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[G.R. No. 138334. August 25, 2003] the wrong flight schedule through its employee Menor.

She insisted that the British Pageant was merely a


ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT substitute for the Jewels of Europe tour, such that the
OF APPEALS and CARAVAN TRAVEL & TOURS cost of the former should be properly set-off against the
INTERNATIONAL, INC., respondents. sum paid for the latter.
DECISION
YNARES-SANTIAGO, J.: For its part, respondent company, through its Operations
Manager, Concepcion Chipeco, denied responsibility for
In May 1991, petitioner Estela L. Crisostomo contracted petitioners failure to join the first tour. Chipeco insisted
the services of respondent Caravan Travel and Tours that petitioner was informed of the correct departure
International, Inc. to arrange and facilitate her booking, date, which was clearly and legibly printed on the plane
ticketing and accommodation in a tour dubbed Jewels of ticket. The travel documents were given to petitioner two
Europe. The package tour included the countries of days ahead of the scheduled trip. Petitioner had only
England, Holland, Germany, Austria, Liechstenstein, herself to blame for missing the flight, as she did not
Switzerland and France at a total cost of P74,322.70. bother to read or confirm her flight schedule as printed
Petitioner was given a 5% discount on the amount, on the ticket.
which included airfare, and the booking fee was also
waived because petitioners niece, Meriam Menor, was Respondent explained that it can no longer reimburse
respondent companys ticketing manager. the amount paid for Jewels of Europe, considering that
the same had already been remitted to its principal in
Pursuant to said contract, Menor went to her aunts Singapore, Lotus Travel Ltd., which had already billed
residence on June 12, 1991 a Wednesday to deliver the same even if petitioner did not join the tour. Lotus
petitioners travel documents and plane tickets. European tour organizer, Insight International Tours Ltd.,
Petitioner, in turn, gave Menor the full payment for the determines the cost of a package tour based on a
package tour. Menor then told her to be at the Ninoy minimum number of projected participants. For this
Aquino International Airport (NAIA) on Saturday, two reason, it is accepted industry practice to disallow refund
hours before her flight on board British Airways. for individuals who failed to take a booked tour.[3]

Without checking her travel documents, petitioner went Lastly, respondent maintained that the British Pageant
to NAIA on Saturday, June 15, 1991, to take the flight for was not a substitute for the package tour that petitioner
the first leg of her journey from Manila to Hongkong. To missed. This tour was independently procured by
petitioners dismay, she discovered that the flight she petitioner after realizing that she made a mistake in
was supposed to take had already departed the previous missing her flight for Jewels of Europe. Petitioner was
day. She learned that her plane ticket was for the flight allowed to make a partial payment of only US$300.00 for
scheduled on June 14, 1991. She thus called up Menor the second tour because her niece was then an
to complain. employee of the travel agency. Consequently,
respondent prayed that petitioner be ordered to pay the
Subsequently, Menor prevailed upon petitioner to take balance of P12,901.00 for the British Pageant package
another tour the British Pageant which included England, tour.
Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 After due proceedings, the trial court rendered a
or P20,881.00 (at the then prevailing exchange rate of decision,[4] the dispositive part of which reads:
P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991. WHEREFORE, premises considered, judgment is
hereby rendered as follows:
Upon petitioners return from Europe, she demanded
from respondent the reimbursement of P61,421.70, 1. Ordering the defendant to return and/or refund to the
representing the difference between the sum she paid plaintiff the amount of Fifty Three Thousand Nine
for Jewels of Europe and the amount she owed Hundred Eighty Nine Pesos and Forty Three Centavos
respondent for the British Pageant tour. Despite several (P53,989.43) with legal interest thereon at the rate of
demands, respondent company refused to reimburse the twelve percent (12%) per annum starting January 16,
amount, contending that the same was non- 1992, the date when the complaint was filed;
refundable.[1] Petitioner was thus constrained to file a
complaint against respondent for breach of contract of 2. Ordering the defendant to pay the plaintiff the amount
carriage and damages, which was docketed as Civil of Five Thousand (P5,000.00) Pesos as and for
Case No. 92-133 and raffled to Branch 59 of the reasonable attorneys fees;
Regional Trial Court of Makati City.
3. Dismissing the defendants counterclaim, for lack of
In her complaint,[2] petitioner alleged that her failure to merit; and
join Jewels of Europe was due to respondents fault since
it did not clearly indicate the departure date on the plane 4. With costs against the defendant.
ticket. Respondent was also negligent in informing her of

1
SO ORDERED.[5] private respondent. At best, petitioners negligence is
only contributory while the private respondent [is guilty]
The trial court held that respondent was negligent in of gross negligence making the principle of pari delicto
erroneously advising petitioner of her departure date inapplicable in the case;
through its employee, Menor, who was not presented as
witness to rebut petitioners testimony. However, II
petitioner should have verified the exact date and time of
departure by looking at her ticket and should have The Honorable Court of Appeals also erred in not ruling
simply not relied on Menors verbal representation. The that the Jewels of Europe tour was not indivisible and
trial court thus declared that petitioner was guilty of the amount paid therefor refundable;
contributory negligence and accordingly, deducted 10%
from the amount being claimed as refund. III

Respondent appealed to the Court of Appeals, which The Honorable Court erred in not granting to the
likewise found both parties to be at fault. However, the petitioner the consequential damages due her as a result
appellate court held that petitioner is more negligent than of breach of contract of carriage.[8]
respondent because as a lawyer and well-traveled
person, she should have known better than to simply Petitioner contends that respondent did not observe the
rely on what was told to her. This being so, she is not standard of care required of a common carrier when it
entitled to any form of damages. Petitioner also forfeited informed her wrongly of the flight schedule. She could
her right to the Jewels of Europe tour and must therefore not be deemed more negligent than respondent since
pay respondent the balance of the price for the British the latter is required by law to exercise extraordinary
Pageant tour. The dispositive portion of the judgment diligence in the fulfillment of its obligation. If she were
appealed from reads as follows: negligent at all, the same is merely contributory and not
the proximate cause of the damage she suffered. Her
WHEREFORE, premises considered, the decision of the loss could only be attributed to respondent as it was the
Regional Trial Court dated October 26, 1995 is hereby direct consequence of its employees gross negligence.
REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the Petitioners contention has no merit.
defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British By definition, a contract of carriage or transportation is
Pageant Package Tour, the same to earn legal interest one whereby a certain person or association of persons
at the rate of SIX PERCENT (6%) per annum, to be obligate themselves to transport persons, things, or
computed from the time the counterclaim was filed until news from one place to another for a fixed price.[9] Such
the finality of this decision. After this decision becomes person or association of persons are regarded as
final and executory, the rate of TWELVE PERCENT carriers and are classified as private or special carriers
(12%) interest per annum shall be additionally imposed and common or public carriers.[10] A common carrier is
on the total obligation until payment thereof is satisfied. defined under Article 1732 of the Civil Code as persons,
The award of attorneys fees is DELETED. Costs against corporations, firms or associations engaged in the
the plaintiff-appellee. business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation,
offering their services to the public.
SO ORDERED.[6]
It is obvious from the above definition that respondent is
Upon denial of her motion for reconsideration,[7] not an entity engaged in the business of transporting
petitioner filed the instant petition under Rule 45 on the either passengers or goods and is therefore, neither a
following grounds: private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to
I another since its covenant with its customers is simply to
make travel arrangements in their behalf. Respondents
It is respectfully submitted that the Honorable Court of services as a travel agency include procuring tickets and
Appeals committed a reversible error in reversing and facilitating travel permits or visas as well as booking
setting aside the decision of the trial court by ruling that customers for tours.
the petitioner is not entitled to a refund of the cost of
unavailed Jewels of Europe tour she being equally, if not While petitioner concededly bought her plane ticket
more, negligent than the private respondent, for in the through the efforts of respondent company, this does not
contract of carriage the common carrier is obliged to mean that the latter ipso facto is a common carrier. At
observe utmost care and extra-ordinary diligence which most, respondent acted merely as an agent of the
is higher in degree than the ordinary diligence required airline, with whom petitioner ultimately contracted for her
of the passenger. Thus, even if the petitioner and private carriage to Europe. Respondents obligation to petitioner
respondent were both negligent, the petitioner cannot be in this regard was simply to see to it that petitioner was
considered to be equally, or worse, more guilty than the properly booked with the airline for the appointed date

2
and time. Her transport to the place of destination, We agree with respondent.
meanwhile, pertained directly to the airline.
Respondents failure to present Menor as witness to
The object of petitioners contractual relation with rebut petitioners testimony could not give rise to an
respondent is the latters service of arranging and inference unfavorable to the former. Menor was already
facilitating petitioners booking, ticketing and working in France at the time of the filing of the
accommodation in the package tour. In contrast, the complaint,[15] thereby making it physically impossible for
object of a contract of carriage is the transportation of respondent to present her as a witness. Then too, even
passengers or goods. It is in this sense that the contract if it were possible for respondent to secure Menors
between the parties in this case was an ordinary one for testimony, the presumption under Rule 131, Section 3(e)
services and not one of carriage. Petitioners submission would still not apply. The opportunity and possibility for
is premised on a wrong assumption. obtaining Menors testimony belonged to both parties,
considering that Menor was not just respondents
The nature of the contractual relation between petitioner employee, but also petitioners niece. It was thus error for
and respondent is determinative of the degree of care the lower court to invoke the presumption that
required in the performance of the latters obligation respondent willfully suppressed evidence under Rule
under the contract. For reasons of public policy, a 131, Section 3(e). Said presumption would logically be
common carrier in a contract of carriage is bound by law inoperative if the evidence is not intentionally omitted but
to carry passengers as far as human care and foresight is simply unavailable, or when the same could have
can provide using the utmost diligence of very cautious been obtained by both parties.[16]
persons and with due regard for all the
circumstances.[11] As earlier stated, however, In sum, we do not agree with the finding of the lower
respondent is not a common carrier but a travel agency. court that Menors negligence concurred with the
It is thus not bound under the law to observe negligence of petitioner and resultantly caused damage
extraordinary diligence in the performance of its to the latter. Menors negligence was not sufficiently
obligation, as petitioner claims. proved, considering that the only evidence presented on
this score was petitioners uncorroborated narration of
Since the contract between the parties is an ordinary the events. It is well-settled that the party alleging a fact
one for services, the standard of care required of has the burden of proving it and a mere allegation
respondent is that of a good father of a family under cannot take the place of evidence.[17] If the plaintiff,
Article 1173 of the Civil Code.[12] This connotes upon whom rests the burden of proving his cause of
reasonable care consistent with that which an ordinarily action, fails to show in a satisfactory manner facts upon
prudent person would have observed when confronted which he bases his claim, the defendant is under no
with a similar situation. The test to determine whether obligation to prove his exception or defense.[18]
negligence attended the performance of an obligation is:
did the defendant in doing the alleged negligent act use Contrary to petitioners claim, the evidence on record
that reasonable care and caution which an ordinarily shows that respondent exercised due diligence in
prudent person would have used in the same situation? performing its obligations under the contract and
If not, then he is guilty of negligence.[13] followed standard procedure in rendering its services to
petitioner. As correctly observed by the lower court, the
In the case at bar, the lower court found Menor negligent plane ticket[19] issued to petitioner clearly reflected the
when she allegedly informed petitioner of the wrong day departure date and time, contrary to petitioners
of departure. Petitioners testimony was accepted as contention. The travel documents, consisting of the tour
indubitable evidence of Menors alleged negligent act itinerary, vouchers and instructions, were likewise
since respondent did not call Menor to the witness stand delivered to petitioner two days prior to the trip.
to refute the allegation. The lower court applied the Respondent also properly booked petitioner for the tour,
presumption under Rule 131, Section 3 (e)[14] of the prepared the necessary documents and procured the
Rules of Court that evidence willfully suppressed would plane tickets. It arranged petitioners hotel
be adverse if produced and thus considered petitioners accommodation as well as food, land transfers and
uncontradicted testimony to be sufficient proof of her sightseeing excursions, in accordance with its avowed
claim. undertaking.

On the other hand, respondent has consistently denied Therefore, it is clear that respondent performed its
that Menor was negligent and maintains that petitioners prestation under the contract as well as everything else
assertion is belied by the evidence on record. The date that was essential to book petitioner for the tour. Had
and time of departure was legibly written on the plane petitioner exercised due diligence in the conduct of her
ticket and the travel papers were delivered two days in affairs, there would have been no reason for her to miss
advance precisely so that petitioner could prepare for the the flight. Needless to say, after the travel papers were
trip. It performed all its obligations to enable petitioner to delivered to petitioner, it became incumbent upon her to
join the tour and exercised due diligence in its dealings take ordinary care of her concerns. This undoubtedly
with the latter. would require that she at least read the documents in

3
order to assure herself of the important details regarding
the trip.

The negligence of the obligor in the performance of the


obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to
exercise due care and prudence in the performance of
the obligation as the nature of the obligation so
demands.[20] There is no fixed standard of diligence
applicable to each and every contractual obligation and
each case must be determined upon its particular facts.
The degree of diligence required depends on the
circumstances of the specific obligation and whether one
has been negligent is a question of fact that is to be
determined after taking into account the particulars of
each case.[21]

The lower court declared that respondents employee


was negligent. This factual finding, however, is not
supported by the evidence on record. While factual
findings below are generally conclusive upon this court,
the rule is subject to certain exceptions, as when the trial
court overlooked, misunderstood, or misapplied some
facts or circumstances of weight and substance which
will affect the result of the case.[22]

In the case at bar, the evidence on record shows that


respondent company performed its duty diligently and
did not commit any contractual breach. Hence, petitioner
cannot recover and must bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of


merit. The decision of the Court of Appeals in CA-G.R.
CV No. 51932 is AFFIRMED. Accordingly, petitioner is
ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the
rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision.
After this Decision becomes final and executory, the rate
of 12% per annum shall be imposed until the obligation
is fully settled, this interim period being deemed to be by
then an equivalent to a forbearance of credit.[23]

SO ORDERED.

4
G.R. No. L-47822 December 22, 1988 On 10 December 1975, the trial court rendered a
Decision 1 finding private respondent to be a common
PEDRO DE GUZMAN, petitioner, carrier and holding him liable for the value of the
vs. undelivered goods (P 22,150.00) as well as for P
COURT OF APPEALS and ERNESTO CENDANA, 4,000.00 as damages and P 2,000.00 as attorney's fees.
respondents.
On appeal before the Court of Appeals, respondent
Vicente D. Millora for petitioner. urged that the trial court had erred in considering him a
common carrier; in finding that he had habitually offered
Jacinto Callanta for private respondent. 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.
FELICIANO, J.:
The Court of Appeals reversed the judgment of the trial
Respondent Ernesto Cendana, a junk dealer, was court and held that respondent had been engaged in
engaged in buying up used bottles and scrap metal in transporting return loads of freight "as a casual
Pangasinan. Upon gathering sufficient quantities of such occupation — a sideline to his scrap iron business" and
scrap material, respondent would bring such material to not as a common carrier. Petitioner came to this Court
Manila for resale. He utilized two (2) six-wheeler trucks by way of a Petition for Review assigning as errors the
which he owned for hauling the material to Manila. On following conclusions of the Court of Appeals:
the return trip to Pangasinan, respondent would load his
vehicles with cargo which various merchants wanted 1. that private respondent was not a common
delivered to differing establishments in Pangasinan. For carrier;
that service, respondent charged freight rates which
were commonly lower than regular commercial rates. 2. that the hijacking of respondent's truck was force
majeure; and
Sometime in November 1970, petitioner Pedro de
Guzman a merchant and authorized dealer of General 3. that respondent was not liable for the value of
Milk Company (Philippines), Inc. in Urdaneta, the undelivered cargo. (Rollo, p. 111)
Pangasinan, contracted with respondent for the hauling
of 750 cartons of Liberty filled milk from a warehouse of We consider first the issue of whether or not private
General Milk in Makati, Rizal, to petitioner's respondent Ernesto Cendana may, under the facts
establishment in Urdaneta on or before 4 December earlier set forth, be properly characterized as a common
1970. Accordingly, on 1 December 1970, respondent carrier.
loaded in Makati the merchandise on to his trucks: 150
cartons were loaded on a truck driven by respondent The Civil Code defines "common carriers" in the
himself, while 600 cartons were placed on board the following terms:
other truck which was driven by Manuel Estrada,
respondent's driver and employee. Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
Only 150 boxes of Liberty filled milk were delivered to business of carrying or transporting passengers or
petitioner. The other 600 boxes never reached petitioner, goods or both, by land, water, or air for compensation,
since the truck which carried these boxes was hijacked offering their services to the public.
somewhere along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the truck, its The above article makes no distinction between one
driver, his helper and the cargo. whose principal business activity is the carrying of
persons or goods or both, and one who does such
On 6 January 1971, petitioner commenced action carrying only as an ancillary activity (in local Idiom as "a
against private respondent in the Court of First Instance sideline"). Article 1732 also carefully avoids making any
of Pangasinan, demanding payment of P 22,150.00, the distinction between a person or enterprise offering
claimed value of the lost merchandise, plus damages transportation service on a regular or scheduled basis
and attorney's fees. Petitioner argued that private and one offering such service on an occasional, episodic
respondent, being a common carrier, and having failed or unscheduled basis. Neither does Article 1732
to exercise the extraordinary diligence required of him by distinguish between a carrier offering its services to the
the law, should be held liable for the value of the "general public," i.e., the general community or
undelivered goods. population, and one who offers services or solicits
business only from a narrow segment of the general
In his Answer, private respondent denied that he was a population. We think that Article 1733 deliberaom
common carrier and argued that he could not be held making such distinctions.
responsible for the value of the lost goods, such loss
having been due to force majeure. So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the

5
notion of "public service," under the Public Service Act render such duties and liabilities merely facultative by
(Commonwealth Act No. 1416, as amended) which at simply failing to obtain the necessary permits and
least partially supplements the law on common carriers authorizations.
set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes: We turn then to the liability of private respondent as a
common carrier.
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or Common carriers, "by the nature of their business and
compensation, with general or limited clientele, whether for reasons of public policy" 2 are held to a very high
permanent, occasional or accidental, and done for degree of care and diligence ("extraordinary diligence")
general business purposes, any common carrier, in the carriage of goods as well as of passengers. The
railroad, street railway, traction railway, subway motor specific import of extraordinary diligence in the care of
vehicle, either for freight or passenger, or both, with or goods transported by a common carrier is, according to
without fixed route and whatever may be its Article 1733, "further expressed in Articles 1734,1735
classification, freight or carrier service of any class, and 1745, numbers 5, 6 and 7" of the Civil Code.
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of Article 1734 establishes the general rule that common
passengers or freight or both, shipyard, marine repair carriers are responsible for the loss, destruction or
shop, wharf or dock, ice plant, deterioration of the goods which they carry, "unless the
ice-refrigeration plant, canal, irrigation system, gas, same is due to any of the following causes only:
electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless (1) Flood, storm, earthquake, lightning or other
communications systems, wire or wireless broadcasting natural disaster or calamity;
stations and other similar public services. ... (Emphasis (2) Act of the public enemy in war, whether
supplied) international or civil;
(3) Act or omission of the shipper or owner of the
It appears to the Court that private respondent is goods;
properly characterized as a common carrier even though (4) The character-of the goods or defects in the
he merely "back-hauled" goods for other merchants from packing or-in the containers; and
Manila to Pangasinan, although such back-hauling was (5) Order or act of competent public authority.
done on a periodic or occasional rather than regular or
scheduled manner, and even though private It is important to point out that the above list of causes of
respondent's principal occupation was not the carriage of loss, destruction or deterioration which exempt the
goods for others. There is no dispute that private common carrier for responsibility therefor, is a closed
respondent charged his customers a fee for hauling their list. Causes falling outside the foregoing list, even if they
goods; that fee frequently fell below commercial freight appear to constitute a species of force majeure fall within
rates is not relevant here. the scope of Article 1735, which provides as follows:

The Court of Appeals referred to the fact that private In all cases other than those mentioned in numbers 1, 2,
respondent held no certificate of public convenience, 3, 4 and 5 of the preceding article, if the goods are lost,
and concluded he was not a common carrier. This is destroyed or deteriorated, common carriers are
palpable error. A certificate of public convenience is not presumed to have been at fault or to have acted
a requisite for the incurring of liability under the Civil negligently, unless they prove that they observed
Code provisions governing common carriers. That extraordinary diligence as required in Article 1733.
liability arises the moment a person or firm acts as a (Emphasis supplied)
common carrier, without regard to whether or not such
carrier has also complied with the requirements of the Applying the above-quoted Articles 1734 and 1735, we
applicable regulatory statute and implementing note firstly that the specific cause alleged in the instant
regulations and has been granted a certificate of public case — the hijacking of the carrier's truck — does not fall
convenience or other franchise. To exempt private within any of the five (5) categories of exempting causes
respondent from the liabilities of a common carrier listed in Article 1734. It would follow, therefore, that the
because he has not secured the necessary certificate of hijacking of the carrier's vehicle must be dealt with under
public convenience, would be offensive to sound public the provisions of Article 1735, in other words, that the
policy; that would be to reward private respondent private respondent as common carrier is presumed to
precisely for failing to comply with applicable statutory have been at fault or to have acted negligently. This
requirements. The business of a common carrier presumption, however, may be overthrown by proof of
impinges directly and intimately upon the safety and well extraordinary diligence on the part of private respondent.
being and property of those members of the general
community who happen to deal with such carrier. The Petitioner insists that private respondent had not
law imposes duties and liabilities upon common carriers observed extraordinary diligence in the care of
for the safety and protection of those who utilize their petitioner's goods. Petitioner argues that in the
services and the law cannot allow a common carrier to circumstances of this case, private respondent should

6
have hired a security guard presumably to ride with the of the trial court shows that the accused acted with
truck carrying the 600 cartons of Liberty filled milk. We grave, if not irresistible, threat, violence or force.3 Three
do not believe, however, that in the instant case, the (3) of the five (5) hold-uppers were armed with firearms.
standard of extraordinary diligence required private The robbers not only took away the truck and its cargo
respondent to retain a security guard to ride with the but also kidnapped the driver and his helper, detaining
truck and to engage brigands in a firelight at the risk of them for several days and later releasing them in
his own life and the lives of the driver and his helper. another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The
The precise issue that we address here relates to the Court of First Instance convicted all the accused of
specific requirements of the duty of extraordinary robbery, though not of robbery in band. 4
diligence in the vigilance over the goods carried in the
specific context of hijacking or armed robbery. In these circumstances, we hold that the occurrence of
the loss must reasonably be regarded as quite beyond
As noted earlier, the duty of extraordinary diligence in the control of the common carrier and properly regarded
the vigilance over goods is, under Article 1733, given as a fortuitous event. It is necessary to recall that even
additional specification not only by Articles 1734 and common carriers are not made absolute insurers against
1735 but also by Article 1745, numbers 4, 5 and 6, all risks of travel and of transport of goods, and are not
Article 1745 provides in relevant part: held liable for acts or events which cannot be foreseen
or are inevitable, provided that they shall have complied
Any of the following or similar stipulations shall be with the rigorous standard of extraordinary diligence.
considered unreasonable, unjust and contrary to public
policy: We, therefore, agree with the result reached by the
Court of Appeals that private respondent Cendana is not
xxx xxx xxx liable for the value of the undelivered merchandise which
was lost because of an event entirely beyond private
(5) that the common carrier shall not be responsible respondent's control.
for the acts or omissions of his or its employees;
ACCORDINGLY, the Petition for Review on certiorari is
(6) that the common carrier's liability for acts hereby DENIED and the Decision of the Court of
committed by thieves, or of robbers who do not act with Appeals dated 3 August 1977 is AFFIRMED. No
grave or irresistible threat, violence or force, is pronouncement as to costs.
dispensed with or diminished; and
SO ORDERED.
(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

7
[G.R. No. 125948. December 29, 1998] Government Code. The said section limits the imposition
of fees and charges on business to such amounts as
FIRST PHILIPPINE INDUSTRIAL CORPORATION, may be commensurate to the cost of regulation,
petitioner, vs. COURT OF APPEALS, HONORABLE inspection, and licensing. Hence, assuming arguendo
PATERNO V. TAC-AN, BATANGAS CITY and that FPIC is liable for the license fee, the imposition
ADORACION C. ARELLANO, in her official capacity as thereof based on gross receipts is violative of the
City Treasurer of Batangas, respondents. aforecited provision. The amount of P956,076.04
DECISION (P239,019.01 per quarter) is not commensurate to the
MARTINEZ, J.: cost of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere
This petition for review on certiorari assails the Decision regulatory imposition."[4]
of the Court of Appeals dated November 29, 1995, in
CA-G.R. SP No. 36801, affirming the decision of the On March 8, 1994, the respondent City Treasurer denied
Regional Trial Court of Batangas City, Branch 84, in Civil the protest contending that petitioner cannot be
Case No. 4293, which dismissed petitioners' complaint considered engaged in transportation business, thus it
for a business tax refund imposed by the City of cannot claim exemption under Section 133 (j) of the
Batangas. Local Government Code.[5]

Petitioner is a grantee of a pipeline concession under On June 15, 1994, petitioner filed with the Regional Trial
Republic Act No. 387, as amended, to contract, install Court of Batangas City a complaint[6] for tax refund with
and operate oil pipelines. The original pipeline prayer for a writ of preliminary injunction against
concession was granted in 1967[1] and renewed by the respondents City of Batangas and Adoracion Arellano in
Energy Regulatory Board in 1992.[2] her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and
Sometime in January 1995, petitioner applied for a collection of the business tax on its gross receipts
mayor's permit with the Office of the Mayor of Batangas violates Section 133 of the Local Government Code; (2)
City. However, before the mayor's permit could be the authority of cities to impose and collect a tax on the
issued, the respondent City Treasurer required petitioner gross receipts of "contractors and independent
to pay a local tax based on its gross receipts for the contractors" under Sec. 141 (e) and 151 does not
fiscal year 1993 pursuant to the Local Government include the authority to collect such taxes on
Code.[3] The respondent City Treasurer assessed a transportation contractors for, as defined under Sec. 131
business tax on the petitioner amounting to P956,076.04 (h), the term "contractors" excludes transportation
payable in four installments based on the gross receipts contractors; and, (3) the City Treasurer illegally and
for products pumped at GPS-1 for the fiscal year 1993 erroneously imposed and collected the said tax, thus
which amounted to P181,681,151.00. In order not to meriting the immediate refund of the tax paid.[7]
hamper its operations, petitioner paid the tax under
protest in the amount of P239,019.01 for the first quarter Traversing the complaint, the respondents argued that
of 1993. petitioner cannot be exempt from taxes under Section
133 (j) of the Local Government Code as said exemption
On January 20, 1994, petitioner filed a letter-protest applies only to "transportation contractors and persons
addressed to the respondent City Treasurer, the engaged in the transportation by hire and common
pertinent portion of which reads: carriers by air, land and water." Respondents assert that
pipelines are not included in the term "common carrier"
"Please note that our Company (FPIC) is a pipeline which refers solely to ordinary carriers such as trucks,
operator with a government concession granted under trains, ships and the like. Respondents further posit that
the Petroleum Act. It is engaged in the business of the term "common carrier" under the said code pertains
transporting petroleum products from the Batangas to the mode or manner by which a product is delivered to
refineries, via pipeline, to Sucat and JTF Pandacan its destination.[8]
Terminals. As such, our Company is exempt from paying
tax on gross receipts under Section 133 of the Local On October 3, 1994, the trial court rendered a decision
Government Code of 1991 x x x x dismissing the complaint, ruling in this wise:

"Moreover, Transportation contractors are not included "xxx Plaintiff is either a contractor or other independent
in the enumeration of contractors under Section 131, contractor.
Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax 'on contractors xxx the exemption to tax claimed by the plaintiff has
and other independent contractors' under Section 143, become unclear. It is a rule that tax exemptions are to be
Paragraph (e) of the Local Government Code does not strictly construed against the taxpayer, taxes being the
include the power to levy on transportation contractors. lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.
"The imposition and assessment cannot be categorized
as a mere fee authorized under Section 147 of the Local

8
"Plaintiff claims that it is a grantee of a pipeline goods or both, by land, water, or air, for compensation,
concession under Republic Act 387, (Exhibit A) whose offering their services to the public."
concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor The test for determining whether a party is a common
the deed of concession grant any tax exemption upon carrier of goods is:
the plaintiff.
1. He must be engaged in the business of carrying
"Even the Local Government Code imposes a tax on goods for others as a public employment, and must hold
franchise holders under Sec. 137 of the Local Tax Code. himself out as ready to engage in the transportation of
Such being the situation obtained in this case goods for person generally as a business and not as a
(exemption being unclear and equivocal) resort to casual occupation;
distinctions or other considerations may be of help:
2. He must undertake to carry goods of the kind to which
1. That the exemption granted under Sec. 133 (j) his business is confined;
encompasses only common carriers so as not to
overburden the riding public or commuters with taxes. 3. He must undertake to carry by the method by which
Plaintiff is not a common carrier, but a special carrier his business is conducted and over his established
extending its services and facilities to a single specific or roads; and
"special customer" under a "special contract."
4. The transportation must be for hire.[15]
2. The Local Tax Code of 1992 was basically enacted to
give more and effective local autonomy to local Based on the above definitions and requirements, there
governments than the previous enactments, to make is no doubt that petitioner is a common carrier. It is
them economically and financially viable to serve the engaged in the business of transporting or carrying
people and discharge their functions with a concomitant goods, i.e. petroleum products, for hire as a public
obligation to accept certain devolution of powers, x x x employment. It undertakes to carry for all persons
So, consistent with this policy even franchise grantees indifferently, that is, to all persons who choose to employ
are taxed (Sec. 137) and contractors are also taxed its services, and transports the goods by land and for
under Sec. 143 (e) and 151 of the Code."[9] compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a
Petitioner assailed the aforesaid decision before this common carrier. In De Guzman vs. Court of Appeals[16]
Court via a petition for review. On February 27, 1995, we we ruled that:
referred the case to the respondent Court of Appeals for
consideration and adjudication.[10] On November 29, "The above article (Art. 1732, Civil Code) makes no
1995, the respondent court rendered a decision[11] distinction between one whose principal business activity
affirming the trial court's dismissal of petitioner's is the carrying of persons or goods or both, and one who
complaint. Petitioner's motion for reconsideration was does such carrying only as an ancillary activity (in local
denied on July 18, 1996.[12] idiom, as a 'sideline'). Article 1732 x x x avoids making
any distinction between a person or enterprise offering
Hence, this petition. At first, the petition was denied due transportation service on a regular or scheduled basis
course in a Resolution dated November 11, 1996.[13] and one offering such service on an occasional, episodic
Petitioner moved for a reconsideration which was or unscheduled basis. Neither does Article 1732
granted by this Court in a Resolution[14] of January 20, distinguish between a carrier offering its services to the
1997. Thus, the petition was reinstated. 'general public,' i.e., the general community or
population, and one who offers services or solicits
Petitioner claims that the respondent Court of Appeals business only from a narrow segment of the general
erred in holding that (1) the petitioner is not a common population. We think that Article 1877 deliberately
carrier or a transportation contractor, and (2) the refrained from making such distinctions.
exemption sought for by petitioner is not clear under the
law. So understood, the concept of 'common carrier' under
Article 1732 may be seen to coincide neatly with the
There is merit in the petition. notion of 'public service,' under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
A "common carrier" may be defined, broadly, as one who least partially supplements the law on common carriers
holds himself out to the public as engaged in the set forth in the Civil Code. Under Section 13, paragraph
business of transporting persons or property from place (b) of the Public Service Act, 'public service' includes:
to place, for compensation, offering his services to the
public generally. 'every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
Article 1732 of the Civil Code defines a "common carrier" compensation, with general or limited clientele, whether
as "any person, corporation, firm or association engaged permanent, occasional or accidental, and done for
in the business of carrying or transporting passengers or general business purposes, any common carrier,

9
railroad, street railway, traction railway, subway motor withholding tax prescribed by Revenue Regulations No.
vehicle, either for freight or passenger, or both, with or 13-78, as amended."
without fixed route and whatever may be its
classification, freight or carrier service of any class, From the foregoing disquisition, there is no doubt that
express service, steamboat, or steamship line, pontines, petitioner is a "common carrier" and, therefore, exempt
ferries and water craft, engaged in the transportation of from the business tax as provided for in Section 133 (j),
passengers or freight or both, shipyard, marine repair of the Local Government Code, to wit:
shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system gas, electric light heat and "Section 133. Common Limitations on the Taxing
power, water supply and power petroleum, sewerage Powers of Local Government Units. - Unless otherwise
system, wire or wireless communications systems, wire provided herein, the exercise of the taxing powers of
or wireless broadcasting stations and other similar public provinces, cities, municipalities, and barangays shall not
services.' "(Underscoring Supplied) extend to the levy of the following :

Also, respondent's argument that the term "common xxxxxxxxx


carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers (j) Taxes on the gross receipts of transportation
transporting goods and passengers through moving contractors and persons engaged in the transportation of
vehicles or vessels either by land, sea or water, is passengers or freight by hire and common carriers by
erroneous. air, land or water, except as provided in this Code."

As correctly pointed out by petitioner, the definition of The deliberations conducted in the House of
"common carriers" in the Civil Code makes no distinction Representatives on the Local Government Code of 1991
as to the means of transporting, as long as it is by land, are illuminating:
water or air. It does not provide that the transportation of
the passengers or goods should be by motor vehicle. In "MR. AQUINO (A). Thank you, Mr. Speaker.
fact, in the United States, oil pipe line operators are
considered common carriers.[17] Mr. Speaker, we would like to proceed to page 95, line 1.
It states : "SEC.121 [now Sec. 131]. Common
Under the Petroleum Act of the Philippines (Republic Act Limitations on the Taxing Powers of Local Government
387), petitioner is considered a "common carrier." Thus, Units." x x x
Article 86 thereof provides that:
MR. AQUINO (A.). Thank you Mr. Speaker.
"Art. 86. Pipe line concessionaire as a common carrier. -
A pipe line shall have the preferential right to utilize Still on page 95, subparagraph 5, on taxes on the
installations for the transportation of petroleum owned by business of transportation. This appears to be one of
him, but is obligated to utilize the remaining those being deemed to be exempted from the taxing
transportation capacity pro rata for the transportation of powers of the local government units. May we know the
such other petroleum as may be offered by others for reason why the transportation business is being
transport, and to charge without discrimination such excluded from the taxing powers of the local government
rates as may have been approved by the Secretary of units?
Agriculture and Natural Resources."
MR. JAVIER (E.). Mr. Speaker, there is an exception
Republic Act 387 also regards petroleum operation as a contained in Section 121 (now Sec. 131), line 16,
public utility. Pertinent portion of Article 7 thereof paragraph 5. It states that local government units may
provides: not impose taxes on the business of transportation,
except as otherwise provided in this code.
"that everything relating to the exploration for and
exploitation of petroleum x x and everything relating to Now, Mr. Speaker, if the Gentleman would care to go to
the manufacture, refining, storage, or transportation by page 98 of Book II, one can see there that provinces
special methods of petroleum, is hereby declared to be a have the power to impose a tax on business enjoying a
public utility." (Underscoring Supplied) franchise at the rate of not more than one-half of 1
percent of the gross annual receipts. So, transportation
The Bureau of Internal Revenue likewise considers the contractors who are enjoying a franchise would be
petitioner a "common carrier." In BIR Ruling No. 069-83, subject to tax by the province. That is the exception, Mr.
it declared: Speaker.

"x x x since [petitioner] is a pipeline concessionaire that What we want to guard against here, Mr. Speaker, is the
is engaged only in transporting petroleum products, it is imposition of taxes by local government units on the
considered a common carrier under Republic Act No. carrier business. Local government units may impose
387 x x x. Such being the case, it is not subject to taxes on top of what is already being imposed by the
National Internal Revenue Code which is the so-called

10
"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.

