G.R. No.
L-47822 December 22, 1988 Only 150 boxes of Liberty filled milk were delivered to
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO
CENDANA, respondents.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in
buying up used bottles and scrap metal in Pangasinan. Upon
gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two
(2) six-wheeler trucks which he owned for hauling the material
to Manila. On the return trip to Pangasinan, respondent would
load his vehicles with cargo which various merchants wanted
delivered to differing establishments in Pangasinan. For that
service, respondent charged freight rates which were commonly
lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a
merchant and authorized dealer of General Milk Company
(Philippines), Inc. in Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of Liberty filled milk
from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December
1970. Accordingly, on 1 December 1970, respondent loaded in
Makati the merchandise on to his trucks: 150 cartons were
loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven
by Manuel Estrada, respondent's driver and employee.
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.
FIRST PHILIPPINE INDUSTRIAL
CORPORATION, petitioner, vs. COURT OF
APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C.
ARELLANO, in her official capacity as City
Treasurer of Batangas, respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of
the Court of Appeals dated November 29, 1995, in CA-G.R. SP
No. 36801, affirming the decision of the Regional Trial Court of
Batangas City, Branch 84, in Civil Case No. 4293, which
dismissed petitioners' complaint for a business tax refund
imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under
Republic Act No. 387, as amended, to contract, install and
operate oil pipelines. The original pipeline concession was
granted in 1967[1]and renewed by the Energy Regulatory Board
in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's
permit with the Office of the Mayor of Batangas City. However,
before the mayor's permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its gross
receipts for the fiscal year 1993 pursuant to the Local
Government Code.[3] The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable
in four installments based on the gross receipts for products
pumped at GPS-1 for the fiscal year 1993 which amounted
to P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount
of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest
addressed to the respondent City Treasurer, the pertinent portion
of which reads:
"Please note that our Company (FPIC) is a pipeline operator
with a government concession granted under the Petroleum
Act. It is engaged in the business of transporting petroleum
products from the Batangas refineries, via pipeline, to Sucat and
JTF Pandacan Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the
enumeration of contractors under Section 131, Paragraph (h) of
the Local Government Code. Therefore, the authority to impose
tax 'on contractors and other independent contractors' under
Section 143, Paragraph (e) of the Local Government Code does
not include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere
fee authorized under Section 147 of the Local Government
Code. The said section limits the imposition of fees and charges
on business to such amounts as may be commensurate to the cost
of regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited
provision. The amount of P956,076.04 (P239,019.01 per
quarter) is not commensurate to the cost of regulation,
inspection and licensing. The fee is already a revenue raising
measure, and not a mere regulatory imposition."[4]
 On March 8, 1994, the respondent City Treasurer denied the "xxx Plaintiff is either a contractor or other independent
protest contending that petitioner cannot be considered engaged contractor.
in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code.[5] xxx the exemption to tax claimed by the plaintiff has become
unclear. It is a rule that tax exemptions are to be strictly
On June 15, 1994, petitioner filed with the Regional Trial
construed against the taxpayer, taxes being the lifeblood of the
Court of Batangas City a complaint[6] for tax refund with prayer
government.Exemption may therefore be granted only by clear
for a writ of preliminary injunction against respondents City of
and unequivocal provisions of law.
Batangas and Adoracion Arellano in her capacity as City
Treasurer. In its complaint, petitioner alleged, inter alia, that:
"Plaintiff claims that it is a grantee of a pipeline concession
(1) the imposition and collection of the business tax on its gross
under Republic Act 387, (Exhibit A) whose concession was
receipts violates Section 133 of the Local Government Code; (2)
lately renewed by the Energy Regulatory Board (Exhibit B). Yet
the authority of cities to impose and collect a tax on the gross
neither said law nor the deed of concession grant any tax
receipts of "contractors and independent contractors" under Sec.
exemption upon the plaintiff.
141 (e) and 151 does not include the authority to collect such
taxes on transportation contractors for, as defined under Sec. 131
"Even the Local Government Code imposes a tax on franchise
(h), the term "contractors" excludes transportation contractors;
holders under Sec. 137 of the Local Tax Code. Such being the
and, (3) the City Treasurer illegally and erroneously imposed
situation obtained in this case (exemption being unclear and
and collected the said tax, thus meriting the immediate refund of
equivocal) resort to distinctions or other considerations may be
the tax paid.[7]
of help:
Traversing the complaint, the respondents argued that
petitioner cannot be exempt from taxes under Section 133 (j) of 1. That the exemption granted under Sec. 133 (j)
the Local Government Code as said exemption applies only to encompasses only common carriers so as
"transportation contractors and persons engaged in the not to overburden the riding public or
transportation by hire and common carriers by air, land and commuters with taxes. Plaintiff is not a
water." Respondents assert that pipelines are not included in the common carrier, but a special carrier
term "common carrier" which refers solely to ordinary carriers extending its services and facilities to a
such as trucks, trains, ships and the like. Respondents further single specific or "special customer"
posit that the term "common carrier" under the said code pertains under a "special contract."
to the mode or manner by which a product is delivered to its
destination.[8] 2. The Local Tax Code of 1992 was basically
enacted to give more and effective local
On October 3, 1994, the trial court rendered a decision
autonomy to local governments than the
dismissing the complaint, ruling in this wise:
 previous enactments, to make them Article 1732 of the Civil Code defines a "common carrier"
economically and financially viable to as "any person, corporation, firm or association engaged in the
serve the people and discharge their business of carrying or transporting passengers or goods or both,
functions with a concomitant obligation by land, water, or air, for compensation, offering their services
to accept certain devolution of powers, x to the public."
x x So, consistent with this policy even
The test for determining whether a party is a common
franchise grantees are taxed (Sec. 137)
carrier of goods is:
and contractors are also taxed under Sec.
143 (e) and 151 of the Code."[9]
1. He must be engaged in the business of carrying
goods for others as a public employment, and
Petitioner assailed the aforesaid decision before this
must hold himself out as ready to engage in the
Court via a petition for review. On February 27, 1995, we
transportation of goods for person generally as a
referred the case to the respondent Court of Appeals for
business and not as a casual occupation;
consideration and adjudication.[10] On November 29, 1995, the
respondent court rendered a decision[11] affirming the trial
2. He must undertake to carry goods of the kind to
court's dismissal of petitioner's complaint. Petitioner's motion
which his business is confined;
for reconsideration was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due 3. He must undertake to carry by the method by which
course in a Resolution dated November 11, 1996.[13] Petitioner his business is conducted and over his established
moved for a reconsideration which was granted by this Court in roads; and
a Resolution[14] of January 20, 1997. Thus, the petition was
reinstated. 4. The transportation must be for hire.[15]
Petitioner claims that the respondent Court of Appeals erred
Based on the above definitions and requirements, there is
in holding that (1) the petitioner is not a common carrier or a
no doubt that petitioner is a common carrier. It is engaged in the
transportation contractor, and (2) the exemption sought for by
business of transporting or carrying goods, i.e. petroleum
petitioner is not clear under the law.
products, for hire as a public employment. It undertakes to carry
There is merit in the petition. for all persons indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land and for
A "common carrier" may be defined, broadly, as one who
compensation. The fact that petitioner has a limited clientele
holds himself out to the public as engaged in the business of
does not exclude it from the definition of a common
transporting persons or property from place to place, for
carrier. In De Guzman vs. Court of Appeals[16] we ruled that:
compensation, offering his services to the public generally.
"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
exceptionunder 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.
SO ORDERED.
NATIONAL STEEL cost against plaintiff, and ordering plaintiff to pay the defendant
CORPORATION, petitioner, vs. COURT OF on the counterclaim as follows:
APPEALS AND VLASONS SHIPPING,
INC., respondents. 1. The sum of P75,000.00 as unpaid freight
and P88,000.00 as demurrage with interest at the
VLASONS SHIPPING, INC., petitioner, vs. COURT OF
legal rate on both amounts from April 7, 1976 until
APPEALS AND NATIONAL STEEL
the same shall have been fully paid;
CORPORATION, respondents.
2. Attorneys fees and expenses of litigation in the sum
DECISION of P100,000.00; and
PANGANIBAN, J.: 3. Cost of suit.

