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Common Carriers Introduction for some reason or other, the suitcases were not actually restored to Prof.

Pablo by ALITALIA until eleven (11) months later, and four (4) months after
[G.R. No. 71929 : December 4, 1990.] institution of her action. 9
192 SCRA 9 CFI: rendered judgment in Dr. Pablo's favor: 20k for nominal damages; 5k
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and for attorney's fees; Ordering the defendant to pay the costs of the suit."
FELIPA E. PABLO, Respondents. Intermediate Appellate Court: not only affirmed the Trial Court's decision
NARVASA, J.: but also increased the award of nominal damages payable by ALITALIA to
P40,000.00. Considering the circumstances, as found by the Trial Court
and the negligence committed by defendant, the amount of P20,000.00
FACTS Dr. Felipa Pablo — an associate professor in the University of the under present inflationary conditions as awarded . . . to the plaintiff as
Philippines, 1 and a research grantee of the Philippine Atomic Energy nominal damages, is too little to make up for the plaintiff's frustration and
Agency — was invited to take part at a meeting of the Department of disappointment in not being able to appear at said conference; and for the
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in embarrassment and humiliation she suffered from the academic
Food and Agriculture of the United Nations in Ispra, Italy. 2 She was invited community for failure to carry out an official mission for which she was
in view of her specialized knowledge in "foreign substances in food and the singled out by the faculty to represent her institution and the country.
agriculture environment." She accepted the invitation. The program Hence, ALITALIA’s appeal on Certiorari. It contends that (1) the Warsaw
announced that she would be the second speaker on the first day of the Convention should have been applied to limit ALITALIA'S liability; and (2)
meeting. 4 Dr. Pablo booked passage on petitioner airline, ALITALIA. that there is no warrant in fact or in law for the award to Dr. Pablo of nominal
She arrived in Milan on the day before the meeting in accordance with the damages and attorney's fees. 14
itinerary and time table set for her by ALITALIA. She was however told by ISSUE W/N the compensation for the injury suffered by Dr. Pablo can be
the ALITALIA personnel there at Milan that her luggage was "delayed restricted to that prescribed by the Warsaw Convention for delay in the
inasmuch as the same . . . (was) in one of the succeeding flights from Rome transport of baggage
to Milan." 5 Her luggage consisted of two (2) suitcases: one contained her
clothing and other personal items; the other, her scientific papers, slides RULING --- NO.
and other research material. But the other flights arriving from Rome did Under the Warsaw Convention, 16 an air carrier is made liable for damages
not have her baggage on board. for:
By then feeling desperate, she went to Rome to try to locate her bags 1) the death, wounding or other bodily injury of a passenger if the
herself. There, she inquired about her suitcases in the domestic and accident causing it took place on board the aircraft or in the course
international airports, and filled out the forms prescribed by ALITALIA for of its operations of embarking or disembarking; 17
people in her predicament. However, her baggage could not be found.
Completely distraught and discouraged, she returned to Manila without 2) the destruction or loss of, or damage to, any registered luggage
attending the meeting in Ispra, Italy. : nad or goods, if the occurrence causing it took place during the carriage
by air;" 18 and
Once back in Manila she demanded that ALITALIA make reparation for the
damages thus suffered by her. ALITALIA offered her "free airline tickets to 3) delay in the transportation by air of passengers, luggage or
compensate her for any alleged damages. . . ." She rejected the offer, and goods. 19
forthwith commenced the action 6 which has given rise to the present In these cases, it is provided in the Convention that the "action for
appellate proceedings. damages, however, founded, can only be brought subject to conditions and
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded limits set out" therein. 20
to Ispra, 7 Italy, but only on the day after her scheduled appearance and The Convention also purports to limit the liability of the carriers in the
participation at the U.N. meeting there. 8 Of course Dr. Pablo was no longer following manner: 21
there to accept delivery; she was already on her way home to Manila. And

1
1. In the carriage of passengers the liability of the carrier for each is proved that the damage resulted from an act or omission of the carrier,
passenger is limited to the sum of 250,000 francs . . . Nevertheless, its servants or agents, done with intent to cause damage or recklessly and
by special contract, the carrier and the passenger may agree to a with knowledge that damage would probably result." The same deletion
higher limit of liability.: nad was effected by the Montreal Agreement of 1966, with the result that a
passenger could recover unlimited damages upon proof of wilful
2. a) In the carriage of registered baggage and of cargo, the liability
misconduct. 24
of the carrier is limited to a sum of 250 francs per kilogramme,
unless the passenger or consignor has made, at the time when the The Convention does not thus operate as an exclusive enumeration of the
package was handed over to the carrier, a special declaration of instances of an airline's liability, or as an absolute limit of the extent of that
interest in delivery at destination and has paid a supplementary liability. Such a proposition is not borne out by the language of the
sum if the case so requires. In that case the carrier will be liable to Convention, as this Court has now, and at an earlier time, pointed out. 25
pay a sum not exceeding the declared sum, unless he proves that Moreover, slight reflection readily leads to the conclusion that it should be
sum is greater than the actual value to the consignor at delivery. 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
b) In the case of loss, damage or delay of part of registered
its transport is not attributable to or attended by any wilful misconduct, bad
baggage or cargo, or of any object contained therein, the weight to
faith, recklessness, or otherwise improper conduct on the part of any official
be taken into consideration in determining the amount to which the
or employee for which the carrier is responsible, and there is otherwise no
carrier's liability is limited shall be only the total weight of the
special or extraordinary form of resulting injury. The Convention's
package or packages concerned. Nevertheless, when the loss,
provisions, in short, do not "regulate or exclude liability for other breaches
damage or delay of a part of the registered baggage or cargo, or
of contract by the carrier" 26 or misconduct of its officers and employees,
of an object contained therein, affects the value of other packages
or for some particular or exceptional type of damage. Otherwise, "an air
covered by the same baggage check or the same air way bill, the
carrier would be exempt from any liability for damages in the event of its
total weight of such package or packages shall also be taken into
absolute refusal, in bad faith, to comply with a contract of carriage, which
consideration in determining the limit of liability.
is absurd." 27 Nor may it for a moment be supposed that if a member of
3. As regards objects of which the passenger takes charge himself the aircraft complement should inflict some physical injury on a passenger,
the liability of the carrier is limited to 5000 francs per passenger. or maliciously destroy or damage the latter's property, the Convention
might successfully be pleaded as the sole gauge to determine the carrier's
4. The limits prescribed . . shall not prevent the court from liability to the passenger. Neither may the Convention be invoked to justify
awarding, in accordance with its own law, in addition, the whole or the disregard of some extraordinary sort of damage resulting to a
part of the court costs and of the other expenses of litigation
passenger and preclude recovery therefor beyond the limits set by said
incurred by the plaintiff. The foregoing provision shall not apply if
Convention. It is in this sense that the Convention has been applied, or
the amount of the damages awarded, excluding court costs and
ignored, depending on the peculiar facts presented by each case.:-cralaw
other expenses of the litigation, does not exceed the sum which
the carrier has offered in writing to the plaintiff within a period of six In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw
months from the date of the occurrence causing the damage, or Convention was applied as regards the limitation on the carrier's liability,
before the commencement of the action, if that is later. there being a simple loss of baggage without any otherwise improper
conduct on the part of the officials or employees of the airline or other
The Warsaw Convention however denies to the carrier availment "of the
special injury sustained by the passenger.
provisions which exclude or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as, in accordance with the On the other hand, the Warsaw Convention has invariably been held
law of the court seized of the case, is considered to be equivalent to wilful inapplicable, or as not restrictive of the carrier's liability, where there was
misconduct," or "if the damage is (similarly) caused . . by any agent of the satisfactory evidence of malice or bad faith attributable to its officers and
carrier acting within the scope of his employment." 22 The Hague Protocol employees. 29 Thus, an air carrier was sentenced to pay not only
amended the Warsaw Convention by removing the provision that if the compensatory but also moral and exemplary damages, and attorney's fees,
airline took all necessary steps to avoid the damage, it could exculpate itself for instance, where its employees rudely put a passenger holding a first-
completely, 23 and declaring the stated limits of liability not applicable "if it class ticket in the tourist or economy section, 30 or ousted a brown Asiatic

2
from the plane to give his seat to a white man, 31 or gave the seat of a plea for moral and exemplary damages and attorney's fees, "for such other
passenger with a confirmed reservation to another, 32 or subjected a and further just and equitable relief in the premises," which certainly is
passenger to extremely rude, even barbaric treatment, as by calling him a broad enough to comprehend an application as well for nominal damages.
"monkey." 33 Besides, petitioner should have realized that the explicit assertion, and
proof, that Dr. Pablo's right had been violated or invaded by it — absent
In the case at bar, no bad faith or otherwise improper conduct may be
any claim for actual or compensatory damages, the prayer thereof having
ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was
been voluntarily deleted by Dr. Pablo upon the return to her of her baggage
eventually returned to her, belatedly, it is true, but without appreciable
— necessarily raised the issue of nominal damages.: rd
damage. The fact is, nevertheless, that some special species of injury was
caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage
and failed to deliver it to her at the time appointed — a breach of its contract
of carriage, to be sure — with the result that she was unable to read the G.R. No. 94149 May 5, 1992
paper and make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had painstakingly
labored over, at the prestigious international conference, to attend which AMERICAN HOME ASSURANCE, COMPANY, petitioner,
she had traveled hundreds of miles, to her chagrin and embarrassment and vs.
the disappointment and annoyance of the organizers. She felt, not THE COURT OF APPEALS and NATIONAL MARINE CORPORATION
unreasonably, that the invitation for her to participate at the conference, and/or NATIONAL MARINE CORPORATION (Manila), respondents.
extended by the Joint FAO/IAEA Division of Atomic Energy in Food and
Agriculture of the United Nations, was a singular honor not only to herself, PARAS, J.:
but to the University of the Philippines and the country as well, an
opportunity to make some sort of impression among her colleagues in that FACTS Both petitioner American Home Assurance Co. and the
field of scientific activity. The opportunity to claim this honor or distinction respondent National Marine Corporation are foreign corporations licensed
was irretrievably lost to her because of Alitalia's breach of its contract. to do business in the Philippines, the former through its branch. The
American Home Assurance Company (Philippines), Inc. and the latter
Apart from this, there can be no doubt that Dr. Pablo underwent profound
through its branch. The National Marine Corporation (Manila) (Rollo, p.
distress and anxiety, which gradually turned to panic and finally despair,
20, Annex L, p.1).
from the time she learned that her suitcases were missing up to the time
when, having gone to Rome, she finally realized that she would no longer
be able to take part in the conference. As she herself put it, she "was really Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of
shocked and distraught and confused." bleached kraft pulp from Haulien, Taiwan on board "SS Kaunlaran", which
is owned and operated by National Marine Corporation with Registration
Certainly, the compensation for the injury suffered by Dr. Pablo cannot No. PID-224. The said shipment was consigned to Mayleen Paper, Inc. of
under the circumstances be restricted to that prescribed by the Warsaw Manila, which insured the shipment with American Home Assurance Co.
Convention for delay in the transport of baggage. as evidenced by Bill of Lading No. HLMN-01.
She is not, of course, entitled to be compensated for loss or damage to her
luggage. As already mentioned, her baggage was ultimately delivered to The shipment arrived in Manila and was discharged into the custody of
her in Manila, tardily but safely. She is however entitled to nominal the Marina Port Services, Inc., for eventual delivery to the consignee-
damages — which, as the law says, is adjudicated in order that a right of assured. However, upon delivery of the shipment to Mayleen Paper, Inc.,
the plaintiff, which has been violated or invaded by the defendant, may be it was found that 122 bales had either been damaged or lost. The loss
vindicated and recognized, and not for the purpose of indemnifying the was calculated to be 4,360 kilograms with an estimated value of
plaintiff for any loss suffered — and this Court agrees that the respondent P61,263.41.
Court of Appeals correctly set the amount thereof at P40,000.00. As to the
purely technical argument that the award to her of such nominal damages Mayleen Paper, Inc. then duly demanded indemnification from respondent
is precluded by her omission to include a specific claim therefor in her National Marine Corporation for the aforesaid damages/losses in the
complaint, it suffices to draw attention to her general prayer, following her
3
shipment but, for apparently no justifiable reason, said demand was not RULING Petitioner: that respondent court failed to consider that
heeded (Petition, p. 4). respondent National Marine Corporation being a common carrier, in
conducting its business is regulated by the Civil Code primarily and
As the shipment was insured with petitioner in the amount of suppletorily by the Code of Commerce; and that respondent court refused
US$837,500.00, Mayleen Paper, Inc. sought recovery from the former. to consider the Bill of Lading as the law governing the parties.
Upon demand and submission of proper documentation, American Home
Assurance paid Mayleen Paper, Inc. the adjusted amount of P31,506.75 Private respondent: countered that in all matters not covered by the Civil
for the damages/losses suffered by the shipment, hence, the former was Code, the rights and obligations of the parties shall be governed by the
subrogated to the rights and interests on Mayleen Paper, Inc. Code of Commerce and by special laws as provided for in Article 1766 of
the Civil Code; that Article 806, 809 and 848 of the Code of Commerce
The petitioner, as subrogee, then brought suit against respondent for the should be applied suppletorily as they provide for the extent of the
recovery of the amount of P31.506.75 and 25% of the total amount due common carriers' liability.
as attorney's fees, by filing a complaint for recovery of sum of money
(Petition, p. 4). National Development Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern
Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987] --- "the law of
National Marine Corporation --- motion to dismiss --- stating that American the country to which the goods are to be transported persons the liability
Home Assurance Company had no cause of action based on Article 848 of the common carrier in case of their loss, destruction or deterioration."
of the Code of Commerce which provides "that claims for averages shall (Article 1753, Civil Code). Thus, for cargoes transported to the Philippines
not be admitted if they do not exceed 5% of the interest which the as in the case at bar, the liability of the carrier is governed primarily by the
claimant may have in the vessel or in the cargo if it be gross average and Civil Code and in all matters not regulated by said Code, the rights and
1% of the goods damaged if particular average, deducting in both cases obligations of common carrier shall be governed by the Code of
the expenses of appraisal, unless there is an agreement to the contrary." Commerce and by special laws (Article 1766, Civil Code).
It contended that based on the allegations of the complaint, the loss
sustained in the case was P35,506.75 which is only .18% of Under Article 1733 of the Civil Code, common carriers from the nature of
P17,420,000.00, the total value of the cargo. their business and for reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety
On the other hand, petitioner countered that Article 848 does not apply as of passengers transported by them according to all circumstances of each
it refers to averages and that a particular average presupposes that the case. Thus, under Article 1735 of the same Code, in all cases other than
loss or damages is due to an inherent defect of the goods, an accident of those mentioned in Article 1734 thereof, the common carrier shall be
the sea, or a force majeure or the negligence of the crew of the carrier, presumed to have been at fault or to have acted negligently, unless it
while claims for damages due to the negligence of the common carrier proves that it has observed the extraordinary diligence required by law
are governed by the Civil Code provisions on Common Carriers. (Ibid., p. 595).

RTC: sustained private respondent's contention and dismissed Common carriers cannot limit their liability for injury or loss of goods
petitioner’s complaint for lack of cause of action. where such injury or loss was caused by its own negligence. Otherwise
stated, the law on averages under the Code of Commerce cannot be
applied in determining liability where there is negligence (Ibid., p. 606).
CA: dismissed on the ground that petitioner utilized the improper remedy
of appeal
Hence, it is but reasonable to conclude that the issue of negligence must
first be addressed before the proper provisions of the Code of Commerce
Hence, this petition.
on the extent of liability may be applied.
ISSUE Application of the law on averages (Articles 806, 809 and 848 of
the Code of Commerce)
4
The records show that upon delivery of the shipment in question of loaded in a sealed 1x40 container van, with no. APLU-982012, boarded
Mayleen's warehouse in Manila, 122 bales were found to be on APL's vessel M/V "Pres. Jackson," Voyage 42, and transshipped to
damaged/lost with straps cut or loose, calculated by the so-called APL's M/V "Pres. Taft"8 for delivery to petitioner in favor of the consignee
"percentage method" at 4,360 kilograms and amounting to P61,263.41 United Laboratories, Inc. (Unilab).
(Rollo, p. 68). Instead of presenting proof of the exercise of extraordinary
diligence as required by law, National Marine Corporation (NMC) filed its On September 30, 1992, the shipment arrived at the port of Manila. On
Motion to Dismiss dated August 7, 1989, hypothetically admitting the truth October 6, 1992, petitioner received the said shipment in its warehouse
of the facts alleged in the complaint to the effect that the loss or damage after it stamped the Permit to Deliver Imported Goods9 procured by the
to the 122 bales was due to the negligence or fault of NMC (Rollo, p. Champs Customs Brokerage.10 Three days thereafter, Oceanica Cargo
179). As ruled by this Court, the filing of a motion to dismiss on the Marine Surveyors Corporation (OCMSC) conducted a stripping survey of
ground of lack of cause of action carries with it the admission of the the shipment located in petitioner's warehouse. The survey results stated:
material facts pleaded in the complaint (Sunbeam Convenience Foods,
Inc. v. C.A., 181 SCRA 443 [1990]). Such being the case, it is evident that 2-pallets STC 40 bags Dried Yeast, both in good order condition and
the Code of Commerce provisions on averages cannot apply. properly sealed

On the other hand, Article 1734 of the Civil Code provides that common 19- steel drums STC Vitamin B Complex Extract, all in good order
carriers are responsible for loss, destruction or deterioration of the goods, condition and properly sealed
unless due to any of the causes enumerated therein. It is obvious that the
case at bar does not fall under any of the exceptions. Thus, American 1-steel drum STC Vitamin B Complex Extract with cut/hole on side, with
Home Assurance Company is entitled to reimbursement of what it paid to approx. spilling of 1%11
Mayleen Paper, Inc. as insurer.
On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc.
(Jardine) issued Gate Pass No. 761412 which stated that "22 drums13 Raw
Materials for Pharmaceutical Mfg." were loaded on a truck with Plate No.
[G.R. No. 166250 : July 26, 2010] PCK-434 facilitated by Champs for delivery to Unilab's warehouse. The
materials were noted to be complete and in good order in the gate
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., pass.14On the same day, the shipment arrived in Unilab's warehouse and
PETITIONER, vs. COURT OF APPEALS AND PIONEER INSURANCE was immediately surveyed by an independent surveyor, J.G. Bernas
AND SURETY CORPORATION, RESPONDENTS. Adjusters & Surveyors, Inc. (J.G. Bernas). The Report stated:
NACHURA, J.:
1-p/bag torn on side contents partly spilled
FACTS On August 31, 1992, the shipper Sylvex Purchasing Corporation
delivered to UTI a shipment of 27 drums of various raw materials for 1-s/drum #7 punctured and retaped on bottom side content lacking
pharmaceutical manufacturing, consisting of: "1) 3 drums (of) extracts,
flavoring liquid, flammable liquid x x x banana flavoring; 2) 2 drums (of) 5-drums shortship/short delivery15
flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags dried yeast;
and 3) 20 drums (of) Vitabs: Vitamin B Complex Extract."4 UTI issued Bill On October 23 and 28, 1992, the same independent surveyor conducted
of Lading No. C320/C15991-2,5 covering the aforesaid shipment. The final inspection surveys which yielded the same results. Consequently,
subject shipment was insured with private respondent Pioneer Insurance Unilab's quality control representative rejected one paper bag containing
and Surety Corporation in favor of Unilab against all risks in the amount of dried yeast and one steel drum containing Vitamin B Complex as unfit for
P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM the intended purpose.16
UL 0627 926 and Open Cargo Policy No. HO-022-RIU.7
Unilab filed a formal claim 17 for the damage against private respondent
On the same day that the bill of lading was issued, the shipment was and UTI. UTI denied liability on the basis of the gate pass issued by

5
Jardine that the goods were in complete and good condition; while private consolidating, shipments, and to perform or provide for break-bulk and
respondent paid the claimed amount on March 23, 1993. By virtue of the distribution operations of the shipments; (2) to assume responsibility for
Loss and Subrogation Receipt18 issued by Unilab in favor of private the transportation of goods from the place of receipt to the place of
respondent, the latter filed a complaint for Damages against APL, UTI and destination; and (3) to use for any part of the transportation a carrier
petitioner with the RTC. subject to the federal law pertaining to common carriers.23

