lapuz as its passenger in its Flight No.
903.
This is still another case of the maltreatment of our overseas contract workers, this time by
the airline supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice
much in seeking employment abroad, where they are deprived of the company of their loved
ones, the direct protection of our laws, and the comfort of our own native culture and way of life.
This Court shall exert every effort to vindicate their rights when they are abused and shall
accord them the commensurate reparation of their injuries consistent with their dignity and
worth as members of the working class.

Dangwa Transportation Co., Inc. v CA October 7, 1991, 202 SCRA 574

Facts: An action for damages was filed by PR because Pedro Cudiamat died as a result of a vehicular
accident. Among others, it was alleged that on said date, while petitioner Theodore M. Lardizabal
was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent
manner and without due regard to traffic rules and regulations and safety to persons and property,
it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to
the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the
victim, first brought his other passengers and cargo to their respective destinations before banging
said victim to the Lepanto Hospital where he expired.

On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the
supervision of the employees, even as they add that they are not absolute insurers of the safety of
the public at large. Further, it was alleged that it was the victim's own carelessness and negligence
which gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus
an award of damages in their favor by way of a counterclaim.

The trial court rendered a decision, effectively in favor of petitioners pronouncing that Pedrito
Cudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless,
defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of
P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable
settlement of the case.

Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision
3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of the lower court,
and ordered petitioners to pay private respondents:

1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim
Pedrito Cudiamat;

2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;

3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and
compensatory damages;

4. The costs of this suit. 4

Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated
October 4, 1990, hence this petition with the central issue herein being whether respondent court
erred in reversing the decision of the trial court and in finding petitioners negligent and liable for
the damages claimed.

It is an established principle that the factual findings of the Court of Appeals as a rule are final and
may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of
which is when the findings of the appellate court are contrary to those of the trial court, in which
case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who
between the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an
evaluation of the evidence in this case for the prope calibration of their conflicting factual findings
and legal conclusions.

The lower court, in declaring that the victim was negligent, made the following findings:

This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle,
especially with one of his hands holding an umbrella. And, without having given the driver or the
conductor any indication that he wishes to board the bus. But defendants can also be found
wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being
closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle
(i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under
such circumstances, equity demands that there must be something given to the heirs of the victim
to assuage their feelings. This, also considering that initially, defendant common carrier had made
overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's
heirs.

However, respondent court, in arriving at a different opinion, declares that:

From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that
the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was
precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary
to the assertion of the appellees, the victim did indicate his intention to board the bus as can be
seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer
walking and made a sign to board the bus when the latter was still at a distance from him. It was at
the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the
latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely
stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so
when we take into account that the platform of the bus was at the time slippery and wet because
of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common
carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them according to the circumstances of each
case (Article 1733, New Civil Code).
After a careful review of the evidence on record, we find no reason to disturb the above holding of
the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own
witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident,
there is a crossing?

A The way going to the mines but it is not being pass(ed) by the bus.

Q And the incident happened before bunkhouse 56, is that not correct?

A It happened between 54 and 53 bunkhouses. 9


The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if
there was anv unusual incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53
and 54.

Q What happened when you delivered this passenger at this particular place in Lepanto?

A When we reached the place, a passenger alighted and I signalled my driver. When we stopped
we went out because I saw an umbrella about a split second and I signalled again the driver, so the
driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was
lying down.

Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down from
the bus how far was he?

A It is about two to three meters.

Q On what direction of the bus was he found about three meters from the bus, was it at the front
or at the back?

A At the back, sir. 10 (Emphasis supplied.)


The foregoing testimonies show that the place of the accident and the place where one of the
passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of
Appeals that the bus was at full stop when the victim boarded the same is correct. They further
confirm the conclusion that the victim fell from the platform of the bus when it suddenly
accelerated forward and was run over by the rear right tires of the vehicle, as shown by the
physical evidence on where he was thereafter found in relation to the bus when it stopped. Under
such circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim
would ride on the bus, since the latter had supposedly not manifested his intention to board the
same, does not merit consideration. When the bus is not in motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver
and the conductor, every time the bus stops, to do no act that would have the effect of increasing
the peril to a passenger while he was attempting to board the same. The premature acceleration
of the bus in this case was a breach of such duty.
It is the duty of common carriers of passengers, including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are
doing so.

Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot
be considered negligent under the circumstances. As clearly explained in the testimony of the
aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow
motion" at the point where the victim had boarded and was on its platform. 13

It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar
which is moving slowly. 14 An ordinarily prudent person would have made the attempt board the
moving conveyance under the same or similar circumstances. The fact that passengers board and
alight from slowly moving vehicle is a matter of common experience both the driver and conductor
in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to
persons boarding cars as well as to those alighting therefrom. 15

Common carriers, from the nature of their business and reasons of public policy, are bound to
observe extraordinary diligence for the safety of the passengers transported by the according to all
the circumstances of each case. 16 A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence very cautious persons, with a
due regard for all the circumstances.

It has also been repeatedly held that in an action based on a contract of carriage, the court need
not make an express finding of fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By contract of carriage, the carrier
assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it is therefore incumbent
upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733
and 1755 of the Civil Code. 18

Moreover, the circumstances under which the driver and the conductor failed to bring the gravely
injured victim immediately to the hospital for medical treatment is a patent and incontrovertible
proof of their negligence. It defies understanding and can even be stigmatized as callous
indifference. The evidence shows that after the accident the bus could have forthwith turned at
Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow
a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim. The
vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was
tersely and correctly confuted by respondent court:

... The pretension of the appellees that the delay was due to the fact that they had to wait for about
twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather
scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of
dressing herself up for about twenty minutes before attending to help her distressed and helpless
husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to
inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the
companion of the victim who informed his family thereof. 20 In fact, it was only after the
refrigerator was unloaded that one of the passengers thought of sending somebody to the house
of the victim, as shown by the testimony of Virginia Abalos again, to wit:

Q Why, what happened to your refrigerator at that particular time?

A I asked them to bring it down because that is the nearest place to our house and when I went
down and asked somebody to bring down the refrigerator, I also asked somebody to call the family
of Mr. Cudiamat.

COURT:

Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21

With respect to the award of damages, an oversight was, however, committed by respondent Court
of Appeals in computing the actual damages based on the gross income of the victim. The rule is
that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings,
but rather the loss of that portion of the earnings which the beneficiary would have received. In
other words, only net earnings, not gross earnings, are to be considered, that is, the total of the
earnings less expenses necessary in the creation of such earnings or income and minus living and
other incidental expenses.

We are of the opinion that the deductible living and other expense of the deceased may fairly and
reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or
compensatory damages, respondent court found that the deceased was 48 years old, in good
health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year.
Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly
awarded P288,000. Applying the aforestated rule on computation based on the net earnings, said
award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with
prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23

Common carrier -

A. Public service -

Laws and Jurisprudence:

Article 1732 of the New Civil Code

Commonwealth Act No. 146 section 13 par. b as amended

Link:
http://www.upecon.org.ph/epdp/wp-content/uploads/2016/01/1936-11-7-960_CA-146-Public-Service-C
ommission-Act.pdf

De Guzman v. CA
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such
material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material
to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged
freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750
cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent
loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada,
respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages
and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to
exercise the extraordinary diligence required of him by the law, should be held liable for the value of the
undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be
held responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common
carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as
damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a
common carrier; in finding that he had habitually offered trucking services to the public; in not exempting
him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this
Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

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

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts
earlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a
sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733 deliberaom
making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:

... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common carrier even though
he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling
was done on a periodic or occasional rather than regular or scheduled manner, and even though private
respondent'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.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt
the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even
if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as
follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are
lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.
(Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the
instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle
must be dealt with under the provisions of Article 1735, in other words, that the private respondent as
common carrier is presumed to have been at fault or to have acted negligently. This presumption, however,
may be overthrown by proof of extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's
goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a
security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not
believe, however, that in the instant case, the standard of extraordinary diligence required private
respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of
his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article
1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public
policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act with grave
or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on
account of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract
of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to
diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves
or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the
limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First
Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with
willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and
loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took
away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days
and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by
the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of
robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite
beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to
recall that even common carriers are not made absolute insurers against all risks of travel and of transport of
goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that
they shall have complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not
liable for the value of the undelivered merchandise which was lost because of an event entirely beyond
private respondent's control.

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

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Test:

1.3 First Philippine Industrial Corporation v. CA 300 SCRA 66


Facts:
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, 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.

"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax
Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to
distinctions or other considerations may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not
to overburden the riding public or commuters with taxes. Plaintiff is not a common
carrier, but a special carrier extending its services and facilities to a single specific or
"special customer" under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy
to local governments than the previous enactments, to make them economically and
financially viable to serve the people and discharge their functions with a
concomitant obligation to accept certain devolution of powers, x x x So, consistent
with this policy even franchise grantees are taxed (Sec. 137) and contractors are also
taxed under Sec. 143 (e) and 151 of the Code."[9]

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27,
1995, we referred the case to the respondent Court of Appeals for consideration and adjudication. [10] On
November 29, 1995, the respondent court rendered a decision[11] affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14] of January
20, 1997.Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a
common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear
under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in
the business of transporting persons or property from place to place, for compensation, offering his services
to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a public employment, and
must hold himself out as ready to engage in the transportation of goods for person generally
as a business and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;

3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and

4. The transportation must be for hire.[15]

Based on the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a
public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that:

"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in
local idiom, as a 'sideline'). Article 1732 x x x avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering
its services to the 'general public,' i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We think that Article 1877
deliberately refrained from making such distinctions.

So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide neatly with the
notion of 'public service,' under the Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, 'public service' includes:
'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light heat
and power, water supply and power petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services.' "(Underscoring Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe
line operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum as may be offered by others
for transport, and to charge without discrimination such rates as may have been approved by the Secretary
of Agriculture and Natural Resources."

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides:

"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to
the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared
to be a public utility." (Underscoring Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No.
069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products,
it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as amended."

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore,
exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:

"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following :

xxxxxxxxx

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code."

The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are
illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common
Limitations on the Taxing Powers of Local Government Units." x x x

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those
being deemed to be exempted from the taxing powers of the local government units. May we know the
reason why the transportation business is being excluded from the taxing powers of the local government
units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph
5. It states that local government units may not impose taxes on the business of transportation, except as
otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces
have the power to impose a tax on business enjoying a franchise at the rate of not more than one-half of 1
percent of the gross annual receipts. So, transportation contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on
the carrier business. Local government units may impose taxes on top of what is already being imposed by
the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a province
may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]

It is clear that the legislative intent in excluding from the taxing power of the local government unit the
imposition of business tax against common carriers is to prevent a duplication of the so-called "common
carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under
the National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the Local Government Code.
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.

1.4 Estrellita M. Bascos v. CA G.R No. 101089 April 7, 1993


SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. Article
1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged
in the business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a common carrier is "whether the
given undertaking is a part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business transacted." . . . The holding of the
Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held
thus: "The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its services
to the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION
MADE ABSOLUTE. Common carriers are obliged to observe extraordinary diligence in the vigilance over
the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the
presumption of negligence does not attach and these instances are enumerated in Article 1734. In those
cases where the presumption is applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption . . . The presumption of negligence was raised against
petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need
not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.

3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED
FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in
the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following
or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the
common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held
that: "Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest
or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such
thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where
the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case, petitioner herself
has made the admission that she was in the trucking business, offering her trucks to those with cargo to move.
Judicial admissions are conclusive and no evidence is required to prove the same.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner presented no
other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES.
While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in
court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE.
Granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract
was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called
by the contracting parties.

DECISION

CAMPOS, JR., J p:

This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A.
CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs.
ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING, defendant-appellant,"
C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed
in toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling
contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000
m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods
Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano,
subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal
worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton.
Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping
Agency the amount of the lost goods in accordance with the contract which stated that:

"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and
non-delivery or damages to the cargo during transport at market value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a
complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of
carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the
following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ
of preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent
to defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, petitioner interposed the following defenses: that there was no contract of carriage since
CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was
liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was
hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was
immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked
properties; that after preliminary investigation, an information for robbery and carnapping were filed against
Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability to
CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to
pay the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00)
as an (sic) for actual damages with legal interest of 12% per cent per annum to be counted from December 4,
1986 until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is
DENIED for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.

Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:

"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE
OF CARGO TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT
THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.

III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN
RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7

The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was
the hijacking referred to a force majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer
that she did business under the name A.M. Bascos Trucking and that said admission dispensed with the
presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The
respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier,
Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a
common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of
400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.

In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged
in this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of
the truck. She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits
were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed
in his testimony his statement that the contract was a lease contract. 10 She also stated that: she was not
catering to the general public. Thus, in her answer to the amended complaint, she said that she does
business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo
to move, not to the general public but to a few customers only in view of the fact that it is only a small
business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a common carrier is "whether the
given undertaking is a part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business transacted." 12 In this case,
petitioner herself has made the admission that she was in the trucking business, offering her trucks to those
with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their services only to a select
group of people and because the private respondents, plaintiffs in the lower court, did not object to the
presentation of affidavits by petitioner where the transaction was referred to as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In
referring to Article 1732 of the Civil Code, it held thus:

"The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 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."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have
dismissed them as self-serving and petitioner contests the conclusion. We are bound by the appellate court's
factual conclusions. Yet, granting that the said evidence were not self-serving, the same were not sufficient to
prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be
and not what it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force
majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported
by them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does
not attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for
the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included
in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the
common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising
from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence,
or force. This is in accordance with Article 1745 of the Civil Code which provides:

"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary
to public policy;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave
or irresistible threat, violences or force, is dispensed with or diminished;"

In the same case, 21 the Supreme Court also held that:

"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."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos'
affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have
concluded that these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the
hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it
had been admitted in court for lack of objection on the part of private respondent, the respondent Court had
discretion in assigning weight to such evidence. We are bound by the conclusion of the appellate court. In a
petition for review on certiorari, We are not to determine the probative value of evidence but to resolve
questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place.
Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as
evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits
are not considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the
information for carnapping and robbery against the accused named in said affidavits did not necessarily
mean that the contents of the affidavits were true because they were yet to be determined in the trial of the
criminal cases.

The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to
disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered
moot and academic by the decision on the merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The
petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.

1.5 FGU Insurance Corporation v. G. P. Sarmiento Trucking


Corporations G.R No. 141910 August 6, 2002

FIRST DIVISION

[G.R. No. 141910. August 6, 2002]

FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO


TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.

DECISION
VITUG, J.:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles,
from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro
Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing the
north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided
with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the
cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion
Industries, Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn,
being the subrogee of the rights and interests of Concepcion Industries, Inc., sought
reimbursement of the amount it had paid to the latter from GPS. Since the trucking company
failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage
against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati
City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion
Industries, Inc., since 1988, and it was not so engaged in business as a common
carrier. Respondents further claimed that the cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting
its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss, explaining
thusly:

Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove
his own affirmative allegation, xxx.

In the instant case, plaintiff did not present any single evidence that would prove that
defendant is a common carrier.

xxxxxxxxx
Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss, damage or
deterioration of goods during transport under 1735 of the Civil Code is not availing.

Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff
was subrogated and the owner of the vehicle which transports the cargo are the laws on
obligation and contract of the Civil Code as well as the law on quasi delicts.

Under the law on obligation and contract, negligence or fault is not presumed. The law on
quasi delict provides for some presumption of negligence but only upon the attendance of
some circumstances. Thus, Article 2185 provides:

Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic
regulation.

Evidence for the plaintiff shows no proof that defendant was violating any traffic
regulation. Hence, the presumption of negligence is not obtaining.

Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendants driver was the one negligent, defendant cannot be made liable for the damages of
the subject cargoes. [2]

The subsequent motion for reconsideration having been denied, [3] plaintiff interposed an
appeal to the Court of Appeals, contending that the trial court had erred (a) in holding that the
appellee corporation was not a common carrier defined under the law and existing
jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The
appellate court, in its decision of 10 June 1999, [4] discoursed, among other things, that -

"x x x in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to prove that the appellee is a
common carrier, the presumption would not arise; consequently, the appellant would have to
prove that the carrier was negligent.

"x x x x x x x x x

"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its `limited clientele, (assuming it was really a common carrier), it
follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant) `must
establish his case by a preponderance of evidence, which means that the evidence as a whole
adduced by one side is superior to that of the other. (Summa Insurance Corporation vs. Court
of Appeals, 243 SCRA 175). This, unfortunately, the appellant failed to do -- hence, the
dismissal of the plaintiffs complaint by the trial court is justified.

"x x x x x x x x x

"Based on the foregoing disquisitions and considering the circumstances that the appellee
trucking corporation has been `its exclusive contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its principal, the inevitable conclusion is that the
appellee is a private carrier.

"x x x x x x x x x

"x x x the lower court correctly ruled that 'the application of the law on common carriers is
not warranted and the presumption of fault or negligence on the part of a common carrier in
case of loss, damage or deterioration of good[s] during transport under [article] 1735 of the
Civil Code is not availing.' x x x.

"Finally, We advert to the long established rule that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and should not be disturbed unless for strong and
valid reasons." [5]

Petitioner's motion for reconsideration was likewise denied;[6] hence, the instant
petition,[7] raising the following issues:
I

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER


AS DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE


CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS
IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED
WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.

III

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE


INSTANT CASE.

On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals
to be amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries,
Inc., rendering or offering its services to no other individual or entity, cannot be considered a
common carrier. 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
hire or compensation, offering their services to the public,[8] whether to the public in general or
to a limited clientele in particular, but never on an exclusive basis.[9] The true test of a common
carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee. [10] Given accepted standards, GPS scarcely
falls within the term common carrier.
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.[11] The law, recognizing the
obligatory force of contracts,[12] will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. [13] A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee
that may include his expectation interest, which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract been
performed, or his reliance interest, which is his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a position as he would have been in had the
contract not been made; or his restitution interest, which is his interest in having restored to him
any benefit that he has conferred on the other party.[14] Indeed, agreements can accomplish little,
either for their makers or for society, unless they are made the basis for action. [15] The effect of
every infraction is to create a new duty, that is, to make recompense to the one who has been
injured by the failure of another to observe his contractual obligation[16] unless he can show
extenuating circumstances, like proof of his exercise of due diligence (normally that of the
diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event,
to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage
between it and petitioners assured, and admits that the cargoes it has assumed to deliver have
been lost or damaged while in its custody. In such a situation, a default on, or failure of
compliance with, the obligation in this case, the delivery of the goods in its custody to the place
of destination - gives rise to a presumption of lack of care and corresponding liability on the part
of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do
so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may
not himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage
between petitioners principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their successors who have
assumed their personality or their juridical position. [17] Consonantly with the axiom res inter alios
acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioners civil action against the driver can only be based on culpa aquiliana, which,
unlike culpa contractual, would require the claimant for damages to prove negligence or fault on
the part of the defendant.[18]
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a
defendant liable where the thing which caused the injury complained of is shown to be under
the latters management and the accident is such that, in the ordinary course of things, cannot
be expected to happen if those who have its management or control use proper care. It affords
reasonable evidence, in the absence of explanation by the defendant, that the accident arose
from want of care.[19] It is not a rule of substantive law and, as such, it does not create an
independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural
convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of
producing specific proof of negligence. The maxim simply places on the defendant the burden
of going forward with the proof.[20] Resort to the doctrine, however, may be allowed only when (a)
the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other
responsible causes, including the conduct of the plaintiff and third persons, are sufficiently
eliminated by the evidence; and (c) the indicated negligence is within the scope of the
defendant's duty to the plaintiff.[21] Thus, it is not applicable when an unexplained accident may
be attributable to one of several causes, for some of which the defendant could not be
responsible.[22]
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties.[23] Nevertheless, the requirement that responsible causes other than those due to
defendants conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right to present evidence. [24] Thus, respondent
corporation may no longer offer proof to establish that it has exercised due care in transporting
the cargoes of the assured so as to still warrant a remand of the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only
insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court
and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking
Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of
the damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez,
JJ., concur.

1.6 Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas,
et al. G.R. No. 157917 August 29, 2012

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe
extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to
a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger
may only be an unemployed high school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse
decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification
the decision rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Paraaque City
that had decreed them jointly and severally liable with Philippine National Railways (PNR), their co-defendant,
to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate
(Aaron), then a high school student of Don Bosco Technical Institute (Don Bosco).

Antecedents

The Pereas were engaged in the business of transporting students from their respective residences in
Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereas used a
KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two
of whom would be seated in the front beside the driver, and the others in the rear, with six students on
either side. They employed Clemente Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On August 22,
1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates residence.
Aaron took his place on the left side of the van near the rear door. The van, with its air-conditioning unit
turned on and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco.
Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already running late
because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an alternate route
at about 6:45 a.m. by traversing the narrow path underneath the Magallanes Interchange that was then
commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was
marked by piles of construction materials and parked passenger jeepneys, and the railroad crossing in the
narrow path had no railroad warning signs, or watchmen, or other responsible persons manning the crossing.
In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by
Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train
neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large
passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its
left side. The train blew its horn to warn motorists of its approach. When the train was about 50 meters away
from the passenger bus and the van, Alano applied the ordinary brakes of the train. He applied the
emergency brakes only when he saw that a collision was imminent. The passenger bus successfully crossed
the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact
threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the
train, which dragged his body and severed his head, instantaneously killing him. Alano fled the scene on
board the train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages
against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR filed their respective answers, with
cross-claims against each other, but Alfaro could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Perea for the adequate and safe
transportation carriage of the former spouses' son from their residence in Paraaque to his
school at the Don Bosco Technical Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation thereof,
Aaron, the minor son of spouses Zarate died in connection with a vehicular/train collision
which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses
Perea, then driven and operated by the latter's employee/authorized driver Clemente Alfaro,
which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996, within the
vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision
was a railroad crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate and safety
warning signs and railings at the site commonly used for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and private
vehicles used on a daily basis the site of the collision as an alternative route and short-cut to
Makati;

(7) The train driver or operator left the scene of the incident on board the commuter train
involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact intended by
the railroad operator for railroad crossing at the time of the vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters
from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable
for negligence constituting the proximate cause of the vehicular collision, which resulted in
the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Perea being the employer of defendant Alfaro
are liable for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the railroad
system is liable for negligence in failing to provide adequate safety warning signs and railings
in the area commonly used by motorists for railroad crossings, constituting the proximate
cause of the vehicular collision which resulted in the death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Perea are liable for breach of the contract of carriage
with plaintiff-spouses in failing to provide adequate and safe transportation for the latter's
son;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the
diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John
Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train
involved in the accident, in allowing or tolerating the motoring public to cross, and its failure
to install safety devices or equipment at the site of the accident for the protection of the
public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any
and whatever amount the latter may be held answerable or which they may be ordered to
pay in favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts
claimed by the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and
exemplary damages and attorney's fees.2

The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe transport of
Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.

In their defense, the Pereas adduced evidence to show that they had exercised the diligence of a good
father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a
drivers license and had not been involved in any vehicular accident prior to the collision; that their own son
had taken the van daily; and that Teodoro Perea had sometimes accompanied Alfaro in the vans trips
transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of
the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the
van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorneys fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereas motion for reconsideration, 4 reiterating that the cooperative
gross negligence of the Pereas and PNR had caused the collision that led to the death of Aaron; and that
the damages awarded to the Zarates were not excessive, but based on the established circumstances.

The CAs Ruling

Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable
together with defendant-appellants spouses Teodorico and Nanette Perea and
defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron
Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.

The Pereas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual,
moral and exemplary damages and attorneys fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.

The trial court erred in awarding excessive damages and attorneys fees.