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
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.

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
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 I seaworthy and fit for holding, carrying
and safekeeping the cargo. Ineluctably, the burden of proof was
placed on NSC by the parties agreement.
This view finds further support in the Code of Commerce
which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and
venture of the shipper, if the contrary has not been expressly
stipulated.
Therefore, the damage and impairment suffered by the goods
during the transportation, due to fortuitous event, force majeure,
or the nature and inherent defect of the things, shall be for the
account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages
arising from the cause mentioned in the preceding article if
proofs against him show that they occurred on account of his
negligence or his omission to take the precautions usually
adopted by careful persons, unless the shipper committed fraud
in the bill of lading, making him to believe that the goods were
of a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the
shipowners obligations are governed by the foregoing
provisions of the Code of Commerce and not by the Civil Code
which, as a general rule, places the prima facie presumption of
negligence on a common carrier. It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to,
cargo, the burden is on the plaintiff to prove that the carrier was
negligent or unseaworthy, and the fact that the goods were lost
or damaged while in the carriers custody does not put the burden
of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only
to exercise due care in the protection of the goods committed to
its care, the burden of proving negligence or a breach of that duty
rests on plaintiff and proof of loss of, or damage to, cargo while
in the carriers possession does not cast on it the burden of
proving proper care and diligence on its part or that the loss
occurred from an excepted cause in the contract or bill of
lading. However, in discharging the burden of proof, plaintiff is
entitled to the benefit of the presumptions and inferences by
which the law aids the bailor in an action against a bailee, and
since the carrier is in a better position to know the cause of the
loss and that it was not one involving its liability, the law
requires that it come forward with the information available to
it, and its failure to do so warrants an inference or presumption
of its liability. However, such inferences and presumptions,
while they may affect the burden of coming forward with
evidence, do not alter the burden of proof which remains 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 Iseaworthy 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 andequipped; 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?
officer of VSI, testified thus:
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
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 NSC failed or neglected to protect itself with such insurance
right to litigate or seek judicial redress of legitimate should not adversely affect VSI, which had nothing to do with
grievances. [45] such failure or neglect.
WHEREFORE, premises considered, the instant
consolidated petitions are hereby DENIED. The questioned
Epilogue Decision of the Court of Appeals is AFFIRMED with the
MODIFICATION that the demurrage awarded to VSI is
At bottom, this appeal really hinges on a factual deleted. No pronouncement as to costs.
issue: when, how and who caused the damage to the SO ORDERED.
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
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO,
respondents.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO
DETERMINE COMMON CARRIER. — Article 1732 of the
Civil Code defines a common carrier as "(a) person, corporation
or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air,
for compensation, offering their services to the public." The test
to determine a common carrier is "whether the given
undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." . .
. The holding of the Court in De Guzman 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.
VALENZUELA HARDWOOD AND INDUSTRIAL
SUPPLY, INC., petitioner, vs. COURT OF
APPEALS AND SEVEN BROTHERS SHIPPING
CORPORATION, respondents.
DECISION
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[1] valid? This is the main question
raised in this petition for review assailing the Decision of
Respondent Court of Appeals[2] in CA-G.R. No. CV-20156
promulgated 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.[5] In modifying the RTC judgment, the
respondent appellate court ratiocinated 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.[7] There the Court 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.[10] The validity of this stipulation is the lis mota of
this 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.[11] Likewise undisputed is the 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,[13] citing 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:
(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[14] and Articles 1170 and 1173 of the Civil
Code.Citing Article 1306 and paragraph 1, Article 1409 of the
Civil Code,[15] petitioner further contends that said stipulation
gives no duty or obligation to 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[17] of the Civil Code, such
stipulation is valid 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.[18] In that case, the trial court similarly nullified a 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.[19] (Underscoring supplied.)
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.[20] This
contention of petitioner 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[21] and
a charter party stipulation which exempts the owner of the vessel
from any loss or damage or delay arising from any other source,
even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose acts
the owner would ordinarily be liable except for said
paragraph.[22] Undoubtedly, Home Insurance is applicable to the
case at bar.
The naked assertion of petitioner that the American rule
enunciated in Home Insurance is not the rule in the
Philippines[23] deserves scant consideration. The Court 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 decisisand 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.[25] We are not persuaded. Whatever
rights petitioner may have under the 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.[26] Being
