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FACTS:

 Davao Union Marketing Corporation (DUMC) contracted the services of


PKS Shipping Company (PKS Shipping) for the shipment to Tacloban City
of 75,000 bags of cement worth P3,375,000.
 DUMC insured the goods for its full value with Philippine American
General Insurance Company (Philamgen).
 The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping.
 December 22, 1988 9 pm: While Limar I was being towed by PKS’ tugboat MT Iron Eagle, the
barge sank a couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing
down with it the entire cargo of 75,000 bags of cement.
 DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen
promptly made payment; it then sought reimbursement from PKS Shipping of the sum paid to
DUMC but the shipping company refused to pay so Philamgen to file suit against PKS Shipping
 RTC: dismissed the complaint - fortuitous event
 CA:Affirmed - not a common carrier but a casual occupation
ISSUE: W/N PKS Shipping is NOT liable since it was NOT a common carrier

HELD: NO. Petition is DENIED

Article 1732. Common carriers are persons, corporations, firms or


associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air for compensation, offering their
services to the public
 Complementary is Section 13, paragraph (b), of the Public Service Act

public service" to be –
"x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed
route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice
refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or
wireless communication systems, wire or wireless broadcasting stations and
other similar public services
 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
 distinction between:
 common or public carrier
 private or special carrier - character of the business, such that if the
undertaking is an isolated transaction , not a part of the business or
occupation, and the carrier does not hold itself out to carry the goods for
the general public or to a limited clientele, although involving the carriage
of goods for a fee
 EX: charter party which includes both the vessel and its crew, such as in
a bareboat or demise, where the charterer obtains the use and service of
all or some part of a ship for a period of time or a voyage or voyages and
gets the control of the vessel and its crew.
 The regularity of its activities in this area indicates more than just a
casual activity on its part
 The appellate court ruled, gathered from the testimonies and sworn
marine protests of the respective vessel masters ofLimar I and MT Iron
Eagle, that there was no way by which the barge’s or the tugboat’s crew
could have prevented the sinking of Limar I. The vessel was suddenly
tossed by waves of extraordinary height of 6 to 8 feet and buffeted by
strong winds of 1.5 knots resulting in the entry of water into the barge’s
hatches. The official Certificate of Inspection of the barge issued by the
Philippine Coastguard and the Coastwise Load Line Certificate would
attest to the seaworthiness of Limar I and should strengthen the factual
findings of the appellate court.
 Findings of fact of the Court of Appeals generally conclude this Court;
none of the recognized exceptions from the rule - (1) when the factual
findings of the Court of Appeals and the trial court are contradictory; (2)
when the conclusion is a finding grounded entirely on speculation,
surmises, or conjectures; (3) when the inference made by the Court of
Appeals from its findings of fact is manifestly mistaken, absurd, or
impossible; (4) when there is a grave abuse of discretion in the
appreciation of facts; (5) when the appellate court, in making its findings,
went beyond the issues of the case and such findings are contrary to the
admissions of both appellant and appellee; (6) when the judgment of the
Court of Appeals is premised on a misapprehension of facts; (7) when the
Court of Appeals failed to notice certain relevant facts which, if properly
considered, would justify a different conclusion; (8) when the findings of
fact are themselves conflicting; (9) when the findings of fact are
conclusions without citation of the specific evidence on which they are
based; and (10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence but such findings are contradicted
by the evidence on record – would appear to be clearly extant in this
instance.
[G.R. No. 149038. April 9, 2003]
PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, petitioner, vs. PKS SHIPPING
COMPANY, respondent.

DECISION
VITUG, J.:

The petition before the Court seeks a review of the decision of the Court of
Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has
affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of
Makati, dismissing the complaint for damages filed by petitioner insurance
corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of
respondent PKS Shipping Company (PKS Shipping) for the shipment to
Tacloban City of seventy-five thousand (75,000) bags of cement worth Three
Million Three Hundred Seventy-Five Thousand Pesos (P3,375,000.00). DUMC
insured the goods for its full value with petitioner Philippine American General
Insurance Company (Philamgen). The goods were loaded aboard the dumb
barge Limar I belonging to PKS Shipping. On the evening of 22 December
1988, about nine oclock, while Limar I was being towed by respondents
tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of
Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo
of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought reimbursement
from PKS Shipping of the sum paid to DUMC but the shipping company refused
to pay, prompting Philamgen to file suit against PKS Shipping with the Makati
RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo
could have been caused either by a fortuitous event, in which case the ship
owner was not liable, or through the negligence of the captain and crew of the
vessel and that, under Article 587 of the Code of Commerce adopting the
Limited Liability Rule, the ship owner could free itself of liability by abandoning,
as it apparently so did, the vessel with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in
toto the decision of the trial court. The appellate court ruled that evidence to
establish that PKS Shipping was a common carrier at the time it undertook to
transport the bags of cement was wanting because the peculiar method of the
shipping companys carrying goods for others was not generally held out as a
business but as a casual occupation. It then concluded that PKS Shipping, not
being a common carrier, was not expected to observe the stringent
extraordinary diligence required of common carriers in the care of goods. The
appellate court, moreover, found that the loss of the goods was sufficiently
established as having been due to fortuitous event, negating any liability on the
part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has
committed a patent error in ruling that PKS Shipping is not a common carrier
and that it is not liable for the loss of the subject cargo. The fact that respondent
has a limited clientele, petitioner argues, does not militate against respondents
being a common carrier and that the only way by which such carrier can be held
exempt for the loss of the cargo would be if the loss were caused by natural
disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered
the Philippine area of responsibility and that, even if it did, respondent would
not be exempt from liability because its employees, particularly the tugmaster,
have failed to exercise due diligence to prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied
because what Philamgen seeks is not a review on points or errors of law but a
review of the undisputed factual findings of the RTC and the appellate court. In
any event, PKS Shipping points out, the findings and conclusions of both courts
find support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils
down to the question of whether it is a private carrier or a common carrier and,
in either case, to the other question of whether or not it has observed the proper
diligence (ordinary, if a private carrier, or extraordinary, if a common carrier)
required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly when such
findings are consistent with those of the trial court, may not at liberty be
reviewed by this Court in a petition for review under Rule 45 of the Rules of
Court. The conclusions derived from those factual findings, however, are not
[1]

necessarily just matters of fact as when they are so linked to, or inextricably
intertwined with, a requisite appreciation of the applicable law. In such
instances, the conclusions made could well be raised as being appropriate
issues in a petition for review before this Court. Thus, an issue whether a carrier
is private or common on the basis of the facts found by a trial court or the
appellate court can be a valid and reviewable question of law.
The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations


engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.

Complementary to the codal definition is Section 13, paragraph (b), of the Public
Service Act; it defines public service to be

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

The prevailing doctrine on the question is that enunciated in the leading


case of De Guzman vs. Court of Appeals. Applying Article 1732 of the Code,
[2]

in conjunction with Section 13(b) of the Public Service Act, this Court has held:

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

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

Much of the distinction between a common or public carrier and a private or


special carrier lies in the character of the business, such that if the undertaking
is an isolated transaction, not a part of the business or occupation, and the
carrier does not hold itself out to carry the goods for the general public or to a
limited clientele, although involving the carriage of goods for a fee, the person
[3]

or corporation providing such service could very well be just a private carrier. A
typical case is that of a charter party which includes both the vessel and its
crew, such as in a bareboat or demise, where the charterer obtains the use and
service of all or some part of a ship for a period of time or a voyage or
voyages and gets the control of the vessel and its crew. Contrary to the
[4] [5]

conclusion made by the appellate court, its factual findings indicate that PKS
Shipping has engaged itself in the business of carrying goods for others,
although for a limited clientele, undertaking to carry such goods for a fee. The
regularity of its activities in this area indicates more than just a casual activity
on its part. Neither can the concept of a common carrier change merely
[6]

because individual contracts are executed or entered into with patrons of the
carrier. Such restrictive interpretation would make it easy for a common carrier
to escape liability by the simple expedient of entering into those distinct
agreements with clients.
Addressing now the issue of whether or not PKS Shipping has exercised
the proper diligence demanded of common carriers, Article 1733 of the Civil
Code requires common carriers to observe extraordinary diligence in the
vigilance over the goods they carry. In case of loss, destruction or deterioration
of goods, common carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them. The provisions
[7]

of Article 1733, notwithstanding, common carriers are exempt from liability for
loss, destruction, or deterioration of the goods due to any of the following
causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;


(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;
and

(5) Order or act of competent public authority. [8]

The appellate court ruled, gathered from the testimonies and sworn marine
protests of the respective vessel masters of Limar I and MT Iron Eagle, that
there was no way by which the barges or the tugboats crew could have
prevented the sinking of Limar I. The vessel was suddenly tossed by waves of
extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of
1.5 knots resulting in the entry of water into the barges hatches. The official
Certificate of Inspection of the barge issued by the Philippine Coastguard and
the Coastwise Load Line Certificate would attest to the seaworthiness of Limar
I and should strengthen the factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none
of the recognized exceptions from the rule - (1) when the factual findings of the
Court of Appeals and the trial court are contradictory; (2) when the conclusion
is a finding grounded entirely on speculation, surmises, or conjectures; (3) when
the inference made by the Court of Appeals from its findings of fact is manifestly
mistaken, absurd, or impossible; (4) when there is a grave abuse of discretion
in the appreciation of facts; (5) when the appellate court, in making its findings,
went beyond the issues of the case and such findings are contrary to the
admissions of both appellant and appellee; (6) when the judgment of the Court
of Appeals is premised on a misapprehension of facts; (7) when the Court of
Appeals failed to notice certain relevant facts which, if properly considered,
would justify a different conclusion; (8) when the findings of fact are themselves
conflicting; (9) when the findings of fact are conclusions without citation of the
specific evidence on which they are based; and (10) when the findings of fact
of the Court of Appeals are premised on the absence of evidence but such
findings are contradicted by the evidence on record would appear to be clearly
extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS
Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
Pedro de Guzman v. Court of Appeals G.R. No. L-47822, December 22, 1988 PARTIES: Pedro de Guzman,
petitioner Court of Appeals and Ernesto Cendana, respondents BRIEF STATEMENT OF THE CASE: Breach
of the contract to carry Extraordinary diligence needed over common carriers BRIEF STATEMENT OF THE
FACTS: Ernesto Cendana 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 (2) two six-wheeler trucks which he owned for the purpose. Upon returning to
Pangasinan, he would load his vehicle with cargo belonging to different merchants to different
establishments in Pangasisnan which respondents charged a freight fee for. Sometime in November
1970, herein petitioner Pedro de Guzman, a merchant and dealer of General Milk Company Inc. in
Pangasinan contracted with respondent for hauling 750 cartons of milk. Unfortunately, only 150 cartons
made it, as the other 600 cartons were intercepted by hijackers along Marcos Highway. Hence,
petitioners commenced an action against private respondent. In his defense, respondent argued that he
cannot be held liable due to force majuere, and that he is not a common carrier and hence is not
required to exercise extraordinary diligence. On appeal before the Court of Appeals, Cendana 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 Cendana 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. De Guzman came to
the Supreme Court by way of a Petition for Review. ISSUES: 1. Is respondent a common carrier? 2. Is the
respondent liable for the loss of the cartons of milk due to force majeure? ARGUMENTS: 1. Herein
respondent is considered as a common carrier. Article 1732 of the New Civil Code avoids any 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. It also avoids a distinction between a person or
enterprise offering transportation services on a regular or scheduled basis and one offering such
services on an occasional, episodic, and unscheduled basis. 2. Respondent is not liable for the value of
the undelivered merchandise . Article 1734 of the Civil Code- The general rule is established by the
article 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: a. Flood, storm,
earthquake, lightning or other natural disasters; b. Act of the public enemy, whether international or
civil; c. Act or omission of the shipper or owner of the goods; d. Character of the goods or defects in the
packing; e. Order or act of competent public authority. Applying the above article, 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, 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. Article 1745: 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 do not act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and (7) that the common carrier shall not responsible for the
loss, destruction or deterioration of goods on account of the defective condition of the car vehicle, ship,
airplane or other equipment used in the contract of carriage. (Emphasis supplied) Under Article 1745 (6)
above, a common carrier is held responsible — and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or robbers, except where such thieves or robbers
in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or
force." The decision of the trial court shows that the armed men who held up the second truck owned
by private respondent acted with grave, if not irresistible, threat, violence or force, which is an
exception of the general rule of Article 1745 (6). RULING: The Petition for Review on certiorari is hereby
DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. 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.

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,


vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

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

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

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

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

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

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

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

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

1. that private respondent was not a common carrier;

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

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

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.