11
[G.R. No. 148496. March 19, 2002] at the end and tearrage at the middle of the subject
damaged cargoes respectively, coupled with the Marine
VIRGINES CALVO doing business under the name and Cargo Survey Report (Exh. H - H-4-A) confirms the fact
style TRANSORIENT CONTAINER TERMINAL of the damaged condition of the subject cargoes. The
SERVICES, INC., petitioner, vs. UCPB GENERAL surveyor[s] report (Exh. H-4-A) in particular, which
INSURANCE CO., INC. (formerly Allied Guarantee Ins. provides among others that:
Co., Inc.) respondent.
DECISION . . . we opine that damages sustained by shipment is
MENDOZA, J.: attributable to improper handling in transit presumably
whilst in the custody of the broker . . . .
This is a petition for review of the decision,[1] dated May
31, 2001, of the Court of Appeals, affirming the is a finding which cannot be traversed and overturned.
decision[2] of the Regional Trial Court, Makati City,
Branch 148, which ordered petitioner to pay respondent, The evidence adduced by the defendants is not enough
as subrogee, the amount of P93,112.00 with legal to sustain [her] defense that [she is] are not liable.
interest, representing the value of damaged cargo Defendant by reason of the nature of [her] business
handled by petitioner, 25% thereof as attorneys fees, should have devised ways and means in order to
and the cost of the suit. prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to
The facts are as follows: the consignee. Defendant did not present any evidence
on what precaution [she] performed to prevent [the] said
Petitioner Virgines Calvo is the owner of Transorient incident, hence the presumption is that the moment the
Container Terminal Services, Inc. (TCTSI), a sole defendant accepts the cargo [she] shall perform such
proprietorship customs broker. At the time material to extraordinary diligence because of the nature of the
this case, petitioner entered into a contract with San cargo.
Miguel Corporation (SMC) for the transfer of 114 reels of
semi-chemical fluting paper and 124 reels of kraft liner ....
board from the Port Area in Manila to SMCs warehouse
at the Tabacalera Compound, Romualdez St., Ermita, Generally speaking under Article 1735 of the Civil Code,
Manila. The cargo was insured by respondent UCPB if the goods are proved to have been lost, destroyed or
General Insurance Co., Inc. deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they
On July 14, 1990, the shipment in question, contained in prove that they have observed the extraordinary
30 metal vans, arrived in Manila on board M/V diligence required by law. The burden of the plaintiff,
Hayakawa Maru and, after 24 hours, were unloaded therefore, is to prove merely that the goods he
from the vessel to the custody of the arrastre operator, transported have been lost, destroyed or deteriorated.
Manila Port Services, Inc. From July 23 to July 25, 1990, Thereafter, the burden is shifted to the carrier to prove
petitioner, pursuant to her contract with SMC, withdrew that he has exercised the extraordinary diligence
the cargo from the arrastre operator and delivered it to required by law. Thus, it has been held that the mere
SMCs warehouse in Ermita, Manila. On July 25, 1990, proof of delivery of goods in good order to a carrier, and
the goods were inspected by Marine Cargo Surveyors, of their arrival at the place of destination in bad order,
who found that 15 reels of the semi-chemical fluting makes out a prima facie case against the carrier, so that
paper were wet/stained/torn and 3 reels of kraft liner if no explanation is given as to how the injury occurred,
board were likewise torn. The damage was placed at the carrier must be held responsible. It is incumbent
P93,112.00. upon the carrier to prove that the loss was due to
accident or some other circumstances inconsistent with
SMC collected payment from respondent UCPB under its liability. (cited in Commercial Laws of the Philippines
its insurance contract for the aforementioned amount. In by Agbayani, p. 31, Vol. IV, 1989 Ed.)
turn, respondent, as subrogee of SMC, brought suit
against petitioner in the Regional Trial Court, Branch Defendant, being a customs brother, warehouseman
148, Makati City, which, on December 20, 1995, and at the same time a common carrier is supposed [to]
rendered judgment finding petitioner liable to respondent exercise [the] extraordinary diligence required by law,
for the damage to the shipment. hence the extraordinary responsibility lasts from the time
the goods are unconditionally placed in the possession
The trial court held: of and received by the carrier for transportation until the
same are delivered actually or constructively by the
It cannot be denied . . . that the subject cargoes carrier to the consignee or to the person who has the
sustained damage while in the custody of defendants. right to receive the same.[3]
Evidence such as the Warehouse Entry Slip (Exh. E);
the Damage Report (Exh. F) with entries appearing Accordingly, the trial court ordered petitioner to pay the
therein, classified as TED and TSN, which the claims following amounts
processor, Ms. Agrifina De Luna, claimed to be tearrage

12
1. The sum of P93,112.00 plus interest; offering its services to the general public, i.e., the
general community or population, and one who offers
2. 25% thereof as lawyers fee; services or solicits business only from a narrow segment
of the general population. We think that Article 1732
3. Costs of suit.[4] deliberately refrained from making such distinctions.

The decision was affirmed by the Court of Appeals on So understood, the concept of common carrier under
appeal. Hence this petition for review on certiorari. Article 1732 may be seen to coincide neatly with the
notion of public service, under the Public Service Act
Petitioner contends that: (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
I. THE COURT OF APPEALS COMMITTED SERIOUS set forth in the Civil Code. Under Section 13, paragraph
AND REVERSIBLE ERROR [IN] DECIDING THE CASE (b) of the Public Service Act, public service includes:
NOT ON THE EVIDENCE PRESENTED BUT ON PURE
SURMISES, SPECULATIONS AND MANIFESTLY x x x every person that now or hereafter may own,
MISTAKEN INFERENCE. operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
II. THE COURT OF APPEALS COMMITTED SERIOUS permanent, occasional or accidental, and done for
AND REVERSIBLE ERROR IN CLASSIFYING THE general business purposes, any common carrier,
PETITIONER AS A COMMON CARRIER AND NOT AS railroad, street railway, traction railway, subway motor
PRIVATE OR SPECIAL CARRIER WHO DID NOT vehicle, either for freight or passenger, or both, with or
HOLD ITS SERVICES TO THE PUBLIC.[5] without fixed route and whatever may be its
classification, freight or carrier service of any class,
It will be convenient to deal with these contentions in the express service, steamboat, or steamship line, pontines,
inverse order, for if petitioner is not a common carrier, ferries and water craft, engaged in the transportation of
although both the trial court and the Court of Appeals passengers or freight or both, shipyard, marine repair
held otherwise, then she is indeed not liable beyond shop, wharf or dock, ice plant, ice-refrigeration plant,
what ordinary diligence in the vigilance over the goods canal, irrigation system, gas, electric light, heat and
transported by her, would require.[6] Consequently, any power, water supply and power petroleum, sewerage
damage to the cargo she agrees to transport cannot be system, wire or wireless communications systems, wire
presumed to have been due to her fault or negligence. or wireless broadcasting stations and other similar public
services. x x x [8]
Petitioner contends that contrary to the findings of the
trial court and the Court of Appeals, she is not a There is greater reason for holding petitioner to be a
common carrier but a private carrier because, as a common carrier because the transportation of goods is
customs broker and warehouseman, she does not an integral part of her business. To uphold petitioners
indiscriminately hold her services out to the public but contention would be to deprive those with whom she
only offers the same to select parties with whom she contracts the protection which the law affords them
may contract in the conduct of her business. notwithstanding the fact that the obligation to carry
goods for her customers, as already noted, is part and
The contention has no merit. In De Guzman v. Court of parcel of petitioners business.
Appeals,[7] the Court dismissed a similar contention and
held the party to be a common carrier, thus Now, as to petitioners liability, Art. 1733 of the Civil Code
provides:
The Civil Code defines common carriers in the following
terms: Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe
Article 1732. Common carriers are persons, extraordinary diligence in the vigilance over the goods
corporations, firms or associations engaged in the and for the safety of the passengers transported by
business of carrying or transporting passengers or them, according to all the circumstances of each case. . .
goods or both, by land, water, or air for compensation, .
offering their services to the public.
In Compania Maritima v. Court of Appeals,[9] the
The above article makes no distinction between one meaning of extraordinary diligence in the vigilance over
whose principal business activity is the carrying of goods was explained thus:
persons or goods or both, and one who does such
carrying only as an ancillary activity . . . Article 1732 also The extraordinary diligence in the vigilance over the
carefully avoids making any distinction between a goods tendered for shipment requires the common
person or enterprise offering transportation service on a carrier to know and to follow the required precaution for
regular or scheduled basis and one offering such service avoiding damage to, or destruction of the goods
on an occasional, episodic or unscheduled basis. entrusted to it for sale, carriage and delivery. It requires
Neither does Article 1732 distinguish between a carrier common carriers to render service with the greatest skill

13
and foresight and to use all reasonable means to Harbor, Manila on 14 July 1990, containerized onto 30 x
ascertain the nature and characteristic of goods 20 secure metal vans, covered by clean EIRs. Except for
tendered for shipment, and to exercise due care in the slight dents and paint scratches on side and roof panels,
handling and stowage, including such methods as their these containers were deemed to have [been] received
nature requires. in good condition.

In the case at bar, petitioner denies liability for the ....


damage to the cargo. She claims that the spoilage or
wettage took place while the goods were in the custody Transfer/Delivery:
of either the carrying vessel M/V Hayakawa Maru, which
transported the cargo to Manila, or the arrastre operator, On July 23, 1990, shipment housed onto 30 x 20 cargo
to whom the goods were unloaded and who allegedly containers was [withdrawn] by Transorient Container
kept them in open air for nine days from July 14 to July Services, Inc. . . . without exception.
23, 1998 notwithstanding the fact that some of the
containers were deformed, cracked, or otherwise [The cargo] was finally delivered to the consignees
damaged, as noted in the Marine Survey Report (Exh. storage warehouse located at Tabacalera Compound,
H), to wit: Romualdez Street, Ermita, Manila from July 23/25,
1990.[12]
MAXU-2062880 - rain gutter deformed/cracked
As found by the Court of Appeals:
ICSU-363461-3 - left side rubber gasket on door
distorted/partly loose From the [Survey Report], it [is] clear that the shipment
was discharged from the vessel to the arrastre, Marina
PERU-204209-4 - with pinholes on roof panel right Port Services Inc., in good order and condition as
portion evidenced by clean Equipment Interchange Reports
(EIRs). Had there been any damage to the shipment,
TOLU-213674-3 - wood flooring we[t] and/or with signs there would have been a report to that effect made by
of water soaked the arrastre operator. The cargoes were withdrawn by
the defendant-appellant from the arrastre still in good
MAXU-201406-0 - with dent/crack on roof panel order and condition as the same were received by the
former without exception, that is, without any report of
ICSU-412105-0 - rubber gasket on left side/door panel damage or loss. Surely, if the container vans were
partly detached loosened.[10] deformed, cracked, distorted or dented, the defendant-
appellant would report it immediately to the consignee or
In addition, petitioner claims that Marine Cargo Surveyor make an exception on the delivery receipt or note the
Ernesto Tolentino testified that he has no personal same in the Warehouse Entry Slip (WES). None of these
knowledge on whether the container vans were first took place. To put it simply, the defendant-appellant
stored in petitioners warehouse prior to their delivery to received the shipment in good order and condition and
the consignee. She likewise claims that after delivered the same to the consignee damaged. We can
withdrawing the container vans from the arrastre only conclude that the damages to the cargo occurred
operator, her driver, Ricardo Nazarro, immediately while it was in the possession of the defendant-
delivered the cargo to SMCs warehouse in Ermita, appellant. Whenever the thing is lost (or damaged) in the
Manila, which is a mere thirty-minute drive from the Port possession of the debtor (or obligor), it shall be
Area where the cargo came from. Thus, the damage to presumed that the loss (or damage) was due to his fault,
the cargo could not have taken place while these were in unless there is proof to the contrary. No proof was
her custody.[11] proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier
Contrary to petitioners assertion, the Survey Report in case of loss or damage to the goods.[13]
(Exh. H) of the Marine Cargo Surveyors indicates that
when the shipper transferred the cargo in question to the Anent petitioners insistence that the cargo could not
arrastre operator, these were covered by clean have been damaged while in her custody as she
Equipment Interchange Report (EIR) and, when immediately delivered the containers to SMCs
petitioners employees withdrew the cargo from the compound, suffice it to say that to prove the exercise of
arrastre operator, they did so without exception or extraordinary diligence, petitioner must do more than
protest either with regard to the condition of container merely show the possibility that some other party could
vans or their contents. The Survey Report pertinently be responsible for the damage. It must prove that it used
reads all reasonable means to ascertain the nature and
characteristic of goods tendered for [transport] and that
Details of Discharge: [it] exercise[d] due care in the handling [thereof].
Petitioner failed to do this.
Shipment, provided with our protective supervision was
noted discharged ex vessel to dock of Pier #13 South

14
Nor is there basis to exempt petitioner from liability
under Art. 1734(4), which provides

Common carriers are responsible for the loss,


destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:

....

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


or in the containers.

....

For this provision to apply, the rule is that if the improper


packing or, in this case, the defect/s in the container,
is/are known to the carrier or his employees or apparent
upon ordinary observation, but he nevertheless accepts
the same without protest or exception notwithstanding
such condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner accepted
the cargo without exception despite the apparent defects
in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary
diligence in the carriage of goods in this case or that she
is exempt from liability, the presumption of negligence as
provided under Art. 1735[15] holds.

WHEREFORE, the decision of the Court of Appeals,


dated May 31, 2001, is AFFIRMED.

SO ORDERED.

15
[G.R. No. 112287. December 12, 1997] The MV Vlasons I is a vessel which renders tramping
service and, as such, does not transport cargo or
NATIONAL STEEL CORPORATION, petitioner, vs. shipment for the general public. Its services are available
COURT OF APPEALS AND VLASONS SHIPPING, only to specific persons who enter into a special contract
INC., respondents. of charter party with its owner. It is undisputed that the
[G.R. No. 112350. December 12, 1997] ship is a private carrier. And it is in this capacity that its
owner, Vlasons Shipping, Inc., entered into a contract of
VLASONS SHIPPING, INC., petitioner, vs. COURT OF affreightment or contract of voyage charter hire with
APPEALS AND NATIONAL STEEL CORPORATION, National Steel Corporation.
respondents.
DECISION The facts as found by Respondent Court of Appeals are
PANGANIBAN, J.: as follows:

The Court finds occasion to apply the rules on the (1) On July 17, 1974, plaintiff National Steel Corporation
seaworthiness of a private carrier, its owners (NSC) as Charterer and defendant Vlasons Shipping,
responsibility for damage to the cargo and its liability for Inc. (VSI) as Owner, entered into a Contract of Voyage
demurrage and attorneys fees. The Court also reiterates Charter Hire (Exhibit B; also Exhibit 1) whereby NSC
the well-known rule that findings of facts of trial courts, hired VSIs vessel, the MV VLASONS I to make one (1)
when affirmed by the Court of Appeals, are binding on voyage to load steel products at Iligan City and
this Court. discharge them at North Harbor, Manila, under the
following terms and conditions, viz:
The Case
1. x x x x x x.
Before us are two separate petitions for review filed by
National Steel Corporation (NSC) and Vlasons Shipping, 2. Cargo: Full cargo of steel products of not less than
Inc. (VSI), both of which assail the August 12, 1993 2,500 MT, 10% more or less at Masters option.
Decision of the Court of Appeals. [1] The Court of
Appeals modified the decision of the Regional Trial 3. x x x x x x
Court of Pasig, Metro Manila, Branch 163 in Civil Case
No. 23317. The RTC disposed as follows: 4. Freight/Payment: P30.00 /metric ton, FIOST basis.
Payment upon presentation of Bill of Lading within fifteen
WHEREFORE, judgment is hereby rendered in favor of (15) days.
defendant and against the plaintiff dismissing the
complaint with cost against plaintiff, and ordering plaintiff 5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
to pay the defendant on the counterclaim as follows:
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
1. The sum of P75,000.00 as unpaid freight and (Weather Working Day of 24 consecutive hours,
P88,000.00 as demurrage with interest at the legal rate Sundays and Holidays Included).
on both amounts from April 7, 1976 until the same shall
have been fully paid; 7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.

2. Attorneys fees and expenses of litigation in the sum of 8. x x x x x x


P100,000.00; and
9. Cargo Insurance: Charterers and/or Shippers must
3. Cost of suit. insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of
SO ORDERED. [2] the officers of the vessel.

On the other hand, the Court of Appeals ruled: 10. Other terms:(a) All terms/conditions of NONYAZAI
C/P [sic] or other internationally recognized Charter
WHEREFORE, premises considered, the decision Party Agreement shall form part of this Contract.
appealed from is modified by reducing the award for
demurrage to P44,000.00 and deleting the award for xxxxxxxxx
attorneys fees and expenses of litigation. Except as thus
modified, the decision is AFFIRMED. There is no The terms F.I.O.S.T. which is used in the shipping
pronouncement as to costs. business is a standard provision in the NANYOZAI
Charter Party which stands for Freight In and Out
SO ORDERED. [3] including Stevedoring and Trading, which means that the
handling, loading and unloading of the cargoes are the
The Facts responsibility of the Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states, Charterers to load,

16
stow and discharge the cargo free of risk and expenses Pureza St., Sta. Mesa, Manila where the cargo was
to owners. x x x (Underscoring supplied). taken and stored. MASCO reported that it found wetting
and rusting of the packages of hot rolled sheets and
Under paragraph 10 thereof, it is provided that (o)wners metal covers of the tinplates; that tarpaulin hatch covers
shall, before and at the beginning of the voyage, were noted torn at various extents; that container/metal
exercise due diligence to make the vessel seaworthy casings of the skids were rusting all over. MASCO
and properly manned, equipped and supplied and to ventured the opinion that rusting of the tinplates was
make the holds and all other parts of the vessel in which caused by contact with SEA WATER sustained while still
cargo is carried, fit and safe for its reception, carriage on board the vessel as a consequence of the heavy
and preservation. Owners shall not be liable for loss of weather and rough seas encountered while en route to
or damage of the cargo arising or resulting from: destination (Exhibit F). It was also reported that
unseaworthiness unless caused by want of due diligence MASCOs surveyors drew at random samples of bad
on the part of the owners to make the vessel seaworthy, order packing materials of the tinplates and delivered the
and to secure that the vessel is properly manned, same to the M.I.T. Testing Laboratories for analysis. On
equipped and supplied and to make the holds and all August 31, 1974, the M.I.T. Testing Laboratories issued
other parts of the vessel in which cargo is carried, fit and Report No. 1770 (Exhibit I) which in part, states, The
safe for its reception, carriage and preservation; xxx; analysis of bad order samples of packing materials xxx
perils, dangers and accidents of the sea or other shows that wetting was caused by contact with SEA
navigable waters; xxx; wastage in bulk or weight or any WATER.
other loss or damage arising from inherent defect,
quality or vice of the cargo; insufficiency of packing; xxx; (5) On September 6, 1974, on the basis of the aforesaid
latent defects not discoverable by due diligence; any Report No. 1770, plaintiff filed with the defendant its
other cause arising without the actual fault or privity of claim for damages suffered due to the downgrading of
Owners or without the fault of the agents or servants of the damaged tinplates in the amount of P941,145.18.
owners. Then on October 3, 1974, plaintiff formally demanded
payment of said claim but defendant VSI refused and
Paragraph 12 of said NANYOZAI Charter Party also failed to pay. Plaintiff filed its complaint against
provides that (o)wners shall not be responsible for split, defendant on April 21, 1976 which was docketed as Civil
chafing and/or any damage unless caused by the Case No. 23317, CFI, Rizal.
negligence or default of the master and crew.
(6) In its complaint, plaintiff claimed that it sustained
(2) On August 6, 7 and 8, 1974, in accordance with the losses in the aforesaid amount of P941,145.18 as a
Contract of Voyage Charter Hire, the MV VLASONS I result of the act, neglect and default of the master and
loaded at plaintiffs pier at Iligan City, the NSCs shipment crew in the management of the vessel as well as the
of 1,677 skids of tinplates and 92 packages of hot rolled want of due diligence on the part of the defendant to
sheets or a total of 1,769 packages with a total weight of make the vessel seaworthy and to make the holds and
about 2,481.19 metric tons for carriage to Manila. The all other parts of the vessel in which the cargo was
shipment was placed in the three (3) hatches of the ship. carried, fit and safe for its reception, carriage and
Chief Mate Gonzalo Sabando, acting as agent of the preservation -- all in violation of defendants undertaking
vessel[,] acknowledged receipt of the cargo on board under their Contract of Voyage Charter Hire.
and signed the corresponding bill of lading, B.L.P.P. No.
0233 (Exhibit D) on August 8, 1974. (7) In its answer, defendant denied liability for the
alleged damage claiming that the MV VLASONS I was
(3) The vessel arrived with the cargo at Pier 12, North seaworthy in all respects for the carriage of plaintiffs
Harbor, Manila, on August 12, 1974. The following day, cargo; that said vessel was not a common carrier
August 13, 1974, when the vessels three (3) hatches inasmuch as she was under voyage charter contract with
containing the shipment were opened by plaintiffs the plaintiff as charterer under the charter party; that in
agents, nearly all the skids of tinplates and hot rolled the course of the voyage from Iligan City to Manila, the
sheets were allegedly found to be wet and rusty. The MV VLASONS I encountered very rough seas, strong
cargo was discharged and unloaded by stevedores hired winds and adverse weather condition, causing strong
by the Charterer. Unloading was completed only on winds and big waves to continuously pound against the
August 24, 1974 after incurring a delay of eleven (11) vessel and seawater to overflow on its deck and hatch
days due to the heavy rain which interrupted the covers; that under the Contract of Voyage Charter Hire,
unloading operations. (Exhibit E) defendant shall not be responsible for losses/damages
except on proven willful negligence of the officers of the
(4) To determine the nature and extent of the wetting vessel, that the officers of said MV VLASONS I
and rusting, NSC called for a survey of the shipment by exercised due diligence and proper seamanship and
the Manila Adjusters and Surveyors Company were not willfully negligent; that furthermore the Voyage
(MASCO). In a letter to the NSC dated March 17, 1975 Charter Party provides that loading and discharging of
(Exhibit G), MASCO made a report of its ocular the cargo was on FIOST terms which means that the
inspection conducted on the cargo, both while it was still vessel was free of risk and expense in connection with
on board the vessel and later at the NDC warehouse in the loading and discharging of the cargo; that the

17
damage, if any, was due to the inherent defect, quality or Customs (Exh. 9). That being a vessel engaged in both
vice of the cargo or to the insufficient packing thereof or overseas and coastwise trade, the MV VLASONS I has
to latent defect of the cargo not discoverable by due a higher degree of seaworthiness and safety.
diligence or to any other cause arising without the actual
fault or privity of defendant and without the fault of the (c) Before it proceeded to Iligan City to perform the
agents or servants of defendant; consequently, voyage called for by the Contract of Voyage Charter
defendant is not liable; that the stevedores of plaintiff Hire, the MV VLASONS I underwent drydocking in Cebu
who discharged the cargo in Manila were negligent and and was thoroughly inspected by the Philippine Coast
did not exercise due care in the discharge of the cargo; Guard. In fact, subject voyage was the vessels first
and that the cargo was exposed to rain and seawater voyage after the drydocking. The evidence shows that
spray while on the pier or in transit from the pier to the MV VLASONS I was seaworthy and properly
plaintiffs warehouse after discharge from the vessel; and manned, equipped and supplied when it undertook the
that plaintiffs claim was highly speculative and grossly voyage. It had all the required certificates of
exaggerated and that the small stain marks or sweat seaworthiness.
marks on the edges of the tinplates were magnified and
considered total loss of the cargo. Finally, defendant (d) The cargo/shipment was securely stowed in three (3)
claimed that it had complied with all its duties and hatches of the ship. The hatch openings were covered
obligations under the Voyage Charter Hire Contract and by hatchboards which were in turn covered by two or
had no responsibility whatsoever to plaintiff. In turn, it double tarpaulins. The hatch covers were water tight.
alleged the following counterclaim: Furthermore, under the hatchboards were steel beams
to give support.
(a) That despite the full and proper performance by
defendant of its obligations under the Voyage Charter (e) The claim of the plaintiff that defendant violated the
Hire Contract, plaintiff failed and refused to pay the contract of carriage is not supported by evidence. The
agreed charter hire of P75,000.00 despite demands provisions of the Civil Code on common carriers
made by defendant; pursuant to which there exists a presumption of
negligence in case of loss or damage to the cargo are
(b) That under their Voyage Charter Hire Contract, not applicable. As to the damage to the tinplates which
plaintiff had agreed to pay defendant the sum of was allegedly due to the wetting and rusting thereof,
P8,000.00 per day for demurrage. The vessel was on there is unrebutted testimony of witness Vicente
demurrage for eleven (11) days in Manila waiting for Angliongto that tinplates sweat by themselves when
plaintiff to discharge its cargo from the vessel. Thus, packed even without being in contract (sic) with water
plaintiff was liable to pay defendant demurrage in the from outside especially when the weather is bad or
total amount of P88,000.00. raining. The rust caused by sweat or moisture on the
tinplates may be considered as a loss or damage but
(c) For filing a clearly unfounded civil action against then, defendant cannot be held liable for it pursuant to
defendant, plaintiff should be ordered to pay defendant Article 1734 of the Civil Case which exempts the carrier
attorneys fees and all expenses of litigation in the from responsibility for loss or damage arising from the
amount of not less than P100,000.00. character of the goods x x x. All the 1,769 skids of the
tinplates could not have been damaged by water as
(8) From the evidence presented by both parties, the trial claimed by plaintiff. It was shown as claimed by plaintiff
court came out with the following findings which were set that the tinplates themselves were wrapped in kraft
forth in its decision: paper lining and corrugated cardboards could not be
affected by water from outside.
(a) The MV VLASONS I is a vessel of Philippine registry
engaged in the tramping service and is available for hire (f) The stevedores hired by the plaintiff to discharge the
only under special contracts of charter party as in this cargo of tinplates were negligent in not closing the hatch
particular case. openings of the MV VLASONS I when rains occurred
during the discharging of the cargo thus allowing
(b) That for purposes of the voyage covered by the rainwater to enter the hatches. It was proven that the
Contract of Voyage Charter Hire (Exh. 1), the MV stevedores merely set up temporary tents to cover the
VLASONS I was covered by the required seaworthiness hatch openings in case of rain so that it would be easy
certificates including the Certification of Classification for them to resume work when the rains stopped by just
issued by an international classification society, the removing the tent or canvas. Because of this improper
NIPPON KAIJI KYOKAI (Exh. 4); Coastwise License covering of the hatches by the stevedores during the
from the Board of Transportation (Exh. 5); International discharging and unloading operations which were
Loadline Certificate from the Philippine Coast Guard interrupted by rains, rainwater drifted into the cargo
(Exh. 6); Cargo Ship Safety Equipment Certificate also through the hatch openings. Pursuant to paragraph 5 of
from the Philippine Coast Guard (Exh. 7); Ship Radio the NANYOSAI [sic] Charter Party which was expressly
Station License (Exh. 8); Certificate of Inspection by the made part of the Contract of Voyage Charter Hire, the
Philippine Coast Guard (Exh. 12); and Certificate of loading, stowing and discharging of the cargo is the sole
Approval for Conversion issued by the Bureau of responsibility of the plaintiff charterer and defendant

18
carrier has no liability for whatever damage may occur or The trial court erred in exempting VSI from liability on the
maybe [sic] caused to the cargo in the process. ground of force majeure.

(g) It was also established that the vessel encountered V


rough seas and bad weather while en route from Iligan
City to Manila causing sea water to splash on the ships The trial court erred in finding that NSC violated the
deck on account of which the master of the vessel (Mr. contract of voyage charter hire.
Antonio C. Dumlao) filed a Marine Protest on August 13,
1974 (Exh. 15) which can be invoked by defendant as a VI
force majeure that would exempt the defendant from
liability. The trial court erred in ordering NSC to pay freight,
demurrage and attorneys fees, to VSI.[4]
(h) Plaintiff did not comply with the requirement
prescribed in paragraph 9 of the Voyage Charter Hire As earlier stated, the Court of Appeals modified the
contract that it was to insure the cargo because it did decision of the trial court by reducing the demurrage
not. Had plaintiff complied with the requirement, then it from P88,000.00 to P44,000.00 and deleting the award
could have recovered its loss or damage from the of attorneys fees and expenses of litigation. NSC and
insurer. Plaintiff also violated the charter party contract VSI filed separate motions for reconsideration. In a
when it loaded not only steel products, i.e. steel bars, Resolution[5] dated October 20, 1993, the appellate
angular bars and the like but also tinplates and hot rolled court denied both motions. Undaunted, NSC and VSI
sheets which are high grade cargo commanding a higher filed their respective petitions for review before this
freight. Thus plaintiff was able to ship high grade cargo Court. On motion of VSI, the Court ordered on February
at a lower freight rate. 14, 1994 the consolidation of these petitions.[6]

(I) As regards defendants counterclaim, the contract of The Issues


voyage charter hire under paragraph 4 thereof, fixed the
freight at P30.00 per metric ton payable to defendant In its petition[7] and memorandum,[8] NSC raises the
carrier upon presentation of the bill of lading within following questions of law and fact:
fifteen (15) days. Plaintiff has not paid the total freight
due of P75,000.00 despite demands. The evidence also Questions of Law
showed that the plaintiff was required and bound under
paragraph 7 of the same Voyage Charter Hire contract 1. Whether or not a charterer of a vessel is liable for
to pay demurrage of P8,000.00 per day of delay in the demurrage due to cargo unloading delays caused by
unloading of the cargoes. The delay amounted to eleven weather interruption;
(11) days thereby making plaintiff liable to pay defendant
for demurrage in the amount of P88,000.00. 2. Whether or not the alleged seaworthiness certificates
(Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and 12) were admissible in
Appealing the RTC decision to the Court of Appeals, evidence and constituted evidence of the vessels
NSC alleged six errors: seaworthiness at the beginning of the voyages; and

I 3. Whether or not a charterers failure to insure its cargo


exempts the shipowner from liability for cargo damage.
The trial court erred in finding that the MV VLASONS I
was seaworthy, properly manned, equipped and Questions of Fact
supplied, and that there is no proof of willful negligence
of the vessels officers. 1. Whether or not the vessel was seaworthy and cargo-
worthy;
II
2. Whether or not vessels officers and crew were
The trial court erred in finding that the rusting of NSCs negligent in handling and caring for NSCs cargo;
tinplates was due to the inherent nature or character of
the goods and not due to contact with seawater. 3. Whether or not NSCs cargo of tinplates did sweat
during the voyage and, hence, rusted on their own; and
III
(4) Whether or not NSCs stevedores were negligent and
The trial court erred in finding that the stevedores hired caused the wetting[/]rusting of NSCs tinplates.
by NSC were negligent in the unloading of NSCs
shipment. In its separate petition, [9] VSI submits for the
consideration of this Court the following alleged errors of
IV the CA:

19
A. The respondent Court of Appeals committed an error part of a ship for a period of time or a voyage or
of law in reducing the award of demurrage from voyages. [12]
P88,000.00 to P44,000.00.
In the instant case, it is undisputed that VSI did not offer
B. The respondent Court of Appeals committed an error its services to the general public. As found by the
of law in deleting the award of P100,000 for attorneys Regional Trial Court, it carried passengers or goods only
fees and expenses of litigation. for those it chose under a special contract of charter
party. [13] As correctly concluded by the Court of
Amplifying the foregoing, VSI raises the following issues Appeals, the MV Vlasons I was not a common but a
in its memorandum: [10] private carrier. [14] Consequently, the rights and
obligations of VSI and NSC, including their respective
I. Whether or not the provisions of the Civil Code of the liability for damage to the cargo, are determined
Philippines on common carriers pursuant to which there primarily by stipulations in their contract of private
exist[s] a presumption of negligence against the carriage or charter party. [15] Recently, in Valenzuela
common carrier in case of loss or damage to the cargo Hardwood and Industrial Supply, Inc., vs. Court of
are applicable to a private carrier. Appeals and Seven Brothers Shipping Corporation, [16]
the Court ruled:
II. Whether or not the terms and conditions of the
Contract of Voyage Charter Hire, including the Nanyozai x x x in a contract of private carriage, the parties may
Charter, are valid and binding on both contracting freely stipulate their duties and obligations which
parties. perforce would be binding on them. Unlike in a contract
involving a common carrier, private carriage does not
The foregoing issues raised by the parties will be involve the general public. Hence, the stringent
discussed under the following headings: provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied
1. Questions of Fact to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein
2. Effect of NSCs Failure to Insure the Cargo is not contravened by stipulations in a charter party that
lessen or remove the protection given by law in contracts
3. Admissibility of Certificates Proving Seaworthiness involving common carriers.[17]

4. Demurrage and Attorneys Fees. Extent of VSIs Responsibility and Liability Over NSCs
Cargo
The Courts Ruling
It is clear from the parties Contract of Voyage Charter
The Court affirms the assailed Decision of the Court of Hire, dated July 17, 1974, that VSI shall not be
Appeals, except in respect of the demurrage. responsible for losses except on proven willful
negligence of the officers of the vessel. The NANYOZAI
Preliminary Matter: Common Carrier or Private Carrier? Charter Party, which was incorporated in the parties
contract of transportation, further provided that the
At the outset, it is essential to establish whether VSI shipowner shall not be liable for loss of or damage to the
contracted with NSC as a common carrier or as a private cargo arising or resulting from unseaworthiness, unless
carrier. The resolution of this preliminary question the same was caused by its lack of due diligence to
determines the law, standard of diligence and burden of make the vessel seaworthy or to ensure that the same
proof applicable to the present case. was properly manned, equipped and supplied, and to
make the holds and all other parts of the vessel in which
Article 1732 of the Civil Code defines a common carrier cargo [was] carried, fit and safe for its reception, carriage
as persons, corporations, firms or associations engaged and preservation. [18] The NANYOZAI Charter Party
in the business of carrying or transporting passengers or also provided that [o]wners shall not be responsible for
goods or both, by land, water, or air, for compensation, split, chafing and/or any damage unless caused by the
offering their services to the public. It has been held that negligence or default of the master or crew.[19]
the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who Burden of Proof
opt to avail themselves of its transportation service for a
fee. [11] A carrier which does not qualify under the In view of the aforementioned contractual stipulations,
above test is deemed a private carrier. Generally, private NSC must prove that the damage to its shipment was
carriage is undertaken by special agreement and the caused by VSIs willful negligence or failure to exercise
carrier does not hold himself out to carry goods for the due diligence in making MV Vlasons I seaworthy and fit
general public. The most typical, although not the only for holding, carrying and safekeeping the cargo.
form of private carriage, is the charter party, a maritime Ineluctably, the burden of proof was placed on NSC by
contract by which the charterer, a party other than the the parties agreement.
shipowner, obtains the use and service of all or some

20
This view finds further support in the Code of Commerce damage rests on plaintiff, and proof that the goods were
which pertinently provides: lost or damaged while in the carriers possession does
not cast on it the burden of proving seaworthiness. x x x
Art. 361. Merchandise shall be transported at the risk Where the contract of carriage exempts the carrier from
and venture of the shipper, if the contrary has not been liability for unseaworthiness not discoverable by due
expressly stipulated. diligence, the carrier has the preliminary burden of
proving the exercise of due diligence to make the vessel
Therefore, the damage and impairment suffered by the seaworthy. [20]
goods during the transportation, due to fortuitous event,
force majeure, or the nature and inherent defect of the In the instant case, the Court of Appeals correctly found
things, shall be for the account and risk of the shipper. that NSC has not taken the correct position in relation to
the question of who has the burden of proof. Thus, in its
The burden of proof of these accidents is on the carrier. brief (pp. 10-11), after citing Clause 10 and Clause 12 of
the NANYOZAI Charter Party (incidentally plaintiff-
Art. 362. The carrier, however, shall be liable for appellants [NSCs] interpretation of Clause 12 is not even
damages arising from the cause mentioned in the correct), it argues that a careful examination of the
preceding article if proofs against him show that they evidence will show that VSI miserably failed to comply
occurred on account of his negligence or his omission to with any of these obligations as if defendant-appellee
take the precautions usually adopted by careful persons, [VSI] had the burden of proof.[21]
unless the shipper committed fraud in the bill of lading,
making him to believe that the goods were of a class or First Issue: Questions of Fact
quality different from what they really were.
Based on the foregoing, the determination of the
Because the MV Vlasons I was a private carrier, the following factual questions is manifestly relevant: (1)
shipowners obligations are governed by the foregoing whether VSI exercised due diligence in making MV
provisions of the Code of Commerce and not by the Civil Vlasons I seaworthy for the intended purpose under the
Code which, as a general rule, places the prima facie charter party; (2) whether the damage to the cargo
presumption of negligence on a common carrier. It is a should be attributed to the willful negligence of the
hornbook doctrine that: officers and crew of the vessel or of the stevedores hired
by NSC; and (3) whether the rusting of the tinplates was
In an action against a private carrier for loss of, or injury caused by its own sweat or by contact with seawater.
to, cargo, the burden is on the plaintiff to prove that the
carrier was negligent or unseaworthy, and the fact that These questions of fact were threshed out and decided
the goods were lost or damaged while in the carriers by the trial court, which had the firsthand opportunity to
custody does not put the burden of proof on the carrier. hear the parties conflicting claims and to carefully weigh
their respective evidence. The findings of the trial court
Since x x x a private carrier is not an insurer but were subsequently affirmed by the Court of Appeals.
undertakes only to exercise due care in the protection of Where the factual findings of both the trial court and the
the goods committed to its care, the burden of proving Court of Appeals coincide, the same are binding on this
negligence or a breach of that duty rests on plaintiff and Court. [22] We stress that, subject to some exceptional
proof of loss of, or damage to, cargo while in the carriers instances, [23] only questions of law -- not questions of
possession does not cast on it the burden of proving fact -- may be raised before this Court in a petition for
proper care and diligence on its part or that the loss review under Rule 45 of the Rules of Court. After a
occurred from an excepted cause in the contract or bill of thorough review of the case at bar, we find no reason to
lading. However, in discharging the burden of proof, disturb the lower courts factual findings, as indeed NSC
plaintiff is entitled to the benefit of the presumptions and has not successfully proven the application of any of the
inferences by which the law aids the bailor in an action aforecited exceptions.
against a bailee, and since the carrier is in a better
position to know the cause of the loss and that it was not Was MV Vlasons I Seaworthy?
one involving its liability, the law requires that it come
forward with the information available to it, and its failure In any event, the records reveal that VSI exercised due
to do so warrants an inference or presumption of its diligence to make the ship seaworthy and fit for the
liability. However, such inferences and presumptions, carriage of NSCs cargo of steel and tinplates. This is
while they may affect the burden of coming forward with shown by the fact that it was drydocked and inspected
evidence, do not alter the burden of proof which remains by the Philippine Coast Guard before it proceeded to
on plaintiff, and, where the carrier comes forward with Iligan City for its voyage to Manila under the contract of
evidence explaining the loss or damage, the burden of voyage charter hire. [24] The vessels voyage from Iligan
going forward with the evidence is again on plaintiff. to Manila was the vessels first voyage after drydocking.
The Philippine Coast Guard Station in Cebu cleared it as
Where the action is based on the shipowners warranty of seaworthy, fitted and equipped; it met all requirements
seaworthiness, the burden of proving a breach thereof for trading as cargo vessel. [25] The Court of Appeals
and that such breach was the proximate cause of the itself sustained the conclusion of the trial court that MV

21
Vlasons I was seaworthy. We find no reason to modify or Q: What is the purpose of the canvas cover?
reverse this finding of both the trial and the appellate
courts. A: So that the cargo would not be soaked with water.

Who Were Negligent: Seamen or Stevedores? A: And will you describe how the canvas cover was
secured on the hatch opening?
As noted earlier, the NSC had the burden of proving that
the damage to the cargo was caused by the negligence WITNESS
of the officers and the crew of MV Vlasons I in making
their vessel seaworthy and fit for the carriage of A: It was placed flat on top of the hatch cover, with a little
tinplates. NSC failed to discharge this burden. canvas flowing over the sides and we place[d] a flat bar
over the canvas on the side of the hatches and then we
Before us, NSC relies heavily on its claim that MV place[d] a stopper so that the canvas could not be
Vlasons I had used an old and torn tarpaulin or canvas removed.
to cover the hatches through which the cargo was
loaded into the cargo hold of the ship. It faults the Court ATTY DEL ROSARIO
of Appeals for failing to consider such claim as an
uncontroverted fact [26] and denies that MV Vlasons I Q: And will you tell us the size of the hatch opening? The
was equipped with new canvas covers in tandem with length and the width of the hatch opening.
the old ones as indicated in the Marine Protest xxx. [27]
We disagree. A: Forty-five feet by thirty-five feet, sir.