patently and undoubtedly patrimonial, petitioners 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[27] which read:
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[28] provides the standard
of ordinary 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.[29] which, in turn, quoted Juan Ysmael & Co. vs. Gabino
Barreto & Co.[30] and argues that the public policy
considerations stated there vis--vis contractual stipulations
limiting the carriers liability be applied with equal force to this
case.[31] It also cites Manila Railroad Co. vs. Compaia
Transatlantica[32] and contends that stipulations exempting a
party from liability for damages due to negligence should not be
countenanced and should be strictly construed against the party
claiming its benefit.[33] We disagree.
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.[34] In the present case, we stress that the private
respondent made no such 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,[35] Walter A. Smith & Co. vs. Cadwallader
Gibson Lumber Co.,[36] N. T. Hashim and Co. vs. Rocha and
Co.,[37] Ohta Development Co. vs.
SteamshipPompey[38] and Limpangco Sons vs. Yangco
Steamship Co.[39] in support of its contention that the shipowner
be held liable for damages.[40] These however are 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.[41] In view of
the above disquisition upholding the 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[42] affirming the liability of 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.
 Sps. Cruz v. Sun Holidays
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a
Complaint on January 25, 2001[1] against Sun Holidays, Inc.
(respondent) with the Regional Trial Court (RTC) of Pasig City
for damages arising from the death of their son Ruelito C. Cruz
(Ruelito) who perished with his wife on September 11, 2000 on
board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the
couple had stayed at Coco Beach Island Resort (Resort) owned
and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort
from September 9 to 11, 2000 was by virtue of a tour package-
contract with respondent that included transportation to and
from the Resort and the point of departure in Batangas.
[2]
Miguel C. Matute (Matute), 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 Beachmountain that was
sheltered from the wind where they boarded M/B Coco Beach
III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther
away from Puerto Galera and into the open seas, the rain and
wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one
of the crew members.
The waves got more unwieldy. After getting hit by two
big waves which came one after the other, M/B Coco Beach
III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to
get out of the boat. Upon seeing the captain, Matute and the
other passengers who reached the surface asked him what they
could do to save the people who were still trapped under the
boat. The captain replied Iligtas niyo na lang ang sarili
niyo (Just save yourselves).
Help came after about 45 minutes when two boats owned by
Asia Divers in Sabang, Puerto Galera passed by the
capsized M/B Coco Beach III. Boarded on those two boats were
22 persons, consisting of 18 passengers and four crew members,
who were brought to Pisa Island. Eight passengers, including
petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed
as a contractual worker for Mitsui Engineering & Shipbuilding
Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of
$900.[3]
Petitioners, by letter of October 26, 2000,[4] demanded
indemnification from respondent for the death of their son in the
amount of at least P4,000,000.
Replying, respondent, by letter dated November 7,
2000,[5] denied any responsibility for the incident which it
considered to be a fortuitous event. It nevertheless offered, as an
act of commiseration, the amount of P10,000 to petitioners upon
their signing of a waiver.
As petitioners declined respondents offer, they filed the
Complaint, as earlier reflected, alleging that respondent, as a
common carrier, was guilty of negligence in allowing M/B Coco
Beach III to sail notwithstanding storm warning bulletins issued
by the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.[6]
In its Answer,[7] respondent denied being a common carrier,
alleging that its boats are not available to the general public as
they only ferry Resort guests and crew members. Nonetheless,
it claimed that it exercised the utmost diligence in ensuring the
safety of its passengers; contrary to petitioners allegation, there
was no storm on September 11, 2000 as the Coast Guard in fact
cleared the voyage; and M/B Coco Beach III was not filled to
capacity and had sufficient life jackets for its passengers. By
way of Counterclaim, respondent alleged that it is entitled to an
award for attorneys fees and litigation expenses amounting to
not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the
Resort customarily requires four conditions to be met before a
boat is allowed to sail, to wit: (1) the sea is calm, (2) there is
clearance from the Coast Guard, (3) there is clearance from the
captain and (4) there is clearance from the Resorts assistant
manager.[8] He added that M/B Coco Beach III met all four
conditions on September 11, 2000,[9] but a subasco or squall,
characterized by strong winds and big waves, suddenly
occurred, causing the boat to capsize.[10]
By Decision of February 16, 2005,[11] Branch 267 of the Pasig
RTC dismissed petitioners Complaint and respondents
Counterclaim.
Petitioners Motion for Reconsideration having been denied by
Order dated September 2, 2005,[12] they appealed to the Court of
Appeals.
By Decision of August 19, 2008,[13] the appellate court
denied petitioners appeal, holding, among other things, that the
trial court correctly ruled that respondent is a private carrier
which is only required to observe ordinary diligence; that
respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that
the proximate cause of the incident was a squall, a fortuitous
event.
Petitioners Motion for Reconsideration having been denied by
Resolution dated January 16, 2009,[14] they filed the present
Petition for Review.[15]
Petitioners maintain the position they took before the
trial court, adding that respondent is a common carrier since by
its tour package, the transporting of its guests is an integral part
of its resort business. They inform that another division of the
appellate court in fact held respondent liable for damages to the
other survivors of the incident.