RTC: decided in favor of private respondent and against APL, UTI and A freight forwarder's liability is limited to damages arising from its own
petitioner, ordering the latter to pay, jointly and severally, the former the negligence, including negligence in choosing the carrier; however, where
(Php76,231.27) with interest as actual damages; The amount equivalent the forwarder contracts to deliver goods to their destination instead of
to 25% of the total sum as attorney's fees; Cost of this litigation. merely arranging for their transportation, it becomes liable as a common
carrier for loss or damage to goods. A freight forwarder assumes the
CA: affirmed the RTC decision. responsibility of a carrier, which actually executes the transport, even
though the forwarder does not carry the merchandise itself.24
CA: rejected UTI's defense that it was merely a forwarder, declaring
instead that it was a common carrier; by issuing the Bill of Lading, UTI It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant
acknowledged receipt of the goods and agreed to transport and deliver thereto, petitioner undertook to transport, ship, and deliver the 27 drums
them at a specific place to a person named or his order; upon the delivery of raw materials for pharmaceutical manufacturing to the consignee.
of the subject shipment to petitioner's warehouse, its liability became
similar to that of a depositary. As such, it ought to have exercised ordinary A bill of lading is a written acknowledgement of the receipt of goods and
diligence in the care of the goods; petitioner failed to exercise the required an agreement to transport and to deliver them at a specified place to a
diligence; rejected petitioner's claim that its liability should be limited to person named or on his or her order.25It operates both as a receipt and as
$500 per package pursuant to the Carriage of Goods by Sea Act a contract. It is a receipt for the goods shipped and a contract to transport
(COGSA) considering that the value of the shipment was declared and deliver the same as therein stipulated. As a receipt, it recites the date
pursuant to the letter of credit and the pro forma invoice. As to APL, the and place of shipment, describes the goods as to quantity, weight,
court considered it as a common carrier notwithstanding the non-issuance dimensions, identification marks, condition, quality, and value. As a
of a bill of lading inasmuch as a bill of lading is not indispensable for the contract, it names the contracting parties, which include the consignee;
execution of a contract of carriage.21 fixes the route, destination, and freight rate or charges; and stipulates the
rights and obligations assumed by the parties.26

ISSUE Petitioner admits that it is a forwarder but disagrees with the CA's Undoubtedly, UTI is liable as a common carrier. Common carriers, as a
conclusion that it is a common carrier. It also questions the appellate general rule, are presumed to have been at fault or negligent if the goods
court's findings that it failed to establish that it exercised extraordinary or they transported deteriorated or got lost or destroyed. That is, unless they
ordinary diligence in the vigilance over the subject shipment. As to the prove that they exercised extraordinary diligence in transporting the
damages allegedly suffered by private respondent, petitioner counters goods. In order to avoid responsibility for any loss or damage, therefore,
that they were not sufficiently proven. Lastly, it insists that its liability, in they have the burden of proving that they observed such diligence.27 Mere
any event, should be limited to $500 pursuant to the package limitation proof of delivery of the goods in good order to a common carrier and of
rule. their arrival in bad order at their destination constitutes a prima facie case
of fault or negligence against the carrier. If no adequate explanation is
RULING The petition is partly meritorious. given as to how the deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible.28
Admittedly, petitioner is a freight forwarder. The term "freight forwarder"
refers to a firm holding itself out to the general public (other than as a
pipeline, rail, motor, or water carrier) to provide transportation of property As correctly found by the RTC and the CA, petitioner failed to rebut the
for compensation and, in the ordinary course of its business, (1) to prima facie presumption of negligence in the carriage of the subject
assemble and consolidate, or to provide for assembling and shipment.
6
First, as stated in the bill of lading, the subject shipment was received by In the present case, the shipper did not declare a higher valuation of the
UTI in apparent good order and condition in New York, United States of goods to be shipped. Contrary to the CA's conclusion, the insertion of the
America. Second, the OCMSC Survey Report stated that one steel drum words "L/C No. LC No. 1-187-008394/ NY 69867 covering shipment of
STC Vitamin B Complex Extract was discovered to be with a cut/hole on raw materials for pharmaceutical Mfg. x x x" cannot be the basis of
the side, with approximate spilling of 1%. Third, though Gate Pass No. petitioner's liability.31 Furthermore, the insertion of an invoice number
7614, issued by Jardine, noted that the subject shipment was in good does not in itself sufficiently and convincingly show that petitioner had
order and condition, it was specifically stated that there were 22 (should knowledge of the value of the cargo.32
be 27 drums per Bill of Lading No. C320/C15991-2) drums of raw
materials for pharmaceutical manufacturing. Last, J.G. Bernas' Survey In light of the foregoing, petitioner's liability should be limited to $500 per
Report stated that "1-s/drum was punctured and retaped on the bottom steel drum. In this case, as there was only one drum lost, private
side and the content was lacking, and there was a short delivery of 5- respondent is entitled to receive only $500 as damages for the loss.
drums."
G.R. No. 112287 December 12, 1997
All these conclusively prove the fact of shipment in good order and
condition, and the consequent damage to one steel drum of Vitamin B
Complex Extract while in the possession of petitioner which failed to NATIONAL STEEL CORPORATION, petitioner,
explain the reason for the damage. Further, petitioner failed to prove that vs.
it observed the extraordinary diligence and precaution which the law COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
requires a common carrier to exercise and to follow in order to avoid
damage to or destruction of the goods entrusted to it for safe carriage and G.R. No. 112350 December 12, 1997
delivery.29
VLASONS SHIPPING, INC., petitioner,
However, we affirm the applicability of the Package Limitation Rule under vs.
the COGSA COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
It is to be noted that the Civil Code does not limit the liability of the
common carrier to a fixed amount per package. In all matters not PANGANIBAN, J.:
regulated by the Civil Code, the rights and obligations of common carriers
are governed by the Code of Commerce and special laws. Thus, the
The Court finds occasion to apply the rules on the seaworthiness
COGSA supplements the Civil Code by establishing a provision limiting
of private carrier, its owner's responsibility for damage to the cargo and its
the carrier's liability in the absence of a shipper's declaration of a higher
liability for demurrage and attorney's fees.
value in the bill of lading.30 Section 4(5) of the COGSA provides:

(5) Neither the carrier nor the ship shall in any event be or become liable FACTS The MV Vlasons I is a vessel which renders tramping service
for any loss or damage to or in connection with the transportation of and, as such, does not transport cargo or shipment for the general public.
goods in an amount exceeding $500 per package of lawful money of the Its services are available only to specific persons who enter into a special
United States, or in case of goods not shipped in packages, per contract of charter party with its owner. It is undisputed that the ship is a
customary freight unit, or the equivalent of that sum in other currency, private carrier. And it is in the capacity that its owner, Vlasons Shipping,
unless the nature and value of such goods have been declared by the Inc., entered into a contract of affreightment or contract of voyage charter
shipper before shipment and inserted in the bill of lading. This declaration, hire with National Steel Corporation.
if embodied in the bill of lading, shall be prima facie evidence, but shall
not be conclusive on the carrier. (1) plaintiff National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a
Contract of Voyage Charter Hire (Exhibit "B"; also Exhibit "1")
7
whereby NSC hired VSI's vessel, the MV "VLASONS I" to make carriage and preservation. Owners shall not be liable for loss of or
one (1) voyage to load steel products at Iligan City and discharge damage of the cargo arising or resulting from: unseaworthiness
them at North Harbor, Manila, under the following terms and unless caused by want of due diligence on the part of the owners
conditions, viz: to make the vessel seaworthy, and to secure that the vessel is
properly manned, equipped and supplied and to make the holds
2. Cargo: Full cargo of steel products of not less than 2,500 MT, and all other parts of the vessel in which cargo is carried, fit and
10% more or less at Master's option. safe for its reception, carriage and preservation; . . . ; perils,
dangers and accidents of the sea or other navigable waters; . . . ;
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment wastage in bulk or weight or any other loss or damage arising
from inherent defect, quality or vice of the cargo; insufficiency of
upon presentation of Bill of Lading within fifteen (15) days.
packing; . . . ; latent defects not discoverable by due diligence;
any other cause arising without the actual fault or privity of
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974. Owners or without the fault of the agents or servants of owners."

6. Loading/Discharging Rate: 750 tons per WWDSHINC. Paragraph 12 of said NANYOZAI Charter Party also provides that
(Weather Working Day of 24 consecutive hours, Sundays and "(o)wners shall not be responsible for split, chafing and/or any
Holidays Included). damage unless caused by the negligence or default of the master
and crew."
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
(2) in accordance with the Contract of Voyage Charter Hire, the
9. Cargo Insurance: Charterer's and/or Shipper's must insure the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's
cargoes. Shipowners not responsible for losses/damages except shipment of 1,677 skids of tinplates and 92 packages of hot rolled
on proven willful negligence of the officers of the vessel. sheets or a total of 1,769 packages with a total weight of about
2,481.19 metric tons for carriage to Manila. The shipment was
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] placed in the three (3) hatches of the ship. Chief Mate Gonzalo
or other internationally recognized Charter Party Agreement shall Sabando, acting as agent of the vessel[,] acknowledged receipt of
form part of this Contract. the cargo on board and signed the corresponding bill of lading,
B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.
xxx xxx xxx
(3) The vessel arrived with the cargo at Pier 12, North Harbor,
The terms "F.I.O.S.T." which is used in the shipping business is a Manila, on August 12, 1974. The following day, August 13, 1974,
standard provision in the NANYOZAI Charter Party which stands when the vessel's three (3) hatches containing the shipment were
for "Freight In and Out including Stevedoring and Trading", which opened by plaintiff's agents, nearly all the skids of tinplates and
means that the handling, loading and unloading of the cargoes hot rolled sheets were allegedly found to be wet and rusty. The
are the responsibility of the Charterer. Under Paragraph 5 of the cargo was discharged and unloaded by stevedores hired by the
NANYOZAI Charter Party, it states, "Charterers to load, stow and Charterer. Unloading was completed only on August 24, 1974
discharge the cargo free of risk and expenses to owners. . . . after incurring a delay of eleven (11) days due to the heavy rain
(Emphasis supplied). which interrupted the unloading operations. (Exhibit "E")

Under paragraph 10 thereof, it is provided that "(o)wners shall, (4) To determine the nature and extent of the wetting and rusting,
before and at the beginning of the voyage, exercise due diligence NSC called for a survey of the shipment by the Manila Adjusters
to make the vessel seaworthy and properly manned, equipped and Surveyors Company (MASCO). In a letter to the NSC dated
and supplied and to make the holds and all other parts of the March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular
vessel in which cargo is carried, fit and safe for its reception, inspection conducted on the cargo, both while it was still on board
8
the vessel and later at the NDC warehouse in Pureza St., Sta. and adverse weather condition, causing strong winds and big
Mesa, Manila where the cargo was taken and stored. MASCO waves to continuously pound against the vessel and seawater to
reported that it found wetting and rusting of the packages of hot overflow on its deck and hatch covers, that under the Contract of
rolled sheets and metal covers of the tinplates; that tarpaulin Voyage Charter Hire, defendant shall not be responsible for
hatch covers were noted torn at various extents; that losses/damages except on proven willful negligence of the
container/metal casings of the skids were rusting all over. officers of the vessel, that the officers of said MV "VLASONS I"
MASCO ventured the opinion that "rusting of the tinplates was exercised due diligence and proper seamanship and were not
caused by contact with SEA WATER sustained while still on willfully negligent; that furthermore the Voyage Charter Party
board the vessel as a consequence of the heavy weather and provides that loading and discharging of the cargo was on FIOST
rough seas encountered while en route to destination (Exhibit terms which means that the vessel was free of risk and expense
"F"). It was also reported that MASCO's surveyors drew at in connection with the loading and discharging of the cargo; that
random samples of bad order packing materials of the tinplates the damage, if any, was due to the inherent defect, quality or vice
and delivered the same to the M.I.T. Testing Laboratories for of the cargo or to the insufficient packing thereof or to latent
analysis. On August 31, 1974, the M.I.T. Testing Laboratories defect of the cargo not discoverable by due diligence or to any
issued Report No. 1770 (Exhibit "I") which in part, states, "The other cause arising without the actual fault or privity of defendant
analysis of bad order samples of packing materials . . . shows and without the fault of the agents or servants of defendant;
that wetting was caused by contact with SEA WATER". consequently, defendant is not liable; that the stevedores of
plaintiff who discharged the cargo in Manila were negligent and
(5) On September 6, 1974, on the basis of the aforesaid Report did not exercise due care in the discharge of the cargo; land that
No. 1770, plaintiff filed with the defendant its claim for damages the cargo was exposed to rain and seawater spray while on the
suffered due to the downgrading of the damaged tinplates in the pier or in transit from the pier to plaintiff's warehouse after
amount of P941,145.18. Then on October 3, 1974, plaintiff discharge from the vessel; and that plaintiff's claim was highly
formally demanded payment of said claim but defendant VSI speculative and grossly exaggerated and that the small stain
refused and failed to pay. Plaintiff filed its complaint against marks or sweat marks on the edges of the tinplates were
defendant on April 21, 1976 which was docketed as Civil Case magnified and considered total loss of the cargo. Finally,
No. 23317, CFI, Rizal. defendant claimed that it had complied with all its duties and
obligations under the Voyage Charter Hire Contract and had no
responsibility whatsoever to plaintiff. In turn, it alleged the
(6) In its complaint, plaintiff claimed that it sustained losses in the
following counterclaim:
aforesaid amount of P941,145.18 as a result of the act, neglect
and default of the master and crew in the management of the
vessel as well as the want of due diligence on the part of the (a) That despite the full and proper performance
defendant to make the vessel seaworthy and to make the holds by defendant of its obligations under the Voyage
and all other parts of the vessel in which the cargo was carried, fit Charter Hire Contract, plaintiff failed and refused
and safe for its reception, carriage and preservation — all in to pay the agreed charter hire of P75,000.00
violation of defendant's undertaking under their Contract of despite demands made by defendant;
Voyage Charter Hire.
(b) That under their Voyage Charter Hire
(7) In its answer, defendant denied liability for the alleged Contract, plaintiff had agreed to pay defendant
damage claiming that the MV "VLASONS I" was seaworthy in all the sum of P8,000.00 per day for demurrage. The
respects for the carriage of plaintiff's cargo; that said vessel was vessel was on demurrage for eleven (11) days in
not a "common carrier" inasmuch as she was under voyage Manila waiting for plaintiff to discharge its cargo
charter contract with the plaintiff as charterer under the charter from the vessel. Thus, plaintiff was liable to pay
party; that in the course of the voyage from Iligan City to Manila, defendant demurrage in the total amount of
the MV "VLASONS I" encountered very rough seas, strong winds P88,000.00.

9
(c) For filing a clearly unfounded civil action undertook the voyage. It has all the required
against defendant, plaintiff should be ordered to certificates of seaworthiness.
pay defendant attorney's fees and all expenses
of litigation in the amount of not less than (d) The cargo/shipment was securely stowed in
P100,000.00. three (3) hatches of the ship. The hatch openings
were covered by hatchboards which were in turn
(8) From the evidence presented by both parties, the RTC came covered by two or double tarpaulins. The hatch
out with the following findings which were set forth in its decision: covers were water tight. Furthermore, under the
hatchboards were steel beams to give support.
(a) The MV "VLASONS I" is a vessel of Philippine
registry engaged in the tramping service and is (e) The claim of the plaintiff that defendant
available for hire only under special contracts of violated the contract of carriage is not supported
charter party as in this particular case. by evidence. The provisions of the Civil Code on
common carriers pursuant to which there exists a
(b) That for purposes of the voyage covered by presumption of negligence in case of loss or
the Contract of Voyage Charter Hire (Exh. "1"), damage to the cargo are not applicable. As to the
the MV VLASONS I" was covered by the required damage to the tinplates which was allegedly due
seaworthiness certificates including the to the wetting and rusting thereof, there is
Certification of Classification issued by an unrebutted testimony of witness Vicente
international classification society, the NIPPON Angliongto that tinplates "sweat" by themselves
KAIJI KYOKAI (Exh. "4"); Coastwise License when packed even without being in contract (sic)
from the Board of Transportation (Exh. "5"); with water from outside especially when the
International Loadline Certificate from the weather is bad or raining. The trust caused by
Philippine Coast Guard (Exh. "6"); Cargo Ship sweat or moisture on the tinplates may be
Safety Equipment Certificate also from the considered as a loss or damage but then,
Philippine Coast Guard (Exh. "7"); Ship Radio defendant cannot be held liable for it pursuant to
Station License (Exh. "8"); Certificate of Article 1734 of the Civil Case which exempts the
Inspection by the Philippine Coast Guard (Exh. carrier from responsibility for loss or damage
"12"); and Certificate of Approval for Conversion arising from the "character of the goods . . ." All
issued by the Bureau of Customs (Exh. "9"). That the 1,769 skids of the tinplates could not have
being a vessel engaged in both overseas and been damaged by water as claimed by plaintiff. It
coastwise trade, the MV "VLASONS I" has a was shown as claimed by plaintiff that the
higher degree of seaworthiness and safety. tinplates themselves were wrapped in kraft paper
lining and corrugated cardboards could not be
(c) Before it proceeded to Iligan City to perform affected by water from outside.
the voyage called for by the Contract of Voyage
Charter Hire, the MV "VLASONS I" underwent (f) The stevedores hired by the plaintiff to
drydocking in Cebu and was thoroughly discharge the cargo of tinplates were negligent in
inspected by the Philippine Coast Guard. In fact, not closing the hatch openings of the MV
subject voyage was the vessel's first voyage after "VLASONS I" when rains occurred during the
the drydocking. The evidence shows that the MV discharging of the cargo thus allowing rainwater
"VLASONS I" was seaworthy and properly to enter the hatches. It was proven that the
manned, equipped and supplied when it stevedores merely set up temporary tents to
cover the hatch openings in case of rain so that it
10
would be easy for them to resume work when the P75,000.00 despite demands. The evidence also
rains stopped by just removing the tent or showed that the plaintiff was required and bound
canvas. Because of this improper covering of the under paragraph 7 of the same Voyage Charter
hatches by the stevedores during the discharging Hire contract to pay demurrage of P8,000.00 per
and unloading operations which were interrupted day of delay in the unloading of the cargoes. The
by rains, rainwater drifted into the cargo through delay amounted to eleven (11) days thereby
the hatch openings. Pursuant to paragraph 5 of making plaintiff liable to pay defendant for
the NANYOSAI [sic] Charter Party which was demurrage in the amount of P88,000.00.
expressly made part of the Contract of Voyage
Charter Hire, the loading, stowing and CA: modified the decision of the trial court by reducing the demurrage
discharging of the cargo is the sole responsibility from P88,000.00 to P44,000.00 and deleting the award of attorneys fees
of the plaintiff charterer and defendant carrier has and expenses of litigation.
no liability for whatever damage may occur or
maybe [sic] caused to the cargo in the process.
NSC and VSI filed their respective petitions for review before this Court.
Petitions were consolidated.
(g) It was also established that the vessel
encountered rough seas and bad weather while ISSUE I. Whether or not the provisions of the Civil Code of the Philippines
en route from Iligan City to Manila causing sea
on common carriers pursuant to which there exist[s] a presumption of
water to splash on the ship's deck on account of negligence against the common carrier in case of loss or damage to the
which the master of the vessel (Mr. Antonio C. cargo are applicable to a private carrier.
Dumlao) filed a "Marine Protest" on August 13,
1974 (Exh. "15"); which can be invoked by
defendant as a force majeure that would exempt RULING --- NO.
the defendant from liability.
The Court affirms the assailed Decision of the Court of Appeals, except in
(h) Plaintiff did not comply with the requirement respect of the demurrage.
prescribed in paragraph 9 of the Voyage Charter
Hire contract that it was to insure the cargo Preliminary Matter: Common Carrier or Private Carrier?
because it did not. Had plaintiff complied with the
requirement, then it could have recovered its loss At the outset, it is essential to establish whether VSI contracted with NSC
or damage from the insurer. Plaintiff also violated as a common carrier or as a private carrier. The resolution of this
the charter party contract when it loaded not only preliminary question determines the law, standard of diligence and burden
"steel products", i.e. steel bars, angular bars and of proof applicable to the present case.
the like but also tinplates and hot rolled sheets
which are high grade cargo commanding a higher Article 1732 of the Civil Code defines a common carrier as "persons,
freight. Thus plaintiff was able to ship grade corporations, firms or associations engaged in the business of carrying or
cargo at a lower freight rate. transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public." It has been held that
(i) As regards defendant's counterclaim, the the true test of a common carrier is the carriage of passengers or goods,
contract of voyage charter hire under Paragraph provided it has space, for all who opt to avail themselves of its
4 thereof, fixed the freight at P30.00 per metric transportation service for a fee.11 A carrier which does not qualify under
ton payable to defendant carrier upon the above test is deemed a private carrier. "Generally, private carriage is
presentation of the bill of lading within fifteen (15) undertaken by special agreement and the carrier does not hold himself
days. Plaintiff has not paid the total freight due of out to carry goods for the general public. The most typical, although not
11
the only form of private carriage, is the charter party, a maritime contract Burden of Proof
by which the charterer, a party other than the shipowner, obtains the use
and service of all or some part of a ship for a period of time or a voyage or In view of the aforementioned contractual stipulations, NSC must prove
voyages."12 that the damage to its shipment was caused by VSI's willful negligence or
failure to exercise due diligence in making MV Vlasons I seaworthy and fit
In the instant case, it is undisputed that VSI did not offer its services to the for holding, carrying and safekeeping the cargo. Ineluctably, the burden of
general public. As found by the Regional Trial Court, it carried passengers proof was placed on NSC by the parties' agreement.
or goods only for those it chose under a "special contract of charter
party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons Because the MV Vlasons I was a private carrier, the shipowner's
I "was not a common but a private carrier."14Consequently, the rights and obligations are governed by the foregoing provisions of the Code of
obligations of VSI and NSC, including their respective liability for damage Commerce and not by the Civil Code which, as a general rule, places
to the cargo, are determined primarily by stipulations in their contract of the prima facie presumption of negligence on a common carrier. It is a
private carriage or charter party.15 Recently, in Valenzuela Hardwood and hornbook doctrine that:
Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping
Corporation,16 the Court ruled:
In an action against a private carrier for loss of, or injury to, cargo,
the burden is on the plaintiff to prove that the carrier was
. . . in a contract of private carriage, the parties may freely negligent or unseaworthy, and the fact that the goods were lost or
stipulate their duties and obligations which perforce would be damaged while in the carrier's custody does not put the burden of
binding on them. Unlike in a contract involving a common carrier, proof on the carrier.
private carriage does not involve the general public. Hence, the
stringent provisions of the Civil Code on common carriers
Since . . . a private carrier is not an insurer but undertakes only to
protecting the general public cannot justifiably be applied to a
exercise due care in the protection of the goods committed to its
ship transporting commercial goods as a private carrier.
care, the burden of proving negligence or a breach of that duty
Consequently, the public policy embodied therein is not rests on plaintiff and proof of loss of, or damage to, cargo while in
contravened by stipulations in a charter party that lessen or
the carrier's possession does not cast on it the burden of proving
remove the protection given by law in contracts involving common
proper care and diligence on its part or that the loss occurred
carriers.17
from an excepted cause in the contract or bill of lading. However,
in discharging the burden of proof, plaintiff is entitled to the
Extent of VSI's Responsibility and benefit of the presumptions and inferences by which the law aids
Liability Over NSC's Cargo the bailor in an action against a bailee, and since the carrier is in
a better position to know the cause of the loss and that it was not
It is clear from the parties' Contract of Voyage Charter Hire, dated July one involving its liability, the law requires that it come forward with
17, 1974, that VSI "shall not be responsible for losses except on proven the information available to it, and its failure to do so warrants an
willful negligence of the officers of the vessel." The NANYOZAI Charter inference or presumption of its liability. However, such inferences
Party, which was incorporated in the parties' contract of transportation and presumptions, while they may affect the burden of coming
further provided that the shipowner shall not be liable for loss of or a forward with evidence, do not alter the burden of proof which
damage to the cargo arising or resulting from unseaworthiness, unless remains on plaintiff, and, where the carrier comes forward with
the same was caused by its lack of due diligence to make the vessel evidence explaining the loss or damage, the burden of going
seaworthy or to ensure that the same was "properly manned, equipped forward with the evidence is again on plaintiff.
and supplied," and to "make the holds and all other parts of the vessel in
which cargo [was] carried, fit and safe for its reception, carriage and Where the action is based on the shipowner's warranty of
preservation."18 The NANYOZAI Charter Party also provided that seaworthiness, the burden of proving a breach thereof and that
"[o]wners shall not be responsible for split, chafing and/or any damage such breach was the proximate cause of the damage rests on
unless caused by the negligence or default of the master or crew."19 plaintiff, and proof that the goods were lost or damaged while in
12
the carrier's possession does not cast on it the burden of proving representative/s.4 Nevertheless, it was admittedly signed by Reputable’s
seaworthiness. . . . Where the contract of carriage exempts the representatives, the terms thereof faithfully observed by the parties and,
carrier from liability for unseaworthiness not discoverable by due as previously stated, the same contract of carriage had been annually
diligence, the carrier has the preliminary burden of proving the executed by the parties every year since 1989.5
exercise of due diligence to make the vessel seaworthy. 20
Under the contract, Reputable undertook to answer for "all risks with
In the instant case, the Court of Appeals correctly found the NSC "has not respect to the goods and shall be liable to the COMPANY (Wyeth), for the
taken the correct position in relation to the question of who has the loss, destruction, or damage of the goods/products due to any and all
burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and causes whatsoever, including theft, robbery, flood, storm, earthquakes,
Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff- lightning, and other force majeure while the goods/products are in transit
appellant's [NSC's] interpretation of Clause 12 is not even correct), it and until actual delivery to the customers, salesmen, and dealers of the
argues that 'a careful examination of the evidence will show that VSI COMPANY".6
miserably failed to comply with any of these obligation's as if defendant-
appellee [VSI] had the burden of The contract also required Reputable to secure an insurance policy on
proof."21 Wyeth’s goods.7 Thus, Reputable signed a Special Risk Insurance Policy
(SR Policy) with petitioner Malayan for the amount of P1,000,000.00.