The records sufficiently support VSIs contention that the xxxxxxxxx


ship used the old tarpaulin, only in addition to the new
one used primarily to make the ships hatches watertight. Q: How was the canvas supported in the middle of the
The foregoing are clear from the marine protest of the hatch opening?
master of the MV Vlasons I, Antonio C. Dumlao, and the
deposition of the ships boatswain, Jose Pascua. The A: There is a hatch board.
salient portions of said marine protest read:
ATTY DEL ROSARIO
x x x That the M/V VLASONS I departed Iligan City or or
about 0730 hours of August 8, 1974, loaded with Q: What is the hatch board made of?
approximately 2,487.9 tons of steel plates and tin plates
consigned to National Steel Corporation; that before A: It is made of wood, with a handle.
departure, the vessel was rigged, fully equipped and
cleared by the authorities; that on or about August 9, Q: And aside from the hatch board, is there any other
1974, while in the vicinity of the western part of Negros material there to cover the hatch?
and Panay, we encountered very rough seas and strong
winds and Manila office was advised by telegram of the A: There is a beam supporting the hatch board.
adverse weather conditions encountered; that in the
morning of August 10, 1974, the weather condition Q: What is this beam made of?
changed to worse and strong winds and big waves
continued pounding the vessel at her port side causing A: It is made of steel, sir.
sea water to overflow on deck andhatch (sic) covers and
which caused the first layer of the canvass covering to Q: Is the beam that was placed in the hatch opening
give way while the new canvass covering still holding on; covering the whole hatch opening?

That the weather condition improved when we reached A: No, sir.


Dumali Point protected by Mindoro; that we re-secured
the canvass covering back to position; that in the Q: How many hatch beams were there placed across the
afternoon of August 10, 1974, while entering Maricaban opening?
Passage, we were again exposed to moderate seas and
heavy rains; that while approaching Fortune Island, we A: There are five beams in one hatch opening.
encountered again rough seas, strong winds and big
waves which caused the same canvass to give way and ATTY DEL ROSARIO
leaving the new canvass holding on;
Q: And on top of the beams you said there is a hatch
xxx xxx xxx [28] board. How many pieces of wood are put on top?

And the relevant portions of Jose Pascuas deposition A: Plenty, sir, because there are several pieces on top of
are as follows: the hatch beam.

22
Q: And is there a space between the hatch boards? Q: In connection with these cargoes which were
unloaded, where is the place.
A: There is none, sir.
A: At the Pier.
Q: They are tight together?
Q: What was used to protect the same from weather?
A: Yes, sir.
ATTY LOPEZ:
Q: How tight?
We object, your Honor, this question was already asked.
A: Very tight, sir. This particular matter . . . the transcript of stenographic
notes shows the same was covered in the direct
Q: Now, on top of the hatch boards, according to you, is examination.
the canvas cover. How many canvas covers?
ATTY ZAMORA:
A: Two, sir. [29]
Precisely, your Honor, we would like to go on detail, this
That due diligence was exercised by the officers and the is the serious part of the testimony.
crew of the MV Vlasons I was further demonstrated by
the fact that, despite encountering rough weather twice, COURT:
the new tarpaulin did not give way and the ships hatches
and cargo holds remained waterproof. As aptly stated by All right, witness may answer.
the Court of Appeals, xxx we find no reason not to
sustain the conclusion of the lower court based on ATTY LOPEZ:
overwhelming evidence, that the MV VLASONS I was
seaworthy when it undertook the voyage on August 8, Q: What was used in order to protect the cargo from the
1974 carrying on board thereof plaintiff-appellants weather?
shipment of 1,677 skids of tinplates and 92 packages of
hot rolled sheets or a total of 1,769 packages from NSCs A: A base of canvas was used as cover on top of the tin
pier in Iligan City arriving safely at North Harbor, Port plates, and tents were built at the opening of the
Area, Manila, on August 12, 1974; xxx. [30] hatches.

Indeed, NSC failed to discharge its burden to show Q: You also stated that the hatches were already
negligence on the part of the officers and the crew of MV opened and that there were tents constructed at the
Vlasons I. On the contrary, the records reveal that it was opening of the hatches to protect the cargo from the rain.
the stevedores of NSC who were negligent in unloading Now, will you describe [to] the Court the tents
the cargo from the ship. constructed.

The stevedores employed only a tent-like material to A: The tents are just a base of canvas which look like a
cover the hatches when strong rains occasioned by a tent of an Indian camp raise[d] high at the middle with
passing typhoon disrupted the unloading of the cargo. the whole side separated down to the hatch, the size of
This tent-like covering, however, was clearly inadequate the hatch and it is soaks [sic] at the middle because of
for keeping rain and seawater away from the hatches of those weather and this can be used only to temporarily
the ship. Vicente Angliongto, an officer of VSI, testified protect the cargo from getting wet by rains.
thus:
Q: Now, is this procedure adopted by the stevedores of
ATTY ZAMORA: covering tents proper?

Q: Now, during your testimony on November 5, 1979, A: No, sir, at the time they were discharging the cargo,
you stated on August 14 you went on board the vessel there was a typhoon passing by and the hatch tent was
upon notice from the National Steel Corporation in order not good enough to hold all of it to prevent the water
to conduct the inspection of the cargo. During the course soaking through the canvas and enter the cargo.
of the investigation, did you chance to see the
discharging operation? Q: In the course of your inspection, Mr. Anglingto [sic],
did you see in fact the water enter and soak into the
WITNESS: canvas and tinplates.

A: Yes, sir, upon my arrival at the vessel, I saw some of A: Yes, sir, the second time I went there, I saw it.
the tinplates already discharged on the pier but majority
of the tinplates were inside the hall, all the hatches were Q: As owner of the vessel, did you not advise the
opened. National Steel Corporation [of] the procedure adopted by

23
its stevedores in discharging the cargo particularly in this The fact that NSC actually accepted and proceeded to
tent covering of the hatches? remove the cargo from the ship during unfavorable
weather will not make VSI liable for any damage caused
A: Yes, sir, I did the first time I saw it, I called the thereby. In passing, it may be noted that the NSC may
attention of the stevedores but the stevedores did not seek indemnification, subject to the laws on prescription,
mind at all, so, I called the attention of the representative from the stevedoring company at fault in the discharge
of the National Steel but nothing was done, just the operations. A stevedore company engaged in
same. Finally, I wrote a letter to them. [31] discharging cargo xxx has the duty to load the cargo xxx
in a prudent manner, and it is liable for injury to, or loss
NSC attempts to discredit the testimony of Angliongto by of, cargo caused by its negligence xxx and where the
questioning his failure to complain immediately about the officers and members and crew of the vessel do nothing
stevedores negligence on the first day of unloading, and have no responsibility in the discharge of cargo by
pointing out that he wrote his letter to petitioner only stevedores xxx the vessel is not liable for loss of, or
seven days later. [32] The Court is not persuaded. damage to, the cargo caused by the negligence of the
Angliongtos candid answer in his aforequoted testimony stevedores xxx [34] as in the instant case.
satisfactorily explained the delay. Seven days lapsed
because he first called the attention of the stevedores, Do Tinplates Sweat?
then the NSCs representative, about the negligent and
defective procedure adopted in unloading the cargo. The trial court relied on the testimony of Vicente
This series of actions constitutes a reasonable response Angliongto in finding that xxx tinplates sweat by
in accord with common sense and ordinary human themselves when packed even without being in contact
experience. Vicente Angliongto could not be blamed for with water from outside especially when the weather is
calling the stevedores attention first and then the NSCs bad or raining xxx. [35] The Court of Appeals affirmed
representative on location before formally informing NSC the trial courts finding.
of the negligence he had observed, because he was not
responsible for the stevedores or the unloading A discussion of this issue appears inconsequential and
operations. In fact, he was merely expressing concern unnecessary. As previously discussed, the damage to
for NSC which was ultimately responsible for the the tinplates was occasioned not by airborne moisture
stevedores it had hired and the performance of their task but by contact with rain and seawater which the
to unload the cargo. stevedores negligently allowed to seep in during the
unloading.
We see no reason to reverse the trial and the appellate
courts findings and conclusions on this point, viz: Second Issue: Effect of NSCs Failure to Insure the
Cargo
In the THIRD assigned error, [NSC] claims that the trial
court erred in finding that the stevedores hired by NSC The obligation of NSC to insure the cargo stipulated in
were negligent in the unloading of NSCs shipment. We the Contract of Voyage Charter Hire is totally separate
do not think so. Such negligence according to the trial and distinct from the contractual or statutory
court is evident in the stevedores hired by [NSC], not responsibility that may be incurred by VSI for damage to
closing the hatch of MV VLASONS I when rains the cargo caused by the willful negligence of the officers
occurred during the discharging of the cargo thus and the crew of MV Vlasons I. Clearly, therefore, NSCs
allowing rain water and seawater spray to enter the failure to insure the cargo will not affect its right, as
hatches and to drift to and fall on the cargo. It was owner and real party in interest, to file an action against
proven that the stevedores merely set up temporary VSI for damages caused by the latters willful negligence.
tents or canvas to cover the hatch openings when it We do not find anything in the charter party that would
rained during the unloading operations so that it would make the liability of VSI for damage to the cargo
be easier for them to resume work after the rains contingent on or affected in any manner by NSCs
stopped by just removing said tents or canvass. It has obtaining an insurance over the cargo.
also been shown that on August 20, 1974, VSI President
Vicente Angliongto wrote [NSC] calling attention to the Third Issue: Admissibility of Certificates Proving
manner the stevedores hired by [NSC] were discharging Seaworthiness
the cargo on rainy days and the improper closing of the
hatches which allowed continuous heavy rain water to NSCs contention that MV Vlasons I was not seaworthy is
leak through and drip to the tinplates covers and anchored on the alleged inadmissibility of the certificates
[Vicente Angliongto] also suggesting that due to four (4) of seaworthiness offered in evidence by VSI. The said
days continuos rains with strong winds that the hatches certificates include the following:
be totally closed down and covered with canvas and the
hatch tents lowered. (Exh 13). This letter was received 1. Certificate of Inspection of the Philippine Coast Guard
by [NSC] on 22 August 1974 while discharging at Cebu
operations were still going on (Exhibit 13-A). [33]
2. Certificate of Inspection from the Philippine Coast
Guard

24
xxx xxx xxx
3. International Load Line Certificate from the Philippine
Coast Guard 2. Cargo: Full cargo of steel products of not less than
2,500 MT, 10% more or less at Masters option.
4. Coastwise License from the Board of Transportation
xxx xxx xxx
5. Certificate of Approval for Conversion issued by the
Bureau of Customs. [36] 6. Loading/Discharging Rate : 750 tons per
WWDSHINC.
NSC argues that the certificates are hearsay for not
having been presented in accordance with the Rules of 7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day.
Court. It points out that Exhibits 3, 4 and 11 allegedly are [39]
not written records or acts of public officers; while
Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced by The Court defined demurrage in its strict sense as the
official publications or certified true copies as required by compensation provided for in the contract of
Sections 25 and 26, Rule 132, of the Rules of Court. [37] affreightment for the detention of the vessel beyond the
laytime or that period of time agreed on for loading and
After a careful examination of these exhibits, the Court unloading of cargo. [40] It is given to compensate the
rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are shipowner for the nonuse of the vessel. On the other
inadmissible, for they have not been properly offered as hand, the following is well-settled:
evidence. Exhibits 3 and 4 are certificates issued by
private parties, but they have not been proven by one Laytime runs according to the particular clause of the
who saw the writing executed, or by evidence of the charter party. x x x If laytime is expressed in running
genuineness of the handwriting of the maker, or by a days, this means days when the ship would be run
subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are continuously, and holidays are not excepted. A
photocopies, but their admission under the best qualification of weather permitting excepts only those
evidence rule have not been demonstrated. days when bad weather reasonably prevents the work
contemplated. [41]
We find, however, that Exhibit 11 is admissible under a
well-settled exception to the hearsay rule per Section 44 In this case, the contract of voyage charter hire provided
of Rule 130 of the Rules of Court, which provides that for a four-day laytime; it also qualified laytime as
(e)ntries in official records made in the performance of a WWDSHINC or weather working days Sundays and
duty by a public officer of the Philippines, or by a person holidays included. [42] The running of laytime was thus
in the performance of a duty specially enjoined by law, made subject to the weather, and would cease to run in
are prima facie evidence of the facts therein stated. [38] the event unfavorable weather interfered with the
Exhibit 11 is an original certificate of the Philippine Coast unloading of cargo. [43] Consequently, NSC may not be
Guard in Cebu issued by Lieutenant Junior Grade Noli held liable for demurrage as the four-day laytime allowed
C. Flores to the effect that the vessel VLASONS I was it did not lapse, having been tolled by unfavorable
drydocked x x x and PCG Inspectors were sent on board weather condition in view of the WWDSHINC
for inspection x x x. After completion of drydocking and qualification agreed upon by the parties. Clearly, it was
duly inspected by PCG Inspectors, the vessel VLASONS error for the trial court and the Court of Appeals to have
I, a cargo vessel, is in seaworthy condition, meets all found and affirmed respectively that NSC incurred
requirements, fitted and equipped for trading as a cargo eleven days of delay in unloading the cargo. The trial
vessel was cleared by the Philippine Coast Guard and court arrived at this erroneous finding by subtracting
sailed for Cebu Port on July 10, 1974. (sic) NSCs claim, from the twelve days, specifically August 13, 1974 to
therefore, is obviously misleading and erroneous. August 24, 1974, the only day of unloading unhampered
by unfavorable weather or rain which was August 22,
At any rate, it should be stressed that that NSC has the 1974. Based on our previous discussion, such finding is
burden of proving that MV Vlasons I was not seaworthy. a reversible error. As mentioned, the respondent
As observed earlier, the vessel was a private carrier and, appellate court also erred in ruling that NSC was liable to
as such, it did not have the obligation of a common VSI for demurrage, even if it reduced the amount by half.
carrier to show that it was seaworthy. Indeed, NSC
glaringly failed to discharge its duty of proving the willful Attorneys Fees
negligence of VSI in making the ship seaworthy resulting
in damage to its cargo. Assailing the genuineness of the VSI assigns as error of law the Court of Appeals deletion
certificate of seaworthiness is not sufficient proof that the of the award of attorneys fees. We disagree. While VSI
vessel was not seaworthy. was compelled to litigate to protect its rights, such fact
by itself will not justify an award of attorneys fees under
Fourth Issue: Demurrage and Attorneys Fees Article 2208 of the Civil Code when x x x no sufficient
showing of bad faith would be reflected in a partys
The contract of voyage charter hire provides inter alia: persistence in a case other than an erroneous conviction
of the righteousness of his cause x x x. [44] Moreover,

25
attorneys fees may not be awarded to a party for the
reason alone that the judgment rendered was favorable
to the latter, as this is tantamount to imposing a premium
on ones right to litigate or seek judicial redress of
legitimate grievances. [45]

Epilogue

At bottom, this appeal really hinges on a factual issue:


when, how and who caused the damage to the cargo?
Ranged against NSC are two formidable truths. First,
both lower courts found that such damage was brought
about during the unloading process when rain and
seawater seeped through the cargo due to the fault or
negligence of the stevedores employed by it. Basic is the
rule that factual findings of the trial court, when affirmed
by the Court of Appeals, are binding on the Supreme
Court. Although there are settled exceptions, NSC has
not satisfactorily shown that this case is one of them.
Second, the agreement between the parties -- the
Contract of Voyage Charter Hire -- placed the burden of
proof for such loss or damage upon the shipper, not
upon the shipowner. Such stipulation, while
disadvantageous to NSC, is valid because the parties
entered into a contract of private charter, not one of
common carriage. Basic too is the doctrine that courts
cannot relieve a party from the effects of a private
contract freely entered into, on the ground that it is
allegedly one-sided or unfair to the plaintiff. The charter
party is a normal commercial contract and its stipulations
are agreed upon in consideration of many factors, not
the least of which is the transport price which is
determined not only by the actual costs but also by the
risks and burdens assumed by the shipper in regard to
possible loss or damage to the cargo. In recognition of
such factors, the parties even stipulated that the shipper
should insure the cargo to protect itself from the risks it
undertook under the charter party. That NSC failed or
neglected to protect itself with such insurance should not
adversely affect VSI, which had nothing to do with such
failure or neglect.

WHEREFORE, premises considered, the instant


consolidated petitions are hereby DENIED. The
questioned Decision of the Court of Appeals is
AFFIRMED with the MODIFICATION that the demurrage
awarded to VSI is deleted. No pronouncement as to
costs.

SO ORDERED.

26
[G.R. No. 131621. September 28, 1999] hand, averred that MIC had no cause of action against it,
LOADSTAR being the party insured. In any event, PGAI
LOADSTAR SHIPPING CO., INC., petitioner, vs. was later dropped as a party defendant after it paid the
COURT OF APPEALS and THE MANILA INSURANCE insurance proceeds to LOADSTAR.
CO., INC., respondents.
DECISION As stated at the outset, the court a quo rendered
DAVIDE, JR., C.J.: judgment in favor of MIC, prompting LOADSTAR to
elevate the matter to the Court of Appeals, which,
Petitioner Loadstar Shipping Co., Inc. (hereafter however, agreed with the trial court and affirmed its
LOADSTAR), in this petition for review on certiorari decision in toto.
under Rule 45 of the 1997 Rules of Civil Procedure,
seeks to reverse and set aside the following: (a) the 30 In dismissing LOADSTARs appeal, the appellate court
January 1997 decision[1] of the Court of Appeals in CA- made the following observations:
G.R. CV No. 36401, which affirmed the decision of 4
October 1991[2] of the Regional Trial Court of Manila, 1) LOADSTAR cannot be considered a private carrier on
Branch 16, in Civil Case No. 85-29110, ordering the sole ground that there was a single shipper on that
LOADSTAR to pay private respondent Manila Insurance fateful voyage. The court noted that the charter of the
Co. (hereafter MIC) the amount of P6,067,178, with legal vessel was limited to the ship, but LOADSTAR retained
interest from the filing of the complaint until fully paid, control over its crew.[4]
P8,000 as attorneys fees, and the costs of the suit; and
(b) its resolution of 19 November 1997,[3] denying 2) As a common carrier, it is the Code of Commerce, not
LOADSTARs motion for reconsideration of said decision. the Civil Code, which should be applied in determining
the rights and liabilities of the parties.
The facts are undisputed.
3) The vessel was not seaworthy because it was
On 19 November 1984, LOADSTAR received on board undermanned on the day of the voyage. If it had been
its M/V Cherokee (hereafter, the vessel) the following seaworthy, it could have withstood the natural and
goods for shipment: inevitable action of the sea on 20 November 1984, when
the condition of the sea was moderate. The vessel sank,
a) 705 bales of lawanit hardwood; not because of force majeure, but because it was not
seaworthy. LOADSTARS allegation that the sinking was
b) 27 boxes and crates of tilewood assemblies and probably due to the convergence of the winds, as stated
others; and by a PAGASA expert, was not duly proven at the trial.
The limited liability rule, therefore, is not applicable
c) 49 bundles of mouldings R & W (3) Apitong considering that, in this case, there was an actual finding
Bolidenized. of negligence on the part of the carrier.[5]

The goods, amounting to P6,067,178, were insured for 4) Between MIC and LOADSTAR, the provisions of the
the same amount with MIC against various risks Bill of Lading do not apply because said provisions bind
including TOTAL LOSS BY TOTAL LOSS OF THE only the shipper/consignee and the carrier. When MIC
VESSEL. The vessel, in turn, was insured by Prudential paid the shipper for the goods insured, it was subrogated
Guarantee & Assurance, Inc. (hereafter PGAI) for P4 to the latters rights as against the carrier, LOADSTAR.[6]
million. On 20 November 1984, on its way to Manila from
the port of Nasipit, Agusan del Norte, the vessel, along 5) There was a clear breach of the contract of carriage
with its cargo, sank off Limasawa Island. As a result of when the shippers goods never reached their
the total loss of its shipment, the consignee made a destination. LOADSTARs defense of diligence of a good
claim with LOADSTAR which, however, ignored the father of a family in the training and selection of its crew
same. As the insurer, MIC paid P6,075,000 to the is unavailing because this is not a proper or complete
insured in full settlement of its claim, and the latter defense in culpa contractual.
executed a subrogation receipt therefor.
6) Art. 361 (of the Code of Commerce) has been
On 4 February 1985, MIC filed a complaint against judicially construed to mean that when goods are
LOADSTAR and PGAI, alleging that the sinking of the delivered on board a ship in good order and condition,
vessel was due to the fault and negligence of and the shipowner delivers them to the shipper in bad
LOADSTAR and its employees. It also prayed that PGAI order and condition, it then devolves upon the shipowner
be ordered to pay the insurance proceeds from the loss to both allege and prove that the goods were damaged
of the vessel directly to MIC, said amount to be deducted by reason of some fact which legally exempts him from
from MICs claim from LOADSTAR. liability. Transportation of the merchandise at the risk
and venture of the shipper means that the latter bears
In its answer, LOADSTAR denied any liability for the loss the risk of loss or deterioration of his goods arising from
of the shippers goods and claimed that the sinking of its fortuitous events, force majeure, or the inherent nature
vessel was due to force majeure. PGAI, on the other and defects of the goods, but not those caused by the

27
presumed negligence or fault of the carrier, unless and winds, in turn, causing the vessel to list and
otherwise proved.[7] eventually sink.

The errors assigned by LOADSTAR boil down to a LOADSTAR goes on to argue that, being a private
determination of the following issues: carrier, any agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was
(1) Is the M/V Cherokee a private or a common carrier? being shipped at owners risk, LOADSTAR was not liable
for any loss or damage to the same. Therefore, the
(2) Did LOADSTAR observe due and/or ordinary Court of Appeals erred in holding that the provisions of
diligence in these premises? the bills of lading apply only to the shipper and the
carrier, and not to the insurer of the goods, which
Regarding the first issue, LOADSTAR submits that the conclusion runs counter to the Supreme Courts ruling in
vessel was a private carrier because it was not issued a the case of St. Paul Fire & Marine Insurance Co. v.
certificate of public convenience, it did not have a regular Macondray & Co., Inc.,[9] and National Union Fire
trip or schedule nor a fixed route, and there was only Insurance Company of Pittsburg v. Stolt-Nielsen Phils.,
one shipper, one consignee for a special cargo. Inc.[10]

In refutation, MIC argues that the issue as to the Finally, LOADSTAR avers that MICs claim had already
classification of the M/V Cherokee was not timely raised prescribed, the case having been instituted beyond the
below; hence, it is barred by estoppel. While it is true period stated in the bills of lading for instituting the same
that the vessel had on board only the cargo of wood suits based upon claims arising from shortage, damage,
products for delivery to one consignee, it was also or non-delivery of shipment shall be instituted within sixty
carrying passengers as part of its regular business. days from the accrual of the right of action. The vessel
Moreover, the bills of lading in this case made no sank on 20 November 1984; yet, the case for recovery
mention of any charter party but only a statement that was filed only on 4 February 1985.
the vessel was a general cargo carrier. Neither was
there any special arrangement between LOADSTAR and MIC, on the other hand, claims that LOADSTAR was
the shipper regarding the shipment of the cargo. The liable, notwithstanding that the loss of the cargo was due
singular fact that the vessel was carrying a particular to force majeure, because the same concurred with
type of cargo for one shipper is not sufficient to convert LOADSTARs fault or negligence.
the vessel into a private carrier.
Secondly, LOADSTAR did not raise the issue of
As regards the second error, LOADSTAR argues that as prescription in the court below; hence, the same must be
a private carrier, it cannot be presumed to have been deemed waived.
negligent, and the burden of proving otherwise devolved
upon MIC.[8] Thirdly, the limited liability theory is not applicable in the
case at bar because LOADSTAR was at fault or
LOADSTAR also maintains that the vessel was negligent, and because it failed to maintain a seaworthy
seaworthy. Before the fateful voyage on 19 November vessel. Authorizing the voyage notwithstanding its
1984, the vessel was allegedly dry docked at Keppel knowledge of a typhoon is tantamount to negligence.
Philippines Shipyard and was duly inspected by the
maritime safety engineers of the Philippine Coast Guard, We find no merit in this petition.
who certified that the ship was fit to undertake a voyage.
Its crew at the time was experienced, licensed and Anent the first assigned error, we hold that LOADSTAR
unquestionably competent. With all these precautions, is a common carrier. It is not necessary that the carrier
there could be no other conclusion except that be issued a certificate of public convenience, and this
LOADSTAR exercised the diligence of a good father of a public character is not altered by the fact that the
family in ensuring the vessels seaworthiness. carriage of the goods in question was periodic,
occasional, episodic or unscheduled.
LOADSTAR further claims that it was not responsible for
the loss of the cargo, such loss being due to force In support of its position, LOADSTAR relied on the 1968
majeure. It points out that when the vessel left Nasipit, case of Home Insurance Co. v. American Steamship
Agusan del Norte, on 19 November 1984, the weather Agencies, Inc.,[11] where this Court held that a common
was fine until the next day when the vessel sank due to carrier transporting special cargo or chartering the
strong waves. MICs witness, Gracelia Tapel, fully vessel to a special person becomes a private carrier that
established the existence of two typhoons, WELFRING is not subject to the provisions of the Civil Code. Any
and YOLING, inside the Philippine area of responsibility. stipulation in the charter party absolving the owner from
In fact, on 20 November 1984, signal no. 1 was declared liability for loss due to the negligence of its agent is void
over Eastern Visayas, which includes Limasawa Island. only if the strict policy governing common carriers is
Tapel also testified that the convergence of winds upheld. Such policy has no force where the public at
brought about by these two typhoons strengthened wind large is not involved, as in the case of a ship totally
velocity in the area, naturally producing strong waves chartered for the use of a single party. LOADSTAR also

28
cited Valenzuela Hardwood and Industrial Supply, Inc. v. goods for others. There is no dispute that private
Court of Appeals[12] and National Steel Corp. v. Court of respondent charged his customers a fee for hauling their
Appeals,[13] both of which upheld the Home Insurance goods; that that fee frequently fell below commercial
doctrine. freight rates is not relevant here.

These cases invoked by LOADSTAR are not applicable The Court of Appeals referred to the fact that private
in the case at bar for simple reason that the factual respondent held no certificate of public convenience,
settings are different. The records do not disclose that and concluded he was not a common carrier. This is
the M/V Cherokee, on the date in question, undertook to palpable error. A certificate of public convenience is not
carry a special cargo or was chartered to a special a requisite for the incurring of liability under the Civil
person only. There was no charter party. The bills of Code provisions governing common carriers. That
lading failed to show any special arrangement, but only a liability arises the moment a person or firm acts as a
general provision to the effect that the M/V Cherokee common carrier, without regard to whether or not such
was a general cargo carrier.[14] Further, the bare fact carrier has also complied with the requirements of the
that the vessel was carrying a particular type of cargo for applicable regulatory statute and implementing
one shipper, which appears to be purely coincidental, is regulations and has been granted a certificate of public
not reason enough to convert the vessel from a common convenience or other franchise. To exempt private
to a private carrier, especially where, as in this case, it respondent from the liabilities of a common carrier
was shown that the vessel was also carrying because he has not secured the necessary certificate of
passengers. public convenience, would be offensive to sound public
policy; that would be to reward private respondent
Under the facts and circumstances obtaining in this precisely for failing to comply with applicable statutory
case, LOADSTAR fits the definition of a common carrier requirements. The business of a common carrier
under Article 1732 of the Civil Code. In the case of De impinges directly and intimately upon the safety and well
Guzman v. Court of Appeals,[15] the Court juxtaposed being and property of those members of the general
the statutory definition of common carriers with the community who happen to deal with such carrier. The
peculiar circumstances of that case, viz.: law imposes duties and liabilities upon common carriers
for the safety and protection of those who utilize their
The Civil Code defines common carriers in the following services and the law cannot allow a common carrier to
terms: render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and
Article 1732. Common carriers are persons, authorizations.
corporations, firms or associations engaged in the
business of carrying or transporting passengers or Moving on to the second assigned error, we find that the
goods or both, by land, water, or air for compensation, M/V Cherokee was not seaworthy when it embarked on
offering their services to the public. its voyage on 19 November 1984. The vessel was not
even sufficiently manned at the time. For a vessel to be
The above article makes no distinction between one seaworthy, it must be adequately equipped for the
whose principal business activity is the carrying of voyage and manned with a sufficient number of
persons or goods or both, and one who does such competent officers and crew. The failure of a common
carrying only as an ancillary activity (in local idiom, as a carrier to maintain in seaworthy condition its vessel
sideline. Article 1732 also carefully avoids making any involved in a contract of carriage is a clear breach of its
distinction between a person or enterprise offering duty prescribed in Article 1755 of the Civil Code.[16]
transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic Neither do we agree with LOADSTARs argument that
or unscheduled basis. Neither does Article 1732 the limited liability theory should be applied in this case.
distinguish between a carrier offering its services to the The doctrine of limited liability does not apply where
general public, i.e., the general community or population, there was negligence on the part of the vessel owner or
and one who offers services or solicits business only agent.[17] LOADSTAR was at fault or negligent in not
from a narrow segment of the general population. We maintaining a seaworthy vessel and in having allowed its
think that Article 1733 deliberately refrained from making vessel to sail despite knowledge of an approaching
such distinctions. typhoon. In any event, it did not sink because of any
storm that may be deemed as force majeure, inasmuch
xxx as the wind condition in the area where it sank was
determined to be moderate. Since it was remiss in the
It appears to the Court that private respondent is performance of its duties, LOADSTAR cannot hide
properly characterized as a common carrier even though behind the limited liability doctrine to escape
he merely back-hauled goods for other merchants from responsibility for the loss of the vessel and its cargo.
Manila to Pangasinan, although such backhauling was
done on a periodic or occasional rather than regular or LOADSTAR also claims that the Court of Appeals erred
scheduled manner, and even though private in holding it liable for the loss of the goods, in utter
respondents principal occupation was not the carriage of disregard of this Courts pronouncements in St. Paul Fire

29
& Marine Ins. Co. v. Macondray & Co., Inc.,[18] and Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs
National Union Fire Insurance v. Stolt-Nielsen Phils., against petitioner.
Inc.[19] It was ruled in these two cases that after paying
the claim of the insured for damages under the SO ORDERED.
insurance policy, the insurer is subrogated merely to the
rights of the assured, that is, it can recover only the
amount that may, in turn, be recovered by the latter.
Since the right of the assured in case of loss or damage
to the goods is limited or restricted by the provisions in
the bills of lading, a suit by the insurer as subrogee is
necessarily subject to the same limitations and
restrictions. We do not agree. In the first place, the
cases relied on by LOADSTAR involved a limitation on
the carriers liability to an amount fixed in the bill of lading
which the parties may enter into, provided that the same
was freely and fairly agreed upon (Articles 1749-1750).
On the other hand, the stipulation in the case at bar
effectively reduces the common carriers liability for the
loss or destruction of the goods to a degree less than
extraordinary (Articles 1744 and 1745), that is, the
carrier is not liable for any loss or damage to shipments
made at owners risk. Such stipulation is obviously null
and void for being contrary to public policy.[20] It has
been said:

Three kinds of stipulations have often been made in a


bill of lading. The first is one exempting the carrier from
any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an
unqualified limitation of such liability to an agreed
valuation. And the third is one limiting the liability of the
carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight.
According to an almost uniform weight of authority, the
first and second kinds of stipulations are invalid as being
contrary to public policy, but the third is valid and
enforceable.[21]

Since the stipulation in question is null and void, it


follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has against
the common carrier, LOADSTAR.

Neither is there merit to the contention that the claim in


this case was barred by prescription. MICs cause of
action had not yet prescribed at the time it was
concerned. Inasmuch as neither the Civil Code nor the
Code of Commerce states a specific prescriptive period
on the matter, the Carriage of Goods by Sea Act
(COGSA) which provides for a one-year period of
limitation on claims for loss of, or damage to, cargoes
sustained during transit may be applied suppletorily to
the case at bar. This one-year prescriptive period also
applies to the insurer of the good.[22] In this case, the
period for filing the action for recovery has not yet
elapsed. Moreover, a stipulation reducing the one-year
period is null and void;[23] it must, accordingly, be struck
down.

WHEREFORE, the instant petition is DENIED and the


challenged decision of 30 January 1997 of the Court of

30
[G.R. No. 147246. August 19, 2003]
The next day, September 6, 1990, the towing bits of the
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, barge broke. It sank completely, resulting in the total loss
vs. COURT OF APPEALS and PRUDENTIAL of the remaining cargo.[11] A second Marine Protest was
GUARANTEE AND ASSURANCE, INC., respondents. filed on September 7, 1990.[12]
DECISION
PUNO, J.: On September 14, 1990, a bidding was conducted to
dispose of the damaged wheat retrieved and loaded on
On appeal is the Court of Appeals May 11, 2000 the three other barges.[13] The total proceeds from the
Decision[1] in CA-G.R. CV No. 49195 and February 21, sale of the salvaged cargo was P201,379.75.[14]
2001 Resolution[2] affirming with modification the April 6,
1994 Decision[3] of the Regional Trial Court of Manila On the same date, September 14, 1990, consignee sent
which found petitioner liable to pay private respondent a claim letter to the petitioner, and another letter dated
the amount of indemnity and attorney's fees. September 18, 1990 to the private respondent for the
value of the lost cargo.
First, the facts.
On January 30, 1991, the private respondent
On June 13, 1990, 3,150 metric tons of Better Western indemnified the consignee in the amount of
White Wheat in bulk, valued at US$423,192.35[4] was P4,104,654.22.[15] Thereafter, as subrogee, it sought
shipped by Marubeni American Corporation of Portland, recovery of said amount from the petitioner, but to no
Oregon on board the vessel M/V NEO CYMBIDIUM V- avail.
26 for delivery to the consignee, General Milling
Corporation in Manila, evidenced by Bill of Lading No. On July 3, 1991, the private respondent filed a complaint
PTD/Man-4.[5] The shipment was insured by the private against the petitioner for recovery of the amount of
respondent Prudential Guarantee and Assurance, Inc. indemnity, attorney's fees and cost of suit.[16] Petitioner
against loss or damage for P14,621,771.75 under filed its answer with counterclaim.[17]
Marine Cargo Risk Note RN 11859/90.[6]
The Regional Trial Court ruled in favor of the private
On July 25, 1990, the carrying vessel arrived in Manila respondent. The dispositive portion of its Decision
and the cargo was transferred to the custody of the states:
petitioner Asia Lighterage and Shipping, Inc. The
petitioner was contracted by the consignee as carrier to WHEREFORE, premises considered, judgment is
deliver the cargo to consignee's warehouse at Bo. hereby rendered ordering defendant Asia Lighterage &
Ugong, Pasig City. Shipping, Inc. liable to pay plaintiff Prudential Guarantee
& Assurance Co., Inc. the sum of P4,104,654.22 with
On August 15, 1990, 900 metric tons of the shipment interest from the date complaint was filed on July 3,
was loaded on barge PSTSI III, evidenced by Lighterage 1991 until fully satisfied plus 10% of the amount
Receipt No. 0364[7] for delivery to consignee. The cargo awarded as and for attorney's fees. Defendant's
did not reach its destination. counterclaim is hereby DISMISSED. With costs against
defendant.[18]
It appears that on August 17, 1990, the transport of said
cargo was suspended due to a warning of an incoming Petitioner appealed to the Court of Appeals insisting that
typhoon. On August 22, 1990, the petitioner proceeded it is not a common carrier. The appellate court affirmed
to pull the barge to Engineering Island off Baseco to the decision of the trial court with modification. The
seek shelter from the approaching typhoon. PSTSI III dispositive portion of its decision reads:
was tied down to other barges which arrived ahead of it
while weathering out the storm that night. A few days WHEREFORE, the decision appealed from is hereby
after, the barge developed a list because of a hole it AFFIRMED with modification in the sense that the
sustained after hitting an unseen protuberance salvage value of P201,379.75 shall be deducted from
underneath the water. The petitioner filed a Marine the amount of P4,104,654.22. Costs against appellant.
Protest on August 28, 1990.[8] It likewise secured the
services of Gaspar Salvaging Corporation which SO ORDERED.
refloated the barge.[9] The hole was then patched with
clay and cement. Petitioners Motion for Reconsideration dated June 3,
2000 was likewise denied by the appellate court in a
The barge was then towed to ISLOFF terminal before it Resolution promulgated on February 21, 2001.
finally headed towards the consignee's wharf on
September 5, 1990. Upon reaching the Sta. Mesa Hence, this petition. Petitioner submits the following
spillways, the barge again ran aground due to strong errors allegedly committed by the appellate court,
current. To avoid the complete sinking of the barge, a viz:[19]
portion of the goods was transferred to three other
barges.[10]

31
(1) THE COURT OF APPEALS DECIDED THE CASE A Further, we ruled that Article 1732 does not distinguish
QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR between a carrier offering its services to the general
WITH THE APPLICABLE DECISIONS OF THE public, and one who offers services or solicits business
SUPREME COURT WHEN IT HELD THAT only from a narrow segment of the general population.
PETITIONER IS A COMMON CARRIER.
In the case at bar, the principal business of the petitioner
(2) THE COURT OF APPEALS DECIDED THE CASE A is that of lighterage and drayage[22] and it offers its
QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR barges to the public for carrying or transporting goods by
WITH THE APPLICABLE DECISIONS OF THE water for compensation. Petitioner is clearly a common
SUPREME COURT WHEN IT AFFIRMED THE carrier. In De Guzman, supra,[23] we considered private
FINDING OF THE LOWER COURT A QUO THAT ON respondent Ernesto Cendaa to be a common carrier
THE BASIS OF THE PROVISIONS OF THE CIVIL even if his principal occupation was not the carriage of
CODE APPLICABLE TO COMMON CARRIERS, THE goods for others, but that of buying used bottles and
LOSS OF THE CARGO IS, THEREFORE, BORNE BY scrap metal in Pangasinan and selling these items in
THE CARRIER IN ALL CASES EXCEPT IN THE FIVE Manila.
(5) CASES ENUMERATED.
We therefore hold that petitioner is a common carrier
(3) THE COURT OF APPEALS DECIDED THE CASE A whether its carrying of goods is done on an irregular
QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR rather than scheduled manner, and with an only limited
WITH THE APPLICABLE DECISIONS OF THE clientele. A common carrier need not have fixed and
SUPREME COURT WHEN IT EFFECTIVELY publicly known routes. Neither does it have to maintain
CONCLUDED THAT PETITIONER FAILED TO terminals or issue tickets.
EXERCISE DUE DILIGENCE AND/OR WAS
NEGLIGENT IN ITS CARE AND CUSTODY OF THE To be sure, petitioner fits the test of a common carrier as
CONSIGNEES CARGO. laid down in Bascos vs. Court of Appeals.[24] The test to
determine a common carrier is whether the given
The issues to be resolved are: undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his
(1) Whether the petitioner is a common carrier; and, occupation rather than the quantity or extent of the
business transacted.[25] In the case at bar, the petitioner
(2) Assuming the petitioner is a common carrier, whether admitted that it is engaged in the business of shipping
it exercised extraordinary diligence in its care and and lighterage,[26] offering its barges to the public,
custody of the consignees cargo. despite its limited clientele for carrying or transporting
goods by water for compensation.[27]
On the first issue, we rule that petitioner is a common
carrier. On the second issue, we uphold the findings of the lower
courts that petitioner failed to exercise extraordinary
Article 1732 of the Civil Code defines common carriers diligence in its care and custody of the consignees
as persons, corporations, firms or associations engaged goods.
in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, Common carriers are bound to observe extraordinary
offering their services to the public. diligence in the vigilance over the goods transported by
them.[28] They are presumed to have been at fault or to
Petitioner contends that it is not a common carrier but a have acted negligently if the goods are lost, destroyed or
private carrier. Allegedly, it has no fixed and publicly deteriorated.[29] To overcome the presumption of
known route, maintains no terminals, and issues no negligence in the case of loss, destruction or
tickets. It points out that it is not obliged to carry deterioration of the goods, the common carrier must
indiscriminately for any person. It is not bound to carry prove that it exercised extraordinary diligence. There
goods unless it consents. In short, it does not hold out its are, however, exceptions to this rule. Article 1734 of the
services to the general public.[20] Civil Code enumerates the instances when the
presumption of negligence does not attach:
We disagree.
Art. 1734. Common carriers are responsible for the loss,
In De Guzman vs. Court of Appeals,[21] we held that the destruction, or deterioration of the goods, unless the
definition of common carriers in Article 1732 of the Civil same is due to any of the following causes only:
Code makes no distinction between one whose principal
business activity is the carrying of persons or goods or (1) Flood, storm, earthquake, lightning, or other natural
both, and one who does such carrying only as an disaster or calamity;
ancillary activity. We also did not distinguish between a
person or enterprise offering transportation service on a (2) Act of the public enemy in war, whether international
regular or scheduled basis and one offering such service or civil;
on an occasional, episodic or unscheduled basis.