The trial court erred in awarding damages in the form of deceaseds loss of earning capacity
in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the
moral damages to 2,500,000.00; and deleted the attorneys fees because the RTC did not state the factual
and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch
260 of Paraaque City is AFFIRMED with the modification that the award of Actual Damages
is reduced to 59,502.76; Moral Damages is reduced to 2,500,000.00; and the award for
Attorneys Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the ruling in Cariaga v.
Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a
sum representing the loss of the deceaseds earning capacity despite Cariaga being only a medical student at
the time of the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age
of 21 (the age when he would have graduated from college and started working for his own livelihood)
instead of 15 years (his age when he died). Considering that the nature of his work and his salary at the time
of Aarons death were unknown, it used the prevailing minimum wage of 280.00/day to compute Aarons
gross annual salary to be 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by
Aarons life expectancy of 39.3 years, his gross income would aggregate to 4,351,164.30, from which his
estimated expenses in the sum of 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net
income. Due to Aarons computed net income turning out to be higher than the amount claimed by the
Zarates, only 2,109,071.00, the amount expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereas motion for reconsideration.8

Issues

In this appeal, the Pereas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial courts decision holding the petitioners
jointly and severally liable to pay damages with Philippine National Railways and dismissing
their cross-claim against the latter.

II. The lower court erred in affirming the trial courts decision awarding damages for loss of
earning capacity of a minor who was only a high school student at the time of his death in the
absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.

Ruling

The petition has no merit.

1.
Were the Pereas and PNR jointly
and severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereas and the PNR, basing their
claim against the Pereas on breach of contract of carriage and against the PNR on quasi-delict.

The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.

To start with, the Pereas defense was that they exercised the diligence of a good father of the family in the
selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a drivers license and that
he had not been involved in any vehicular accident prior to the fatal collision with the train; that they even
had their own son travel to and from school on a daily basis; and that Teodoro Perea himself sometimes
accompanied Alfaro in transporting the passengers to and from school. The RTC gave scant consideration to
such defense by regarding such defense as inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the Pereas operated as a
common carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a
good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9primarily because he only caters to some specific or privileged individuals, and his operation is
neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus
service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place
to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier.10 A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes,
by special agreement in a particular instance only, to transport goods or persons from one place to another
either gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code govern the contract of
private carriage.The diligence required of a private carrier is only ordinary, that is, the diligence of a good
father of the family. In contrast, a common carrier is a person, corporation, firm or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering such services to the public.12 Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act, 13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14

In relation to common carriers, the Court defined public use in the following terms in United States v. Tan
Piaco,15viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public,
we must look not only to the character of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility
commission. There must be, in general, a right which the law compels the owner to give to
the general public. It is not enough that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The true criterion by which to judge the
character of the use is whether the public may enjoy it by right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction
between a person or an enterprise offering transportation on a regular or an isolated basis; and has not
distinguished a carrier offering his services to the general public, that is, the general community or
population, from one offering his services only to a narrow segment of the general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly
with the notion of public service under the Public Service Act, which supplements the law on common
carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service
Act, includes:
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 clientle, whether permanent
or occasional, and done for the general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or
both, with or without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public
services. x x x.17

Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as
common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if
they had limited clientle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business
actually transacted, or the number and character of the conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as his
business or occupation. If the undertaking is a single transaction, not a part of the general business or
occupation engaged in, as advertised and held out to the general public, the individual or the entity
rendering such service is a private, not a common, carrier. The question must be determined by the character
of the business actually carried on by the carrier, not by any secret intention or mental reservation it may
entertain or assert when charged with the duties and obligations that the law imposes.21

Applying these considerations to the case before us, there is no question that the Pereas as the operators
of a school bus service were: (a) engaged in transporting passengers generally as a business, not just as a
casual occupation; (b) undertaking to carry passengers over established roads by the method by which the
business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientle, the
Pereas operated as a common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they operated the service
and for a fee.

The common carriers standard of care and vigilance as to the safety of the passengers is defined by law.
Given the nature of the business and for reasons of public policy, the common carrier is bound "to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case."22 Article 1755 of the Civil Code specifies that the
common carrier should "carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances." To successfully
fend off liability in an action upon the death or injury to a passenger, the common carrier must prove his or
its observance of that extraordinary diligence; otherwise, the legal presumption that he or it was at fault or
acted negligently would stand.23 No device, whether by stipulation, posting of notices, statements on tickets,
or otherwise, may dispense with or lessen the responsibility of the common carrier as defined under Article
1755 of the Civil Code. 24

And, secondly, the Pereas have not presented any compelling defense or reason by which the Court might
now reverse the CAs findings on their liability. On the contrary, an examination of the records shows that
the evidence fully supported the findings of the CA.

As earlier stated, the Pereas, acting as a common carrier, were already presumed to be negligent at the
time of the accident because death had occurred to their passenger.25 The presumption of negligence, being
a presumption of law, laid the burden of evidence on their shoulders to establish that they had not been
negligent.26 It was the law no less that required them to prove their observance of extraordinary diligence in
seeing to the safe and secure carriage of the passengers to their destination. Until they did so in a credible
manner, they stood to be held legally responsible for the death of Aaron and thus to be held liable for all the
natural consequences of such death.
There is no question that the Pereas did not overturn the presumption of their negligence by credible
evidence. Their defense of having observed the diligence of a good father of a family in the selection and
supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their liability
as a common carrier did not cease upon proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employee. This was the reason why the RTC treated this
defense of the Pereas as inappropriate in this action for breach of contract of carriage.

The Pereas were liable for the death of Aaron despite the fact that their driver might have acted beyond
the scope of his authority or even in violation of the orders of the common carrier.27 In this connection, the
records showed their drivers actual negligence. There was a showing, to begin with, that their driver
traversed the railroad tracks at a point at which the PNR did not permit motorists going into the Makati area
to cross the railroad tracks. Although that point had been used by motorists as a shortcut into the Makati
area, that fact alone did not excuse their driver into taking that route. On the other hand, with his familiarity
with that shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the risks.
Compounding his lack of care was that loud music was playing inside the air-conditioned van at the time of
the accident. The loudness most probably reduced his ability to hear the warning horns of the oncoming
train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he sought to
overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost
his view of the train that was then coming from the opposite side of the passenger bus, leading him to
miscalculate his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus
avoided a collision with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not
slow down or go to a full stop before traversing the railroad tracks despite knowing that his slackening of
speed and going to a full stop were in observance of the right of way at railroad tracks as defined by the
traffic laws and regulations.28He thereby violated a specific traffic regulation on right of way, by virtue of
which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something
which a prudent and reasonable man would not do,32 or as Judge Cooley defines it, (t)he failure to observe
for the protection of the interests of another person, that degree of care, precaution, and vigilance which
the circumstances justly demand, whereby such other person suffers injury."33

The test by which to determine the existence of negligence in a particular case has been aptly
stated in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated
as follows: Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not,
then he is guilty of negligence. The law here in effect adopts the standard supposed to be
supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal
judgment of the actor in the situation before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and prudence and determines
liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculation cannot here be of much value but
this much can be profitably said: Reasonable men govern their conduct by the circumstances
which are before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only when there is
something before them to suggest or warn of danger. Could a prudent man, in the case
under consideration, foresee harm as a result of the course actually pursued? If so, it was the
duty of the actor to take precautions to guard against that harm. Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this prevision, is always necessary
before negligence can be held to exist. Stated in these terms, the proper criterion for
determining the existence of negligence in a given case is this: Conduct is said to be negligent
when a prudent man in the position of the tortfeasor would have foreseen that an effect
harmful to another was sufficiently probable to warrant his foregoing the conduct or
guarding against its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent when he
traversed the railroad tracks at a point not allowed for a motorists crossing despite being fully aware of the
grave harm to be thereby caused to his passengers; and when he disregarded the foresight of harm to his
passengers by overtaking the bus on the left side as to leave himself blind to the approach of the oncoming
train that he knew was on the opposite side of the bus.

Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court held
the PNR solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear
end of the bus that was then traversing the railroad crossing. But the circumstances of that case and this one
share no similarities. In Philippine National Railways v. Intermediate Appellate Court, no evidence of
contributory negligence was adduced against the owner of the bus. Instead, it was the owner of the bus
who proved the exercise of extraordinary diligence by preponderant evidence. Also, the records are replete
with the showing of negligence on the part of both the Pereas and the PNR. Another distinction is that the
passenger bus in Philippine National Railways v. Intermediate Appellate Court was traversing the dedicated
railroad crossing when it was hit by the train, but the Pereas school van traversed the railroad tracks at a
point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally" liable for
damages arising from the death of Aaron. They had been impleaded in the same complaint as defendants
against whom the Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to
or arising out of the accident, and questions of fact and of law were common as to the Zarates. 36 Although
the basis of the right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereas was
distinct from the basis of the Zarates right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil
Code), they nonetheless could be held jointly and severally liable by virtue of their respective negligence
combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
negligence despite the school van of the Pereas traversing the railroad tracks at a point not dedicated by
the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the safety of
others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard
had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of
the risks to others as well as the need to control the vehicular and other traffic there. Verily, the Pereas and
the PNR were joint tortfeasors.

2.
Was the indemnity for loss of
Aarons earning capacity proper?

The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the RTC on the
liability, the CA modified the amount. Both lower courts took into consideration that Aaron, while only a high
school student, had been enrolled in one of the reputable schools in the Philippines and that he had been a
normal and able-bodied child prior to his death. The basis for the computation of Aarons earning capacity
was not what he would have become or what he would have wanted to be if not for his untimely death, but
the minimum wage in effect at the time of his death. Moreover, the RTCs computation of Aarons life
expectancy rate was not reckoned from his age of 15 years at the time of his death, but on 21 years, his age
when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and fully warranted.

Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1wphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim
Jussi Leinos loss of earning capacity as a pilot for being speculative due to his having graduated from high
school at the International School in Manila only two years before the shooting, and was at the time of the
shooting only enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court, that he was for all intents and purposes only a high
school graduate.

We reject the Pereas submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not
akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid
professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation
of Aarons earning capacity was premised on him being a lowly minimum wage earner despite his being then
enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his
success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his
parents and in favor of the defendants whose negligence not only cost Aaron his life and his right to work
and earn money, but also deprived his parents of their right to his presence and his services as well. Our law
itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty party in
favor of the heirs of the deceased, and shall in every case be assessed and awarded by the court "unless the
deceased on account of permanent physical disability not caused by the defendant, had no earning capacity
at the time of his death."38 Accordingly, we emphatically hold in favor of the indemnification for Aarons loss
of earning capacity despite him having been unemployed, because compensation of this nature is awarded
not for loss of time or earnings but for loss of the deceaseds power or ability to earn money.39

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriagas earning capacity,
although he survived the accident but his injuries rendered him permanently incapacitated, was computed to
be that of the physician that he dreamed to become. The Court considered his scholastic record sufficient to
justify the assumption that he could have finished the medical course and would have passed the medical
board examinations in due time, and that he could have possibly earned a modest income as a medical
practitioner. Also, in People v. Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and
murder victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time, and
that their jobs would probably pay them high monthly salaries from 10,000.00 to 15,000.00 upon their
graduation. Their earning capacities were computed at rates higher than the minimum wage at the time of
their deaths due to their being already senior agriculture students of the University of the Philippines in Los
Baos, the countrys leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the
respective amounts of 2,500,000.00 and 1,000,000.00 on the ground that such amounts were excessive.

The plea is unwarranted.

The moral damages of 2,500,000.00 were really just and reasonable under the established circumstances of
this case because they were intended by the law to assuage the Zarates deep mental anguish over their
sons unexpected and violent death, and their moral shock over the senseless accident. That amount would
not be too much, considering that it would help the Zarates obtain the means, diversions or amusements
that would alleviate their suffering for the loss of their child. At any rate, reducing the amount as excessive
might prove to be an injustice, given the passage of a long time from when their mental anguish was inflicted
on them on August 22, 1996.

Anent the 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render
effective the desired example for the public good. As a common carrier, the Pereas needed to be vigorously
reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident
from happening again. Only by an award of exemplary damages in that amount would suffice to instill in
them and others similarly situated like them the ever-present need for greater and constant vigilance in the
conduct of a business imbued with public interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November
13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

1.7 National Steel Corporation v. CA December 12, 1997, 283 SCRA 45

The Court finds occasion to apply the rules on the seaworthiness of a private carrier, its owners
responsibility for damage to the cargo and its liability for demurrage and attorneys fees. The Court also
reiterates the well-known rule that findings of facts of trial courts, when affirmed by the Court of Appeals,
are binding on this Court.

The Case

Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons
Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. [1] The Court of
Appeals modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No.
23317. The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the
complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the counterclaim as
follows:

1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal
rate on both amounts from April 7, 1976 until the same shall have been fully paid;
2. Attorneys fees and expenses of litigation in the sum of P100,000.00; and
3. Cost of suit.

SO ORDERED. [2]

On the other hand, the Court of Appeals ruled:

WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for
demurrage to P44,000.00 and deleting the award for attorneys fees and expenses of litigation. Except as
thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.

SO ORDERED. [3]

The Facts

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a special
contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in this
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of
voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:

(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping,
Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit B; also Exhibit 1) whereby NSC
hired VSIs vessel, the MV VLASONS I to make one (1) voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila, under the following terms and conditions, viz:

1. x x x x x x.

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.

3. x x x x x x

4. Freight/Payment: P30.00 /metric ton, FIOST basis. Payment upon presentation of Bill of Lading within
fifteen (15) days.

5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.

6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours,
Sundays and Holidays Included).

7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.

8. x x x x x x

9. Cargo Insurance: Charterers and/or Shippers must insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of the officers of the vessel.

10. Other terms:(a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter
Party Agreement shall form part of this Contract.

xxxxxxxxx

The terms F.I.O.S.T. which is used in the shipping business is a standard provision in the NANYOZAI Charter
Party which stands for Freight In and Out including Stevedoring and Trading, which means that the handling,
loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states, Charterers to load, stow and discharge the cargo free of risk and
expenses to owners. x x x(Underscoring supplied).

Under paragraph 10 thereof, it is provided that (o)wners shall, before and at the beginning of the voyage,
exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to
make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting
from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel
seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds
and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation; xxx; perils, dangers and accidents of the sea or other navigable waters; xxx; wastage in bulk or
weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of
packing; xxx; latent defects not discoverable by due diligence; any other cause arising without the actual
fault or privity of Owners or without the fault of the agents or servants of owners.

Paragraph 12 of said NANYOZAI Charter Party also provides that (o)wners shall not be responsible for split,
chafing and/or any damage unless caused by the negligence or default of the master and crew.

(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV VLASONS I
loaded at plaintiffs pier at Iligan City, the NSCs shipment of 1,677 skids of tinplates and 92 packages of hot
rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to
Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as
agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of
lading, B.L.P.P. No. 0233 (Exhibit D) on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day,
August 13, 1974, when the vessels three (3) hatches containing the shipment were opened by plaintiffs
agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The
cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on
August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the
unloading operations. (Exhibit E)

(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment
by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975
(Exhibit G), MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on
board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken
and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and
metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that
container/metal casings of the skids were rusting all over. MASCO ventured the opinion that rusting of the
tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence
of the heavy weather and rough seas encountered while en route to destination (Exhibit F). It was also
reported that MASCOs surveyors drew at random samples of bad order packing materials of the tinplates
and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing
Laboratories issued Report No. 1770 (Exhibit I) which in part, states, The analysis of bad order samples of
packing materials xxx shows that wetting was caused by contact with SEA WATER.

(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its
claim for damages suffered due to the downgrading of the damaged tinplates in the amount
of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim but defendant
VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was
docketed as Civil Case No. 23317, CFI, Rizal.

(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a result
of the act, neglect and default of the master and crew in the management of the vessel as well as the want
of due diligence on the part of the defendant to make the vessel seaworthy and to make the holds and all
other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and
preservation -- all in violation of defendants undertaking under their Contract of Voyage Charter Hire.

(7) In its answer, defendant denied liability for the alleged damage claiming that the MV VLASONS I was
seaworthy in all respects for the carriage of plaintiffs cargo; that said vessel was not a common
carrier inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter
party; that in the course of the voyage from Iligan City to Manila, the MV VLASONS I encountered very rough
seas, strong winds and adverse weather condition, causing strong winds and big waves to continuously
pound against the vessel and seawater to overflow on its deck and hatch covers; that under the Contract of
Voyage Charter Hire, defendant shall not be responsible for losses/damages except on proven willful
negligence of the officers of the vessel, that the officers of said MV VLASONS I exercised due diligence and
proper seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides
that loading and discharging of the cargo was on FIOST terms which means that the vessel was free of risk
and expense in connection with the loading and discharging of the cargo; that the damage, if any, was due
to the inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent defect of
the cargo not discoverable by due diligence or to any other cause arising without the actual fault or privity of
defendant and without the fault of the agents or servants of defendant; consequently, defendant is not
liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent and did not
exercise due care in the discharge of the cargo; and that the cargo was exposed to rain and seawater spray
while on the pier or in transit from the pier to plaintiffs warehouse after discharge from the vessel; and that
plaintiffs claim was highly speculative and grossly exaggerated and that the small stain marks or sweat
marks on the edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant
claimed that it had complied with all its duties and obligations under the Voyage Charter Hire Contract and
had no responsibility whatsoever to plaintiff. In turn, it alleged the following counterclaim:
(a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter
Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite demands
made by defendant;

(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum
of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila waiting for
plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant demurrage in the
total amount of P88,000.00.

(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay defendant
attorneys fees and all expenses of litigation in the amount of not less than P100,000.00.

(8) From the evidence presented by both parties, the trial court came out with the following findings which
were set forth in its decision:

(a) The MV VLASONS I is a vessel of Philippine registry engaged in the tramping service and is available for
hire only under special contracts of charter party as in this particular case.

(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. 1), the MV
VLASONS I was covered by the required seaworthiness certificates including the Certification of
Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh. 4); Coastwise
License from the Board of Transportation (Exh. 5); International Loadline Certificate from the Philippine
Coast Guard (Exh. 6); Cargo Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh. 7);
Ship Radio Station License (Exh. 8); Certificate of Inspection by the Philippine Coast Guard (Exh. 12); and
Certificate of Approval for Conversion issued by the Bureau of Customs (Exh. 9). That being a vessel engaged
in both overseas and coastwise trade, the MV VLASONS I has a higher degree of seaworthiness and safety.

(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter Hire,
the MV VLASONS I underwent drydocking in Cebu and was thoroughly inspected by the Philippine Coast
Guard. In fact, subject voyage was the vessels first voyage after the drydocking. The evidence shows that the
MV VLASONS I was seaworthy and properly manned, equipped and supplied when it undertook the
voyage. It had all the required certificates of seaworthiness.

(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were
covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were
water tight.Furthermore, under the hatchboards were steel beams to give support.

(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by
evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a presumption
of negligence in case of loss or damage to the cargo are not applicable. As to the damage to the tinplates
which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of witness
Vicente Angliongto that tinplates sweat by themselves when packed even without being in contract (sic)
with water from outside especially when the weather is bad or raining. The rust caused by sweat or moisture
on the tinplates may be considered as a loss or damage but then, defendant cannot be held liable for it
pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for loss or damage
arising from the character of the goods x x x. All the 1,769 skids of the tinplates could not have been
damaged by water as claimed by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves
were wrapped in kraft paper lining and corrugated cardboards could not be affected by water from outside.

(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the
hatch openings of the MV VLASONS I when rains occurred during the discharging of the cargo thus allowing
rainwater to enter the hatches. It was proven that the stevedores merely set up temporary tents to cover
the hatch openings in case of rain so that it would be easy for them to resume work when the rains stopped
by just removing the tent or canvas. Because of this improper covering of the hatches by the stevedores
during the discharging and unloading operations which were interrupted by rains, rainwater drifted into the
cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party which was
expressly made part of the Contract of Voyage Charter Hire, the loading, stowing and discharging of the
cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no liability for whatever
damage may occur or maybe [sic] caused to the cargo in the process.

(g) It was also established that the vessel encountered rough seas and bad weather while en route from
Iligan City to Manila causing sea water to splash on the ships deck on account of which the master of the
vessel (Mr. Antonio C. Dumlao) filed a Marine Protest on August 13, 1974 (Exh. 15) which can be invoked by
defendant as a force majeure that would exempt the defendant from liability.

(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire
contract that it was to insure the cargo because it did not. Had plaintiff complied with the requirement, then
it could have recovered its loss or damage from the insurer. Plaintiff also violated the charter party contract
when it loaded not only steel products, i.e. steel bars, angular bars and the like but also tinplates and hot
rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff was able to ship high
grade cargo at a lower freight rate.

(I) As regards defendants counterclaim, the contract of voyage charter hire under paragraph 4 thereof, fixed
the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of lading
within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite demands. The
evidence also showed that the plaintiff was required and bound under paragraph 7 of the same Voyage
Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The
delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant for demurrage in the
amount of P88,000.00.

Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV VLASONS I was seaworthy, properly manned, equipped and
supplied, and that there is no proof of willful negligence of the vessels officers.
II
The trial court erred in finding that the rusting of NSCs tinplates was due to the inherent nature or character
of the goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSCs
shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorneys fees, to VSI.[4]
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of
litigation.NSC and VSI filed separate motions for reconsideration. In a Resolution[5] dated October 20, 1993,
the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review
before this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these
petitions.[6]

The Issues

In its petition[7] and memorandum,[8] NSC raises the following questions of law and fact:
Questions of Law

1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays
caused by weather interruption;
2. Whether or not the alleged seaworthiness certificates (Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and 12) were
admissible in evidence and constituted evidence of the vessels seaworthiness at the beginning
of the voyages; and
3. Whether or not a charterers failure to insure its cargo exempts the shipowner from liability for
cargo damage.

Questions of Fact

1. Whether or not the vessel was seaworthy and cargo-worthy;


2. Whether or not vessels officers and crew were negligent in handling and caring for NSCs cargo;
3. Whether or not NSCs cargo of tinplates did sweat during the voyage and, hence, rusted on their
own; and
(4) Whether or not NSCs stevedores were negligent and caused the wetting[/]rusting of NSCs
tinplates.
In its separate petition, [9] VSI submits for the consideration of this Court the following alleged errors of
the CA:

A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage
from P88,000.00 to P44,000.00.

B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for
attorneys fees and expenses of litigation.

Amplifying the foregoing, VSI raises the following issues in its memorandum: [10]

I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which
there exist[s] a presumption of negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier.

II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai
Charter, are valid and binding on both contracting parties.

The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSCs Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorneys Fees.

The Courts Ruling

The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.

Preliminary Matter: Common Carrier or Private Carrier?


At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a
private carrier. The resolution of this preliminary question determines the law, standard of diligence and
burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public. It has been held that the true test of a common carrier is
the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its
transportation service for a fee. [11] A carrier which does not qualify under the above test is deemed a private
carrier. Generally, private carriage is undertaken by special agreement and the carrier does not hold himself
out to carry goods for the general public. The most typical, although not the only form of private carriage, is
the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the
use and service of all or some part of a ship for a period of time or a voyage or voyages. [12]
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by
the Regional Trial Court, it carried passengers or goods only for those it chose under a special contract of
charter party. [13] As correctly concluded by the Court of Appeals, the MV Vlasons I was not a common but a
private carrier. [14] Consequently, the rights and obligations of VSI and NSC, including their respective liability
for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or
charter party. [15] Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and
Seven Brothers Shipping Corporation, [16] the Court ruled:

x x x in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does
not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a
private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving common carriers.[17]

Extent of VSIs Responsibility and Liability Over NSCs Cargo

It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974, that VSI shall not be
responsible for losses except on proven willful negligence of the officers of the vessel. The NANYOZAI
Charter Party, which was incorporated in the parties contract of transportation, further provided that the
shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness,
unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the
same was properly manned, equipped and supplied, and to make the holds and all other parts of the vessel
in which cargo [was] carried, fit and safe for its reception, carriage and preservation. [18] The NANYOZAI
Charter Party also provided that [o]wners shall not be responsible for split, chafing and/or any damage
unless caused by the negligence or default of the master or crew.[19]

Burden of Proof

In view of the aforementioned contractual stipulations, NSC must prove that the damage to its
shipment was caused by VSIs willful negligence or failure to exercise due diligence in making MV Vlasons
Iseaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was
placed on NSC by the parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:

Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been
expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous
event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the
shipper.