G.R. No. 125948. December 29, 1998]


FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT
OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS
CITY and ADORACION C. ARELLANO, in her official capacity as City
Treasurer of Batangas, respondents.

DECISION
MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court
of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a
business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
1967[1] and renewed by the Energy Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993
pursuant to the Local Government Code.[3] The respondent City Treasurer assessed a business tax
on the petitioner amounting to P956,076.04 payable in four installments based on the gross receipts
for products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In
order not to hamper its operations, petitioner paid the tax under protest in the amount
of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:

"Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to Sucat
and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on
gross receipts under Section 133 of the Local Government Code of 1991 x x x x

"Moreover, Transportation contractors are not included in the enumeration of


contractors under Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax 'on contractors and other independent
contractors' under Section 143, Paragraph (e) of the Local Government Code does not
include the power to levy on transportation contractors.

"The imposition and assessment cannot be categorized as a mere fee authorized under
Section 147 of the Local Government Code. The said section limits the imposition of
fees and charges on business to such amounts as may be commensurate to the cost of
regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable
for the license fee, the imposition thereof based on gross receipts is violative of the
aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and licensing. The fee is already a
revenue raising measure, and not a mere regulatory imposition."[4]

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner
cannot be considered engaged in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint[6] for tax refund with prayer for a writ of preliminary injunction against respondents City
of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts
violates Section 133 of the Local Government Code; (2) the authority of cities to impose and
collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e)
and 151 does not include the authority to collect such taxes on transportation contractors for, as
defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the
City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the
immediate refund of the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes
under Section 133 (j) of the Local Government Code as said exemption applies only to
"transportation contractors and persons engaged in the transportation by hire and common carriers
by air, land and water." Respondents assert that pipelines are not included in the term "common
carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the
like. Respondents further posit that the term "common carrier" under the said code pertains to the
mode or manner by which a product is delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this
wise:

"xxx Plaintiff is either a contractor or other independent contractor.

xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that
tax exemptions are to be strictly construed against the taxpayer, taxes being the
lifeblood of the government. Exemption may therefore be granted only by clear and
unequivocal provisions of law.

"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387,
(Exhibit A) whose concession was lately renewed by the Energy Regulatory Board
(Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption
upon the plaintiff.

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

1. That the exemption granted under Sec. 133 (j) encompasses


only common carriers so as not to overburden the riding public or
commuters with taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities to a single
specific or "special customer" under a "special contract."

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

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

1. He must be engaged in the business of carrying goods for others as a public


employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation;

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


confined;

3. He must undertake to carry by the method by which his business is


conducted and over his established roads; and

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

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

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

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

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

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

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

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

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

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

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in


transporting petroleum products, it is considered a common carrier under Republic
Act No. 387 x x x. Such being the case, it is not subject to withholding tax prescribed
by Revenue Regulations No. 13-78, as amended."

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government
Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government
Units. - Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of the
following :

xxxxxxxxx

(j) Taxes on the gross receipts of transportation contractors and persons


engaged in the transportation of passengers or freight by hire and
common carriers by air, land or water, except as provided in this Code."

The deliberations conducted in the House of Representatives on the Local Government Code
of 1991 are illuminating:

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

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

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

Still on page 95, subparagraph 5, on taxes on the business of transportation. This


appears to be one of those being deemed to be exempted from the taxing powers of
the local government units. May we know the reason why the transportation
business is being excluded from the taxing powers of the local government units?

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

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

What we want to guard against here, Mr. Speaker, is the imposition of taxes by
local government units on the carrier business. Local government units may
impose taxes on top of what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125
[now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]

It is clear that the legislative intent in excluding from the taxing power of the local government
unit the imposition of business tax against common carriers is to prevent a duplication of the so-
called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.

G.R. No. 147079 December 21, 2004

A.F. SANCHEZ BROKERAGE INC., petitioners,


vs.
THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION, respondents.

DECISION

CARPIO MORALES, J.:

Before this Court on a petition for Certiorari is the appellate court’s Decision1 of August 10, 2000
reversing and setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil
Case No. 93-76B which dismissed the complaint of respondent FGU Insurance Corporation (FGU
Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez Brokerage).

On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at
Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000
Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the
consignee, Wyeth-Suaco Laboratories, Inc.2The Femenal tablets were placed in 124 cartons and the
Nordiol tablets were placed in 20 cartons which were packed together in one (1) LD3 aluminum
container, while the Trinordial tablets were packed in two pallets, each of which contained 30
cartons.3

Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk
Note No. 4995 pursuant to Marine Open Policy No. 138.4
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),5 it
was discharged "without exception"6 and delivered to the warehouse of the Philippine Skylanders,
Inc. (PSI) located also at the NAIA for safekeeping.7

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco
engaged the services of Sanchez Brokerage which had been its licensed broker since 1984.8 As its
customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees
for the cargo and thereafter delivers it to Wyeth-Suaco.9

On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid
PSI storage fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,10 was
issued. On the receipt, another representative of Sanchez Brokerage, M. Sison,11 acknowledged that
he received the cargoes consisting of three pieces in good condition.12

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes13 which
were thereupon stripped from the aluminum containers14 and loaded inside two transport vehicles
hired by Sanchez Brokerage.15

Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben
Alonso and Tony Akas,16 employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine
and cargo surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU
Insurance.

Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo
City for quality control check.17 The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated
that the delivery consisted of one container with 144 cartons of Femenal and Nordiol and 1 pallet
containing Trinordiol.18

On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the
cargoes by affixing his signature on the delivery receipt.19 Upon inspection, however, he, together
with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol
tablets were in bad order.20 He thus placed a note above his signature on the delivery receipt stating
that 44 cartons of oral contraceptives were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.

Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report21 dated July 31,
1992 stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were "wetted" (sic).22

The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 attached to which was an
"Annexed Schedule" whereon it was indicated that prior to the loading of the cargoes to the broker’s
trucks at the NAIA, they were inspected and found to be in "apparent good condition."24 Also noted
was that at the time of delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell,
which could account for the wetting of the 44 cartons of Femenal and Nordiol tablets.25

On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report26 confirming that 38 x
700 blister packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister
packs of Nordiol tablets were heavily damaged with water and emitted foul smell.

On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection27 of 38 cartons of Femenal


and 3 cartons of Nordiol on the ground that they were "delivered to Hizon Laboratories with heavy
water damaged (sic) causing the cartons to sagged (sic) emitting a foul order and easily attracted
flies."28
Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez Brokerage the payment
of P191,384.25 representing the value of its loss arising from the damaged tablets.

As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim
against FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its
claim under Marine Risk Note Number 4995.

Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance.

On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco,
Sanchez Brokerage, by letter31 of January 7, 1993, disclaimed liability for the damaged goods,
positing that the damage was due to improper and insufficient export packaging; that when the
sealed containers were opened outside the PSI warehouse, it was discovered that some of the loose
cartons were wet,32 prompting its (Sanchez Brokerage’s) representative Morales to inform the Import-
Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the
latter advised to still deliver them to Hizon Laboratories where an adjuster would assess the
damage.33

Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of
Makati City against the Sanchez Brokerage.

The trial court, by Decision34 of July 29, 1996, dismissed the complaint, holding that the Survey
Report prepared by the Elite Surveyors is bereft of any evidentiary support and a mere product of
pure guesswork.35

On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez
Brokerage engaged not only in the business of customs brokerage but also in the transportation and
delivery of the cargo of its clients, hence, a common carrier within the context of Article 1732 of the
New Civil Code.36

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good
order and condition but were in a damaged state when delivered to Wyeth-Suaco, the appellate
court held that Sanchez Brokerage is presumed negligent and upon it rested the burden of proving
that it exercised extraordinary negligence not only in instances when negligence is directly proven
but also in those cases when the cause of the damage is not known or unknown.37

The appellate court thus disposed:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The
Decision of the Court a quo is REVERSED. Another Decision is hereby rendered in favor of
the Appellant and against the Appellee as follows:

1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181,
431.49, with interest thereupon at the rate of 6% per annum, from the date of the
Decision of the Court, until the said amount is paid in full;

2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00
as and by way of attorney’s fees; and

3. The counterclaims of the Appellee are DISMISSED.38


Sanchez Brokerage’s Motion for Reconsideration having been denied by the appellate court’s
Resolution of December 8, 2000 which was received by petitioner on January 5, 2001, it comes to
this Court on petition for certiorari filed on March 6, 2001.

In the main, petitioner asserts that the appellate court committed grave and reversible error
tantamount to abuse of discretion when it found petitioner a "common carrier" within the context of
Article 1732 of the New Civil Code.

Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner
should have taken was to file a petition for review on certiorari since the sole office of a writ of
certiorari is the correction of errors of jurisdiction including the commission of grave abuse of
discretion amounting to lack or excess of jurisdiction and does not include correction of the appellate
court’s evaluation of the evidence and factual findings thereon.

On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to
overcome the presumption of negligence, it being documented that petitioner withdrew from the
warehouse of PSI the subject shipment entirely in good order and condition.39

The petition fails.

Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any
case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to this
Court by filing a petition for review, which would be but a continuation of the appellate process over
the original case.40

The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for
reconsideration of its Decision of August 10, 2000 was received by petitioner on January 5, 2001.
Since petitioner failed to appeal within 15 days or on or before January 20, 2001, the appellate
court’s decision had become final and executory. The filing by petitioner of a petition for certiorari on
March 6, 2001 cannot serve as a substitute for the lost remedy of appeal.

In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not
merely reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction.

Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial
court based on its finding that petitioner is liable for the damage to the cargo as a common
carrier. What petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the
subject of an ordinary appeal.

Where the issue or question involves or affects the wisdom or legal soundness of the decision – not
the jurisdiction of the court to render said decision – the same is beyond the province of a petition
for certiorari.41 The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in
order to review the judgment of lower courts as to its intrinsic correctness, either upon the law or the
facts of the case.42

Procedural technicalities aside, the petition still fails.

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier,
as defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified
that the services the firm offers include the delivery of goods to the warehouse of the consignee or
importer.

ATTY. FLORES:

Q: What are the functions of these license brokers, license customs broker?

WITNESS:

As customs broker, we calculate the taxes that has to be paid in cargos, and those upon
approval of the importer, we prepare the entry together for processing and claims from
customs and finally deliver the goods to the warehouse of the importer.43

Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity.44 The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by law is bereft of merit.
It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article 173345 of the Civil
Code, extraordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.46

The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of Appeals:47

The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and "to use all reasonable
means to ascertain the nature and characteristics of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their nature
requires."48

In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in
NAIA in good order and condition;49 and that upon delivery by petitioner to Hizon Laboratories Inc.,
some of the cargoes were found to be in bad order, as noted in the Delivery Receipt50 issued by
petitioner, and as indicated in the Survey Report of Elite Surveyors51 and the Destruction Report of
Hizon Laboratories, Inc.52

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they
were damaged due to the fault or negligence of the shipper for failing to properly pack them and to
the inherent characteristics of the goods53 ; and that it should not be faulted for following the
instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed
to the latter that some of the cartons, on examination outside the PSI warehouse, were found to be
wet.54

While paragraph No. 4 of Article 173455 of the Civil Code exempts a common carrier from liability if
the loss or damage is due to the character of the goods or defects in the packing or in the
containers, the rule is that if the improper packing is known to the carrier or his employees or is
apparent upon ordinary observation, but he nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not relieved of liability for the resulting damage.56

If the claim of petitioner that some of the cartons were already damaged upon delivery to it were
true, then it should naturally have received the cargo under protest or with reservations duly noted
on the receipt issued by PSI. But it made no such protest or reservation.57

Moreover, as observed by the appellate court, if indeed petitioner’s employees only examined the
cargoes outside the PSI warehouse and found some to be wet, they would certainly have gone back
to PSI, showed to the warehouseman the damage, and demanded then and there for Bad Order
documents or a certification confirming the damage.58 Or, petitioner would have presented, as
witness, the employees of the PSI from whom Morales and Domingo took delivery of the cargo to
prove that, indeed, part of the cargoes was already damaged when the container was allegedly
opened outside the warehouse.59

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead,
it asserts that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse
but such notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon
Laboratories, Inc.

While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992,
he failed to specifically declare what time he received the call. As to whether the call was made at
the PSI warehouse when the shipment was stripped from the airport containers, or when the
cargoes were already in transit to Antipolo, it is not determinable. Aside from that phone call,
petitioner admitted that it had no documentary evidence to prove that at the time it received the
cargoes, a part of it was wet, damaged or in bad condition.60

The 4-page weather data furnished by PAGASA61 on request of Sanchez Brokerage hardly
impresses, no witness having identified it and interpreted the technical terms thereof.