32
(3) Act or omission of the shipper or owner of the goods; consignee's wharf on September 5, 1990, typhoon
Loleng has already entered the Philippine area of
(4) The character of the goods or defects in the packing responsibility.[32] A part of the testimony of Robert
or in the containers; Boyd, Cargo Operations Supervisor of the petitioner,
reveals:
(5) Order or act of competent public authority.
DIRECT-EXAMINATION BY ATTY. LEE:[33]
In the case at bar, the barge completely sank after its
towing bits broke, resulting in the total loss of its cargo. xxxxxxxxx
Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the q - Now, Mr. Witness, did it not occur to you it might be
cargo. However, petitioner failed to prove that the safer to just allow the Barge to lie where she was instead
typhoon is the proximate and only cause of the loss of of towing it?
the goods, and that it has exercised due diligence
before, during and after the occurrence of the typhoon to a - Since that time that the Barge was refloated, GMC
prevent or minimize the loss.[30] The evidence show (General Milling Corporation, the consignee) as I have
that, even before the towing bits of the barge broke, it said was in a hurry for their goods to be delivered at their
had already previously sustained damage when it hit a Wharf since they needed badly the wheat that was
sunken object while docked at the Engineering Island. It loaded in PSTSI-3. It was needed badly by the
even suffered a hole. Clearly, this could not be solely consignee.
attributed to the typhoon. The partly-submerged vessel
was refloated but its hole was patched with only clay and q - And this is the reason why you towed the Barge as
cement. The patch work was merely a provisional you did?
remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it a - Yes, sir.
recklessly exposed the cargo to further damage. A
portion of the cross-examination of Alfredo Cunanan, xxxxxxxxx
cargo-surveyor of Tan-Gatue Adjustment Co., Inc.,
states: CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

CROSS-EXAMINATION BY ATTY. DONN LEE:[31] xxxxxxxxx

xxxxxxxxx q - And then from ISLOFF Terminal you proceeded to


the premises of the GMC? Am I correct?
q - Can you tell us what else transpired after that
incident? a - The next day, in the morning, we hired for additional
two (2) tugboats as I have stated.
a - After the first accident, through the initiative of the
barge owners, they tried to pull out the barge from the q - Despite of the threats of an incoming typhoon as you
place of the accident, and bring it to the anchor terminal testified a while ago?
for safety, then after deciding if the vessel is stabilized,
they tried to pull it to the consignees warehouse, now a - It is already in an inner portion of Pasig River. The
while on route another accident occurred, now this time typhoon would be coming and it would be dangerous if
the barge totally hitting something in the course. we are in the vicinity of Manila Bay.

q - You said there was another accident, can you tell the q - But the fact is, the typhoon was incoming? Yes or
court the nature of the second accident? no?

a - The sinking, sir. a - Yes.

q - Can you tell the nature . . . can you tell the court, if q - And yet as a standard operating procedure of your
you know what caused the sinking? Company, you have to secure a sort of Certification to
determine the weather condition, am I correct?
a - Mostly it was related to the first accident because
there was already a whole (sic) on the bottom part of the a - Yes, sir.
barge.
q - So, more or less, you had the knowledge of the
xxxxxxxxx incoming typhoon, right?

This is not all. Petitioner still headed to the consignees a - Yes, sir.
wharf despite knowledge of an incoming typhoon. During
the time that the barge was heading towards the q - And yet you proceeded to the premises of the GMC?

33
a - ISLOFF Terminal is far from Manila Bay and anytime
even with the typhoon if you are already inside the
vicinity or inside Pasig entrance, it is a safe place to tow
upstream.

Accordingly, the petitioner cannot invoke the occurrence


of the typhoon as force majeure to escape liability for the
loss sustained by the private respondent. Surely,
meeting a typhoon head-on falls short of due diligence
required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted
that when the towing bits of the vessel broke that caused
its sinking and the total loss of the cargo upon reaching
the Pasig River, it was no longer affected by the
typhoon. The typhoon then is not the proximate cause of
the loss of the cargo; a human factor, i.e., negligence
had intervened.

IN VIEW THEREOF, the petition is DENIED. The


Decision of the Court of Appeals in CA-G.R. CV No.
49195 dated May 11, 2000 and its Resolution dated
February 21, 2001 are hereby AFFIRMED. Costs
against petitioner.

SO ORDERED.

34
[G.R. No. 149038. April 9, 2003] fortuitous event, negating any liability on the part of PKS
Shipping to the shipper.
PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, petitioner, vs. PKS SHIPPING COMPANY, In the instant appeal, Philamgen contends that the
respondent. appellate court has committed a patent error in ruling
DECISION that PKS Shipping is not a common carrier and that it is
VITUG, J.: not liable for the loss of the subject cargo. The fact that
respondent has a limited clientele, petitioner argues,
The petition before the Court seeks a review of the does not militate against respondents being a common
decision of the Court of Appeals in C.A. G.R. CV No. carrier and that the only way by which such carrier can
56470, promulgated on 25 June 2001, which has be held exempt for the loss of the cargo would be if the
affirmed in toto the judgment of the Regional Trial Court loss were caused by natural disaster or calamity.
(RTC), Branch 65, of Makati, dismissing the complaint Petitioner avers that typhoon "APIANG" has not entered
for damages filed by petitioner insurance corporation the Philippine area of responsibility and that, even if it
against respondent shipping company. did, respondent would not be exempt from liability
because its employees, particularly the tugmaster, have
Davao Union Marketing Corporation (DUMC) contracted failed to exercise due diligence to prevent or minimize
the services of respondent PKS Shipping Company the loss.
(PKS Shipping) for the shipment to Tacloban City of
seventy-five thousand (75,000) bags of cement worth PKS Shipping, in its comment, urges that the petition
Three Million Three Hundred Seventy-Five Thousand should be denied because what Philamgen seeks is not
Pesos (P3,375,000.00). DUMC insured the goods for its a review on points or errors of law but a review of the
full value with petitioner Philippine American General undisputed factual findings of the RTC and the appellate
Insurance Company (Philamgen). The goods were court. In any event, PKS Shipping points out, the
loaded aboard the dumb barge Limar I belonging to PKS findings and conclusions of both courts find support from
Shipping. On the evening of 22 December 1988, about the evidence and applicable jurisprudence.
nine oclock, while Limar I was being towed by
respondents tugboat, MT Iron Eagle, the barge sank a The determination of possible liability on the part of PKS
couple of miles off the coast of Dumagasa Point, in Shipping boils down to the question of whether it is a
Zamboanga del Sur, bringing down with it the entire private carrier or a common carrier and, in either case, to
cargo of 75,000 bags of cement. the other question of whether or not it has observed the
proper diligence (ordinary, if a private carrier, or
DUMC filed a formal claim with Philamgen for the full extraordinary, if a common carrier) required of it given
amount of the insurance. Philamgen promptly made the circumstances.
payment; it then sought reimbursement from PKS
Shipping of the sum paid to DUMC but the shipping The findings of fact made by the Court of Appeals,
company refused to pay, prompting Philamgen to file suit particularly when such findings are consistent with those
against PKS Shipping with the Makati RTC. of the trial court, may not at liberty be reviewed by this
Court in a petition for review under Rule 45 of the Rules
The RTC dismissed the complaint after finding that the of Court.[1] The conclusions derived from those factual
total loss of the cargo could have been caused either by findings, however, are not necessarily just matters of fact
a fortuitous event, in which case the ship owner was not as when they are so linked to, or inextricably intertwined
liable, or through the negligence of the captain and crew with, a requisite appreciation of the applicable law. In
of the vessel and that, under Article 587 of the Code of such instances, the conclusions made could well be
Commerce adopting the Limited Liability Rule, the ship raised as being appropriate issues in a petition for
owner could free itself of liability by abandoning, as it review before this Court. Thus, an issue whether a
apparently so did, the vessel with all her equipment and carrier is private or common on the basis of the facts
earned freightage. found by a trial court or the appellate court can be a valid
and reviewable question of law.
Philamgen interposed an appeal to the Court of Appeals
which affirmed in toto the decision of the trial court. The The Civil Code defines common carriers in the following
appellate court ruled that evidence to establish that PKS terms:
Shipping was a common carrier at the time it undertook
to transport the bags of cement was wanting because Article 1732. Common carriers are persons,
the peculiar method of the shipping companys carrying corporations, firms or associations engaged in the
goods for others was not generally held out as a business of carrying or transporting passengers or
business but as a casual occupation. It then concluded goods or both, by land, water, or air for compensation,
that PKS Shipping, not being a common carrier, was not offering their services to the public.
expected to observe the stringent extraordinary diligence
required of common carriers in the care of goods. The Complementary to the codal definition is Section 13,
appellate court, moreover, found that the loss of the paragraph (b), of the Public Service Act; it defines public
goods was sufficiently established as having been due to service to be

35
and gets the control of the vessel and its crew.[5]
x x x every person that now or hereafter may own, Contrary to the conclusion made by the appellate court,
operate, manage, or control in the Philippines, for hire or its factual findings indicate that PKS Shipping has
compensation, with general or limited clientele, whether engaged itself in the business of carrying goods for
permanent, occasional or accidental, and done for others, although for a limited clientele, undertaking to
general business purposes, any common carrier, carry such goods for a fee. The regularity of its activities
railroad, street railway, subway motor vehicle, either for in this area indicates more than just a casual activity on
freight or passenger, or both, with or without fixed route its part.[6] Neither can the concept of a common carrier
and whatever may be its classification, freight or carrier change merely because individual contracts are
service of any class, express service, steamboat, or executed or entered into with patrons of the carrier. Such
steamship, or steamship line, pontines, ferries and water restrictive interpretation would make it easy for a
craft, engaged in the transportation of passengers or common carrier to escape liability by the simple
freight or both, shipyard, marine repair shop, wharf or expedient of entering into those distinct agreements with
dock, ice plant, ice refrigeration plant, canal, irrigation clients.
system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless Addressing now the issue of whether or not PKS
communication systems, wire or wireless broadcasting Shipping has exercised the proper diligence demanded
stations and other similar public services. x x x. of common carriers, Article 1733 of the Civil Code
(Underscoring supplied). requires common carriers to observe extraordinary
diligence in the vigilance over the goods they carry. In
The prevailing doctrine on the question is that case of loss, destruction or deterioration of goods,
enunciated in the leading case of De Guzman vs. Court common carriers are presumed to have been at fault or
of Appeals.[2] Applying Article 1732 of the Code, in to have acted negligently, and the burden of proving
conjunction with Section 13(b) of the Public Service Act, otherwise rests on them.[7] The provisions of Article
this Court has held: 1733, notwithstanding, common carriers are exempt
from liability for loss, destruction, or deterioration of the
The above article makes no distinction between one goods due to any of the following causes:
whose principal business activity is the carrying of
persons or goods or both, and one who does such (1) Flood, storm, earthquake, lightning, or other natural
carrying only as an ancillary activity (in local idiom, as `a disaster or calamity;
sideline). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering (2) Act of the public enemy in war, whether international
transportation service on a regular or scheduled basis or civil;
and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 (3) Act or omission of the shipper or owner of the goods;
distinguish between a carrier offering its services to the
`general public, i.e., the general community or (4) The character of the goods or defects in the packing
population, and one who offers services or solicits or in the containers; and
business only from a narrow segment of the general
population. We think that Article 1732 deliberately (5) Order or act of competent public authority.[8]
refrained from making such distinctions.
The appellate court ruled, gathered from the testimonies
So understood, the concept of `common carrier under and sworn marine protests of the respective vessel
Article 1732 may be seen to coincide neatly with the masters of Limar I and MT Iron Eagle, that there was no
notion of `public service, under the Public Service Act way by which the barges or the tugboats crew could
(Commonwealth Act No. 1416, as amended) which at have prevented the sinking of Limar I. The vessel was
least partially supplements the law on common carriers suddenly tossed by waves of extraordinary height of six
set forth in the Civil Code. (6) to eight (8) feet and buffeted by strong winds of 1.5
knots resulting in the entry of water into the barges
Much of the distinction between a common or public hatches. The official Certificate of Inspection of the
carrier and a private or special carrier lies in the barge issued by the Philippine Coastguard and the
character of the business, such that if the undertaking is Coastwise Load Line Certificate would attest to the
an isolated transaction, not a part of the business or seaworthiness of Limar I and should strengthen the
occupation, and the carrier does not hold itself out to factual findings of the appellate court.
carry the goods for the general public or to a limited
clientele, although involving the carriage of goods for a Findings of fact of the Court of Appeals generally
fee,[3] the person or corporation providing such service conclude this Court; none of the recognized exceptions
could very well be just a private carrier. A typical case is from the rule - (1) when the factual findings of the Court
that of a charter party which includes both the vessel of Appeals and the trial court are contradictory; (2) when
and its crew, such as in a bareboat or demise, where the the conclusion is a finding grounded entirely on
charterer obtains the use and service of all or some part speculation, surmises, or conjectures; (3) when the
of a ship for a period of time or a voyage or voyages[4] inference made by the Court of Appeals from its findings

36
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.

37
[G.R. No. 131166. September 30, 1999] The MV Doa Paz carried an estimated 4,000
passengers; many indeed, were not in the passenger
CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO manifest. Only 24 survived the tragedy after having been
LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO rescued from the burning waters by vessels that
S. GO, CARLOS S. GO, VICTORIANO S. GO, responded to distress calls.[5] Among those who
DOMINADOR S. GO, RICARDO S. GO, EDWARD S. perished were public school teacher Sebastian Caezal
GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, (47 years old) and his daughter Corazon Caezal (11
FRANCISCO SORIANO, VECTOR SHIPPING years old), both unmanifested passengers but proved to
CORPORATION, TERESITA G. CAEZAL AND SOTERA be on board the vessel.
E. CAEZAL, respondents.
DECISION On March 22, 1988, the board of marine inquiry in BMI
PARDO, J.: Case No. 653-87 after investigation found that the MT
Vector, its registered operator Francisco Soriano, and its
Is the charterer of a sea vessel liable for damages owner and actual operator Vector Shipping Corporation,
resulting from a collision between the chartered vessel were at fault and responsible for its collision with MV
and a passenger ship? Doa Paz.[6]

When MT Vector left the port of Limay, Bataan, on On February 13, 1989, Teresita Caezal and Sotera E.
December 19, 1987 carrying petroleum products of Caezal, Sebastian Caezals wife and mother
Caltex (Philippines), Inc. (hereinafter Caltex) no one respectively, filed with the Regional Trial Court, Branch
could have guessed that it would collide with MV Doa 8, Manila, a complaint for Damages Arising from Breach
Paz, killing almost all the passengers and crew members of Contract of Carriage against Sulpicio Lines, Inc.
of both ships, and thus resulting in one of the countrys (hereafter Sulpicio). Sulpicio, in turn, filed a third party
worst maritime disasters. complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex (Philippines), Inc. Sulpicio
The petition before us seeks to reverse the Court of alleged that Caltex chartered MT Vector with gross and
Appeals decision[1]holding petitioner jointly liable with evident bad faith knowing fully well that MT Vector was
the operator of MT Vector for damages when the latter improperly manned, ill-equipped, unseaworthy and a
collided with Sulpicio Lines, Inc.s passenger ship MV hazard to safe navigation; as a result, it rammed against
Doa Paz. MV Doa Paz in the open sea setting MT Vectors highly
flammable cargo ablaze.
The facts are as follows:
On September 15, 1992, the trial court rendered
On December 19, 1987, motor tanker MT Vector left decision dismissing the third party complaint against
Limay, Bataan, at about 8:00 p.m., enroute to Masbate, petitioner. The dispositive portion reads:
loaded with 8,800 barrels of petroleum products shipped
by petitioner Caltex.[2] MT Vector is a tramping motor WHEREFORE, judgement is hereby rendered in favor of
tanker owned and operated by Vector Shipping plaintiffs and against defendant-3rd party plaintiff
Corporation, engaged in the business of transporting fuel Sulpicio Lines, Inc., to wit:
products such as gasoline, kerosene, diesel and crude
oil. During that particular voyage, the MT Vector carried 1. For the death of Sebastian E. Caezal and his 11-year
on board gasoline and other oil products owned by old daughter Corazon G. Caezal, including loss of future
Caltex by virtue of a charter contract between them.[3] earnings of said Sebastian, moral and exemplary
damages, attorneys fees, in the total amount of P
On December 20, 1987, at about 6:30 a.m., the 1,241,287.44 and finally;
passenger ship MV Doa Paz left the port of Tacloban
headed for Manila with a complement of 59 crew 2. The statutory costs of the proceedings.
members including the master and his officers, and
passengers totaling 1,493 as indicated in the Coast Likewise, the 3rd party complaint is hereby DISMISSED
Guard Clearance.[4] The MV Doa Paz is a passenger for want of substantiation and with costs against the 3rd
and cargo vessel owned and operated by Sulpicio Lines, party plaintiff.
Inc. plying the route of Manila/ Tacloban/ Catbalogan/
Manila/ Catbalogan/ Tacloban/ Manila, making trips IT IS SO ORDERED.
twice a week.
DONE IN MANILA, this 15th day of September 1992.
At about 10:30 p.m. of December 20, 1987, the two
vessels collided in the open sea within the vicinity of ARSENIO M. GONONG
Dumali Point between Marinduque and Oriental Mindoro.
All the crewmembers of MV Doa Paz died, while the two Judge[7]
survivors from MT Vector claimed that they were
sleeping at the time of the incident. On appeal to the Court of Appeals interposed by Sulpicio
Lines, Inc., on April 15, 1997, the Court of Appeal

38
modified the trial courts ruling and included petitioner lading or equivalent shipping documents on the one
Caltex as one of the those liable for damages. Thus: hand, or a charter party or similar contract on the
other.[9]
WHEREFORE, in view of all the foregoing, the judgment
rendered by the Regional Trial Court is hereby Petitioner and Vector entered into a contract of
MODIFIED as follows: affreightment, also known as a voyage charter.[10]

WHEREFORE, defendant Sulpicio Lines, Inc., is ordered A charter party is a contract by which an entire ship, or
to pay the heirs of Sebastian E. Caezal and Corazon some principal part thereof, is let by the owner to
Caezal: another person for a specified time or use; a contract of
affreightment is one by which the owner of a ship or
1. Compensatory damages for the death of Sebastian other vessel lets the whole or part of her to a merchant
E.Caezal and Corazon Caezal the total amount of ONE or other person for the conveyance of goods, on a
HUNDRED THOUSAND PESOS (P100,000); particular voyage, in consideration of the payment of
freight.[11]
2. Compensatory damages representing the unearned
income of Sebastian E. Caezal, in the total amount of A contract of affreightment may be either time charter,
THREE HUNDRED SIX THOUSAND FOUR HUNDRED wherein the leased vessel is leased to the charterer for a
EIGHTY (P306,480.00) PESOS; fixed period of time, or voyage charter, wherein the ship
is leased for a single voyage. In both cases, the charter-
3. Moral damages in the amount of THREE HUNDRED party provides for the hire of the vessel only, either for a
THOUSAND PESOS (P 300,000.00); determinate period of time or for a single or consecutive
voyage, the ship owner to supply the ships store, pay for
4. Attorneys fees in the concept of actual damages in the the wages of the master of the crew, and defray the
amount of FIFTY THOUSAND PESOS (P 50,000.00); expenses for the maintenance of the ship.[12]

5. Costs of the suit. Under a demise or bareboat charter on the other hand,
the charterer mans the vessel with his own people and
Third party defendants Vector Shipping Co. and Caltex becomes, in effect, the owner for the voyage or service
(Phils.), Inc. are held equally liable under the third party stipulated, subject to liability for damages caused by
complaint to reimburse/indemnify defendant Sulpicio negligence.
Lines, Inc. of the above-mentioned damages, attorneys
fees and costs which the latter is adjudged to pay If the charter is a contract of affreightment, which leaves
plaintiffs, the same to be shared half by Vector Shipping the general owner in possession of the ship as owner for
Co. (being the vessel at fault for the collision) and the the voyage, the rights and the responsibilities of
other half by Caltex (Phils.), Inc. (being the charterer that ownership rest on the owner. The charterer is free from
negligently caused the shipping of combustible cargo liability to third persons in respect of the ship.[13]
aboard an unseaworthy vessel).
Second : MT Vector is a common carrier
SO ORDERED.
Charter parties fall into three main categories: (1)
JORGE S. IMPERIAL Demise or bareboat, (2) time charter, (3) voyage charter.
Does a charter party agreement turn the common carrier
Associate Justice into a private one? We need to answer this question in
order to shed light on the responsibilities of the parties.
WE CONCUR:
In this case, the charter party agreement did not convert
RAMON U. MABUTAS. JR. PORTIA ALIO the common carrier into a private carrier. The parties
HERMACHUELOS entered into a voyage charter, which retains the
character of the vessel as a common carrier.
Associate Justice Associate Justice[8]
In Planters Products, Inc. vs. Court of Appeals,[14] we
Hence, this petition. said:

We find the petition meritorious. It is therefore imperative that a public carrier shall remain
as such, notwithstanding the charter of the whole or
First: The charterer has no liability for damages under portion of a vessel by one or more persons, provided the
Philippine Maritime laws. charter is limited to the ship only, as in the case of a
time-charter or voyage charter. It is only when the
The respective rights and duties of a shipper and the charter includes both the vessel and its crew, as in a
carrier depends not on whether the carrier is public or bareboat or demise that a common carrier becomes
private, but on whether the contract of carriage is a bill of private, at least insofar as the particular voyage covering

39
the charter-party is concerned. Indubitably, a ship-owner
in a time or voyage charter retains possession and (b) Properly man, equip, and supply the ship;
control of the ship, although her holds may, for the
moment, be the property of the charterer. xxx xxx xxx

Later, we ruled in Coastwise Lighterage Corporation vs. Thus, the carriers are deemed to warrant impliedly the
Court of Appeals:[15] seaworthiness of the ship. For a vessel to be seaworthy,
it must be adequately equipped for the voyage and
Although a charter party may transform a common manned with a sufficient number of competent officers
carrier into a private one, the same however is not true and crew. The failure of a common carrier to maintain in
in a contract of affreightment xxx seaworthy condition the vessel involved in its contract of
carriage is a clear breach of its duty prescribed in Article
A common carrier is a person or corporation whose 1755 of the Civil Code.[18]
regular business is to carry passengers or property for
all persons who may choose to employ and to The provisions owed their conception to the nature of the
remunerate him.[16] MT Vector fits the definition of a business of common carriers. This business is
common carrier under Article 1732 of the Civil Code. In impressed with a special public duty. The public must of
Guzman vs. Court of Appeals,[17] we ruled: necessity rely on the care and skill of common carriers in
the vigilance over the goods and safety of the
The Civil Code defines common carriers in the following passengers, especially because with the modern
terms: development of science and invention, transportation
has become more rapid, more complicated and
Article 1732. Common carriers are persons, somehow more hazardous.[19] For these reasons, a
corporations, firms or associations engaged in the passenger or a shipper of goods is under no obligation
business of carrying or transporting passengers for to conduct an inspection of the ship and its crew, the
passengers or goods or both, by land, water, or air for carrier being obliged by law to impliedly warrant its
compensation, offering their services to the public. seaworthiness.

The above article makes no distinction between one This aside, we now rule on whether Caltex is liable for
whose principal business activity is the carrying of damages under the Civil Code.
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a Third: Is Caltex liable for damages under the Civil Code?
sideline). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering We rule that it is not.
transportation service on a regular or scheduled basis
and one offering such services on a an occasional, Sulpicio argues that Caltex negligently shipped its highly
episodic or unscheduled basis. Neither does Article 1732 combustible fuel cargo aboard an unseaworthy vessel
distinguish between a carrier offering its services to the such as the MT Vector when Caltex:
general public, i.e., the general community or population,
and one who offers services or solicits business only 1. Did not take steps to have M/T Vectors certificate of
from a narrow segment of the general population. We inspection and coastwise license renewed;
think that Article 1733 deliberately refrained from making
such distinctions. 2. Proceeded to ship its cargo despite defects found by
Mr. Carlos Tan of Bataan Refinery Corporation;
It appears to the Court that private respondent is
properly characterized as a common carrier even though 3. Witnessed M/T Vector submitting fake documents and
he merely back-hauled goods for other merchants from certificates to the Philippine Coast Guard.
Manila to Pangasinan, although such backhauling was
done on a periodic, occasional rather than regular or Sulpicio further argues that Caltex chose MT Vector to
scheduled manner, and even though respondents transport its cargo despite these deficiencies:
principal occupation was not the carriage of goods for
others. There is no dispute that private respondent 1. The master of M/T Vector did not posses the required
charged his customers a fee for hauling their goods; that Chief Mate license to command and navigate the vessel;
the fee frequently fell below commercial freight rates is
not relevant here. 2. The second mate, Ronaldo Tarife, had the license of a
Minor Patron, authorized to navigate only in bays and
Under the Carriage of Goods by Sea Act : rivers when the subject collision occurred in the open
sea;
Sec. 3. (1) The carrier shall be bound before and at the
beginning of the voyage to exercise due diligence to - 3. The Chief Engineer, Filoteo Aguas, had no license to
operate the engine of the vessel;
(a) Make the ship seaworthy;

40
4. The vessel did not have a Third Mate, a radio operator its licenses and compliance with all maritime laws. To
and a lookout; and demand more from shippers and hold them liable in case
of failure exhibits nothing but the futility of our maritime
5. The vessel had a defective main engine.[20] laws insofar as the protection of the public in general is
concerned. By the same token, we cannot expect
As basis for the liability of Caltex, the Court of Appeals passengers to inquire every time they board a common
relied on Articles 20 and 2176 of the Civil Code, which carrier, whether the carrier possesses the necessary
provide: papers or that all the carriers employees are qualified.
Such a practice would be an absurdity in a business
Article 20. - Every person who contrary to law, willfully or where time is always of the essence. Considering the
negligently causes damage to another, shall indemnify nature of transportation business, passengers and
the latter for the same. shippers alike customarily presume that common
carriers possess all the legal requisites in its operation.
Article 2176. - Whoever by act or omission causes
damage to another, there being fault or negligence, is Thus, the nature of the obligation of Caltex demands
obliged to pay for the damage done. Such fault or ordinary diligence like any other shipper in shipping his
negligence, if there is no pre-existing contractual relation cargoes.
between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter. A cursory reading of the records convinces us that
Caltex had reasons to believe that MT Vector could
And what is negligence? legally transport cargo that time of the year.

The Civil Code provides: Atty. Poblador: Mr. Witness, I direct your attention to this
portion here containing the entries here under VESSELS
Article 1173. The fault or negligence of the obligor DOCUMENTS
consists in the omission of that diligence which is
required by the nature of the obligation and corresponds 1. Certificate of Inspection No. 1290-85, issued
with the circumstances of the persons, of the time and of December 21, 1986, and Expires December 7, 1987, Mr.
the place. When negligence shows bad faith, the Witness, what steps did you take regarding the
provisions of Article 1171 and 2201 paragraph 2, shall impending expiry of the C.I. or the Certificate of
apply. Inspection No. 1290-85 during the hiring of MT Vector?

If the law does not state the diligence which is to be Apolinar Ng: At the time when I extended the Contract, I
observed in the performance, that which is expected of a did nothing because the tanker has a valid C.I. which will
good father of a family shall be required. expire on December 7, 1987 but on the last week of
November, I called the attention of Mr. Abalos to ensure
In Southeastern College, Inc. vs. Court of Appeals,[21] that the C.I. be renewed and Mr. Abalos, in turn, assured
we said that negligence, as commonly understood, is me they will renew the same.
conduct which naturally or reasonably creates undue risk
or harm to others. It may be the failure to observe that Q: What happened after that?
degree of care, precaution, and vigilance, which the
circumstances justly demand, or the omission to do A: On the first week of December, I again made a follow-
something which ordinarily regulate the conduct of up from Mr. Abalos, and said they were going to send
human affairs, would do. me a copy as soon as possible, sir.[24]

The charterer of a vessel has no obligation before xxx xxx xxx


transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty Q: What did you do with the C.I.?
rests upon the common carrier simply for being engaged
in public service.[22] The Civil Code demands diligence A: We did not insist on getting a copy of the C.I. from Mr.
which is required by the nature of the obligation and that Abalos on the first place, because of our long business
which corresponds with the circumstances of the relation, we trust Mr. Abalos and the fact that the vessel
persons, the time and the place. Hence, considering the was able to sail indicates that the documents are in
nature of the obligation between Caltex and MT Vector, order. xxx[25]
the liability as found by the Court of Appeals is without
basis. On cross examination -

The relationship between the parties in this case is Atty. Sarenas: This being the case, and this being an
governed by special laws. Because of the implied admission by you, this Certificate of Inspection has
warranty of seaworthiness,[23] shippers of goods, when expired on December 7. Did it occur to you not to let the
transacting with common carriers, are not expected to vessel sail on that day because of the very approaching
inquire into the vessels seaworthiness, genuineness of date of expiration?

41
complaint to reimburse/indemnify defendant Sulpicio
Apolinar Ng: No sir, because as I said before, the Lines, Inc. the damages the latter is adjudged to pay
operation Manager assured us that they were able to plaintiffs-appellees. The Court AFFIRMS the decision of
secure a renewal of the Certificate of Inspection and that the Court of Appeals insofar as it orders Sulpicio Lines,
they will in time submit us a copy.[26] Inc. to pay the heirs of Sebastian E. Caezal and Corazon
Caezal damages as set forth therein. Third-party
Finally, on Mr. Ngs redirect examination: defendant-appellee Vector Shipping Corporation and
Francisco Soriano are held liable to reimburse/indemnify
Atty. Poblador: Mr. Witness, were you aware of the defendant Sulpicio Lines, Inc. whatever damages,
pending expiry of the Certificate of Inspection in the attorneys fees and costs the latter is adjudged to pay
coastwise license on December 7, 1987. What was your plaintiffs-appellees in the case.
assurance for the record that this document was
renewed by the MT Vector? No costs in this instance.

Atty. Sarenas: xxx SO ORDERED.

Atty. Poblador: The certificate of Inspection?

A: As I said, firstly, we trusted Mr. Abalos as he is a long


time business partner; secondly, those three years, they
were allowed to sail by the Coast Guard. That are some
that make me believe that they in fact were able to
secure the necessary renewal.

Q: If the Coast Guard clears a vessel to sail, what would


that mean?

Atty. Sarenas: Objection.

Court: He already answered that in the cross


examination to the effect that if it was allowed, referring
to MV Vector, to sail, where it is loaded and that it was
scheduled for a destination by the Coast Guard, it
means that it has Certificate of Inspection extended as
assured to this witness by Restituto Abalos. That in no
case MV Vector will be allowed to sail if the Certificate of
Inspection is, indeed, not to be extended. That was his
repeated explanation to the cross-examination. So, there
is no need to clarify the same in the re-direct
examination.[27]

Caltex and Vector Shipping Corporation had been doing


business since 1985, or for about two years before the
tragic incident occurred in 1987. Past services rendered
showed no reason for Caltex to observe a higher degree
of diligence.

Clearly, as a mere voyage charterer, Caltex had the right


to presume that the ship was seaworthy as even the
Philippine Coast Guard itself was convinced of its
seaworthiness. All things considered, we find no legal
basis to hold petitioner liable for damages.

As Vector Shipping Corporation did not appeal from the


Court of Appeals decision, we limit our ruling to the
liability of Caltex alone. However, we maintain the Court
of Appeals ruling insofar as Vector is concerned .