Upon the other hand, respondent contends that petitioners failed
to present evidence to prove that it is a common carrier; that the
Resorts ferry services for guests cannot be considered as
ancillary to its business as no income is derived therefrom; that
it exercised extraordinary diligence as shown by the conditions
it had imposed before allowing M/B Coco Beach III to sail; that
the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case
wherein the appellate court held it liable for damages involved
different plaintiffs, issues and evidence.[16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of
Appeals[17] in characterizing respondent as a common carrier.
The Civil Code defines common carriers in the
following terms:
Article 1732. Common carriers
are persons, corporations, firms or
associations engaged in the
business of carrying or
transporting passengers or goods
or both, by land, water, or air for
compensation, offering their
services to the public.
The above article makes no
distinction between one whose principal
business activity is the carrying of persons or
goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as
a sideline). Article 1732 also carefully avoids
making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguish 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 cause of the
loss. And it should have exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
fortuitous event.[25]
Respondent cites the squall that occurred during the voyage as
the fortuitous event that overturned M/B Coco Beach III. As
reflected above, however, the occurrence of squalls was
expected under the weather condition of September 11,
2000. Moreover, evidence shows that M/B Coco Beach
III suffered engine trouble before it capsized and sank.[26] The
incident was, therefore, not completely free from human
intervention.
The Court need not belabor how respondents evidence likewise
fails to demonstrate that it exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
squall.