during the effectivity of the Marine Policy and SR Policy, Reputable


G.R. No. 184300 July 11, 2012 received from Wyeth 1,000 boxes of Promil infant formula worth
P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation
MALAYAN INSURANCE CO., INC., Petitioner, in Libis, Quezon City. Unfortunately, the truck carrying Wyeth’s products
vs. was hijacked by about 10 armed men. They threatened to kill the truck
PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE driver and two of his helpers should they refuse to turn over the truck and
FORWARDER SERVICES, INC., Respondents. its contents to the said highway robbers. The hijacked truck was
recovered two weeks later without its cargo.
REYES, J.:
Philippines First, after due investigation and adjustment, and pursuant to
the Marine Policy, paid Wyeth P2,133,257.00 as indemnity. Philippines
FACTS Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent First then demanded reimbursement from Reputable, having been
Reputable Forwarder Services, Inc. (Reputable) had been annually subrogated to the rights of Wyeth by virtue of the payment. The latter,
executing a contract of carriage, whereby the latter undertook to transport however, ignored the demand.
and deliver the former’s products to its customers, dealers or salesmen.3
Consequently, Philippines First instituted an action for sum of money
Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from against Reputable on August 12, 1996.8 In its complaint, Philippines First
respondent Philippines First Insurance Co., Inc. (Philippines First) to stated that Reputable is a "private corporation engaged in the business of
secure its interest over its own products. Philippines First thereby insured a common carrier." In its answer,9 Reputable claimed that it is a private
Wyeth’s nutritional, pharmaceutical and other products usual or incidental carrier. It also claimed that it cannot be made liable under the contract of
to the insured’s business while the same were being transported or carriage with Wyeth since the contract was not signed by Wyeth’s
shipped in the Philippines. The policy covers all risks of direct physical representative and that the cause of the loss was force majeure, i.e., the
loss or damage from any external cause, if by land, and provides a limit of hijacking incident.
P6,000,000.00 per any one land vehicle.
Subsequently, Reputable impleaded Malayan as third-party defendant in
Wyeth executed its annual contract of carriage with Reputable. It turned an effort to collect the amount covered in the SR Policy. According to
out, however, that the contract was not signed by Wyeth’s
13
Reputable, "it was validly insured with Malayan for P1,000,000.00 with Further, Malayan posits that there resulted in an impairment of contract
respect to the lost products under the latter’s Insurance Policy No. SR- when the CA failed to apply the express provisions of Section 5 (referred
0001-02577 effective February 1, 1994 to February 1, 1995" and that the to by Malayan as over insurance clause) and Section 12 (referred to by
SR Policy covered the risk of robbery or hijacking.10 Malayan as other insurance clause) of its SR Policy as these provisions
could have been read together there being no actual conflict between
Disclaiming any liability, Malayan argued, among others, that under them.
Section 5 of the SR Policy, the insurance does not cover any loss or
damage to property which at the time of the happening of such loss or Reputable, meanwhile, contends that it is exempt from liability for acts
damage is insured by any marine policy and that the SR Policy expressly committed by thieves/robbers who act with grave or irresistible threat
excluded third-party liability. whether it is a common carrier or a private/special carrier. It, however,
maintains the correctness of the CA ruling that Malayan is liable to
RTC: found Reputable liable to Philippines First for the amount of Philippines First for the full amount of its policy coverage and not merely a
indemnity it paid to Wyeth, among others. In turn, Malayan was found by ratable portion thereof under Section 12 of the SR Policy.
the RTC to be liable to Reputable to the extent of the policy coverage.
Finally, Philippines First contends that the factual finding that Reputable is
CA: rendered the assailed decision sustaining the ruling of the RTC a private carrier should be accorded the highest degree of respect and
must be considered conclusive between the parties, and that a review of
The CA ruled, among others, that: (1) Reputable is estopped from such finding by the Court is not warranted under the circumstances. As to
assailing the validity of the contract of carriage on the ground of lack of its alleged judicial admission that Reputable is a common carrier,
Philippines First proffered the declaration made by Reputable that it is a
signature of Wyeth’s representative/s; (2) Reputable is liable under the
private carrier. Said declaration was allegedly reiterated by Reputable in
contract for the value of the goods even if the same was lost due to
its third party complaint, which in turn was duly admitted by Malayan in its
fortuitous event; and (3) Section 12 of the SR Policy prevails over Section
answer to the said third-party complaint. In addition, Reputable even
5, it being the latter provision; however, since the ratable proportion
provision of Section 12 applies only in case of double insurance, which is presented evidence to prove that it is a private carrier.
not present, then it should not be applied and Malayan should be held
liable for the full amount of the policy coverage, that is, P1,000,000.00. 14 As to the applicability of Sections 5 and 12 in the SR Policy, Philippines
First reiterated the ruling of the CA. Philippines First, however, prayed for
Hence, this petition. a slight modification of the assailed decision, praying that Reputable and
Malayan be rendered solidarily liable to it in the amount of P998,000.00,
which represents the balance from the P1,000.000.00 coverage of the SR
Malayan insists that the CA failed to properly resolve the issue on the Policy after deducting P2,000.00 under Section 10 of the said SR Policy.17
"statutory limitations on the liability of common carriers" and the
"difference between an ‘other insurance clause’ and an ‘over insurance
ISSUES 1) Whether Reputable is a private carrier;
clause’."

2) Whether Reputable is strictly bound by the stipulations in its


Malayan also contends that the CA erred when it held that Reputable is a
contract of carriage with Wyeth, such that it should be liable for
private carrier and should be bound by the contractual stipulations in the
any risk of loss or damage, for any cause whatsoever, including
contract of carriage. This argument is based on its assertion that
Philippines First judicially admitted in its complaint that Reputable is a that due to theft or robbery and other force majeure;
common carrier and as such, Reputable should not be held liable
pursuant to Article 1745(6) of the Civil Code.16 Necessarily, if Reputable is RULING On the first issue – Reputable is a private carrier.
not liable for the loss, then there is no reason to hold Malayan liable to
Reputable. The Court agrees with the RTC and CA that Reputable is a private carrier.
Well-entrenched in jurisprudence is the rule that factual findings of the

14
trial court, especially when affirmed by the appellate court, are accorded common carrier or that it even contested or proved otherwise Reputable’s
the highest degree of respect and considered conclusive between the position that it is a private or special carrier.
parties, save for certain exceptional and meritorious circumstances, none
of which are present in this case.18 Hence, in the face of Reputable’s contrary admission as to the nature of
its own business, what was stated by Philippines First in its complaint is
Malayan relies on the alleged judicial admission of Philippines First in its reduced to nothing more than mere allegation, which must be proved for it
complaint that Reputable is a common carrier.19 Invoking Section 4, Rule to be given any weight or value. The settled rule is that mere allegation is
129 of the Rules on Evidence that "an admission verbal or written, made not proof.26
by a party in the course of the proceeding in the same case, does not
require proof," it is Malayan’s position that the RTC and CA should have More importantly, the finding of the RTC and CA that Reputable is a
ruled that special or private carrier is warranted by the evidence on record,
primarily, the unrebutted testimony of Reputable’s Vice President and
Reputable is a common carrier. Consequently, pursuant to Article 1745(6) General Manager, Mr. William Ang Lian Suan, who expressly stated in
of the Civil Code, the liability of Reputable for the loss of Wyeth’s goods open court that Reputable serves only one customer, Wyeth.27
should be dispensed with, or at least diminished.
Under Article 1732 of the Civil Code, common carriers are persons,
It is true that judicial admissions, such as matters alleged in the pleadings corporations, firms, or associations engaged in the business of carrying or
do not require proof, and need not be offered to be considered by the transporting passenger or goods, or both by land, water or air for
court. "The court, for the proper decision of the case, may and should compensation, offering their services to the public. On the other hand, a
consider, without the introduction of evidence, the facts admitted by the private carrier is one wherein the carriage is generally undertaken by
parties."20 The rule on judicial admission, however, also states that such special agreement and it does not hold itself out to carry goods for the
allegation, statement, or admission is conclusive as against the general public.28 A common carrier becomes a private carrier when it
pleader,21 and that the facts alleged in the complaint are deemed undertakes to carry a special cargo or chartered to a special person
admissions of the plaintiff and binding upon him.22 In this case, the only.29 For all intents and purposes, therefore, Reputable operated as a
pleader or the plaintiff who alleged that Reputable is a common carrier private/special carrier with regard to its contract of carriage with Wyeth.
was Philippines First. It cannot, by any stretch of imagination, be made
conclusive as against Reputable whose nature of business is in question. On the second issue – Reputable is bound by the terms of the contract of
carriage.
It should be stressed that Philippines First is not privy to the SR Policy
between Wyeth and Reputable; rather, it is a mere subrogee to the right The extent of a private carrier’s obligation is dictated by the stipulations of
of Wyeth to collect from Reputable under the terms of the contract of a contract it entered into, provided its stipulations, clauses, terms and
carriage. Philippines First is not in any position to make any admission, conditions are not contrary to law, morals, good customs, public order, or
much more a definitive pronouncement, as to the nature of Reputable’s public policy. "The Civil Code provisions on common carriers should not
business and there appears no other connection between Philippines be applied where the carrier is not acting as such but as a private carrier.
First and Reputable which suggests mutual familiarity between them. Public policy governing common carriers has no force where the public at
large is not involved."30
Moreover, records show that the alleged judicial admission of Philippines
First was essentially disputed by Reputable when it stated in paragraphs Thus, being a private carrier, the extent of Reputable’s liability is fully
2, 4, and 11 of its answer that it is actually a private or special carrier.23 In governed by the stipulations of the contract of carriage, one of which is
addition, Reputable stated in paragraph 2 of its third-party complaint that that it shall be liable to Wyeth for the loss of the goods/products due to
it is "a private carrier engaged in the carriage of goods."24 Such allegation any and all causes whatsoever, including theft, robbery and other force
was, in turn, admitted by Malayan in paragraph 2 of its answer to the majeure while the goods/products are in transit and until actual delivery to
third-party complaint.25 There is also nothing in the records which show Wyeth’s customers, salesmen and dealers.31
that Philippines First persistently maintained its stance that Reputable is a
15
defendant is ordered to pay plaintiff the sum of Seven Thousand
(P7,000.00) Pesos for the value of the two (2) suit cases; Four
BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP Hundred U.S. ($400.00) Dollars representing the value of the
MAHTANI, and PHILIPPINE AIRLINES, respondents. G.R. No. 121824 contents of plaintiff's luggage; Fifty Thousand (P50,000.00) Pesos
January 29, 1998 for moral and actual damages and twenty percent (20%) of the
total amount imposed against the defendant for attorney's fees
and costs of this action.
ROMERO, J.:
CA AFFIRMED in toto the dec of RTC:
FACTS Mahtani decided to visit his relatives in Bombay, India. In
anticipation of his visit, he obtained the services of a certain Mr. Gumar to
prepare his travel plans. The latter, in turn, purchased a ticket from BA. ISSUE BA assails the award of compensatory damages and attorney's
fees, as well as the dismissal of its third-party complaint against PAL.11
Since BA had no direct flights from Manila to Bombay, Mahtani had to
take a flight to Hongkong via PAL, and upon arrival in Hongkong he had RULING Regarding the first assigned issue, BA asserts that the award of
to take a connecting flight to Bombay on board BA. compensatory damages in the separate sum of P7,000.00 for the loss of
Mahtani's two pieces of luggage was without basis since Mahtani in his
complaint12 stated the following as the value of his personal belongings:
Prior to his departure, Mahtani checked in at the PAL counter in Manila
his two pieces of luggage containing his clothings and personal effects,
confident that upon reaching Hongkong, the same would be transferred to 8. On the said travel, plaintiff took with him the following items
the BA flight bound for Bombay. and its corresponding value, to wit:

Unfortunately, when Mahtani arrived in Bombay he discovered that his 1. personal belonging P10,000.00
luggage was missing and that upon inquiry from the BA representatives,
he was told that the same might have been diverted to London. After 2. gifts for his parents and relatives $5,000.00
patiently waiting for his luggage for one week, BA finally advised him to
file a claim by accomplishing the "Property Irregularity Report."4 Moreover, he failed to declare a higher valuation with respect to his
luggage, a condition provided for in the ticket, which reads:13
Back in the Philippines, Mahtani filed his complaint for damages and
attorney's fees 5 against BA and Mr. Gumar before the trial court Liability for loss, delay, or damage to baggage is limited unless a
higher value is declared in advance and additional charges are
BA: Mahtani did not have a cause of action against it. Likewise, BA filed a paid:
third-party complaint 7 against PAL alleging that the reason for the non-
transfer of the luggage was due to the latter's late arrival in Hongkong, 1. For most international travel (including domestic corporations
thus leaving hardly any time for the proper transfer of Mahtani's luggage of international journeys) the liability limit is approximately U.S.
to the BA aircraft bound for Bombay. $9.07 per pound (U.S. $20.000) per kilo for checked baggage and
U.S. $400 per passenger for unchecked baggage.
PAL: disclaimed any liability, arguing that there was, in fact, adequate
time to transfer the luggage to BA facilities in Hongkong. Furthermore, the Before we resolve the issues raised by BA, it is needful to state that the
transfer of the luggage to Hongkong authorities should be considered as nature of an airline's contract of carriage partakes of two types, namely: a
transfer to BA.8 contract to deliver a cargo or merchandise to its destination and a
contract to transport passengers to their destination. A business intended
RTC: rendered its decision in favor of Mahtani to serve the traveling public primarily, it is imbued with public interest,
hence, the law governing common carriers imposes an exacting
16
standard.14 Neglect or malfeasance by the carrier's employees could kilogram, unless the consignor has made, at time the package
predictably furnish bases for an action for damages.15 was handed over to the carrier, a special declaration of the value
at delivery and has paid a supplementary sum if the case so
In the instant case, it is apparent that the contract of carriage was requires. In that case the carrier will be liable to pay a sum not
between Mahtani and BA. Moreover, it is indubitable that his luggage exceeding the declared sum, unless he proves that the sum is
never arrived in Bombay on time. Therefore, as in a number of cases 16 we greater than the actual value to the consignor at delivery.
have assessed the airlines' culpability in the form of damages for breach
of contract involving misplaced luggage. American jurisprudence provides that an air carrier is not liable for the
loss of baggage in an amount in excess of the limits specified in the tariff
In determining the amount of compensatory damages in this kind of which was filed with the proper authorities, such tariff being binding, on
cases, it is vital that the claimant satisfactorily prove during the trial the the passenger regardless of the passenger's lack of knowledge thereof or
existence of the factual basis of the damages and its causal connection to assent thereto.20 This doctrine is recognized in this jurisdiction.21
defendant's acts.17
Notwithstanding the foregoing, we have, nevertheless, ruled against blind
In this regard, the trial court granted the following award as compensatory reliance on adhesion contracts where the facts and circumstances justify
damages: that they should be disregarded.22

Since plaintiff did not declare the value of the contents in his In addition, we have held that benefits of limited liability are subject to
luggage and even failed to show receipts of the alleged gifts for waiver such as when the air carrier failed to raise timely objections during
the members of his family in Bombay, the most that can be the trial when questions and answers regarding the actual claims and
expected for compensation of his lost luggage (2 suit cases) is damages sustained by the passenger were asked.23
Twenty U.S. Dollars ($20.00) per kilo, or combined value of Four
Hundred ($400.00) U.S. Dollars for Twenty kilos representing the Given the foregoing postulates, the inescapable conclusion is that BA had
contents plus Seven Thousand (P7,000.00) Pesos representing waived the defense of limited liability when it allowed Mahtani to testify as
the purchase price of the two (2) suit cases. to the actual damages he incurred due to the misplacement of his
luggage, without any objection.
However, as earlier stated, it is the position of BA that there should have
been no separate award for the luggage and the contents thereof since As to the issue of the dismissal of BA's third-party complaint against PAL,
Mahtani failed to declare a separate higher valuation for the
luggage,18 and therefore, its liability is limited, at most, only to the amount Undeniably, for the loss of his luggage, Mahtani is entitled to damages
stated in the ticket. from BA, in view of their contract of carriage. Yet, BA adamantly
disclaimed its liability and instead imputed it to PAL which the latter
Considering the facts of the case, we cannot assent to such specious naturally denies. In other words, BA and PAL are blaming each other for
argument. the incident.