The burden of proof of these accidents is on the carrier.

Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding
article if proofs against him show that they occurred on account of his negligence or his omission to take the
precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading,
making him to believe that the goods were of a class or quality different from what they really were.

Because the MV Vlasons I was a private carrier, the shipowners obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places
the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that
the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the
carriers custody does not put the burden of proof on the carrier.

Since x x x a private carrier is not an insurer but undertakes only to exercise due care in the protection of the
goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and
proof of loss of, or damage to, cargo while in the carriers possession does not cast on it the burden of
proving proper care and diligence on its part or that the loss occurred from an excepted cause in the
contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of
the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the
carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the
law requires that it come forward with the information available to it, and its failure to do so warrants an
inference or presumption of its liability. However, such inferences and presumptions, while they may affect
the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff,
and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going
forward with the evidence is again on plaintiff.

Where the action is based on the shipowners warranty of seaworthiness, the burden of proving a breach
thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the
goods were lost or damaged while in the carriers possession does not cast on it the burden of proving
seaworthiness. x x x Where the contract of carriage exempts the carrier from liability for unseaworthiness
not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due
diligence to make the vessel seaworthy. [20]

In the instant case, the Court of Appeals correctly found that NSC has not taken the correct position in
relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and
Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellants [NSCs] interpretation of Clause 12
is not even correct), it argues that a careful examination of the evidence will show that VSI miserably failed
to comply with any of these obligations as if defendant-appellee [VSI] had the burden of proof.[21]

First Issue: Questions of Fact

Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1)
whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the
charter party; (2) whether the damage to the cargo should be attributed to the willful negligence of the
officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the rusting of the
tinplates was caused by its own sweat or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties conflicting claims and to carefully weigh their respective evidence. The
findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings of
both the trial court and the Court of Appeals coincide, the same are binding on this Court. [22] We stress that,
subject to some exceptional instances, [23] only questions of law -- not questions of fact -- may be raised
before this Court in a petition for review under Rule 45 of the Rules of Court. After a thorough review of the
case at bar, we find no reason to disturb the lower courts factual findings, as indeed NSC has not successfully
proven the application of any of the aforecited exceptions.

Was MV Vlasons I Seaworthy?

In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for
the carriage of NSCs cargo of steel and tinplates. This is shown by the fact that it was drydocked and
inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the
contract of voyage charter hire. [24] The vessels voyage from Iligan to Manila was the vessels first voyage after
drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel. [25] The Court of Appeals itself sustained the conclusion of the trial
court that MV Vlasons I was seaworthy. We find no reason to modify or reverse this finding of both the trial
and the appellate courts.

Who Were Negligent: Seamen or Stevedores?

As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the
negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the
carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas
to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court
of Appeals for failing to consider such claim as an uncontroverted fact [26] and denies that MV Vlasons I was
equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest xxx. [27] We
disagree.
The records sufficiently support VSIs contention that the ship used the old tarpaulin, only in addition to
the new one used primarily to make the ships hatches watertight. The foregoing are clear from the marine
protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ships boatswain,
Jose Pascua. The salient portions of said marine protest read:

x x x That the M/V VLASONS I departed Iligan City or or about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that
before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about
August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough
seas and strong winds and Manila office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather condition changed to worse and strong
winds and big waves continued pounding the vessel at her port side causing sea water to overflow on deck
andhatch (sic) covers and which caused the first layer of the canvass covering to give way while the new
canvass covering still holding on;

That the weather condition improved when we reached Dumali Point protected by Mindoro; that we
re-secured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering
Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching
Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same
canvass to give way and leaving the new canvass holding on;

xxx xxx xxx [28]


And the relevant portions of Jose Pascuas deposition are as follows:
Q: What is the purpose of the canvas cover?
A: So that the cargo would not be soaked with water.
A: And will you describe how the canvas cover was secured on the hatch opening?
WITNESS
A: It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we
place[d] a flat bar over the canvas on the side of the hatches and then we place[d] a stopper
so that the canvas could not be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch opening? The length and the width of the hatch
opening.
A: Forty-five feet by thirty-five feet, sir.
xxxxxxxxx
Q: How was the canvas supported in the middle of the hatch opening?
A: There is a hatch board.
ATTY DEL ROSARIO
Q: What is the hatch board made of?
A: It is made of wood, with a handle.
Q: And aside from the hatch board, is there any other material there to cover the hatch?
A: There is a beam supporting the hatch board.
Q: What is this beam made of?
A: It is made of steel, sir.
Q: Is the beam that was placed in the hatch opening covering the whole hatch opening?
A: No, sir.
Q: How many hatch beams were there placed across the opening?
A: There are five beams in one hatch opening.
ATTY DEL ROSARIO
Q: And on top of the beams you said there is a hatch board. How many pieces of wood are put on
top?
A: Plenty, sir, because there are several pieces on top of the hatch beam.
Q: And is there a space between the hatch boards?
A: There is none, sir.
Q: They are tight together?
A: Yes, sir.
Q: How tight?
A: Very tight, sir.
Q: Now, on top of the hatch boards, according to you, is the canvas cover. How many canvas
covers?
A: Two, sir. [29]
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give
way and the ships hatches and cargo holds remained waterproof. As aptly stated by the Court of Appeals,
xxx we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence,
that the MV VLASONS I was seaworthy when it undertook the voyage on August 8, 1974 carrying on board
thereof plaintiff-appellants shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a
total of 1,769 packages from NSCs pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on
August 12, 1974; xxx. [30]
Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew
of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were negligent in
unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by
a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly
inadequate for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an officer
of VSI, testified thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979, you stated on August 14 you went on board
the vessel upon notice from the National Steel Corporation in order to conduct the inspection
of the cargo. During the course of the investigation, did you chance to see the discharging
operation?
WITNESS:
A: Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier
but majority of the tinplates were inside the hall, all the hatches were opened.
Q: In connection with these cargoes which were unloaded, where is the place.
A: At the Pier.
Q: What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the transcript of
stenographic notes shows the same was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q: What was used in order to protect the cargo from the weather?
A: A base of canvas was used as cover on top of the tin plates, and tents were built at the opening
of the hatches.
Q: You also stated that the hatches were already opened and that there were tents constructed at
the opening of the hatches to protect the cargo from the rain. Now, will you describe [to] the
Court the tents constructed.
A: The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the
middle with the whole side separated down to the hatch, the size of the hatch and it is soaks
[sic] at the middle because of those weather and this can be used only to temporarily protect
the cargo from getting wet by rains.
Q: Now, is this procedure adopted by the stevedores of covering tents proper?
A: No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the
hatch tent was not good enough to hold all of it to prevent the water soaking through the
canvas and enter the cargo.
Q: In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak
into the canvas and tinplates.
A: Yes, sir, the second time I went there, I saw it.
Q: As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure
adopted by its stevedores in discharging the cargo particularly in this tent covering of the
hatches?
A: Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did
not mind at all, so, I called the attention of the representative of the National Steel but nothing
was done, just the same.Finally, I wrote a letter to them. [31]
NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain
immediately about the stevedores negligence on the first day of unloading, pointing out that he wrote his
letter to petitioner only seven days later. [32] The Court is not persuaded. Angliongtos candid answer in his
aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the
attention of the stevedores, then the NSCs representative, about the negligent and defective procedure
adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with
common sense and ordinary human experience. Vicente Angliongto could not be blamed for calling the
stevedores attention first and then the NSCs representative on location before formally informing NSC of the
negligence he had observed, because he was not responsible for the stevedores or the unloading
operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the
stevedores it had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts findings and conclusions on this point, viz:

In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by
NSC were negligent in the unloading of NSCs shipment. We do not think so. Such negligence according to
the trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV VLASONS I when rains
occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set up temporary
tents or canvas to cover the hatch openings when it rained during the unloading operations so that it would
be easier for them to resume work after the rains stopped by just removing said tents or canvass. It has also
been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the
manner the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper closing of
the hatches which allowed continuous heavy rain water to leak through and drip to the tinplates covers and
[Vicente Angliongto] also suggesting that due to four (4) days continuos rains with strong winds that the
hatches be totally closed down and covered with canvas and the hatch tents lowered. (Exh 13). This letter
was received by [NSC] on 22 August 1974 while discharging operations were still going on (Exhibit 13-A). [33]

The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted
that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company
at fault in the discharge operations. A stevedore company engaged in discharging cargo xxx has the duty to
load the cargo xxx in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence
xxx and where the officers and members and crew of the vessel do nothing and have no responsibility in the
discharge of cargo by stevedores xxx the vessel is not liable for loss of, or damage to, the cargo caused by
the negligence of the stevedores xxx [34] as in the instant case.

Do Tinplates Sweat?

The trial court relied on the testimony of Vicente Angliongto in finding that xxx tinplates sweat by
themselves when packed even without being in contact with water from outside especially when the
weather is bad or raining xxx. [35] The Court of Appeals affirmed the trial courts finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the
damage to the tinplates was occasioned not by airborne moisture but by contact with rain and seawater
which the stevedores negligently allowed to seep in during the unloading.

Second Issue: Effect of NSCs Failure to Insure the Cargo

The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally
separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage
to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I. Clearly, therefore,
NSCs failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action
against VSI for damages caused by the latters willful negligence. We do not find anything in the charter party
that would make the liability of VSI for damage to the cargo contingent on or affected in any manner by
NSCs obtaining an insurance over the cargo.

Third Issue: Admissibility of Certificates Proving Seaworthiness

NSCs contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the
certificates of seaworthiness offered in evidence by VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippine Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs. [36]
NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules
of Court. It points out that Exhibits 3, 4 and 11 allegedly are not written records or acts of public officers;
while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced by official publications or certified true copies as
required by Sections 25 and 26, Rule 132, of the Rules of Court. [37]
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by
private parties, but they have not been proven by one who saw the writing executed, or by evidence of the
genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per
Section 44 of Rule 130 of the Rules of Court, which provides that (e)ntries in official records made in the
performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty
specially enjoined by law, are prima facie evidence of the facts therein stated. [38] Exhibit 11 is an original
certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect
that the vessel VLASONS I was drydocked x x x and PCG Inspectors were sent on board for inspection x x
x. After completion of drydocking and duly inspected by PCG Inspectors, the vessel VLASONS I, a cargo
vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel
was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974. (sic) NSCs claim,
therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that that NSC has the burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the obligation of
a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving
the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the
genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorneys Fees

The contract of voyage charter hire provides inter alia:


xxx xxx xxx

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.

xxx xxx xxx

6. Loading/Discharging Rate : 750 tons per WWDSHINC.

7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day. [39]

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

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

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

Attorneys Fees

VSI assigns as error of law the Court of Appeals deletion of the award of attorneys fees. We
disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award
of attorneys fees under Article 2208 of the Civil Code when x x x no sufficient showing of bad faith would be
reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his
cause x x x. [44] Moreover, attorneys fees may not be awarded to a party for the reason alone that the
judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on ones right to
litigate or seek judicial redress of legitimate grievances. [45]

Epilogue

At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the
cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such damage was
brought about during the unloading process when rain and seawater seeped through the cargo due to the
fault or negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial court,
when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are settled
exceptions, NSC has not satisfactorily shown that this case is one of them. Second, the agreement between
the parties -- the Contract of Voyage Charter Hire -- placed the burden of proof for such loss or damage upon
the shipper, not upon the shipowner. Such stipulation, while disadvantageous to NSC, is valid because the
parties entered into a contract of private charter, not one of common carriage. Basic too is the doctrine that
courts cannot relieve a party from the effects of a private contract freely entered into, on the ground that it
is allegedly one-sided or unfair to the plaintiff. The charter party is a normal commercial contract and its
stipulations are agreed upon in consideration of many factors, not the least of which is the transport price
which is determined not only by the actual costs but also by the risks and burdens assumed by the shipper in
regard to possible loss or damage to the cargo. In recognition of such factors, the parties even stipulated
that the shipper should insure the cargo to protect itself from the risks it undertook under the charter
party. That NSC failed or neglected to protect itself with such insurance should not adversely affect VSI,
which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The
questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage
awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.

1.8 Sps Cruz v. Holiday


Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against Sun Holidays,
Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son
Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach
III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at
Coco Beach Island Resort (Resort) owned and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a
tour package-contract with respondent that included transportation to and from the Resort and the point of
departure in Batangas.

Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of the incident
that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in
the afternoon of September 10, 2000, but was advised to stay for another night because of strong winds and
heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners son and
his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where they
boarded M/B Coco Beach III, which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open
seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to
the front, leaving the wheel to one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco
Beach III capsized putting all passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain,
Matute and the other passengers who reached the surface asked him what they could do to save the people
who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save
yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the
capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four
crew members, who were brought to Pisa Island. Eight passengers, including petitioners son and his wife, died
during the incident.

At the time of 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 4,000,000.

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 10,000
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 300,000.

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.

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 Appeals17 in characterizing respondent as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their
services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline").
Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberately refrained from making such
distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes:

. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services . . .18 (emphasis and underscoring supplied.)

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of 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

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
causeof 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.

Article 176427 vis--vis Article 220628 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 50,000.29

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.
Borja34teaches 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:

2/3 x [80 - age of deceased at the time of death]


Life expectancy = 2/3 x [80 - 28]
2/3 x [52]

Life expectancy = 35

Documentary evidence shows that Ruelito was earning a basic monthly salary of $90035 which, when converted
to Philippine peso applying the annual average exchange rate of $1 = 44 in 2000,36 amounts to 39,600.
Ruelitos net earning capacity is thus computed as follows:

Net = life expectancy x (gross annual income - reasonable and necessary living expenses).
Earning = 35 x (475,200 - 237,600)
Capacity = 35 x (237,600)

Net
Earning = 8,316,000
Capacity

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.

Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is
presumed to have acted recklessly, thus warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.37

Under the circumstances, it is reasonable to award petitioners the amount of 100,000 as moral damages and
100,000 as exemplary damages.381avvphi1

Pursuant to Article 220839 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 Appeals40 teaches that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory damages, subject to the following
rules, to wit

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty only in the present petition, the
interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction,
in accordance with paragraph number 3 of the immediately cited guideline in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE. Judgment is
rendered in favor of petitioners ordering respondent to pay petitioners the following: (1) 50,000 as indemnity
for the death of Ruelito Cruz; (2) 8,316,000 as indemnity for Ruelitos loss of earning capacity; (3) 100,000 as
moral damages; (4) 100,000 as exemplary damages; (5) 10% of the total amount adjudged against respondent
as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed from
the finality of this decision until full payment. SO ORDERED.
Characteristics

Broader concept

Ancillary business

Limited clientele

Means of transportation

Laws and Jurisprudence:

Article 1732 of the New Civil Code

National Steel Corporation v. CA

a. Asia Lighterage and Shipping, Inc. v. CA, G.R. No. 147246, August 19. 2003
On appeal is the Court of Appeals May 11, 2000 Decision in CA-G.R. CV No.
[1]

49195 and February 21, 2001 Resolution affirming with modification the April 6,
[2]

1994 Decision of the Regional Trial Court of Manila which found petitioner liable to
[3]

pay private respondent the amount of indemnity and attorney's fees.


First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk,
valued at US$423,192.35 was shipped by Marubeni American Corporation of
[4]

Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the
consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No.
PTD/Man-4. The shipment was insured by the private respondent Prudential
[5]

Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under
Marine Cargo Risk Note RN 11859/90. [6]

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was
transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The
petitioner was contracted by the consignee as carrier to deliver the cargo to
consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI
III, evidenced by Lighterage Receipt No. 0364 for delivery to consignee. The cargo
[7]

did not reach its destination.


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

secured the services of Gaspar Salvaging Corporation which refloated the


barge. The hole was then patched with clay and cement.
[9]

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

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

Protest was filed on September 7, 1990. [12]

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


wheat retrieved and loaded on the three other barges. The total proceeds from the
[13]

sale of the salvaged cargo was P201,379.75. [14]

On the same date, September 14, 1990, consignee sent a claim letter to the
petitioner, and another letter dated September 18, 1990 to the private respondent for
the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the
amount of P4,104,654.22. Thereafter, as subrogee, it sought recovery of said
[15]

amount from the petitioner, but to no avail.


On July 3, 1991, the private respondent filed a complaint against the petitioner for
recovery of the amount of indemnity, attorney's fees and cost of suit. Petitioner filed
[16]

its answer with counterclaim. [17]

The Regional Trial Court ruled in favor of the private respondent. The dispositive
portion of its Decision states:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia


Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co.,
Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July 3,
1991 until fully satisfied plus 10% of the amount awarded as and for attorney's
fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant. [18]

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


carrier. The appellate court affirmed the decision of the trial court with
modification. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.

SO ORDERED.

Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied
by the appellate court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed
by the appellate court, viz: [19]

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

The issues to be resolved are:


(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised
extraordinary diligence in its care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to
the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly,
it has no fixed and publicly known route, maintains no terminals, and issues no
tickets. It points out that it is not obliged to carry indiscriminately for any person. It is
not bound to carry goods unless it consents. In short, it does not hold out its services
to the general public. [20]

We disagree.
In De Guzman vs. Court of Appeals, we held that the definition of common
[21]

carriers in Article 1732 of the Civil Code makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity. We also did not distinguish between
a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled
basis. Further, we ruled that Article 1732 does not distinguish between a carrier
offering its services to the general public, and one who offers services or solicits
business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and
drayage and it offers its barges to the public for carrying or transporting goods by
[22]

water for compensation. Petitioner is clearly a common carrier. In De


Guzman, supra, we considered private respondent Ernesto Cendaa to be a
[23]

common carrier even if his principal occupation was not the carriage of goods for
others, but that of buying used bottles and scrap metal in Pangasinan and selling
these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of
goods is done on an irregular rather than scheduled manner, and with an only limited
clientele. A common carrier need not have fixed and publicly known routes. Neither
does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs.
Court of Appeals. The test to determine a common carrier is whether the given
[24]

undertaking is a part of the business engaged in by the carrier which he has held out
to the general public as his occupation rather than the quantity or extent of the
business transacted. In the case at bar, the petitioner admitted that it is engaged in
[25]

the business of shipping and lighterage, offering its barges to the public, despite its
[26]

limited clientele for carrying or transporting goods by water for compensation. [27]

On the second issue, we uphold the findings of the lower courts that petitioner
failed to exercise extraordinary diligence in its care and custody of the consignees
goods.
Common carriers are bound to observe extraordinary diligence in the vigilance
over the goods transported by them. They are presumed to have been at fault or to
[28]

have acted negligently if the goods are lost, destroyed or deteriorated. To [29]

overcome the presumption of negligence in the case of loss, destruction or


deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does
not attach:

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

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

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting
in the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner failed
to prove that the typhoon is the proximate and only cause of the loss of the goods,
and that it has exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss. The evidence show that, even before the
[30]

towing bits of the barge broke, it had already previously sustained damage when it hit
a sunken object while docked at the Engineering Island. It even suffered a
hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged
vessel was refloated but its hole was patched with only clay and cement. The patch
work was merely a provisional remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo
to further damage. A portion of the cross-examination of Alfredo Cunanan,
cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE: [31]

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

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

Operations Supervisor of the petitioner, reveals:

DIRECT-EXAMINATION BY ATTY. LEE: [33]

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

xxxxxxxxx

CROSS-EXAMINATION BY ATTY. IGNACIO: [34]

xxxxxxxxx

q - And then from ISLOFF Terminal you proceeded to the premises of the
GMC? Am I correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I have
stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be coming and
it would be dangerous if we are in the vicinity of Manila Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

q - And yet as a standard operating procedure of your Company, you have to secure
a sort of Certification to determine the weather condition, am I correct?

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if
you are already inside the vicinity or inside Pasig entrance, it is a safe place to
tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force
majeure to escape liability for the loss sustained by the private respondent. Surely,
meeting a typhoon head-on falls short of due diligence required from a common
carrier. More importantly, the officers/employees themselves of petitioner admitted
that when the towing bits of the vessel broke that caused its sinking and the total loss
of the cargo upon reaching the Pasig River, it was no longer affected by the
typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a
human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated
February 21, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED

b. Fabre, Jr. v. CA, No. 111127, july 26, 1996, 259 SCRA 426

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of


Appeals[1] in CA-GR No. 28245, dated September 30, 1992, which affirmed with
modification the decision of the Regional Trial Court of Makati, Branch 58, ordering
petitioners jointly and severally to pay damages to private respondent Amyline
Antonio, and its resolution which denied petitioners motion for reconsideration for
lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school
children which they operated in Manila.The couple had a driver, Porfirio J. Cabil,
whom they hired in 1981, after trying him out for two weeks. His job was to take
school children to and from the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian
Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33
members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did not leave
the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in the
evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However,
the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar
with the area (it being his first trip to La Union), was forced to take a detour through
the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway, running on a south to east direction, which he
described as siete. The road was slippery because it was raining, causing the bus,
which was running at the speed of 50 kilometers per hour, to skid to the left road
shoulder. The bus hit the left traffic steel brace and sign along the road and rammed
the fence of one Jesus Escano, then turned over and landed on its left side, coming
to a full stop only after a series of impacts. The bus came to rest off the road. A
coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was
thrown on the floor of the bus and pinned down by a wooden seat which came off
after being unscrewed. It took three persons to safely remove her from this
position. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too
late. He said he was not familiar with the area and he could not have seen the curve
despite the care he took in driving the bus, because it was dark and there was no
sign on the road. He said that he saw the curve when he was already within 15 to 30
meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3,
1984. On the basis of their finding they filed a criminal complaint against the driver,
Porfirio Cabil. The case was later filed with the Lingayen Regional Trial
Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latters
fence. On the basis of Escanos affidavit of desistance the case against petitioners
Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of
Makati, Metro Manila. As a result of the accident, she is now suffering from
paraplegia and is permanently paralyzed from the waist down. During the trial she
described the operations she underwent and adduced evidence regarding the cost of
her treatment and therapy. Immediately after the accident, she was taken to the
Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not adequately equipped,
she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she
was given sedatives. An x-ray was taken and the damage to her spine was
determined to be too severe to be treated there. She was therefore brought to Manila,
first to the Philippine General Hospital and later to the Makati Medical Center where
she underwent an operation to correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a
long distance trip and that the driver was properly screened and tested before being admitted
for employment. Indeed, all the evidence presented have shown the negligent act of the
defendants which ultimately resulted to the accident subject of this case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for damages, the
Court is therefore not in a position to award damages to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against defendants
Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180
of the Civil Code of the Philippines and said defendants are ordered to pay jointly and
severally to the plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;


2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to
Amyline Antonio but dismissed it with respect to the other plaintiffs on the ground that
they failed to prove their respective claims.The Court of Appeals modified the award
of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.