WHEREFORE, the Court hereby GRANTS the petition


and SETS ASIDE the decision of the Court of Appeals in
CA-G. R. CV No. 39626, promulgated on April 15, 1997,
insofar as it held Caltex liable under the third party

42
G.R. No. 114167 July 12, 1995 Hence, this petition.

COASTWISE LIGHTERAGE CORPORATION, There are two main issues to be resolved herein. First,
petitioner, whether or not petitioner Coastwise Lighterage was
vs. transformed into a private carrier, by virtue of the
COURT OF APPEALS and the PHILIPPINE GENERAL contract of affreightment which it entered into with the
INSURANCE COMPANY, respondents. consignee, Pag-asa Sales, Inc. Corollarily, if it were in
fact transformed into a private carrier, did it exercise the
RESOLUTION ordinary diligence to which a private carrier is in turn
bound? Second, whether or not the insurer was
subrogated into the rights of the consignee against the
FRANCISCO, R., J.: carrier, upon payment by the insurer of the value of the
consignee's goods lost while on board one of the
This is a petition for review of a Decision rendered by the carrier's vessels.
Court of Appeals, dated December 17, 1993, affirming
Branch 35 of the Regional Trial Court, Manila in holding On the first issue, petitioner contends that the RTC and
that herein petitioner is liable to pay herein private the Court of Appeals erred in finding that it was a
respondent the amount of P700,000.00, plus legal common carrier. It stresses the fact that it contracted
interest thereon, another sum of P100,000.00 as with Pag-asa Sales, Inc. to transport the shipment of
attorney's fees and the cost of the suit. molasses from Negros Oriental to Manila and refers to
this contract as a "charter agreement". It then proceeds
The factual background of this case is as follows: to cite the case of Home Insurance Company vs.
American Steamship Agencies, Inc.2 wherein this Court
Pag-asa Sales, Inc. entered into a contract to transport held: ". . . a common carrier undertaking to carry a
molasses from the province of Negros to Manila with special cargo or chartered to a special person only
Coastwise Lighterage Corporation (Coastwise for becomes a private carrier."
brevity), using the latter's dumb barges. The barges
were towed in tandem by the tugboat MT Marica, which Petitioner's reliance on the aforementioned case is
is likewise owned by Coastwise. misplaced. In its entirety, the conclusions of the court are
as follows:
Upon reaching Manila Bay, while approaching Pier 18,
one of the barges, "Coastwise 9", struck an unknown Accordingly, the charter party contract is one of
sunken object. The forward buoyancy compartment was affreightment over the whole vessel, rather than a
damaged, and water gushed in through a hole "two demise. As such, the liability of the shipowner for acts or
inches wide and twenty-two inches long"1 As a negligence of its captain and crew, would remain in the
consequence, the molasses at the cargo tanks were absence of stipulation.3
contaminated and rendered unfit for the use it was
intended. This prompted the consignee, Pag-asa Sales, The distinction between the two kinds of charter parties
Inc. to reject the shipment of molasses as a total loss. (i.e. bareboat or demise and contract of affreightment) is
Thereafter, Pag-asa Sales, Inc. filed a formal claim with more clearly set out in the case of Puromines, Inc. vs.
the insurer of its lost cargo, herein private respondent, Court of Appeals,4 wherein we ruled:
Philippine General Insurance Company (PhilGen, for
short) and against the carrier, herein petitioner, Under the demise or bareboat charter of the vessel, the
Coastwise Lighterage. Coastwise Lighterage denied the charterer will generally be regarded as the owner for the
claim and it was PhilGen which paid the consignee, Pag- voyage or service stipulated. The charterer mans the
asa Sales, Inc., the amount of P700,000.00, vessel with his own people and becomes the owner pro
representing the value of the damaged cargo of hac vice, subject to liability to others for damages
molasses. caused by negligence. To create a demise, the owner of
a vessel must completely and exclusively relinquish
In turn, PhilGen then filed an action against Coastwise possession, command and navigation thereof to the
Lighterage before the Regional Trial Court of Manila, charterer, anything short of such a complete transfer is a
seeking to recover the amount of P700,000.00 which it contract of affreightment (time or voyage charter party)
paid to Pag-asa Sales, Inc. for the latter's lost cargo. or not a charter party at all.
PhilGen now claims to be subrogated to all the
contractual rights and claims which the consignee may On the other hand a contract of affreightment is one in
have against the carrier, which is presumed to have which the owner of the vessel leases part or all of its
violated the contract of carriage. space to haul goods for others. It is a contract for special
service to be rendered by the owner of the vessel and
The RTC awarded the amount prayed for by PhilGen. under such contract the general owner retains the
On Coastwise Lighterage's appeal to the Court of possession, command and navigation of the ship, the
Appeals, the award was affirmed. charterer or freighter merely having use of the space in

43
the vessel in return for his payment of the charter hire. . . Jesus R. Constantino, the patron of the vessel
.. "Coastwise 9" admitted that he was not licensed. The
Code of Commerce, which subsidiarily governs common
. . . . An owner who retains possession of the ship carriers (which are primarily governed by the provisions
though the hold is the property of the charterer, remains of the Civil Code) provides:
liable as carrier and must answer for any breach of duty
as to the care, loading and unloading of the cargo. . . . Art. 609. — Captains, masters, or patrons of vessels
must be Filipinos, have legal capacity to contract in
Although a charter party may transform a common accordance with this code, and prove the skill capacity
carrier into a private one, the same however is not true and qualifications necessary to command and direct the
in a contract of affreightment on account of the vessel, as established by marine and navigation laws,
aforementioned distinctions between the two. ordinances or regulations, and must not be disqualified
according to the same for the discharge of the duties of
Petitioner admits that the contract it entered into with the the position. . . .
consignee was one of affreightment.5 We agree. Pag-
asa Sales, Inc. only leased three of petitioner's vessels, Clearly, petitioner Coastwise Lighterage's embarking on
in order to carry cargo from one point to another, but the a voyage with an unlicensed patron violates this rule. It
possession, command and navigation of the vessels cannot safely claim to have exercised extraordinary
remained with petitioner Coastwise Lighterage. diligence, by placing a person whose navigational skills
are questionable, at the helm of the vessel which
Pursuant therefore to the ruling in the aforecited eventually met the fateful accident. It may also logically,
Puromines case, Coastwise Lighterage, by the contract follow that a person without license to navigate, lacks not
of affreightment, was not converted into a private carrier, just the skill to do so, but also the utmost familiarity with
but remained a common carrier and was still liable as the usual and safe routes taken by seasoned and legally
such. authorized ones. Had the patron been licensed, he could
be presumed to have both the skill and the knowledge
The law and jurisprudence on common carriers both that would have prevented the vessel's hitting the
hold that the mere proof of delivery of goods in good sunken derelict ship that lay on their way to Pier 18.
order to a carrier and the subsequent arrival of the same
goods at the place of destination in bad order makes for As a common carrier, petitioner is liable for breach of the
a prima facie case against the carrier. contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction
It follows then that the presumption of negligence that of goods it transported, by proof of its exercise of
attaches to common carriers, once the goods it extraordinary diligence.
transports are lost, destroyed or deteriorated, applies to
the petitioner. This presumption, which is overcome only On the issue of subrogation, which petitioner contends
by proof of the exercise of extraordinary diligence, as inapplicable in this case, we once more rule against
remained unrebutted in this case. the petitioner. We have already found petitioner liable for
breach of the contract of carriage it entered into with
The records show that the damage to the barge which Pag-asa Sales, Inc. However, for the damage sustained
carried the cargo of molasses was caused by its hitting by the loss of the cargo which petitioner-carrier was
an unknown sunken object as it was heading for Pier 18. transporting, it was not the carrier which paid the value
The object turned out to be a submerged derelict vessel. thereof to Pag-asa Sales, Inc. but the latter's insurer,
Petitioner contends that this navigational hazard was the herein private respondent PhilGen.
efficient cause of the accident. Further it asserts that the
fact that the Philippine Coastguard "has not exerted any Article 2207 of the Civil Code is explicit on this point:
effort to prepare a chart to indicate the location of
sunken derelicts within Manila North Harbor to avoid Art. 2207. If the plaintiffs property has been
navigational accidents"6 effectively contributed to the insured, and he has received indemnity from the
happening of this mishap. Thus, being unaware of the insurance company for the injury or loss arising out of
hidden danger that lies in its path, it became impossible the wrong or breach of contract complained of, the
for the petitioner to avoid the same. Nothing could have insurance company shall be subrogated to the rights of
prevented the event, making it beyond the pale of even the insured against the wrongdoer or the person who
the exercise of extraordinary diligence. violated the contract. . . .

However, petitioner's assertion is belied by the evidence This legal provision containing the equitable principle of
on record where it appeared that far from having subrogation has been applied in a long line of cases
rendered service with the greatest skill and utmost including Compania Maritima v. Insurance Company of
foresight, and being free from fault, the carrier was North America;7 Fireman's Fund Insurance Company v.
culpably remiss in the observance of its duties. Jamilla & Company, Inc.,8 and Pan Malayan Insurance
Corporation v. Court of Appeals,9 wherein this Court
explained:

44
Article 2207 of the Civil Code is founded on the well-
settled principle of subrogation. If the insured property is
destroyed or damaged through the fault or negligence of
a party other than the assured, then the insurer, upon
payment to the assured will be subrogated to the rights
of the assured to recover from the wrongdoer to the
extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operated as an
equitable assignment to the former of all remedies which
the latter may have against the third party whose
negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out
of, any privity of contract or upon written assignment of
claim. It accrues simply upon payment of the insurance
claim by the insurer.

Undoubtedly, upon payment by respondent insurer


PhilGen of the amount of P700,000.00 to Pag-asa Sales,
Inc., the consignee of the cargo of molasses totally
damaged while being transported by petitioner
Coastwise Lighterage, the former was subrogated into
all the rights which Pag-asa Sales, Inc. may have had
against the carrier, herein petitioner Coastwise
Lighterage.

WHEREFORE, premises considered, this petition is


DENIED and the appealed decision affirming the order
of Branch 35 of the Regional Trial Court of Manila for
petitioner Coastwise Lighterage to pay respondent
Philippine General Insurance Company the "principal
amount of P700,000.00 plus interest thereon at the legal
rate computed from March 29, 1989, the date the
complaint was filed until fully paid and another sum of
P100,000.00 as attorney's fees and costs"10 is likewise
hereby AFFIRMED

SO ORDERED.

45
G.R. No. 101503 September 15, 1993 bonds. The hatches remained closed and tightly sealed
throughout the entire voyage.5
PLANTERS PRODUCTS, INC., petitioner,
vs. Upon arrival of the vessel at her port of call on 3 July
COURT OF APPEALS, SORIAMONT STEAMSHIP 1974, the steel pontoon hatches were opened with the
AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, use of the vessel's boom. Petitioner unloaded the cargo
respondents. from the holds into its steelbodied dump trucks which
were parked alongside the berth, using metal scoops
Gonzales, Sinense, Jimenez & Associates for petitioner. attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an
Siguion Reyna, Montecillo & Ongsiako Law Office for F.I.O.S. clause).6 The hatches remained open
private respondents. throughout the duration of the discharge.7

Each time a dump truck was filled up, its load of Urea
BELLOSILLO, J.: was covered with tarpaulin before it was transported to
the consignee's warehouse located some fifty (50)
Does a charter-party1 between a shipowner and a meters from the wharf. Midway to the warehouse, the
charterer transform a common carrier into a private one trucks were made to pass through a weighing scale
as to negate the civil law presumption of negligence in where they were individually weighed for the purpose of
case of loss or damage to its cargo? ascertaining the net weight of the cargo. The port area
was windy, certain portions of the route to the
Planters Products, Inc. (PPI), purchased from Mitsubishi warehouse were sandy and the weather was variable,
International Corporation (MITSUBISHI) of New York, raining occasionally while the discharge was in
U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% progress.8 The petitioner's warehouse was made of
fertilizer which the latter shipped in bulk on 16 June 1974 corrugated galvanized iron (GI) sheets, with an opening
aboard the cargo vessel M/V "Sun Plum" owned by at the front where the dump trucks entered and unloaded
private respondent Kyosei Kisen Kabushiki Kaisha the fertilizer on the warehouse floor. Tarpaulins and GI
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San sheets were placed in-between and alongside the trucks
Fernando, La Union, Philippines, as evidenced by Bill of to contain spillages of the ferilizer.9
Lading No. KP-1 signed by the master of the vessel and
issued on the date of departure. It took eleven (11) days for PPI to unload the cargo, from
5 July to 18 July 1974 (except July 12th, 14th and
On 17 May 1974, or prior to its voyage, a time charter- 18th).10 A private marine and cargo surveyor, Cargo
party on the vessel M/V "Sun Plum" pursuant to the Superintendents Company Inc. (CSCI), was hired by PPI
Uniform General Charter2 was entered into between to determine the "outturn" of the cargo shipped, by taking
Mitsubishi as shipper/charterer and KKKK as shipowner, draft readings of the vessel prior to and after discharge.
in Tokyo, Japan.3 Riders to the aforesaid charter-party 11 The survey report submitted by CSCI to the
starting from par. 16 to 40 were attached to the pre- consignee (PPI) dated 19 July 1974 revealed a shortage
printed agreement. Addenda Nos. 1, 2, 3 and 4 to the in the cargo of 106.726 M/T and that a portion of the
charter-party were also subsequently entered into on the Urea fertilizer approximating 18 M/T was contaminated
18th, 20th, 21st and 27th of May 1974, respectively. with dirt. The same results were contained in a
Certificate of Shortage/Damaged Cargo dated 18 July
Before loading the fertilizer aboard the vessel, four (4) of 1974 prepared by PPI which showed that the cargo
her holds4 were all presumably inspected by the delivered was indeed short of 94.839 M/T and about 23
charterer's representative and found fit to take a load of M/T were rendered unfit for commerce, having been
urea in bulk pursuant to par. 16 of the charter-party polluted with sand, rust and
which reads: dirt. 12

16. . . . At loading port, notice of readiness to be Consequently, PPI sent a claim letter dated 18
accomplished by certificate from National Cargo Bureau December 1974 to Soriamont Steamship Agencies
inspector or substitute appointed by charterers for his (SSA), the resident agent of the carrier, KKKK, for
account certifying the vessel's readiness to receive P245,969.31 representing the cost of the alleged
cargo spaces. The vessel's hold to be properly swept, shortage in the goods shipped and the diminution in
cleaned and dried at the vessel's expense and the value of that portion said to have been contaminated
vessel to be presented clean for use in bulk to the with dirt. 13
satisfaction of the inspector before daytime commences.
(emphasis supplied) Respondent SSA explained that they were not able to
respond to the consignee's claim for payment because,
After the Urea fertilizer was loaded in bulk by stevedores according to them, what they received was just a request
hired by and under the supervision of the shipper, the for shortlanded certificate and not a formal claim, and
steel hatches were closed with heavy iron lids, covered that this "request" was denied by them because they
with three (3) layers of tarpaulin, then tied with steel "had nothing to do with the discharge of the shipment."

46
14 Hence, on 18 July 1975, PPI filed an action for defendant carrier was not negligent in performing its
damages with the Court of First Instance of Manila. The obligation . . . 18 (emphasis supplied).
defendant carrier argued that the strict public policy
governing common carriers does not apply to them Petitioner PPI appeals to us by way of a petition for
because they have become private carriers by reason of review assailing the decision of the Court of Appeals.
the provisions of the charter-party. The court a quo Petitioner theorizes that the Home Insurance case has
however sustained the claim of the plaintiff against the no bearing on the present controversy because the issue
defendant carrier for the value of the goods lost or raised therein is the validity of a stipulation in the
damaged when it ruled thus: 15 charter-party delimiting the liability of the shipowner for
loss or damage to goods cause by want of due
. . . Prescinding from the provision of the law that a deligence on its part or that of its manager to make the
common carrier is presumed negligent in case of loss or vessel seaworthy in all respects, and not whether the
damage of the goods it contracts to transport, all that a presumption of negligence provided under the Civil Code
shipper has to do in a suit to recover for loss or damage applies only to common carriers and not to private
is to show receipt by the carrier of the goods and to carriers. 19 Petitioner further argues that since the
delivery by it of less than what it received. After that, the possession and control of the vessel remain with the
burden of proving that the loss or damage was due to shipowner, absent any stipulation to the contrary, such
any of the causes which exempt him from liability is shipowner should made liable for the negligence of the
shipted to the carrier, common or private he may be. captain and crew. In fine, PPI faults the appellate court
Even if the provisions of the charter-party aforequoted in not applying the presumption of negligence against
are deemed valid, and the defendants considered respondent carrier, and instead shifting the onus
private carriers, it was still incumbent upon them to probandi on the shipper to show want of due deligence
prove that the shortage or contamination sustained by on the part of the carrier, when he was not even at hand
the cargo is attributable to the fault or negligence on the to witness what transpired during the entire voyage.
part of the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed to As earlier stated, the primordial issue here is whether a
do. By this omission, coupled with their failure to destroy common carrier becomes a private carrier by reason of a
the presumption of negligence against them, the charter-party; in the negative, whether the shipowner in
defendants are liable (emphasis supplied). the instant case was able to prove that he had exercised
that degree of diligence required of him under the law.
On appeal, respondent Court of Appeals reversed the
lower court and absolved the carrier from liability for the It is said that etymology is the basis of reliable judicial
value of the cargo that was lost or damaged. 16 Relying decisions in commercial cases. This being so, we find it
on the 1968 case of Home Insurance Co. v. American fitting to first define important terms which are relevant to
Steamship Agencies, Inc.,17 the appellate court ruled our discussion.
that the cargo vessel M/V "Sun Plum" owned by private
respondent KKKK was a private carrier and not a A "charter-party" is defined as a contract by which an
common carrier by reason of the time charterer-party. entire ship, or some principal part thereof, is let by the
Accordingly, the Civil Code provisions on common owner to another person for a specified time or use; 20 a
carriers which set forth a presumption of negligence do contract of affreightment by which the owner of a ship or
not find application in the case at bar. Thus — other vessel lets the whole or a part of her to a merchant
or other person for the conveyance of goods, on a
. . . In the absence of such presumption, it was particular voyage, in consideration of the payment of
incumbent upon the plaintiff-appellee to adduce freight; 21 Charter parties are of two types: (a) contract
sufficient evidence to prove the negligence of the of affreightment which involves the use of shipping
defendant carrier as alleged in its complaint. It is an old space on vessels leased by the owner in part or as a
and well settled rule that if the plaintiff, upon whom rests whole, to carry goods for others; and, (b) charter by
the burden of proving his cause of action, fails to show in demise or bareboat charter, by the terms of which the
a satisfactory manner the facts upon which he bases his whole vessel is let to the charterer with a transfer to him
claim, the defendant is under no obligation to prove his of its entire command and possession and consequent
exception or defense (Moran, Commentaries on the control over its navigation, including the master and the
Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 crew, who are his servants. Contract of affreightment
Phil. 202). may either be time charter, wherein the vessel is leased
to the charterer for a fixed period of time, or voyage
But, the record shows that the plaintiff-appellee dismally charter, wherein the ship is leased for a single voyage.
failed to prove the basis of its cause of action, i.e. the 22 In both cases, the charter-party provides for the hire
alleged negligence of defendant carrier. It appears that of vessel only, either for a determinate period of time or
the plaintiff was under the impression that it did not have for a single or consecutive voyage, the shipowner to
to establish defendant's negligence. Be that as it may, supply the ship's stores, pay for the wages of the master
contrary to the trial court's finding, the record of the and the crew, and defray the expenses for the
instant case discloses ample evidence showing that maintenance of the ship.

47
Upon the other hand, the term "common or public controversy therein was the validity of a stipulation in the
carrier" is defined in Art. 1732 of the Civil Code. 23 The charter-party exempting the shipowners from liability for
definition extends to carriers either by land, air or water loss due to the negligence of its agent, and not the
which hold themselves out as ready to engage in effects of a special charter on common carriers. At any
carrying goods or transporting passengers or both for rate, the rule in the United States that a ship chartered
compensation as a public employment and not as a by a single shipper to carry special cargo is not a
casual occupation. The distinction between a "common common carrier, 29 does not find application in our
or public carrier" and a "private or special carrier" lies in jurisdiction, for we have observed that the growing
the character of the business, such that if the concern for safety in the transportation of passengers
undertaking is a single transaction, not a part of the and /or carriage of goods by sea requires a more
general business or occupation, although involving the exacting interpretation of admiralty laws, more
carriage of goods for a fee, the person or corporation particularly, the rules governing common carriers.
offering such service is a private carrier. 24
We quote with approval the observations of Raoul
Article 1733 of the New Civil Code mandates that Colinvaux, the learned barrister-at-law 30 —
common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the As a matter of principle, it is difficult to find a valid
vigilance over the goods they carry.25 In the case of distinction between cases in which a ship is used to
private carriers, however, the exercise of ordinary convey the goods of one and of several persons. Where
diligence in the carriage of goods will suffice. Moreover, the ship herself is let to a charterer, so that he takes over
in the case of loss, destruction or deterioration of the the charge and control of her, the case is different; the
goods, common carriers are presumed to have been at shipowner is not then a carrier. But where her services
fault or to have acted negligently, and the burden of only are let, the same grounds for imposing a strict
proving otherwise rests on them.26 On the contrary, no responsibility exist, whether he is employed by one or
such presumption applies to private carriers, for many. The master and the crew are in each case his
whosoever alleges damage to or deterioration of the servants, the freighter in each case is usually without
goods carried has the onus of proving that the cause any representative on board the ship; the same
was the negligence of the carrier. opportunities for fraud or collusion occur; and the same
difficulty in discovering the truth as to what has taken
It is not disputed that respondent carrier, in the ordinary place arises . . .
course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When In an action for recovery of damages against a common
petitioner chartered the vessel M/V "Sun Plum", the ship carrier on the goods shipped, the shipper or consignee
captain, its officers and compliment were under the should first prove the fact of shipment and its
employ of the shipowner and therefore continued to be consequent loss or damage while the same was in the
under its direct supervision and control. Hardly then can possession, actual or constructive, of the carrier.
we charge the charterer, a stranger to the crew and to Thereafter, the burden of proof shifts to respondent to
the ship, with the duty of caring for his cargo when the prove that he has exercised extraordinary diligence
charterer did not have any control of the means in doing required by law or that the loss, damage or deterioration
so. This is evident in the present case considering that of the cargo was due to fortuitous event, or some other
the steering of the ship, the manning of the decks, the circumstances inconsistent with its liability. 31
determination of the course of the voyage and other
technical incidents of maritime navigation were all To our mind, respondent carrier has sufficiently
consigned to the officers and crew who were screened, overcome, by clear and convincing proof, the prima facie
chosen and hired by the shipowner. 27 presumption of negligence.

It is therefore imperative that a public carrier shall remain The master of the carrying vessel, Captain Lee Tae Bo,
as such, notwithstanding the charter of the whole or in his deposition taken on 19 April 1977 before the
portion of a vessel by one or more persons, provided the Philippine Consul and Legal Attache in the Philippine
charter is limited to the ship only, as in the case of a Embassy in Tokyo, Japan, testified that before the
time-charter or voyage-charter. It is only when the fertilizer was loaded, the four (4) hatches of the vessel
charter includes both the vessel and its crew, as in a were cleaned, dried and fumigated. After completing the
bareboat or demise that a common carrier becomes loading of the cargo in bulk in the ship's holds, the steel
private, at least insofar as the particular voyage covering pontoon hatches were closed and sealed with iron lids,
the charter-party is concerned. Indubitably, a shipowner then covered with three (3) layers of serviceable
in a time or voyage charter retains possession and tarpaulins which were tied with steel bonds. The hatches
control of the ship, although her holds may, for the remained close and tightly sealed while the ship was in
moment, be the property of the charterer. 28 transit as the weight of the steel covers made it
impossible for a person to open without the use of the
Respondent carrier's heavy reliance on the case of ship's boom. 32
Home Insurance Co. v. American Steamship Agencies,
supra, is misplaced for the reason that the meat of the

48
It was also shown during the trial that the hull of the that all losses and deterioration which the goods may
vessel was in good condition, foreclosing the possibility suffer during the transportation by reason of fortuitous
of spillage of the cargo into the sea or seepage of water event, force majeure, or the inherent defect of the goods,
inside the hull of the vessel. 33 When M/V "Sun Plum" shall be for the account and risk of the shipper, and that
docked at its berthing place, representatives of the proof of these accidents is incumbent upon the carrier.
consignee boarded, and in the presence of a 37 The carrier, nonetheless, shall be liable for the loss
representative of the shipowner, the foreman, the and damage resulting from the preceding causes if it is
stevedores, and a cargo surveyor representing CSCI, proved, as against him, that they arose through his
opened the hatches and inspected the condition of the negligence or by reason of his having failed to take the
hull of the vessel. The stevedores unloaded the cargo precautions which usage has established among careful
under the watchful eyes of the shipmates who were persons. 38
overseeing the whole operation on rotation basis. 34
Respondent carrier presented a witness who testified on
Verily, the presumption of negligence on the part of the the characteristics of the fertilizer shipped and the
respondent carrier has been efficaciously overcome by expected risks of bulk shipping. Mr. Estanislao
the showing of extraordinary zeal and assiduity Chupungco, a chemical engineer working with Atlas
exercised by the carrier in the care of the cargo. This Fertilizer, described Urea as a chemical compound
was confirmed by respondent appellate court thus — consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea also
. . . Be that as it may, contrary to the trial court's finding, contains 46% nitrogen and is highly soluble in water.
the record of the instant case discloses ample evidence However, during storage, nitrogen and ammonia do not
showing that defendant carrier was not negligent in normally evaporate even on a long voyage, provided that
performing its obligations. Particularly, the following the temperature inside the hull does not exceed eighty
testimonies of plaintiff-appellee's own witnesses clearly (80) degrees centigrade. Mr. Chupungco further added
show absence of negligence by the defendant carrier; that in unloading fertilizer in bulk with the use of a
that the hull of the vessel at the time of the discharge of clamped shell, losses due to spillage during such
the cargo was sealed and nobody could open the same operation amounting to one percent (1%) against the bill
except in the presence of the owner of the cargo and the of lading is deemed "normal" or "tolerable." The primary
representatives of the vessel (TSN, 20 July 1977, p. 14); cause of these spillages is the clamped shell which does
that the cover of the hatches was made of steel and it not seal very tightly. Also, the wind tends to blow away
was overlaid with tarpaulins, three layers of tarpaulins some of the materials during the unloading process.
and therefore their contents were protected from the
weather (TSN, 5 April 1978, p. 24); and, that to open The dissipation of quantities of fertilizer, or its
these hatches, the seals would have to be broken, all the daterioration in value, is caused either by an extremely
seals were found to be intact (TSN, 20 July 1977, pp. high temperature in its place of storage, or when it
15-16) (emphasis supplied). comes in contact with water. When Urea is drenched in
water, either fresh or saline, some of its particles
The period during which private respondent was to dissolve. But the salvaged portion which is in liquid form
observe the degree of diligence required of it as a public still remains potent and usable although no longer
carrier began from the time the cargo was saleable in its original market value.
unconditionally placed in its charge after the vessel's
holds were duly inspected and passed scrutiny by the The probability of the cargo being damaged or getting
shipper, up to and until the vessel reached its destination mixed or contaminated with foreign particles was made
and its hull was reexamined by the consignee, but prior greater by the fact that the fertilizer was transported in
to unloading. This is clear from the limitation clause "bulk," thereby exposing it to the inimical effects of the
agreed upon by the parties in the Addendum to the elements and the grimy condition of the various pieces
standard "GENCON" time charter-party which provided of equipment used in transporting and hauling it.
for an F.I.O.S., meaning, that the loading, stowing,
trimming and discharge of the cargo was to be done by The evidence of respondent carrier also showed that it
the charterer, free from all risk and expense to the was highly improbable for sea water to seep into the
carrier. 35 Moreover, a shipowner is liable for damage to vessel's holds during the voyage since the hull of the
the cargo resulting from improper stowage only when the vessel was in good condition and her hatches were
stowing is done by stevedores employed by him, and tightly closed and firmly sealed, making the M/V "Sun
therefore under his control and supervision, not when Plum" in all respects seaworthy to carry the cargo she
the same is done by the consignee or stevedores under was chartered for. If there was loss or contamination of
the employ of the latter. 36 the cargo, it was more likely to have occurred while the
same was being transported from the ship to the dump
Article 1734 of the New Civil Code provides that trucks and finally to the consignee's warehouse. This
common carriers are not responsible for the loss, may be gleaned from the testimony of the marine and
destruction or deterioration of the goods if caused by the cargo surveyor of CSCI who supervised the unloading.
charterer of the goods or defects in the packaging or in He explained that the 18 M/T of alleged "bar order
the containers. The Code of Commerce also provides cargo" as contained in their report to PPI was just an

49
approximation or estimate made by them after the
fertilizer was discharged from the vessel and segregated
from the rest of the cargo.

The Court notes that it was in the month of July when


the vessel arrived port and unloaded her cargo. It rained
from time to time at the harbor area while the cargo was
being discharged according to the supply officer of PPI,
who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed
enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk


shipment of highly soluble goods like fertilizer carries
with it the risk of loss or damage. More so, with a
variable weather condition prevalent during its
unloading, as was the case at bar. This is a risk the
shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent
character of the goods which makes it highly vulnerable
to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the
other hand, no proof was adduced by the petitioner
showing that the carrier was remise in the exercise of
due diligence in order to minimize the loss or damage to
the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed


decision of the Court of Appeals, which reversed the trial
court, is AFFIRMED. Consequently, Civil Case No.
98623 of the then Court of the First Instance, now
Regional Trial Court, of Manila should be, as it is hereby
DISMISSED.

Costs against petitioner.

SO ORDERED.

50
[G.R. No. 150255. April 22, 2005] 37 coils was accomplished.[10] No tugboat pulled the
barge back to the pier, however.
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, petitioner, vs. TRANSPORT At around 5:30 a.m. of October 27, 1991, due to strong
VENTURE, INC., INDUSTRIAL INSURANCE waves,[11] the crew of the barge abandoned it and
COMPANY, LTD., and BLACK SEA SHIPPING AND transferred to the vessel. The barge pitched and rolled
DODWELL now INCHCAPE SHIPPING SERVICES, with the waves and eventually capsized, washing the 37
respondents. coils into the sea.[12] At 7:00 a.m., a tugboat finally
DECISION arrived to pull the already empty and damaged barge
CARPIO-MORALES, J.: back to the pier.[13]

On petition for review is the June 27, 2001 Decision[1] of Earnest efforts on the part of both the consignee Little
the Court of Appeals, as well as its Resolution[2] dated Giant and Industrial Insurance to recover the lost
September 28, 2001 denying the motion for cargoes proved futile.[14]
reconsideration, which affirmed that of Branch 21 of the
Regional Trial Court (RTC) of Manila in Civil Case No. Little Giant thus filed a formal claim against Industrial
92-63132[3] holding petitioner Schmitz Transport Insurance which paid it the amount of P5,246,113.11.
Brokerage Corporation (Schmitz Transport), together Little Giant thereupon executed a subrogation receipt[15]
with Black Sea Shipping Corporation (Black Sea), in favor of Industrial Insurance.
represented by its ship agent Inchcape Shipping Inc.
(Inchcape), and Transport Venture (TVI), solidarily liable Industrial Insurance later filed a complaint against
for the loss of 37 hot rolled steel sheets in coil that were Schmitz Transport, TVI, and Black Sea through its
washed overboard a barge. representative Inchcape (the defendants) before the
RTC of Manila, for the recovery of the amount it paid to
On September 25, 1991, SYTCO Pte Ltd. Singapore Little Giant plus adjustment fees, attorneys fees, and
shipped from the port of Ilyichevsk, Russia on board M/V litigation expenses.[16]
Alexander Saveliev (a vessel of Russian registry and
owned by Black Sea) 545 hot rolled steel sheets in coil Industrial Insurance faulted the defendants for
weighing 6,992,450 metric tons. undertaking the unloading of the cargoes while typhoon
signal No. 1 was raised in Metro Manila.[17]
The cargoes, which were to be discharged at the port of
Manila in favor of the consignee, Little Giant Steel Pipe By Decision of November 24, 1997, Branch 21 of the
Corporation (Little Giant),[4] were insured against all RTC held all the defendants negligent for unloading the
risks with Industrial Insurance Company Ltd. (Industrial cargoes outside of the breakwater notwithstanding the
Insurance) under Marine Policy No. M-91-3747-TIS.[5] storm signal.[18] The dispositive portion of the decision
reads:
The vessel arrived at the port of Manila on October 24,
1991 and the Philippine Ports Authority (PPA) assigned WHEREFORE, premises considered, the Court renders
it a place of berth at the outside breakwater at the Manila judgment in favor of the plaintiff, ordering the defendants
South Harbor.[6] to pay plaintiff jointly and severally the sum of
P5,246,113.11 with interest from the date the complaint
Schmitz Transport, whose services the consignee was filed until fully satisfied, as well as the sum of
engaged to secure the requisite clearances, to receive P5,000.00 representing the adjustment fee plus the sum
the cargoes from the shipside, and to deliver them to its of 20% of the amount recoverable from the defendants
(the consignees) warehouse at Cainta, Rizal,[7] in turn as attorneys fees plus the costs of suit. The
engaged the services of TVI to send a barge and counterclaims and cross claims of defendants are
tugboat at shipside. hereby DISMISSED for lack of [m]erit.[19]

On October 26, 1991, around 4:30 p.m., TVIs tugboat To the trial courts decision, the defendants Schmitz
Lailani towed the barge Erika V to shipside.[8] Transport and TVI filed a joint motion for reconsideration
assailing the finding that they are common carriers and
By 7:00 p.m. also of October 26, 1991, the tugboat, after the award of excessive attorneys fees of more than
positioning the barge alongside the vessel, left and P1,000,000. And they argued that they were not
returned to the port terminal.[9] At 9:00 p.m., arrastre motivated by gross or evident bad faith and that the
operator Ocean Terminal Services Inc. commenced to incident was caused by a fortuitous event. [20]
unload 37 of the 545 coils from the vessel unto the
barge. By resolution of February 4, 1998, the trial court denied
the motion for reconsideration. [21]
By 12:30 a.m. of October 27, 1991 during which the
weather condition had become inclement due to an All the defendants appealed to the Court of Appeals
approaching storm, the unloading unto the barge of the which, by decision of June 27, 2001, affirmed in toto the
decision of the trial court, [22] it finding that all the

51
defendants were common carriers Black Sea and TVI for assumption of risk, no person shall be responsible for
engaging in the transport of goods and cargoes over the those events which could not be foreseen, or which
seas as a regular business and not as an isolated though foreseen, were inevitable.
transaction,[23] and Schmitz Transport for entering into
a contract with Little Giant to transport the cargoes from In order, to be considered a fortuitous event, however,
ship to port for a fee.[24] (1) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his
In holding all the defendants solidarily liable, the obligation, must be independent of human will; (2) it
appellate court ruled that each one was essential such must be impossible to foresee the event which constitute
that without each others contributory negligence the the caso fortuito, or if it can be foreseen it must be
incident would not have happened and so much so that impossible to avoid; (3) the occurrence must be such as
the person principally liable cannot be distinguished with to render it impossible for the debtor to fulfill his
sufficient accuracy.[25] obligation in any manner; and (4) the obligor must be
free from any participation in the aggravation of the
In discrediting the defense of fortuitous event, the injury resulting to the creditor.[32]
appellate court held that although defendants obviously
had nothing to do with the force of nature, they however [T]he principle embodied in the act of God doctrine
had control of where to anchor the vessel, where strictly requires that the act must be occasioned solely
discharge will take place and even when the discharging by the violence of nature. Human intervention is to be
will commence.[26] excluded from creating or entering into the cause of the
mischief. When the effect is found to be in part the result
The defendants respective motions for reconsideration of the participation of man, whether due to his active
having been denied by Resolution[27] of September 28, intervention or neglect or failure to act, the whole
2001, Schmitz Transport (hereinafter referred to as occurrence is then humanized and removed from the
petitioner) filed the present petition against TVI, rules applicable to the acts of God.[33]
Industrial Insurance and Black Sea.
The appellate court, in affirming the finding of the trial
Petitioner asserts that in chartering the barge and court that human intervention in the form of contributory
tugboat of TVI, it was acting for its principal, consignee negligence by all the defendants resulted to the loss of
Little Giant, hence, the transportation contract was by the cargoes,[34] held that unloading outside the
and between Little Giant and TVI.[28] breakwater, instead of inside the breakwater, while a
storm signal was up constitutes negligence.[35] It thus
By Resolution of January 23, 2002, herein respondents concluded that the proximate cause of the loss was
Industrial Insurance, Black Sea, and TVI were required Black Seas negligence in deciding to unload the cargoes
to file their respective Comments.[29] at an unsafe place and while a typhoon was
approaching.[36]
By its Comment, Black Sea argued that the cargoes
were received by the consignee through petitioner in From a review of the records of the case, there is no
good order, hence, it cannot be faulted, it having had no indication that there was greater risk in loading the
control and supervision thereover.[30] cargoes outside the breakwater. As the defendants
proffered, the weather on October 26, 1991 remained
For its part, TVI maintained that it acted as a passive normal with moderate sea condition such that port
party as it merely received the cargoes and transferred operations continued and proceeded normally.[37]
them unto the barge upon the instruction of
petitioner.[31] The weather data report,[38] furnished and verified by
the Chief of the Climate Data Section of PAG-ASA and
In issue then are: marked as a common exhibit of the parties, states that
while typhoon signal No. 1 was hoisted over Metro
(1) Whether the loss of the cargoes was due to a Manila on October 23-31, 1991, the sea condition at the
fortuitous event, independent of any act of negligence on port of Manila at 5:00 p.m. - 11:00 p.m. of October 26,
the part of petitioner Black Sea and TVI, and 1991 was moderate. It cannot, therefore, be said that the
defendants were negligent in not unloading the cargoes
(2) If there was negligence, whether liability for the loss upon the barge on October 26, 1991 inside the
may attach to Black Sea, petitioner and TVI. breakwater.

When a fortuitous event occurs, Article 1174 of the Civil That no tugboat towed back the barge to the pier after
Code absolves any party from any and all liability arising the cargoes were completely loaded by 12:30 in the
therefrom: morning[39] is, however, a material fact which the
appellate court failed to properly consider and
ART. 1174. Except in cases expressly specified by the appreciate[40] the proximate cause of the loss of the
law, or when it is otherwise declared by stipulation, or cargoes. Had the barge been towed back promptly to the
when the nature of the obligation requires the pier, the deteriorating sea conditions notwithstanding,

52
the loss could have been avoided. But the barge was left
floating in open sea until big waves set in at 5:30 a.m., A: We handled the unloading of the cargo[es] from
causing it to sink along with the cargoes.[41] The loss vessel to lighter and then the delivery of [the] cargo[es]
thus falls outside the act of God doctrine. from lighter to BASECO then to the truck and to the
warehouse, Sir.
The proximate cause of the loss having been
determined, who among the parties is/are responsible Q: Now, in connection with this work which you are
therefor? doing, Mr. Witness, you are supposed to perform, what
equipment do (sic) you require or did you use in order to
Contrary to petitioners insistence, this Court, as did the effect this unloading, transfer and delivery to the
appellate court, finds that petitioner is a common carrier. warehouse?
For it undertook to transport the cargoes from the
shipside of M/V Alexander Saveliev to the consignees A: Actually, we used the barges for the ship side
warehouse at Cainta, Rizal. As the appellate court put it, operations, this unloading [from] vessel to lighter, and on
as long as a person or corporation holds [itself] to the this we hired or we sub-contracted with [T]ransport
public for the purpose of transporting goods as [a] Ventures, Inc. which [was] in-charged (sic) of the barges.
business, [it] is already considered a common carrier Also, in BASECO compound we are leasing cranes to
regardless if [it] owns the vehicle to be used or has to have the cargo unloaded from the barge to trucks, [and]
hire one.[42] That petitioner is a common carrier, the then we used trucks to deliver [the cargoes] to the
testimony of its own Vice-President and General consignees warehouse, Sir.
Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of Q: And whose trucks do you use from BASECO
cargoes reflects so. compound to the consignees warehouse?

Atty. Jubay: Will you please tell us what [are you] A: We utilized of (sic) our own trucks and we have some
functions x x x as Executive Vice-President and General other contracted trucks, Sir.
Manager of said Company?
xxx
Mr. Aro: Well, I oversee the entire operation of the
brokerage and transport business of the company. I also ATTY. JUBAY: Will you please explain to us, to the
handle the various division heads of the company for Honorable Court why is it you have to contract for the
operation matters, and all other related functions that the barges of Transport Ventures Incorporated in this
President may assign to me from time to time, Sir. particular operation?