Admittedly, in a contract of air carriage a declaration by the passenger of In resolving this issue, it is worth observing that the contract of air
a higher value is needed to recover a greater amount. Article 22(1) of the transportation was exclusively between Mahtani and BA, the latter merely
Warsaw Convention,19 provides as follows: endorsing the Manila to Hongkong leg of the former's journey to PAL, as
its subcontractor or agent. In fact, the fourth paragraph of the "Conditions
xxx xxx xxx of Contracts" of the ticket32issued by BA to Mahtani confirms that the
contract was one of continuous air transportation from Manila to Bombay.
(2) In the transportation of checked baggage and goods, the
liability of the carrier shall be limited to a sum of 250 francs per
17
4. . . . carriage to be performed hereunder by several successive Since the instant petition was based on breach of contract of carriage,
carriers is regarded as a single operation. Mahtani can only sue BA alone, and not PAL, since the latter was not a
party to the contract. However, this is not to say that PAL is relieved from
Prescinding from the above discussion, it is undisputed that PAL, in any liability due to any of its negligent acts. In China Air Lines,
transporting Mahtani from Manila to Hongkong acted as the agent of BA. Ltd. v. Court of Appeals,37 while not exactly in point, the case, however,
illustrates the principle which governs this particular situation. In that
case, we recognized that a carrier (PAL), acting as an agent of another
Parenthetically, the Court of Appeals should have been cognizant of the
well-settled rule that an agent is also responsible for any negligence in the carrier, is also liable for its own negligent acts or omission in the
performance of its function.33 and is liable for damages which the principal performance of its duties.
may suffer by reason of its negligent act.34 Hence, the Court of Appeals
erred when it opined that BA, being the principal, had no cause of action
against PAL, its agent or sub-contractor.
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and
Also, it is worth mentioning that both BA and PAL are members of the ERNESTO CENDANA, respondents. G.R. No. L-47822 December 22,
International Air Transport Association (IATA), wherein member airlines 1988
are regarded as agents of each other in the issuance of the tickets and
other matters pertaining to their relationship. 35 Therefore, in the instant
case, the contractual relationship between BA and PAL is one of agency,
the former being the principal, since it was the one which issued the FELICIANO, J.:
confirmed ticket, and the latter the agent.
FACTS Respondent Ernesto Cendana, a junk dealer, was engaged in
Our pronouncement that BA is the principal is consistent with our ruling buying up used bottles and scrap metal in Pangasinan. Upon gathering
in Lufthansa German Airlines v.Court of Appeals.36 In that case, sufficient quantities of such scrap material, respondent would bring such
Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg material to Manila for resale. He utilized two (2) six-wheeler trucks which
trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines he owned for hauling the material to Manila. On the return trip to
which was to carry Antiporda to a specific destination "bumped" him off. Pangasinan, respondent would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan.
An action for damages was filed against Lufthansa which, however, For that service, respondent charged freight rates which were commonly
denied any liability, contending that its responsibility towards its lower than regular commercial rates.
passenger is limited to the occurrence of a mishap on its own line.
Consequently, when Antiporda transferred to Air Kenya, its obligation as a petitioner Pedro de Guzman a merchant and authorized dealer of General
principal in the contract of carriage ceased; from there on, it merely acted Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted
as a ticketing agent for Air Kenya. with respondent for the hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to petitioner's establishment
In rejecting Lufthansa's argument, we ruled: in Urdaneta on or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to his trucks: 150
In the very nature of their contract, Lufthansa is clearly the cartons were loaded on a truck driven by respondent himself, while 600
principal in the contract of carriage with Antiporda and remains to cartons were placed on board the other truck which was driven by Manuel
be so, regardless of those instances when actual carriage was to Estrada, respondent's driver and employee.
be performed by various carriers. The issuance of confirmed
Lufthansa ticket in favor of Antiporda covering his entire five-leg Only 150 boxes of Liberty filled milk were delivered to petitioner. The
trip abroad successive carriers concretely attest to this. other 600 boxes never reached petitioner, since the truck which carried
these boxes was hijacked somewhere along the MacArthur Highway in
18
Paniqui, Tarlac, by armed men who took with them the truck, its driver, his distinction between a person or enterprise offering transportation service
helper and the cargo. on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732
petitioner commenced action against private respondent before CFI, distinguish between a carrier offering its services to the "general public,"
demanding payment of P 22,150.00, the claimed value of the lost i.e., the general community or population, and one who offers services or
merchandise, plus damages and attorney's fees. Petitioner argued that solicits business only from a narrow segment of the general population.
private respondent, being a common carrier, and having failed to exercise We think that Article 1733 deliberaom making such distinctions.
the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods. So understood, the concept of "common carrier" under Article 1732 may
be seen to coincide neatly with the notion of "public service," under the
private respondent: denied that he was a common carrier and argued that Public Service Act (Commonwealth Act No. 1416, as amended) which at
he could not be held responsible for the value of the lost goods, such loss least partially supplements the law on common carriers set forth in the
having been due to force majeure. Civil Code. Under Section 13, paragraph (b) of the Public Service Act,
"public service" includes:
RTC decision: finding private respondent to be a common carrier and
holding him liable for the value of the undelivered goods (P 22,150.00) as ... every person that now or hereafter may own, operate,
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees. manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
CA reversed the judgment of the trial court and held that respondent had
general business purposes, any common carrier, railroad,
been engaged in transporting return loads of freight "as a casual
street railway, traction railway, subway motor vehicle,
occupation — a sideline to his scrap iron business" and not as a common
either for freight or passenger, or both, with or without
carrier.
fixed route and whatever may be its classification, freight
or carrier service of any class, express service,
ISSUES 1. that private respondent was not a common carrier; steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or
2. that the hijacking of respondent's truck was force freight or both, shipyard, marine repair shop, wharf or
majeure; and dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas,
3. that respondent was not liable for the value of the electric light, heat and power, water supply and power
undelivered cargo. (Rollo, p. 111) petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
RULING The Civil Code defines "common carriers" in the following terms: stations and other similar public services. ... (Emphasis
supplied)
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying It appears to the Court that private respondent is properly characterized
or transporting passengers or goods or both, by land, as a common carrier even though he merely "back-hauled" goods for
water, or air for compensation, offering their services to other merchants from Manila to Pangasinan, although such back-hauling
the public. was done on a periodic or occasional rather than regular or scheduled
manner, and even though private respondent's principal occupation was
not the carriage of goods for others. There is no dispute that private
The above article makes no distinction between one
respondent charged his customers a fee for hauling their goods; that fee
whose principal business activity is the carrying of persons or goods or
frequently fell below commercial freight rates is not relevant here.
both, and one who does such carrying only as an ancillary activity (in local
Idiom as "a sideline"). Article 1732 also carefully avoids making any
19
The Court of Appeals referred to the fact that private respondent held no (5) Order or act of competent public
certificate of public convenience, and concluded he was not a common authority.
carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions It is important to point out that the above list of causes of loss, destruction
governing common carriers. That liability arises the moment a person or or deterioration which exempt the common carrier for responsibility
firm acts as a common carrier, without regard to whether or not such therefor, is a closed list. Causes falling outside the foregoing list, even if
carrier has also complied with the requirements of the applicable they appear to constitute a species of force majeure fall within the scope
regulatory statute and implementing regulations and has been granted a of Article 1735, which provides as follows:
certificate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not In all cases other than those mentioned in numbers 1, 2,
secured the necessary certificate of public convenience, would be 3, 4 and 5 of the preceding article, if the goods are lost,
offensive to sound public policy; that would be to reward private destroyed or deteriorated, common carriers are
respondent precisely for failing to comply with applicable statutory presumed to have been at fault or to have acted
requirements. The business of a common carrier impinges directly and negligently, unless they prove that they observed
intimately upon the safety and well being and property of those members extraordinary diligence as required in Article 1733.
of the general community who happen to deal with such carrier. The law
(Emphasis supplied)
imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a
common carrier to render such duties and liabilities merely facultative by Applying the above-quoted Articles 1734 and 1735, we note firstly that the
simply failing to obtain the necessary permits and authorizations. specific cause alleged in the instant case — the hijacking of the carrier's
truck — does not fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore, that the hijacking
We turn then to the liability of private respondent as a common carrier.
of the carrier's vehicle must be dealt with under the provisions of Article
1735, in other words, that the private respondent as common carrier is
Common carriers, "by the nature of their business and for reasons of presumed to have been at fault or to have acted negligently. This
public policy" 2 are held to a very high degree of care and diligence presumption, however, may be overthrown by proof of extraordinary
("extraordinary diligence") in the carriage of goods as well as of diligence on the part of private respondent.
passengers. The specific import of extraordinary diligence in the care of
goods transported by a common carrier is, according to Article 1733,
Petitioner insists that private respondent had not observed extraordinary
"further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" diligence in the care of petitioner's goods. Petitioner argues that in the
of the Civil Code. circumstances of this case, private respondent should have hired a
security guard presumably to ride with the truck carrying the 600 cartons
Article 1734 establishes the general rule that common carriers are of Liberty filled milk. We do not believe, however, that in the instant case,
responsible for the loss, destruction or deterioration of the goods which the standard of extraordinary diligence required private respondent to
they carry, "unless the same is due to any of the following causes only: retain a security guard to ride with the truck and to engage brigands in a
firelight at the risk of his own life and the lives of the driver and his helper.
(1) Flood, storm, earthquake, lightning or
other natural disaster or calamity; The precise issue that we address here relates to the specific
(2) Act of the public enemy in war, requirements of the duty of extraordinary diligence in the vigilance over
whether international or civil; the goods carried in the specific context of hijacking or armed robbery.
(3) Act or omission of the shipper or
owner of the goods;
As noted earlier, the duty of extraordinary diligence in the vigilance over
(4) The character-of the goods or defects
goods is, under Article 1733, given additional specification not only by
in the packing or-in the containers; and

20
Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, truck, driven by Manuel Estrada and loaded with the 600 cartons of
Article 1745 provides in relevant part: Liberty filled milk destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that the accused acted
Any of the following or similar stipulations shall be with grave, if not irresistible, threat, violence or force.3 Three (3) of the five
considered unreasonable, unjust and contrary to public (5) hold-uppers were armed with firearms. The robbers not only took
policy: away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another
xxx xxx xxx province (in Zambales). The hijacked truck was subsequently found by
the police in Quezon City. The Court of First Instance convicted all the
accused of robbery, though not of robbery in band. 4
(5) that the common carrier shall not be
responsible for the acts or omissions of
In these circumstances, we hold that the occurrence of the loss must
his or its employees;
reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to
(6) that the common carrier's liability for recall that even common carriers are not made absolute insurers against
acts committed by thieves, or of all risks of travel and of transport of goods, and are not held liable for acts
robbers who donot act with grave or or events which cannot be foreseen or are inevitable, provided that they
irresistible threat, violence or force, is shall have complied with the rigorous standard of extraordinary diligence.
dispensed with or diminished; and
We, therefore, agree with the result reached by the Court of Appeals that
(7) that the common carrier shall not private respondent Cendana is not liable for the value of the undelivered
responsible for the loss, destruction or merchandise which was lost because of an event entirely beyond private
deterioration of goods on account of the respondent's control.
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 FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs.
information for robbery in band was filed in the Court of First Instance of COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the BATANGAS CITY and ADORACION C. ARELLANO, in her official
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, capacity as City Treasurer of Batangas, respondents. G.R. No.
Oscar Oria and one John Doe." There, the accused were charged with 125948 December 29, 1998
willfully and unlawfully taking and carrying away with them the second

21
Respondents assert that pipelines are not included in the term "common
carrier" which refers solely to ordinary carriers such as trucks, trains,
MARTINEZ, J.: ships and the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or manner by which a
FACTS Petitioner is a grantee of a pipeline concession under Republic product is delivered to its destination.8
Act No. 387, as amended, to contract, install and operate oil pipelines.
The original pipeline concession was granted in 19671 and renewed by RTC: rendered a decision dismissing the complaint:hat the exemption
the Energy Regulatory Board in 1992. 2 granted under Sec. 133 (j) encompasses only common carriers so as not
to overburden the riding public or commuters with taxes. Plaintiff is not a
common carrier, but a special carrier extending its services and facilities
petitioner applied for a mayor's permit with the Office of the Mayor of
to a single specific or "special customer" under a "special contract."
Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on
its gross receipts for the fiscal year 1993 pursuant to the Local CA: affirmed the trial court's dismissal of petitioner's complaint.
Government Code3. In order not to hamper its operations, petitioner paid
the tax under protest in the amount of P239,019.01 for the first quarter of Hence, this petition. At first, the petition was denied due course in a
1993. Resolution dated November 11, 1996. 13Petitioner moved for a
reconsideration which was granted by this Court in a Resolution 14 of
petitioner filed a letter-protest addressed to the respondent City January 22, 1997. Thus, the petition was reinstated.
Treasurer. It claimed that Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is engaged in ISSUE W/N the petitioner is a common carrier or a transportation
the business of transporting petroleum products from the Batangas contractor thus entitled to business tax exemption
refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such,
our Company is exempt from paying tax on gross receipts under Section RULING There is merit in the petition.
133 of the Local Government Code of 1991
A "common carrier" may be defined, broadly, as one who holds himself
respondent City Treasurer denied the protest contending that petitioner out to the public as engaged in the business of transporting persons or
cannot be considered engaged in transportation business, thus it cannot property from place to place, for compensation, offering his services to
claim exemption under Section 133 (j) of the Local Government Code.5 the public generally.

petitioner filed with the Regional Trial Court of Batangas City a Art. 1732 of the Civil Code defines a "common carrier" as "any person,
complaint6 for tax refund with prayer for writ of preliminary injunction corporation, firm or association engaged in the business of carrying or
against respondents City of Batangas and Adoracion Arellano in her transporting passengers or goods or both, by land, water, or air, for
capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, compensation, offering their services to the public."
that: (2) the authority of cities to impose and collect a tax on the gross
receipts of "contractors and independent contractors" under Sec. 141 (e)
The test for determining whether a party is a common carrier of goods is:
and 151 does not include the authority to collect such taxes on
1. He must be engaged in the business of carrying goods for others as a
transportation contractors for, as defined under Sec. 131 (h), the term public employment, and must hold himself out as ready to engage in the
"contractors" excludes transportation contractors, among others transportation of goods for person generally as a business and not as a
casual occupation; 2. He must undertake to carry goods of the kind to
respondents argued that petitioner cannot be exempt from taxes under which his business is confined; 3. He must undertake to carry by the
Section 133 (j) of the Local Government Code as said exemption applies method by which his business is conducted and over his established
only to "transportation contractors and persons engaged in the roads; and 4. The transportation must be for hire. 15
transportation by hire and common carriers by air, land and water."

22
Based on the above definitions and requirements, there is no doubt that As correctly pointed out by petitioner, the definition of "common carriers"
petitioner is a common carrier. It is engaged in the business of in the Civil Code makes no distinction as to the means of transporting, as
transporting or carrying goods, i.e. petroleum products, for hire as a public long as it is by land, water or air. It does not provide that the
employment. It undertakes to carry for all persons indifferently, that is, to transportation of the passengers or goods should be by motor vehicle. In
all persons who choose to employ its services, and transports the goods fact, in the United States, oil pipe line operators are considered common
by land and for compensation. The fact that petitioner has a limited carriers. 17
clientele does not exclude it from the definition of a common carrier. In De
Guzman vs. Court of Appeals 16we ruled that: The above article (Art. Under the Petroleum Act of the Philippines (Republic Act 387), petitioner
1732, Civil Code) makes no distinction between one whose principal is considered a "common carrier." Thus, Article 86 thereof provides that:
business activity is the carrying of persons or goods or both, and one who Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall
does such carrying only as an ancillary activity (in local idiom, as a have the preferential right to utilize installations for the transportation of
"sideline"). Article 1732 . . . avoids making any distinction between a petroleum owned by him, but is obligated to utilize the remaining
person or enterprise offering transportation service on transportation capacity pro rata for the transportation of such other
a regular or scheduled basis and one offering such service on petroleum as may be offered by others for transport, and to charge
an occasional, episodic or unscheduled basis. Neither does Article 1732 without discrimination such rates as may have been approved by the
distinguish between a carrier offering its services to the "general Secretary of Agriculture and Natural Resources.
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
Republic Act 387 also regards petroleum operation as a public utility.
population. We think that Article 1877 deliberately refrained from making
Pertinent portion of Article 7 thereof provides: that everything relating to
such distinctions. So understood, the concept of "common carrier" under the exploration for and exploitation of petroleum . . . and everything
Article 1732 may be seen to coincide neatly with the notion of "public relating to the manufacture, refining, storage, or transportation by special
service," under the Public Service Act (Commonwealth Act No. 1416, as methods of petroleum, is hereby declared to be a public utility. (Emphasis
amended) which at least partially supplements the law on common
Supplied)
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes: every person that now or
hereafter may own, operate. manage, or control in the Philippines, for hire The Bureau of Internal Revenue likewise considers the petitioner a
or compensation, with general or limited clientele, whether permanent, "common carrier." In BIR Ruling No. 069-83, it declared: . . . since
occasional or accidental, and done for general business purposes, any [petitioner] is a pipeline concessionaire that is engaged only in
common carrier, railroad, street railway, traction railway, subway motor transporting petroleum products, it is considered a common carrier under
vehicle, either for freight or passenger, or both, with or without fixed route Republic Act No. 387 . . . . Such being the case, it is not subject to
and whatever may be its classification, freight or carrier service of any withholding tax prescribed by Revenue Regulations No. 13-78, as
class, express service, steamboat, or steamship line, pontines, ferries and amended.
water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration From the foregoing disquisition, there is no doubt that petitioner is a
plant, canal, irrigation system gas, electric light heat and power, water "common carrier" and, therefore, exempt from the business tax
supply andpower petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and
other similar public services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in


Section 133 (j) of the Local Government Code refers only to common
G.R. No. 147246 August 19, 2003
carriers transporting goods and passengers through moving vehicles or
vessels either by land, sea or water, is erroneous.