The Court of Appeals sustained the trial courts finding that petitioner Cabil failed
to exercise due care and precaution in the operation of his vehicle considering the
time and the place of the accident. The Court of Appeals held that the Fabres were
themselves presumptively negligent. Hence, this petition. Petitioners raise the
following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO
WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the


amount of P600,000.00. It is insisted that, on the assumption that petitioners are
liable, an award of P600,000.00 is unconscionable and highly speculative. Amyline
Antonio testified that she was a casual employee of a company called Suaco,
earning P1,650.00 a month, and a dealer of Avon products, earning an average of
P1,000.00 monthly. Petitioners contend that as casual employees do not have
security of tenure, the award of P600,000.00, considering Amyline Antonios earnings,
is without factual basis as there is no assurance that she would be regularly earning
these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case
on the theory that petitioners are liable for breach of contract of carriage or culpa
contractual or on the theory of quasi delict or culpa aquiliana as both the Regional
Trial Court and the Court of Appeals held, for although the relation of passenger and
carrier is contractual both in origin and nature, nevertheless the act that breaks the
contract may be also a tort.[2] In either case, the question is whether the bus driver,
petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres,
who owned the bus, failed to exercise the diligence of a good father of the family in
the selection and supervision of their employee is fully supported by the evidence on
record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and, as a consequence, the road was slippery, and it
was dark. He averred these facts to justify his failure to see that there lay a sharp
curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50
kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead.[3] By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabils first one outside of
Manila, Cabil should have driven his vehicle at a moderate speed. There is
testimony[4] that the vehicles passing on that portion of the road should only be
running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running
at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery,
that it was dark, that he drove his bus at 50 kilometers an hour when even on a good
day the normal speed was only 20 kilometers an hour, and that he was unfamiliar
with the terrain, Cabil was grossly negligent and should be held liable for the injuries
suffered by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the
selection and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the
applicant possessed a professional drivers license. The employer should also
examine the applicant for his qualifications, experience and record of service.[5] Due
diligence in supervision, on the other hand, requires the formulation of rules and
regulations for the guidance of employees and the issuance of proper instructions as
well as actual implementation and monitoring of consistent compliance with the
rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union,
apparently did not consider the fact that Cabil had been driving for school children
only, from their homes to the St. Scholasticas College in Metro Manila.[7] They had
hired him only after a two-week apprenticeship. They had tested him for certain
matters, such as whether he could remember the names of the children he would be
taking to school, which were irrelevant to his qualification to drive on a long distance
travel, especially considering that the trip to La Union was his first. The existence of
hiring procedures and supervisory policies cannot be casually invoked to overturn
the presumption of negligence on the part of an employer.[8]
Petitioners argue that they are not liable because (1) an earlier departure (made
impossible by the congregations delayed meeting) could have averted the mishap
and (2) under the contract, the WWCF was directly responsible for the conduct of the
trip. Neither of these contentions hold water. The hour of departure had not been
fixed. Even if it had been, the delay did not bear directly on the cause of the
accident. With respect to the second contention, it was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to
which he wishes to be conveyed, but exercises no other control over the conduct of the driver,
is not responsible for acts of negligence of the latter or prevented from recovering for
injuries suffered from a collision between the automobile and a train, caused by the
negligence either of the locomotive engineer or the automobile driver.[9]

As already stated, this case actually involves a contract of carriage. Petitioners,


the Fabres, did not have to be engaged in the business of public transportation for
the provisions of the Civil Code on common carriers to apply to them. As this Court
has held:[10]

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully
avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the general public, i.e., the general
community or population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise extraordinary diligence for
the safe transportation of the passengers to their destination. This duty of care is not
excused by proof that they exercised the diligence of a good father of the family in
the selection and supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the formers employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court
and of the appellate court that petitioners are liable under Arts. 2176 and 2180
for quasi delict, fully justify finding them guilty of breach of contract of carriage under
Arts. 1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline
Antonio. However, we think the Court of Appeals erred in increasing the amount of
compensatory damages because private respondents did not question this award as
inadequate.[11] To the contrary, the award of P500,000.00 for compensatory
damages which the Regional Trial Court made is reasonable considering the
contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able
to work again has not been foreclosed. In fact she testified that one of her previous
employers had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the
Court of Appeals do not sufficiently indicate the factual and legal basis for them, we
find that they are nevertheless supported by evidence in the records of this
case. Viewed as an action for quasi delict, this case falls squarely within the purview
of Art. 2219(2) providing for the payment of moral damages in cases of quasi
delict. On the theory that petitioners are liable for breach of contract of carriage, the
award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since
Cabils gross negligence amounted to bad faith.[12]Amyline Antonios testimony, as
well as the testimonies of her father and co-passengers, fully establish the physical
suffering and mental anguish she endured as a result of the injuries caused by
petitioners negligence.
The award of exemplary damages and attorneys fees was also properly
made. However, for the same reason that it was error for the appellate court to
increase the award of compensatory damages, we hold that it was also error for it to
increase the award of moral damages and reduce the award of attorneys fees,
inasmuch as private respondents, in whose favor the awards were made, have not
appealed.[13]
As above stated, the decision of the Court of Appeals can be sustained either on
the theory of quasi delict or on that of breach of contract. The question is whether, as
the two courts below held, petitioners, who are the owners and driver of the bus, may
be made to respond jointly and severally to private respondent. We hold that they
may be. In Dangwa Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to those in
this case, this Court held the bus company and the driver jointly and severally liable
for damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v.
Court of Appeals[15] a driver found negligent in failing to stop the bus in order to let off
passengers when a fellow passenger ran amuck, as a result of which the passengers
jumped out of the speeding bus and suffered injuries, was held also jointly and
severally liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the
driver of the bus on which plaintiff was riding concurred with the negligence of a third
party who was the driver of another vehicle, thus causing an accident. In Anuran v.
Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,[18] the bus
company, its driver, the operator of the other vehicle and the driver of the vehicle
were jointly and severally held liable to the injured passenger or the latters heirs. The
basis of this allocation of liability was explained in Viluan v. Court of Appeals,[19] thus:

Nor should it make any difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177,
that in case of injury to a passenger due to the negligence of the driver of the bus on which
he was riding and of the driver of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages. Some members of the Court,
though, are of the view that under the circumstances they are liable on quasi-delict.[20]

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this Court
exonerated the jeepney driver from liability to the injured passengers and their
families while holding the owners of the jeepney jointly and severally liable, but that is
because that case was expressly tried and decided exclusively on the theory of culpa
contractual. As this Court there explained:

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

As in the case of BLTB, private respondents in this case and her co-plaintiffs did
not stake out their claim against the carrier and the driver exclusively on one theory,
much less on that of breach of contract alone. After all, it was permitted for them to
allege alternative causes of action and join as many parties as may be liable on such
causes of action[23] so long as private respondent and her co-plaintiffs do not recover
twice for the same injury. What is clear from the cases is the intent of the plaintiff
there to recover from both the carrier and the driver, thus justifying the holding that
the carrier and the driver were jointly and severally liable because their separate and
distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION as to the award of damages. Petitioners are ORDERED to PAY
jointly and severally the private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.

SO ORDERED.

c. Phil. American general insurance Company v. PKS Shipping Co.


April 9, 2003

The petition before the Court seeks a review of the decision of the Court of
Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has
affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of Makati,
dismissing the complaint for damages filed by petitioner insurance corporation
against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of
respondent PKS Shipping Company (PKS Shipping) for the shipment to Tacloban
City of seventy-five thousand (75,000) bags of cement worth Three Million Three
Hundred Seventy-Five Thousand Pesos (P3,375,000.00). DUMC insured the goods
for its full value with petitioner Philippine American General Insurance Company
(Philamgen). The goods were loaded aboard the dumb barge Limar I belonging to
PKS Shipping. On the evening of 22 December 1988, about nine oclock, while Limar
I was being towed by respondents tugboat, MT Iron Eagle, the barge sank a couple
of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with
it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought reimbursement from
PKS Shipping of the sum paid to DUMC but the shipping company refused to pay,
prompting Philamgen to file suit against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo
could have been caused either by a fortuitous event, in which case the ship owner
was not liable, or through the negligence of the captain and crew of the vessel and
that, under Article 587 of the Code of Commerce adopting the Limited Liability Rule,
the ship owner could free itself of liability by abandoning, as it apparently so did, the
vessel with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in
toto the decision of the trial court. The appellate court ruled that evidence to establish
that PKS Shipping was a common carrier at the time it undertook to transport the
bags of cement was wanting because the peculiar method of the shipping companys
carrying goods for others was not generally held out as a business but as a casual
occupation. It then concluded that PKS Shipping, not being a common carrier, was
not expected to observe the stringent extraordinary diligence required of common
carriers in the care of goods. The appellate court, moreover, found that the loss of
the goods was sufficiently established as having been due to fortuitous event,
negating any liability on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed
a patent error in ruling that PKS Shipping is not a common carrier and that it is not
liable for the loss of the subject cargo. The fact that respondent has a limited clientele,
petitioner argues, does not militate against respondents being a common carrier and
that the only way by which such carrier can be held exempt for the loss of the cargo
would be if the loss were caused by natural disaster or calamity. Petitioner avers that
typhoon "APIANG" has not entered the Philippine area of responsibility and that,
even if it did, respondent would not be exempt from liability because its employees,
particularly the tugmaster, have failed to exercise due diligence to prevent or
minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because
what Philamgen seeks is not a review on points or errors of law but a review of the
undisputed factual findings of the RTC and the appellate court. In any event, PKS
Shipping points out, the findings and conclusions of both courts find support from the
evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to
the question of whether it is a private carrier or a common carrier and, in either case,
to the other question of whether or not it has observed the proper diligence (ordinary,
if a private carrier, or extraordinary, if a common carrier) required of it given the
circumstances.
The findings of fact made by the Court of Appeals, particularly when such
findings are consistent with those of the trial court, may not at liberty be reviewed by
this Court in a petition for review under Rule 45 of the Rules of
Court. The conclusions derived from those factual findings, however, are not
[1]

necessarily just matters of fact as when they are so linked to, or inextricably
intertwined with, a requisite appreciation of the applicable law. In such instances, the
conclusions made could well be raised as being appropriate issues in a petition for
review before this Court. Thus, an issue whether a carrier is private or common on
the basis of the facts found by a trial court or the appellate court can be a valid and
reviewable question of law.
The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

Complementary to the codal definition is Section 13, paragraph (b), of the Public
Service Act; it defines public service to be
x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, subway motor vehicle, either for freight or passenger, or both, with
or without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum, sewerage system, wire or wireless
communication systems, wire or wireless broadcasting stations and other similar public
services. x x x. (Underscoring supplied).

The prevailing doctrine on the question is that enunciated in the leading case
of De Guzman vs. Court of Appeals. Applying Article 1732 of the Code, in
[2]

conjunction with Section 13(b) of the Public Service Act, this Court has held:

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as `a sideline). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the `general public, i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think
that Article 1732 deliberately refrained from making such distinctions.

So understood, the concept of `common carrier under Article 1732 may be seen to coincide
neatly with the notion of `public service, under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements the law on common carriers set
forth in the Civil Code.

Much of the distinction between a common or public carrier and a private or


special carrier lies in the character of the business, such that if the undertaking is an
isolated transaction, not a part of the business or occupation, and the carrier does
not hold itself out to carry the goods for the general public or to a limited clientele,
although involving the carriage of goods for a fee, the person or corporation
[3]

providing such service could very well be just a private carrier. A typical case is that
of a charter party which includes both the vessel and its crew, such as in a bareboat
or demise, where the charterer obtains the use and service of all or some part of a
ship for a period of time or a voyage or voyages and gets the control of the vessel
[4]

and its crew. Contrary to the conclusion made by the appellate court, its factual
[5]

findings indicate that PKS Shipping has engaged itself in the business of carrying
goods for others, although for a limited clientele, undertaking to carry such goods for
a fee. The regularity of its activities in this area indicates more than just a casual
activity on its part. Neither can the concept of a common carrier change merely
[6]

because individual contracts are executed or entered into with patrons of the
carrier. Such restrictive interpretation would make it easy for a common carrier to
escape liability by the simple expedient of entering into those distinct agreements
with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the
proper diligence demanded of common carriers, Article 1733 of the Civil Code
requires common carriers to observe extraordinary diligence in the vigilance over the
goods they carry. In case of loss, destruction or deterioration of goods, common
carriers are presumed to have been at fault or to have acted negligently, and the
burden of proving otherwise rests on them. The provisions of Article 1733,
[7]

notwithstanding, common carriers are exempt from liability for loss, destruction, or
deterioration of the goods due to any of the following causes:

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

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers; and

(5) Order or act of competent public authority. [8]

The appellate court ruled, gathered from the testimonies and sworn marine
protests of the respective vessel masters of Limar I and MT Iron Eagle, that there
was no way by which the barges or the tugboats crew could have prevented the
sinking of Limar I. The vessel was suddenly tossed by waves of extraordinary height
of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the
entry of water into the barges hatches. The official Certificate of Inspection of the
barge issued by the Philippine Coastguard and the Coastwise Load Line Certificate
would attest to the seaworthiness of Limar I and should strengthen the factual
findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the
recognized exceptions from the rule - (1) when the factual findings of the Court of
Appeals and the trial court are contradictory; (2) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjectures; (3) when the inference
made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd,
or impossible; (4) when there is a grave abuse of discretion in the appreciation of
facts; (5) when the appellate court, in making its findings, went beyond the issues of
the case and such findings are contrary to the admissions of both appellant and
appellee; (6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed to notice certain
relevant facts which, if properly considered, would justify a different conclusion;
(8) when the findings of fact are themselves conflicting; (9) when the findings of fact
are conclusions without citation of the specific evidence on which they are based;
and (10) when the findings of fact of the Court of Appeals are premised on the
absence of evidence but such findings are contradicted by the evidence on record
would appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS
Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
d. Virgines Calvo v. UCPB General Insurance Co., G.R. No. 148496, March
19, 2002

This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of
Appeals, affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148,
which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00 with
legal interest, representing the value of damaged cargo handled by petitioner, 25% thereof as
attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc.
(TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner
entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of
semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila
to SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo
was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in
Manila on board M/V Hayakawa Maru and, after 24 hours, were unloaded from the vessel to
the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator
and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990, the goods were
inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting
paper were wet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage
was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against
petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20,
1995, rendered judgment finding petitioner liable to respondent for the damage to the
shipment.
The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh.
F) with entries appearing therein, classified as TED and TSN, which the claims processor,
Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the
subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh.
H - H-4-A) confirms the fact of the damaged condition of the subject cargoes. The
surveyor[s] report (Exh. H-4-A) in particular, which provides among others that:

. . . we opine that damages sustained by shipment is attributable to improper handling in


transit presumably whilst in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that [she is]
are not liable. Defendant by reason of the nature of [her] business should have devised ways
and means in order to prevent the damage to the cargoes which it is under obligation to take
custody of and to forthwith deliver to the consignee. Defendant did not present any evidence
on what precaution [she] performed to prevent [the] said incident, hence the presumption is
that the moment the defendant accepts the cargo [she] shall perform such extraordinary
diligence because of the nature of the cargo.

....

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have
been lost, destroyed or deteriorated, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they have observed the extraordinary
diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the
goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is
shifted to the carrier to prove that he has exercised the extraordinary diligence required by
law. Thus, it has been held that the mere proof of delivery of goods in good order to a carrier,
and of their arrival at the place of destination in bad order, makes out a prima facie case
against the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability. (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a common carrier
is supposed [to] exercise [the] extraordinary diligence required by law, hence the
extraordinary responsibility lasts from the time the goods are unconditionally placed in the
possession of and received by the carrier for transportation until the same are delivered
actually or constructively by the carrier to the consignee or to the person who has the right to
receive the same.[3]

Accordingly, the trial court ordered petitioner to pay the following amounts

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;

3. Costs of suit.[4]

The decision was affirmed by the Court of Appeals on appeal. Hence this petition for
review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR
SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]

It will be convenient to deal with these contentions in the inverse order, for if petitioner
is not a common carrier, although both the trial court and the Court of Appeals held
otherwise, then she is indeed not liable beyond what ordinary diligence in the vigilance over
the goods transported by her, would require.[6] Consequently, any damage to the cargo she
agrees to transport cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs broker and
warehouseman, she does not indiscriminately hold her services out to the public but only
offers the same to select parties with whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a
similar contention and held the party to be a common carrier, thus

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the general public, i.e., the general
community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions.

So understood, the concept of common carrier under Article 1732 may be seen to coincide
neatly with the notion of public service, under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements the law on common carriers set
forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, public
service includes:

x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless broadcasting stations and other
similar public services. x x x [8]

There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioners contention
would be to deprive those with whom she contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for her customers, as already
noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of each case. . . .

In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in


the vigilance over goods was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and to use all reasonable means
to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that
the spoilage or wettage took place while the goods were in the custody of either the carrying
vessel M/V Hayakawa Maru, which transported the cargo to Manila, or the arrastre operator,
to whom the goods were unloaded and who allegedly kept them in open air for nine days
from July 14 to July 23, 1998 notwithstanding the fact that some of the containers were
deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to
wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.[10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that
he has no personal knowledge on whether the container vans were first stored in petitioners
warehouse prior to their delivery to the consignee. She likewise claims that after
withdrawing the container vans from the arrastre operator, her driver, Ricardo Nazarro,
immediately delivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere
thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the
cargo could not have taken place while these were in her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo
Surveyors indicates that when the shipper transferred the cargo in question to the arrastre
operator, these were covered by clean Equipment Interchange Report (EIR) and, when
petitioners employees withdrew the cargo from the arrastre operator, they did so without
exception or protest either with regard to the condition of container vans
or their contents. The Survey Report pertinently reads

Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to dock
of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal
vans, covered by clean EIRs. Except for slight dents and paint scratches on side and roof
panels, these containers were deemed to have [been] received in good condition.

....

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by
Transorient Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignees storage warehouse located at Tabacalera
Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to
the arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean
Equipment Interchange Reports (EIRs). Had therebeen 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.
SO ORDERED.

e. Caltex(phil) v. Sulpicio Lines, 315 SCRA 709, 1999 case


Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered
vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum
products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would
collide with MV Doa Paz, killing almost all the passengers and crew members of both ships, and thus
resulting in one of the countrys worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals decision[1]holding petitioner jointly
liable with the operator of MT Vector for damages when the latter collided with Sulpicio Lines, Inc.s
passenger ship MV Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to
Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex.[2] MT Vector is a
tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of
transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that particular voyage,
the MT Vector carried on board gasoline and other oil products owned by Caltex by virtue of a charter
contract between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of
Tacloban headed for Manila with a complement of 59 crew members including the master and his
officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance.[4] The MV Doa Paz is
a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/
Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the
vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa
Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the
incident.
The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger
manifest. Only 24 survived the tragedy after having been rescued from the burning waters by vessels
that responded to distress calls.[5] Among those who perished were public school teacher Sebastian
Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both unmanifested passengers but
proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation found
that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector
Shipping Corporation, were at fault and responsible for its collision with MV Doa Paz.[6]
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother
respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for Damages Arising
from Breach of Contract of Carriage against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn,
filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex
(Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith
knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to
safe navigation; as a result, it rammed against MV Doa Paz in the open sea setting MT Vectors highly
flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision dismissing the third party complaint
against petitioner. The dispositive portion reads:

WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against


defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit:

1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal,
including loss of future earnings of said Sebastian, moral and exemplary damages, attorneys
fees, in the total amount of P 1,241,287.44 and finally;

2. The statutory costs of the proceedings.

Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with
costs against the 3rd party plaintiff.

IT IS SO ORDERED.

DONE IN MANILA, this 15th day of September 1992.

ARSENIO M. GONONG

Judge[7]

On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court
of Appeal modified the trial courts ruling and included petitioner Caltex as one of the those liable for
damages. Thus:

WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial
Court is hereby MODIFIED as follows:

WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E.
Caezal and Corazon Caezal:

1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the total
amount of ONE HUNDRED THOUSAND PESOS (P100,000);

2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the


total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY
(P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P
300,000.00);

4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND
PESOS (P 50,000.00);

5. Costs of the suit.

Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable
under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the
above-mentioned damages, attorneys fees and costs which the latter is adjudged to pay
plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at fault for the
collision) and the other half by Caltex (Phils.), Inc. (being the charterer that negligently
caused the shipping of combustible cargo aboard an unseaworthy vessel).

SO ORDERED.

JORGE S. IMPERIAL

Associate Justice

WE CONCUR:

RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS

Associate Justice Associate Justice[8]

Hence, this petition.


We find the petition meritorious.
First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping
documents on the one hand, or a charter party or similar contract on the other.[9]
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.[10]
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; a contract of affreightment is one by which the
owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of freight.[11]
A contract of affreightment may be either time charter, wherein the leased vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In
both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of
time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of
the master of the crew, and defray the expenses for the maintenance of the ship.[12]
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for
damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in possession of the ship
as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer
is free from liability to third persons in respect of the ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the common carrier into a private one? We need to answer
this question in order to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a private
carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common
carrier.
In Planters Products, Inc. vs. Court of Appeals,[14] we said:

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the
charter includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the charterer.

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15]

Although a charter party may transform a common carrier into a private one, the same
however is not true in a contract of affreightment xxx

A common carrier is a person or corporation whose regular business is to carry passengers or


property for all persons who may choose to employ and to remunerate him. [16] MT Vector fits the
definition of a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of
Appeals,[17] we ruled:
The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers for passengers or goods or both, by land,
water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such services on a an occasional, episodic or unscheduled
basis.Neither does Article 1732 distinguish between a carrier offering its services to the
general public, i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article
1733 deliberately refrained from making such distinctions.

It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely back-hauled goods for other merchants from Manila to Pangasinan,
although such backhauling was done on a periodic, occasional rather than regular or
scheduled manner, and even though respondents principal occupation was not the carriage of
goods for others. There is no dispute that private respondent charged his customers a fee for
hauling their goods; that the fee frequently fell below commercial freight rates is not relevant
here.
Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise
due diligence to -

(a) Make the ship seaworthy;


(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code.[18]
The provisions owed their conception to the nature of the business of common carriers. This
business is impressed with a special public duty. The public must of necessity rely on the care and skill
of common carriers in the vigilance over the goods and safety of the passengers, especially because with
the modern development of science and invention, transportation has become more rapid, more
complicated and somehow more hazardous.[19] For these reasons, a passenger or a shipper of goods is
under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an
unseaworthy vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of inspection and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these deficiencies:
1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate
the vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in
bays and rivers when the subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;
4. The vessel did not have a Third Mate, a radio operator and a lookout; and
5. The vessel had a defective main engine.[20]
As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil
Code, which provide:

Article 20. - Every person who contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

Article 2176. - Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter.
And what is negligence?
The Civil Code provides:

Article 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place.When negligence shows bad faith, the provisions of
Article 1171 and 2201 paragraph 2, shall apply.

If the law does not state the diligence which is to be observed in the performance, that which
is expected of a good father of a family shall be required.