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

ATTY. FLORES:

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

WITNESS:

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

Q: HOW IS IT?

WITNESS:

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

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

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

Costs against petitioner.

SO ORDERED.

G.R. No. 74811 September 30, 1988

CHUA YEK HONG, petitioner,


vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR OLIT, respondents.

Francisco D. Estrada for petitioner.

Purita Hontanosas-Cortes for private respondents.

MELENCIO-HERRERA, J.:

In this Petition for Review on certiorari petitioner seeks to set aside the Decision of respondent Appellate Court in AC G.R. No. 01375 entitled
"Chua Yek Hong vs. Mariano Guno, et al.," promulgated on 3 April 1986, reversing the Trial Court and relieving private respondents
(defendants below) of any liability for damages for loss of cargo.

The basic facts are not disputed:

Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private
respondents are the owners of the vessel, "M/V Luzviminda I," a common carrier engaged in
coastwise trade from the different ports of Oriental Mindoro to the Port of Manila.

In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel
"M/V Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo,
however, did not reach Manila because somewhere between Cape Santiago and Calatagan,
Batangas, the vessel capsized and sank with all its cargo.
On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro, a
Complaint for damages based on breach of contract of carriage against private respondents (Civil
Case No. R-3205).

In their Answer, private respondents averred that even assuming that the alleged cargo was truly
loaded aboard their vessel, their liability had been extinguished by reason of the total loss of said
vessel.

On 17 May 1983, the Trial Court rendered its Decision, the dispositive portion of which follows:

WHEREFORE, in view of the foregoing considerations, the court believes and so


holds that the preponderance of evidence militates in favor of the plaintiff and against
the defendants by ordering the latter, jointly and severally, to pay the plaintiff the sum
of P101,227.40 representing the value of the cargo belonging to the plaintiff which
was lost while in the custody of the defendants; P65,550.00 representing
miscellaneous expenses of plaintiff on said lost cargo; attorney's fees in the amount
of P5,000.00, and to pay the costs of suit. (p. 30, Rollo).

On appeal, respondent Appellate Court ruled to the contrary when it applied Article 587 of the Code
of Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private
respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their
interest in the vessel such that a total loss thereof results in its extinction. The decretal portion of that
Decision 1 reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is


hereby REVERSED, and another one entered dismissing the complaint against
defendants-appellants and absolving them from any and all liabilities arising from the
loss of 1,000 sacks of copra belonging to plaintiff-appellee. Costs against appellee.
(p. 19, Rollo).

Unsuccessful in his Motion for Reconsideration of the aforesaid Decision, petitioner has availed of
the present recourse.

The basic issue for resolution is whether or not respondent Appellate Court erred in applying the
doctrine of limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs.
Laserna, supra.

Article 587 of the Code of Commerce provides:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods
which he loaded on the vessel; but he may exempt himself therefrom by abandoning
the vessel with all the equipments and the freight it may have earned during the
voyage.

The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner
(Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both
the ship owner and ship agent are civilly and directly liable for the indemnities in favor of third
persons, which may arise from the conduct of the captain in the care of goods transported, as well
as for the safety of passengers transported Yangco vs. Laserna, supra; Manila Steamship Co., Inc.
vs. Abdulhaman et al., 100 Phil. 32 [1956]).
However, under the same Article, this direct liability is moderated and limited by the ship agent's or
ship owner's right of abandonment of the vessel and earned freight. This expresses the universal
principle of limited liability under maritime law. The most fundamental effect of abandonment is the
cessation of the responsibility of the ship agent/owner (Switzerland General Insurance Co., Ltd. vs.
Ramirez, L-48264, February 21, 1980, 96 SCRA 297). It has thus been held that by necessary
implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right
to abandon the vessel with all her equipment and the freight it may have earned during the voyage,"
and "to the insurance thereof if any" (Yangco vs. Lasema, supra). In other words, the ship owner's or
agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The
total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it
can attach (Govt. Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]).

As this Court held:

If the ship owner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of collisions
or shipwrecks, his liability is merely co-extensive with his interest in the vessel such
that a total loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra).

The rationale therefor has been explained as follows:

The real and hypothecary nature of the liability of the ship owner or agent embodied
in the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in
the prevailing conditions of the maritime trade and sea voyages during the medieval
ages, attended by innumerable hazards and perils. To offset against these adverse
conditions and to encourage ship building and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a
ship to the vessel, equipment, and freight, or insurance, if any, so that if the ship
owner or agent abandoned the ship, equipment, and freight, his liability was
extinguished. (Abueg vs. San Diego, 77 Phil. 730 [1946])

—0—

Without the principle of limited liability, a ship owner and investor in maritime
commerce would run the risk of being ruined by the bad faith or negligence of his
captain, and the apprehension of this would be fatal to the interest of navigation."
Yangco vs. Lasema, supra).

—0—

As evidence of this real nature of the maritime law we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money, and (2)
the right to retain the cargo and the embargo and detention of the vessel even in
cases where the ordinary civil law would not allow more than a personal action
against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by
abandoning the vessel and freight money, thus avoiding the possibility of risking his
whole fortune in the business, it is also just that his maritime creditor may for any
reason attach the vessel itself to secure his claim without waiting for a settlement of
his rights by a final judgment, even to the prejudice of a third person. (Phil. Shipping
Co. vs. Vergara, 6 Phil. 284 [1906]).
The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to
a passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship
owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is
insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there
is nothing in the records to show that the loss of the cargo was due to the fault of the private
respondent as shipowners, or to their concurrent negligence with the captain of the vessel.

What about the provisions of the Civil Code on common carriers? Considering the "real and
hypothecary nature" of liability under maritime law, these provisions would not have any effect on the
principle of limited liability for ship owners or ship agents. As was expounded by this Court:

In arriving at this conclusion, the fact is not ignored that the illfated, S.S. Negros, as a
vessel engaged in interisland trade, is a common carrier, and that the relationship
between the petitioner and the passengers who died in the mishap rests on a
contract of carriage. But assuming that petitioner is liable for a breach of contract of
carriage, the exclusively 'real and hypothecary nature of maritime law operates to
limit such liability to the value of the vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel was insured. (Yangco vs. Laserila, et
al., supra).

Moreover, Article 1766 of the Civil Code provides:

Art. 1766. In all matters not regulated by this Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by special laws.

In other words, the primary law is the Civil Code (Arts. 17321766) and in default thereof, the Code of
Commerce and other special laws are applied. Since the Civil Code contains no provisions
regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is
the provisions of the Code of Commerce, more particularly Article 587, that govern in this case.

In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-
extensive with his interest in the vessel such that a total loss thereof results in its extinction (Yangco
vs. Laserna, supra), and none of the exceptions to the rule on limited liability being present, the
liability of private respondents for the loss of the cargo of copra must be deemed to have been
extinguished. There is no showing that the vessel was insured in this case.

WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs.

SO ORDERED.

Chua Yek Hong v. IAC, Guno and Olit


WHO WON: Guno and Olit

DOCTRINE:
The doctrine of limited liability gives the ship agent’s or owner’s right of abandonment of the vessel and
earned freight and such abandonment provides the cessation of the responsibility of the ship agent/owner.
In other words, the ship agent/owner’s liability is merely co-extensive with his interest in the vessel that a
total loss thereof results in its extinction, “no vessel, no liability.”

FACTS:
Chua Yek Hong is a duly licensed copra dealer based at Puerto Galera, Oriental Mindoro, while Guno
and Olit are the owners of the vessel M/V Luzviminda I, a common carrier engaged in coastwise trade
from the different ports of Oriental Mindoro to the Port of Manila.

- Chua Yek loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V
Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however,
did not reach Manila because somewhere between Cape Santiago and Calatagan, Batangas,
the vessel capsized and sank with all its cargo.
- On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro,
a Complaint for damages based on breach of contract of carriage against private respondents.
- Respondents averred that even assuming that the alleged cargo was truly loaded aboard their
vessel, their liability had been extinguished by reason of the total loss of said vessel.
- Trial court held in favor of Chua Yek by ordering respondents, jointly and severally, to pay plaintiff
the sum of P101,227.40 representing the value of the cargo which was lost while in the custody of
respondents. CA reversed. It applied Art. 587 of the Code of Commerce and the doctrine in Yangco
v. Laserna (73 Phil. 330 [1941]) and held that private respondents' liability, as ship owners, for the
loss of the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof
results in its extinction.

ISSUE: W/N CA has erred in applying the doctrine of limited liability under Art. 587 of the Code of
Commerce as expounded in Yangco v. Laserna? NO

RULING:
Article 587 of the Code of Commerce provides: The ship agents shall be civilly liable for the indemnities in
favor of third persons which may arise from the conduct of the captain in the care of the goods which he
loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all the equipment
and the freight it may have earned during the voyage.

Said article is the source of the doctrine of limited liability, which gives the ship agent’s or owner’s right of
abandonment of the vessel

and earned freight and such abandonment provides the cessation of the responsibility of the ship
agent/owner. In other words, the ship agent/owner’s liability is merely co-extensive with his interest in the
vessel that a total loss thereof results in its extinction, “no vessel, no liability.”

RATIO of this doctrine *in case sir asks*


To offset against innumerable hazards and perils and to encourage ship building and maritime commerce,
it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship
to the vessel, equipment, and freight, or insurance, if any. Without the principle of limited liability, a ship
owner and investor in maritime commerce would run the risk of being ruined by the bad faith or negligence
of his captain, and the apprehension of this would be fatal to the interest of navigation." (Yangco vs.
Lasema)

The limited liability rule, however provides for exceptions: (1) where the injury or death to a passenger is
due either to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain
(2) where the vessel is insured; and (3) in workmen's compensation claims. In this case, there is nothing in
the records to show that the loss of the cargo was due to the fault of the private respondent as ship owners,
or to their concurrent negligence with the captain of the vessel and there was no showing that the vessel
was insured.

Also, the provisions of the Civil Code on common carriers do not apply in this case since the circumstances
of the case are not within those that can be regulated by such law, specifically there were no provisions
regulating liability of the ship owners or agent in the event of total loss/destruction of the vessel, and so the
Code of Commerce and other special laws shall apply.
In sum, it is held that the respondents are freed from their liabilities applying the limited liability rule for
having totally lost the vessel and none of the exceptions apply to them, the liability for the loss of the cargo
of the copra must be deemed extinguished.

INSURANCE COMPANY G.R. No. 180784


OF NORTH AMERICA,
Petitioner, Present:

CARPIO, * J.,
- versus - PERALTA, Acting Chairperson,
ABAD,
PEREZ, ** and
MENDOZA, JJ.

ASIAN TERMINALS, INC., Promulgated:


Respondent. February 15, 2012
x-------------------------------------------------x

DECISION

PERALTA, J.:

This is a petition for review on certiorari[1] of the Decision of the Regional


Trial Court (RTC) of Makati City, Branch 138 (trial court) in Civil Case No. 05-809
and its Order dated December 4, 2007 on the ground that the trial court committed
reversible error of law.

The trial court dismissed petitioners complaint for actual damages on the
ground of prescription under the Carriage of Goods by Sea Act (COGSA).
The facts are as follows:

On November 9, 2002, Macro-Lite Korea Corporation shipped to San Miguel


Corporation, through M/V "DIMI P" vessel, one hundred eighty-five (185) packages
(231,000 sheets) of electrolytic tin free steel, complete and in good order condition
and covered by Bill of Lading No. POBUPOHMAN20638.[2] The shipment had a
declared value of US$169,850.35[3] and was insured with petitioner Insurance
Company of North America against all risks under Marine Policy No. MOPA-
06310.[4]

The carrying vessel arrived at the port of Manila on November 19, 2002, and
when the shipment was discharged therefrom, it was noted that seven (7) packages
thereof were damaged and in bad order.[5] The shipment was then turned over to the
custody of respondent Asian Terminals, Inc. (ATI) on November 21, 2002 for
storage and safekeeping pending its withdrawal by the consignee's authorized
customs broker, R.V. Marzan Brokerage Corp. (Marzan).
On November 22, 23 and 29, 2002, the subject shipment was withdrawn by
Marzan from the custody of respondent. On November 29, 2002, prior to the last
withdrawal of the shipment, a joint inspection of the said cargo was conducted per
the Request for Bad Order Survey[6] dated November 29, 2002, and the examination
report, which was written on the same request, showed that an additional five (5)
packages were found to be damaged and in bad order.
On January 6, 2003, the consignee, San Miguel Corporation, filed separate
claims[7] against respondent and petitioner for the damage to 11,200 sheets of
electrolytic tin free steel.