Q: Now, in connection [with] your duties and functions as A: Firstly, we dont own any barges. That is why we hired
you mentioned, will you please tell the Honorable Court the services of another firm whom we know [al]ready for
if you came to know the company by the name Little quite sometime, which is Transport Ventures, Inc.
Giant Steel Pipe Corporation? (Emphasis supplied)[43]

A: Yes, Sir. Actually, we are the brokerage firm of that It is settled that under a given set of facts, a customs
Company. broker may be regarded as a common carrier. Thus, this
Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable
Q: And since when have you been the brokerage firm of Court of Appeals,[44] held:
that company, if you can recall?
The appellate court did not err in finding petitioner, a
A: Since 1990, Sir. customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit,
Q: Now, you said that you are the brokerage firm of this
Company. What work or duty did you perform in behalf Art. 1732. Common carriers are persons, corporations,
of this company? firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
A: We handled the releases (sic) of their cargo[es] from water, or air, for compensation, offering their services to
the Bureau of Customs. We [are] also in-charged of the the public.
delivery of the goods to their warehouses. We also
handled the clearances of their shipment at the Bureau xxx
of Customs, Sir.
Article 1732 does not distinguish between one whose
xxx principal business activity is the carrying of goods and
one who does such carrying only as an ancillary activity.
Q: Now, what precisely [was] your agreement with this The contention, therefore, of petitioner that it is not a
Little Giant Steel Pipe Corporation with regards to this common carrier but a customs broker whose principal
shipment? What work did you do with this shipment? function is to prepare the correct customs declaration

53
and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to Was the reasonable care and caution which an ordinarily
deliver the goods for pecuniary consideration.[45] prudent person would have used in the same situation
exercised by TVI?[52]
And in Calvo v. UCPB General Insurance Co. Inc.,[46]
this Court held that as the transportation of goods is an This Court holds not.
integral part of a customs broker, the customs broker is
also a common carrier. For to declare otherwise would TVIs failure to promptly provide a tugboat did not only
be to deprive those with whom [it] contracts the increase the risk that might have been reasonably
protection which the law affords them notwithstanding anticipated during the shipside operation, but was the
the fact that the obligation to carry goods for [its] proximate cause of the loss. A man of ordinary prudence
customers, is part and parcel of petitioners business.[47] would not leave a heavily loaded barge floating for a
considerable number of hours, at such a precarious
As for petitioners argument that being the agent of Little time, and in the open sea, knowing that the barge does
Giant, any negligence it committed was deemed the not have any power of its own and is totally defenseless
negligence of its principal, it does not persuade. from the ravages of the sea. That it was nighttime and,
therefore, the members of the crew of a tugboat would
True, petitioner was the broker-agent of Little Giant in be charging overtime pay did not excuse TVI from calling
securing the release of the cargoes. In effecting the for one such tugboat.
transportation of the cargoes from the shipside and into
Little Giants warehouse, however, petitioner was As for petitioner, for it to be relieved of liability, it should,
discharging its own personal obligation under a contact following Article 1739[53] of the Civil Code, prove that it
of carriage. exercised due diligence to prevent or minimize the loss,
before, during and after the occurrence of the storm in
Petitioner, which did not have any barge or tugboat, order that it may be exempted from liability for the loss of
engaged the services of TVI as handler[48] to provide the goods.
the barge and the tugboat. In their Service Contract,[49]
while Little Giant was named as the consignee, While petitioner sent checkers[54] and a supervisor[55]
petitioner did not disclose that it was acting on on board the vessel to counter-check the operations of
commission and was chartering the vessel for Little TVI, it failed to take all available and reasonable
Giant.[50] Little Giant did not thus automatically become precautions to avoid the loss. After noting that TVI failed
a party to the Service Contract and was not, therefore, to arrange for the prompt towage of the barge despite
bound by the terms and conditions therein. the deteriorating sea conditions, it should have
summoned the same or another tugboat to extend help,
Not being a party to the service contract, Little Giant but it did not.
cannot directly sue TVI based thereon but it can
maintain a cause of action for negligence.[51] This Court holds then that petitioner and TVI are
solidarily liable[56] for the loss of the cargoes. The
In the case of TVI, while it acted as a private carrier for following pronouncement of the Supreme Court is
which it was under no duty to observe extraordinary instructive:
diligence, it was still required to observe ordinary
diligence to ensure the proper and careful handling, care The foundation of LRTAs liability is the contract of
and discharge of the carried goods. carriage and its obligation to indemnify the victim arises
from the breach of that contract by reason of its failure to
Thus, Articles 1170 and 1173 of the Civil Code provide: exercise the high diligence required of the common
carrier. In the discharge of its commitment to ensure the
ART. 1170. Those who in the performance of their safety of passengers, a carrier may choose to hire its
obligations are guilty of fraud, negligence, or delay, and own employees or avail itself of the services of an
those who in any manner contravene the tenor thereof, outsider or an independent firm to undertake the task. In
are liable for damages. either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
ART. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is Should Prudent be made likewise liable? If at all, that
required by the nature of the obligation and corresponds liability could only be for tort under the provisions of
with the circumstances of the persons, of the time and of Article 2176 and related provisions, in conjunction with
the place. When negligence shows bad faith, the Article 2180 of the Civil Code. x x x [O]ne might ask
provisions of articles 1171 and 2202, paragraph 2, shall further, how then must the liability of the common carrier,
apply. on one hand, and an independent contractor, on the
other hand, be described? It would be solidary. A
If the law or contract does not state the diligence which contractual obligation can be breached by tort and when
is to be observed in the performance, that which is the same act or omission causes the injury, one resulting
expected of a good father of a family shall be required. in culpa contractual and the other in culpa aquiliana,

54
Article 2194 of the Civil Code can well apply. In fine, a WHEREFORE, judgment is hereby rendered ordering
liability for tort may arise even under a contract, where petitioner Schmitz Transport & Brokerage Corporation,
tort is that which breaches the contract. Stated and Transport Venture Incorporation jointly and severally
differently, when an act which constitutes a breach of liable for the amount of P5,246,113.11 with the
contract would have itself constituted the source of a MODIFICATION that interest at SIX PERCENT per
quasi-delictual liability had no contract existed between annum of the amount due should be computed from the
the parties, the contract can be said to have been promulgation on November 24, 1997 of the decision of
breached by tort, thereby allowing the rules on tort to the trial court.
apply.[57]
Costs against petitioner.
As for Black Sea, its duty as a common carrier extended
only from the time the goods were surrendered or SO ORDERED.
unconditionally placed in its possession and received for
transportation until they were delivered actually or
constructively to consignee Little Giant.[58]

Parties to a contract of carriage may, however, agree


upon a definition of delivery that extends the services
rendered by the carrier. In the case at bar, Bill of Lading
No. 2 covering the shipment provides that delivery be
made to the port of discharge or so near thereto as she
may safely get, always afloat.[59] The delivery of the
goods to the consignee was not from pier to pier but
from the shipside of M/V Alexander Saveliev and into
barges, for which reason the consignee contracted the
services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant,
through petitioner, it had discharged its duty.[60]

In fine, no liability may thus attach to Black Sea.

Respecting the award of attorneys fees in an amount


over P1,000,000.00 to Industrial Insurance, for lack of
factual and legal basis, this Court sets it aside. While
Industrial Insurance was compelled to litigate its rights,
such fact by itself does not justify the award of attorneys
fees under Article 2208 of the Civil Code. For no
sufficient showing of bad faith would be reflected in a
partys persistence in a case other than an erroneous
conviction of the righteousness of his cause.[61] To
award attorneys fees to a party just because the
judgment is rendered in its favor would be tantamount to
imposing a premium on ones right to litigate or seek
judicial redress of legitimate grievances.[62]

On the award of adjustment fees: The adjustment fees


and expense of divers were incurred by Industrial
Insurance in its voluntary but unsuccessful efforts to
locate and retrieve the lost cargo. They do not constitute
actual damages.[63]

As for the court a quos award of interest on the amount


claimed, the same calls for modification following the
ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals[64] that when the demand cannot be
reasonably established at the time the demand is made,
the interest shall begin to run not from the time the claim
is made judicially or extrajudicially but from the date the
judgment of the court is made (at which the time the
quantification of damages may be deemed to have been
reasonably ascertained).[65]

55
[G.R. No. 147079. December 21, 2004] Among those who witnessed the release of the cargoes
from the PSI warehouse were Ruben Alonso and Tony
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE Akas,[16] employees of Elite Adjusters and Surveyors
HON. COURT OF APPEALS and FGU INSURANCE Inc. (Elite Surveyors), a marine and cargo surveyor and
CORPORATION, respondents. insurance claim adjusters firm engaged by Wyeth-Suaco
DECISION on behalf of FGU Insurance.
CARPIO MORALES, J.:
Upon instructions of Wyeth-Suaco, the cargoes were
Before this Court on a petition for Certiorari is the delivered to Hizon Laboratories Inc. in Antipolo City for
appellate courts Decision[1] of August 10, 2000 quality control check.[17] The delivery receipt, bearing
reversing and setting aside the judgment of Branch 133, No. 07037 dated July 29, 1992, indicated that the
Regional Trial Court of Makati City, in Civil Case No. 93- delivery consisted of one container with 144 cartons of
76B which dismissed the complaint of respondent FGU Femenal and Nordiol and 1 pallet containing
Insurance Corporation (FGU Insurance) against Trinordiol.[18]
petitioner A.F. Sanchez Brokerage, Inc. (Sanchez
Brokerage). On July 31, 1992, Ronnie Likas, a representative of
Wyeth-Suaco, acknowledged the delivery of the cargoes
On July 8, 1992, Wyeth-Pharma GMBH shipped on by affixing his signature on the delivery receipt.[19] Upon
board an aircraft of KLM Royal Dutch Airlines at inspection, however, he, together with Ruben Alonzo of
Dusseldorf, Germany oral contraceptives consisting of Elite Surveyors, discovered that 44 cartons containing
86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol Femenal and Nordiol tablets were in bad order.[20] He
tablets and 42,000 Blisters Trinordiol tablets for delivery thus placed a note above his signature on the delivery
to Manila in favor of the consignee, Wyeth-Suaco receipt stating that 44 cartons of oral contraceptives
Laboratories, Inc.[2] The Femenal tablets were placed in were in bad order. The remaining 160 cartons of oral
124 cartons and the Nordiol tablets were placed in 20 contraceptives were accepted as complete and in good
cartons which were packed together in one (1) LD3 order.
aluminum container, while the Trinordial tablets were
packed in two pallets, each of which contained 30 Ruben Alonzo thus prepared and signed, along with
cartons.[3] Ronnie Likas, a survey report[21] dated July 31, 1992
stating that 41 cartons of Femenal tablets and 3 cartons
Wyeth-Suaco insured the shipment against all risks with of Nordiol tablets were wetted (sic).[22]
FGU Insurance which issued Marine Risk Note No. 4995
pursuant to Marine Open Policy No. 138.[4] The Elite Surveyors later issued Certificate No. CS-
0731-1538/92[23] attached to which was an Annexed
Upon arrival of the shipment on July 11, 1992 at the Schedule whereon it was indicated that prior to the
Ninoy Aquino International Airport (NAIA),[5] it was loading of the cargoes to the brokers trucks at the NAIA,
discharged without exception[6] and delivered to the they were inspected and found to be in apparent good
warehouse of the Philippine Skylanders, Inc. (PSI) condition.[24] Also noted was that at the time of delivery
located also at the NAIA for safekeeping.[7] to the warehouse of Hizon Laboratories Inc., slight to
heavy rains fell, which could account for the wetting of
In order to secure the release of the cargoes from the the 44 cartons of Femenal and Nordiol tablets.[25]
PSI and the Bureau of Customs, Wyeth-Suaco engaged
the services of Sanchez Brokerage which had been its On August 4, 1992, the Hizon Laboratories Inc. issued a
licensed broker since 1984.[8] As its customs broker, Destruction Report[26] confirming that 38 x 700 blister
Sanchez Brokerage calculates and pays the customs packs of Femenal tablets, 3 x 700 blister packs of
duties, taxes and storage fees for the cargo and Femenal tablets and 3 x 700 blister packs of Nordiol
thereafter delivers it to Wyeth-Suaco.[9] tablets were heavily damaged with water and emitted
foul smell.
On July 29, 1992, Mitzi Morales and Ernesto Mendoza,
representatives of Sanchez Brokerage, paid PSI storage On August 5, 1992, Wyeth-Suaco issued a Notice of
fee amounting to P8,572.35 a receipt for which, Official Materials Rejection[27] of 38 cartons of Femenal and 3
Receipt No. 016992,[10] was issued. On the receipt, cartons of Nordiol on the ground that they were delivered
another representative of Sanchez Brokerage, M. to Hizon Laboratories with heavy water damaged (sic)
Sison,[11] acknowledged that he received the cargoes causing the cartons to sagged (sic) emitting a foul order
consisting of three pieces in good condition.[12] and easily attracted flies.[28]

Wyeth-Suaco being a regular importer, the customs Wyeth-Suaco later demanded, by letter[29] of August 25,
examiner did not inspect the cargoes[13] which were 1992, from Sanchez Brokerage the payment of
thereupon stripped from the aluminum containers[14] P191,384.25 representing the value of its loss arising
and loaded inside two transport vehicles hired by from the damaged tablets.
Sanchez Brokerage.[15]

56
As the Sanchez Brokerage refused to heed the demand, the Decision of the Court, until the said amount is paid in
Wyeth-Suaco filed an insurance claim against FGU full;
Insurance which paid Wyeth-Suaco the amount of
P181,431.49 in settlement of its claim under Marine Risk 2. The Appellee is hereby ordered to pay to the
Note Number 4995. Appellant the amount of P20,000.00 as and by way of
attorneys fees; and
Wyeth-Suaco thus issued Subrogation Receipt[30] in
favor of FGU Insurance. 3. The counterclaims of the Appellee are
DISMISSED.[38]
On demand by FGU Insurance for payment of the
amount of P181,431.49 it paid Wyeth-Suaco, Sanchez Sanchez Brokerages Motion for Reconsideration having
Brokerage, by letter[31] of January 7, 1993, disclaimed been denied by the appellate courts Resolution of
liability for the damaged goods, positing that the damage December 8, 2000 which was received by petitioner on
was due to improper and insufficient export packaging; January 5, 2001, it comes to this Court on petition for
that when the sealed containers were opened outside certiorari filed on March 6, 2001.
the PSI warehouse, it was discovered that some of the
loose cartons were wet,[32] prompting its (Sanchez In the main, petitioner asserts that the appellate court
Brokerages) representative Morales to inform the Import- committed grave and reversible error tantamount to
Export Assistant of Wyeth-Suaco, Ramir Calicdan, about abuse of discretion when it found petitioner a common
the condition of the cargoes but that the latter advised to carrier within the context of Article 1732 of the New Civil
still deliver them to Hizon Laboratories where an adjuster Code.
would assess the damage.[33]
Respondent FGU Insurance avers in its Comment that
Hence, the filing by FGU Insurance of a complaint for the proper course of action which petitioner should have
damages before the Regional Trial Court of Makati City taken was to file a petition for review on certiorari since
against the Sanchez Brokerage. the sole office of a writ of certiorari is the correction of
errors of jurisdiction including the commission of grave
The trial court, by Decision[34] of July 29, 1996, abuse of discretion amounting to lack or excess of
dismissed the complaint, holding that the Survey Report jurisdiction and does not include correction of the
prepared by the Elite Surveyors is bereft of any appellate courts evaluation of the evidence and factual
evidentiary support and a mere product of pure findings thereon.
guesswork.[35]
On the merits, respondent FGU Insurance contends that
On appeal, the appellate court reversed the decision of petitioner, as a common carrier, failed to overcome the
the trial court, it holding that the Sanchez Brokerage presumption of negligence, it being documented that
engaged not only in the business of customs brokerage petitioner withdrew from the warehouse of PSI the
but also in the transportation and delivery of the cargo of subject shipment entirely in good order and
its clients, hence, a common carrier within the context of condition.[39]
Article 1732 of the New Civil Code.[36]
The petition fails.
Noting that Wyeth-Suaco adduced evidence that the
cargoes were delivered to petitioner in good order and Rule 45 is clear that decisions, final orders or resolutions
condition but were in a damaged state when delivered to of the Court of Appeals in any case, i.e., regardless of
Wyeth-Suaco, the appellate court held that Sanchez the nature of the action or proceedings involved, may be
Brokerage is presumed negligent and upon it rested the appealed to this Court by filing a petition for review,
burden of proving that it exercised extraordinary which would be but a continuation of the appellate
negligence not only in instances when negligence is process over the original case.[40]
directly proven but also in those cases when the cause
of the damage is not known or unknown.[37] The Resolution of the Court of Appeals dated December
8, 2000 denying the motion for reconsideration of its
The appellate court thus disposed: Decision of August 10, 2000 was received by petitioner
on January 5, 2001. Since petitioner failed to appeal
IN THE LIGHT OF ALL THE FOREGOING, the appeal of within 15 days or on or before January 20, 2001, the
the Appellant is GRANTED. The Decision of the Court a appellate courts decision had become final and
quo is REVERSED. Another Decision is hereby executory. The filing by petitioner of a petition for
rendered in favor of the Appellant and against the certiorari on March 6, 2001 cannot serve as a substitute
Appellee as follows: for the lost remedy of appeal.

1. The Appellee is hereby ordered to pay the Appellant In another vein, the rule is well settled that in a petition
the principal amount of P181, 431.49, with interest for certiorari, the petitioner must prove not merely
thereupon at the rate of 6% per annum, from the date of reversible error but also grave abuse of discretion
amounting to lack or excess of jurisdiction.

57
transports according to all the circumstances of each
Petitioner alleges that the appellate court erred in case. In the event that the goods are lost, destroyed or
reversing and setting aside the decision of the trial court deteriorated, it is presumed to have been at fault or to
based on its finding that petitioner is liable for the have acted negligently, unless it proves that it observed
damage to the cargo as a common carrier. What extraordinary diligence.[46]
petitioner is ascribing is an error of judgment, not of
jurisdiction, which is properly the subject of an ordinary The concept of extra-ordinary diligence was explained in
appeal. Compania Maritima v. Court of Appeals:[47]

Where the issue or question involves or affects the The extraordinary diligence in the vigilance over the
wisdom or legal soundness of the decision not the goods tendered for shipment requires the common
jurisdiction of the court to render said decision the same carrier to know and to follow the required precaution for
is beyond the province of a petition for certiorari.[41] The avoiding damage to, or destruction of the goods
supervisory jurisdiction of this Court to issue a cert writ entrusted to it for sale, carriage and delivery. It requires
cannot be exercised in order to review the judgment of common carriers to render service with the greatest skill
lower courts as to its intrinsic correctness, either upon and foresight and to use all reasonable means to
the law or the facts of the case.[42] ascertain the nature and characteristics of goods
tendered for shipment, and to exercise due care in the
Procedural technicalities aside, the petition still fails. handling and stowage, including such methods as their
nature requires.[48]
The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined In the case at bar, it was established that petitioner
under Article 1732 of the Civil Code, to wit: received the cargoes from the PSI warehouse in NAIA in
good order and condition;[49] and that upon delivery by
Art. 1732. Common carriers are persons, corporations, petitioner to Hizon Laboratories Inc., some of the
firms or associations engaged in the business of carrying cargoes were found to be in bad order, as noted in the
or transporting passengers or goods or both, by land, Delivery Receipt[50] issued by petitioner, and as
water, or air, for compensation, offering their services to indicated in the Survey Report of Elite Surveyors[51] and
the public. the Destruction Report of Hizon Laboratories, Inc.[52]

Anacleto F. Sanchez, Jr., the Manager and Principal In an attempt to free itself from responsibility for the
Broker of Sanchez Brokerage, himself testified that the damage to the goods, petitioner posits that they were
services the firm offers include the delivery of goods to damaged due to the fault or negligence of the shipper for
the warehouse of the consignee or importer. failing to properly pack them and to the inherent
characteristics of the goods[53]; and that it should not be
ATTY. FLORES: faulted for following the instructions of Calicdan of
Wyeth-Suaco to proceed with the delivery despite
Q: What are the functions of these license brokers, information conveyed to the latter that some of the
license customs broker? cartons, on examination outside the PSI warehouse,
were found to be wet.[54]
WITNESS:
While paragraph No. 4 of Article 1734[55] of the Civil
As customs broker, we calculate the taxes that has to be Code exempts a common carrier from liability if the loss
paid in cargos, and those upon approval of the importer, or damage is due to the character of the goods or
we prepare the entry together for processing and claims defects in the packing or in the containers, the rule is
from customs and finally deliver the goods to the that if the improper packing is known to the carrier or his
warehouse of the importer.[43] employees or is apparent upon ordinary observation, but
he nevertheless accepts the same without protest or
Article 1732 does not distinguish between one whose exception notwithstanding such condition, he is not
principal business activity is the carrying of goods and relieved of liability for the resulting damage.[56]
one who does such carrying only as an ancillary
activity.[44] The contention, therefore, of petitioner that it If the claim of petitioner that some of the cartons were
is not a common carrier but a customs broker whose already damaged upon delivery to it were true, then it
principal function is to prepare the correct customs should naturally have received the cargo under protest
declaration and proper shipping documents as required or with reservations duly noted on the receipt issued by
by law is bereft of merit. It suffices that petitioner PSI. But it made no such protest or reservation.[57]
undertakes to deliver the goods for pecuniary
consideration. Moreover, as observed by the appellate court, if indeed
petitioners employees only examined the cargoes
In this light, petitioner as a common carrier is mandated outside the PSI warehouse and found some to be wet,
to observe, under Article 1733[45] of the Civil Code, they would certainly have gone back to PSI, showed to
extraordinary diligence in the vigilance over the goods it the warehouseman the damage, and demanded then

58
and there for Bad Order documents or a certification Since petitioner received all the cargoes in good order
confirming the damage.[58] Or, petitioner would have and condition at the time they were turned over by the
presented, as witness, the employees of the PSI from PSI warehouseman, and upon their delivery to Hizon
whom Morales and Domingo took delivery of the cargo Laboratories, Inc. a portion thereof was found to be in
to prove that, indeed, part of the cargoes was already bad order, it was incumbent on petitioner to prove that it
damaged when the container was allegedly opened exercised extraordinary diligence in the carriage of the
outside the warehouse.[59] goods. It did not, however. Hence, its presumed
negligence under Article 1735 of the Civil Code remains
Petitioner goes on to posit that contrary to the report of unrebutted.
Elite Surveyors, no rain fell that day. Instead, it asserts
that some of the cargoes were already wet on delivery WHEREFORE, the August 10, 2000 Decision of the
by PSI outside the PSI warehouse but such Court of Appeals is hereby AFFIRMED.
notwithstanding Calicdan directed Morales to proceed
with the delivery to Hizon Laboratories, Inc. Costs against petitioner.

While Calicdan testified that he received the purported SO ORDERED.


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

The 4-page weather data furnished by PAGASA[61] on


request of Sanchez Brokerage hardly impresses, no
witness having identified it and interpreted the technical
terms thereof.

The possibility on the other hand that, as found by Hizon


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

ATTY. FLORES:

Q: Was there any instance that a shipment of this


nature, oral contraceptives, that arrived at the NAIA were
damaged and claimed by the Wyeth-Suaco without any
question?

WITNESS:

A: Yes sir, there was an instance that one cartoon (sic)


were wetted (sic) but Wyeth-Suaco did not claim
anything against us.

ATTY. FLORES:

Q: HOW IS IT?

WITNESS:

A: We experienced, there was a time that we


experienced that there was a cartoon (sic) wetted (sic)
up to the bottom are wet specially during rainy
season.[62]

59
LOADSTAR SHIPPING CO., INC., cement was good as gone due to exposure to sea water.
Petitioner, Petitioner thus failed to deliver the goods to the
consignee in Manila.
The consignee demanded from petitioner full
reimbursement of the cost of the lost shipment.
- versus - Petitioner, however, refused to reimburse the consignee
despite repeated demands.
Nonetheless, on March 11, 1985, respondent insurance
company paid the consignee P1,400,000 plus an
additional amount of P500,000, the value of the lost
G.R. No. 157481 shipment of cement. In return, the consignee executed a
Loss and Subrogation Receipt in favor of respondent
Present: concerning the latters subrogation rights against
petitioner.
Quisumbing, J., Hence, on October 15, 1986, respondent filed a
(Chairman), complaint docketed as Civil Case No. 86-37957, against
Carpio, petitioner with the Regional Trial Court of Manila, Branch
Carpio Morales, and 8. It alleged that: (1) the M/V Weasel was not seaworthy
Tinga, JJ. at the commencement of the voyage; (2) the weather
and sea conditions then prevailing were usual and
PIONEER ASIA INSURANCE CORP., expected for that time of the year and as such, was an
Respondent. ordinary peril of the voyage for which the M/V Weasel
Promulgated: should have been normally able to cope with; and (3)
petitioner was negligent in the selection and supervision
January 24, 2006 of its agents and employees then manning the M/V
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Weasel.
- - - - - - - - - - -x In its Answer, petitioner alleged that no fault nor
DECISION negligence could be attributed to it because it exercised
QUISUMBING, J.: due diligence to make the ship seaworthy, as well as
For review on certiorari are (1) the Decision[1] dated properly manned and equipped. Petitioner insisted that
October 15, 2002 and (2) the Resolution[2] dated the failure to deliver the subject cargo to the consignee
February 27, 2003, of the Court of Appeals in CA-G.R. was due to force majeure. Petitioner claimed it could not
CV No. 40999, which affirmed with modification the be held liable for an act or omission not directly
Decision[3] dated February 15, 1993 of the Regional attributable to it.
Trial Court of Manila, Branch 8 in Civil Case No. 86- On February 15, 1993, the RTC rendered a Decision in
37957. favor of respondent, to wit:
The pertinent facts are as follows: WHEREFORE, in view of the foregoing, judgment is
Petitioner Loadstar Shipping Co., Inc. (Loadstar for hereby rendered in favor of plaintiff and against
brevity) is the registered owner and operator of the defendant Loadstar Shipping Co., Inc. ordering the latter
vessel M/V Weasel. It holds office at 1294 Romualdez to pay as follows:
St., Paco, Manila. 1. To pay plaintiff the sum of P1,900,000.00 with legal
On June 6, 1984, Loadstar entered into a voyage-charter rate of interest per annum from date of complaint until
with Northern Mindanao Transport Company, Inc. for the fully paid;
carriage of 65,000 bags of cement from Iligan City to 2. To pay the sum equal to 25% of the claim as and
Manila. The shipper was Iligan Cement Corporation, for attorneys fees and litigation expenses; and,
while the consignee in Manila was Market Developers, 3. To pay the costs of suit.
Inc. IT IS SO ORDERED.[6]
On June 24, 1984, 67,500 bags of cement were loaded The RTC reasoned that petitioner, as a common carrier,
on board M/V Weasel and stowed in the cargo holds for bears the burden of proving that it exercised
delivery to the consignee. The shipment was covered by extraordinary diligence in its vigilance over the goods it
petitioners Bill of Lading[4] dated June 23, 1984. transported. The trial court explained that in case of loss
Prior to the voyage, the consignee insured the shipment or destruction of the goods, a statutory presumption
of cement with respondent Pioneer Asia Insurance arises that the common carrier was negligent unless it
Corporation for P1,400,000, for which respondent issued could prove that it had observed extraordinary diligence.
Marine Open Policy No. MOP-006 dated September 17, Petitioners defense of force majeure was found bereft of
1980, covering all shipments made on or after factual basis. The RTC called attention to the PAG-ASA
September 30, 1980.[5] report that at the time of the incident, tropical storm
At 12:50 in the afternoon of June 24, 1984, M/V Weasel Asiang had moved away from the Philippines. Further,
left Iligan City for Manila in good weather. However, at records showed that the sea and weather conditions in
4:31 in the morning of June 25, 1984, Captain Vicente C. the area of Hinubaan, Negros Occidental from 8:00 p.m.
Montera, master of M/V Weasel, ordered the vessel to of June 24, 1984 to 8:00 a.m. the next day were slight
be forced aground. Consequently, the entire shipment of and smooth. Thus, the trial court concluded that the

60
cause of the loss was not tropical storm Asiang or any Prefatorily, we stress that the finding of fact by the trial
other force majeure, but gross negligence of petitioner. court, when affirmed by the Court of Appeals, is not
Petitioner appealed to the Court of Appeals. reviewable by this Court in a petition for review on
In its Decision dated October 15, 2002, the Court of certiorari. However, the conclusions derived from such
Appeals affirmed the RTC Decision with modification factual finding are not necessarily pure issues of fact
that Loadstar shall only pay the sum of 10% of the total when they are inextricably intertwined with the
claim for attorneys fees and litigation expenses. It ruled, determination of a legal issue. In such instances, the
WHEREFORE, premises considered, the Decision dated conclusions made may be raised in a petition for review
February 15, 1993, of the Regional Trial Court of Manila, before this Court.[10]
National Capital Judicial Region, Branch 8, in Civil Case The threshold issues in this case are: (1) Given the
No. 86-37957 is hereby AFFIRMED with the circumstances of this case, is petitioner a common or a
MODIFICATION that the appellant shall only pay the private carrier? and (2) In either case, did petitioner
sum of 10% of the total claim as and for attorneys fees exercise the required diligence i.e., the extraordinary
and litigation expenses. Costs against the appellant. diligence of a common carrier or the ordinary diligence of
SO ORDERED.[7] a private carrier?
Petitioners Motion for Reconsideration was denied.[8] Article 1732 of the Civil Code defines a common carrier
The instant petition is anchored now on the following as follows:
assignments of error:
I Article 1732. Common carriers are persons,
THE HONORABLE COURT OF APPEALS ERRED IN corporations, firms or associations engaged in the
HOLDING THAT PETITIONER IS A COMMON business of carrying or transporting passengers or
CARRIER UNDER ARTICLE 1732 OF THE CIVIL goods or both, by land, water, or air, for compensation,
CODE. offering their services to the public.
II Petitioner is a corporation engaged in the business of
ASSUMING ARGUENDO THAT PETITIONER IS A transporting cargo by water and for compensation,
COMMON CARRIER, THE HONORABLE COURT OF offering its services indiscriminately to the public. Thus,
APPEALS ERRED IN HOLDING THAT THE without doubt, it is a common carrier. However,
PROXIMATE CAUSE OF THE LOSS OF CARGO WAS petitioner entered into a voyage-charter with the
NOT A FORTUITOUS EVENT BUT WAS ALLEGEDLY Northern Mindanao Transport Company, Inc. Now, had
DUE TO THE FAILURE OF PETITIONER TO the voyage-charter converted petitioner into a private
EXERCISE EXTRAORDINARY DILIGENCE. carrier?
III We think not. The voyage-charter agreement between
THE HONORABLE COURT OF APPEALS ERRED IN petitioner and Northern Mindanao Transport Company,
AFFIRMING THE AWARD BY THE TRIAL COURT OF Inc. did not in any way convert the common carrier into a
ATTORNEYS FEES AND LITIGATION EXPENSES IN private carrier. We have already resolved this issue with
FAVOR OF HEREIN RESPONDENT.[9] finality in Planters Products, Inc. v. Court of Appeals[11]
On the first and second issues, petitioner contends that where we ruled that:
at the time of the voyage the carriers voyage-charter It is therefore imperative that a public carrier shall remain
with the shipper converted it into a private carrier. Thus, as such, notwithstanding the charter of the whole or
the presumption of negligence against common carriers portion of a vessel by one or more persons, provided the
could not apply. Petitioner further avers that the charter is limited to the ship only, as in the case of a
stipulation in the voyage-charter holding it free from time-charter or voyage-charter. It is only when the
liability is valid and binds the respondent. In any event, charter includes both the vessel and its crew, as in a
petitioner insists that it had exercised extraordinary bareboat or demise that a common carrier becomes
diligence and that the proximate cause of the loss of the private, at least insofar as the particular voyage covering
cargo was a fortuitous event. the charter-party is concerned. Indubitably, a shipowner
With regard to the third issue, petitioner points out that in a time or voyage charter retains possession and
the award of attorneys fees and litigation expenses control of the ship, although her holds may, for the
appeared only in the dispositive portion of the RTC moment, be the property of the charterer.[12]
Decision with nary a justification. Petitioner maintains Conformably, petitioner remains a common carrier
that the Court of Appeals thus erred in affirming the notwithstanding the existence of the charter agreement
award. with the Northern Mindanao Transport Company, Inc.
For its part, respondent dismisses as factual issues the since the said charter is limited to the ship only and does
inquiry on (1) whether the loss of the cargo was due to not involve both the vessel and its crew. As elucidated in
force majeure or due to petitioners failure to exercise Planters Products, its charter is only a voyage-charter,
extraordinary diligence; and (2) whether respondent is not a bareboat charter.
entitled to recover attorneys fees and expenses of As a common carrier, petitioner is required to observe
litigation. extraordinary diligence in the vigilance over the goods it
Respondent further counters that the Court of Appeals transports.[13] When the goods placed in its care are
was correct when it held that petitioner was a common lost, petitioner is presumed to have been at fault or to
carrier despite the charter of the whole vessel, since the have acted negligently. Petitioner therefore has the
charter was limited to the ship only. burden of proving that it observed extraordinary

61
diligence in order to avoid responsibility for the lost dated February 27, 2003, of the Court of Appeals in CA-
cargo.[14] G.R. CV No. 40999, are AFFIRMED.
In Compania Maritima v. Court of Appeals,[15] we said: Costs against petitioner.
it is incumbent upon the common carrier to prove that SO ORDERED.
the loss, deterioration or destruction was due to accident
or some other circumstances inconsistent with its
liability.
...
The extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common
carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods
entrusted to it for safe carriage and delivery. It requires
common carriers to render service with the greatest skill
and foresight and to use all reasonable means to
ascertain the nature and characteristics of goods
tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their
nature requires.[16]
Article 1734 enumerates the instances when a carrier
might be exempt from liability for the loss of the goods.
These are:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international
or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing
or in the containers; and
(5) Order or act of competent public authority.[17]
Petitioner claims that the loss of the goods was due to a
fortuitous event under paragraph 1. Yet, its claim is not
substantiated. On the contrary, we find supported by
evidence on record the conclusion of the trial court and
the Court of Appeals that the loss of the entire shipment
of cement was due to the gross negligence of petitioner.
Records show that in the evening of June 24, 1984, the
sea and weather conditions in the vicinity of Negros
Occidental were calm. The records reveal that petitioner
took a shortcut route, instead of the usual route, which
exposed the voyage to unexpected hazard. Petitioner
has only itself to blame for its misjudgment.
Petitioner heavily relies on Home Insurance Co. v.
American Steamship Agencies, Inc.[18] and Valenzuela
Hardwood and Industrial Supply, Inc. v. Court of
Appeals.[19] The said cases involved a private carrier,
not a common carrier. Moreover, the issue in both cases
is not the effect of a voyage-charter on a common
carrier, but the validity of a stipulation absolving the
private carrier from liability in case of loss of the cargo
attributable to the negligence of the private carrier.
Lastly, on the third issue, we find consistent with law and
prevailing jurisprudence the Court of Appeals award of
attorneys fees and expenses of litigation equivalent to
ten percent (10%) of the total claim. The contract
between the parties in this case contained a stipulation
that in case of suit, attorneys fees and expenses of
litigation shall be limited to only ten percent (10%) of the
total monetary award. Given the circumstances of this
case, we deem the said amount just and equitable.
WHEREFORE, the petition is DENIED. The assailed
Decision dated October 15, 2002 and the Resolution

62
G.R. No. L-69044 May 29, 1987 for the recovery of the amounts it had paid to the insured
before the then Court of First instance of Manila, Branch
EASTERN SHIPPING LINES, INC., petitioner, XXX (Civil Case No. 6087).
vs.
INTERMEDIATE APPELLATE COURT and Petitioner-Carrier denied liability mainly on the ground
DEVELOPMENT INSURANCE & SURETY that the loss was due to an extraordinary fortuitous
CORPORATION, respondents. event, hence, it is not liable under the law.