In Southeastern College, Inc. vs. Court of Appeals,[21] we said that negligence, as commonly
understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the
failure to observe that degree of care, precaution, and vigilance, which the circumstances justly demand,
or the omission to do something which ordinarily regulate the conduct of human affairs, would do.
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for being
engaged in public service.[22] The Civil Code demands diligence which is required by the nature of the
obligation and that which corresponds with the circumstances of the persons, the time and the
place. Hence, considering the nature of the obligation between Caltex and MT Vector, the liability as
found by the Court of Appeals is without basis.
The relationship between the parties in this case is governed by special laws. Because of the implied
warranty of seaworthiness,[23] shippers of goods, when transacting with common carriers, are not
expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all
maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing
but the futility of our maritime laws insofar as the protection of the public in general is concerned. By
the same token, we cannot expect passengers to inquire every time they board a common carrier,
whether the carrier possesses the necessary papers or that all the carriers employees are qualified. Such a
practice would be an absurdity in a business where time is always of the essence. Considering the nature
of transportation business, passengers and shippers alike customarily presume that common carriers
possess all the legal requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes.
A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector
could legally transport cargo that time of the year.
Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here
under VESSELS DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987, Mr.
Witness, what steps did you take regarding the impending expiry of the C.I. or the Certificate of
Inspection No. 1290-85 during the hiring of MT Vector?
Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid C.I.
which will expire on December 7, 1987 but on the last week of November, I called the attention of Mr.
Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn, assured me they will renew the same.
Q: What happened after that?
A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were going to
send me a copy as soon as possible, sir.[24]
xxx xxx xxx
Q: What did you do with the C.I.?
A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our long
business relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates that the
documents are in order. xxx[25]
On cross examination -
Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection has
expired on December 7. Did it occur to you not to let the vessel sail on that day because of the very
approaching date of expiration?
Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able
to secure a renewal of the Certificate of Inspection and that they will in time submit us a copy.[26]
Finally, on Mr. Ngs redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in the
coastwise license on December 7, 1987. What was your assurance for the record that this document was
renewed by the MT Vector?
Atty. Sarenas: xxx
Atty. Poblador: The certificate of Inspection?
A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three years,
they were allowed to sail by the Coast Guard. That are some that make me believe that they in fact were
able to secure the necessary renewal.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Atty. Sarenas: Objection.
Court: He already answered that in the cross examination to the effect that if it was allowed, referring to MV
Vector, to sail, where it is loaded and that it was scheduled for a destination by the Coast Guard, it means
that it has Certificate of Inspection extended as assured to this witness by Restituto Abalos. That in no
case MV Vector will be allowed to sail if the Certificate of Inspection is, indeed, not to be extended. That
was his repeated explanation to the cross-examination. So, there is no need to clarify the same in the
re-direct examination.[27]
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years
before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to
observe a higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as
even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we
find no legal basis to hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we limit our
ruling to the liability of Caltex alone. However, we maintain the Court of Appeals ruling insofar as
Vector is concerned .
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the
Court of Appeals in CA-G. R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex
liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the
damages the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the Court
of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon
Caezal damages as set forth therein. Third-party defendant-appellee Vector Shipping Corporation and
Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever
damages, attorneys fees and costs the latter is adjudged to pay plaintiffs-appellees in the case.
No costs in this instance.
SO ORDERED.

f. Loadstar Shipping Co. v. Pioneer Asia Insurance G.R No. 157481


January 2006
For review on certiorari are (1) the Decision[1] dated October 15, 2002 and (2)
the Resolution[2] dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No.
40999, which affirmed with modification the Decision [3] dated February 15, 1993 of the
Regional Trial Court of Manila, Branch 8 in Civil Case No. 86-37957.

The pertinent facts are as follows:

Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered owner
and operator of the vessel M/V Weasel. It holds office at 1294 Romualdez St.,
Paco, Manila.

On June 6, 1984, Loadstar entered into a voyage-charter with Northern Mindanao


Transport Company, Inc. for the carriage of 65,000 bags of cement
from Iligan City to Manila. The shipper was Iligan Cement Corporation, while the
consignee in Manila was Market Developers, Inc.

On June 24, 1984, 67,500 bags of cement were loaded on board M/V Weasel and
stowed in the cargo holds for delivery to the consignee. The shipment was covered by
petitioners Bill of Lading[4] dated June 23, 1984.

Prior to the voyage, the consignee insured the shipment of cement with respondent
Pioneer Asia Insurance Corporation for P1,400,000, for which respondent issued Marine
Open Policy No. MOP-006 dated September 17, 1980, covering all shipments made on or
after September 30, 1980.[5]

At 12:50 in the afternoon of June 24, 1984, M/V


Weasel left Iligan City for Manila in good weather. However, at 4:31 in the morning
of June 25, 1984, Captain Vicente C. Montera, master of M/V Weasel, ordered the vessel to
be forced aground. Consequently, the entire shipment of cement was good as gone due to
exposure to sea water. Petitioner thus failed to deliver the goods to the consignee
in Manila.

The consignee demanded from petitioner full reimbursement of the cost of the lost
shipment. Petitioner, however, refused to reimburse the consignee despite repeated
demands.
Nonetheless, on March 11, 1985, respondent insurance company paid the
consignee P1,400,000 plus an additional amount of P500,000, the value of the lost
shipment of cement. In return, the consignee executed a Loss and Subrogation Receipt in
favor of respondent concerning the latters subrogation rights against petitioner.

Hence, on October 15, 1986, respondent filed a complaint docketed as Civil Case No.
86-37957, against petitioner with the Regional Trial Court of Manila, Branch 8. It alleged
that: (1) the M/V Weasel was not seaworthy at the commencement of the voyage; (2) the
weather and sea conditions then prevailing were usual and expected for that time of the
year and as such, was an ordinary peril of the voyage for which the M/V Weasel should
have been normally able to cope with; and (3) petitioner was negligent in the selection and
supervision of its agents and employees then manning the M/V Weasel.

In its Answer, petitioner alleged that no fault nor negligence could be attributed to it
because it exercised due diligence to make the ship seaworthy, as well as properly manned
and equipped. Petitioner insisted that the failure to deliver the subject cargo to the
consignee was due to force majeure. Petitioner claimed it could not be held liable for an act
or omission not directly attributable to it.

On February 15, 1993, the RTC rendered a Decision in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in
favor of plaintiff and against defendant Loadstar Shipping Co., Inc. ordering
the latter to pay as follows:

1. To pay plaintiff the sum of P1,900,000.00 with legal rate of interest


per annum from date of complaint until fully paid;

2. To pay the sum equal to 25% of the claim as and for attorneys fees
and litigation expenses; and,

3. To pay the costs of suit.

IT IS SO ORDERED.[6]

The RTC reasoned that petitioner, as a common carrier, bears the burden of proving
that it exercised extraordinary diligence in its vigilance over the goods it transported. The
trial court explained that in case of loss or destruction of the goods, a statutory presumption
arises that the common carrier was negligent unless it could prove that it had observed
extraordinary diligence.
Petitioners defense of force majeure was found bereft of factual basis. The RTC
called attention to the PAG-ASA report that at the time of the incident, tropical
storm Asiang had moved away from the Philippines. Further, records showed that the sea
and weather conditions in the area of Hinubaan, Negros Occidental from 8:00 p.m. of June
24, 1984 to 8:00 a.m. the next day were slight and smooth. Thus, the trial court concluded
that the cause of the loss was not tropical storm Asiang or any other force majeure, but
gross negligence of petitioner.

Petitioner appealed to the Court of Appeals.

In its Decision dated October 15, 2002, the Court of Appeals affirmed the RTC
Decision with modification that Loadstar shall only pay the sum of 10% of the total claim
for attorneys fees and litigation expenses. It ruled,
WHEREFORE, premises considered, the Decision dated February 15,
1993, of the Regional Trial Court of Manila, National Capital Judicial Region,
Branch 8, in Civil Case No. 86-37957 is hereby AFFIRMED with the
MODIFICATION that the appellant shall only pay the sum of 10% of the total
claim as and for attorneys fees and litigation expenses. Costs against the
appellant.

SO ORDERED.[7]

Petitioners Motion for Reconsideration was denied.[8]

The instant petition is anchored now on the following assignments of error:


I
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER IS A COMMON CARRIER UNDER ARTICLE 1732 OF THE
CIVIL CODE.

II
ASSUMING ARGUENDO THAT PETITIONER IS A COMMON CARRIER,
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE PROXIMATE CAUSE OF THE LOSS OF CARGO WAS NOT A
FORTUITOUS EVENT BUT WAS ALLEGEDLY DUE TO THE FAILURE
OF PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE.

III
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
AWARD BY THE TRIAL COURT OF ATTORNEYS FEES AND
LITIGATION EXPENSES IN FAVOR OF HEREIN RESPONDENT.[9]
On the first and second issues, petitioner contends that at the time of the voyage the
carriers voyage-charter with the shipper converted it into a private carrier. Thus, the
presumption of negligence against common carriers could not apply. Petitioner further
avers that the stipulation in the voyage-charter holding it free from liability is valid and
binds the respondent. In any event, petitioner insists that it had exercised extraordinary
diligence and that the proximate cause of the loss of the cargo was a fortuitous event.

With regard to the third issue, petitioner points out that the award of attorneys fees
and litigation expenses appeared only in the dispositive portion of the RTC Decision with
nary a justification. Petitioner maintains that the Court of Appeals thus erred in affirming
the award.

For its part, respondent dismisses as factual issues the inquiry on (1) whether the loss
of the cargo was due to force majeure or due to petitioners failure to exercise extraordinary
diligence; and (2) whether respondent is entitled to recover attorneys fees and expenses of
litigation.

Respondent further counters that the Court of Appeals was correct when it held that
petitioner was a common carrier despite the charter of the whole vessel, since the charter
was limited to the ship only.

Prefatorily, we stress that the finding of fact by the trial court, when affirmed by the
Court of Appeals, is not reviewable by this Court in a petition for review on certiorari.
However, the conclusions derived from such factual finding are not necessarily pure issues
of fact when they are inextricably intertwined with the determination of a legal issue. In
such instances, the conclusions made may be raised in a petition for review before this
Court.[10]

The threshold issues in this case are: (1) Given the circumstances of this case, is
petitioner a common or a private carrier? and (2) In either case, did petitioner exercise the
required diligence i.e., the extraordinary diligence of a common carrier or the ordinary
diligence of a private carrier?

Article 1732 of the Civil Code defines a common carrier as follows:


Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public.
Petitioner is a corporation engaged in the business of transporting cargo by water and for
compensation, offering its services indiscriminately to the public. Thus, without doubt, it
is a common carrier. However, petitioner entered into a voyage-charter with the Northern
Mindanao Transport Company, Inc. Now, had the voyage-charter converted petitioner
into a private carrier?

We think not. The voyage-charter agreement between petitioner and Northern Mindanao
Transport Company, Inc. did not in any way convert the common carrier into a private
carrier. We have already resolved this issue with finality in Planters Products, Inc. v.
Court of Appeals[11] where we ruled that:
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be
the property of the charterer.[12]

Conformably, petitioner remains a common carrier notwithstanding the existence


of the charter agreement with the Northern Mindanao Transport Company, Inc. since the
said charter is limited to the ship only and does not involve both the vessel and its crew.
As elucidated in Planters Products, its charter is only a voyage-charter, not a bareboat
charter.

As a common carrier, petitioner is required to observe extraordinary diligence in


the vigilance over the goods it transports.[13] When the goods placed in its care are lost,
petitioner is presumed to have been at fault or to have acted negligently. Petitioner
therefore has the burden of proving that it observed extraordinary diligence in order to
avoid responsibility for the lost cargo.[14]

In Compania Maritima v. Court of Appeals,[15] we said:


it is incumbent upon the common carrier to prove that the loss,
deterioration or destruction was due to accident or some other circumstances
inconsistent with its liability.
...

The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for safe carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and to use all reasonable means to ascertain
the nature and characteristics of goods tendered for shipment, and to exercise
due care in the handling and stowage, including such methods as their nature
requires.[16]

Article 1734 enumerates the instances when a carrier might be exempt from
liability for the loss of the goods. These are:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
and
(5) Order or act of competent public authority.[17]

Petitioner claims that the loss of the goods was due to a fortuitous event under
paragraph 1. Yet, its claim is not substantiated. On the contrary, we find supported by
evidence on record the conclusion of the trial court and the Court of Appeals that the loss
of the entire shipment of cement was due to the gross negligence of petitioner.

Records show that in the evening of June 24, 1984, the sea and weather conditions
in the vicinity of Negros Occidental were calm. The records reveal that petitioner took a
shortcut route, instead of the usual route, which exposed the voyage to unexpected hazard.
Petitioner has only itself to blame for its misjudgment.

Petitioner heavily relies on Home Insurance Co. v. American Steamship Agencies,


Inc.[18] and Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals.[19] The
said cases involved a private carrier, not a common carrier. Moreover, the issue in both
cases is not the effect of a voyage-charter on a common carrier, but the validity of a
stipulation absolving the private carrier from liability in case of loss of the cargo
attributable to the negligence of the private carrier.

Lastly, on the third issue, we find consistent with law and prevailing jurisprudence
the Court of Appeals award of attorneys fees and expenses of litigation equivalent to ten
percent (10%) of the total claim. The contract between the parties in this case contained a
stipulation that in case of suit, attorneys fees and expenses of litigation shall be limited to
only ten percent (10%) of the total monetary award. Given the circumstances of this case,
we deem the said amount just and equitable.
WHEREFORE, the petition is DENIED. The assailed Decision dated October 15,
2002 and the Resolution dated February 27, 2003, of the Court of Appeals in CA-G.R.
CV No. 40999, are AFFIRMED.

Costs against petitioner.

SO ORDERED.

g. Home Assurance Corp., G.R. No. 150403, Jan. 25 2007.


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 Courts resolution in this petition for review on certiorari 1 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 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, attorneys 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 petitioners operations manager, it is
clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited
MCCIIs 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 (respondents 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 charterers account.31 This deserves scant consideration. This simply meant
that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability
for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary
to public policy.32

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

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

Costs against petitioner.

SO ORDERED.

h. Planters v. CA G.R. No. 101503, September 15, 1993 226 SCRA 476

Does a charter-party between a shipowner and a charterer transform a common carrier into a private one as
1

to negate the civil law presumption of negligence in case of loss or damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New
York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June
1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill
of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the
Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner,
2

in Tokyo, Japan. Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the
3

pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into
on the 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds were all presumably inspected by the
4

charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party
which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau
inspector or substitute appointed by charterers for his account certifying the vessel's readiness to receive
cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the
vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences.
(emphasis supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper,
the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with
steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. 5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the
use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an F.I.O.S. clause). The hatches remained open
6

throughout the duration of the discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to
the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the
trucks were made to pass through a weighing scale where they were individually weighed for the purpose of
ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally while the discharge was in
progress. The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening
8

at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and
GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and
18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI
10

to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after
discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a
11

shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated
18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and
about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and
dirt.
12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the
resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the
goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for payment because,
according to them, what they received was just a request for shortlanded certificate and not a formal claim,
and that this "request" was denied by them because they "had nothing to do with the discharge of the
shipment." Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of
14

Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to
them because they have become private carriers by reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or
damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or
damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or
damage is to show receipt by the carrier of the goods and to delivery by it of less than what it received. After
that, the burden of proving that the loss or damage was due to any of the causes which exempt him from
liability is shipted to the carrier, common or private he may be. Even if the provisions of the charter-party
aforequoted are deemed valid, and the defendants considered private carriers, it was still incumbent upon
them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or
negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the
cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of
negligence against them, the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for
the value of the cargo that was lost or damaged. Relying on the 1968 case of Home Insurance
16

Co. v. American Steamship Agencies, Inc., the appellate court ruled that the cargo vessel M/V "Sun Plum"
17

owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time
charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of
negligence do not find application in the case at bar. Thus

. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient
evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an old and well
settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a
satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his
exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13
Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action,
i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that it
did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing that defendant carrier was not negligent in
performing its obligation . . . (emphasis supplied).
18

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals.
Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the
issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner
for loss or damage to goods cause by want of due deligence on its part or that of its manager to make the
vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil
Code applies only to common carriers and not to private carriers. Petitioner further argues that since the
19

possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the appellate
court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence on the part of the carrier, when he was not even at
hand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason
of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had
exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it
fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship
20

or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight; Charter parties are of two types: (a) contract of
21

affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole,
to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole
vessel is let to the charterer with a transfer to him of its entire command and possession and consequent
control over its navigation, including the master and the crew, who are his servants. Contract of affreightment
may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire
22

of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to
supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The 23

definition extends to carriers either by land, air or water which hold themselves out as ready to engage in
carrying goods or transporting passengers or both for compensation as a public employment and not as a
casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies
in the character of the business, such that if the undertaking is a single transaction, not a part of the general
business or occupation, although involving the carriage of goods for a fee, the person or corporation offering
such service is a private carrier.24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business,
should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private
25

carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the
case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or
to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such
26

presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried
has the onus of proving that the cause was the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the
ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to
be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means
in doing so. This is evident in the present case considering that the steering of the ship, the manning of the
decks, the determination of the course of the voyage and other technical incidents of maritime navigation
were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering
the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies,
supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in
the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not
the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our
29

jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and
/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the
rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30

As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey
the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the
charge and control of her, the case is different; the shipowner is not then a carrier. But where her services
only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or
many. The master and the crew are in each case his servants, the freighter in each case is usually without
any representative on board the ship; the same opportunities for fraud or collusion occur; and the same
difficulty in discovering the truth as to what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same was in
the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to
prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration
of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the
Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the
fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing
the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with
iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The
hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made
it impossible for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of
spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When M/V "Sun Plum"
33

docked at its berthing place, representatives of the consignee boarded, and in the presence of a
representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome
by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This was
confirmed by respondent appellate court thus

. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample
evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the
following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by the
defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody
could open the same except in the presence of the owner of the cargo and the representatives of the vessel
(TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins,
three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p.
24); and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact
(TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required of it as a public
carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were
duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its
hull was reexamined by the consignee, but prior to unloading. This is clear from the limitation clause agreed
upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an
F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the
charterer, free from all risk and expense to the carrier. Moreover, a shipowner is liable for damage to the
35

cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and
therefore under his control and supervision, not when the same is done by the consignee or stevedores under
the employ of the latter.36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction
or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the
containers. The Code of Commerce also provides that all losses and deterioration which the goods may
suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the
goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon
the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding
37

causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed
to take the precautions which usage has established among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the
expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer,
described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds
which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during
storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the
temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added
that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause
of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away
some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high
temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water,
either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still
remains potent and usable although no longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made
greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the
elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the
vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were
tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she
was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while
the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse.
This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the
unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was
just an approximation or estimate made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It
rained from time to time at the harbor area while the cargo was being discharged according to the supply
officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump
trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with
it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was
the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier
has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration;
as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof
was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to
minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the
trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now
Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.

i. A.F Sanchez Brokerage Inc. v. CA, G.R. No. 147079, December 21, 2004
Before this Court on a petition for Certiorari is the appellate courts Decision of [1]

August 10, 2000 reversing and setting aside the judgment of Branch 133, Regional
Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of
respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM
Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of
86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters
Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco
Laboratories, Inc. The Femenal tablets were placed in 124 cartons and the Nordiol
[2]

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), it was discharged without exception and delivered to the warehouse
[5] [6]

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. As its customs broker, Sanchez Brokerage
[8]

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, was issued. On the receipt, another
[10]

representative of Sanchez Brokerage, M. Sison, acknowledged that he received the


[11]

cargoes consisting of three pieces in good condition. [12]

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the
cargoes which were thereupon stripped from the aluminum containers and loaded
[13] [14]

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, employees of Elite Adjusters and Surveyors
[16]

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. The delivery receipt, [17]

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. Upon [19]

inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered
that 44 cartons containing Femenal and Nordiol tablets were in bad order. He thus [20]

placed a note above his signature on the delivery receipt stating that 44 cartons of
oral contraceptives were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey
report dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3 cartons
[21]

of Nordiol tablets were wetted (sic). [22]


The Elite Surveyors later issued Certificate No. CS-0731-1538/92 attached to
[23]

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. Also noted was that at the time of delivery to the
[24]

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 confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister
[26]

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 of 38 [27]

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 of August 25, 1992, from Sanchez


[29]

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 in favor of FGU Insurance.
[30]

On demand by FGU Insurance for payment of the amount of P181,431.49 it paid


Wyeth-Suaco, Sanchez Brokerage, by letter of January 7, 1993, disclaimed liability
[31]

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, prompting its (Sanchez Brokerages) representative Morales to inform the
[32]

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 of July 29, 1996, dismissed the complaint, holding
[34]

that the Survey Report prepared by the Elite Surveyors is bereft of any evidentiary
support and a mere product of pure guesswork. [35]

On appeal, the appellate court reversed the decision of the trial court, it holding
that the Sanchez Brokerage engaged not only in the business of customs brokerage
but also in the transportation and delivery of the cargo of its clients, hence, a
common carrier within the context of Article 1732 of the New Civil Code. [36]

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to
petitioner in good order and condition but were in a damaged state when delivered to
Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed
negligent and upon it rested the burden of proving that it exercised extraordinary
negligence not only in instances when negligence is directly proven but also in those
cases when the cause of the damage is not known or unknown. [37]
The appellate court thus disposed:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED.
The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered
in favor of the Appellant and against the Appellee as follows:

1. The Appellee is hereby ordered to pay the Appellant the principal


amount of P181, 431.49, with interest thereupon at the rate of 6% per
annum, from the date of the Decision of the Court, until the said
amount is paid in full;

2. The Appellee is hereby ordered to pay to the Appellant the amount of


P20,000.00 as and by way of attorneys fees; and

3. The counterclaims of the Appellee are DISMISSED. [38]

Sanchez Brokerages Motion for Reconsideration having been denied by the


appellate courts Resolution of December 8, 2000 which was received by petitioner
on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6,
2001.
In the main, petitioner asserts that the appellate court committed grave and
reversible error tantamount to abuse of discretion when it found petitioner a common
carrier within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of
action which petitioner should have taken was to file a petition for review on certiorari
since the sole office of a writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to lack or excess of
jurisdiction and does not include correction of the appellate courts evaluation of the
evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common
carrier, failed to overcome the presumption of negligence, it being documented that
petitioner withdrew from the warehouse of PSI the subject shipment entirely in good
order and condition. [39]

The petition fails.


Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals
in any case, i.e., regardless of the nature of the action or proceedings involved, may
be appealed to this Court by filing a petition for review, which would be but a
continuation of the appellate process over the original case. [40]

The Resolution of the Court of Appeals dated December 8, 2000 denying the
motion for reconsideration of its Decision of August 10, 2000 was received by
petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on
or before January 20, 2001, the appellate courts decision had become final and
executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot
serve as a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner
must prove not merely reversible error but also grave abuse of discretion amounting
to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the
decision of the trial court based on its finding that petitioner is liable for the damage to
the cargo as a common carrier. What petitioner is ascribing is an error of judgment,
not of jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of
the decision not the jurisdiction of the court to render said decision the same is
beyond the province of a petition for certiorari. The supervisory jurisdiction of this
[41]

Court to issue a cert writ cannot be exercised in order to review the judgment of
lower courts as to its intrinsic correctness, either upon the law or the facts of the
case. [42]

Procedural technicalities aside, the petition still fails.


The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit:

Art. 1732. Common carriers are persons, corporations, firms or associations


engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez


Brokerage, himself testified that the services the firm offers include the delivery of
goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
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. The contention, therefore, of petitioner that it is not a common carrier but a
[44]

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 of the Civil Code, extraordinary diligence in the vigilance over the goods it
[45]

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; and that upon delivery by
[49]

petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad
order, as noted in the Delivery Receipt issued by petitioner, and as indicated in the
[50]

Survey Report of Elite Surveyors and the Destruction Report of Hizon Laboratories,
[51]

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 of the Civil Code exempts a common
[55]

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. Or, petitioner would have presented, as witness, the
[58]

employees of the PSI from whom Morales and Domingo took delivery of the cargo to
prove that, indeed, part of the cargoes was already damaged when the container
was allegedly opened outside the warehouse. [59]

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain
fell that day. Instead, it asserts that some of the cargoes were already wet on delivery
by PSI outside the PSI warehouse but such notwithstanding Calicdan directed
Morales to proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales
on July 29, 1992, he failed to specifically declare what time he received the call. As to
whether the call was made at the PSI warehouse when the shipment was stripped
from the airport containers, or when the cargoes were already in transit to Antipolo, it
is not determinable. Aside from that phone call, petitioner admitted that it had no
documentary evidence to prove that at the time it received the cargoes, a part of it
was wet, damaged or in bad condition. [60]
The 4-page weather data furnished by PAGASA on request of Sanchez [61]

Brokerage hardly impresses, no witness having identified it and interpreted the


technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the
oral contraceptives were damaged by rainwater while in transit to Antipolo City is
more likely then. Sanchez himself testified that in the past, there was a similar
instance when the shipment of Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the
NAIA were damaged and claimed by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did
not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted
(sic) up to the bottom are wet specially during rainy season.[62]

Since petitioner received all the cargoes in good order and condition at the time
they were turned over by the PSI warehouseman, and upon their delivery to Hizon
Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on
petitioner to prove that it exercised extraordinary diligence in the carriage of the
goods. It did not, however. Hence, its presumed negligence under Article 1735 of the
Civil Code remains unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby
AFFIRMED.
Costs against petitioner.
SO ORDERED.