Petitioner engaged the services of an independent adjuster/surveyor, BA


McLarens Phils., Inc., to conduct an investigation and evaluation on the claim and
to prepare the necessary report.[8] BA McLarens Phils., Inc. submitted to petitioner
an Survey Report[9] dated January 22, 2003 and another report[10] dated May 5,
2003 regarding the damaged shipment. It noted that out of the reported twelve (12)
damaged skids, nine (9) of them were rejected and three (3) skids were accepted by
the consignees representative as good order. BA McLarens Phils., Inc. evaluated the
total cost of damage to the nine (9) rejected skids (11,200 sheets of electrolytic tin
free steel) to be P431,592.14.
The petitioner, as insurer of the said cargo, paid the consignee the amount
of P431,592.14 for the damage caused to the shipment, as evidenced by the
Subrogation Receipt dated January 8, 2004. Thereafter, petitioner, formally
demanded reparation against respondent. As respondent failed to satisfy its demand,
petitioner filed an action for damages with the RTC of Makati City.
The trial court found, thus:
The Court finds that the subject shipment indeed suffered
additional damages. The Request for Bad Order Survey No. 56422 shows
that prior to the turn over of the shipment from the custody of ATI to the
consignee, aside from the seven (7) packages which were already
damaged upon arrival at the port of Manila, five (5) more packages were
found with "dent, cut and crumple" while in the custody of ATI. This
document was issued by ATI and was jointly executed by the
representatives of ATI, consignee and customs, and the Shed Supervisor.
Thus, ATI is now estopped from claiming that there was no additional
damage suffered by the shipment. It is, therefore, only logical to conclude
that the damage was caused solely by the negligence of defendant ATI.
This evidence of the plaintiff was refuted by the defendant by merely
alleging that "the damage to the 5 Tin Plates is only in its external
packaging. However, the fact remains that the consignee has rejected the
same as total loss for not being suitable for their intended purpose. In
addition, the photographs presented by the plaintiff show that the
shipment also suffered severe dents and some packages were even
critically crumpled.[11]

As to the extent of liability, ATI invoked the Contract for Cargo Handling
Services executed between the Philippine Ports Authority and Marina Ports
Services, Inc. (now Asian Terminals, Inc.). Under the said contract, ATI's liability
for damage to cargoes in its custody is limited to P5,000.00 for each package, unless
the value of the cargo shipment is otherwise specified or manifested or
communicated in writing, together with the declared Bill of Lading value and
supported by a certified packing list to the contractor by the interested party or
parties before the discharge or lading unto vessel of the goods.

The trial court found that there was compliance by the shipper and consignee
with the above requirement. The Bill of Lading, together with the corresponding
invoice and packing list, was shown to ATI prior to the discharge of the goods from
the vessel. Since the shipment was released from the custody of ATI, the trial court
found that the same was declared for tax purposes as well as for the assessment of
arrastre charges and other fees. For the purpose, the presentation of the invoice,
packing list and other shipping documents to ATI for the proper assessment of the
arrastre charges and other fees satisfied the condition of declaration of the actual
invoices of the value of the goods to overcome the limitation of liability of the
arrastre operator.[12]
Further, the trial court found that there was a valid subrogation between the
petitioner and the assured/consignee San Miguel Corporation. The respondent
admitted the existence of Global Marine Policy No. MOPA-06310 with San Miguel
Corporation and Marine Risk Note No. 3445,[13] which showed that the cargo was
indeed insured with petitioner. The trial court held that petitioners claim is
compensable because the Subrogation Receipt,16 which was admitted as to its
existence by respondent, was sufficient to establish not only the relationship of the
insurer and the assured, but also the amount paid to settle the insurance claim.[14]

However, the trial court dismissed the complaint on the ground that the
petitioners claim was already barred by the statute of limitations. It held that
COGSA, embodied in Commonwealth Act (CA) No. 65, applies to this case, since
the goods were shipped from a foreign port to the Philippines. The trial court stated
that under the said law, particularly paragraph 4, Section 3 (6)[15] thereof, the shipper
has the right to bring a suit within one year after the delivery of the goods or the date
when the goods should have been delivered, in respect of loss or damage thereto.
The trial court held:

In the case at bar, the records show that the shipment was delivered to the
consignee on 22, 23 and 29 of November 2002. The plaintiff took almost a year to
approve and pay the claim of its assured, San Miguel, despite the fact that it had
initially received the latter's claim as well as the inspection report and survey report
of McLarens as early as January 2003. The assured/consignee had only until
November of 2003 within which to file a suit against the defendant. However, the
instant case was filed only on September 7, 2005 or almost three (3) years from the
date the subject shipment was delivered to the consignee. The plaintiff, as insurer
of the shipment which has paid the claim of the insured, is subrogated to all the
rights of the said insured in relation to the reimbursement of such claim. As such,
the plaintiff cannot acquire better rights than that of the insured. Thus, the plaintiff
has no one but itself to blame for having acted lackadaisically on San Miguel's
claim.

WHEREFORE, the complaint and counterclaim are hereby


DISMISSED.[16]

Petitioners motion for reconsideration was denied by the trial court in the
[17]
Order dated December 4, 2007.
Petitioner filed this petition under Rule 45 of the Rules of Court directly before
this Court, alleging that it is raising a pure question of law:

THE TRIAL COURT COMMITTED A PURE AND SERIOUS


ERROR OF LAW IN APPLYING THE ONE-YEAR PRESCRIPTIVE
PERIOD FOR FILING A SUIT UNDER THE CARRIAGE OF GOODS
BY SEA ACT (COGSA) TO AN ARRASTRE OPERATOR.[18]

Petitioner states that while it is in full accord with the trial court in finding
respondent liable for the damaged shipment, it submits that the trial courts dismissal
of the complaint on the ground of prescription under the COGSA is legally
erroneous. It contends that the one-year limitation period for bringing a suit in court
under the COGSA is not applicable to this case, because the prescriptive period
applies only to the carrier and the ship. It argues that respondent, which is engaged
in warehousing, arrastre and stevedoring business, is not a carrier as defined by the
COGSA, because it is not engaged in the business of transportation of goods by sea
in international trade as a common carrier. Petitioner asserts that since the complaint
was filed against respondent arrastre operator only, without impleading the carrier,
the prescriptive period under the COGSA is not applicable to this case.

Moreover, petitioner contends that the term carriage of goods in the COGSA
covers the period from the time the goods are loaded to the vessel to the time they
are discharged therefrom. It points out that it sued respondent only for the additional
five (5) packages of the subject shipment that were found damaged while in
respondents custody, long after the shipment was discharged from the vessel. The
said damage was confirmed by the trial court and proved by the Request for Bad
Order Survey No. 56422.[19]
Petitioner prays that the decision of the trial court be reversed and set aside
and a new judgment be promulgated granting its prayer for actual damages.
The main issues are: (1) whether or not the one-year prescriptive period for
filing a suit under the COGSA applies to this action for damages against respondent
arrastre operator; and (2) whether or not petitioner is entitled to recover actual
damages in the amount of P431,592.14 from respondent.
To reiterate, petitioner came straight to this Court to appeal from the decision
of the trial court under Rule 45 of the Rules of Court on the ground that it is raising
only a question of law.

Microsoft Corporation v. Maxicorp, Inc.[20] explains the difference between


questions of law and questions of fact, thus:

The distinction between questions of law and questions of fact is settled. A


question of law exists when the doubt or difference centers on what the law is on a
certain state of facts. A question of fact exists if the doubt centers on the truth or
falsity of the alleged facts. Though this delineation seems simple, determining the
true nature and extent of the distinction is sometimes problematic. For example, it is
incorrect to presume that all cases where the facts are not in dispute automatically
involve purely questions of law.

There is a question of law if the issue raised is capable of being resolved without
need of reviewing the probative value of the evidence. The resolution of the issue
must rest solely on what the law provides on the given set of circumstances. Once
it is clear that the issue invites a review of the evidence presented, the question posed
is one of fact. If the query requires a re-evaluation of the credibility of witnesses, or
the existence or relevance of surrounding circumstances and their relation to each
other, the issue in that query is factual. x x x[21]

In this case, although petitioner alleged that it is merely raising a question of


law, that is, whether or not the prescriptive period under the COGSA applies to an
action for damages against respondent arrastre operator, yet petitioner prays for the
reversal of the decision of the trial court and that it be granted the relief sought,
which is the award of actual damages in the amount of P431,592.14. For a question
to be one of law, it must not involve an examination of the probative value of the
evidence presented by the litigants or any of them.[22] However, to resolve the issue
of whether or not petitioner is entitled to recover actual damages from respondent
requires the Court to evaluate the evidence on record; hence, petitioner is also raising
a question of fact.
Under Section 1, Rule 45, providing for appeals by certiorari before the
Supreme Court, it is clearly enunciated that only questions of law may be set
forth.[23] The Court may resolve questions of fact only when the case falls under the
following exceptions:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures;
(2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when
in making its findings the Court of Appeals went beyond the issues of the case, or
its findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioner's main and reply briefs
are not disputed by the respondent; and (10) when the findings of fact are premised
on the supposed absence of evidence and contradicted by the evidence on record.[24]

In this case, the fourth exception cited above applies, as the trial court
rendered judgment based on a misapprehension of facts.

We first resolve the issue on whether or not the one-year prescriptive period
for filing a suit under the COGSA applies to respondent arrastre operator.

The Carriage of Goods by Sea Act (COGSA), Public Act No. 521 of the
74th US Congress, was accepted to be made applicable to all contracts for the
carriage of goods by sea to and from Philippine ports in foreign trade by virtue of
CA No. 65.

Section 1 of CA No. 65 states:

Section 1. That the provisions of Public Act Numbered Five hundred and
twenty-one of the Seventy-fourth Congress of the United States, approved on April
sixteenth, nineteen hundred and thirty-six, be accepted, as it is hereby accepted to
be made applicable to all contracts for the carriage of goods by sea to and from
Philippine ports in foreign trade: Provided, That nothing in the Act shall be
construed as repealing any existing provision of the Code of Commerce which is
now in force, or as limiting its application.

Section 1, Title I of CA No. 65 defines the relevant terms in Carriage of Goods


by Sea, thus:

Section 1. When used in this Act -


(a) The term "carrier" includes the owner or the charterer who enters into a
contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to contracts of carriage
covered by a bill of lading or any similar document of title, insofar as such document
relates to the carriage of goods by sea, including any bill of lading or any similar
document as aforesaid issued under or pursuant to a charter party from the moment
at which such bill of lading or similar document of title regulates the relations
between a carrier and a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and articles of
every kind whatsoever, except live animals and cargo which by the contract of
carriage is stated as being carried on deck and is so carried.
(d) The term "ship" means any vessel used for the carriage of goods by sea.
(e) The term "carriage of goods" covers the period from the time when
the goods are loaded to the time when they are discharged from the ship.[25]

It is noted that the term carriage of goods covers the period from the time
when the goods are loaded to the time when they are discharged from the ship; thus,
it can be inferred that the period of time when the goods have been discharged from
the ship and given to the custody of the arrastre operator is not covered by the
COGSA.
The prescriptive period for filing an action for the loss or damage of the goods
under the COGSA is found in paragraph (6), Section 3, thus:

6) Unless notice of loss or damage and the general nature of such loss or
damage be given in writing to the carrier or his agent at the port of discharge before
or at the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie
evidence of the delivery by the carrier of the goods as described in the bill of lading.
If the loss or damage is not apparent, the notice must be given within three days of
the delivery.

Said notice of loss or damage maybe endorsed upon the receipt for the goods
given by the person taking delivery thereof.

The notice in writing need not be given if the state of the goods has at the
time of their receipt been the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one year after
delivery of the goods or the date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either apparent or concealed, is not
given as provided for in this section, that fact shall not affect or prejudice the right
of the shipper to bring suit within one year after the delivery of the goods or the
date when the goods should have been delivered.[26]

From the provision above, the carrier and the ship may put up the defense of
prescription if the action for damages is not brought within one year after the
delivery of the goods or the date when the goods should have been delivered. It has
been held that not only the shipper, but also the consignee or legal holder of the bill
may invoke the prescriptive period.[27] However, the COGSA does not mention that
an arrastre operator may invoke the prescriptive period of one year; hence, it does
not cover the arrastre operator.