No. 71478 May 29, 1987 On August 31, 1979, the Trial Court rendered judgment
in favor of Development Insurance in the amounts of
EASTERN SHIPPING LINES, INC., petitioner, P256,039.00 and P92,361.75, respectively, with legal
vs. interest, plus P35,000.00 as attorney's fees and costs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., Petitioner Carrier took an appeal to the then Court of
and DOWA FIRE & MARINE INSURANCE CO., LTD., Appeals which, on August 14, 1984, affirmed.
respondents.
Petitioner Carrier is now before us on a Petition for
Review on Certiorari.
MELENCIO-HERRERA, J.:
G.R. NO. 71478
These two cases, both for the recovery of the value of
cargo insurance, arose from the same incident, the On June 16, 1978, respondents Nisshin Fire & Marine
sinking of the M/S ASIATICA when it caught fire, Insurance Co. NISSHIN for short), and Dowa Fire &
resulting in the total loss of ship and cargo. Marine Insurance Co., Ltd. (DOWA, for brevity), as
subrogees of the insured, filed suit against Petitioner
The basic facts are not in controversy: Carrier for the recovery of the insured value of the cargo
lost with the then Court of First Instance of Manila,
In G.R. No. 69044, sometime in or prior to June, 1977, Branch 11 (Civil Case No. 116151), imputing
the M/S ASIATICA, a vessel operated by petitioner unseaworthiness of the ship and non-observance of
Eastern Shipping Lines, Inc., (referred to hereinafter as extraordinary diligence by petitioner Carrier.
Petitioner Carrier) loaded at Kobe, Japan for
transportation to Manila, 5,000 pieces of calorized lance Petitioner Carrier denied liability on the principal grounds
pipes in 28 packages valued at P256,039.00 consigned that the fire which caused the sinking of the ship is an
to Philippine Blooming Mills Co., Inc., and 7 cases of exempting circumstance under Section 4(2) (b) of the
spare parts valued at P92,361.75, consigned to Central Carriage of Goods by Sea Act (COGSA); and that when
Textile Mills, Inc. Both sets of goods were insured the loss of fire is established, the burden of proving
against marine risk for their stated value with respondent negligence of the vessel is shifted to the cargo shipper.
Development Insurance and Surety Corporation.
On September 15, 1980, the Trial Court rendered
In G.R. No. 71478, during the same period, the same judgment in favor of NISSHIN and DOWA in the
vessel took on board 128 cartons of garment fabrics and amounts of US $46,583.00 and US $11,385.00,
accessories, in two (2) containers, consigned to respectively, with legal interest, plus attorney's fees of
Mariveles Apparel Corporation, and two cases of P5,000.00 and costs. On appeal by petitioner, the then
surveying instruments consigned to Aman Enterprises Court of Appeals on September 10, 1984, affirmed with
and General Merchandise. The 128 cartons were modification the Trial Court's judgment by decreasing the
insured for their stated value by respondent Nisshin Fire amount recoverable by DOWA to US $1,000.00 because
& Marine Insurance Co., for US $46,583.00, and the 2 of $500 per package limitation of liability under the
cases by respondent Dowa Fire & Marine Insurance Co., COGSA.
Ltd., for US $11,385.00.
Hence, this Petition for Review on certiorari by Petitioner
Enroute for Kobe, Japan, to Manila, the vessel caught Carrier.
fire and sank, resulting in the total loss of ship and
cargo. The respective respondent Insurers paid the Both Petitions were initially denied for lack of merit. G.R.
corresponding marine insurance values to the No. 69044 on January 16, 1985 by the First Division,
consignees concerned and were thus subrogated unto and G. R. No. 71478 on September 25, 1985 by the
the rights of the latter as the insured. Second Division. Upon Petitioner Carrier's Motion for
Reconsideration, however, G.R. No. 69044 was given
G.R. NO. 69044 due course on March 25, 1985, and the parties were
required to submit their respective Memoranda, which
On May 11, 1978, respondent Development Insurance & they have done.
Surety Corporation (Development Insurance, for short),
having been subrogated unto the rights of the two On the other hand, in G.R. No. 71478, Petitioner Carrier
insured companies, filed suit against petitioner Carrier sought reconsideration of the Resolution denying the

63
Petition for Review and moved for its consolidation with
G.R. No. 69044, the lower-numbered case, which was Petitioner Carrier claims that the loss of the vessel by
then pending resolution with the First Division. The same fire exempts it from liability under the phrase "natural
was granted; the Resolution of the Second Division of disaster or calamity. " However, we are of the opinion
September 25, 1985 was set aside and the Petition was that fire may not be considered a natural disaster or
given due course. calamity. This must be so as it arises almost invariably
from some act of man or by human means. 10 It does
At the outset, we reject Petitioner Carrier's claim that it is not fall within the category of an act of God unless
not the operator of the M/S Asiatica but merely a caused by lightning 11 or by other natural disaster or
charterer thereof. We note that in G.R. No. 69044, calamity. 12 It may even be caused by the actual fault or
Petitioner Carrier stated in its Petition: privity of the carrier. 13

There are about 22 cases of the "ASIATICA" pending in Article 1680 of the Civil Code, which considers fire as an
various courts where various plaintiffs are represented extraordinary fortuitous event refers to leases of rural
by various counsel representing various consignees or lands where a reduction of the rent is allowed when
insurance companies. The common defendant in these more than one-half of the fruits have been lost due to
cases is petitioner herein, being the operator of said such event, considering that the law adopts a protection
vessel. ... 1 policy towards agriculture. 14

Petitioner Carrier should be held bound to said As the peril of the fire is not comprehended within the
admission. As a general rule, the facts alleged in a exception in Article 1734, supra, Article 1735 of the Civil
party's pleading are deemed admissions of that party Code provides that all cases than those mention in
and binding upon it. 2 And an admission in one pleading Article 1734, the common carrier shall be presumed to
in one action may be received in evidence against the have been at fault or to have acted negligently, unless it
pleader or his successor-in-interest on the trial of proves that it has observed the extraordinary deligence
another action to which he is a party, in favor of a party required by law.
to the latter action. 3
In this case, the respective Insurers. as subrogees of the
The threshold issues in both cases are: (1) which law cargo shippers, have proven that the transported goods
should govern — the Civil Code provisions on Common have been lost. Petitioner Carrier has also proved that
carriers or the Carriage of Goods by Sea Act? and (2) the loss was caused by fire. The burden then is upon
who has the burden of proof to show negligence of the Petitioner Carrier to proved that it has exercised the
carrier? extraordinary diligence required by law. In this regard,
the Trial Court, concurred in by the Appellate Court,
On the Law Applicable made the following Finding of fact:

The law of the country to which the goods are to be The cargoes in question were, according to the
transported governs the liability of the common carrier in witnesses defendant placed in hatches No, 2 and 3 cf
case of their loss, destruction or deterioration. 4 As the the vessel, Boatswain Ernesto Pastrana noticed that
cargoes in question were transported from Japan to the smoke was coming out from hatch No. 2 and hatch No.
Philippines, the liability of Petitioner Carrier is governed 3; that where the smoke was noticed, the fire was
primarily by the Civil Code. 5 However, in all matters not already big; that the fire must have started twenty-four
regulated by said Code, the rights and obligations of 24) our the same was noticed; that carbon dioxide was
common carrier shall be governed by the Code of ordered released and the crew was ordered to open the
Commerce and by special laws. 6 Thus, the Carriage of hatch covers of No, 2 tor commencement of fire fighting
Goods by Sea Act, a special law, is suppletory to the by sea water: that all of these effort were not enough to
provisions of the Civil Code. 7 control the fire.

On the Burden of Proof Pursuant to Article 1733, common carriers are bound to
extraordinary diligence in the vigilance over the goods.
Under the Civil Code, common carriers, from the nature The evidence of the defendant did not show that
of their business and for reasons of public policy, are extraordinary vigilance was observed by the vessel to
bound to observe extraordinary diligence in the vigilance prevent the occurrence of fire at hatches numbers 2 and
over goods, according to all the circumstances of each 3. Defendant's evidence did not likewise show he
case. 8 Common carriers are responsible for the loss, amount of diligence made by the crew, on orders, in the
destruction, or deterioration of the goods unless the care of the cargoes. What appears is that after the
same is due to any of the following causes only: cargoes were stored in the hatches, no regular
inspection was made as to their condition during the
(1) Flood, storm, earthquake, lightning or other voyage. Consequently, the crew could not have even
natural disaster or calamity; explain what could have caused the fire. The defendant,
in the Court's mind, failed to satisfactorily show that
xxx xxx xxx 9 extraordinary vigilance and care had been made by the

64
crew to prevent the occurrence of the fire. The shipment and inserted in bill of lading. This declaration if
defendant, as a common carrier, is liable to the embodied in the bill of lading shall be prima facie
consignees for said lack of deligence required of it under evidence, but all be conclusive on the carrier.
Article 1733 of the Civil Code. 15
By agreement between the carrier, master or agent of
Having failed to discharge the burden of proving that it the carrier, and the shipper another maximum amount
had exercised the extraordinary diligence required by than that mentioned in this paragraph may be fixed:
law, Petitioner Carrier cannot escape liability for the loss Provided, That such maximum shall not be less than the
of the cargo. figure above named. In no event shall the carrier be
Liable for more than the amount of damage actually
And even if fire were to be considered a "natural sustained.
disaster" within the meaning of Article 1734 of the Civil
Code, it is required under Article 1739 of the same Code xxx xxx xxx
that the "natural disaster" must have been the
"proximate and only cause of the loss," and that the Article 1749 of the New Civil Code also allows the
carrier has "exercised due diligence to prevent or limitations of liability in this wise:
minimize the loss before, during or after the occurrence
of the disaster. " This Petitioner Carrier has also failed to Art. 1749. A stipulation that the common carrier's
establish satisfactorily. liability as limited to the value of the goods appearing in
the bill of lading, unless the shipper or owner declares a
Nor may Petitioner Carrier seek refuge from liability greater value, is binding.
under the Carriage of Goods by Sea Act, It is provided
therein that: 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
Sec. 4(2). Neither the carrier nor the ship shall be package although the Code expressly permits a
responsible for loss or damage arising or resulting from stipulation limiting such liability. Thus, the COGSA which
is suppletory to the provisions of the Civil Code, steps in
(b) Fire, unless caused by the actual fault or privity and supplements the Code by establishing a statutory
of the carrier. provision limiting the carrier's liability in the absence of a
declaration of a higher value of the goods by the shipper
xxx xxx xxx in the bill of lading. The provisions of the Carriage of
Goods by.Sea Act on limited liability are as much a part
In this case, both the Trial Court and the Appellate of a bill of lading as though physically in it and as much a
Court, in effect, found, as a fact, that there was "actual part thereof as though placed therein by agreement of
fault" of the carrier shown by "lack of diligence" in that the parties. 16
"when the smoke was noticed, the fire was already big;
that the fire must have started twenty-four (24) hours In G.R. No. 69044, there is no stipulation in the
before the same was noticed; " and that "after the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7
cargoes were stored in the hatches, no regular limiting the carrier's liability for the loss or destruction of
inspection was made as to their condition during the the goods. Nor is there a declaration of a higher value of
voyage." The foregoing suffices to show that the the goods. Hence, Petitioner Carrier's liability should not
circumstances under which the fire originated and exceed US $500 per package, or its peso equivalent, at
spread are such as to show that Petitioner Carrier or its the time of payment of the value of the goods lost, but in
servants were negligent in connection therewith. no case "more than the amount of damage actually
Consequently, the complete defense afforded by the sustained."
COGSA when loss results from fire is unavailing to
Petitioner Carrier. The actual total loss for the 5,000 pieces of calorized
lance pipes was P256,039 (Exhibit "C"), which was
On the US $500 Per Package Limitation: exactly the amount of the insurance coverage by
Development Insurance (Exhibit "A"), and the amount
Petitioner Carrier avers that its liability if any, should not affirmed to be paid by respondent Court. The goods
exceed US $500 per package as provided in section 4(5) were shipped in 28 packages (Exhibit "C-2") Multiplying
of the COGSA, which reads: 28 packages by $500 would result in a product of
$14,000 which, at the current exchange rate of P20.44 to
(5) Neither the carrier nor the ship shall in any event US $1, would be P286,160, or "more than the amount of
be or become liable for any loss or damage to or in damage actually sustained." Consequently, the
connection with the transportation of goods in an amount aforestated amount of P256,039 should be upheld.
exceeding $500 per package lawful money of the United
States, or in case of goods not shipped in packages, per With respect to the seven (7) cases of spare parts
customary freight unit, or the equivalent of that sum in (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit
other currency, unless the nature and value of such "I"), which is likewise the insured value of the cargo
goods have been declared by the shipper before (Exhibit "H") and amount was affirmed to be paid by

65
respondent Court. however, multiplying seven (7) cases
by $500 per package at the present prevailing rate of Although this approach has not completely escaped
P20.44 to US $1 (US $3,500 x P20.44) would yield criticism, there is, nonetheless, much to commend it. It
P71,540 only, which is the amount that should be paid gives needed recognition to the responsibility of the
by Petitioner Carrier for those spare parts, and not courts to construe and apply the statute as enacted,
P92,361.75. however great might be the temptation to "modernize" or
reconstitute it by artful judicial gloss. If COGSA's
In G.R. No. 71478, in so far as the two (2) cases of package limitation scheme suffers from internal illness,
surveying instruments are concerned, the amount Congress alone must undertake the surgery. There is, in
awarded to DOWA which was already reduced to $1,000 this regard, obvious wisdom in the Ninth Circuit's
by the Appellate Court following the statutory $500 conclusion in Hartford that technological advancements,
liability per package, is in order. whether or not forseeable by the COGSA promulgators,
do not warrant a distortion or artificial construction of the
In respect of the shipment of 128 cartons of garment statutory term "package." A ruling that these large
fabrics in two (2) containers and insured with NISSHIN, reusable metal pieces of transport equipment qualify as
the Appellate Court also limited Petitioner Carrier's COGSA packages — at least where, as here, they were
liability to $500 per package and affirmed the award of carrier owned and supplied — would amount to just such
$46,583 to NISSHIN. it multiplied 128 cartons a distortion.
(considered as COGSA packages) by $500 to arrive at
the figure of $64,000, and explained that "since this Certainly, if the individual crates or cartons prepared by
amount is more than the insured value of the goods, that the shipper and containing his goods can rightly be
is $46,583, the Trial Court was correct in awarding said considered "packages" standing by themselves, they do
amount only for the 128 cartons, which amount is less not suddenly lose that character upon being stowed in a
than the maximum limitation of the carrier's liability." carrier's container. I would liken these containers to
detachable stowage compartments of the ship. They
We find no reversible error. The 128 cartons and not the simply serve to divide the ship's overall cargo stowage
two (2) containers should be considered as the shipping space into smaller, more serviceable loci. Shippers'
unit. packages are quite literally "stowed" in the containers
utilizing stevedoring practices and materials analogous
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 to those employed in traditional on board stowage.
F 2d 807 (1981), the consignees of tin ingots and the
shipper of floor covering brought action against the In Yeramex International v. S.S. Tando,, 1977 A.M.C.
vessel owner and operator to recover for loss of ingots 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943
and floor covering, which had been shipped in vessel — (4 Cir. 1979), another district with many maritime cases
supplied containers. The U.S. District Court for the followed Judge Beeks' reasoning in Matsushita and
Southern District of New York rendered judgment for the similarly rejected the functional economics test. Judge
plaintiffs, and the defendant appealed. The United Kellam held that when rolls of polyester goods are
States Court of Appeals, Second Division, modified and packed into cardboard cartons which are then placed in
affirmed holding that: containers, the cartons and not the containers are the
packages.
When what would ordinarily be considered packages are
shipped in a container supplied by the carrier and the xxx xxx xxx
number of such units is disclosed in the shipping
documents, each of those units and not the container The case of Smithgreyhound v. M/V Eurygenes, 18
constitutes the "package" referred to in liability limitation followed the Mitsui test:
provision of Carriage of Goods by Sea Act. Carriage of
Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5). Eurygenes concerned a shipment of stereo equipment
packaged by the shipper into cartons which were then
Even if language and purposes of Carriage of Goods by placed by the shipper into a carrier- furnished container.
Sea Act left doubt as to whether carrier-furnished The number of cartons was disclosed to the carrier in the
containers whose contents are disclosed should be bill of lading. Eurygenes followed the Mitsui test and
treated as packages, the interest in securing treated the cartons, not the container, as the COGSA
international uniformity would suggest that they should packages. However, Eurygenes indicated that a carrier
not be so treated. Carriage of Goods by Sea Act, 4(5), could limit its liability to $500 per container if the bill of
46 U.S.C.A. 1304(5). lading failed to disclose the number of cartons or units
within the container, or if the parties indicated, in clear
... After quoting the statement in Leather's Best, supra, and unambiguous language, an agreement to treat the
451 F 2d at 815, that treating a container as a package container as the package.
is inconsistent with the congressional purpose of
establishing a reasonable minimum level of liability, (Admiralty Litigation in Perpetuum: The Continuing Saga
Judge Beeks wrote, 414 F. Supp. at 907 (footnotes of Package Limitations and Third World Delivery
omitted): Problems by Chester D. Hooper & Keith L. Flicker,

66
published in Fordham International Law Journal, Vol. 6, We do not agree. petitioner Carrier was given- full
1982-83, Number 1) (Emphasis supplied) opportunity to present its evidence but it failed to do so.
On this point, the Trial Court found:
In this case, the Bill of Lading (Exhibit "A") disclosed the
following data: xxx xxx xxx

2 Containers Indeed, since after November 6, 1978, to August 27,


1979, not to mention the time from June 27, 1978, when
(128) Cartons) its answer was prepared and filed in Court, until
September 26, 1978, when the pre-trial conference was
Men's Garments Fabrics and Accessories Freight conducted for the last time, the defendant had more than
Prepaid nine months to prepare its evidence. Its belated notice to
take deposition on written interrogatories of its witnesses
Say: Two (2) Containers Only. in Japan, served upon the plaintiff on August 25th, just
two days before the hearing set for August 27th,
Considering, therefore, that the Bill of Lading clearly knowing fully well that it was its undertaking on July 11
disclosed the contents of the containers, the number of the that the deposition of the witnesses would be
cartons or units, as well as the nature of the goods, and dispensed with if by next time it had not yet been
applying the ruling in the Mitsui and Eurygenes cases it obtained, only proves the lack of merit of the defendant's
is clear that the 128 cartons, not the two (2) containers motion for postponement, for which reason it deserves
should be considered as the shipping unit subject to the no sympathy from the Court in that regard. The
$500 limitation of liability. defendant has told the Court since February 16, 1979,
that it was going to take the deposition of its witnesses in
True, the evidence does not disclose whether the Japan. Why did it take until August 25, 1979, or more
containers involved herein were carrier-furnished or not. than six months, to prepare its written interrogatories.
Usually, however, containers are provided by the carrier. Only the defendant itself is to blame for its failure to
19 In this case, the probability is that they were so adduce evidence in support of its defenses.
furnished for Petitioner Carrier was at liberty to pack and
carry the goods in containers if they were not so packed. xxx xxx xxx 22
Thus, at the dorsal side of the Bill of Lading (Exhibit "A")
appears the following stipulation in fine print: Petitioner Carrier was afforded ample time to present its
side of the case. 23 It cannot complain now that it was
11. (Use of Container) Where the goods receipt of denied due process when the Trial Court rendered its
which is acknowledged on the face of this Bill of Lading Decision on the basis of the evidence adduced. What
are not already packed into container(s) at the time of due process abhors is absolute lack of opportunity to be
receipt, the Carrier shall be at liberty to pack and carry heard. 24
them in any type of container(s).
On the Award of Attorney's Fees:

The foregoing would explain the use of the estimate Petitioner Carrier questions the award of attorney's fees.
"Say: Two (2) Containers Only" in the Bill of Lading, In both cases, respondent Court affirmed the award by
meaning that the goods could probably fit in two (2) the Trial Court of attorney's fees of P35,000.00 in favor
containers only. It cannot mean that the shipper had of Development Insurance in G.R. No. 69044, and
furnished the containers for if so, "Two (2) Containers" P5,000.00 in favor of NISSHIN and DOWA in G.R. No.
appearing as the first entry would have sufficed. and if 71478.
there is any ambiguity in the Bill of Lading, it is a cardinal
principle in the construction of contracts that the Courts being vested with discretion in fixing the amount
interpretation of obscure words or stipulations in a of attorney's fees, it is believed that the amount of
contract shall not favor the party who caused the P5,000.00 would be more reasonable in G.R. No. 69044.
obscurity. 20 This applies with even greater force in a The award of P5,000.00 in G.R. No. 71478 is affirmed.
contract of adhesion where a contract is already
prepared and the other party merely adheres to it, like WHEREFORE, 1) in G.R. No. 69044, the judgment is
the Bill of Lading in this case, which is draw. up by the modified in that petitioner Eastern Shipping Lines shall
carrier. 21 pay the Development Insurance and Surety Corporation
the amount of P256,039 for the twenty-eight (28)
On Alleged Denial of Opportunity to Present Deposition packages of calorized lance pipes, and P71,540 for the
of Its Witnesses: (in G.R. No. 69044 only) seven (7) cases of spare parts, with interest at the legal
rate from the date of the filing of the complaint on June
Petitioner Carrier claims that the Trial Court did not give 13, 1978, plus P5,000 as attorney's fees, and the costs.
it sufficient time to take the depositions of its witnesses
in Japan by written interrogatories. 2) In G.R.No.71478,the judgment is hereby
affirmed.SO ORDERED.

67
[G.R. No. 104685. March 14, 1996]
Defendant asserts in its Answer and its evidence tend to
SABENA BELGIAN WORLD AIRLINES, petitioner, vs. show that while it admits that the plaintiff was a
HON. COURT OF APPEALS and MA. PAULA SAN passenger on board Flight No. SN 284 with a piece of
AGUSTIN, respondents. checked in luggage bearing Tag No. 71423, the loss of
DECISION the luggage was due to plaintiffs sole if not contributory
VITUG, J.: negligence; that she did not declare the valuable items in
her checked-in luggage at the flight counter when she
The appeal before the Court involves the issue of an checked in for her flight from Casablanca to Brussels so
airlines liability for lost luggage. The petition for review that either the representative of the defendant at the
assails the decision of the Court Appeals,[1] dated 27 counter would have advised her to secure an insurance
February 1992, affirming an award of damages made by on the alleged valuable items and required her to pay
the trial court in a complaint filed by private respondent additional charges, or would have refused acceptance of
against petitioner. her baggage as required by the generally accepted
practices of international carriers; that Section 9(a),
The factual background of the case, narrated by the trial Article IX of General Conditions of carriage requiring
court and reproduced at length by the appellate court, is passengers to collect their checked baggage at the
hereunder quoted: place of stopover, plaintiff neglected to claim her
baggage at the Brussels Airport; that plaintiff should
On August 21, 1987, plaintiff was a passenger on board have retrieved her undeclared valuables from her
Flight SN 284 of defendant airline originating from baggage at the Brussels Airport since her flight from
Casablanca to Brussels, Belgium on her way back to Brussels to Manila will still have to visit for confirmation
Manila. Plaintiff checked in her luggage which contained inasmuch as only her flight from Casablanca to Brussels
her valuables, namely: jewelries valued at $2,350.00; was confirmed; that defendant incorporated in all
clothes $1,500.00; shoes/bag $150; accessories $75; Sabena Plane Tickets, including Sabena Ticket No.
luggage itself $10.00; or a total of $4,265.00, for which 082422-72502241 issued to plaintiff in Manila on August
she was issued Tag No. 71423. She stayed overnight in 21, 1987, a warning that Items of value should be carried
Brussels and her luggage was left on board Flight SN on your person and that some carriers assume no
284. liability for fragile, valuable or perishable articles and that
further information may he obtained from the carrier for
Plaintiff arrived at Manila International Airport on guidance; that granting without conceding that defendant
September 2, 1987 and immediately submitted her Tag is liable, its liability is limited only to US $20.00 per kilo
No. 71423 to facilitate the release of her luggage hut the due to plaintiffs failure to declare a higher value on the
luggage was missing. She was advised to accomplish contents of her checked in luggage and pay additional
and submit a property Irregularity Report which she charges thereon.[2]
submitted and filed on the same day.
The trial court rendered judgment ordering petitioner
She followed up her claim on September 14, 1987 but Sabena Belgian World Airlines to pay private respondent
the luggage remained to be missing. Ma. Paula San Agustin

On September 15, 1987, she filed her formal complaint (a) x x x US$4,265.00 or its legal exchange in Philippine
with the office of Ferge Massed, defendants Local pesos;
Manager, demanding immediate attention (Exh. A).
(b) x x x P30,000.00 as moral damages;
On September 30, 1987, on the occasion of plaintiffs
following up of her luggage claim, she was furnished (c) x x x P10,000.00 as exemplary damages;
copies of defendants telexes with an information that the
Brussels Office of defendant found the luggage and that (d) x x x P10,000.00 attorneys fees; and
they have broken the locks for identification (Exhibit B).
Plaintiff was assured by the defendant that it has notified (e) (t)he costs of the suit.[3]
its Manila Office that the luggage will be shipped to
Manila on October 27, 1987. But unfortunately plaintiff Sabena appealed the decision of the Regional Trial
was informed that the luggage was lost for the second Court to the Court of Appeals. The appellate court, in its
time (Exhibits C and C-1). decision of 27 February 1992, affirmed in toto the trial
courts judgment.
At the time of the filling of the complaint, the luggage
with its content has not been found. Petitioner airline company, in contending that the alleged
negligence of private respondent should be considered
Plaintiff demanded from the defendant the money value the primary cause for the loss of her luggage, avers that,
of the luggage and its contents amounting to $4,265.00 despite her awareness that the flight ticket had been
or its exchange value, but defendant refused to settle the confirmed only for Casablanca and Brussels, and that
claim. her flight from Brussels to Manila had yet to be

68
confirmed, she did not retrieve the luggage upon arrival
in Brussels. Petitioner insists that private respondent, (1) Flood, storm, earthquake, lightning, or other natural
being a seasoned international traveler, must have disaster or calamity;
likewise been familiar with the standard provisions
contained in her flight ticket that items of value are (2) Act of the public enemy in war, whether international
required to be hand-carried by the passenger and that or civil;
the liability of the airline or loss, delay or damage to
baggage would be limited, in any event, to only (3) Act or omission of the shipper or owner of the goods;
US$20.00 per kilo unless a higher value is declared in
advance and corresponding additional charges are paid (4) The character of the goods or defects in the packing
thereon. At the Casablanca International Airport, private or in the containers;
respondent, in checking in her luggage, evidently did not
declare its contents or value. Petitioner cites Section (5) Order or act of competent public authority.
5(c), Article IX, of the General Conditions of Carriage,
signed at Warsaw, Poland, on 02 October 1929, as Not one of the above excepted causes obtains in this
amended by the Hague Protocol of 1955, generally case.[5]
observed by International carriers, stating, among other
things, that: The above rules remain basically unchanged even when
the contract is breached by tort[6] although
Passengers shall not include in his checked baggage, noncontradictory principles on quasi-delict may then be
and the carrier may refuse to carry as checked baggage, assimilated as also forming part of the governing law.
fragile or perishable articles, money, jewelry, precious Petitioner is not thus entirely off track when it has
metals, negotiable papers, securities or other likewise raised in its defense the tort doctrine of
valuables.[4] proximate cause. Unfortunately for petitioner, however,
the doctrine cannot, in this particular instance, support
Fault or negligence consists in the omission of that its case. Proximate cause is that which, in natural and
diligence which is demanded by the nature of an continuous sequence, unbroken by any efficient
obligation and corresponds with the circumstances of the intervening cause, produces injury and without which the
person, of the time, and of the place. When the source of result would not have occurred. The exemplification by
an obligation is derived from a contract, the mere breach the Court in one case[7] is simple and explicit; viz:
or non-fulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor. This rule (T)he proximate legal cause is that acting first and
is not different in the case of common carriers in the producing the injury, either immediately or by setting
carriage of goods which, indeed, are bound to observe other events in motion, all constituting a natural and
not just the due diligence of a good father of a family but Continuous chain of events, each having a close causal
that of extraordinary care in the vigilance over the goods. Connection with its immediate predecessor, the final
The appellate court has aptly observed: event in the chain immediately affecting the injury as a
natural and probable result of the cause which first
x x x Art. 1733 of the [Civil] Code provides that from the acted, under such circumstances that the person
very nature of their business and by reasons of public responsible for the first event should, as an ordinarily
policy, common carriers are bound to observe prudent, and intelligent person, have reasonable ground
extraordinary diligence in the vigilance over the goods to expect at the moment of his act or default that an
transported by them. This extraordinary responsibility, injury to some person might probably result therefrom.
according to Art. 1736, lasts from the time the goods are
unconditionally placed in the possession of and received It remained undisputed that private respondents luggage
by the carrier until they are delivered actually or was lost while it was in the custody of petitioner. It was
constructively to the consignee or person who has the supposed to arrive on the same flight that private
right to receive them. Art. 1737 states that the common respondent took in returning to Manila on 02 September
carriers duty to observe extraordinary diligence in the 1987. When she discovered that the luggage was
vigilance over the goods transported by them remains in missing, she promptly accomplished and filed a Property
full force and effect even when they are temporarily Irregularity Report. She followed up her claim on 14
unloaded or stored in transit. And Art. 1735 establishes September 1987, and filed, on the following day, a
the presumption that if the goods are lost, destroyed or formal letter-complaint with petitioner. She felt relieved
deteriorated, common carriers are presumed to have when, on 23 October 1987, she was advised that her
been at fault or to have acted negligently, unless they luggage had finally been found, with its contents intact
prove that they had observed extraordinary diligence as when examined, and that she could expect it to arrive on
required in Article 1733. 27 October 1987. She then waited anxiously only to be
told later that her luggage had been lost for the second
The only exceptions to the foregoing extraordinary time. Thus, the appellate court, given all the facts before
responsibility of the common carrier is when the loss, it, sustained the trial court in finding petitioner ultimately
destruction, or deterioration of the goods is due to any of guilty of gross negligence in the handling of private
the following causes: respondents luggage. The loss of said baggage not only

69
once by twice, said the appellate court, underscores the property, the Convention might successfully be pleaded
wanton negligence and lack of care on the part of the as the sole gauge to determine the carriers liability to the
carrier. passenger. Neither may the Convention be invoked to
justify the disregard of some extraordinary sort of
The above findings, which certainly cannot be said to be damage resulting to a passenger and preclude recovery
without basis, foreclose whatever rights petitioner might therefor beyond the limits set by said Convention. It is in
have had to the possible limitation of liabilities enjoyed this sense that the Convention has been applied, or
by international air carriers under the Warsaw ignored, depending on the peculiar facts presented by
Convention (Convention for the Unification of Certain each case.
Rules Relating to International Carriage by Air, as
amended by the Hague Protocol of 1955, the Montreal The Court thus sees no error in the preponderant
Agreement of 1966, the Guatemala Protocol of 1971 and application to the instant case by the appellate court, as
the Montreal Protocols of 1975). In Alitalia vs. well as by the trial court, of the usual rules on the extent
Intermediate Appellate Court,[8] now Chief Justice of recoverable damages beyond the Warsaw limitations.
Andres R. Narvasa, speaking for the Court, has Under domestic law and jurisprudence (the Philippines
explained it well; he said: being the country of destination), the attendance of
gross negligence (given the equivalent of fraud or bad
The Warsaw Convention however denies to the carrier faith) holds the common carrier liable for all damages
availment of the provisions which exclude or limit his which can be reasonably attributed, although
liability, if the damage is caused by his wilful misconduct unforeseen, to the non-performance of the obligation,[9]
or by such default on his part as, in accordance with the including moral and exemplary damages.[10]
law of the court seized of the case, is considered to be
equivalent to wilful misconduct, or if the damage is WHEREFORE, the decision appealed from is
(similarly) caused x x x by any agent of the carrier acting AFFIRMED. Costs against petitioner.
within the scope of his employment. The Hague Protocol
amended the Warsaw Convention by removing the SO ORDERED.
provision that if the airline took all necessary steps to
avoid the damage, it could exculpate itself completely,
and declaring the stated limits of liability not applicable if
it is proved that the damage resulted from an act or
omission of the carrier, its servants or agents, done with
intent to cause damage or recklessly and with
knowledge that damage would probably result. The
same deletion was effected by the Montreal Agreement
of 1966, with the result that a passenger could recover
unlimited damages upon proof of wilful misconduct.

The Convention does not thus operate as an exclusive


enumeration of the instances of an airlines 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 wilful 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 Contentions
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 latters

70
[G.R. No. 125817. January 16, 2002] hence, the filing of the complaint for damages by private
respondent against petitioners.
ABELARDO LIM and ESMADITO GUNNABAN,
petitioners, vs. COURT OF APPEALS and DONATO H. In his answer Lim denied liability by contending that he
GONZALES, respondents. exercised due diligence in the selection and supervision
DECISION of his employees. He further asserted that as the
BELLOSILLO, J.: jeepney was registered in Vallartas name, it was Vallarta
and not private respondent who was the real party in
When a passenger jeepney covered by a certificate of interest.[1] For his part, petitioner Gunnaban averred
public convenience is sold to another who continues to that the accident was a fortuitous event which was
operate it under the same certificate of public beyond his control.[2]
convenience under the so-called kabit system, and in the
course thereof the vehicle meets an accident through the Meanwhile, the damaged passenger jeepney was left by
fault of another vehicle, may the new owner sue for the roadside to corrode and decay. Private respondent
damages against the erring vehicle? Otherwise stated, explained that although he wanted to take his jeepney
does the new owner have any legal personality to bring home he had no capability, financial or otherwise, to tow
the action, or is he the real party in interest in the suit, the damaged vehicle.[3]
despite the fact that he is not the registered owner under
the certificate of public convenience? The main point of contention between the parties related
to the amount of damages due private respondent.
Sometime in 1982 private respondent Donato Gonzales Private respondent Gonzales averred that per estimate
purchased an Isuzu passenger jeepney from Gomercino made by an automobile repair shop he would have to
Vallarta, holder of a certificate of public convenience for spend P236,000.00 to restore his jeepney to its original
the operation of public utility vehicles plying the condition.[4] On the other hand, petitioners insisted that
Monumento-Bulacan route. While private respondent they could have the vehicle repaired for P20,000.00.[5]
Gonzales continued offering the jeepney for public
transport services he did not have the registration of the On 1 October 1993 the trial court upheld private
vehicle transferred in his name nor did he secure for respondent's claim and awarded him P236,000.00 with
himself a certificate of public convenience for its legal interest from 22 July 1990 as compensatory
operation. Thus Vallarta remained on record as its damages and P30,000.00 as attorney's fees. In support
registered owner and operator. of its decision, the trial court ratiocinated that as vendee
and current owner of the passenger jeepney private
On 22 July 1990, while the jeepney was running respondent stood for all intents and purposes as the real
northbound along the North Diversion Road somewhere party in interest. Even Vallarta himself supported private
in Meycauayan, Bulacan, it collided with a ten-wheeler- respondent's assertion of interest over the jeepney for,
truck owned by petitioner Abelardo Lim and driven by his when he was called to testify, he dispossessed himself
co-petitioner Esmadito Gunnaban. Gunnaban owned of any claim or pretension on the property. Gunnaban
responsibility for the accident, explaining that while he was found by the trial court to have caused the accident
was traveling towards Manila the truck suddenly lost its since he panicked in the face of an emergency which
brakes. To avoid colliding with another vehicle, he was rather palpable from his act of directing his vehicle
swerved to the left until he reached the center island. to a perilous streak down the fast lane of the
However, as the center island eventually came to an superhighway then across the island and ultimately to
end, he veered farther to the left until he smashed into a the opposite lane where it collided with the jeepney.
Ferroza automobile, and later, into private respondent's
passenger jeepney driven by one Virgilio Gonzales. The On the other hand, petitioner Lim's liability for
impact caused severe damage to both the Ferroza and Gunnaban's negligence was premised on his want of
the passenger jeepney and left one (1) passenger dead diligence in supervising his employees. It was admitted
and many others wounded. during trial that Gunnaban doubled as mechanic of the
ill-fated truck despite the fact that he was neither tutored
Petitioner Lim shouldered the costs for hospitalization of nor trained to handle such task.[6]
the wounded, compensated the heirs of the deceased
passenger, and had the Ferroza restored to good Forthwith, petitioners appealed to the Court of Appeals
condition. He also negotiated with private respondent which, on 17 July 1996, affirmed the decision of the trial
and offered to have the passenger jeepney repaired at court. In upholding the decision of the court a quo the
his shop. Private respondent however did not accept the appeals court concluded that while an operator under
offer so Lim offered him P20,000.00, the assessment of the kabit system could not sue without joining the
the damage as estimated by his chief mechanic. Again, registered owner of the vehicle as his principal, equity
petitioner Lim's proposition was rejected; instead, private demanded that the present case be made an
respondent demanded a brand-new jeep or the amount exception.[7] Hence this petition.
of P236,000.00. Lim increased his bid to P40,000.00 but
private respondent was unyielding. Under the It is petitioners' contention that the Court of Appeals
circumstances, negotiations had to be abandoned; erred in sustaining the decision of the trial court despite

71
their opposition to the well-established doctrine that an In the present case it is at once apparent that the evil
operator of a vehicle continues to be its operator as long sought to be prevented in enjoining the kabit system
as he remains the operator of record. According to does not exist. First, neither of the parties to the
petitioners, to recognize an operator under the kabit pernicious kabit system is being held liable for damages.
system as the real party in interest and to countenance Second, the case arose from the negligence of another
his claim for damages is utterly subversive of public vehicle in using the public road to whom no
policy. Petitioners further contend that inasmuch as the representation, or misrepresentation, as regards the
passenger jeepney was purchased by private ownership and operation of the passenger jeepney was
respondent for only P30,000.00, an award of made and to whom no such representation, or
P236,000.00 is inconceivably large and would amount to misrepresentation, was necessary. Thus it cannot be
unjust enrichment.[8] said that private respondent Gonzales and the registered
owner of the jeepney were in estoppel for leading the
Petitioners' attempt to illustrate that an affirmance of the public to believe that the jeepney belonged to the
appealed decision could be supportive of the pernicious registered owner. Third, the riding public was not
kabit system does not persuade. Their labored efforts to bothered nor inconvenienced at the very least by the
demonstrate how the questioned rulings of the courts a illegal arrangement. On the contrary, it was private
quo are diametrically opposed to the policy of the law respondent himself who had been wronged and was
requiring operators of public utility vehicles to secure a seeking compensation for the damage done to him.
certificate of public convenience for their operation is Certainly, it would be the height of inequity to deny him
quite unavailing. his right.

The kabit system is an arrangement whereby a person In light of the foregoing, it is evident that private
who has been granted a certificate of public convenience respondent has the right to proceed against petitioners
allows other persons who own motor vehicles to operate for the damage caused on his passenger jeepney as
them under his license, sometimes for a fee or well as on his business. Any effort then to frustrate his
percentage of the earnings.[9] Although the parties to claim of damages by the ingenuity with which petitioners
such an agreement are not outrightly penalized by law, framed the issue should be discouraged, if not repelled.
the kabit system is invariably recognized as being
contrary to public policy and therefore void and In awarding damages for tortuous injury, it becomes the
inexistent under Art. 1409 of the Civil Code. sole design of the courts to provide for adequate
compensation by putting the plaintiff in the same
In the early case of Dizon v. Octavio[10] the Court financial position he was in prior to the tort. It is a
explained that one of the primary factors considered in fundamental principle in the law on damages that a
the granting of a certificate of public convenience for the defendant cannot be held liable in damages for more
business of public transportation is the financial capacity than the actual loss which he has inflicted and that a
of the holder of the license, so that liabilities arising from plaintiff is entitled to no more than the just and adequate
accidents may be duly compensated. The kabit system compensation for the injury suffered. His recovery is, in
renders illusory such purpose and, worse, may still be the absence of circumstances giving rise to an
availed of by the grantee to escape civil liability caused allowance of punitive damages, limited to a fair
by a negligent use of a vehicle owned by another and compensation for the harm done. The law will not put
operated under his license. If a registered owner is him in a position better than where he should be in had
allowed to escape liability by proving who the supposed not the wrong happened.[12]
owner of the vehicle is, it would be easy for him to
transfer the subject vehicle to another who possesses no In the present case, petitioners insist that as the
property with which to respond financially for the passenger jeepney was purchased in 1982 for only
damage done. Thus, for the safety of passengers and P30,000.00 to award damages considerably greater than
the public who may have been wronged and deceived this amount would be improper and unjustified.
through the baneful kabit system, the registered owner Petitioners are at best reminded that indemnification for
of the vehicle is not allowed to prove that another person damages comprehends not only the value of the loss
has become the owner so that he may be thereby suffered but also that of the profits which the obligee
relieved of responsibility. Subsequent cases affirm such failed to obtain. In other words, indemnification for
basic doctrine.[11] damages is not limited to damnum emergens or actual
loss but extends to lucrum cessans or the amount of
It would seem then that the thrust of the law in enjoining profit lost.[13]
the kabit system is not so much as to penalize the
parties but to identify the person upon whom Had private respondent's jeepney not met an accident it
responsibility may be fixed in case of an accident with could reasonably be expected that it would have
the end view of protecting the riding public. The policy continued earning from the business in which it was
therefore loses its force if the public at large is not engaged. Private respondent avers that he derives an
deceived, much less involved. average income of P300.00 per day from his passenger
jeepney and this earning was included in the award of
damages made by the trial court and upheld by the

72
appeals court. The award therefore of P236,000.00 as annum shall be computed from the time the judgment of
compensatory damages is not beyond reason nor the lower court is made until the finality of this Decision.
speculative as it is based on a reasonable estimate of If the adjudged principal and interest remain unpaid
the total damage suffered by private respondent, i.e. thereafter, the interest shall be twelve percent (12%) per
damage wrought upon his jeepney and the income lost annum computed from the time judgment becomes final
from his transportation business. Petitioners for their part and executory until it is fully satisfied.
did not offer any substantive evidence to refute the
estimate made by the courts a quo. Costs against petitioners.