2. Effect of Charter Party.


3. Common carrier v. Private Carrier.

Laws and Jurisprudence:

a. Cebu Salvage Corporation v. Philippine Home Assurance Corp.


G.R. No. 150403 January 25, 2007

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 Courts 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 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, attorneys 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 petitioners operations manager, it is
clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited
MCCIIs 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 (respondents 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 charterers account.31 This deserves scant consideration. This simply meant
that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability
for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary
to public policy.32

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

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

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

SO ORDERED.

b. Valenzuela Hardwood and Industrial Supply, Inc. v. CA G.R No.


102316 June 30, 1997

PANGANIBAN, J.:

Is a stipulation in a charter party that the (o)wners shall not be responsible for
loss, split, short-landing, breakages and any kind of damages to the
cargo valid? This is the main question raised in this petition for review assailing the
[1]

Decision of Respondent Court of Appeals in CA-G.R. No. CV-20156 promulgated


[2]

on October 15, 1991. The Court of Appeals modified the judgment of the Regional
Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which
reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co.,
Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the
value of the policy of the lost logs with legal interest thereon from the date of demand on
February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven
Brothers Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS
(P2,000,000.00) representing the value of lost logs plus legal interest from the date of
demand on April 24, 1984 until full payment thereof; the reasonable attorneys fees in the
amount equivalent to five (5) percent of the amount of the claim and the costs of the suit.

Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of
TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of
the stipulated freight charges.

Defendant South Sea Surety and Insurance Companys counterclaim is hereby dismissed.

In its assailed Decision, Respondent Court of Appeals held:

WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the
liability of the Seven Brothers Shipping Corporation to the plaintiff is concerned which is
hereby REVERSED and SET ASIDE. [3]

The Facts

The factual antecedents of this case as narrated in the Court of Appeals Decision
are as follows:

It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply,
Inc.) entered into an agreement with the defendant Seven Brothers (Shipping Corporation)
whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers
lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.

On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant
South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine
Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date.

On 24 January 1984, the plaintiff gave the check in payment of the premium on the
insurance policy to Mr. Victorio Chua.

In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting
in the loss of the plaintiffs insured logs.

On 30 January 1984, a check for P5,625.00 (Exh. E) to cover payment of the premium and
documentary stamps due on the policy was tendered due to the insurer but was not
accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance
policy it issued as of the date of the inception for non-payment of the premium due in
accordance with Section 77 of the Insurance Code.

On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co.,
Inc. the payment of the proceeds of the policy but the latter denied liability under the
policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping
Corporation for the value of the lost logs but the latter denied the claim.

After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and
against defendants. Both defendants shipping corporation and the surety company appealed.

Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the
following assignment of errors, to wit:

A. The lower court erred in holding that the proximate cause of the sinking of the vessel
Seven Ambassadors, was not due to fortuitous event but to the negligence of the captain in
stowing and securing the logs on board, causing the iron chains to snap and the logs to roll to
the portside.

B. The lower court erred in declaring that the non-liability clause of the Seven Brothers
Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is void for
being contrary to public policy invoking article 1745 of the New Civil Code.

C. The lower court erred in holding defendant-appellant Seven Brothers Shipping


Corporation liable in the alternative and ordering/directing it to pay plaintiff-appellee the
amount of two million (P2,000,000.00) pesos representing the value of the logs plus legal
interest from date of demand until fully paid.

D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping


Corporation to pay appellee reasonable attorneys fees in the amount equivalent to 5% of the
amount of the claim and the costs of the suit.

E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its
counter-claim for attorneys fees.

F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping
Corporation.

Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:

A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant
South Sea Surety and Insurance Company, Inc. and likewise erred in not holding that he was
the representative of the insurance broker Columbia Insurance Brokers, Ltd.

B. The trial court erred in holding that Victorio Chua received compensation/commission on
the premiums paid on the policies issued by the defendant-appellant South Sea Surety and
Insurance Company, Inc.

C. The trial court erred in not applying Section 77 of the Insurance Code.

D. The trial court erred in disregarding the receipt of payment clause attached to and forming
part of the Marine Cargo Insurance Policy No. 84/24229.

E. The trial court in disregarding the statement of account or bill stating the amount of
premium and documentary stamps to be paid on the policy by the plaintiff-appellee.
F. The trial court erred in disregarding the indorsement of cancellation of the policy due to
non-payment of premium and documentary stamps.

G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance
Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing value of the policy with
legal interest from 2 February 1984 until the amount is fully paid,

H. The trial court erred in not awarding to the defendant-appellant the attorneys fees alleged
and proven in its counterclaim.

The primary issue to be resolved before us is whether defendants shipping corporation and
the surety company are liable to the plaintiff for the latters lost logs.
[4]

The Court of Appeals affirmed in part the RTC judgment by sustaining the liability
of South Sea Surety and Insurance Company (South Sea), but modified it by holding
that Seven Brothers Shipping Corporation (Seven Brothers) was not liable for the lost
cargo. In modifying the RTC judgment, the respondent appellate court ratiocinated
[5]

thus:

It appears that there is a stipulation in the charter party that the ship owner would be
exempted from liability in case of loss.

The court a quo erred in applying the provisions of the Civil Code on common carriers to
establish the liability of the shipping corporation. The provisions on common carriers should
not be applied where the carrier is not acting as such but as a private carrier.

Under American jurisprudence, a common carrier undertaking to carry a special cargo or


chartered to a special person only, becomes a private carrier.

As a private carrier, a stipulation exempting the owner from liability even for the negligence
of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc.,
23 SCRA 24).

The shipping corporation should not therefore be held liable for the loss of the logs. [6]

South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc.
(Valenzuela) filed separate petitions for review before this Court. In a Resolution
dated June 2, 1995, this Court denied the petition of South Sea. There the Court
[7]

found no reason to reverse the factual findings of the trial court and the Court of
Appeals that Chua was indeed an authorized agent of South Sea when he received
Valenzuelas premium payment for the marine cargo insurance policy which was thus
binding on the insurer. [8]

The Court is now called upon to resolve the petition for review filed by Valenzuela
assailing the CA Decision which exempted Seven Brothers from any liability for the
lost cargo.

The Issue
Petitioner Valenzuelas arguments revolve around a single issue: whether or not
respondent Court (of Appeals) committed a reversible error in upholding the validity
of the stipulation in the charter party executed between the petitioner and the private
respondent exempting the latter from liability for the loss of petitioners logs arising
from the negligence of its (Seven Brothers) captain. [9]

The Courts Ruling

The petition is not meritorious.

Validity of Stipulation is Lis Mota

The charter party between the petitioner and private respondent stipulated that
the (o)wners shall not be responsible for loss, split, short-landing, breakages and any
kind of damages to the cargo. The validity of this stipulation is the lis mota of this
[10]

case.
It should be noted at the outset that there is no dispute between the parties that
the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss
of its cargo was the snapping of the iron chains and the subsequent rolling of the logs
to the portside due to the negligence of the captain in stowing and securing the logs
on board the vessel and not due to fortuitous event. Likewise undisputed is the
[11]

status of Private Respondent Seven Brothers as a private carrier when it contracted


to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its
petition.[12]

The trial court deemed the charter party stipulation void for being contrary to
public policy, citing Article 1745 of the Civil Code which provides:
[13]

Art. 1745. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:

(1) That the goods are transported at the risk of the owner or shipper;

(2) That the common carrier will not be liable for any loss, destruction, or deterioration of
the goods;

(3) That the common carrier need not observe any diligence in the custody of the goods;

(4) That the common carrier shall exercise a degree of diligence less than that of a good
father of a family, or of a man of ordinary prudence in the vigilance over the movables
transported;

(5) That the common carrier shall not be responsible for the acts or omissions of his or its
employees;

(6) That the common carriers liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is 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.

Petitioner Valenzuela adds that the stipulation is void for being contrary to
Articles 586 and 587 of the Code of Commerce and Articles 1170 and 1173 of the
[14]

Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil
Code, petitioner further contends that said stipulation gives no duty or obligation to
[15]

the private respondent to observe the diligence of a good father of a family in the
custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private
respondent had acted as a private carrier in transporting petitioners lauan logs. Thus,
Article 1745 and other Civil Code provisions on common carriers which were cited by
petitioner may not be applied unless expressly stipulated by the parties in their
charter party. [16]

In a contract of private carriage, the parties may validly stipulate that


responsibility for the cargo rests solely on the charterer, exempting the shipowner
from liability for loss of or damage to the cargo caused even by the negligence of the
ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid
[17]

because it is freely entered into by the parties and the same is not contrary to law,
morals, good customs, public order, or public policy. Indeed, their contract of private
carriage is not even a contract of adhesion. We stress that in a contract of private
carriage, the parties may freely stipulate their duties and obligations which perforce
would be binding on them. Unlike in a contract involving a common carrier, private
carriage does not involve the general public. Hence, the stringent provisions of the
Civil Code on common carriers protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a private carrier. Consequently,
the public policy embodied therein is not contravened by stipulations in a charter
party that lessen or remove the protection given by law in contracts involving
common carriers.
The issue posed in this case and the arguments raised by petitioner are not
novel; they were resolved long ago by this Court in Home Insurance Co. vs.
American Steamship Agencies, Inc. In that case, the trial court similarly nullified a
[18]

stipulation identical to that involved in the present case for being contrary to public
policy based on Article 1744 of the Civil Code and Article 587 of the Code of
Commerce.Consequently, the trial court held the shipowner liable for damages
resulting from the partial loss of the cargo. This Court reversed the trial court and laid
down, through Mr. Justice Jose P. Bengzon, the following well-settled observation
and doctrine:

The provisions of our Civil Code on common carriers were taken from Anglo-American
law. Under American jurisprudence, a common carrier undertaking to carry a special cargo
or chartered to a special person only, becomes a private carrier. As a private carrier, a
stipulation exempting the owner from liability for the negligence of its agent is not against
public policy, and is deemed valid.

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not
be applied where the carrier is not acting as such but as a private carrier. The stipulation in
the charter party absolving the owner from liability for loss due to the negligence of its agent
would be void only if the strict public policy governing common carriers is applied. Such
policy has no force where the public at large is not involved, as in this case of a ship totally
chartered for the use of a single party. (Underscoring supplied.)
[19]

Indeed, where the reason for the rule ceases, the rule itself does not apply. The
general public enters into a contract of transportation with common carriers without a
hand or a voice in the preparation thereof. The riding public merely adheres to the
contract; even if the public wants to, it cannot submit its own stipulations for the
approval of the common carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted in tickets, invoices or other
documents over which the riding public has no understanding or, worse, no
choice. Compared to the general public, a charterer in a contract of private carriage
is not similarly situated. It can -- and in fact it usually does -- enter into a free and
voluntary agreement. In practice, the parties in a contract of private carriage can
stipulate the carriers obligations and liabilities over the shipment which, in turn,
determine the price or consideration of the charter. Thus, a charterer, in exchange
for convenience and economy, may opt to set aside the protection of the law on
common carriers. When the charterer decides to exercise this option, he takes a
normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to the
present case because it covers only a stipulation exempting a private carrier from
liability for the negligence of his agent, but it does not apply to a stipulation
exempting a private carrier like private respondent from the negligence of his
employee or servant which is the situation in this case. This contention of petitioner
[20]

is bereft of merit, for it raises a distinction without any substantive difference. The
case of Home Insurance specifically dealt with the liability of the shipowner for acts
or negligence of its captain and crew and a charter party stipulation which exempts
[21]

the owner of the vessel from any loss or damage or delay arising from any other
source, even from the neglect or fault of the captain or crew or some other person
employed by the owner on board, for whose acts the owner would ordinarily be liable
except for said paragraph. Undoubtedly, Home Insurance is applicable to the case
[22]

at bar.
The naked assertion of petitioner that the American rule enunciated in Home
Insurance is not the rule in the Philippines deserves scant consideration. The Court
[23]

there categorically held that said rule was reasonable and proceeded to apply it in
the resolution of that case. Petitioner miserably failed to show such circumstances or
arguments which would necessitate a departure from a well-settled
rule.Consequently, our ruling in said case remains a binding judicial precedent based
on the doctrine of stare decisis and Article 8 of the Civil Code which provides that
(j)udicial decisions applying or interpreting the laws or the Constitution shall form part
of the legal system of the Philippines.
In fine, the respondent appellate court aptly stated that [in the case of] a private
carrier, a stipulation exempting the owner from liability even for the negligence of its
agent is valid.[24]

Other Arguments
On the basis of the foregoing alone, the present petition may already be
denied; the Court, however, will discuss the other arguments of petitioner for the
benefit and satisfaction of all concerned.

Articles 586 and 587, Code of Commerce

Petitioner Valenzuela insists that the charter party stipulation is contrary to


Articles 586 and 587 of the Code of Commerce which confer on petitioner the right to
recover damages from the shipowner and ship agent for the acts or conduct of the
captain. We are not persuaded. Whatever rights petitioner may have under the
[25]

aforementioned statutory provisions were waived when it entered into the charter
party.
Article 6 of the Civil Code provides that (r)ights may be waived, unless the waiver
is contrary to law, public order, public policy, morals, or good customs, or prejudicial
to a person with a right recognized by law. As a general rule patrimonial rights may
be waived as opposed to rights to personality and family rights which may not be
made the subject of waiver. Being patently and undoubtedly patrimonial, petitioners
[26]

right conferred under said articles may be waived. This, the petitioner did by
acceding to the contractual stipulation that it is solely responsible for any damage to
the cargo, thereby exempting the private carrier from any responsibility for loss or
damage thereto. Furthermore, as discussed above, the contract of private carriage
binds petitioner and private respondent alone; it is not imbued with public policy
considerations for the general public or third persons are not affected thereby.

Articles 1170 and 1173, Civil Code

Petitioner likewise argues that the stipulation subject of this controversy is void
for being contrary to Articles 1170 and 1173 of the Civil Code which read:
[27]

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 2201, shall apply.

If the law does not state the diligence which is to be observed in the performance, that which
is expected of a good father of a family shall be required.

The Court notes that the foregoing articles are applicable only to the obligor or
the one with an obligation to perform. In the instant case, Private Respondent Seven
Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss
was shifted to petitioner by virtue of the charter party. This shifting of responsibility,
as earlier observed, is not void. The provisions cited by petitioner are, therefore,
inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the
second paragraph of Article 1173 of the Civil Code which prescribes the standard of
diligence to be observed in the event the law or the contract is silent. In the instant
case, Article 362 of the Code of Commerce provides the standard of ordinary
[28]

diligence for the carriage of goods by a carrier. The standard of diligence under this
statutory provision may, however, be modified in a contract of private carriage as the
petitioner and private respondent had done in their charter party.

Cases Cited by Petitioner Inapplicable

Petitioner cites Shewaram vs. Philippine Airlines, Inc. which, in turn, [29]

quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. and argues that the public
[30]

policy considerations stated there vis--viscontractual stipulations limiting the carriers


liability be applied with equal force to this case. It also cites Manila Railroad Co. vs.
[31]

Compaia Transatlantica and contends that stipulations exempting a party from


[32]

liability for damages due to negligence should not be countenanced and should be
strictly construed against the party claiming its benefit. We disagree.
[33]

The cases of Shewaram and Ysmael both involve a common carrier; thus, they
necessarily justify the application of such policy considerations and concomitantly
stricter rules. As already discussed above, the public policy considerations behind
the rigorous treatment of common carriers are absent in the case of private
carriers. Hence, the stringent laws applicable to common carriers are not applied to
private carriers. The case of Manila Railroad is also inapplicable because the action
for damages there does not involve a contract for transportation. Furthermore, the
defendant therein made a promise to use due care in the lifting operations
and, consequently, it was bound by its undertaking; besides, the exemption was
intended to cover accidents due to hidden defects in the apparatus or other
unforseeable occurrences not caused by its personal negligence. This promise was
thus construed to make sense together with the stipulation against liability for
damages. In the present case, we stress that the private respondent made no such
[34]

promise. The agreement of the parties to exempt the shipowner from responsibility
for any damage to the cargo and place responsibility over the same to petitioner is
the lone stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez
Costelo, Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., N. T. Hashim
[35] [36]

and Co. vs. Rocha and Co., Ohta


[37]
Development Co. vs.
SteamshipPompey and Limpangco Sons vs. Yangco Steamship Co. in support of
[38] [39]

its contention that the shipowner be held liable for damages. These however are
[40]

not on all fours with the present case because they do not involve a similar factual
milieu or an identical stipulation in the charter party expressly exempting the
shipowner from responsibility for any damage to the cargo.

Effect of the South Sea Resolution

In its memorandum, Seven Brothers argues that petitioner has no cause of action
against it because this Court has earlier affirmed the liability of South Sea for the loss
suffered by petitioner. Private respondent submits that petitioner is not legally entitled
to collect twice for a single loss. In view of the above disquisition upholding the
[41]

validity of the questioned charter party stipulation and holding that petitioner may not
recover from private respondent, the present issue is moot and academic. It suffices
to state that the Resolution of this Court dated June 2, 1995 affirming the liability of
[42]

South Sea does not, by itself, necessarily preclude the petitioner from proceeding
against private respondent. An aggrieved party may still recover the deficiency from
the person causing the loss in the event the amount paid by the insurance company
does not fully cover the loss. Article 2207 of the Civil Code provides:

ART. 2207. If the plaintiffs property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the loss or injury.

WHEREFORE, premises considered, the petition is hereby DENIED for its utter
failure to show any reversible error on the part of Respondent Court. The assailed
Decision is AFFIRMED.
SO ORDERED

c. Loadmasters Customs Services, Inc. Glodel Brokerage


Corporation, G.R. No. 179446 January 10, 2011

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court
assailing the August 24, 2007 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV
No. 82822, entitled R&B Insurance Corporation v. Glodel Brokerage Corporation and
Loadmasters Customs Services, Inc., which held petitioner Loadmasters Customs
Services, Inc. (Loadmasters) liable to respondent Glodel Brokerage
Corporation (Glodel) in the amount of P1,896,789.62 representing the insurance
indemnity which R&B Insurance Corporation (R&B Insurance) paid to the
insured-consignee, Columbia Wire and Cable Corporation (Columbia).

THE FACTS:

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All
Risks. On August 28, 2001, the cargoes were shipped on board the vessel Richard Rey
from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in
turn, engaged the services of Loadmasters for the use of its delivery trucks to transport
the cargoes to Columbias warehouses/plants in Bulacan and Valenzuela City.

The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven
by its employed drivers and accompanied by its employed truck helpers. Six (6) truckloads
of copper cathodes were to be delivered to Balagtas, Bulacan, while the other six (6)
truckloads were destined for Lawang Bato, Valenzuela City. The cargoes in six truckloads
for Lawang Bato were duly delivered in Columbias warehouses there. Of the six (6) trucks
en route to Balagtas, Bulacan, however, only five (5) reached the destination. One (1) truck,
loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.

Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the
copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for
insurance indemnity in the amount of P1,903,335.39. After the requisite investigation and
adjustment, R&B Insurance paid Columbia the amount of P1,896,789.62 as insurance
indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both


Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila (RTC),
docketed as Civil Case No. 02-103040. It sought reimbursement of the amount it had paid
to Columbia for the loss of the subject cargo. It claimed that it had been subrogated to the
right of the consignee to recover from the party/parties who may be held legally liable for
the loss.[2]

On November 19, 2003, the RTC rendered a decision[3] holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters counterclaim for
damages and attorneys fees against R&B Insurance. The dispositive portion of the
decision reads:

WHEREFORE, all premises considered, the plaintiff having


established by preponderance of evidence its claims against defendant
Glodel Brokerage Corporation, judgment is hereby rendered ordering
the latter:

1. To pay plaintiff R&B Insurance Corporation the sum


of P1,896,789.62 as actual and compensatory damages,
with interest from the date of complaint until fully paid;
2. To pay plaintiff R&B Insurance Corporation the amount
equivalent to 10% of the principal amount recovered as and
for attorneys fees plus P1,500.00 per appearance in Court;
3. To pay plaintiff R&B Insurance Corporation the sum
of P22,427.18 as litigation expenses.
WHEREAS, the defendant Loadmasters Customs Services, Inc.s
counterclaim for damages and attorneys fees against plaintiff are hereby
dismissed.

With costs against defendant Glodel Brokerage Corporation.


SO ORDERED.[4]
Both R&B Insurance and Glodel appealed the RTC decision to the CA.

On August 24, 2007, the CA rendered the assailed decision which reads in part:

Considering that appellee is an agent of appellant Glodel, whatever


liability the latter owes to appellant R&B Insurance Corporation as
insurance indemnity must likewise be the amount it shall be paid by
appellee Loadmasters.

WHEREFORE, the foregoing considered, the appeal is PARTLY


GRANTED in that the appellee Loadmasters is likewise held liable to
appellant Glodel in the amount of P1,896,789.62 representing the
insurance indemnity appellant Glodel has been held liable to appellant
R&B Insurance Corporation.

Appellant Glodels appeal to absolve it from any liability is herein


DISMISSED.

SO ORDERED.[5]

Hence, Loadmasters filed the present petition for review on certiorari before this
Court presenting the following

ISSUES

1. Can Petitioner Loadmasters be held liable to Respondent Glodel in


spite of the fact that the latter respondent Glodel did not file a
cross-claim against it (Loadmasters)?

2. Under the set of facts established and undisputed in the case, can
petitioner Loadmasters be legally considered as an Agent of respondent
Glodel?[6]
To totally exculpate itself from responsibility for the lost goods, Loadmasters argues
that it cannot be considered an agent of Glodel because it never represented the latter in its
dealings with the consignee. At any rate, it further contends that Glodel has no recourse
against it for its (Glodels) failure to file a cross-claim pursuant to Section 2, Rule 9 of the
1997 Rules of Civil Procedure.

Glodel, in its Comment,[7] counters that Loadmasters is liable to it under its cross-claim
because the latter was grossly negligent in the transportation of the subject cargo. With
respect to Loadmasters claim that it is already estopped from filing a cross-claim, Glodel
insists that it can still do so even for the first time on appeal because there is no rule that
provides otherwise. Finally, Glodel argues that its relationship with Loadmasters is that
of Charter wherein the transporter (Loadmasters) is only hired for the specific job of
delivering the merchandise. Thus, the diligence required in this case is merely ordinary
diligence or that of a good father of the family, not the extraordinary diligence required of
common carriers.

R&B Insurance, for its part, claims that Glodel is deemed to have interposed a
cross-claim against Loadmasters because it was not prevented from presenting evidence
to prove its position even without amending its Answer. As to the relationship between
Loadmasters and Glodel, it contends that a contract of agency existed between the two
corporations.[8]

Subrogation is the substitution of one person in the place of another with reference
to a lawful claim or right, so that he who is substituted succeeds to the rights of the other
in relation to a debt or claim, including its remedies or securities. [9] Doubtless, R&B
Insurance is subrogated to the rights of the insured to the extent of the amount it paid the
consignee under the marine insurance, as provided under Article 2207 of the Civil Code,
which reads:

ART. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured
against the wrong-doer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.

As subrogee of the rights and interest of the consignee, R&B Insurance has the right
to seek reimbursement from either Loadmasters or Glodel or both for breach of contract
and/or tort.

The issue now is who, between Glodel and Loadmasters, is liable to pay R&B Insurance
for the amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common
carriers to determine their liability for the loss of the subject cargo. Under Article 1732 of
the Civil Code, common carriers are persons, corporations, firms, or associations engaged
in the business of carrying or transporting passenger or goods, or both by land, water or air
for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier because it is
engaged in the business of transporting goods by land, through its trucking service. It is
a common carrier as distinguished from a private carrier wherein the carriage is
generally undertaken by special agreement and it does not hold itself out to carry goods
for the general public.[10] The distinction is significant in the sense that 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.[11]

In the present case, there is no indication that the undertaking in the contract between
Loadmasters and Glodel was private in character. There is no showing that Loadmasters
solely and exclusively rendered services to Glodel.