Respondent arrastre operators responsibility and liability for losses and


damages are set forth in Section 7.01 of the Contract for Cargo Handling
Services executed between the Philippine Ports Authority and Marina Ports
Services, Inc. (now Asian Terminals, Inc.), thus:

Section 7.01 Responsibility and Liability for Losses and Damages;


Exceptions - The CONTRACTOR shall, at its own expense, handle all merchandise
in all work undertaken by it hereunder, diligently and in a skillful, workman-like
and efficient manner. The CONTRACTOR shall be solely responsible as an
independent contractor, and hereby agrees to accept liability and to pay to the
shipping company, consignees, consignors or other interested party or parties
for the loss, damage or non-delivery of cargoes in its custody and control to
the extent of the actual invoice value of each package which in no case shall be
more than FIVE THOUSAND PESOS (P5,000.00) each, unless the value of the
cargo shipment is otherwise specified or manifested or communicated in
writing together with the declared Bill of Lading value and supported by a
certified packing list to the CONTRACTOR by the interested party or parties
before the discharge or loading unto vessel of the goods. This amount of Five
Thousand Pesos (P5,000.00) per package may be reviewed and adjusted by the
AUTHORITY from time to time. The CONTRACTOR shall not be responsible for
the condition or the contents of any package received, nor for the weight nor for
any loss, injury or damage to the said cargo before or while the goods are being
received or remains in the piers, sheds, warehouses or facility, if the loss, injury or
damage is caused by force majeure or other causes beyond the CONTRACTOR's
control or capacity to prevent or remedy; PROVIDED, that a formal
claim together with the necessary copies of Bill of Lading, Invoice, Certified
Packing List and Computation arrived at covering the loss, injury or damage
or non-delivery of such goods shall have been filed with the CONTRACTOR
within fifteen (15) days from day of issuance by the CONTRACTOR of a
certificate of non-delivery; PROVIDED, however, that if said
CONTRACTOR fails to issue such certification within fifteen (15) days from
receipt of a written request by the shipper/consignee or his duly authorized
representative or any interested party, said certification shall be deemed to
have been issued, and thereafter, the fifteen (15) day period within which to
file the claim commences; PROVIDED, finally, that the request for
certification of loss shall be made within thirty (30) days from the date of
delivery of the package to the consignee.[28]

Based on the Contract above, the consignee has a period of thirty (30) days
from the date of delivery of the package to the consignee within which to request a
certificate of loss from the arrastre operator. From the date of the request for a
certificate of loss, the arrastre operator has a period of fifteen (15) days within which
to issue a certificate of non-delivery/loss either actually or constructively. Moreover,
from the date of issuance of a certificate of non-delivery/loss, the consignee has
fifteen (15) days within which to file a formal claim covering the loss, injury,
damage or non-delivery of such goods with all accompanying documentation against
the arrastre operator.

Petitioner clarified that it sued respondent only for the additional five (5)
packages of the subject shipment that were found damaged while in respondents
custody, which fact of damage was sustained by the trial court and proved by the
Request for Bad Order Survey No. 56422.[29]
Petitioner pointed out the importance of the Request for Bad Order Survey by
citing New Zealand Insurance Company Limited v. Navarro.[30] In the said case,
the Court ruled that the request for, and the result of, the bad order examination,
which were filed and done within fifteen days from the haulage of the goods from
the vessel, served the purpose of a claim, which is to afford the carrier or depositary
reasonable opportunity and facilities to check the validity of the claims while facts
are still fresh in the minds of the persons who took part in the transaction and
documents are still available. Hence, even if the consignee therein filed a formal
claim beyond the stipulated period of 15 days, the arrastre operator was not relieved
of liability as the purpose of a formal claim had already been satisfied by the
consignees timely request for the bad order examination of the goods shipped and
the result of the said bad order examination.
To elaborate, New Zealand Insurance Company, Ltd. v. Navarro held:
We took special note of the above pronouncement six (6) years later
in Firemans Fund Insurance Co. v. Manila Port Service Co., et al. There, fifteen
(15) cases of nylon merchandise had been discharged from the carrying vessel and
received by defendant Manila Port Service Co., the arrastre operator, on 7 July
1961. Out of those fifteen (15) cases, however, only twelve (12) had been delivered
to the consignee in good condition. Consequently, on 20 July 1961, the consignee's
broker requested a bad order examination of the shipment, which was later certified
by defendant's own inspector to be short of three (3) cases. On 15 August 1961, a
formal claim for indemnity was then filed by the consignee, who was later replaced
in the action by plaintiff Fireman's Fund Insurance Co., the insurer of the goods.
Defendant, however, refused to honor the claim, arguing that the same had not been
filed within fifteen (15) days from the date of discharge of the shipment from the
carrying vessel, as required under the arrastre Management Contract then in force
between itself and the Bureau of Customs. The trial court upheld this argument and
hence dismissed the complaint. On appeal by the consignee, this Court, speaking
through Mr. Justice J.B.L. Reyes, reversed the trial court and found the defendant
arrastre operator liable for the value of the lost cargo, explaining as follows:

However, the trial court has overlooked the significance of the request
for, and the result of, the bad order examination, which were filed and done
within fifteen days from the haulage of the goods from the vessel. Said request
and result, in effect, served the purpose of a claim, which is

to afford the carrier or depositary reasonable


opportunity and facilities to check the validity of the claims
while facts are still fresh in the minds of the persons who took
part in the transaction and documents are still available.
(Consunji vs. Manila Port Service, L-15551, 29 November 1960)

Indeed, the examination undertaken by the defendant's own inspector not only
gave the defendant an opportunity to check the goods but is itself a verification
of its own liability x x x.

In other words, what the Court considered as the crucial factor in declaring
the defendant arrastre operator liable for the loss occasioned, in the Fireman's
Fund case, was the fact that defendant, by virtue of the consignee's request for a
bad order examination, had been able formally to verify the existence and extent of
its liability within fifteen (15) days from the date of discharge of the shipment from
the carrying vessel -- i.e., within the same period stipulated under the Management
Contract for the consignee to file a formal claim. That a formal claim had been
filed by the consignee beyond the stipulated period of fifteen (15) days neither
relieved defendant of liability nor excused payment thereof, the purpose of a
formal claim, as contemplated in Consunji, having already been fully served
and satisfied by the consignee's timely request for, and the eventual result of,
the bad order examination of the nylon merchandise shipped.

Relating the doctrine of Fireman's Fund to the case at bar, the record shows
that delivery to the warehouse of consignee Monterey Farms Corporation of the
5,974 bags of soybean meal, had been completed by respondent Razon (arrastre
operator) on 9 July 1974. On that same day, a bad order examination of the goods
delivered was requested by the consignee and was, in fact, conducted by respondent
Razon's own inspector, in the presence of representatives of both the Bureau of
Customs and the consignee. The ensuing bad order examination report what the
trial court considered a "certificate of loss confirmed that out of the 5,974 bags of
soybean meal loaded on board the M/S "Zamboanga" and shipped to Manila, 173
bags had been damaged in transitu while an additional 111 bags had been damaged
after the entire shipment had been discharged from the vessel and placed in the
custody of respondent Razon. Hence, as early as 9 July 1974 (the date of last
delivery to the consignee's warehouse), respondent Razon had been able to
verify and ascertain for itself not only the existence of its liability to the
consignee but, more significantly, the exact amount thereof - i.e., P5,746.61,
representing the value of 111 bags of soybean meal. We note further that such
verification and ascertainment of liability on the part of respondent Razon,
had been accomplished "within thirty (30) days from the date of delivery of
last package to the consignee, broker or importer" as well as "within fifteen
(15) days from the date of issuance by the Contractor [respondent Razon] of a
certificate of loss, damage or injury or certificate of non-delivery" the periods
prescribed under Article VI, Section 1 of the Management Contract here involved,
within which a request for certificate of loss and a formal claim, respectively, must
be filed by the consignee or his agent. Evidently, therefore, the rule laid down by
the Court in Fireman's Fund finds appropriate application in the case at bar.[31]

In this case, the records show that the goods were deposited with the arrastre
operator on November 21, 2002. The goods were withdrawn from the arrastre
operator on November 22, 23 and 29, 2002. Prior to the withdrawal on November 29,
2002, the broker of the importer, Marzan, requested for a bad order survey in the
presence of a Customs representative and other parties concerned. The joint
inspection of cargo was conducted and it was found that an additional five (5)
packages were found in bad order as evidenced by the document entitled Request for
Bad Order Survey[32] dated November 29, 2002, which document also contained the
examination report, signed by the Customs representative,
Supervisor/Superintendent, consignees representative, and the ATI Inspector.
Thus, as early as November 29, 2002, the date of the last withdrawal of the
goods from the arrastre operator, respondent ATI was able to verify that five (5)
packages of the shipment were in bad order while in its custody. The certificate of
non-delivery referred to in the Contract is similar to or identical with the examination
report on the request for bad order survey.[33] Like in the case of New Zealand
Insurance Company Ltd. v. Navarro, the verification and ascertainment of
liability by respondent ATI had been accomplished within thirty (30) days from
the date of delivery of the package to the consignee and within fifteen (15) days
from the date of issuance by the Contractor (respondent ATI) of the
examination report on the request for bad order survey. Although the formal
claim was filed beyond the 15-day period from the issuance of the examination report
on the request for bad order survey, the purpose of the time limitations for the filing
of claims had already been fully satisfied by the request of the consignees broker for
a bad order survey and by the examination report of the arrastre operator on the result
thereof, as the arrastre operator had become aware of and had verified the facts giving
rise to its liability.[34] Hence, the arrastre operator suffered no prejudice by the lack
of strict compliance with the 15-day limitation to file the formal complaint.[35]
The next factual issue is whether or not petitioner is entitled to actual damages
in the amount of P431,592.14. The payment of the said amount by petitioner to the
assured/consignee was based on the Evaluation Report[36] of BA McLarens Phils.,
Inc., thus:

xxxx

CIRCUMSTANCES OF LOSS

As reported, the shipment consisting of 185 packages (344.982 MT) Electrolytic Tin
Free Steel, JISG 3315SPTFS, MRT-4CA, Matte Finish arrived Manila via Ocean
Vessel, M/V DIMI P V-075 on November 9, 2002 and subsequently docked
alongside Pier No. 9, South Harbor, Manila. The cargo of Electrolyic Tin Free
Steel was discharged ex-vessel complete with seven (7) skidsnoted in bad order
condition by the vessel[s] representative. These skids were identified as nos.
2HD804211, 2HD804460, SHD804251, SHD803784, 2HD803763, 2HD803765
and 2HD803783 and covered with Bad Order Tally Receipts No. 3709, 3707, 3703
and 3704. Thereafter, the same were stored inside the warehouse of Pier No.
9, South Harbor, Manila, pending delivery to the consignees warehouse.
On November 22, 23 and 29, 2002, the subject cargo was withdrawn from the Pier
by the consignee authorized broker, R. V. Marzan Brokerage Corp. and the same
was delivered to the consignees final warehouse located at Silangan, Canlubang,
Laguna complete with twelve (12) skids in bad order condition.

VISUAL INSPECTION

We conducted an ocular inspection on the reported damaged Electrolytic Tin Free


Steel, Matte Finish at the consignees warehouse located at Brgy. Silangan,
Canlubang, Laguna and noted that out of the reported twelve (12) damaged skids,
nine (9) of them were rejected and three (3) skids were accepted by the
consignees representative as complete and without exceptions.

xxxx

EVALUATION OF INDEMNITY
We evaluated the loss/damage sustained by the subject shipments and arrived
as follows:

PRODUCT NOS. PRODUCTS NAMED NO. OF SHEETS NET WT. PER PACKING LIST
2HD803763 Electrolytic Tin Free 1,200 1,908
Steel JISG3315
2HD803783 -do- 1,200 1,908
2HD803784 -do- 1,200 1,908
2HD804460 -do- 1,400 1,698
2HD803765 -do- 1,200 1,908
2HD804522 -do- 1,200 1,987
2HD804461 -do- 1,400 1,698
2HD804540 -do- 1,200 1,987
2HD804549 -do- 1,200 1,987
9 SKIDS TOTAL 11,200 16,989 kgs.

P9,878,547.58 P478,959.88
------------------ = 42.7643 x 11,200
231,000
Less: Deductible 0.50% based on sum insured 49,392.74
Total P429,567.14
Add: Surveyors Fee 2,025.00
Sub-Total P431,592.14
Note: Above evaluation is Assureds tentative liability as the salvage proceeds on the
damaged stocks has yet to be determined.

RECOVERY ASPECT

Prospect of recovery would be feasible against the shipping company and


the Arrastre operator considering the copies of Bad Order Tally
Receipts and Bad Order Certificate issued by the subject parties.[37]

To clarify, based on the Evaluation Report, seven (7) skids were damaged
upon arrival of the vessel per the Bad Order Cargo Receipts[38] issued by the shipping
company, and an additional five (5) skids were damaged in the custody of the
arrastre operator per the Bad Order Certificate/Examination Report[39] issued by the
arrastre contractor. The Evaluation Report states that out of the
reported twelve damaged skids, only nine were rejected, and three were
accepted as good order by the consignees representative. Out of the nine skids that
were rejected, five skids were damaged upon arrival of the vessel as shown by
the product numbers in the Evaluation Report, which product numbers matched those
in the Bad Order Cargo Receipts[40] issued by the shipping company. It can then be
safely inferred that the four remaining rejected skids were damaged in the
custody of the arrastre operator, as the Bad Order Certificate/Examination Report
did not indicate the product numbers thereof.