However, we are constrained to depart from the SO ORDERED.


conclusion of the lower courts that upon the award of
compensatory damages legal interest should be
imposed beginning 22 July 1990, i.e. the date of the
accident. Upon the provisions of Art. 2213 of the Civil
Code, interest "cannot be recovered upon unliquidated
claims or damages, except when the demand can be
established with reasonable certainty." It is axiomatic
that if the suit were for damages, unliquidated and not
known until definitely ascertained, assessed and
determined by the courts after proof, interest at the rate
of six percent (6%) per annum should be from the date
the judgment of the court is made (at which time the
quantification of damages may be deemed to be
reasonably ascertained).[14]

In this case, the matter was not a liquidated obligation as


the assessment of the damage on the vehicle was
heavily debated upon by the parties with private
respondent's demand for P236,000.00 being refuted by
petitioners who argue that they could have the vehicle
repaired easily for P20,000.00. In fine, the amount due
private respondent was not a liquidated account that was
already demandable and payable.

One last word. We have observed that private


respondent left his passenger jeepney by the roadside at
the mercy of the elements. Article 2203 of the Civil Code
exhorts parties suffering from loss or injury to exercise
the diligence of a good father of a family to minimize the
damages resulting from the act or omission in question.
One who is injured then by the wrongful or negligent act
of another should exercise reasonable care and
diligence to minimize the resulting damage. Anyway, he
can recover from the wrongdoer money lost in
reasonable efforts to preserve the property injured and
for injuries incurred in attempting to prevent damage to
it.[15]

However we sadly note that in the present case


petitioners failed to offer in evidence the estimated
amount of the damage caused by private respondent's
unconcern towards the damaged vehicle. It is the burden
of petitioners to show satisfactorily not only that the
injured party could have mitigated his damages but also
the amount thereof; failing in this regard, the amount of
damages awarded cannot be proportionately reduced.

WHEREFORE, the questioned Decision awarding


private respondent Donato Gonzales P236,000.00 with
legal interest from 22 July 1990 as compensatory
damages and P30,000.00 as attorney's fees is
MODIFIED. Interest at the rate of six percent (6%) per

73
G.R. No. L-64693 April 27, 1984
Thereafter, in March 1973, respondent Nicasio Ocampo
LITA ENTERPRISES, INC., petitioner, decided to register his taxicabs in his name. He
vs. requested the manager of petitioner Lita Enterprises,
SECOND CIVIL CASES DIVISION, INTERMEDIATE Inc. to turn over the registration papers to him, but the
APPELLATE COURT, NICASIO M. OCAMPO and latter allegedly refused. Hence, he and his wife filed a
FRANCISCA P. GARCIA, respondents. complaint against Lita Enterprises, Inc., Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance
Manuel A. Concordia for petitioner. Co. and the Sheriff of Manila for reconveyance of motor
vehicles with damages, docketed as Civil Case No.
Nicasio Ocampo for himself and on behalf of his 90988 of the Court of First Instance of Manila. Trial on
correspondents. the merits ensued and on July 22, 1975, the said court
rendered a decision, the dispositive portion of which
reads: têñ.£îhqwâ£
ESCOLIN, J.:ñé+.£ªwph!1
WHEREFORE, the complaint is hereby dismissed as far
"Ex pacto illicito non oritur actio" [No action arises out of as defendants Rosita Sebastian Vda. de Galvez,
an illicit bargain] is the tune-honored maxim that must be Visayan Surety & Insurance Company and the Sheriff of
applied to the parties in the case at bar. Having entered Manila are concerned.
into an illegal contract, neither can seek relief from the
courts, and each must bear the consequences of his Defendant Lita Enterprises, Inc., is ordered to transfer
acts. the registration certificate of the three Toyota cars not
levied upon with Engine Nos. 2R-230026, 2R-688740
The factual background of this case is undisputed. and 2R-585884 [Exhs. A, B, C and D] by executing a
deed of conveyance in favor of the plaintiff.
Sometime in 1966, the spouses Nicasio M. Ocampo and
Francisca Garcia, herein private respondents, purchased Plaintiff is, however, ordered to pay Lita Enterprises,
in installment from the Delta Motor Sales Corporation Inc., the rentals in arrears for the certificate of
five (5) Toyota Corona Standard cars to be used as convenience from March 1973 up to May 1973 at the
taxicabs. Since they had no franchise to operate rate of P200 a month per unit for the three cars. (Annex
taxicabs, they contracted with petitioner Lita Enterprises, A, Record on Appeal, p. 102-103, Rollo)
Inc., through its representative, Manuel Concordia, for
the use of the latter's certificate of public convenience in Petitioner Lita Enterprises, Inc. moved for
consideration of an initial payment of P1,000.00 and a reconsideration of the decision, but the same was
monthly rental of P200.00 per taxicab unit. To effectuate denied by the court a quo on October 27, 1975. (p. 121,
Id agreement, the aforesaid cars were registered in the Ibid.)
name of petitioner Lita Enterprises, Inc, Possession,
however, remained with tile spouses Ocampo who On appeal by petitioner, docketed as CA-G.R. No.
operated and maintained the same under the name 59157-R, the Intermediate Appellate Court modified the
Acme Taxi, petitioner's trade name. decision by including as part of its dispositive portion
another paragraph, to wit: têñ.£îhqwâ£
About a year later, on March 18, 1967, one of said
taxicabs driven by their employee, Emeterio Martin, In the event the condition of the three Toyota rears will
collided with a motorcycle whose driver, one Florante no longer serve the purpose of the deed of conveyance
Galvez, died from the head injuries sustained therefrom. because of their deterioration, or because they are no
A criminal case was eventually filed against the driver longer serviceable, or because they are no longer
Emeterio Martin, while a civil case for damages was available, then Lita Enterprises, Inc. is ordered to pay
instituted by Rosita Sebastian Vda. de Galvez, heir of the plaintiffs their fair market value as of July 22, 1975.
the victim, against Lita Enterprises, Inc., as registered (Annex "D", p. 167, Rollo.)
owner of the taxicab in the latter case, Civil Case No.
72067 of the Court of First Instance of Manila, petitioner Its first and second motions for reconsideration having
Lita Enterprises, Inc. was adjudged liable for damages in been denied, petitioner came to Us, praying that:
the amount of P25,000.00 and P7,000.00 for attorney's têñ.£îhqwâ£
fees.
1. ...
This decision having become final, a writ of execution
was issued. One of the vehicles of respondent spouses 2. ... after legal proceedings, decision be rendered
with Engine No. 2R-914472 was levied upon and sold at or resolution be issued, reversing, annulling or amending
public auction for 12,150.00 to one Sonnie Cortez, the the decision of public respondent so that:
highest bidder. Another car with Engine No. 2R-915036
was likewise levied upon and sold at public auction for
P8,000.00 to a certain Mr. Lopez.

74
(a) the additional paragraph added by the public sold or delivered, or damages for its property agreed to
respondent to the DECISION of the lower court (CFI) be be sold or delivered, or damages for its violation. The
deleted; rule has sometimes been laid down as though it was
equally universal, that where the parties are in pari
(b) that private respondents be declared liable to delicto, no affirmative relief of any kind will be given to
petitioner for whatever amount the latter has paid or was one against the other." 3 Although certain exceptions to
declared liable (in Civil Case No. 72067) of the Court of the rule are provided by law, We see no cogent reason
First Instance of Manila to Rosita Sebastian Vda. de why the full force of the rule should not be applied in the
Galvez, as heir of the victim Florante Galvez, who died instant case.
as a result ot the gross negligence of private
respondents' driver while driving one private WHEREFORE, all proceedings had in Civil Case No.
respondents' taxicabs. (p. 39, Rollo.) 90988 entitled "Nicasio Ocampo and Francisca P.
Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al.,
Unquestionably, the parties herein operated under an Defendants" of the Court of First Instance of Manila and
arrangement, comonly known as the "kabit system", CA-G.R. No. 59157-R entitled "Nicasio Ocampo and
whereby a person who has been granted a certificate of Francisca P. Garica, Plaintiffs-Appellees, versus Lita
convenience allows another person who owns motors Enterprises, Inc., Defendant-Appellant," of the
vehicles to operate under such franchise for a fee. A Intermediate Appellate Court, as well as the decisions
certificate of public convenience is a special privilege rendered therein are hereby annuleled and set aside. No
conferred by the government . Abuse of this privilege by costs.
the grantees thereof cannot be countenanced. The "kabit
system" has been Identified as one of the root causes of SO ORDERED.
the prevalence of graft and corruption in the government
transportation offices. In the words of Chief Justice
Makalintal, 1 "this is a pernicious system that cannot be
too severely condemned. It constitutes an imposition
upon the goo faith of the government.

Although not outrightly penalized as a criminal offense,


the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and
inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either
party to enforce an illegal contract, but will leave them
both where it finds them. Upon this premise, it was
flagrant error on the part of both the trial and appellate
courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them
such aid. It provides:têñ.£îhqwâ£

ART. 1412. if the act in which the unlawful or


forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed;

(1) when the fault, is on the part of both contracting


parties, neither may recover what he has given by virtue
of the contract, or demand the performance of the
other's undertaking.

The defect of inexistence of a contract is permanent and


incurable, and cannot be cured by ratification or by
prescription. As this Court said in Eugenio v. Perdido, 2
"the mere lapse of time cannot give efficacy to contracts
that are null void."

The principle of in pari delicto is well known not only in


this jurisdiction but also in the United States where
common law prevails. Under American jurisdiction, the
doctrine is stated thus: "The proposition is universal that
no action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be

75
[G.R. No. 144274. September 20, 2004] swapped with a Pajero owned by Albert Jaucian/Auto
Palace Car Exchange. For her part, Linda Gonzales
NOSTRADAMUS VILLANUEVA petitioner, vs. declared that her presence at the scene of the accident
PRISCILLA R. DOMINGO and LEANDRO LUIS R. was upon the request of the actual owner of the
DOMINGO, respondents. Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for
DECISION whom she had been working as agent/seller. On the
CORONA, J.: other hand, Auto Palace Car Exchange represented by
Albert Jaucian claimed that he was not the registered
This is a petition to review the decision[1] of the Court of owner of the car. Moreover, it could not be held
Appeals in CA-G.R. CV No. 52203 affirming in turn the subsidiary liable as employer of Ocfemia because the
decision of the trial court finding petitioner liable to latter was off-duty as utility employee at the time of the
respondent for damages. The dispositive portion read: incident. Neither was Ocfemia performing a duty related
to his employment.[3]
WHEREFORE, the appealed decision is hereby
AFFIRMED except the award of attorneys fees including After trial, the trial court found petitioner liable and
appearance fees which is DELETED. ordered him to pay respondent actual, moral and
exemplary damages plus appearance and attorneys
SO ORDERED.[2] fees:

The facts of the case, as summarized by the Court of WHEREFORE, judgment is hereby rendered for the
Appeals, are as follows: plaintiffs, ordering Nostradamus Villanueva to pay the
amount of P99,580 as actual damages, P25,000.00 as
[Respondent] Priscilla R. Domingo is the registered moral damages, P25,000.00 as exemplary damages and
owner of a silver Mitsubishi Lancer Car model 1980 attorneys fees in the amount of P10,000.00 plus
bearing plate No. NDW 781 91 with [co-respondent] appearance fees of P500.00 per hearing with legal
Leandro Luis R. Domingo as authorized driver. interest counted from the date of judgment. In conformity
[Petitioner] Nostradamus Villanueva was then the with the law on equity and in accordance with the ruling
registered owner of a green Mitsubishi Lancer bearing in First Malayan Lending and Finance Corporation vs.
Plate No. PHK 201 91. Court of Appeals (supra), Albert Jaucian is hereby
ordered to indemnify Nostradamus Villanueva for
On 22 October 1991 at about 9:45 in the evening, whatever amount the latter is hereby ordered to pay
following a green traffic light, [respondent] Priscilla under the judgment.
Domingos silver Lancer car with Plate No. NDW 781 91
then driven by [co-respondent] Leandro Luis R. Domingo SO ORDERED.[4]
was cruising along the middle lane of South
Superhighway at moderate speed from north to south. The CA upheld the trial courts decision but deleted the
Suddenly, a green Mitsubishi Lancer with plate No. PHK award for appearance and attorneys fees because the
201 91 driven by Renato Dela Cruz Ocfemia darted from justification for the grant was not stated in the body of
Vito Cruz Street towards the South Superhighway the decision. Thus, this petition for review which raises a
directly into the path of NDW 781 91 thereby hitting and singular issue:
bumping its left front portion. As a result of the impact,
NDW 781 91 hit two (2) parked vehicles at the roadside, MAY THE REGISTERED OWNER OF A MOTOR
the second hitting another parked car in front of it. VEHICLE BE HELD LIABLE FOR DAMAGES ARISING
FROM A VEHICULAR ACCIDENT INVOLVING HIS
Per Traffic Accident Report prepared by Traffic MOTOR VEHICLE WHILE BEING OPERATED BY THE
Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz EMPLOYEE OF ITS BUYER WITHOUT THE LATTERS
Ocfemia was driving with expired license and positive for CONSENT AND KNOWLEDGE?[5]
alcoholic breath. Hence, Manila Assistant City
Prosecutor Oscar A. Pascua recommended the filing of Yes.
information for reckless imprudence resulting to (sic)
damage to property and physical injuries. We have consistently ruled that the registered owner of
any vehicle is directly and primarily responsible to the
The original complaint was amended twice: first, public and third persons while it is being operated.[6]
impleading Auto Palace Car Exchange as commercial The rationale behind such doctrine was explained way
agent and/or buyer-seller and second, impleading Albert back in 1957 in Erezo vs. Jepte[7]:
Jaucian as principal defendant doing business under the
name and style of Auto Palace Car Exchange. The principle upon which this doctrine is based is that in
dealing with vehicles registered under the Public Service
Except for Ocfemia, all the defendants filed separate Law, the public has the right to assume or presume that
answers to the complaint. [Petitioner] Nostradamus the registered owner is the actual owner thereof, for it
Villanueva claimed that he was no longer the owner of would be difficult for the public to enforce the actions that
the car at the time of the mishap because it was they may have for injuries caused to them by the

76
vehicles being negligently operated if the public should that any damage or injury is caused by the vehicle on
be required to prove who the actual owner is. How would the public highways, responsibility therefore can be fixed
the public or third persons know against whom to on a definite individual, the registered owner. Instances
enforce their rights in case of subsequent transfers of are numerous where vehicles running on public
the vehicles? We do not imply by his doctrine, however, highways caused accidents or injuries to pedestrians or
that the registered owner may not recover whatever other vehicles without positive identification of the owner
amount he had paid by virtue of his liability to third or drivers, or with very scant means of identification. It is
persons from the person to whom he had actually sold, to forestall these circumstances, so inconvenient or
assigned or conveyed the vehicle. prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the
Under the same principle the registered owner of any determination of persons responsible for damages or
vehicle, even if not used for a public service, should injuries caused on public highways:
primarily be responsible to the public or to third persons
for injuries caused the latter while the vehicle is being One of the principal purposes of motor vehicles
driven on the highways or streets. The members of the legislation is identification of the vehicle and of the
Court are in agreement that the defendant-appellant operator, in case of accident; and another is that the
should be held liable to plaintiff-appellee for the injuries knowledge that means of detection are always available
occasioned to the latter because of the negligence of the may act as a deterrent from lax observance of the law
driver, even if the defendant-appellant was no longer the and of the rules of conservative and safe operation.
owner of the vehicle at the time of the damage because Whatever purpose there may be in these statutes, it is
he had previously sold it to another. What is the legal subordinate at the last to the primary purpose of
basis for his (defendant-appellants) liability? rendering it certain that the violator of the law or of the
rules of safety shall not escape because of lack of
There is a presumption that the owner of the guilty means to discover him. The purpose of the statute is
vehicle is the defendant-appellant as he is the registered thwarted, and the displayed number becomes a share
owner in the Motor Vehicles Office. Should he not be and delusion, if courts would entertain such defenses as
allowed to prove the truth, that he had sold it to another that put forward by appellee in this case. No responsible
and thus shift the responsibility for the injury to the real person or corporation could be held liable for the most
and actual owner? The defendant holds the affirmative outrageous acts of negligence, if they should be allowed
of this proposition; the trial court held the negative. to pace a middleman between them and the public, and
escape liability by the manner in which they recompense
The Revised Motor Vehicle Law (Act No. 3992, as servants. (King vs. Brenham Automobile Co., Inc. 145
amended) provides that no vehicle may be used or S.W. 278, 279.)
operated upon any public highway unless the same is
property registered. It has been stated that the system of With the above policy in mind, the question that
licensing and the requirement that each machine must defendant-appellant poses is: should not the registered
carry a registration number, conspicuously displayed, is owner be allowed at the trial to prove who the actual and
one of the precautions taken to reduce the danger of real owner is, and in accordance with such proof escape
injury to pedestrians and other travelers from the or evade responsibility by and lay the same on the
careless management of automobiles. And to furnish a person actually owning the vehicle? We hold with the
means of ascertaining the identity of persons violating trial court that the law does not allow him to do so; the
the laws and ordinances, regulating the speed and law, with its aim and policy in mind, does not relieve him
operation of machines upon the highways (2 R.C.L. directly of the responsibility that the law fixes and places
1176). Not only are vehicles to be registered and that no upon him as an incident or consequence of registration.
motor vehicles are to be used or operated without being Were a registered owner allowed to evade responsibility
properly registered for the current year, but that dealers by proving who the supposed transferee or owner is, it
in motor vehicles shall furnish thee Motor Vehicles Office would be easy for him, by collusion with others or
a report showing the name and address of each otherwise, to escape said responsibility and transfer the
purchaser of motor vehicle during the previous month same to an indefinite person, or to one who possesses
and the manufacturers serial number and motor number. no property with which to respond financially for the
(Section 5(c), Act No. 3992, as amended.) damage or injury done. A victim of recklessness on the
public highways is usually without means to discover or
Registration is required not to make said registration the identify the person actually causing the injury or
operative act by which ownership in vehicles is damage. He has no means other than by a recourse to
transferred, as in land registration cases, because the the registration in the Motor Vehicles Office to determine
administrative proceeding of registration does not bear who is the owner. The protection that the law aims to
any essential relation to the contract of sale between the extend to him would become illusory were the registered
parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. owner given the opportunity to escape liability by
888), but to permit the use and operation of the vehicle disproving his ownership. If the policy of the law is to be
upon any public highway (section 5 [a], Act No. 3992, as enforced and carried out, the registered owner should
amended). The main aim of motor vehicle registration is not be allowed to prove the contrary to the prejudice of
to identify the owner so that if any accident happens, or the person injured, that is, to prove that a third person or

77
another has become the owner, so that he may thereby This Court has consistently ruled that regardless of who
be relieved of the responsibility to the injured person. the actual owner is of a motor vehicle might be, the
registered owner is the operator of the same with
The above policy and application of the law may appear respect to the public and third persons, and as such,
quite harsh and would seem to conflict with truth and directly and primarily responsible for the consequences
justice. We do not think it is so. A registered owner who of its operation. In contemplation of law, the
has already sold or transferred a vehicle has the owner/operator of record is the employer of the driver,
recourse to a third-party complaint, in the same action the actual operator and employer being considered
brought against him to recover for the damage or injury merely as his agent (MYC-Agro-Industrial Corporation
done, against the vendee or transferee of the vehicle. vs. Vda. de Caldo, 132 SCRA 10, citing Vargas vs.
The inconvenience of the suit is no justification for Langcay, 6 SCRA 174; Tamayo vs. Aquino, 105 Phil.
relieving him of liability; said inconvenience is the price 949).
he pays for failure to comply with the registration that the
law demands and requires. We believe that it is immaterial whether or not the driver
was actually employed by the operator of record. It is
In synthesis, we hold that the registered owner, the even not necessary to prove who the actual owner of the
defendant-appellant herein, is primarily responsible for vehicle and the employer of the driver is. Granting that,
the damage caused to the vehicle of the plaintiff- in this case, the father of the driver is the actual owner
appellee, but he (defendant-appellant) has a right to be and that he is the actual employer, following the well-
indemnified by the real or actual owner of the amount settled principle that the operator of record continues to
that he may be required to pay as damage for the injury be the operator of the vehicle in contemplation of law, as
caused to the plaintiff-appellant.[8] regards the public and third person, and as such is
responsible for the consequences incident to its
Petitioner insists that he is not liable for damages since operation, we must hold and consider such owner-
the driver of the vehicle at the time of the accident was operator of record as the employer, in contemplation of
not an authorized driver of the new (actual) owner of the law, of the driver. And, to give effect to this policy of law
vehicle. He claims that the ruling in First Malayan as enunciated in the above cited decisions of this Court,
Leasing and Finance Corporation vs. CA[9] implies that we must now extend the same and consider the actual
to hold the registered owner liable for damages, the operator and employer as the agent of the operator of
driver of the vehicle must have been authorized, allowed record.[11]
and permitted by its actual owner to operate and drive it.
Thus, if the vehicle is driven without the knowledge and Contrary to petitioners position, the First Malayan ruling
consent of the actual owner, then the registered owner is applicable to him since the case involves the same set
cannot be held liable for damages. of facts ― the registered owner had previously sold the
vehicle to someone else and was being driven by an
He further argues that this was the underlying theory employee of the new (actual) owner. Duavit is
behind Duavit vs. CA[10] wherein the court absolved the inapplicable since the vehicle there was not transferred
registered owner from liability after finding that the to another; the registered and the actual owner was one
vehicle was virtually stolen from the owners garage by a and the same person. Besides, in Duavit, the defense of
person who was neither authorized nor employed by the the registered owner, Gilberto Duavit, was that the
owner. Petitioner concludes that the ruling in Duavit and vehicle was practically stolen from his garage by Oscar
not the one in First Malayan should be applicable to him. Sabiano, as affirmed by the latter:

Petitioners argument lacks merit. Whether the driver is Defendant Sabiano, in his testimony, categorically
authorized or not by the actual owner is irrelevant to admitted that he took the jeep from the garage of
determining the liability of the registered owner who the defendant Duavit without the consent and authority of
law holds primarily and directly responsible for any the latter. He testified further that Duavit even filed
accident, injury or death caused by the operation of the charges against him for the theft of the jeep but which
vehicle in the streets and highways. To require the driver Duavit did not push through as his (Sabianos) parents
of the vehicle to be authorized by the actual owner apologized to Duavit on his behalf.[12]
before the registered owner can be held accountable is
to defeat the very purpose why motor vehicle legislations As correctly pointed out by the CA, the Duavit ruling is
are enacted in the first place. not applicable to petitioners case since the circumstance
of unauthorized use was not present. He in fact
Furthermore, there is nothing in First Malayan which voluntarily delivered his car to Albert Jaucian as part of
even remotely suggests that the driver must be the downpayment for a vehicle he purchased from
authorized before the registered owner can be held Jaucian. Thus, he could not claim that the vehicle was
accountable. In First Malayan, the registered owner, stolen from him since he voluntarily ceded possession
First Malayan Corporation, was held liable for damages thereof to Jaucian. It was the latter, as the new (actual)
arising from the accident even if the vehicle involved was owner, who could have raised the defense of theft to
already owned by another party: prove that he was not liable for the acts of his employee

78
Ocfemia. Thus, there is no reason to apply the Duavit
ruling to this case.

The ruling in First Malayan has been reiterated in BA


Finance Corporation vs. CA[13] and more recently in
Aguilar, Sr. vs. Commercial Savings Bank.[14] In BA
Finance, we held the registered owner liable even if, at
the time of the accident, the vehicle was leased by
another party and was driven by the lessees employee.
In Aguilar, the registered owner-bank answered for
damages for the accident even if the vehicle was being
driven by the Vice-President of the Bank in his private
capacity and not as an officer of the Bank, as claimed by
the Bank. We find no reason to deviate from these
decisions.

The main purpose of vehicle registration is the easy


identification of the owner who can be held responsible
for any accident, damage or injury caused by the
vehicle. Easy identification prevents inconvenience and
prejudice to a third party injured by one who is unknown
or unidentified. To allow a registered owner to escape
liability by claiming that the driver was not authorized by
the new (actual) owner results in the public detriment the
law seeks to avoid.

Finally, the issue of whether or not the driver of the


vehicle during the accident was authorized is not at all
relevant to determining the liability of the registered
owner. This must be so if we are to comply with the
rationale and principle behind the registration
requirement under the motor vehicle law.

WHEREFORE, the petition is hereby DENIED. The


January 26, 2000 decision of the Court of Appeals is
AFFIRMED.

SO ORDERED.

79
[G.R. No. 143360. September 5, 2002]
3. P30,000.00 for medical expenses, and funeral
EQUITABLE LEASING CORPORATION, petitioner, vs. expenses.
LUCITA SUYOM, MARISSA ENANO, MYRNA TAMAYO
and FELIX OLEDAN, respondents. C. TO MARISSA ENANO
DECISION
PANGANIBAN, J.: 1. P7,000.00 as actual damages

In an action based on quasi delict, the registered owner D. TO LUCITA SUYOM


of a motor vehicle is solidarily liable for the injuries and
damages caused by the negligence of the driver, in spite 1. The sum of P5,000.00 for the medical treatment of her
of the fact that the vehicle may have already been the two sons.
subject of an unregistered Deed of Sale in favor of
another person. Unless registered with the Land The sum of P120,000.00 as and for attorneys fees.[4]
Transportation Office, the sale -- while valid and binding
between the parties -- does not affect third parties, The Facts
especially the victims of accidents involving the said
transport equipment. Thus, in the present case, On July 17, 1994, a Fuso Road Tractor driven by Raul
petitioner, which is the registered owner, is liable for the Tutor rammed into the house cum store of Myrna
acts of the driver employed by its former lessee who has Tamayo located at Pier 18, Vitas, Tondo, Manila. A
become the owner of that vehicle by virtue of an portion of the house was destroyed. Pinned to death
unregistered Deed of Sale. under the engine of the tractor were Respondent Myrna
Tamayos son, Reniel Tamayo, and Respondent Felix
Statement of the Case Oledans daughter, Felmarie Oledan. Injured were
Respondent Oledan himself, Respondent Marissa
Before us is a Petition for Review under Rule 45 of the Enano, and two sons of Respondent Lucita Suyom.
Rules of Court, assailing the May 12, 2000 Decision[1] of
the Court of Appeals[2] (CA) in CA-GR CV No. 55474. Tutor was charged with and later convicted of reckless
The decretal portion of the Decision reads as follows: imprudence resulting in multiple homicide and multiple
physical injuries in Criminal Case No. 296094-SA,
WHEREFORE, premises considered, the instant appeal Metropolitan Trial Court of Manila, Branch 12.[5]
is hereby DISMISSED for lack of merit. The assailed
decision, dated May 5, 1997, of the Regional Trial Court Upon verification with the Land Transportation Office,
of Manila, Branch 14, in Civil Case No. 95-73522, is respondents were furnished a copy of Official Receipt
hereby AFFIRMED with MODIFICATION that the award No. 62204139[6] and Certificate of Registration No.
of attorneys fees is DELETED.[3] 08262797,[7] showing that the registered owner of the
tractor was Equitable Leasing Corporation/leased to
On the other hand, in Civil Case No. 95-73522, the Edwin Lim. On April 15, 1995, respondents filed against
Regional Trial Court (RTC) of Manila (Branch 14) had Raul Tutor, Ecatine Corporation (Ecatine) and Equitable
earlier disposed in this wise: Leasing Corporation (Equitable) a Complaint[8] for
damages docketed as Civil Case No. 95-73522 in the
WHEREFORE, judgment is hereby rendered in favor of RTC of Manila, Branch 14.
the plaintiffs and against the defendant Equitable
Leasing Corporation ordering said defendant to pay to The trial court, upon motion of plaintiffs counsel, issued
the plaintiffs the following: an Order dropping Raul Tutor, Ecatine and Edwin Lim
from the Complaint, because they could not be located
A. TO MYRNA TAMAYO and served with summonses.[9] On the other hand, in its
Answer with Counterclaim,[10] petitioner alleged that the
1. the sum of P50,000.00 for the death of Reniel vehicle had already been sold to Ecatine and that the
Tamayo; former was no longer in possession and control thereof
at the time of the incident. It also claimed that Tutor was
2. P50,000.00 as moral damages; and an employee, not of Equitable, but of Ecatine.

3. P56,000.00 for the damage to the store and its After trial on the merits, the RTC rendered its Decision
contents, and funeral expenses. ordering petitioner to pay actual and moral damages and
attorneys fees to respondents. It held that since the
B. TO FELIX OLEDAN Deed of Sale between petitioner and Ecatine had not
been registered with the Land Transportation Office
1. the sum of P50,000.00 for the death of Felmarie (LTO), the legal owner was still Equitable.[11] Thus,
Oledan; petitioner was liable to respondents.[12]

2. P50,000.00 as moral damages; and Ruling of the Court of Appeals

80
felonies committed by their employees in the discharge
Sustaining the RTC, the CA held that petitioner was still of the latters duties.[22] This liability attaches when the
to be legally deemed the owner/operator of the tractor, employees who are convicted of crimes committed in the
even if that vehicle had been the subject of a Deed of performance of their work are found to be insolvent and
Sale in favor of Ecatine on December 9, 1992. The are thus unable to satisfy the civil liability adjudged.[23]
reason cited by the CA was that the Certificate of
Registration on file with the LTO still remained in On the other hand, under Article 2176 in relation to
petitioners name.[13] In order that a transfer of Article 2180[24] of the Civil Code, an action predicated
ownership of a motor vehicle can bind third persons, it on quasi delict may be instituted against the employer
must be duly recorded in the LTO.[14] for an employees act or omission. The liability for the
negligent conduct of the subordinate is direct and
The CA likewise upheld respondents claim for moral primary, but is subject to the defense of due diligence in
damages against petitioner because the appellate court the selection and supervision of the employee.[25] The
considered Tutor, the driver of the tractor, to be an agent enforcement of the judgment against the employer for an
of the registered owner/operator.[15] action based on Article 2176 does not require the
employee to be insolvent, since the liability of the former
Hence, this Petition.[16] is solidary -- the latter being statutorily considered a joint
tortfeasor.[26] To sustain a claim based on quasi delict,
Issues the following requisites must be proven: (a) damage
suffered by the plaintiff, (b) fault or negligence of the
In its Memorandum, petitioner raises the following issues defendant, and (c) connection of cause and effect
for the Courts consideration: between the fault or negligence of the defendant and the
damage incurred by the plaintiff.[27]
I
These two causes of action (ex delicto or ex quasi
Whether or not the Court of Appeals and the trial court delicto) may be availed of, subject to the caveat[28] that
gravely erred when they decided and held that petitioner the offended party cannot recover damages twice for the
[was] liable for damages suffered by private respondents same act or omission or under both causes.[29] Since
in an action based on quasi delict for the negligent acts these two civil liabilities are distinct and independent of
of a driver who [was] not the employee of the petitioner. each other, the failure to recover in one will not
necessarily preclude recovery in the other.[30]
II
In the instant case, respondents -- having failed to
Whether or not the Court of Appeals and the trial court recover anything in the criminal case -- elected to file a
gravely erred when they awarded moral damages to separate civil action for damages, based on quasi delict
private respondents despite their failure to prove that the under Article 2176 of the Civil Code.[31] The evidence is
injuries they suffered were brought by petitioners clear that the deaths and the injuries suffered by
wrongful act.[17] respondents and their kins were due to the fault of the
driver of the Fuso tractor.
This Courts Ruling
Dated June 4, 1991, the Lease Agreement[32] between
The Petition has no merit. petitioner and Edwin Lim stipulated that it is the intention
of the parties to enter into a FINANCE LEASE
First Issue: AGREEMENT.[33] Under such scheme, ownership of
Liability for Wrongful Acts the subject tractor was to be registered in the name of
petitioner, until the value of the vehicle has been fully
Petitioner contends that it should not be held liable for paid by Edwin Lim.[34] Further, in the Lease
the damages sustained by respondents and that arose Schedule,[35] the monthly rental for the tractor was
from the negligence of the driver of the Fuso Road stipulated, and the term of the Lease was scheduled to
Tractor, which it had already sold to Ecatine at the time expire on December 4, 1992. After a few months, Lim
of the accident. Not having employed Raul Tutor, the completed the payments to cover the full price of the
driver of the vehicle, it could not have controlled or tractor.[36] Thus, on December 9, 1992, a Deed of
supervised him.[18] Sale[37] over the tractor was executed by petitioner in
favor of Ecatine represented by Edwin Lim. However,
We are not persuaded. In negligence cases, the the Deed was not registered with the LTO.
aggrieved party may sue the negligent party under (1)
Article 100[19] of the Revised Penal Code, for civil We hold petitioner liable for the deaths and the injuries
liability ex delicto; or (2) under Article 2176[20] of the complained of, because it was the registered owner of
Civil Code, for civil liability ex quasi delicto.[21] the tractor at the time of the accident on July 17,
1994.[38] The Court has consistently ruled that,
Furthermore, under Article 103 of the Revised Penal regardless of sales made of a motor vehicle, the
Code, employers may be held subsidiarily liable for registered owner is the lawful operator insofar as the

81
public and third persons are concerned; consequently, it and Lim has been overtaken by the Deed of Sale on
is directly and primarily responsible for the December 9, 1992, between petitioner and Ecatine.
consequences of its operation.[39] In contemplation of While this Deed does not affect respondents in this quasi
law, the owner/operator of record is the employer of the delict suit, it definitely binds petitioner because, unlike
driver, the actual operator and employer being them, it is a party to it.
considered as merely its agent.[40] The same principle
applies even if the registered owner of any vehicle does We must stress that the failure of Equitable and/or
not use it for public service.[41] Ecatine to register the sale with the LTO should not
prejudice respondents, who have the legal right to rely
Since Equitable remained the registered owner of the on the legal principle that the registered vehicle owner is
tractor, it could not escape primary liability for the deaths liable for the damages caused by the negligence of the
and the injuries arising from the negligence of the driver. Petitioner cannot hide behind its allegation that
driver.[42] Tutor was the employee of Ecatine. This will effectively
prevent respondents from recovering their losses on the
The finance-lease agreement between Equitable on the basis of the inaction or fault of petitioner in failing to
one hand and Lim or Ecatine on the other has already register the sale. The non-registration is the fault of
been superseded by the sale. In any event, it does not petitioner, which should thus face the legal
bind third persons. The rationale for this rule has been consequences thereof.
aptly explained in Erezo v. Jepte,[43] which we quote
hereunder: Second Issue:
Moral Damages
x x x. The main aim of motor vehicle registration is to
identify the owner so that if any accident happens, or Petitioner further claims that it is not liable for moral
that any damage or injury is caused by the vehicle on damages, because respondents failed to establish or
the public highways, responsibility therefor can be fixed show the causal connection or relation between the
on a definite individual, the registered owner. Instances factual basis of their claim and their wrongful act or
are numerous where vehicles running on public omission, if any. [49]
highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner Moral damages are not punitive in nature, but are
or drivers, or with very scant means of identification. It is designed to compensate[50] and alleviate in some way
to forestall these circumstances, so inconvenient or the physical suffering, mental anguish, fright, serious
prejudicial to the public, that the motor vehicle anxiety, besmirched reputation, wounded feelings, moral
registration is primarily ordained, in the interest of the shock, social humiliation, and similar injury unjustly
determination of persons responsible for damages or caused a person.[51] Although incapable of pecuniary
injuries caused on public highways.[44] computation, moral damages must nevertheless be
somehow proportional to and in approximation of the
Further, petitioners insistence on FGU Insurance Corp. suffering inflicted.[52] This is so because moral damages
v. Court of Appeals is misplaced.[45] First, in FGU are in the category of an award designed to compensate
Insurance, the registered vehicle owner, which was the claimant for actual injury suffered, not to impose a
engaged in a rent-a-car business, rented out the car. In penalty on the wrongdoer.[53]
this case, the registered owner of the truck, which is
engaged in the business of financing motor vehicle Viewed as an action for quasi delict, the present case
acquisitions, has actually sold the truck to Ecatine, which falls squarely within the purview of Article 2219 (2),[54]
in turn employed Tutor. Second, in FGU Insurance, the which provides for the payment of moral damages in
registered owner of the vehicle was not held responsible cases of quasi delict.[55] Having established the liability
for the negligent acts of the person who rented one of its of petitioner as the registered owner of the vehicle,[56]
cars, because Article 2180 of the Civil Code was not respondents have satisfactorily shown the existence of
applicable. We held that no vinculum juris as employer the factual basis for the award[57] and its causal
and employee existed between the owner and the connection to the acts of Raul Tutor, who is deemed as
driver.[46] In this case, the registered owner of the petitioners employee.[58] Indeed, the damages and
tractor is considered under the law to be the employer of injuries suffered by respondents were the proximate
the driver, while the actual operator is deemed to be its result of petitioners tortious act or omission.[59]
agent.[47] Thus, Equitable, the registered owner of the
tractor, is -- for purposes of the law on quasi delict -- the Further, no proof of pecuniary loss is necessary in order
employer of Raul Tutor, the driver of the tractor. Ecatine, that moral damages may be awarded, the amount of
Tutors actual employer, is deemed as merely an agent indemnity being left to the discretion of the court.[60] The
of Equitable.[48] evidence gives no ground for doubt that such discretion
was properly and judiciously exercised by the trial
True, the LTO Certificate of Registration, dated 5/31/91, court.[61] The award is in fact consistent with the rule
qualifies the name of the registered owner as that moral damages are not intended to enrich the
EQUITABLE LEASING CORPORATION/Leased to injured party, but to alleviate the moral suffering
Edwin Lim. But the lease agreement between Equitable

82
undergone by that party by reason of the defendants
culpable action.[62]

WHEREFORE, the Petition is DENIED and the assailed


Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

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