In fact, Loadmasters admitted that it is a common carrier.[12]

In the same vein, Glodel is also considered a common carrier within the context of
Article 1732. In its Memorandum,[13] it states that it is a corporation duly organized and
existing under the laws of the Republic of the Philippines and is engaged in the business
of customs brokering. It cannot be considered otherwise because as held by this Court
in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,[14] a customs
broker is also regarded as a common carrier, the transportation of goods being an integral
part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the
nature of their business and for reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by them according to all the
circumstances of such case, as required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that extreme measure of care and caution
which persons of unusual prudence and circumspection observe for securing and
preserving their own property or rights.[15] This exacting standard imposed on common
carriers in a contract of carriage of goods is intended to tilt the scales in favor of the
shipper who is at the mercy of the common carrier once the goods have been lodged for
shipment.[16] Thus, in case of loss of the goods, the common carrier is presumed to have
been at fault or to have acted negligently.[17] This presumption of fault or negligence,
however, may be rebutted by proof that the common carrier has observed extraordinary
diligence over the goods.

With respect to the time frame of this extraordinary responsibility, the Civil Code
provides that the exercise of extraordinary diligence 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.[18]

Premises considered, the Court is of the view that both Loadmasters and Glodel are
jointly and severally liable to R & B Insurance for the loss of the subject cargo. Under
Article 2194 of the New Civil Code, the responsibility of two or more persons who are
liable for a quasi-delict is solidary.

Loadmasters claim that it was never privy to the contract entered into by Glodel with
the consignee Columbia or R&B Insurance as subrogee, is not a valid defense. It may not
have a direct contractual relation with Columbia, but it is liable for tort under the
provisions of Article 2176 of the Civil Code on quasi-delicts which expressly provide:

ART. 2176. Whoever by act or omission causes damage to another,


there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by
the provisions of this Chapter.

Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage
Service, Inc. v. Phoenix Assurance Company of New York,/McGee & Co., Inc.[19] where
this Court held that a tort may arise despite the absence of a contractual relationship, to
wit:

We agree with the Court of Appeals that the complaint filed


by Phoenix and McGee against Mindanao Terminal, from which the
present case has arisen, states a cause of action. The present action is
based on quasi-delict, arising from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte Produce. Even assuming
that both Phoenix and McGee have only been subrogated in the rights of
Del Monte Produce, who is not a party to the contract of service between
Mindanao Terminal and Del Monte, still the insurance carriers may have
a cause of action in light of the Courts consistent ruling that the act that
breaks the contract may be also a tort. In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. In
the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal handled the
cargoes belonging to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte Produce and Mindanao
Terminal, the allegation of negligence on the part of the defendant
should be sufficient to establish a cause of action arising from
quasi-delict. [Emphases supplied]

In connection therewith, Article 2180 provides:


ART. 2180. The obligation imposed by Article 2176 is demandable
not only for ones own acts or omissions, but also for those of persons for
whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their


employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business
or industry.

It is not disputed that the subject cargo was lost while in the custody of Loadmasters
whose employees (truck driver and helper) were instrumental in the hijacking or robbery of
the shipment.As employer, Loadmasters should be made answerable for the damages
caused by its employees who acted within the scope of their assigned task of delivering the
goods safely to the warehouse.

Whenever an employees negligence causes damage or injury to another, there


instantly arises a presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees.[20] To avoid liability for a quasi-delict
committed by its employee, an employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence of a good father of a family in
the selection and supervision of his employee.[21] In this regard, Loadmasters failed.

Glodel is also liable because of its failure to exercise extraordinary diligence. It


failed to ensure that Loadmasters would fully comply with the undertaking to safely
transport the subject cargo to the designated destination. It should have been more prudent
in entrusting the goods to Loadmasters by taking precautionary measures, such as
providing escorts to accompany the trucks in delivering the cargoes. Glodel should,
therefore, be held liable with Loadmasters. Its defense of force majeure is unavailing.

At this juncture, the Court clarifies that there exists no principal-agent relationship
between Glodel and Loadmasters, as erroneously found by the CA. Article 1868 of the
Civil Code provides: By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent or
authority of the latter. The elements of a contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority.[22]

Accordingly, there can be no contract of agency between the parties. Loadmasters


never represented Glodel. Neither was it ever authorized to make such representation. It
is a settled rule that the basis for agency is representation, that is, the agent acts for and
on behalf of the principal on matters within the scope of his authority and said acts have
the same legal effect as if they were personally executed by the principal. On the part of
the principal, there must be an actual intention to appoint or an intention naturally
inferable from his words or actions, while on the part of the agent, there must be an
intention to accept the appointment and act on it.[23] Such mutual intent is not obtaining in
this case.

What then is the extent of the respective liabilities of Loadmasters and


Glodel? Each wrongdoer is liable for the total damage suffered by R&B Insurance.
Where there are several causes for the resulting damages, a party is not relieved from
liability, even partially. It is sufficient that the negligence of a party is an efficient cause
without which the damage would not have resulted. It is no defense to one of the
concurrent tortfeasors that the damage would not have resulted from his negligence alone,
without the negligence or wrongful acts of the other concurrent tortfeasor. As stated in
the case of Far Eastern Shipping v. Court of Appeals,[24]
X x x. Where several causes producing an injury are concurrent
and each is an efficient cause without which the injury would not have
happened, the injury may be attributed to all or any of the causes and
recovery may be had against any or all of the responsible persons
although under the circumstances of the case, it may appear that one of
them was more culpable, and that the duty owed by them to the injured
person was not the same. No actor's negligence ceases to be a proximate
cause merely because it does not exceed the negligence of other actors.
Each wrongdoer is responsible for the entire result and is liable as
though his acts were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is
solidary since both of them are liable for the total damage. Where the
concurrent or successive negligent acts or omissions of two or more
persons, although acting independently, are in combination the direct
and proximate cause of a single injury to a third person, it is impossible
to determine in what proportion each contributed to the injury
and either of them is responsible for the whole injury. Where their
concurring negligence resulted in injury or damage to a third party, they
become joint tortfeasors and are solidarily liable for the resulting
damage under Article 2194 of the Civil Code. [Emphasis supplied]

The Court now resolves the issue of whether Glodel can collect from Loadmasters, it
having failed to file a cross-claim against the latter.

Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach
of contract of service as the latter is primarily liable for the loss of the subject cargo. In
this case, however, it cannot succeed in seeking judicial sanction against Loadmasters
because the records disclose that it did not properly interpose a cross-claim against the
latter. Glodel did not even pray that Loadmasters be liable for any and all claims that it
may be adjudged liable in favor of R&B Insurance. Under the Rules, a compulsory
counterclaim, or a cross-claim, not set up shall be barred.[25]Thus, a cross-claim cannot be
set up for the first time on appeal.
For the consequence, Glodel has no one to blame but itself. The Court cannot come
to its aid on equitable grounds. Equity, which has been aptly described as a justice outside
legality, is applied only in the absence of, and never against, statutory law or judicial
rules of procedure.[26] The Court cannot be a lawyer and take the cudgels for a party who
has been at fault or negligent.

WHEREFORE, the petition is PARTIALLY GRANTED. The August 24,


2007 Decision of the Court of Appeals is MODIFIED to read as follows:

WHEREFORE, judgment is rendered declaring petitioner


Loadmasters Customs Services, Inc. and respondent Glodel Brokerage
Corporation jointly and severally liable to respondent R&B Insurance
Corporation for the insurance indemnity it paid to consignee Columbia Wire
& Cable Corporation and ordering both parties to pay, jointly and severally,
R&B Insurance Corporation a] the amount of P1,896,789.62 representing the
insurance indemnity; b] the amount equivalent to ten (10%) percent thereof
for attorneys fees; and c] the amount of P22,427.18 for litigation expenses.

The cross-claim belatedly prayed for by respondent Glodel Brokerage


Corporation against petitioner Loadmasters Customs Services, Inc. is
DENIED.
SO ORDERED.

4. Common carrier v. Other contracts.


4.1Distinguish from:
a. Towage.
b. Arrastre.
c. Stevedoring,
d. Travel Agency.

Laws and Jurisprudence:


a. Cargolift Shipping Inc. V. L. Actuario Marketing Co. and
Skyland Brokerage June 27, 2006

This is a petition for review on certiorari of the July 6, 2000 Decision[1] of the Court of
Appeals in CA-G.R. CV No. 55664, which affirmed the judgment[2] of the Regional Trial
Court of Caloocan City, Branch 121, in Civil Case No. C-16120 in so far as it found
petitioner Cargolift Shipping, Inc. (Cargolift) liable, as third-party defendant, for actual
damages in the sum of P97,021.20, as well as the November 28, 2000
Resolution[3] denying the motion for reconsideration.

The antecedent facts of the case are as follows:

Sometime in March 1993, respondent L. Acuario Marketing Corp., (Acuario) and


respondent Skyland Brokerage, Inc., (Skyland) entered into a time charter
agreement[4] whereby Acuario leased to Skyland its L. Acuario II barge for use by the
latter in transporting electrical posts from Manila to Limay, Bataan. At the same time,
Skyland also entered into a separate contract[5] with petitioner Cargolift, for the latters
tugboats to tow the aforesaid barge.

In accordance with the foregoing contracts, petitioners tugboat M/T Beejay left
the Manila South Harbor on April 1, 1993 with Acuarios barge in tow. It reached
the port of Limay, Bataan on April 3, 1993, whereupon M/T Beejay disengaged and once
again set sail for Manila. Petitioners other tugboat, the M/T Count, remained in Bataan to
secure the barge for unloading.

Off-loading operations went underway until April 7, 1993, when operations were
interrupted for the next two days to give way to the observance of the lenten season. The
unloading of the cargo was concluded on April 12, 1993, by which time M/T Beejay had
gone back to Bataan for the return trip. The M/T Beejay and the barge returned to
the port of Manila on April 13, 1993.

On the same day, the barge was brought to Acuarios shipyard where it was allegedly
discovered by Acuarios dry-docking officer, Guillermo Nacu, Jr., that the barge was listing
due to a leak in its hull. According to Nacu, he was informed by the skipper of the tugboat
that the damage was sustained in Bataan. To confirm the same, Nacu ordered an
underwater survey of the barge and prepared a damage report dated April 14, 1993. No
representative of Skyland was present during the inspection although it was furnished with
a copy of the said report.

The barge was consequently dry-docked for repairs at the Western Shipyard from
April 16 to April 26, 1993. Acuario spent the total sum of P97,021.20 for the repairs.[6]

Pursuant to its contract with Skyland which provided that (a)ny damage or loss on
the barge due to the fault or negligence of charterers shall be the responsibility of the
(c)harterer or his representative,[7] Acuario wrote Skyland seeking reimbursement of its
repair costs, failing which, it filed a complaint for damages against Skyland before the
Regional Trial Court of Caloocan City, where the case was docketed as Civil Case No.
C-16120 and raffled to Branch 121.

Skyland, in turn, filed a third-party complaint[8] against petitioner alleging that it was
responsible for the damage sustained by the barge.
According to Acuario and its witnesses, the weather in Bataan shifted drastically at
dawn of April 7, 1993 while the barge was docked at the Limay port eight meters away
from the stone wall. Due to strong winds and large waves, the barge repeatedly hit its hull
on the wall, thus prompting the barge patron to alert the tugboat captain of the M/T Count
to tow the barge farther out to sea. However, the tugboat failed to pull the barge to a safer
distance due to engine malfunction, thereby causing the barge to sustain a hole in its
hull. Fortunately, no part of the cargo was lost even if only half of it had been unloaded at
that time.[9]

On the other hand, petitioner and Skyland denied that the barge had been damaged. One
of its witnesses, Salvador D. Ocampo, claimed that he was involved in all aspects of the
operation and that no accident of any sort was brought to his knowledge. He alleged that
the barge patron and tug master made no mention of any maritime casualty during the
clearing of the vessels at the Philippine Ports Authority in Limay, Bataan. The barge was
in good condition and was not damaged when it was turned over to Acuario on April 13,
1993.[10]

In due course, the trial court promulgated its decision dated June 10, 1996, the dispositive
part of which reads:

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

1. Ordering the defendant Skyland Brokerage to pay to the


plaintiff L. Acuario Marketing Corporation the cost of
repairs of the barge L. Acuario II in the amount of
P97,021.20 and to seek reimbursement from the third-party
defendant Cargolift Shipping;
2. Ordering the defendant to pay attorneys fees in the amount of
P24,255.30 and to seek reimbursement thereof from the
third-party defendant; and
3. Ordering the defendant to pay the costs of suit subject to
reimbursement from the third-party defendant.

SO ORDERED.[11]

The trial court gave credence to the testimonies of Acuarios witnesses that the barge
sustained damage while it was being chartered by Skyland. It held that the positive
testimonies of Acuarios witnesses, coupled with documentary evidence detailing the nature
and extent of the damage as well as the repairs done on the barge, should prevail over the
bare denials of Skyland and petitioner. It also noted that two of the latters three witnesses
were not in Limay, Bataan when the incident happened.

The trial court further held that Skyland was liable under its time charter agreement
with Acuario pursuant to Article 1159 of the Civil Code which states that contracts have
the force of law between the contracting parties. Skyland must bear the consequences of
the tugboats incapacity to respond to the barges request for assistance because Acuario
had no control in the selection of the tugboats used by Skyland. But since the ultimate
fault lies with petitioner, justice demands that the latter reimburse Skyland for whatever it
may be adjudged to pay Acuario.[12]

Both Skyland and petitioner elevated the matter to the Court of Appeals which,
on July 6, 2000, rendered the assailed Decision affirming the trial court, but deleting the
award of attorneys fees. Upon denial of its motion for reconsideration,[13] petitioner
brought the instant petition raising the following issues:

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE


FINDING OF THE TRIAL COURT THAT L. ACUARIO II SUSTAINED
DAMAGE AND THAT IT WAS SUSTAINED DURING ITS CHARTER TO
RESPONDENT SKYLAND.

II

ASSUMING THAT L. ACUARIO II SUFFERED DAMAGE, WHETHER


THE COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURT
DECISION HOLDING PETITIONER LIABLE THEREFOR.[14]

The petition lacks merit.

On the first assigned error, petitioner is asking this Court to resolve factual issues that
have already been settled by the courts below. The question of whether the barge had
been damaged during its charter to Skyland is a factual matter, the determination of
which may not be generally disturbed on appeal. Questions of fact are not reviewable by
this Court except under certain exceptional circumstances.[15] No such exceptional
circumstance exists in the case at bar.

On the contrary, the factual conclusions reached by the courts below are consistent with
the evidence on record. Acuarios witnesses testified that strong winds and waves caused
the barge to bump into the walls of the pier where it was berthed for
unloading. Petitioners tugboat failed to tow it farther away due to engine breakdown, thus
causing the barge to sustain a hole in its hull. These testimonies were duly supported and
corroborated by documentary evidence detailing the damage and repairs done on the
barge.[16]

On the other hand, petitioner and Skylands denial that there was inclement weather in the
early hours of April 7, 1993 and that the barge sustained no damage on this occasion were
not supported by evidence to overcome the positive allegations of Acuarios witnesses
who were present at the place and time of the incident. The categorical declaration of
Acuarios witnesses regarding the events which led to the damage on the barge shifted the
burden of evidence on petitioner and Skyland. They could have easily disproved Acuarios
claims by presenting competent proof that there was no weather disturbance on that day
or, by presenting the testimony of individuals who have personal knowledge of the events
which transpired.

Moreover, the inability of petitioners and Skylands witnesses to unequivocally declare


that it was still the M/T Count that secured the barge during the resumption of off-loading
operations casts suspicion on their credibility. As aptly observed by the trial court, such
hesitation on the part of its witnesses is indicative of uncertainty, if not a propensity to
withhold information that could be unfavorable to their cause.[17] To our mind, therefore,
the trial court rightly concluded that petitioners M/T Count indeed encountered
mechanical trouble, as asserted by Acuario. The fact that petitioner did not categorically
deny the allegation of mechanical trouble only serves to strengthen the trial courts
conclusion.

Petitioners assertion that it is contrary to human experience for the barge to have made
the return trip to Manila if it sustained the alleged damage deserves short shrift. The trial
court found that the damage on the barge was not too extensive as to render it incapable
of staying afloat and being used in operation. Neither was it impossible for the barges
cargo to remain intact and undamaged during the weather disturbance. Apart from the
fact that the cargo which consisted of wooden electric poles are, by nature, not easily
damaged by adverse weather,[18] part of it had already been unloaded when the
unfortunate incident occurred.

Consequently, we find no cogent reason to disturb the lower courts finding that the
barge sustained a hole in its hull when petitioners tugboat failed to tow it to a safer
distance as the weather changed in the port of Limay. This Court is bound by the factual
determinations of the appellate court especially when these are supported by substantial
evidence and merely affirm those of the trial court,[19] as in this case. There is no showing
here that the inferences made by the Court of Appeals were manifestly mistaken, or that
the appealed judgment was based on a misapprehension of facts, or that the appellate
court overlooked certain relevant, undisputed facts which, if properly considered, would
justify a different conclusion.[20] Thus, a reversal of the factual findings in this case is
unwarranted.

As for the second assigned error, petitioner asserts that it could not be held liable for the
damage sustained by Acuarios barge because the latter sought to recover upon its contract
with Skyland, to which petitioner was not a party. Since it had no contractual relation with
Acuario, only Skyland should be held liable under the contract. Besides, Skyland
contractually assumed the risk that the tugboat might encounter engine trouble when it
acknowledged in its contract with petitioner that the latters vessels were in good order and
in seaworthy condition. At any rate, it was neither negligent in the performance of its
obligation nor the proximate cause of the damage.

We do not agree.
It was not Acuario that seeks to hold petitioner liable for the damage to the barge, as the
former in fact sued only Skyland pursuant to their charter agreement. It was Skyland that
impleaded petitioner as third-party defendant considering that Skyland was being held
accountable for the damage attributable to petitioner. In other words, petitioner was not
sued under Skylands charter agreement with Acuario, but pursuant to its separate
undertaking with Skyland. Strictly speaking, therefore, petitioner is not being held liable
under any charter agreement with Acuario.

Consequently, it is not correct for petitioner to assert that Acuario could not recover
damages from it due to lack of privity of contract between them. It is not Acuario that is
seeking damages from petitioner but Skyland, with whom it undoubtedly had a juridical
tie. While Acuario could hold Skyland liable under its charter agreement, Skyland in turn
could enforce liability on petitioner based on the latters obligation to Skyland. In other
words, petitioner is being held liable by Skyland and not by Acuario.

Thus, in the performance of its contractual obligation to Skyland, petitioner was required
to observe the due diligence of a good father of the family. This much was held in the old
but still relevant case of Baer Senior & Co.s Successors v. La Compania
Maritima[21] where the Court explained that a tug and its owners must observe ordinary
diligence in the performance of its obligation under a contract of towage. The negligence
of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his
failure to exercise due care and prudence in the performance of the obligation as the
nature of the obligation so demands.[22]

In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its
tugboat is free of mechanical problems. While adverse weather has always been a real
threat to maritime commerce, the least that petitioner could have done was to ensure that
the M/T Count or any of its other tugboats would be able to secure the barge at all times
during the engagement. This is especially true when considered with the fact that
Acuarios barge was wholly dependent upon petitioners tugboat for propulsion. The barge
was not equipped with any engine and needed a tugboat for maneuvering.[23]

Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or
inspection, the engine malfunction could have been discovered or avoided. The M/T Count
was exclusively controlled by petitioner and the latter had the duty to see to it that the
tugboat was in good running condition. There is simply no basis for petitioners assertion
that Skyland contractually assumed the risk of any engine trouble that the tugboat may
encounter. Skyland merely procured petitioners towing service but in no way assumed any
such risk.

That petitioners negligence was the proximate cause of the damage to the barge cannot be
doubted. Had its tugboat been serviceable, the barge could have been moved away from
the stone wall with facility. It is too late in the day for petitioner to insist that the
proximate cause of the damage was the barge patrons negligence in not objecting to the
position of the barge by the stone wall. Aside from the fact that the position of the barge
is quite understandable since off-loading operations were then still underway,[24] the
alleged negligence of the barge patron is a matter that is also being raised for the first
time before this Court.

Thus, the damage to the barge could have been avoided had it not been for the tugboats
inability to tow it away from the stone wall. Considering that a barge has no power of its
own and is totally defenseless against the ravages of the sea, it was incumbent upon
petitioner to see to it that it could secure the barge by providing a seaworthy
tugboat. Petitioners failure to do so did not only increase the risk that might have been
reasonably anticipated during the shipside operation but was the proximate cause of the
damage.[25] Hence, as correctly found by the courts below, it should ultimately be held
liable therefor.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of
Appeals in CA-G.R. CV No. 55664 dated July 6, 2000 and the Resolution dated November
28, 2000, finding petitioner Cargolift Shipping, Inc. liable, as third-party defendant, for
actual damages in the sum of P97,021.20, are AFFIRMED.

SO ORDERED.

b. Mindanao Terminal and Brokerage services v. Phoenix


Assurance Co. May 8, 2009

Before us is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil
Procedure of the 29 October 2003[2] Decision of the Court of Appeals and the 26
February 2004Resolution[3] of the same court denying petitioners motion for
reconsideration.

The facts of the case are not disputed.

Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal
and Brokerage Service, Inc. (Mindanao Terminal), a stevedoring company, to load and
stow a shipment of 146,288 cartons of fresh green Philippine bananas and 15,202 cartons
of fresh pineapples belonging to Del Monte Fresh Produce International, Inc. (Del Monte
Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked at the port
of Davao City and the goods were to be transported by it to the port of Inchon, Korea in
favor of consignee Taegu Industries, Inc. Del Monte Produce insured the shipment under
an open cargo policy with private respondent Phoenix Assurance Company of New York
(Phoenix), a non-life insurance company, and private respondent McGee & Co. Inc.
(McGee), the underwriting manager/agent of Phoenix.[4]

Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel
set sail from the port of Davao City and arrived at the port of Inchon, Korea. It was then
discovered upon discharge that some of the cargo was in bad condition. The Marine
Cargo Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the
shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment and
2,185 cartons of the pineapple shipment were so damaged that they no longer had
commercial value.[5]

Del Monte Produce filed a claim under the open cargo policy for the damages to its
shipment. McGees Marine Claims Insurance Adjuster evaluated the claim and
recommended that payment in the amount of $210,266.43 be made. A check for the
recommended amount was sent to Del Monte Produce; the latter then issued a
subrogation receipt[6] to Phoenix and McGee.

Phoenix and McGee instituted an action for damages[7] against Mindanao Terminal in the
Regional Trial Court (RTC) of Davao City, Branch 12. After trial, the RTC,[8] in a
decision dated 20 October 1999, held that the only participation of Mindanao Terminal
was to load the cargoes on board the M/V Mistrau under the direction and supervision of
the ships officers, who would not have accepted the cargoes on board the vessel and
signed the foremans report unless they were properly arranged and tightly secured to
withstand voyage across the open seas. Accordingly, Mindanao Terminal cannot be held
liable for whatever happened to the cargoes after it had loaded and stowed them.
Moreover, citing the survey report, it was found by the RTC that the cargoes were
damaged on account of a typhoon which M/V Mistrau had encountered during the voyage.
It was further held that Phoenix and McGee had no cause of action against Mindanao
Terminal because the latter, whose services were contracted by Del Monte, a distinct
corporation from Del Monte Produce, had no contract with the assured Del Monte
Produce. The RTC dismissed the complaint and awarded the counterclaim of Mindanao
Terminal in the amount of P83,945.80 as actual damages and P100,000.00 as attorneys
fees.[9] The actual damages were awarded as reimbursement for the expenses incurred by
Mindanao Terminals lawyer in attending the hearings in the case wherein he had to travel
all the way from Metro Manila to Davao City.