Hence, it should be pointed out that the Evaluation Report shows that the
claim for actual damages in the amount of P431,592.14 covers five (5)[41] out of
the seven (7) skids that were found to be damaged upon arrival of the vessel and
covered by Bad Order Cargo Receipt Nos. 3704, 3706, 3707 and 3709,[42] which
claim should have been filed with the shipping company. Petitioner must have
realized that the claim for the said five (5) skids was already barred under COGSA;
hence, petitioner filed the claim for actual damages only against respondent arrastre
operator.
As regards the four (4) skids that were damaged in the custody of the arrastre
operator, petitioner is still entitled to recover from respondent. The Court has ruled
that the Request for Bad Order Survey and the examination report on the said request
satisfied the purpose of a formal claim, as respondent was made aware of and was
able to verify that five (5) skids were damaged or in bad order while in its custody
before the last withdrawal of the shipment on November 29, 2002. Hence, even if the
formal claim was filed beyond the 15-day period stipulated in the Contract,
respondent was not prejudiced thereby, since it already knew of the number of skids
damaged in its possession per the examination report on the request for bad order
survey.

Remand of the case to the trial court for the determination of the liability of
respondent to petitioner is not necessary as the Court can resolve the same based on
the records before it.[43] The Court notes that petitioner, who filed this action for
damages for the five (5) skids that were damaged while in the custody of respondent,
was not forthright in its claim, as it knew that the damages it sought in the amount
of P431,592.14, which was based on the Evaluation Report of its adjuster/surveyor,
BA McLarens Phils., Inc., covered nine (9) skids. Based on the same Evaluation
Report, only four of the nine skids were damaged in the custody of respondent.
Petitioner should have been straightforward about its exact claim, which is borne out
by the evidence on record, as petitioner can be granted only the amount of damages
that is due to it.
Based on the Evaluation Report[44] of BA McLarens Phils., Inc., dated May 5,
2003, the four (4) skids damaged while in the custody of the arrastre operator and the
amount of actual damages therefore are as follows:

PRODUCT NOS. PRODUCTS NAMED NO. OF SHEETS NET WT. PER


PACKING LIST
2HD804522 Electrolytic Tin Free 1,200 1,987
Steel JISG3315
2HD804461 -do- 1,400 1,698
2HD804540 -do- 1,200 1,987
2HD804549 -do- 1,200 1,987
----------------------------------------------------------------------------------------------------------
4 SKIDS TOTAL 5,000
P9,878,547.58 (Insured value)[45] P213,821.50
------------------ = 42.7643 x 5,000
231,000 (Total number of sheets)
Less: Deductible 0.50% based on sum insured[46] 49,392.74
Total P164,428.76

In view of the foregoing, petitioner is entitled to actual damages in the amount


of P164,428.76 for the four (4) skids damaged while in the custody of respondent.

WHEREFORE, the petition is GRANTED. The Decision of the Regional


Trial Court of Makati City, Branch 138, dated October 17, 2006, in Civil Case No.
05-809, and its Order dated December 4, 2007, are hereby REVERSED and SET
ASIDE. Respondent Asian Terminals, Inc. is ORDERED to pay petitioner
Insurance Company of North America actual damages in the amount of One Hundred
Sixty-Four Thousand Four Hundred Twenty-Eight Pesos and Seventy-Six Centavos
(P164,428.76). Twelve percent (12%) interest per annum shall be imposed on the
amount of actual damages from the date the award becomes final and executory until
its full satisfaction.

Costs against petitioner.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

G.R. No. L-69044 May 29, 1987


EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents.

No. 71478 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner,


vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE
CO., LTD., respondents.

MELENCIO-HERRERA, J.:

These two cases, both for the recovery of the value of cargo insurance, arose from the same
incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and
cargo.

The basic facts are not in controversy:

In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by
petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at
P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at
P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine
risk for their stated value with respondent Development Insurance and Surety Corporation.

In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment
fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two
cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128
cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for
US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US
$11,385.00.

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship
and cargo. The respective respondent Insurers paid the corresponding marine insurance values to
the consignees concerned and were thus subrogated unto the rights of the latter as the insured.

G.R. NO. 69044

On May 11, 1978, respondent Development Insurance & Surety Corporation (Development
Insurance, for short), having been subrogated unto the rights of the two insured companies, filed suit
against petitioner Carrier for the recovery of the amounts it had paid to the insured before the then
Court of First instance of Manila, Branch XXX (Civil Case No. 6087).

Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary
fortuitous event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the
amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as
attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on
August 14, 1984, affirmed.

Petitioner Carrier is now before us on a Petition for Review on Certiorari.

G.R. NO. 71478

On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa
Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against
Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First
Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and
non-observance of extraordinary diligence by petitioner Carrier.

Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the
ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act
(COGSA); and that when the loss of fire is established, the burden of proving negligence of the
vessel is shifted to the cargo shipper.

On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the
amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees
of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984,
affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by
DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA.

Hence, this Petition for Review on certiorari by Petitioner Carrier.

Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First
Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. Upon Petitioner
Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due course on March 25,
1985, and the parties were required to submit their respective Memoranda, which they have done.

On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution
denying the Petition for Review and moved for its consolidation with G.R. No. 69044, the lower-
numbered case, which was then pending resolution with the First Division. The same was granted;
the Resolution of the Second Division of September 25, 1985 was set aside and the Petition was
given due course.

At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but
merely a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition:

There are about 22 cases of the "ASIATICA" pending in various courts where various
plaintiffs are represented by various counsel representing various consignees or
insurance companies. The common defendant in these cases is petitioner herein,
being the operator of said vessel. ... 1

Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a
party's pleading are deemed admissions of that party and binding upon it. 2 And an admission in one
pleading in one action may be received in evidence against the pleader or his successor-in-interest
on the trial of another action to which he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern — the Civil Code provisions on
Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show
negligence of the carrier?

On the Law Applicable

The law of the country to which the goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were
transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by
the Civil Code. 5 However, in all matters not regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the
Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7

On the Burden of Proof

Under the Civil Code, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the
circumstances of each case. 8Common carriers are responsible for the loss, destruction, or
deterioration of the goods unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

xxx xxx xxx 9

Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase
"natural disaster or calamity. " However, we are of the opinion that fire may not be considered a
natural disaster or calamity. This must be so as it arises almost invariably from some act of man or
by human means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by other natural disaster or
calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13

Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the
rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection policy
towards agriculture. 14

As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases
than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves
that it has observed the extraordinary deligence required by law.

In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the
transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by
fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary
diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made
the following Finding of fact:

The cargoes in question were, according to the witnesses defendant placed in


hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke
was coming out from hatch No. 2 and hatch No. 3; that where the smoke was
noticed, the fire was already big; that the fire must have started twenty-four 24) our
the same was noticed; that carbon dioxide was ordered released and the crew was
ordered to open the hatch covers of No, 2 tor commencement of fire fighting by sea
water: that all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the
vigilance over the goods. The evidence of the defendant did not show that
extraordinary vigilance was observed by the vessel to prevent the occurrence of fire
at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount
of diligence made by the crew, on orders, in the care of the cargoes. What appears is
that after the cargoes were stored in the hatches, no regular inspection was made as
to their condition during the voyage. Consequently, the crew could not have even
explain what could have caused the fire. The defendant, in the Court's mind, failed to
satisfactorily show that extraordinary vigilance and care had been made by the crew
to prevent the occurrence of the fire. The defendant, as a common carrier, is liable to
the consignees for said lack of deligence required of it under Article 1733 of the Civil
Code. 15

Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot
escape liability for the loss of the cargo.

And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the
Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have
been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to
prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner
Carrier has also failed to establish satisfactorily.

Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is
provided therein that:

Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage
arising or resulting from

(b) Fire, unless caused by the actual fault or privity of the carrier.

xxx xxx xxx

In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was
"actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire
was already big; that the fire must have started twenty-four (24) hours before the same was noticed;
" and that "after the cargoes were stored in the hatches, no regular inspection was made as to their
condition during the voyage." The foregoing suffices to show that the circumstances under which the
fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent
in connection therewith. Consequently, the complete defense afforded by the COGSA when loss
results from fire is unavailing to Petitioner Carrier.

On the US $500 Per Package Limitation:

Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided
in section 4(5) of the COGSA, which reads:

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss
or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been declared by
the shipper before shipment and inserted in bill of lading. This declaration if
embodied in the bill of lading shall be prima facie evidence, but all be conclusive on
the carrier.

By agreement between the carrier, master or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named. In no
event shall the carrier be Liable for more than the amount of damage actually
sustained.

xxx xxx xxx

Article 1749 of the New Civil Code also allows the limitations of liability in this wise:

Art. 1749. A stipulation that the common carrier's liability as limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.

It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed
amount per package although the Code expressly permits a stipulation limiting such liability. Thus,
the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the
Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration
of a higher value of the goods by the shipper in the bill of lading. The provisions of the Carriage of
Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it
and as much a part thereof as though placed therein by agreement of the parties. 16

In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss
or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed
US $500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the amount of
damage actually sustained."

The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which
was exactly the amount of the insurance coverage by Development Insurance (Exhibit "A"), and the
amount affirmed to be paid by respondent Court. The goods were shipped in 28 packages (Exhibit
"C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current
exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage
actually sustained." Consequently, the aforestated amount of P256,039 should be upheld.

With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75
(Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to
be paid by respondent Court. however, multiplying seven (7) cases by $500 per package at the
present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is
the amount that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75.

In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the
amount awarded to DOWA which was already reduced to $1,000 by the Appellate Court following
the statutory $500 liability per package, is in order.

In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with
NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per package and
affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA
packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more
than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said
amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier's
liability."

We find no reversible error. The 128 cartons and not the two (2) containers should be considered as
the shipping unit.

In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin
ingots and the shipper of floor covering brought action against the vessel owner and operator to
recover for loss of ingots and floor covering, which had been shipped in vessel — supplied
containers. The U.S. District Court for the Southern District of New York rendered judgment for the
plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division,
modified and affirmed holding that:

When what would ordinarily be considered packages are shipped in a container


supplied by the carrier and the number of such units is disclosed in the shipping
documents, each of those units and not the container constitutes the "package"
referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage of
Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).

Even if language and purposes of Carriage of Goods by Sea Act left doubt as to
whether carrier-furnished containers whose contents are disclosed should be treated
as packages, the interest in securing international uniformity would suggest that they
should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).

... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating
a container as a package is inconsistent with the congressional purpose of
establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F.
Supp. at 907 (footnotes omitted):

Although this approach has not completely escaped criticism, there


is, nonetheless, much to commend it. It gives needed recognition to
the responsibility of the courts to construe and apply the statute as
enacted, however great might be the temptation to "modernize" or
reconstitute it by artful judicial gloss. If COGSA's package limitation
scheme suffers from internal illness, Congress alone must undertake
the surgery. There is, in this regard, obvious wisdom in the Ninth
Circuit's conclusion in Hartford that technological advancements,
whether or not forseeable by the COGSA promulgators, do not
warrant a distortion or artificial construction of the statutory term
"package." A ruling that these large reusable metal pieces of
transport equipment qualify as COGSA packages — at least where,
as here, they were carrier owned and supplied — would amount to
just such a distortion.

Certainly, if the individual crates or cartons prepared by the shipper


and containing his goods can rightly be considered "packages"
standing by themselves, they do not suddenly lose that character
upon being stowed in a carrier's container. I would liken these
containers to detachable stowage compartments of the ship. They
simply serve to divide the ship's overall cargo stowage space into
smaller, more serviceable loci. Shippers' packages are quite literally
"stowed" in the containers utilizing stevedoring practices and
materials analogous to those employed in traditional on board
stowage.

In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other
grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases
followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional
economics test. Judge Kellam held that when rolls of polyester goods are packed
into cardboard cartons which are then placed in containers, the cartons and not the
containers are the packages.

xxx xxx xxx

The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:

Eurygenes concerned a shipment of stereo equipment packaged by the shipper into


cartons which were then placed by the shipper into a carrier- furnished
container. The number of cartons was disclosed to the carrier in the bill of lading.
Eurygenes followed the Mitsui test and treated the cartons, not the container, as the
COGSA packages. However, Eurygenes indicated that a carrier could limit its liability
to $500 per container if the bill of lading failed to disclose the number of cartons or
units within the container, or if the parties indicated, in clear and unambiguous
language, an agreement to treat the container as the package.