23
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, The next day, the towing bits of the barge broke. It sank completely,
vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND resulting in the total loss of the remaining cargo.11 A second Marine
ASSURANCE, INC., respondents. G.R. No. 147246 August 19, 2003 Protest was filed.12

a bidding was conducted to dispose of the damaged wheat retrieved and


loaded on the three other barges.13 The total proceeds from the sale of
PUNO, J.: the salvaged cargo was P201,379.75.14

FACTS 3,150 metric tons of Better Western White Wheat in bulk, valued consignee sent a claim letter to the petitioner, and another letter on a
at US$423,192.354 was shipped by Marubeni American Corporation of separate date to the private respondent for the value of the lost cargo.
Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for
delivery to the consignee, General Milling Corporation in Manila, the private respondent indemnified the consignee in the amount
evidenced by Bill of Lading No. PTD/Man-4.5The shipment was insured of P4,104,654.22.15Thereafter, as subrogee, it sought recovery of said
by the private respondent Prudential Guarantee and Assurance, Inc. amount from the petitioner, but to no avail.
against loss or damage for P14,621,771.75 under Marine Cargo Risk
Note RN 11859/90.6 the private respondent filed a complaint against the petitioner for recovery
of the amount of indemnity, attorney's fees and cost of suit.16 Petitioner
the carrying vessel arrived in Manila and the cargo was transferred to the filed its answer with counterclaim.17
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner
was contracted by the consignee as carrier to deliver the cargo to RTC: ruled in favor of the private respondent, ordering defendant Asia
consignee's warehouse at Bo. Ugong, Pasig City. Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee &
Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date
900 metric tons of the shipment was loaded on barge PSTSI III, complaint was filed on July 3, 1991 until fully satisfied plus 10% of the
evidenced by Lighterage Receipt No. 03647 for delivery to consignee. The amount awarded as and for attorney's fees.
cargo did not reach its destination.
CA: affirmed the decision of the trial court with modification in the sense
It appears that the transport of said cargo was suspended due to a that the salvage value of P201,379.75 shall be deducted from the amount
warning of an incoming typhoon. the petitioner proceeded to pull the of P4,104,654.22.
barge to Engineering Island off Baseco to seek shelter from the
approaching typhoon. PSTSI III was tied down to other barges which ISSUES
arrived ahead of it while weathering out the storm that night. A few days
after, the barge developed a list because of a hole it sustained after hitting (1) Whether the petitioner is a common carrier; and,
an unseen protuberance underneath the water. The petitioner filed a
Marine Protest. It likewise secured the services of Gaspar Salvaging
Corporation which refloated the barge. 9 The hole was then patched with (2) Assuming the petitioner is a common carrier, whether it
clay and cement. exercised extraordinary diligence in its care and custody of the
consignee's cargo.
The barge was then towed to ISLOFF terminal before it finally headed
towards the consignee's wharf. Upon reaching the Sta. Mesa spillways, On the first issue, we rule that petitioner is a common carrier.
the barge again ran aground due to strong current. To avoid the complete
sinking of the barge, a portion of the goods was transferred to three other Article 1732 of the Civil Code defines common carriers as persons,
barges.10 corporations, firms or associations engaged in the business of carrying or

24
transporting passengers or goods or both, by land, water, or air, for in the business of shipping and lighterage,26 offering its barges to the
compensation, offering their services to the public. public, despite its limited clientele for carrying or transporting goods by
water for compensation.27
Petitioner contends that it is not a common carrier but a private carrier.
Allegedly, it has no fixed and publicly known route, maintains no On the second issue, we uphold the findings of the lower courts that
terminals, and issues no tickets. It points out that it is not obliged to carry petitioner failed to exercise extraordinary diligence in its care and custody
indiscriminately for any person. It is not bound to carry goods unless it of the consignee's goods.
consents. In short, it does not hold out its services to the general public. 20
Common carriers are bound to observe extraordinary diligence in the
We disagree. vigilance over the goods transported by them.28 They are presumed to
have been at fault or to have acted negligently if the goods are lost,
In De Guzman vs. Court of Appeals,21 we held that the definition destroyed or deteriorated.29 To overcome the presumption of negligence
of common carriers in Article 1732 of the Civil Code makes no distinction in the case of loss, destruction or deterioration of the goods, the common
between one whose principal business activity is the carrying of persons carrier must prove that it exercised extraordinary diligence. There are,
or goods or both, and one who does such carrying only as an ancillary however, exceptions to this rule. Article 1734 of the Civil Code
activity. We also did not distinguish between a person or enterprise enumerates the instances when the presumption of negligence does not
offering transportation service on a regular or scheduled basis and one attach:
offering such service on an occasional, episodic or unscheduled basis.
Further, we ruled that Article 1732 does not distinguish between a carrier Art. 1734. Common carriers are responsible for the loss,
offering its services to the general public, and one who offers services or destruction, or deterioration of the goods, unless the same is due
solicits business only from a narrow segment of the general population. to any of the following causes only:

In the case at bar, the principal business of the petitioner is that of (1) Flood, storm, earthquake, lightning, or other natural
lighterage and drayage22 and it offers its barges to the public for carrying disaster or calamity;
or transporting goods by water for compensation. Petitioner is clearly a
common carrier. In De Guzman, supra,23 we considered private (2) Act of the public enemy in war, whether international
respondent Ernesto Cendaña to be a common carrier even if his principal or civil;
occupation was not the carriage of goods for others, but that of buying
used bottles and scrap metal in Pangasinan and selling these items in
(3) Act or omission of the shipper or owner of the goods;
Manila.
(4) The character of the goods or defects in the packing
We therefore hold that petitioner is a common carrier whether its carrying or in the containers;
of goods is done on an irregular rather than scheduled manner, and with
an only limited clientele. A common carrier need not have fixed and
publicly known routes. Neither does it have to maintain terminals or issue (5) Order or act of competent public authority.
tickets.
In the case at bar, the barge completely sank after its towing bits broke,
To be sure, petitioner fits the test of a common carrier as laid down resulting in the total loss of its cargo. Petitioner claims that this was
in Bascos vs. Court of Appeals.24 The test to determine a common caused by a typhoon, hence, it should not be held liable for the loss of the
carrier is "whether the given undertaking is a part of the business cargo. However, petitioner failed to prove that the typhoon is the
engaged in by the carrier which he has held out to the general public as proximate and only cause of the loss of the goods, and that it has
his occupation rather than the quantity or extent of the business exercised due diligence before, during and after the occurrence of the
transacted."25 In the case at bar, the petitioner admitted that it is engaged typhoon to prevent or minimize the loss.30 The evidence show that, even
before the towing bits of the barge broke, it had already previously
25
sustained damage when it hit a sunken object while docked at the whose principal business activity is the carrying of persons or goods or
Engineering Island. It even suffered a hole. Clearly, this could not be both, and one who does such carrying only as an ancillary activity (in local
solely attributed to the typhoon. The partly-submerged vessel was idiom, as a "sideline"). Article 1732 also carefully avoids making any
refloated but its hole was patched with only clay and cement. The patch distinction between a person or enterprise offering transportation service
work was merely a provisional remedy, not enough for the barge to sail on a regular or scheduled basis and one offering such service on an
safely. Thus, when petitioner persisted to proceed with the voyage, it occasional, episodic or unscheduled basis. Neither does Article 1732
recklessly exposed the cargo to further damage. distinguished between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
Petitioner still headed to the consignee's wharf despite knowledge of an services or solicits business only from a narrow segment of the general
incoming typhoon. During the time that the barge was heading towards population. We think that Article 1732 deliberately refrained from making
the consignee's wharf on September 5, 1990, typhoon "Loleng" has such distinctions."
already entered the Philippine area of responsibility.
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS
Accordingly, the petitioner cannot invoke the occurrence of the typhoon TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
as force majeure to escape liability for the loss sustained by the private HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
respondent. Surely, meeting a typhoon head-on falls short of due ABSOLUTE. — Common carriers are obliged to observe extraordinary
diligence required from a common carrier. More importantly, the diligence in the vigilance over the goods transported by them.
officers/employees themselves of petitioner admitted that when the towing Accordingly, they are presumed to have been at fault or to have acted
bits of the vessel broke that caused its sinking and the total loss of the negligently if the goods are lost, destroyed or deteriorated. There are very
cargo upon reaching the Pasig River, it was no longer affected by the few instances when the presumption of negligence does not attach and
typhoon. The typhoon then is not the proximate cause of the loss of the these instances are enumerated in Article 1734. In those cases where the
cargo; a human factor, i.e., negligence had intervened. presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption . . . The
presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
G.R. No. 101089. April 7, 1993. own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and
RODOLFO A. CIPRIANO, respondents. G.R. No. 101089. April 7, 1993 3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED
NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In De
SYLLABUS Guzman vs. Court of Appeals, the Court held that hijacking, not being
included in the provisions of Article 1734, must be dealt with under the
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE provisions of Article 1735 and thus, the common carrier is presumed to
COMMON CARRIER. — Article 1732 of the Civil Code defines a common have been at fault or negligent. To exculpate the carrier from liability
carrier as "(a) person, corporation or firm, or association engaged in the arising from hijacking, he must prove that the robbers or the hijackers
business of carrying or transporting passengers or goods or both, by land, acted with grave or irresistible threat, violence, or force. This is in
water or air, for compensation, offering their services to the public." The accordance with Article 1745 of the Civil Code which provides: "Art. 1745.
test to determine a common carrier is "whether the given undertaking is a Any of the following or similar stipulations shall be considered
part of the business engaged in by the carrier which he has held out to unreasonable, unjust and contrary to public policy . . . (6) That the
the general public as his occupation rather than the quantity or extent of common carrier's liability for acts committed by thieves, or of robbers who
the business transacted." . . . The holding of the Court in De Guzman vs. do not act with grave or irresistible threat, violences or force, is dispensed
Court of Appeals is instructive. In referring to Article 1732 of the Civil with or diminished"; In the same case, the Supreme Court also held that:
Code, it held thus: "The above article makes no distinction between one "Under Article 1745 (6) above, a common carrier is held responsible —

26
and will not be allowed to divest or to diminish such responsibility — even presentation by private respondent, Rodolfo Cipriano, of proofs that
for acts of strangers like thieves or robbers, except where such thieves or petitioner was a common carrier. The respondent Court also adopted in
robbers in fact acted "with grave of irresistible threat, violence of force," toto the trial court's decision that petitioner was a common carrier,
We believe and so hold that the limits of the duty of extraordinary Moreover, both courts appreciated the following pieces of evidence as
diligence in the vigilance over the goods carried are reached where the indicators that petitioner was a common carrier: the fact that the truck
goods are lost as a result of a robbery which is attended by "grave or driver of petitioner, Maximo Sanglay, received the cargo consisting of 400
irresistible threat, violence or force." bags of soya bean meal as evidenced by a cargo receipt signed by
Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also
FACTS Rodolfo A. Cipriano representing Cipriano Trading Enterprise an employee of petitioner; and the fact that control of the cargo was
(CIPTRADE for short) entered into a hauling contract 2 with Jibfair placed in petitioner's care.
Shipping Agency Corporation whereby the former bound itself to haul the
latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, In disputing the conclusion of the trial and appellate courts that petitioner
Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. was a common carrier, she alleged in this petition that the contract
To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, between her and Rodolfo A. Cipriano, representing CIPTRADE, was
subcontracted with Estrellita Bascos (petitioner) to transport and to deliver lease of the truck. She cited as evidence certain affidavits which referred
400 sacks of soya bean meal worth P156,404.00 from the Manila Port to the contract as "lease". These affidavits were made by Jesus Bascos 8
Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner and by petitioner herself. 9 She further averred that Jesus Bascos
failed to deliver the said cargo. As a consequence of that failure, Cipriano confirmed in his testimony his statement that the contract was a lease
paid Jibfair Shipping Agency the amount of the lost goods in accordance contract. 10 She also stated that: she was not catering to the general
with the contract. public. Thus, in her answer to the amended complaint, she said that she
does business under the same style of A.M. Bascos Trucking, offering her
Petitioner: there was no contract of carriage since CIPTRADE leased her trucks for lease to those who have cargo to move, not to the general
cargo truck to load the cargo from Manila Port Area to Laguna; that public but to a few customers only in view of the fact that it is only a small
CIPTRADE was liable to petitioner in the amount of P11,000.00 for business. 11
loading the cargo; that the truck carrying the cargo was hijacked along
Canonigo St., Paco, Manila on the night of October 21, 1988; that the We agree with the respondent Court in its finding that petitioner is a
hijacking was immediately reported to CIPTRADE and that petitioner and common carrier.
the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were Article 1732 of the Civil Code defines a common carrier as "(a) person,
filed against Jose Opriano, et al.; and that hijacking, being a force corporation or firm, or association engaged in the business of carrying or
majeure, exculpated petitioner from any liability to CIPTRADE. transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine
RTC: rendered a decision in favor of plaintiff and against defendant a common carrier is "whether the given undertaking is a part of the
ordering the latter to pay the former business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business
CA: affirmed the trial court's judgment. transacted." 12 In this case, petitioner herself has made the admission
that she was in the trucking business, offering her trucks to those with
ISSUES (1) was petitioner a common carrier?; and (2) was the hijacking cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same. 13
referred to a force majeure?

But petitioner argues that there was only a contract of lease because they
The Court of Appeals, in holding that petitioner was a common carrier,
offer their services only to a select group of people and because the
found that she admitted in her answer that she did business under the
private respondents, plaintiffs in the lower court, did not object to the
name A.M. Bascos Trucking and that said admission dispensed with the

27
presentation of affidavits by petitioner where the transaction was referred In this case, petitioner alleged that hijacking constituted force majeure
to as a lease contract. which exculpated her from liability for the loss of the cargo. In De Guzman
vs. Court of Appeals, 20 the Court held that hijacking, not being included
Regarding the first contention, the holding of the Court in De Guzman vs. in the provisions of Article 1734, must be dealt with under the provisions
Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil of Article 1735 and thus, the common carrier is presumed to have been at
Code, it held thus: fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave
"The above article makes no distinction between one whose principal or irresistible threat, violence, or force. This is in accordance with Article
business activity is the carrying of persons or goods or both, and one who 1745 of the Civil Code which provides:
does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction "Art. 1745. Any of the following or similar stipulations shall be considered
between a person or enterprise offering transportation service on a unreasonable, unjust and contrary to public policy;
regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 xxx xxx xxx
distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or (6) That the common carrier's liability for acts committed by thieves, or of
solicits business only from a narrow segment of the general population. robbers who do not act with grave or irresistible threat, violences or force,
We think that Article 1732 deliberately refrained from making such is dispensed with or diminished;"
distinctions."
In the same case, 21 the Supreme Court also held that:
Regarding the affidavits presented by petitioner to the court, both the trial
and appellate courts have dismissed them as self-serving and petitioner
"Under Article 1745 (6) above, a common carrier is held responsible —
contests the conclusion. We are bound by the appellate court's factual and will not be allowed to divest or to diminish such responsibility — even
conclusions. Yet, granting that the said evidence were not self-serving, for acts of strangers like thieves or robbers except where such thieves or
the same were not sufficient to prove that the contract was one of lease. It
robbers in fact acted with grave or irresistible threat, violence or force. We
must be understood that a contract is what the law defines it to be and not
believe and so hold that the limits of the duty of extraordinary diligence in
what it is called by the contracting parties. 15 Furthermore, petitioner
the vigilance over the goods carried are reached where the goods are lost
presented no other proof of the existence of the contract of lease. He who as a result of a robbery which is attended by "grave or irresistible threat,
alleges a fact has the burden of proving it. 16 violence or force."

Likewise, We affirm the holding of the respondent court that the loss of
To establish grave and irresistible force, petitioner presented her
the goods was not due to force majeure.
accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's
24 "Salaysay". However, both the trial court and the Court of Appeals
Common carriers are obliged to observe extraordinary diligence in the have concluded that these affidavits were not enough to overcome the
vigilance over the goods transported by them. 17 Accordingly, they are presumption. Petitioner's affidavit about the hijacking was based on what
presumed to have been at fault or to have acted negligently if the goods had been told her by Juanito Morden. It was not a first-hand account.
are lost, destroyed or deteriorated. 18 There are very few instances when While it had been admitted in court for lack of objection on the part of
the presumption of negligence does not attach and these instances are private respondent, the respondent Court had discretion in assigning
enumerated in Article 1734. 19 In those cases where the presumption is weight to such evidence. We are bound by the conclusion of the appellate
applied, the common carrier must prove that it exercised extraordinary court. In a petition for review on certiorari, We are not to determine the
diligence in order to overcome the presumption. probative value of evidence but to resolve questions of law. Secondly, the
affidavit of Jesus Bascos did not dwell on how the hijacking took place.
Thirdly, while the affidavit of Juanito Morden, the truck helper in the

28
hijacked truck, was presented as evidence in court, he himself was a the shipment in question, contained in 30 metal vans, arrived in Manila on
witness as could be gleaned from the contents of the petition. Affidavits board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the
are not considered the best evidence if the affiants are available as vessel to the custody of the arrastre operator, Manila Port Services, Inc.
witnesses. 25 The subsequent filing of the information for carnapping and petitioner, pursuant to her contract with SMC, withdrew the cargo from the
robbery against the accused named in said affidavits did not necessarily arrastre operator and delivered it to SMC's warehouse in Ermita, Manila.
mean that the contents of the affidavits were true because they were yet the goods were inspected by Marine Cargo Surveyors, who found that 15
to be determined in the trial of the criminal cases. reels of the semi-chemical fluting paper were "wet/stained/torn" and 3
reels of kraft liner board were likewise torn. The damage was placed
The presumption of negligence was raised against petitioner. It was at P93,112.00.
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her SMC collected payment from respondent UCPB under its insurance
own failure to adduce sufficient proof of extraordinary diligence made the contract for the aforementioned amount. In turn, respondent, as subrogee
presumption conclusive against her. of SMC, brought suit against petitioner in…

Having affirmed the findings of the respondent Court on the substantial RTC Makati: which rendered judgment finding petitioner liable to
issues involved, We find no reason to disturb the conclusion that the respondent for the damage to the shipment.
motion to lift/dissolve the writ of preliminary attachment has been
rendered moot and academic by the decision on the merits. CA: affirmed the decision on appeal. Hence this petition for review
on certiorari.
In the light of the foregoing analysis, it is Our opinion that the petitioner's
claim cannot be sustained. The petition is DISMISSED and the decision Petitioner contends that contrary to the findings of the trial court and the
of the Court of Appeals is hereby AFFIRMED. Court of Appeals, she is not a common carrier but a private carrier
because, as a customs broker and warehouseman, she does not
SO ORDERED. indiscriminately hold her services out to the public but only offers the
same to select parties with whom she may contract in the conduct of her
VIRGINES CALVO doing business under the name and style business.
TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly ISSUE W/n petitioner is a common carrier
Allied Guarantee Ins. Co., Inc.) respondent. G.R. No. 148496 March 19,
2002 RULING It will be convenient to deal with these contentions in the inverse
order, for if petitioner is not a common carrier, although both the trial court
MENDOZA, J.: and the Court of Appeals held otherwise, then she is indeed not liable
beyond what ordinary diligence in the vigilance over the goods
FACTS Petitioner Virgines Calvo is the owner of Transorient Container transported by her, would require.6 Consequently, any damage to the
Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. At cargo she agrees to transport cannot be presumed to have been due to
the time material to this case, petitioner entered into a contract with San her fault or negligence.
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 The contention has no merit. In De Guzman v. Court of Appeals,7 the
Manila to SMC's warehouse at the Tabacalera Compound, Romualdez Court dismissed a similar contention and held the party to be a common
St., Ermita, Manila. The cargo was insured by respondent UCPB General carrier, thus -
Insurance Co., Inc.
The Civil Code defines "common carriers" in the following terms:

29
"Article 1732. Common carriers are persons, corporations, firms There is greater reason for holding petitioner to be a common carrier
or associations engaged in the business of carrying or because the transportation of goods is an integral part of her business. To
transporting passengers or goods or both, by land, water, or air uphold petitioner's contention would be to deprive those with whom she
for compensation, offering their services to the public." contracts the protection which the law affords them notwithstanding the
fact that the obligation to carry goods for her customers, as already noted,
The above article makes no distinction between one is part and parcel of petitioner's business.
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
an ancillary activity . . . Article 1732 also carefully avoids making
any distinction between a person or enterprise offering Common carriers, from the nature of their business and for
transportation service on a regular or scheduled basis and one reasons of public policy, are bound to observe extraordinary
offering such service on an occasional, episodic or unscheduled diligence in the vigilance over the goods and for the safety of the
basis. Neither does Article 1732 distinguish between a carrier passengers transported by them, according to all the
offering its services to the "general public," i.e., the general circumstances of each case. . . .
community or population, and one who offers services or solicits
business only from a narrow segment of the general population.
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary
We think that Article 1732 deliberately refrained from making
diligence in the vigilance over goods" was explained thus:
such distinctions.
The extraordinary diligence in the vigilance over the goods
So understood, the concept of "common carrier" under Article
tendered for shipment requires the common carrier to know and
1732 may be seen to coincide neatly with the notion of "public
to follow the required precaution for avoiding damage to, or
service," under the Public Service Act (Commonwealth Act No.
destruction of the goods entrusted to it for sale, carriage and
1416, as amended) which at least partially supplements the law
delivery. It requires common carriers to render service with the
on common carriers set forth in the Civil Code. Under Section 13, greatest skill and foresight and "to use all reasonable means to
paragraph (b) of the Public Service Act, "public service" includes:
ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage,
" x x x every person that now or hereafter may own, including such methods as their nature requires."
operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
In the case at bar, petitioner denies liability for the damage to the cargo.
permanent, occasional or accidental, and done for
She claims that the "spoilage or wettage" took place while the goods were
general business purposes, any common carrier, railroad,
in the custody of either the carrying vessel "M/V Hayakawa Maru," which
street railway, traction railway, subway motor vehicle,
transported the cargo to Manila, or the arrastre operator, to whom the
either for freight or passenger, or both, with or without
goods were unloaded and who allegedly kept them in open air for nine
fixed route and whatever may be its classification, freight days from July 14 to July 23, 1998 notwithstanding the fact that some of
or carrier service of any class, express service, the containers were deformed, cracked, or otherwise damaged, as noted
steamboat, or steamship line, pontines, ferries and water
in the Marine Survey Report
craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation In addition, petitioner claims that Marine Cargo Surveyor Ernesto
system, gas, electric light, heat and power, water supply Tolentino testified that he has no personal knowledge on whether the
and power petroleum, sewerage system, wire or wireless container vans were first stored in petitioner's warehouse prior to their
communications systems, wire or wireless broadcasting delivery to the consignee. She likewise claims that after withdrawing the
stations and other similar public services. x x x" 8 container vans from the arrastre operator, her driver, Ricardo Nazarro,
immediately delivered the cargo to SMC's warehouse in Ermita, Manila,

30
which is a mere thirty-minute drive from the Port Area where the cargo must prove that it used "all reasonable means to ascertain the nature and
came from. Thus, the damage to the cargo could not have taken place characteristic of goods tendered for [transport] and that [it] exercise[d] due
while these were in her custody.11 care in the handling [thereof]." Petitioner failed to do this.

Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Nor is there basis to exempt petitioner from liability under Art. 1734(4),
Marine Cargo Surveyors indicates that when the shipper transferred the which provides --
cargo in question to the arrastre operator, these were covered by clean
Equipment Interchange Report (EIR) and, when petitioner's employees Common carriers are responsible for the loss, destruction, or
withdrew the cargo from the arrastre operator, they did so without deterioration of the goods, unless the same is due to any of the
exception or protest either with regard to the condition of container vans following causes only:
or their contents. The Survey Report pertinently reads --
....
As found by the Court of Appeals:
(4) The character of the goods or defects in the packing or in the
From the [Survey Report], it [is] clear that the shipment was containers.
discharged from the vessel to the arrastre, Marina Port Services
Inc., in good order and condition as evidenced by clean ....
Equipment Interchange Reports (EIRs). Had there been any
damage to the shipment, there would have been a report to that
effect made by the arrastre operator. The cargoes were For this provision to apply, the rule is that if the improper packing or, in
withdrawn by the defendant-appellant from the arrastre still in this case, the defect/s in the container, is/are known to the carrier or his
good order and condition as the same were received by the employees or apparent upon ordinary observation, but he nevertheless
former without exception, that is, without any report of damage or accepts the same without protest or exception notwithstanding such
loss. Surely, if the container vans were deformed, cracked, condition, he is not relieved of liability for damage resulting therefrom.14 In
distorted or dented, the defendant-appellant would report it this case, petitioner accepted the cargo without exception despite the
immediately to the consignee or make an exception on the apparent defects in some of the container vans. Hence, for failure of
delivery receipt or note the same in the Warehouse Entry Slip petitioner to prove that she exercised extraordinary diligence in the
(WES). None of these took place. To put it simply, the defendant- carriage of goods in this case or that she is exempt from liability, the
appellant received the shipment in good order and condition and presumption of negligence as provided under Art. 173515 holds.
delivered the same to the consignee damaged. We can only
conclude that the damages to the cargo occurred while it was in
the possession of the defendant-appellant. Whenever the thing is
lost (or damaged) in the possession of the debtor (or obligor), it
shall be presumed that the loss (or damage) was due to his fault,
unless there is proof to the contrary. No proof was proffered to
rebut this legal presumption and the presumption of negligence
attached to a common carrier in case of loss or damage to the
goods.13

Anent petitioner's insistence that the cargo could not have been damaged
while in her custody as she immediately delivered the containers to
SMC's compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than merely show the
possibility that some other party could be responsible for the damage. It
31
G.R. No. 150255. April 22, 2005 At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the crew
of the barge abandoned it and transferred to the vessel. The barge
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners, pitched and rolled with the waves and eventually capsized, washing the
vs. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE 37 coils into the sea.12 At 7:00 a.m., a tugboat finally arrived to pull the
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now already empty and damaged barge back to the pier.13
INCHCAPE SHIPPING SERVICES, Respondents. G.R. No. 150255.
April 22, 2005 Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.14
CARPIO-MORALES, J.:
Little Giant thus filed a formal claim against Industrial Insurance which
FACTS On September 25, 1991, SYTCO Pte Ltd. Singapore shipped paid it the amount of ₱5,246,113.11. Little Giant thereupon executed a
from the port of Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a subrogation receipt15 in favor of Industrial Insurance.
vessel of Russian registry and owned by Black Sea) 545 hot rolled steel
sheets in coil weighing 6,992,450 metric tons. Industrial Insurance later filed a complaint against Schmitz Transport, TVI,
and Black Sea through its representative Inchcape (the defendants)
The cargoes, which were to be discharged at the port of Manila in favor of before the RTC Manila , for the recovery of the amount it paid to Little
the consignee, Little Giant Steel Pipe Corporation (Little Giant),4 were Giant plus adjustment fees, attorney’s fees, and litigation expenses.16
insured against all risks with Industrial Insurance Company Ltd. (Industrial
Insurance) under Marine Policy No. M-91-3747-TIS.5 Industrial Insurance faulted the defendants for undertaking the unloading
of the cargoes while typhoon signal No. 1 was raised in Metro Manila.17
The vessel arrived at the port of Manila and the Philippine Ports Authority
(PPA) assigned it a place of berth at the outside breakwater at the Manila RTC: held all the defendants negligent for unloading the cargoes outside
South Harbor.6 of the breakwater notwithstanding the storm signal.

Schmitz Transport, whose services the consignee engaged to secure the CA: affirmed in toto the decision of the trial court, 22 it finding that all the
requisite clearances, to receive the cargoes from the shipside, and to defendants were common carriers — Black Sea and TVI for engaging in
deliver them to its (the consignee’s) warehouse at Cainta, Rizal,7 in turn the transport of goods and cargoes over the seas as a regular business
engaged the services of TVI to send a barge and tugboat at shipside. and not as an isolated transaction,23 and Schmitz Transport for entering
into a contract with Little Giant to transport the cargoes from ship to port
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the for a fee.24
barge "Erika V" to shipside.8
In holding all the defendants solidarily liable, the appellate court ruled that
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the "each one was essential such that without each other’s contributory
barge alongside the vessel, left and returned to the port terminal.9 At 9:00 negligence the incident would not have happened and so much so that
p.m., arrastre operator Ocean Terminal Services Inc. commenced to the person principally liable cannot be distinguished with sufficient
unload 37 of the 545 coils from the vessel unto the barge. accuracy."25

By 12:30 a.m. of October 27, 1991 during which the weather condition In discrediting the defense of fortuitous event, the appellate court held
had become inclement due to an approaching storm, the unloading unto that "although defendants obviously had nothing to do with the force of
the barge of the 37 coils was accomplished.10 No tugboat pulled the barge nature, they however had control of where to anchor the vessel, where
back to the pier, however. discharge will take place and even when the discharging will
commence."26

32
Petitioner asserts that in chartering the barge and tugboat of TVI, it was failure to act, the whole occurrence is then humanized and removed from
acting for its principal, consignee Little Giant, hence, the transportation the rules applicable to the acts of God.33
contract was by and between Little Giant and TVI.28
The appellate court, in affirming the finding of the trial court that human
Black Sea: argued that the cargoes were received by the consignee intervention in the form of contributory negligence by all the defendants
through petitioner in good order, hence, it cannot be faulted, it having had resulted to the loss of the cargoes,34 held that unloading outside the
no control and supervision thereover.30 breakwater, instead of inside the breakwater, while a storm signal was up
constitutes negligence.35 It thus concluded that the proximate cause of the
TVI: maintained that it acted as a passive party as it merely received the loss was Black Sea’s negligence in deciding to unload the cargoes at an
cargoes and transferred them unto the barge upon the instruction of unsafe place and while a typhoon was approaching.36
petitioner.31
From a review of the records of the case, there is no indication that there
ISSUES (1) Whether the loss of the cargoes was due to a fortuitous was greater risk in loading the cargoes outside the breakwater. As the
event, independent of any act of negligence on the part of petitioner Black defendants proffered, the weather on October 26, 1991 remained normal
Sea and TVI, and with moderate sea condition such that port operations continued and
proceeded normally.37
(2) If there was negligence, whether liability for the loss may attach to
Black Sea, petitioner and TVI. The weather data report,38 furnished and verified by the Chief of the
Climate Data Section of PAG-ASA and marked as a common exhibit of
RULING When a fortuitous event occurs, Article 1174 of the Civil Code the parties, states that while typhoon signal No. 1 was hoisted over Metro
Manila on October 23-31, 1991, the sea condition at the port of Manila at
absolves any party from any and all liability arising therefrom:
5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. It cannot,
therefore, be said that the defendants were negligent in not unloading the
ART. 1174. Except in cases expressly specified by the law, or when it is cargoes upon the barge on October 26, 1991 inside the breakwater.
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those
That no tugboat towed back the barge to the pier after the cargoes were
events which could not be foreseen, or which though foreseen, were
completely loaded by 12:30 in the morning39 is, however, a material fact
inevitable.
which the appellate court failed to properly consider and
appreciate40 — the proximate cause of the loss of the cargoes. Had the
In order, to be considered a fortuitous event, however, (1) the cause of barge been towed back promptly to the pier, the deteriorating sea
the unforeseen and unexpected occurrence, or the failure of the debtor to conditions notwithstanding, the loss could have been avoided. But the
comply with his obligation, must be independent of human will; (2) it must barge was left floating in open sea until big waves set in at 5:30 a.m.,
be impossible to foresee the event which constitute the caso fortuito, or if causing it to sink along with the cargoes.41 The loss thus falls outside the
it can be foreseen it must be impossible to avoid; (3) the occurrence must "act of God doctrine."
be such as to render it impossible for the debtor to fulfill his obligation in
any manner; and (4) the obligor must be free from any participation in the
The proximate cause of the loss having been determined, who among the
aggravation of the injury resulting to the creditor.32
parties is/are responsible therefor?
[T]he principle embodied in the act of God doctrine strictly requires that
Contrary to petitioner’s insistence, this Court, as did the appellate court,
the act must be occasioned solely by the violence of nature. Human
finds that petitioner is a common carrier. For it undertook to transport the
intervention is to be excluded from creating or entering into the cause of
cargoes from the shipside of "M/V Alexander Saveliev" to the consignee’s
the mischief. When the effect is found to be in part the result of the
warehouse at Cainta, Rizal. As the appellate court put it, "as long as a
participation of man, whether due to his active intervention or neglect or
person or corporation holds [itself] to the public for the purpose of

33
transporting goods as [a] business, [it] is already considered a common the shipside and into Little Giant’s warehouse, however, petitioner was
carrier regardless if [it] owns the vehicle to be used or has to hire discharging its own personal obligation under a contact of carriage.
one."42 That petitioner is a common carrier, the testimony of its own Vice-
President and General Manager Noel Aro that part of the services it offers Petitioner, which did not have any barge or tugboat, engaged the services
to its clients as a brokerage firm includes the transportation of cargoes of TVI as handler48 to provide the barge and the tugboat. In their Service
reflects so. Contract,49 while Little Giant was named as the consignee, petitioner did
not disclose that it was acting on commission and was chartering the
It is settled that under a given set of facts, a customs broker may be vessel for Little Giant.50 Little Giant did not thus automatically become a
regarded as a common carrier. Thus, this Court, in A.F. Sanchez party to the Service Contract and was not, therefore, bound by the terms
Brokerage, Inc. v. The Honorable Court of Appeals,44 held: and conditions therein.

The appellate court did not err in finding petitioner, a customs broker, to Not being a party to the service contract, Little Giant cannot directly sue
be also a common carrier, as defined under Article 1732 of the Civil Code, TVI based thereon but it can maintain a cause of action for negligence.51
to wit,
In the case of TVI, while it acted as a private carrier for which it was under
Art. 1732. Common carriers are persons, corporations, firms or no duty to observe extraordinary diligence, it was still required to observe
associations engaged in the business of carrying or transporting ordinary diligence to ensure the proper and careful handling, care and
passengers or goods or both, by land, water, or air, for compensation, discharge of the carried goods.
offering their services to the public.
Thus, Articles 1170 and 1173 of the Civil Code provide:
xxx
ART. 1170. Those who in the performance of their obligations are guilty of
Article 1732 does not distinguish between one whose principal business fraud, negligence, or delay, and those who in any manner contravene the
activity is the carrying of goods and one who does such carrying only as tenor thereof, are liable for damages.
an ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to ART. 1173. The fault or negligence of the obligor consists in the omission
prepare the correct customs declaration and proper shipping documents of that diligence which is required by the nature of the obligation and
as required by law is bereft of merit. It suffices that petitioner undertakes corresponds with the circumstances of the persons, of the time and of the
to deliver the goods for pecuniary consideration.45 place. When negligence shows bad faith, the provisions of articles 1171
and 2202, paragraph 2, shall apply.
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held that
as the transportation of goods is an integral part of a customs broker, the If the law or contract does not state the diligence which is to be observed
customs broker is also a common carrier. For to declare otherwise "would in the performance, that which is expected of a good father of a family
be to deprive those with whom [it] contracts the protection which the law shall be required.
affords them notwithstanding the fact that the obligation to carry goods for
[its] customers, is part and parcel of petitioner’s business."47
Was the reasonable care and caution which an ordinarily prudent person
would have used in the same situation exercised by TVI?52
As for petitioner’s argument that being the agent of Little Giant, any
negligence it committed was deemed the negligence of its principal, it
This Court holds not.
does not persuade.
TVI’s failure to promptly provide a tugboat did not only increase the risk
True, petitioner was the broker-agent of Little Giant in securing the that might have been reasonably anticipated during the shipside
release of the cargoes. In effecting the transportation of the cargoes from operation, but was the proximate cause of the loss. A man of ordinary
34
prudence would not leave a heavily loaded barge floating for a the parties, the contract can be said to have been breached by tort,
considerable number of hours, at such a precarious time, and in the open thereby allowing the rules on tort to apply.57
sea, knowing that the barge does not have any power of its own and is
totally defenseless from the ravages of the sea. That it was nighttime and, As for Black Sea, its duty as a common carrier extended only from the
therefore, the members of the crew of a tugboat would be charging time the goods were surrendered or unconditionally placed in its
overtime pay did not excuse TVI from calling for one such tugboat. possession and received for transportation until they were delivered
actually or constructively to consignee Little Giant.58
As for petitioner, for it to be relieved of liability, it should, following Article
173953 of the Civil Code, prove that it exercised due diligence to prevent Parties to a contract of carriage may, however, agree upon a definition of
or minimize the loss, before, during and after the occurrence of the storm delivery that extends the services rendered by the carrier. In the case at
in order that it may be exempted from liability for the loss of the goods. 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,
While petitioner sent checkers54 and a supervisor55 on board the vessel to always afloat."59 The delivery of the goods to the consignee was not from
counter-check the operations of TVI, it failed to take all available and "pier to pier" but from the shipside of "M/V Alexander Saveliev" and into
reasonable precautions to avoid the loss. After noting that TVI failed to barges, for which reason the consignee contracted the services of
arrange for the prompt towage of the barge despite the deteriorating sea petitioner. Since Black Sea had constructively delivered the cargoes to
conditions, it should have summoned the same or another tugboat to Little Giant, through petitioner, it had discharged its duty. 60
extend help, but it did not.
In fine, no liability may thus attach to Black Sea.
This Court holds then that petitioner and TVI are solidarily liable 56 for the
loss of the cargoes. The following pronouncement of the Supreme Court
is instructive:
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT
The foundation of LRTA’s liability is the contract of carriage and its OF APPEALS and FGU INSURANCE CORPORATION, respondents.
obligation to indemnify the victim arises from the breach of that contract G.R. No. 147079 December 21, 2004
by reason of its failure to exercise the high diligence required of the
common carrier. In the discharge of its commitment to ensure the safety
of passengers, a carrier may choose to hire its own employees or avail
itself of the services of an outsider or an independent firm to undertake
the task. In either case, the common carrier is not relieved of its CARPIO MORALES, J.:
responsibilities under the contract of carriage.
FACTS Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal
Should Prudent be made likewise liable? If at all, that liability could only Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of
be for tort under the provisions of Article 2176 and related provisions, in 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and
conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the
further, how then must the liability of the common carrier, on one hand, consignee, Wyeth-Suaco Laboratories, Inc.2The Femenal tablets were
and an independent contractor, on the other hand, be described? It would placed in 124 cartons and the Nordiol tablets were placed in 20 cartons
be solidary. A contractual obligation can be breached by tort and when which were packed together in one (1) LD3 aluminum container, while the
the same act or omission causes the injury, one resulting in culpa Trinordial tablets were packed in two pallets, each of which contained 30
contractual and the other in culpa aquiliana, Article 2194 of the Civil Code cartons.3
can well apply. In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract. Stated differently, when an Wyeth-Suaco insured the shipment against all risks with FGU Insurance
act which constitutes a breach of contract would have itself constituted which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy
the source of a quasi-delictual liability had no contract existed between No. 138.4
35
Upon arrival of the shipment at the Ninoy Aquino International Airport Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a
(NAIA),5 it was discharged "without exception"6 and delivered to the survey report21 stating that 41 cartons of Femenal tablets and 3 cartons
warehouse of the Philippine Skylanders, Inc. (PSI) located also at the of Nordiol tablets were "wetted" (sic).22
NAIA for safekeeping.7
The Elite Surveyors later issued Certificate No. CS-0731-
In order to secure the release of the cargoes from the PSI and the Bureau 1538/9223 attached to which was an "Annexed Schedule" whereon it was
of Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage indicated that prior to the loading of the cargoes to the broker’s trucks at
which had been its licensed broker since 1984.8 As its customs broker, the NAIA, they were inspected and found to be in "apparent good
Sanchez Brokerage calculates and pays the customs duties, taxes and condition."24 Also noted was that at the time of delivery to the warehouse
storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.9 of Hizon Laboratories Inc., slight to heavy rains fell, which could account
for the wetting of the 44 cartons of Femenal and Nordiol tablets.25
Mitzi Morales and Ernesto Mendoza, representatives of Sanchez
Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for the Hizon Laboratories Inc. issued a Destruction Report26 confirming that
which, Official Receipt No. 016992,10 was issued. On the receipt, another 38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of
representative of Sanchez Brokerage, M. Sison,11 acknowledged that he Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily
received the cargoes consisting of three pieces in good condition.12 damaged with water and emitted foul smell.

Wyeth-Suaco being a regular importer, the customs examiner did not Wyeth-Suaco issued a Notice of Materials Rejection27 of 38 cartons of
inspect the cargoes13 which were thereupon stripped from the aluminum Femenal and 3 cartons of Nordiol on the ground that they were "delivered
containers14 and loaded inside two transport vehicles hired by Sanchez to Hizon Laboratories with heavy water damaged (sic) causing the
Brokerage.15 cartons to sagged (sic) emitting a foul order and easily attracted flies."28

Among those who witnessed the release of the cargoes from the PSI Wyeth-Suaco later demanded, by letter29 from Sanchez Brokerage the
warehouse were Ruben Alonso and Tony Akas,16 employees of Elite payment of P191,384.25 representing the value of its loss arising from the
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo damaged tablets.
surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on
behalf of FGU Insurance. As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco
filed an insurance claim against FGU Insurance which paid Wyeth-Suaco
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon the amount of P181,431.49 in settlement of its claim under Marine Risk
Laboratories Inc. in Antipolo City for quality control check. 17 The delivery Note Number 4995.
receipt indicated that the delivery consisted of one container with 144
cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.18 Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU
Insurance.
Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the
delivery of the cargoes by affixing his signature on the delivery On demand by FGU Insurance for payment of the amount of P181,431.49
receipt.19 Upon inspection, however, he, together with Ruben Alonzo of it paid Wyeth-Suaco, Sanchez Brokerage, by letter, disclaimed liability for
Elite Surveyors, discovered that 44 cartons containing Femenal and the damaged goods, positing that the damage was due to improper and
Nordiol tablets were in bad order.20 He thus placed a note above his insufficient export packaging; that when the sealed containers were
signature on the delivery receipt stating that 44 cartons of oral opened outside the PSI warehouse, it was discovered that some of the
contraceptives were in bad order. The remaining 160 cartons of oral loose cartons were wet,32 prompting its (Sanchez Brokerage’s)
contraceptives were accepted as complete and in good order. representative Morales to inform the Import-Export Assistant of Wyeth-
Suaco, Ramir Calicdan, about the condition of the cargoes but that the

36
latter advised to still deliver them to Hizon Laboratories where an adjuster as required by law is bereft of merit. It suffices that petitioner undertakes
would assess the damage.33 to deliver the goods for pecuniary consideration.