Phoenix and McGee appealed to the Court of Appeals. The appellate court
reversed and set aside[10] the decision of the RTC in its 29 October 2003 decision. The
same court ordered Mindanao Terminal to pay Phoenix and McGee the total amount of
$210,265.45 plus legal interest from the filing of the complaint until fully paid and
attorneys fees of 20% of the claim.[11] It sustained Phoenixs and McGees argument that
the damage in the cargoes was the result of improper stowage by Mindanao Terminal. It
imposed on Mindanao Terminal, as the stevedore of the cargo, the duty to exercise
extraordinary diligence in loading and stowing the cargoes. It further held that even with
the absence of a contractual relationship between Mindanao Terminal and Del Monte
Produce, the cause of action of Phoenix and McGee could be based on quasi-delict under
Article 2176 of the Civil Code.[12]

Mindanao Terminal filed a motion for reconsideration,[13] which the Court of


Appeals denied in its 26 February 2004[14] resolution. Hence, the present petition for
review.
Mindanao Terminal raises two issues in the case at bar, namely: whether it was
careless and negligent in the loading and stowage of the cargoes onboard M/V
Mistrau making it liable for damages; and, whether Phoenix and McGee has a cause of
action against Mindanao Terminal under Article 2176 of the Civil Code on quasi-delict.
To resolve the petition, three questions have to be answered: first, whether Phoenix and
McGee have a cause of action against Mindanao Terminal; second, whether Mindanao
Terminal, as a stevedoring company, is under obligation to observe the same
extraordinary degree of diligence in the conduct of its business as required by law for
common carriers[15] and warehousemen;[16] and third, whether Mindanao Terminal
observed the degree of diligence required by law of a stevedoring company.

We agree with the Court of Appeals that the complaint filed by Phoenix and
McGee against Mindanao Terminal, from which the present case has arisen, states a
cause of action. The present action is based on quasi-delict, arising from the negligent
and careless loading and stowing of the cargoes belonging to Del Monte Produce. Even
assuming that both Phoenix and McGee have only been subrogated in the rights of Del
Monte Produce, who is not a party to the contract of service between Mindanao Terminal
and Del Monte, still the insurance carriers may have a cause of action in light of the
Courts consistent ruling that the act that breaks the contract may be also a tort. [17] In fine,
a liability for tort may arise even under a contract, where tort is that which breaches the
contract[18]. In the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the alleged negligent
manner by which Mindanao Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the part of the defendant should be
sufficient to establish a cause of action arising from quasi-delict.[19]

The resolution of the two remaining issues is determinative of the ultimate result of
this case.

Article 1173 of the Civil Code is very clear that if the law or contract does not state
the degree of diligence which is to be observed in the performance of an obligation then
that which is expected of a good father of a family or ordinary diligence shall be required.
Mindanao Terminal, a stevedoring company which was charged with the loading and
stowing the cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely as a
labor provider in the case at bar. There is no specific provision of law that imposes a higher
degree of diligence than ordinary diligence for a stevedoring company or one who is
charged only with the loading and stowing of cargoes. It was neither alleged nor proven
by Phoenix and McGee that Mindanao Terminal was bound by contractual stipulation to
observe a higher degree of diligence than that required of a good father of a family. We
therefore conclude that following Article 1173, Mindanao Terminal was required to
observe ordinary diligence only in loading and stowing the cargoes of Del Monte Produce
aboard M/V Mistrau.

The Court of Appeals erred when it cited the case of Summa Insurance
Corporation v. CA and Port Service Inc.[20] in imposing a higher degree of diligence,[21] on
Mindanao Terminal in loading and stowing the cargoes. The case of Summa Insurance
Corporation v. CA, which involved the issue of whether an arrastre operator is legally
liable for the loss of a shipment in its custody and the extent of its liability, is inapplicable
to the factual circumstances of the case at bar. Therein, a vessel owned by the National
Galleon Shipping Corporation (NGSC) arrived at Pier 3, SouthHarbor, Manila, carrying a
shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal
Corporation (Semirara) as "notify party." The shipment, including a bundle of PC 8 U
blades, was discharged from the vessel to the custody of the private respondent, the
exclusive arrastre operator at the South Harbor. Accordingly, three good-order cargo
receipts were issued by NGSC, duly signed by the ship's checker and a representative of
private respondent. When Semirara inspected the shipment at house, it discovered that the
bundle of PC8U blades was missing. From those facts, the Court observed:

x x x The relationship therefore between the consignee and the arrastre


operator must be examined. This relationship is much akin to that existing
between the consignee or owner of shipped goods and the common carrier,
or that between a depositor and a warehouseman[[22]]. In the performance of
its obligations, an arrastre operator should observe the same degree of
diligence as that required of a common carrier and a warehouseman as
enunciated under Article 1733 of the Civil Code and Section 3(b) of the
Warehouse Receipts Law, respectively. Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to take good
care of the goods and to turn them over to the party entitled to their
possession. (Emphasis supplied)[23]

There is a distinction between an arrastre and a stevedore.[24] Arrastre, a Spanish word


which refers to hauling of cargo, comprehends the handling of cargo on the wharf or
between the establishment of the consignee or shipper and the ship's tackle. The
responsibility of the arrastre operator lasts until the delivery of the cargo to the consignee.
The service is usually performed by longshoremen. On the other hand, stevedoring refers
to the handling of the cargo in the holds of the vessel or between the ship's tackle and the
holds of the vessel. The responsibility of the stevedore ends upon the loading and stowing
of the cargo in the vessel.

It is not disputed that Mindanao Terminal was performing purely stevedoring


function while the private respondent in the Summa case was performing arrastre function.
In the present case, Mindanao Terminal, as a stevedore, was only charged with the
loading and stowing of the cargoes from the pier to the ships cargo hold; it was never the
custodian of the shipment of Del Monte Produce. A stevedore is not a common carrier for
it does not transport goods or passengers; it is not akin to a warehouseman for it does not
store goods for profit. The loading and stowing of cargoes would not have a far reaching
public ramification as that of a common carrier and a warehouseman; the public is
adequately protected by our laws on contract and on quasi-delict. The public policy
considerations in legally imposing upon a common carrier or a warehouseman a higher
degree of diligence is not present in a stevedoring outfit which mainly provides labor in
loading and stowing of cargoes for its clients.

In the third issue, Phoenix and McGee failed to prove by preponderance of


evidence[25] that Mindanao Terminal had acted negligently. Where the evidence on an
issue of fact is in equipoise or there is any doubt on which side the evidence
preponderates the party having the burden of proof fails upon that issue. That is to say, if
the evidence touching a disputed fact is equally balanced, or if it does not produce a just,
rational belief of its existence, or if it leaves the mind in a state of perplexity, the party
holding the affirmative as to such fact must fail.[26]
We adopt the findings[27] of the RTC,[28] which are not disputed by Phoenix and
McGee. The Court of Appeals did not make any new findings of fact when it reversed the
decision of the trial court. The only participation of Mindanao Terminal was to load the
cargoes on board M/V Mistrau.[29] It was not disputed by Phoenix and McGee that the
materials, such as ropes, pallets, and cardboards, used in lashing and rigging the cargoes
were all provided by M/V Mistrau and these materials meets industry standard.[30]
It was further established that Mindanao Terminal loaded and stowed the cargoes
of Del Monte Produce aboard the M/V Mistrau in accordance with the stowage plan, a
guide for the area assignments of the goods in the vessels hold, prepared by Del Monte
Produce and the officers of M/V Mistrau.[31] The loading and stowing was done under the
direction and supervision of the ship officers. The vessels officer would order the closing
of the hatches only if the loading was done correctly after a final inspection.[32] The said
ship officers would not have accepted the cargoes on board the vessel if they were not
properly arranged and tightly secured to withstand the voyage in open seas. They would
order the stevedore to rectify any error in its loading and stowing. A foremans report, as
proof of work done on board the vessel, was prepared by the checkers of Mindanao
Terminal and concurred in by the Chief Officer of M/V Mistrau after they were satisfied
that the cargoes were properly loaded.[33]

Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn [34] and on the
survey report[35] of the damage to the cargoes. Byeong, whose testimony was refreshed by
the survey report,[36] found that the cause of the damage was improper stowage[37] due to
the manner the cargoes were arranged such that there were no spaces between cartons, the
use of cardboards as support system, and the use of small rope to tie the cartons together
but not by the negligent conduct of Mindanao Terminal in loading and stowing the
cargoes. As admitted by Phoenix and McGee in their Comment[38] before us, the latter is
merely a stevedoring company which was tasked by Del Monte to load and stow the
shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V Mistrau.
How and where it should load and stow a shipment in a vessel is wholly dependent on the
shipper and the officers of the vessel. In other words, the work of the stevedore was under
the supervision of the shipper and officers of the vessel. Even the materials used for
stowage, such as ropes, pallets, and cardboards, are provided for by the vessel. Even the
survey report found that it was because of the boisterous stormy weather due to the
typhoon Seth, as encountered by M/V Mistrau during its voyage, which caused the
shipments in the cargo hold to collapse, shift and bruise in extensive extent.[39] Even the
deposition of Byeong was not supported by the conclusion in the survey report that:
CAUSE OF DAMAGE

xxx

From the above facts and our survey results, we are of the opinion that
damage occurred aboard the carrying vessel during sea transit, being caused
by ships heavy rolling and pitching under boisterous weather while
proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October,
1994 as described in the sea protest.[40]

As it is clear that Mindanao Terminal had duly exercised the required degree of
diligence in loading and stowing the cargoes, which is the ordinary diligence of a good
father of a family, the grant of the petition is in order.

However, the Court finds no basis for the award of attorneys fees in favor of
petitioner. None of the circumstances enumerated in Article 2208 of the Civil Code exists.
The present case is clearly not an unfounded civil action against the plaintiff as there is
no showing that it was instituted for the mere purpose of vexation or injury. It is not
sound public policy to set a premium to the right to litigate where such right is exercised
in good faith, even if erroneously.[41] Likewise, the RTC erred in awarding P83,945.80
actual damages to Mindanao Terminal. Although actual expenses were incurred by
Mindanao Terminal in relation to the trial of this case in Davao City, the lawyer of
Mindanao Terminal incurred expenses for plane fare, hotel accommodations and food, as
well as other miscellaneous expenses, as he attended the trials coming all the way
from Manila. But there is no showing that Phoenix and McGee made a false claim against
Mindanao Terminal resulting inthe protracted trial of the case necessitating the incurrence
of expenditures.[42]

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals


in CA-G.R. CV No. 66121 is SET ASIDE and the decision of
the Regional Trial Court of Davao City, Branch 12 in Civil Case No. 25,311.97 is
hereby REINSTATED MINUS the awards of P100,000.00 as attorneys fees
and P83,945.80 as actual damages.

SO ORDERED.

c. Cebu Arrastre Services v. Collector of Internal Revenue May 30


1956
This is an appeal from the decision of the Board of Tax Appeals affirming the decision of the Collector of Internal
Revenue (later referred to as COLLECTOR), denying exemption to the Petitioner-Appellant Cebu Arrastre Service
(later referred to as CEBU ARRASTRE) from the percentage tax under section 191 of the National Internal
Revenue Code, and for refund of the amount of P2,867.02 already paid.
In 1952 the Cebu Arrastre, an association of persons engaged in the handling of cargoes carried by coastwise
vessels stopping at the port of Cebu, thru its counsel Atty. Jose Muaa petitioned the Collector of Internal
Revenue for the exemption and the refund based on the following grounds: chanroblesvirtuallawlibrary
(1) That they were a group of laborers who had recently organized themselves into an arrastre service
association merely for the purpose of centralizing the collection of handling charges and making direct payment
to the men in order to insure the compliance of the Minimum Wage Law requirement.
(2) That the work of the men of the said arrastre group is under the direct supervision and control of the
officers of the ships.
(3) That the Cebu Arrastre Service is engaged solely in the loading and unloading of cargoes to and from the
boats and is not engaged in the transportation business.
Acting upon the petition, the Collector referred the matter to his agent in Cebu for investigation. Mr. Ignacio
Quijano, the Assistant Agent, conducted the investigation and filed his report, the pertinent portions of which
are as follows:
chanroble svirtuallawlibrary

1. The loading and unloading of cargoes to and from the ships holds is done by the laborers under the Cebu
Arrastre Service Co., Inc.
2. The supervision of the ships officers in the work is confined only to the proper handling of the cargoes
according to their nature and to the proper placing of the cargoes inside the ships holds.
3. As to the laborers actuations outside of the handling and placing of cargoes inside the ships holds the
officers of the ship have no supervision.
xxx xxx xxx
6. The Cebu Arrastre Service Co., Inc. is not engaged in the transportation of the cargoes from the wharf to
the bodegas of the shippers. The shippers have their own trucks or provide for the transportation of their
cargoes from the wharf to their bodegas.
7. The laborers of the Cebu Arrastre Service Co., Inc. help only in the loading of the cargoes from the wharf to
the shippers trucks, for the shippers trucks are provided with their own journales.
On the basis of said report the Collector denied the petition, holding that inasmuch as the Cebu Arrastre was
engaged in the loading and unloading of vessels in port, it may be considered a stevedore within the meaning of
section 191 of the Tax Code. In this connection, it may be stated that section 191 of the Tax Code imposes a tax
equivalent to 3 per cent of the gross receipts on certain businesses and business entities, among them
stevedores.
In his brief counsel for Petitioner-Appellant bitterly assails the proceedings had in this case, saying that it has
been most inquisitorial, reminiscent of the ancient and antiquated method of administering justice by which
the Defendant was condemned without benefit of confrontation. The guarantee and protection jealousy
safeguarded by our Constitution has been completely disregarded. The report of the BIR Agent was a mere
unilateral affair and its findings were arrived at without the Petitioner-Appellants having had the slightest
opportunity to be confronted and his side heard. We have examined the record of the proceedings and find this
attack unfounded. Although the Board of Tax Appeals as an appellate board usually considers only the evidence
that comes with the appeal, nevertheless, in this case a hearing was had before it, and the very same counsel
Atty. Jose Muaa testified on behalf of the Cebu Arrastre, his client and of which he was the president, but he
failed to present any evidence or give any testimony in support of his present contention that the Cebu Arrastre
is not engaged in the work of loading cargoes into the holds of the boat or unloading the same from it. But in his
memorandum filed with the Tax Board, he made statements which the Tax Board liberally considered as
evidence but which the Board regarded as insufficient and not entirely credible. We reproduce a portion of the
decision of the Tax Board on this point: chanroble svirtuallawlibrary

In its memorandum filed with us in support of its petition for review of the case, Petitioners counsel makes
some additional statements of facts wherein he avers that, Their work (that of the companys laborers) was
simply the handling of cargoes at the wharf almost mechanically under the control and supervision of the
shipping companies. In cases where boats had booms their work was simply to load on the wharf at the ships
tackle by placing the cargoes in the sling and hooking unto the tackle, and unloading by unhooking the sling from
the tackle and discharging the cargoes on the wharf. In rare cases where the boats have no booms, these men
carry the cargoes up to the deck for the stevedores on board to store in the hold, in the case of loading, and
carry cargoes from the deck which have been unloaded from the hold by the stevedores to the wharf.
We have here three descriptions of the kind of work performed by the laborers of Petitionercorporation, of
which one is widely different from the other two: one is from the investigator of the Bureau of Internal
chanroblesvirtualla wlibrary

Revenue who says that the laborers in question carry cargoes to and from the pier to the hold of ships, which
agrees with the description appearing on the original request to the Collector by the President and Counselor of
the Corporation, the other being the contention of the same official of the Arrastre Service who, in his
memorandum on appeal, would have us believe that its workingmen merely place the cargoes in the slings and
then leave the ships tackle to lift and drop them into the holds or dump them on decks, there to be stowed by
another set of workingmen, presumably not connected at all with the Arrastre Service Corporation. When ships
are not provided with booms, cargoes are carried by the Arrastre Service laborers over planks or ladders to be
dumped into the deck or into the hold, there to be stowed by another set of stevedores not related to the
Corporation.
xxx xxx xxx
The question, then revolves around the facts and around the credibility of the description depicting the exact
nature of the work of the laborers working under the contracts entered into by the Cebu Arrastre Co. Inc. with
Cebu shipowners. We just determine therefore, which of the two conflicting versions comes nearer the reality of
the situation.
We may say at the outset that the preponderance of evidence is in favor of the version of the Assistant Agent
of the Bureau of Internal Revenue of Cebu. According to him the loading and unloading of cargoes to and from
the ships holds is done by the laborers under the Cebu Arrastre Service Co., Inc. and the ships officers
supervision is limited to the proper placing of the same inside the ships hold, the inference being that said
proper placing (stowing) is being done by the corporation laborers. This is not contradicted by the version of
the Petitioner as given in its original petition wherein it says: The men working under the Cebu Arrastre
chanroble svirtuallawlibrary

Service are same men of Katubusanan sa Mamumuo who have been handling the loading of the boats of the
Aboitiz & Co. and of the Philippine Navigation Co. since 1947 up to the present. It says also, further on: The chanroblesvirtuallawlibrary

Cebu Arrastre Service is dedicated itself solely to the loading and unloading of cargoes on the boats .. It is true
that the President and Counsel corrected this description in the memorandum on appeal to the effect that
laborers of the corporation do not, except on rare occasions, engage in loading or unloading the boat but limit
their work on loading or unloading pele-mele the slings of the boats under contract with the Arrastre Service,
but in the opinion of the Board this amendment is not nearer to the truth than the original version which was
corroborated by the official who investigated the case by order of the Collector of Internal Revenue.
It is noteworthy that in the agreement entered into by the shipowners and the corporation mention is twice
made of the arrastre service on the vessels (but never on the piers) to be done by the laborers of the Cebu
Arrastre Service Inc. Another circumstance which may help in obtaining a clear picture of the situation is that
nowhere in these papers is it contended that the stevedores actually performing the stowing work belong to an
organization not related to the Petitioner.
We quote the following definitions of stevedores, viz: chanroblesvirtuallawlibrary

Stevedores is one who works at, or one who is responsible for, the unloading and loading of a vessel in port.
(Websters New International Dictionary, Second Edition (unabridged), p. 2473).
A stevedore is a person employed in loading and unloading a vessel. (The Owego, D. C. Wash., 292 F. 505, 507).
Stevedores are class of laborers at the ports whose business it is to load and unload vessels. (The Senator, 21 F.
191).
Stevedore is defined as one whose occupation is to load and unload vessels in port; in other words, a chan roblesvirtualawlibrary

contractor or a jobber for special business ready to be employed by anybody at his line of work (Rankin vs.
Merchants and Miners Transp. Co., 73 Ga. 239, 54 Am. Rep. 874).
Stevedore and longshoreman, are synonymous terms when interpreted in the light of the work they
perform, namely loading and unloading of vessels (Zampiere vs. Willian Spencer and Son Corporation, 18b N.Y.S.
639, 640, 194 App. Div. 576).
Under the above definitions the Cebu Arrastre admittedly engaged in the work of loading and unloading
coastwise vessels calling at the port of Cebu, should be regarded as a stevedore and therefore subject to the
percentage tax under section 191 of the Tax Code. But even if we applied the narrower and more specific
concept of stevedore used by the Tax Board, namely, that a stevedore is one who places cargoes in the holds of
ships in such a way that the boat would maintain an even keel, and that even with the movement of the boat,
especially in rough weather, the cargoes would not be displaced from their original position, still, under the
finding of fact made by the Tax Board that the Cebu Arrastre is engaged in this work of towing cargo either in
the hold or even on the deck, Appellant would be subject to the tax. We also agree with the Tax Board that the
purpose for which the Petitioner-Appellant was organized, and the supervision exercised by the ships officers
over its work in loading and unloading vessels including the towing of cargo, has nothing to do with the tax
liability of the Petitioner-Appellant.
In view of the foregoing, the decision appealed from is hereby affirmed, with costs in both instances.
Paras, C.J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ.,
concur.
d. Crisostomo v. CA August 25, 2003 G.R No. 138334
In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her
booking, ticketing and accommodation in a tour dubbed Jewels of Europe. The
package tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was
given a 5% discount on the amount, which included airfare, and the booking fee was
also waived because petitioners niece, Meriam Menor, was respondent companys
ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in
turn, gave Menor the full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioners dismay, she discovered that the flight she was supposed to
take had already departed the previous day. She learned that her plane ticket was for
the flight scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she paid
for Jewels of Europe and the amount she owed respondent for the British Pageant
tour. Despite several demands, respondent company refused to reimburse the
amount, contending that the same was non-refundable. Petitioner was thus
[1]

constrained to file a complaint against respondent for breach of contract of carriage


and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch
59 of the Regional Trial Court of Makati City.
In her complaint, petitioner alleged that her failure to join Jewels of Europe was
[2]

due to respondents fault since it did not clearly indicate the departure date on the
plane ticket. Respondent was also negligent in informing her of the wrong flight
schedule through its employee Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such that the cost of the former
should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was clearly
and legibly printed on the plane ticket. The travel documents were given to petitioner
two days ahead of the scheduled trip. Petitioner had only herself to blame for missing
the flight, as she did not bother to read or confirm her flight schedule as printed on
the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels
of Europe, considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did
not join the tour. Lotus European tour organizer, Insight International Tours Ltd.,
determines the cost of a package tour based on a minimum number of projected
participants. For this reason, it is accepted industry practice to disallow refund for
individuals who failed to take a booked tour. [3]

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

which reads:

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

1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty
Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when the complaint was filed;

2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;

3. Dismissing the defendants counterclaim, for lack of merit; and

4. With costs against the defendant.

SO ORDERED. [5]

The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not presented
as witness to rebut petitioners testimony. However, petitioner should have verified
the exact date and time of departure by looking at her ticket and should have simply
not relied on Menors verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and accordingly, deducted 10% from
the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled to
any form of damages. Petitioner also forfeited her right to the Jewels of Europe tour
and must therefore pay respondent the balance of the price for the British Pageant
tour. The dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October
26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED
requiring the plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British Pageant Package Tour, the same to earn
legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the time
the counterclaim was filed until the finality of this decision. After this decision becomes final
and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The award of
attorneys fees is DELETED. Costs against the plaintiff-appellee.

SO ORDERED. [6]

Upon denial of her motion for reconsideration, petitioner filed the instant petition
[7]

under Rule 45 on the following grounds:


I

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

II

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

III

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

Petitioner contends that respondent did not observe the standard of care required
of a common carrier when it informed her wrongly of the flight schedule. She could
not be deemed more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation. If she were
negligent at all, the same is merely contributory and not the proximate cause of the
damage she suffered. Her loss could only be attributed to respondent as it was the
direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price. Such person or association of
[9]

persons are regarded as carriers and are classified as private or special carriers and
common or public carriers. A common carrier is defined under Article 1732 of the
[10]
Civil Code as persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make
travel arrangements in their behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking customers
for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents obligation to
petitioner in this regard was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners booking, ticketing and accommodation in
the package tour. In contrast, the object of a contract of carriage is
the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of
carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with
due regard for all the circumstances. As earlier stated, however, respondent is not a
[11]

common carrier but a travel agency. It is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family under
Article 1173 of the Civil Code. This connotes reasonable care consistent with that
[12]

which an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the performance
of an obligation is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. [13]

In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since respondent
did not call Menor to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e) of the Rules of Court that
[14]

evidence willfully suppressed would be adverse if produced and thus considered


petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioners assertion is belied by the evidence on record. The date
and time of departure was legibly written on the plane ticket and the travel papers
were delivered two days in advance precisely so that petitioner could prepare for the
trip. It performed all its obligations to enable petitioner to join the tour and exercised
due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony
could not give rise to an inference unfavorable to the form