(Admiralty Litigation in Perpetuum: The Continuing Saga of Package


Limitations and Third World Delivery Problems by Chester D. Hooper
& Keith L. Flicker, published in Fordham International Law Journal,
Vol. 6, 1982-83, Number 1) (Emphasis supplied)

In this case, the Bill of Lading (Exhibit "A") disclosed the following data:

2 Containers

(128) Cartons)

Men's Garments Fabrics and Accessories Freight Prepaid

Say: Two (2) Containers Only.

Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the
number of cartons or units, as well as the nature of the goods, and applying the ruling in
the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be
considered as the shipping unit subject to the $500 limitation of liability.

True, the evidence does not disclose whether the containers involved herein were carrier-furnished
or not. Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they were so
furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal side of
the Bill of Lading (Exhibit "A") appears the following stipulation in fine print:

11. (Use of Container) Where the goods receipt of which is acknowledged on the
face of this Bill of Lading are not already packed into container(s) at the time of
receipt, the Carrier shall be at liberty to pack and carry them in any type of
container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of
Lading, meaning that the goods could probably fit in two (2) containers only. It cannot mean that the
shipper had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would
have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the
construction of contracts that the interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity. 20 This applies with even greater force in a contract of
adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill
of Lading in this case, which is draw. up by the carrier. 21

On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)

Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its
witnesses in Japan by written interrogatories.

We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to
do so. On this point, the Trial Court found:

xxx xxx xxx

Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time
from June 27, 1978, when its answer was prepared and filed in Court, until
September 26, 1978, when the pre-trial conference was conducted for the last time,
the defendant had more than nine months to prepare its evidence. Its belated notice
to take deposition on written interrogatories of its witnesses in Japan, served upon
the plaintiff on August 25th, just two days before the hearing set for August 27th,
knowing fully well that it was its undertaking on July 11 the that the deposition of the
witnesses would be dispensed with if by next time it had not yet been obtained, only
proves the lack of merit of the defendant's motion for postponement, for which
reason it deserves no sympathy from the Court in that regard. The defendant has
told the Court since February 16, 1979, that it was going to take the deposition of its
witnesses in Japan. Why did it take until August 25, 1979, or more than six months,
to prepare its written interrogatories. Only the defendant itself is to blame for its
failure to adduce evidence in support of its defenses.

xxx xxx xxx 22

Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now
that it was denied due process when the Trial Court rendered its Decision on the basis of the
evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 24

On the Award of Attorney's Fees:

Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed
the award by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in
G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.

Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the
amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R.
No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping
Lines shall pay the Development Insurance and Surety Corporation the amount of P256,039 for the
twenty-eight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare
parts, with interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus
P5,000 as attorney's fees, and the costs.

2) In G.R.No.71478,the judgment is hereby affirmed.

SO ORDERED.

Eastern Shipping Lines, Inc. v. IAC and Development Insurance & Surety Corp. G.R. No. L-69044 May 29,
1987 Eastern Shipping Lines, Inc. v. The Nisshin Fire and Marine Insurance Co., and Dowa Fire & Marine
Insurance Co., Ltd. G.R. No. 71478 May 29, 1987 Melencio-Herrera, J. FACTS:  (G.R. No. L-69044): a
vessel operated by petitioner Eastern Shipping Lines, Inc., loaded at Kobe, Japan for transportation to
Manila, 5000 pieces of calorized lance pipes in 28 packages consigned to Philippine Blooming Mills Co.,
Inc., and 7 cases of spare parts consigned to Central Textile Mills, Inc.; both sets of goods were insured
with Development Insurance and Surety Corp.  (G.R. No. 71478): the same vessel took on board 128
cartons of garment fabrics and accessories, in 2 containers, consigned to Mariveles Apparel Corporation,
and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise  the
vessel caught fire and sank, resulting in the total loss of ship and cargo ISSUES: 1. which law should
govern — the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act?; 2. who
has the burden of proof to show negligence of the carrier? 3. what is the extent of the carrier’s liability?
HELD: 1. The law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration. As the cargoes were transported from
Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code.
However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a
special law, is suppletory to the provisions of the Civil Code.  2. Article 1735 of the Civil Code provides
that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at
fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence
required by law. The burden is upon Eastern Shipping Lines to prove that it has exercised the
extraordinary diligence required by law.  Note: fire –not considered a natural disaster or calamity
within the contemplation of Art. 1734 for it arises almost invariably from some act of man or by human
means; it does not fall within the category of an act of God unless caused by lightning or by other
natural disaster or calamity  having failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law, Eastern Shipping Lines cannot escape liability for the loss of the
cargo As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of Goods by Sea Act
which provides: “Neither the carrier nor the ship shall be responsible for loss or damage arising or
resulting from x x x (b) Fire, unless caused by the actual fault or privity of the carrier.”  there was actual
fault of the carrier shown by lack of diligence in that when the smoke was noticed, the fire was already
big; that the fire must have started 24 hours before the same was noticed; and that after the cargoes
were stored in the hatches, no regular inspection was made as to their condition during the voyage.  3.
See Art. 1749. G.R. No. 69044: no stipulation in the Bills of Lading limiting the carrier’s liability for the
loss or destruction of the goods; no declaration of a higher value of the goods; Hence, Eastern Shipping
Lines’ liability should not exceed US $500 per package (as provided in 4(5) of the COGSA), or its peso
equivalent, at the time of payment of the value of the goods lost, but in no case more than the amount
of damage actually sustained

G.R. No. 71238 March 19, 1992

LUFTHANSA GERMAN AIRLINES, petitioner,


vs.
INTERMEDIATE APPELLATE COURT and SPOUSES HENRY H. ALCANTARA and TERESITA
ALCANTARA, respondents.

BIDIN, J.:

This is a petition for review on certiorari decision of the then Intermediate Appellate Court * dated
May 31, 1984, affirming with modification the decision of the then Court of First Instance of Manila,
Sixth Judicial District, Branch XXIV, and the resolution dated June 18, 1985 denying the motion for
reconsideration of the said decision.

The antecedent facts of this case are as follows:

On January 21, 1979, respondent Henry H. Alcantara shipped thirteen (13) pieces of luggage
through petitioner Lufthansa from Teheran to Manila as evidenced by Lufthansa Air Waybill No. 220-
9776-2733 (Exhibit "A", also Exhibit "1"). The Air Waybill discloses that the actual gross weight of the
thirteen (13) pieces of luggage is 180 kilograms. Respondent Henry H. Alcantara did not declare an
inventory of the contents or the value of the luggages when he delivered them to Lufthansa.

On March 3, 1979, the thirteen (13) pieces of luggage were boarded in one of Lufthansa's flights
which arrived in Manila on the same date. After the luggages arrived in Manila, the consignee,
respondent Teresita Alcantara, was able to claim from the cargo broker Philippine Skylanders, Inc.
on March 6, 1979 only twelve (12) out of the thirteen (13) pieces of luggage with a total weight of
174 kilograms (Exhibits "20" and "20-A").

The private respondents advised Lufthansa of the loss of one of the luggages and of the contents
thereof (Exhibits "B", "C" and "D"). Petitioner Lufthansa sent telex tracing messages to different
stations and to the Philippine Airlines which actually carried the cargo (Exhibits "3", "5", "7", "9", "11",
"12", "13" and "14"). But all efforts in tracing the missing luggage were fruitless (Exhibits "4", "6", "8",
"10", "12" and "17").

Since efforts to trace the missing luggage yielded negative results, Lufthansa informed Henry
Alcantara accordingly and advised him to file a claim invoice (Exhibits "18" and "19").

On September 24, 1979, the private respondents wrote the petitioner demanding the production of
the missing luggage within then (10) days from receipt (Exhibit "E"). Since the petitioner did not
comply with said demand, the private respondents filed a complaint dated May 7, 1980, for breach of
contract with damages against the petitioner before the Court of First Instance of Manila, Sixth
Judicial District, Branch XXIV.
The petitioner filed its answer to the complaint alleging that the Warsaw Convention limits the liability
of the carrier, if any, with respect to cargo to a sum of 250 francs per kilo ($20.00 per kilo or $9.07
per pound), unless a higher value is declared in advance and additional charges are paid by the
passenger and the conditions of the contract as set forth in the air waybill expressly subject the
contract of carriage of cargo to the Warsaw Convention. The petitioner also alleged that it never
acted fraudulently or in bad faith so as to entitle respondent spouses to moral damages and
attorney's fees, nor did it act in a wanton, fraudulent, reckless, oppressive or malevolent manner as
to entitle spouses to exemplary damages.

After trial, on November 18, 1981, the trial court ** rendered its decision, the dispositive portion of
which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs, spouses Henry H.


Alcantara and Teresita Alcantara, and against Lufthansa German Airlines.

(1) Ordering defendant to pay plaintiffs the sum of P200,000.00 for actual damages,
with interest thereon at the legal rate from the date of the filing of the complaint until
the principal sum is fully paid;

(2) Ordering defendant to pay plaintiffs the sum of P20,000.00 as attorney's fees; and

(3) Ordering defendant to pay the costs of suit.

SO ORDERED. (Rollo, pp. 62-63)

The petitioner appealed to the then Intermediate Appellate Court. On May 31, 1984, the appellate
promulgated its decision, the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, the decision appealed from is hereby


AFFIRMED with the modification that the amount of P20,000.00 awarded as
attorney's fees shall be deleted, the costs to be borne by the respective parties.

SO ORDERED. (Rollo, p. 39).

Its motion for reconsideration having been denied, the petition filed the instant petition.

The main issue in this case is whether or not the private respondents are entitled to an award of
damages beyond the liability set forth in the Warsaw Convention and in the Airwaybill of Lading.

The petitioner contends that the Republic of the Philippines is a party to the "Convention for the
Unification of Certain Rules Relating to International Transportation by Air," otherwise known as the
Warsaw Convention. After the Senate of the Republic of the Philippines, by its Resolution No. 19 of
May 16, 1950, concurred in the adherence by the government of the Philippines to the said
Convention, and after the government of the Republic of the Philippines formally notified the
government of the Republic of Poland of such adherence on November 9, 1950, Presidential
Proclamation No. 201 signed by the late President Ramon Magsaysay on September 23, 1965
made public the adherence of the Republic of the Philippines to the said Warsaw Convention which
applies to all international transportation of persons, baggage or goods performed by aircraft for hire.
Since the contract between the petitioner and respondent Henry H. Alcantara embodied in Airwaybill
No. 220-9776-2733 is one of international carriage by air, it is subject to the Warsaw Convention,
which in Article 22 limits the liability of the carrier with respect to checked baggage to a sum of 250
French francs per kilo (equivalent to US $20.00/kilo) unless a higher value has been declared in
advance and additional charges are paid by the passenger. Respondent Henry H. Alcantara having
admitted that he did not declare the value or contents of the missing luggage, the liability of the
petitioner is therefore limited by the Warsaw Convention and the Airwaybill to US$20.00 per kilo.

The petitioner further argues that the award of P200,000.00 as actual damages is not borne by
evidence. It insists that the testimonial and documentary evidence of respondent spouses failed to
indicate the actual value of the alleged contents of the missing luggage and have not presented
actual proof as to the contents, total weight and value of the missing luggage as well as the actual
damage they suffered (Rollo, pp. 88-89, 95).

On the other hand, the private respondents maintain that the petitioner, as found by the trial and
appellate courts, waived the benefits of the Warsaw Convention when it offered a settlement in the
amount of $200.00 which is much higher than what the Convention prescribes and never raised
timely objections during the trial to the introduction of evidence regarding the actual claims and
damages sustained by respondent Alcantara.

The private respondents also claim that in the trial of the case, they proved a loss of P200,000.00
and an expense of $15,000.00 in vainly trying to locate the missing luggage all over Europe and the
trial court awarded less than what was proven (Rollo, p. 118).

The petition is without merit.

The loss of one luggage belonging to the private respondents while the same was in the custody of
the petitioner is not disputed. The contract of air carriage generates a relation attended with a public
duty. Neglect or malfeasance of the carrier's employees could given ground for an action for
damages (Zulueta v. Pan American World Airways, Inc., 43 SCRA 37 [1972]). Common carriers are
liable for the missing goods for failure to comply with its duty (American Insurance Co., Inc. v.
Macondray & Co., Inc., 39 SCRA 494 [171]).