Hence, the filing by FGU Insurance of a complaint for damages before the In this light, petitioner as a common carrier is mandated to observe, under
RTC Makati against the Sanchez Brokerage. Article 173345 of the Civil Code, extraordinary diligence in the vigilance
over the goods it transports according to all the circumstances of each
RTC: dismissed the complaint, holding that the Survey Report prepared case. In the event that the goods are lost, destroyed or deteriorated, it is
by the Elite Surveyors is bereft of any evidentiary support and a mere presumed to have been at fault or to have acted negligently, unless it
product of pure guesswork.35 proves that it observed extraordinary diligence.46

CA: reversed the decision of the trial court, holding that the Sanchez The concept of "extra-ordinary diligence" was explained in Compania
Brokerage engaged not only in the business of customs brokerage but Maritima v. Court of Appeals:47
also in the transportation and delivery of the cargo of its clients, hence, a
common carrier within the context of Article 1732 of the New Civil Code; The extraordinary diligence in the vigilance over the goods
held that Sanchez Brokerage is presumed negligent and upon it rested tendered for shipment requires the common carrier to know and
the burden of proving that it exercised extraordinary negligence not only to follow the required precaution for avoiding damage to, or
in instances when negligence is directly proven but also in those cases destruction of the goods entrusted to it for sale, carriage and
when the cause of the damage is not known or unknown.37 delivery. It requires common carriers to render service with the
greatest skill and foresight and "to use all reasonable means to
ISSUE/CONTENTION In the main, petitioner asserts that the appellate ascertain the nature and characteristics of goods tendered for
court committed grave and reversible error tantamount to abuse of shipment, and to exercise due care in the handling and stowage,
discretion when it found petitioner a "common carrier" within the context including such methods as their nature requires."48
of Article 1732 of the New Civil Code.
In the case at bar, it was established that petitioner received the cargoes
RULING --- No. The appellate court did not err in finding petitioner, a from the PSI warehouse in NAIA in good order and condition;49 and that
customs broker, to be also a common carrier, as defined under Article upon delivery by petitioner to Hizon Laboratories Inc., some of the
1732 of the Civil Code, to wit: cargoes were found to be in bad order, as noted in the Delivery
Receipt50 issued by petitioner, and as indicated in the Survey Report of
Elite Surveyors51 and the Destruction Report of Hizon Laboratories, Inc.52
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for In an attempt to free itself from responsibility for the damage to the goods,
compensation, offering their services to the public. petitioner posits that they were damaged due to the fault or negligence of
the shipper for failing to properly pack them and to the inherent
characteristics of the goods53 ; and that it should not be faulted for
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez
following the instructions of Calicdan of Wyeth-Suaco to proceed with the
Brokerage, himself testified that the services the firm offers include the
delivery despite information conveyed to the latter that some of the
delivery of goods to the warehouse of the consignee or importer.
cartons, on examination outside the PSI warehouse, were found to be
wet.54
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as
While paragraph No. 4 of Article 173455 of the Civil Code exempts a
an ancillary activity.44 The contention, therefore, of petitioner that it is not a
common carrier from liability if the loss or damage is due to the character
common carrier but a customs broker whose principal function is to
of the goods or defects in the packing or in the containers, the rule is that
prepare the correct customs declaration and proper shipping documents
if the improper packing is known to the carrier or his employees or is

37
apparent upon ordinary observation, but he nevertheless accepts the Since petitioner received all the cargoes in good order and condition at
same without protest or exception notwithstanding such condition, he is the time they were turned over by the PSI warehouseman, and upon their
not relieved of liability for the resulting damage.56 delivery to Hizon Laboratories, Inc. a portion thereof was found to be in
bad order, it was incumbent on petitioner to prove that it exercised
If the claim of petitioner that some of the cartons were already damaged extraordinary diligence in the carriage of the goods. It did not, however.
upon delivery to it were true, then it should naturally have received the Hence, its presumed negligence under Article 1735 of the Civil Code
cargo under protest or with reservations duly noted on the receipt issued remains unrebutted.
by PSI. But it made no such protest or reservation.57

Moreover, as observed by the appellate court, if indeed petitioner’s


employees only examined the cargoes outside the PSI warehouse and FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO
found some to be wet, they would certainly have gone back to PSI, TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
showed to the warehouseman the damage, and demanded then and G.R. No. 141910 August 6, 2002
there for Bad Order documents or a certification confirming the
damage.58 Or, petitioner would have presented, as witness, the
employees of the PSI from whom Morales and Domingo took delivery of
the cargo to prove that, indeed, part of the cargoes was already damaged
when the container was allegedly opened outside the warehouse.59 VITUG, J.:

Petitioner goes on to posit that contrary to the report of Elite Surveyors, FACTS G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver
no rain fell that day. Instead, it asserts that some of the cargoes were on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators
already wet on delivery by PSI outside the PSI warehouse but such aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site
notwithstanding Calicdan directed Morales to proceed with the delivery to of Concepcion Industries, Inc., along South Superhighway in Alabang,
Hizon Laboratories, Inc. Metro Manila, to the Central Luzon Appliances in Dagupan City. While the
truck was traversing the north diversion road along McArthur highway in
Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck,
While Calicdan testified that he received the purported telephone call of causing it to fall into a deep canal, resulting in damage to the cargoes.
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 FGU Insurance Corporation (FGU), an insurer of the shipment, paid to
cargoes were already in transit to Antipolo, it is not determinable. Aside Concepcion Industries, Inc., the value of the covered cargoes in the sum
from that phone call, petitioner admitted that it had no documentary of P204,450.00. FGU, in turn, being the subrogee of the rights and
evidence to prove that at the time it received the cargoes, a part of it was interests of Concepcion Industries, Inc., sought reimbursement of the
wet, damaged or in bad condition.60 amount it had paid to the latter from GPS. Since the trucking company
failed to heed the claim, FGU filed a complaint for damages and breach of
contract of carriage against GPS and its driver Lambert Eroles RTC
The 4-page weather data furnished by PAGASA61 on request of Sanchez makati. respondents asserted that GPS was the exclusive hauler only of
Brokerage hardly impresses, no witness having identified it and Concepcion Industries, Inc., since 1988, and it was not so engaged in
interpreted the technical terms thereof. business as a common carrier. Respondents further claimed that the
cause of damage was purely accidental.
The possibility on the other hand that, as found by Hizon Laboratories,
Inc., the oral contraceptives were damaged by rainwater while in transit to GPS filed with leave of court a motion to dismiss the complaint by way of
Antipolo City is more likely then. Sanchez himself testified that in the past, demurrer to evidence on the ground that petitioner had failed to prove that
there was a similar instance when the shipment of Wyeth-Suaco was also it was a common carrier.
found to be wet by rain.

38
RTC: granted the motion to dismiss the tenor thereof.13 A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been lost or
CA: rejected the appeal of petitioner and ruled in favor of GPS. suffered. The remedy serves to preserve the interests of the promisee
that may include his "expectation interest," which is his interest in having
ISSUES the benefit of his bargain by being put in as good a position as he would
have been in had the contract been performed, or his "reliance interest,"
which is his interest in being reimbursed for loss caused by reliance on
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A the contract by being put in as good a position as he would have been in
COMMON CARRIER AS DEFINED UNDER THE LAW AND had the contract not been made; or his "restitution interest," which is his
EXISTING JURISPRUDENCE. interest in having restored to him any benefit that he has conferred on the
other party.14 Indeed, agreements can accomplish little, either for their
WHETHER RESPONDENT GPS, EITHER AS A COMMON makers or for society, unless they are made the basis for action.15 The
CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO effect of every infraction is to create a new duty, that is, to make
HAVE BEEN NEGLIGENT WHEN THE GOODS IT recompense to the one who has been injured by the failure of another to
UNDERTOOK TO TRANSPORT SAFELY WERE observe his contractual obligation16 unless he can show extenuating
SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE circumstances, like proof of his exercise of due diligence (normally that of
CUSTODY AND POSSESSION. the diligence of a good father of a family or, exceptionally by stipulation or
by law such as in the case of common carriers, that of extraordinary
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS diligence) or of the attendance of fortuitous event, to excuse him from his
APPLICABLE IN THE INSTANT CASE. ensuing liability.

On the first issue, the Court finds the conclusion of the trial court and the Respondent trucking corporation recognizes the existence of a contract of
Court of Appeals to be amply justified. GPS, being an exclusive contractor carriage between it and petitioner’s assured, and admits that the cargoes
and hauler of Concepcion Industries, Inc., rendering or offering its it has assumed to deliver have been lost or damaged while in its custody.
services to no other individual or entity, cannot be considered a common In such a situation, a default on, or failure of compliance with, the
carrier. Common carriers are persons, corporations, firms or associations obligation – in this case, the delivery of the goods in its custody to the
engaged in the business of carrying or transporting passengers or goods place of destination - gives rise to a presumption of lack of care and
or both, by land, water, or air, for hire or compensation, offering their corresponding liability on the part of the contractual obligor the burden
services to the public,8 whether to the public in general or to a limited being on him to establish otherwise. GPS has failed to do so.
clientele in particular, but never on an exclusive basis. 9 The true test of a
common carrier is the carriage of passengers or goods, providing space Respondent driver, on the other hand, without concrete proof of his
for those who opt to avail themselves of its transportation service for a negligence or fault, may not himself be ordered to pay petitioner. The
fee.10Given accepted standards, GPS scarcely falls within the term driver, not being a party to the contract of carriage between petitioner’s
"common carrier." principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their
The above conclusion nothwithstanding, GPS cannot escape from successors who have assumed their personality or their juridical
liability. position.17 Consonantly with the axiom res inter alios acta aliis neque
nocet prodest, such contract can neither favor nor prejudice a third
In culpa contractual, upon which the action of petitioner rests as being the person. Petitioner’s civil action against the driver can only be based
subrogee of Concepcion Industries, Inc., the mere proof of the existence on culpa aquiliana, which, unlike culpa contractual, would require the
of the contract and the failure of its compliance justify, prima facie, a claimant for damages to prove negligence or fault on the part of the
corresponding right of relief.11 The law, recognizing the obligatory force of defendant.18
contracts,12 will not permit a party to be set free from liability for any kind
of misperformance of the contractual undertaking or a contravention of
39
A word in passing. Res ipsa loquitur, a doctrine being invoked by
petitioner, holds a defendant liable where the thing which caused the
injury complained of is shown to be under the latter’s management and ESTELA L. CRISOSTOMO, Petitioner, vs. The Court of Appeals and
the accident is such that, in the ordinary course of things, cannot be CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.
expected to happen if those who have its management or control use G.R. No. 138334 August 25, 2003
proper care. It affords reasonable evidence, in the absence of explanation
by the defendant, that the accident arose from want of care.19 It is not a
rule of substantive law and, as such, it does not create an independent
ground of liability. Instead, it is regarded as a mode of proof, or a mere
procedural convenience since it furnishes a substitute for, and relieves YNARES-SANTIAGO, J.:
the plaintiff of, the burden of producing specific proof of negligence. The
maxim simply places on the defendant the burden of going forward with FACTS In May 1991, petitioner Estela L. Crisostomo contracted the
the proof.20 Resort to the doctrine, however, may be allowed only when services of respondent Caravan Travel and Tours International, Inc. to
(a) the event is of a kind which does not ordinarily occur in the absence of arrange and facilitate her booking, ticketing and accommodation in a tour
negligence; (b) other responsible causes, including the conduct of the dubbed "Jewels of Europe". The package tour included the countries of
plaintiff and third persons, are sufficiently eliminated by the evidence; and England, Holland, Germany, Austria, Liechstenstein, Switzerland and
(c) the indicated negligence is within the scope of the defendant's duty to France at a total cost of P74,322.70. Petitioner was given a 5% discount
the plaintiff.21 Thus, it is not applicable when an unexplained accident may on the amount, which included airfare, and the booking fee was also
be attributable to one of several causes, for some of which the defendant waived because petitioner’s niece, Meriam Menor, was respondent
could not be responsible.22 company’s ticketing manager.

Res ipsa loquitur generally finds relevance whether or not a contractual Pursuant to said contract, Menor went to her aunt’s residence on June 12,
relationship exists between the plaintiff and the defendant, for the 1991 – a Wednesday – to deliver petitioner’s travel documents and plane
inference of negligence arises from the circumstances and nature of the tickets. Petitioner, in turn, gave Menor the full payment for the package
occurrence and not from the nature of the relation of the tour. Menor then told her to be at the Ninoy Aquino International Airport
parties.23 Nevertheless, the requirement that responsible causes other (NAIA) on Saturday, two hours before her flight on board British Airways.
than those due to defendant’s conduct must first be eliminated, for the
doctrine to apply, should be understood as being confined only to cases Without checking her travel documents, petitioner went to NAIA on
of pure (non-contractual) tort since obviously the presumption of Saturday, June 15, 1991, to take the flight for the first leg of her journey
negligence in culpa contractual, as previously so pointed out, immediately from Manila to Hongkong. To petitioner’s dismay, she discovered that the
attaches by a failure of the covenant or its tenor. In the case of the truck flight she was supposed to take had already departed the previous day.
driver, whose liability in a civil action is predicated on culpa acquiliana, She learned that her plane ticket was for the flight scheduled on June 14,
while he admittedly can be said to have been in control and management 1991. She thus called up Menor to complain.
of the vehicle which figured in the accident, it is not equally shown,
however, that the accident could have been exclusively due to his
Subsequently, Menor prevailed upon petitioner to take another tour – the
negligence, a matter that can allow, forthwith, res ipsa loquitur to work
"British Pageant" – which included England, Scotland and Wales in its
against him.
itinerary. For this tour package, petitioner was asked anew to pay
US$785.00 or P20,881.00 (at the then prevailing exchange rate of
If a demurrer to evidence is granted but on appeal the order of dismissal P26.60). She gave respondent US$300 or P7,980.00 as partial payment
is reversed, the movant shall be deemed to have waived the right to and commenced the trip in July 1991.
present evidence.24 Thus, respondent corporation may no longer offer
proof to establish that it has exercised due care in transporting the
Upon petitioner’s return from Europe, she demanded from respondent the
cargoes of the assured so as to still warrant a remand of the case to the
reimbursement of P61,421.70, representing the difference between the
trial court.1âwphi1.nêt
sum she paid for "Jewels of Europe" and the amount she owed
40
respondent for the "British Pageant" tour. Despite several demands, petitioner was guilty of contributory negligence and accordingly, deducted
respondent company refused to reimburse the amount, contending that 10% from the amount being claimed as refund.
the same was non-refundable.1 Petitioner was thus constrained to file a
complaint against respondent for breach of contract of carriage and CA: likewise found both parties to be at fault. However, the appellate
damages, RTC Makati court held that petitioner is more negligent than respondent because as a
lawyer and well-traveled person, she should have known better than to
Petitioner: alleged that her failure to join "Jewels of Europe" was due to simply rely on what was told to her. This being so, she is not entitled to
respondent’s fault since it did not clearly indicate the departure date on any form of damages. Petitioner also forfeited her right to the "Jewels of
the plane ticket. Respondent was also negligent in informing her of the Europe" tour and must therefore pay respondent the balance of the price
wrong flight schedule through its employee Menor. She insisted that the for the "British Pageant" tour.
"British Pageant" was merely a substitute for the "Jewels of Europe" tour,
such that the cost of the former should be properly set-off against the sum ISSUE/CONTENTION Petitioner: contends that respondent did not
paid for the latter. observe the standard of care required of a common carrier when it
informed her wrongly of the flight schedule. She could not be deemed
respondent company: through its Operations Manager, Concepcion more negligent than respondent since the latter is required by law to
Chipeco, denied responsibility for petitioner’s failure to join the first tour. exercise extraordinary diligence in the fulfillment of its obligation. If she
Chipeco insisted that petitioner was informed of the correct departure were negligent at all, the same is merely contributory and not the
date, which was clearly and legibly printed on the plane ticket. The travel proximate cause of the damage she suffered. Her loss could only be
documents were given to petitioner two days ahead of the scheduled trip. attributed to respondent as it was the direct consequence of its
Petitioner had only herself to blame for missing the flight, as she did not employee’s gross negligence.
bother to read or confirm her flight schedule as printed on the ticket; that it
can no longer reimburse the amount paid for "Jewels of Europe", RULING Petitioner’s contention has no merit.
considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if By definition, a contract of carriage or transportation is one whereby a
petitioner did not join the tour. Lotus’ European tour organizer, Insight
certain person or association of persons obligate themselves to transport
International Tours Ltd., determines the cost of a package tour based on
persons, things, or news from one place to another for a fixed price.9 Such
a minimum number of projected participants. For this reason, it is
person or association of persons are regarded as carriers and are
accepted industry practice to disallow refund for individuals who failed to
classified as private or special carriers and common or public carriers.10 A
take a booked tour; that the "British Pageant" was not a substitute for the common carrier is defined under Article 1732 of the Civil Code as
package tour that petitioner missed. This tour was independently persons, corporations, firms or associations engaged in the business of
procured by petitioner after realizing that she made a mistake in missing
carrying or transporting passengers or goods or both, by land, water or
her flight for "Jewels of Europe". Petitioner was allowed to make a partial
air, for compensation, offering their services to the public.
payment of only US$300.00 for the second tour because her niece was
then an employee of the travel agency. Consequently, respondent prayed
that petitioner be ordered to pay the balance of P12,901.00 for the "British It is obvious from the above definition that respondent is not an entity
Pageant" package tour. engaged in the business of transporting either passengers or goods and
is therefore, neither a private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another since its
RTC rendered a decision in favor of petitioner; respondent was negligent
covenant with its customers is simply to make travel arrangements in their
in erroneously advising petitioner of her departure date through its
behalf. Respondent’s services as a travel agency include procuring tickets
employee, Menor, who was not presented as witness to rebut petitioner’s and facilitating travel permits or visas as well as booking customers for
testimony. However, petitioner should have verified the exact date and tours.
time of departure by looking at her ticket and should have simply not
relied on Menor’s verbal representation. The trial court thus declared that

41
While petitioner concededly bought her plane ticket through the efforts of The operator of a. school bus service is a common carrier in the eyes of
respondent company, this does not mean that the latter ipso facto is a the law. He is bound to observe extraordinary diligence in the conduct of
common carrier. At most, respondent acted merely as an agent of the his business. He is presumed to be negligent when death occurs to a
airline, with whom petitioner ultimately contracted for her carriage to passenger. His liability may include indemnity for loss of earning capacity
Europe. Respondent’s obligation to petitioner in this regard was simply to even if the deceased passenger may only be an unemployed high school
see to it that petitioner was properly booked with the airline for the student at the time of the accident.
appointed date and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline. Antecedents The Pereñas were engaged in the business of transporting
students from their respective residences in Parañaque City to Don Bosco
The object of petitioner’s contractual relation with respondent is the in Pasong Tamo, Makati City, and back. In their business, the Pereñas
latter’s service of arranging and facilitating petitioner’s booking, ticketing used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
and accommodation in the package tour. In contrast, the object of a capacity to transport 14 students at a time, two of whom would be seated
contract of carriage is the transportation of passengers or goods. It is in in the front beside the driver, and the others in the rear, with six students
this sense that the contract between the parties in this case was an on either side. They employed Clemente Alfaro (Alfaro) as driver of the
ordinary one for services and not one of carriage. Petitioner’s submission van.
is premised on a wrong assumption.
the Zarates contracted the Pereñas to transport Aaron to and from Don
The nature of the contractual relation between petitioner and respondent Bosco. On August 22, 1996, as on previous school days, the van picked
is determinative of the degree of care required in the performance of the Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his
latter’s obligation under the contract. For reasons of public policy, a place on the left side of the van near the rear door. The van, with its air-
common carrier in a contract of carriage is bound by law to carry conditioning unit turned on and the stereo playing loudly, ultimately
passengers as far as human care and foresight can provide using the carried all the 14 student riders on their way to Don Bosco. Considering
utmost diligence of very cautious persons and with due regard for all the that the students were due at Don Bosco by 7:15 a.m., and that they were
circumstances.11 As earlier stated, however, respondent is not a common already running late because of the heavy vehicular traffic on the South
carrier but a travel agency. It is thus not bound under the law to observe Superhighway, Alfaro took the van to an alternate route at about 6:45
extraordinary diligence in the performance of its obligation, as petitioner a.m. by traversing the narrow path underneath the Magallanes
claims. Interchange that was then commonly used by Makati-bound vehicles as a
short cut into Makati. At the time, the narrow path was marked by piles of
Since the contract between the parties is an ordinary one for services, the construction materials and parked passenger jeepneys, and the railroad
standard of care required of respondent is that of a good father of a family crossing in the narrow path had no railroad warning signs, or watchmen,
under Article 1173 of the Civil Code.12 or other responsible persons manning the crossing. In fact, the bamboo
barandilla was up, leaving the railroad crossing open to traversing
motorists.