Article 1764[27] vis--vis Article 2206[28] of the Civil
Code holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to pay the
following: (1) indemnity for death, (2) indemnity for loss of
earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of
Ruelito which is fixed at P50,000.[29]
As for damages representing unearned income, the
formula for its computation is:
Net Earning Capacity = life expectancy x (gross
annual income -
reasonable and
necessary living
expenses).
Life expectancy is determined in accordance
with the formula:
2 / 3 x [80 age of deceased at the time of death][30]
The first factor, i.e., life expectancy, is computed by
applying the formula (2/3 x [80 age at death]) adopted in the
American Expectancy Table of Mortality or the Actuarial of
Combined Experience Table of Mortality.[31]
The second factor is computed by multiplying the life
expectancy by the net earnings of the deceased, i.e., the total
earnings less expenses necessary in the creation of such earnings
or income and less living and other incidental expenses.[32] The
loss is not equivalent to the entire earnings of the deceased, but
only such portion as he would have used to support his
dependents or heirs. Hence, to be deducted from his gross
earnings are the necessary expenses supposed to be used by the
deceased for his own needs.[33]
In computing the third factor necessary living
expense, Smith Bell Dodwell Shipping Agency Corp. v.
Borja[34] teaches that when, as in this case, there is no showing
that the living expenses constituted the smaller percentage of the
gross income, the living expenses are fixed at half of the gross
income.
Applying the above guidelines, the Court determines
Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at
the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a
basic monthly salary of $900[35] which, when converted to
Philippine peso applying the annual average exchange rate of $1
= P44 in 2000,[36] amounts to P39,600. Ruelitos net earning
capacity is thus computed as follows:
Net Earning Capacity = life expectancy x (gross annual
income -
reasonable and necessary living expenses).

= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since
respondent common carriers breach of contract of carriage
resulted in the death of petitioners son, following Article
1764 vis--vis Article 2206 of the Civil Code, petitioners are
entitled to moral damages.
Since respondent failed to prove that it exercised the
extraordinary diligence required of common carriers, it is
presumed to have acted recklessly, thus warranting the award
too of exemplary damages, which are granted in contractual
obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.[37]
Under the circumstances, it is reasonable to award
petitioners the amount of P100,000 as moral damages
and P100,000 as exemplary damages.[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's
fees may also be awarded where exemplary damages are
awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of
Appeals[40] teaches that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for
payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit
1. When the obligation is breached, and it
consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due
should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be
computed from default, i.e., from judicial or
extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
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 The total amount adjudged against respondent shall earn interest
base for the computation of legal interest shall, in at the rate of 12% per annum computed from the finality of this
any case, be on the amount finally adjudged. decision until full payment.

3. When the judgment of the court SO ORDERED.

awarding a sum of money becomes final and
executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality
until its satisfaction, this interim period being
deemed to be by then an equivalent to a
forbearance of credit. (emphasis supplied).

Since the amounts payable by respondent have been determined

with certainty only in the present petition, the interest due shall
be computed upon the finality of this decision at the rate of 12%
per annum until satisfaction, in accordance with paragraph
number 3 of the immediately cited guideline in Easter Shipping
Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19,

2008 is REVERSED and SET ASIDE. Judgment is rendered
in favor of petitioners ordering respondent to pay petitioners the
following: (1) P50,000 as indemnity for the death of Ruelito
Cruz; (2) P8,316,000 as indemnity for Ruelitos loss of earning
capacity; (3) P100,000 as moral damages; (4) P100,000 as
exemplary damages; (5) 10% of the total amount adjudged
against respondent as attorneys fees; and (6) the costs of suit.