In Alitalia vs. Intermediate Appellate Court (192 SCRA 9 [1990]) where petitioner Alitalia as carrier
failed to deliver a passenger's (Dr. Felipa Pablo's) baggage containing the papers she was
scheduled to read and the materials which would have enabled her to make scientific presentation
(consisting of slides, autoradiograms or films, tables and tabulations ) in a prestigious international
conference in Rome where she was invited to participate in the conference, extended by the Joint
FAO/IAEA Division of Atomic Energy in Food and Agriculture of the Untied Nations, as a
consequence of which she failed to participate in the conference, this Court held that the Warsaw
Convention does not exclude liability for other breaches of contract by the carrier. Thus:

The Convention does not thus operate as an exclusive enumeration of the instances
of an airline's liability, or as an absolute limit of the extent of that liability. Such a
proposition is not borne out by the language of the Convention, as this Court has
now, and at an earlier time, pointed out. Moreover, slight reflection readily leads to
the conclusion that it should be deemed a limit of liability only in those cases where
the cause of the death or injury to person, or destruction, loss or damage to property
or delay in its transport is not attributable to or attended by any wilfull misconduct,
bad faith, recklessness, or otherwise improper conduct on the part of any official or
employee for which the carrier is responsible, and there is otherwise no special or
extraordinary form of resulting injury. The Convention's provisions, in short, do not
"regulate or exclude liability for other breaches of contract by the carrier" or
misconduct of its officers and employees, or for some particular or exceptional type
of damage. Otherwise, "an air carrier would be exempt from any liability for damages
in the event of its absolute refusal, in bad faith, to comply with a contract of carriage,
which is absurd." Nor may it for a moment be supposed that if a member of the
aircraft complement should inflict some physical injury on a passenger, or maliciously
destroy or damage the latter's property, the Convention might successfully be
pleaded as the sole gauge to determine the carrier's liability to the passenger.
Neither may the Convention invoked to justify the disregard of some extraordinary
sort of damage resulting to a passenger and preclude recovery therefor beyond the
limits set by said Convention. It is in this sense that the Convention has been
applied, or ignored, depending on the peculiar facts presented by each case.

xxx xxx xxx

In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the
employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to
her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless,
that some species of injury was caused to Dr. Pablo because petitioner ALITALIA
misplaced her baggage and failed to deliver it to her at the time appointed — a
breach of its contract of carriage, to be sure — with the result that she was unable to
read the paper and make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had painstakingly labored
over, at the prestigious international conference, to attend which she had traveled
hundreds of miles, to her chagrin and embarrassment and the disappointment and
annoyance of the organizers. She felt, no unreasonably, that the invitation for her to
participate at the conference, extended by the Joint FAO/IAEA Division of Atomic
Energy in Food and Agriculture of the United Nations, was a singular honor not only
to herself, but to the University of the Philippines and the country as well, an
opportunity to make some sort of impression among her colleagues in that field of
scientific activity. The opportunity to claim this honor or distinction was irretrievably
lost to her because of Alitalia's breach of its contract.

Apart from this, there can be no doubt that Dr. Pablo underwent profound distress
and anxiety, which gradually turned to panic and finally despair, from the time she
learned that her suitcases were missing up to the time when, having gone to Rome,
she finally realized that she would no longer be able to take part in the conference.
As she herself put it, she "was really shocked and distraught and confused."

Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for delay in
the transport of baggage.

She is not, of course, entitled to be compensated for loss or damage to her luggage.
As already mentioned, her baggage was ultimately delivered to her in Manila, tardily,
but safely. She is however entitled to nominal damages — which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated and recognized, and not for the purpose of
indemnifying the plaintiff that for any loss suffered — and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at P40,000.00.

In the case at bar, the trial court found that: (a) petitioners airline has not successfully refuted the
presumption established by Article 1735 of the Civil Code that the loss of the luggage in question
was due to the negligence or fault of its employees; (b) the contents of the missing luggage of
private respondents could not be replaced and were assessed at P200,000.00 by the latter;
(c) respondent Henry Alcantara spent about $15,000.00 in trying to locate said luggage in Frankfurt,
Germany, London, United Kingdom and Hongkong;
(d) there being no evidence to the contrary, the foregoing assessments made by private respondents
were fair and reasonable; and (e) private respondents were unable to present ample evidence to
prove fraud and bad faith and are therefore not entitled to moral damages under Article 2220 of the
Civil Code (Rollo, p. 61).

On the other hand, the Court of Appeals found that the lower court's award of P200,000.00 as actual
compensatory damages is well based factually and legally (Rollo, p. 37) except as to the deletion of
attorney's fees due to the absence of findings of gross and evident bad faith (Rollo, p. 39).

Under the circumstances, there appears to be no cogent reason to disturb the factual findings of
both the trial court and the Court of Appeals.

Furthermore, the respondent court found that petitioner waived the applicability of the Warsaw
Convention to the case at bar when it offered private respondent a higher amount than that which
is provided in the said law and failed to raise timely objections during the trial when questions and
answers were brought out regarding the actual claims and damages sustained by Alcantara which
were even subjected to lengthy cross examination by Lufthansa's counsel. In Abrenica v. Gonda (34
Phil. 739), this Court held:

. . . (I)t has been repeatedly laid down as a rule of evidence that a protest or
objection against the admission of any evidence must be made at the proper time,
and that if not so made it will be understood to have been waived. The proper time to
make a protest or objection is when, from the question addressed to the witness, or
from the answer thereto, or from the presentation of proof, the inadmissibility of
evidence is, or may be inferred.

It is also settled that the court cannot disregard evidence which would ordinarily be incompetent
under the rules but has been rendered admissible by the failure of a party to object thereto. Thus:

. . . The acceptance of an incompetent witness to testify in a civil suit, as well as the


allowance of improper questions that may be put to him while on the stand is a
matter resting in the discretion of the litigant. He may asset his right by timely
objection or he may waive it, expressly or by silence. In any case, the option rests
with him. Once admitted, the testimony is in the case for what it is worth and the
judge has no power to disregard it for the sole reason that it could have been
excluded, if it had been objected to, nor to strike it out on its own motion. (Cruz v.
CA, et al., 192 SCRA 209 [1990] citing Marella vs. Reyes, 12 Phil. 1). (Emphasis
supplied).

WHEREFORE, the petition is Dismissed and the questioned decision and resolution of the appellate
court are Affirmed. No costs.

SO ORDERED.

SPOUSES DANTE CRUZ and G.R. No. 186312


LEONORA CRUZ,
Petitioners, Present:
CARPIO MORALES, J.,
Chairperson,
BRION,
- versus - BERSAMIN,
ABAD,* and
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
Respondent.
Promulgated:
June 29, 2010

x-------------------------------------------------x

DECISION

CARPIO MORALES, J.:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,
2001[1] against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC)
of Pasig City for damages arising from the death of their son Ruelito C. Cruz
(Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B
Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental
Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned
and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to
11, 2000 was by virtue of a tour package-contract with respondent that included
transportation to and from the Resort and the point of departure in Batangas.

Miguel C. Matute (Matute),[2] a scuba diving instructor and one of the survivors,
gave his account of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally
scheduled to leave the Resort in the afternoon of September 10, 2000, but was
advised to stay for another night because of strong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests
including petitioners son and his wife trekked to the other side of
the Coco Beach mountain that was sheltered from the wind where they boarded M/B
Coco Beach III, which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto
Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt
from side to side and the captain to step forward to the front, leaving the wheel to
one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came
one after the other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the
boat. Upon seeing the captain, Matute and the other passengers who reached the
surface asked him what they could do to save the people who were still trapped under
the boat. The captain replied Iligtas niyo na lang ang sarili niyo (Just save
yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang,
Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two
boats were 22 persons, consisting of 18 passengers and four crew members, who
were brought to Pisa Island. Eight passengers, including petitioners son and his wife,
died during the incident.

At the time of 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, 2000as 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 base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.

3. When the judgment of the court awarding a sum of money


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

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

WHEREFORE, the Court of Appeals Decision of August 19,


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

The total amount adjudged against respondent shall earn interest at the rate of 12%
per annum computed from the finality of this decision until full payment.

SO ORDERED.
FACTS:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001
against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City
for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with
his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en
route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at
Coco Beach Island Resort (Resort) owned and operated by respondent.The stay of the
newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of
a tour package contract with respondent that included transportation to and from the Resort
and the point of departure in Batangas. Miguel C. Matute (Matute),a scuba diving instructor
and one of the survivors, gave his account of the incident that led to the filing of the
complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of September 10, 2000, but was advised to stay for
another night because of strong winds and heavy rains. On September 11, 2000, as it was
still windy, Matute and 25 other Resort guests including petitioners' son and
his wife trekked to the other side of the Coco Beach mountain that was sheltered from the
wind where they boarded M/B Coco Beach III,which was to ferry them to Batangas.Shortly
after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into
the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one of the crew members.The
waves got more unwieldy. After getting hit by two big waves which came one after the other,
M/B Coco Beach IIIcapsized 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).AcCTaD Help came after about 45 minutes when two
boats owned by Asia Divers in Sabang, Puerto Galera passed by the capsized M/B Coco
Beach III.Boarded on those two boats were 22 persons, consisting of 18 passengers and
four crew members, who were brought to Pisa Island. Eight passengers, including
petitioners' son and his wife, died during the incident.
At the time of Ruelito's death, he was 28 years old and employed as a contractual worker
for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly
salary of $900. Petitioners, by letter of October 26, 2000, demanded indemnification from
respondent for the death of their son in the amount of at least P4,000,000. Respondent
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 .Petitioners declined, they filed the Complaint, alleging that
respondent, as a common carrier, was guilty of negligence in allowingM/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.Carlos Bonquin, captain of M/B Coco Beach III, averred that the
Resort customarily requires four conditions to be met before a boat is allowed to sail, to wit:
(1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there is clearance from
the captain and (4) there is clearance from the Resort's assistant manager.
He added thatM/B Coco Beach III met all four conditions on September 11, 2000,but
asubasco or squall, characterized by strong winds and big waves, suddenly occurred,
causing the boat to capsize. By Decision of February 16, 2005, Branch 267 of the Pasig
RTC dismissed petitioners' Complaint and respondent's Counterclaim
Petitioners' Motion for Reconsideration having been denied by Order dated September 2,
2005,they appealed to the Court of Appeals. By Decision of August 19, 2008, 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 boardM/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,they filed the present Petition for Review

ISSUE:
1.
WON
respondent is a common carrier
2.
WON respondent is guilty of negligence in allowing M/B Coco Beach III sail notwithstanding
storm
warning bulletins issued by PAGASA

HELD:
1.
YES.
Petitioners correctly rely on De Guzman v. Court of Appeals 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 make 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.

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondent's ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And
the tour packages it offers, which include the ferry services, may be availed of by anyone who
can afford to pay the same. These services are thus available to the public. That respondent
does not charge a separate fee or fare for its ferry services is of no moment. It would be
imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in
arriving at the tour package price. That guests who opt not to avail of respondent’s ferry
services pay the same amount is likewise inconsequential. These guests may only be
deemed to have overpaid.

2.
YES.
A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other people’s lives at risk. The extraordinary diligence required of com
mon carriers demand that they take care of the goods or lives entrusted to their hands as if
they were their own. This respondent failed to do.

Respondent 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.
The incident was, therefore, not completely free from human intervention

The Court need not belabor how respondent's evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the squall

As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has
deliberately refrained from making distinctions on whether the carrying of persons or goods
is the carrier's principal business, whether it is offered on a regular basis, or whether it is
offered to the general public. The intent of the law is thus to not consider such distinctions.
Otherwise, there is no telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid the legal
obligations and liabilities of common carriers.

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. By the testimony of Dr.
Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under such
weather condition.

Respondent's insistence that the incident was caused by a fortuitous event does not
impress either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
been such as to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the aggravation of
the resulting injury to the creditor.

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.
Article 1764 vis-à \-vis Article 2206 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. 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]

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 which,
when converted to Philippine peso applying the annual average exchange rate of $1 = P44
in 2000, amounts to P39,600. Ruelito's net earning capacity is thus computed as follows:

Net Earning Capacity = life expectancy x (gross annual income -reasonable and necessary
living expenses).
= 35 x (P475,200 -P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000

Respecting the award of moral damages, since respondent common carrier's breach of
contract of carriage resulted in the death of petitioners' son, following Article 1764 vis-à-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.
Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as
moral damages and P100,000 as exemplary damages

THE Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the
following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity
for Ruelito's loss of earning capacity; (3) P100,000 as moral damages; (4) P100,000 as
exemplary damages; (5) 10% of the total amount adjudged against respondent as attorney’s
fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per
annum computed from the finality of this decision until full payment.

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