At about the time the van was to traverse the railroad crossing, PNR
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, vs. Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, vicinity of the Magallanes Interchange travelling northbound. As the train
NATIONAL RAILWAYS, and the COURT OF APPEALS Respondents. neared the railroad crossing, Alfaro drove the van eastward across the
G.R. No. 157917 August 29, 2012 railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on
its left side. The train blew its horn to warn motorists of its approach.
When the train was about 50 meters away from the passenger bus and
BERSAMIN, J.: the van, Alano applied the ordinary brakes of the train. He applied the
emergency brakes only when he saw that a collision was imminent. The
42
passenger bus successfully crossed the railroad tracks, but the van driven Pereñas: adduced evidence to show that they had exercised the diligence
by Alfaro did not. The train hit the rear end of the van, and the impact of a good father of the family in the selection and supervision of Alfaro, by
threw nine of the 12 students in the rear, including Aaron, out of the van. making sure that Alfaro had been issued a driver’s license and had not
Aaron landed in the path of the train, which dragged his body and severed been involved in any vehicular accident prior to the collision; that their
his head, instantaneously killing him. Alano fled the scene on board the own son had taken the van daily; and that Teodoro Pereña had
train, and did not wait for the police investigator to arrive. sometimes accompanied Alfaro in the van’s trips transporting the students
to school.
Devastated by the early and unexpected death of Aaron, the Zarates
commenced this action for damages against Alfaro, the Pereñas, PNR PNR: tended to show that the proximate cause of the collision had been
and Alano. The Pereñas and PNR filed their respective answers, with the reckless crossing of the van whose driver had not first stopped,
cross-claims against each other, but Alfaro could not be served with looked and listened; and that the narrow path traversed by the van had
summons. not been intended to be a railroad crossing for motorists.

(9) PNR received the demand letter of the spouses Zarate; Ruling of the RTC judgment is hereby rendered in favor of the plaintiff
and against the defendants ordering them to jointly and severally pay the
(10) PNR refused to acknowledge any liability for the plaintiffs
vehicular/train collision;
The CA’s Ruling CA promulgated its decision, affirming the findings of
(11) The eventual closure of the railroad crossing alleged by the RTC, but limited the moral damages to ₱ 2,500,000.00; and deleted
PNR was an internal arrangement between the former and its the attorney’s fees because the RTC did not state the factual and legal
project contractor; and bases

Issues In this appeal, the Pereñas list the following as the errors
(12) The site of the vehicular/train collision was within the vicinity
committed by the CA, to wit:
or less than 100 meters from the Magallanes station of PNR.

I. The lower court erred when it upheld the trial court’s decision holding
B. ISSUES
the petitioners jointly and severally liable to pay damages with Philippine
National Railways and dismissing their cross-claim against the latter.
(3) Whether or not defendant Philippine National Railways being
the operator of the railroad system is liable for negligence in
Ruling The petition has no merit.
failing to provide adequate safety warning signs and railings in
the area commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular collision which 1.
resulted in the death of the plaintiff spouses' son; Were the Pereñas and PNR jointly
and severally liable for damages?
(4) Whether or not defendant spouses Pereña are liable for
breach of the contract of carriage with plaintiff-spouses in failing The Zarates brought this action for recovery of damages against both the
to provide adequate and safe transportation for the latter's son; Pereñas and the PNR, basing their claim against the Pereñas on breach
of contract of carriage and against the PNR on quasi-delict.
The Zarates’ claim against the Pereñas was upon breach of the contract
of carriage for the safe transport of Aaron; but that against PNR was The RTC found the Pereñas and the PNR negligent. The CA affirmed the
based on quasi-delict under Article 2176, Civil Code. findings.

We concur with the CA.


43
To start with, the Pereñas’ defense was that they exercised the diligence In relation to common carriers, the Court defined public use in the
of a good father of the family in the selection and supervision of Alfaro, following terms in United States v. Tan Piaco,15viz:
the van driver, by seeing to it that Alfaro had a driver’s license and that he
had not been involved in any vehicular accident prior to the fatal collision "Public use" is the same as "use by the public". The essential feature of
with the train; that they even had their own son travel to and from school the public use is not confined to privileged individuals, but is open to the
on a daily basis; and that Teodoro Pereña himself sometimes indefinite public. It is this indefinite or unrestricted quality that gives it its
accompanied Alfaro in transporting the passengers to and from school. public character. In determining whether a use is public, we must look not
The RTC gave scant consideration to such defense by regarding such only to the character of the business to be done, but also to the proposed
defense as inappropriate in an action for breach of contract of carriage. mode of doing it. If the use is merely optional with the owners, or the
public benefit is merely incidental, it is not a public use, authorizing the
We find no adequate cause to differ from the conclusions of the lower exercise of the jurisdiction of the public utility commission. There must be,
courts that the Pereñas operated as a common carrier; and that their in general, a right which the law compels the owner to give to the general
standard of care was extraordinary diligence, not the ordinary diligence of public. It is not enough that the general prosperity of the public is
a good father of a family. promoted. Public use is not synonymous with public interest. The true
criterion by which to judge the character of the use is whether the public
Although in this jurisdiction the operator of a school bus service has been may enjoy it by right or only by permission.
usually regarded as a private carrier,9primarily because he only caters to
some specific or privileged individuals, and his operation is neither open In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of
to the indefinite public nor for public use, the exact nature of the operation the Civil Code avoided any distinction between a person or an enterprise
of a school bus service has not been finally settled. This is the occasion to offering transportation on a regular or an isolated basis; and has not
lay the matter to rest. distinguished a carrier offering his services to the general public, that is,
the general community or population, from one offering his services only
A carrier is a person or corporation who undertakes to transport or convey to a narrow segment of the general population.
goods or persons from one place to another, gratuitously or for hire. The
carrier is classified either as a private/special carrier or as a Nonetheless, the concept of a common carrier embodied in Article 1732
common/public carrier.10 A private carrier is one who, without making the of the Civil Code coincides neatly with the notion of public service under
activity a vocation, or without holding himself or itself out to the public as the Public Service Act, which supplements the law on common carriers
ready to act for all who may desire his or its services, undertakes, by found in the Civil Code. Public service, according to Section 13,
special agreement in a particular instance only, to transport goods or paragraph (b) of the Public Service Act, includes:
persons from one place to another either gratuitously or for hire.11 The
provisions on ordinary contracts of the Civil Code govern the contract of x x x every person that now or hereafter may own, operate, manage, or
private carriage.The diligence required of a private carrier is only ordinary, control in the Philippines, for hire or compensation, with general or limited
that is, the diligence of a good father of the family. In contrast, a common clientèle, whether permanent or occasional, and done for the general
carrier is a person, corporation, firm or association engaged in the business purposes, any common carrier, railroad, street railway, traction
business of carrying or transporting passengers or goods or both, by land, railway, subway motor vehicle, either for freight or passenger, or both,
water, or air, for compensation, offering such services to the with or without fixed route and whatever may be its classification, freight
public.12 Contracts of common carriage are governed by the provisions on or carrier service of any class, express service, steamboat, or steamship
common carriers of the Civil Code, the Public Service Act,13 and other line, pontines, ferries and water craft, engaged in the transportation of
special laws relating to transportation. A common carrier is required to passengers or freight or both, shipyard, marine repair shop, ice-
observe extraordinary diligence, and is presumed to be at fault or to have refrigeration plant, canal, irrigation system, gas, electric light, heat and
acted negligently in case of the loss of the effects of passengers, or the power, water supply and power petroleum, sewerage system, wire or
death or injuries to passengers.14 wireless communications systems, wire or wireless broadcasting stations
and other similar public services. x x x.17

44
Given the breadth of the aforequoted characterization of a common And, secondly, the Pereñas have not presented any compelling defense
carrier, the Court has considered as common carriers pipeline or reason by which the Court might now reverse the CA’s findings on their
operators,18 custom brokers and warehousemen,19 and barge liability. On the contrary, an examination of the records shows that the
operators20 even if they had limited clientèle. evidence fully supported the findings of the CA.

As all the foregoing indicate, the true test for a common carrier is not the As earlier stated, the Pereñas, acting as a common carrier, were already
quantity or extent of the business actually transacted, or the number and presumed to be negligent at the time of the accident because death had
character of the conveyances used in the activity, but whether the occurred to their passenger.25 The presumption of negligence, being a
undertaking is a part of the activity engaged in by the carrier that he has presumption of law, laid the burden of evidence on their shoulders to
held out to the general public as his business or occupation. If the establish that they had not been negligent.26 It was the law no less that
undertaking is a single transaction, not a part of the general business or required them to prove their observance of extraordinary diligence in
occupation engaged in, as advertised and held out to the general public, seeing to the safe and secure carriage of the passengers to their
the individual or the entity rendering such service is a private, not a destination. Until they did so in a credible manner, they stood to be held
common, carrier. The question must be determined by the character of legally responsible for the death of Aaron and thus to be held liable for all
the business actually carried on by the carrier, not by any secret intention the natural consequences of such death.
or mental reservation it may entertain or assert when charged with the
duties and obligations that the law imposes.21 There is no question that the Pereñas did not overturn the presumption of
their negligence by credible evidence. Their defense of having observed
Applying these considerations to the case before us, there is no question the diligence of a good father of a family in the selection and supervision
that the Pereñas as the operators of a school bus service were: (a) of their driver was not legally sufficient. According to Article 1759 of the
engaged in transporting passengers generally as a business, not just as a Civil Code, their liability as a common carrier did not cease upon proof
casual occupation; (b) undertaking to carry passengers over established that they exercised all the diligence of a good father of a family in the
roads by the method by which the business was conducted; and (c) selection and supervision of their employee. This was the reason why the
transporting students for a fee. Despite catering to a limited clientèle, the RTC treated this defense of the Pereñas as inappropriate in this action for
Pereñas operated as a common carrier because they held themselves out breach of contract of carriage.
as a ready transportation indiscriminately to the students of a particular
school living within or near where they operated the service and for a fee. The Pereñas were liable for the death of Aaron despite the fact that their
driver might have acted beyond the scope of his authority or even in
The common carrier’s standard of care and vigilance as to the safety of violation of the orders of the common carrier.27 In this connection, the
the passengers is defined by law. Given the nature of the business and records showed their driver’s actual negligence. There was a showing, to
for reasons of public policy, the common carrier is bound "to observe begin with, that their driver traversed the railroad tracks at a point at which
extraordinary diligence in the vigilance over the goods and for the safety the PNR did not permit motorists going into the Makati area to cross the
of the passengers transported by them, according to all the circumstances railroad tracks. Although that point had been used by motorists as a
of each case."22 Article 1755 of the Civil Code specifies that the common shortcut into the Makati area, that fact alone did not excuse their driver
carrier should "carry the passengers safely as far as human care and into taking that route. On the other hand, with his familiarity with that
foresight can provide, using the utmost diligence of very cautious shortcut, their driver was fully aware of the risks to his passengers but he
persons, with a due regard for all the circumstances." To successfully still disregarded the risks. Compounding his lack of care was that loud
fend off liability in an action upon the death or injury to a passenger, the music was playing inside the air-conditioned van at the time of the
common carrier must prove his or its observance of that extraordinary accident. The loudness most probably reduced his ability to hear the
diligence; otherwise, the legal presumption that he or it was at fault or warning horns of the oncoming train to allow him to correctly appreciate
acted negligently would stand.23 No device, whether by stipulation, posting the lurking dangers on the railroad tracks. Also, he sought to overtake a
of notices, statements on tickets, or otherwise, may dispense with or passenger bus on the left side as both vehicles traversed the railroad
lessen the responsibility of the common carrier as defined under Article tracks. In so doing, he lost his view of the train that was then coming from
1755 of the Civil Code. 24 the opposite side of the passenger bus, leading him to miscalculate his
45
chances of beating the bus in their race, and of getting clear of the train. consideration, foresee harm as a result of the course actually pursued? If
As a result, the bus avoided a collision with the train but the van got so, it was the duty of the actor to take precautions to guard against that
slammed at its rear, causing the fatality. Lastly, he did not slow down or harm. Reasonable foresight of harm, followed by the ignoring of the
go to a full stop before traversing the railroad tracks despite knowing that suggestion born of this prevision, is always necessary before negligence
his slackening of speed and going to a full stop were in observance of the can be held to exist. Stated in these terms, the proper criterion for
right of way at railroad tracks as defined by the traffic laws and determining the existence of negligence in a given case is this: Conduct is
regulations.28He thereby violated a specific traffic regulation on right of said to be negligent when a prudent man in the position of the tortfeasor
way, by virtue of which he was immediately presumed to be negligent.29 would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing the conduct or guarding against its
The omissions of care on the part of the van driver constituted consequences. (Emphasis supplied)
negligence,30 which, according to Layugan v. Intermediate Appellate
Court,31 is "the omission to do something which a reasonable man, guided Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was
by those considerations which ordinarily regulate the conduct of human entirely negligent when he traversed the railroad tracks at a point not
affairs, would do, or the doing of something which a prudent and allowed for a motorist’s crossing despite being fully aware of the grave
reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he harm to be thereby caused to his passengers; and when he disregarded
failure to observe for the protection of the interests of another person, that the foresight of harm to his passengers by overtaking the bus on the left
degree of care, precaution, and vigilance which the circumstances justly side as to leave himself blind to the approach of the oncoming train that
demand, whereby such other person suffers injury.’"33 he knew was on the opposite side of the bus.

The test by which to determine the existence of negligence in a particular Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate
case has been aptly stated in the leading case of Picart v. Appellate Court,35 where the Court held the PNR solely liable for the
Smith,34 thuswise: damages caused to a passenger bus and its passengers when its train hit
the rear end of the bus that was then traversing the railroad crossing. But
The test by which to determine the existence of negligence in a particular the circumstances of that case and this one share no similarities. In
case may be stated as follows: Did the defendant in doing the alleged Philippine National Railways v. Intermediate Appellate Court, no evidence
negligent act use that reasonable care and caution which an ordinarily of contributory negligence was adduced against the owner of the bus.
prudent person would have used in the same situation? If not, then he is Instead, it was the owner of the bus who proved the exercise of
guilty of negligence. The law here in effect adopts the standard supposed extraordinary diligence by preponderant evidence. Also, the records are
to be supplied by the imaginary conduct of the discreet paterfamilias of replete with the showing of negligence on the part of both the Pereñas
the Roman law. The existence of negligence in a given case is not and the PNR. Another distinction is that the passenger bus in Philippine
determined by reference to the personal judgment of the actor in the National Railways v. Intermediate Appellate Court was traversing the
situation before him. The law considers what would be reckless, dedicated railroad crossing when it was hit by the train, but the Pereñas’
blameworthy, or negligent in the man of ordinary intelligence and school van traversed the railroad tracks at a point not intended for that
prudence and determines liability by that. purpose.

The question as to what would constitute the conduct of a prudent man in At any rate, the lower courts correctly held both the Pereñas and the PNR
a given situation must of course be always determined in the light of "jointly and severally" liable for damages arising from the death of Aaron.
human experience and in view of the facts involved in the particular case. They had been impleaded in the same complaint as defendants against
Abstract speculation cannot here be of much value but this much can be whom the Zarates had the right to relief, whether jointly, severally, or in
profitably said: Reasonable men govern their conduct by the the alternative, in respect to or arising out of the accident, and questions
circumstances which are before them or known to them. They are not, of fact and of law were common as to the Zarates.36 Although the basis of
and are not supposed to be, omniscient of the future. Hence they can be the right to relief of the Zarates (i.e., breach of contract of carriage)
expected to take care only when there is something before them to against the Pereñas was distinct from the basis of the Zarates’ right to
suggest or warn of danger. Could a prudent man, in the case under relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code),
46
they nonetheless could be held jointly and severally liable by virtue of In the meantime, the said vessel M/V Seven Ambassador sank on 25
their respective negligence combining to cause the death of Aaron. As to January 1984 resulting in the loss of the plaintiff's insured logs.
the PNR, the RTC rightly found the PNR also guilty of negligence despite
the school van of the Pereñas traversing the railroad tracks at a point not a check for P5,625.00 (Exh. "E") to cover payment of the premium and
dedicated by the PNR as a railroad crossing for pedestrians and documentary stamps due on the policy was tendered due to the insurer
motorists, because the PNR did not ensure the safety of others through but was not accepted. Instead, the South Sea Surety and Insurance Co.,
the placing of crossbars, signal lights, warning signs, and other Inc. cancelled the insurance policy it issued as of the date of the inception
permanent safety barriers to prevent vehicles or pedestrians from for non-payment of the premium due in accordance with Section 77 of the
crossing there. The RTC observed that the fact that a crossing guard had Insurance Code.
been assigned to man that point from 7 a.m. to 5 p.m. was a good
indicium that the PNR was aware of the risks to others as well as the
plaintiff demanded from defendant South Sea Surety and Insurance Co.,
need to control the vehicular and other traffic there. Verily, the Pereñas
Inc. the payment of the proceeds of the policy but the latter denied liability
and the PNR were joint tortfeasors.
under the policy. Plaintiff likewise filed a formal claim with defendant
Seven Brothers Shipping Corporation for the value of the lost logs but the
latter denied the claim.

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY RTC: rendered judgment in favor of plaintiff and against defendants. Both
INC., petitioner, vs. COURT OF APPEALS AND SEVEN BROTHERS defendants shipping corporation and the surety company appealed.
SHIPPING CORPORATION, respondents. G.R. No. 102316 June 30,
1997 CA: affirmed in part the RTC judgment by sustaining the liability of South
Sea Surety and Insurance Company ("South Sea"), but modified it by
PANGANIBAN, J.: holding that Seven Brothers Shipping Corporation ("Seven Brothers") was
not liable for the lost cargo. 5
Is a stipulation in a charter party that the "(o)wners shall not be
responsible for loss, split, short-landing, breakages and any kind of South Sea and herein Petitioner Valenzuela Hardwood and Industrial
damages to the cargo" 1 valid? Supply, Inc. ("Valenzuela") filed separate petitions for review before this
Court. In a Resolution dated June 2, 1995, this Court denied the petition
FACTS It appears that on 16 January 1984, plaintiff (Valenzuela of South Sea. 7 There the Court found no reason to reverse the factual
Hardwood and Industrial Supply, Inc.) entered into an agreement with the findings of the trial court and the Court of Appeals that Chua was indeed
defendant Seven Brothers (Shipping Corporation) whereby the latter an authorized agent of South Sea when he received Valenzuela's
undertook to load on board its vessel M/V Seven Ambassador the premium payment for the marine cargo insurance policy which was thus
former's lauan round logs numbering 940 at the port of Maconacon, binding on the insurer. 8
Isabela for shipment to Manila.
The Court is now called upon to resolve the petition for review filed by
plaintiff insured the logs against loss and/or damage with defendant South Valenzuela assailing the CA Decision which exempted Seven Brothers
Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter from any liability for the lost cargo.
issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00
on said date. ISSUE Petitioner Valenzuela's arguments resolve around a single issue:
"whether or not respondent Court (of Appeals) committed a reversible
the plaintiff gave the check in payment of the premium on the insurance error in upholding the validity of the stipulation in the charter party
policy to Mr. Victorio Chua. executed between the petitioner and the private respondent exempting
the latter from liability for the loss of petitioner's logs arising from the
negligence of its (Seven Brothers') captain." 9

47
The Court's Ruling The petition is not meritorious. (6) That the common carrier's liability for acts committed
by thieves, or of robbers who do not act with grave or
Validity of Stipulation is Lis Mota irresistible threat, violence or force, is dispensed with or
diminished;
The charter party between the petitioner and private respondent
stipulated that the "(o)wners shall not be responsible for loss, split, short- (7) That the common carrier is not responsible for the
landing, breakages and any kind of damages to the cargo." 10 The validity loss, destruction, or deterioration of goods on account of
of this stipulation is the lis mota of this case. the defective condition of the car, vehicle, ship, airplane
or other equipment used in the contract of carriage.
It should be noted at the outset that there is no dispute between the
parties that the proximate cause of the sinking of M/V Seven Petitioner Valenzuela adds that the stipulation is void for being contrary to
Ambassadors resulting in the loss of its cargo was the "snapping of the Articles 586 and 587 of the Code of Commerce 14 and Articles 1170 and
iron chains and the subsequent rolling of the logs to the portside due to 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409
the negligence of the captain in stowing and securing the logs on board of the Civil Code, 15 petitioner further contends that said stipulation "gives
the vessel and not due to fortuitous event." 11 Likewise undisputed is the no duty or obligation to the private respondent to observe the diligence of
status of Private Respondent Seven Brothers as a private carrier when it a good father of a family in the custody and transportation of the cargo."
contracted to transport the cargo of Petitioner Valenzuela. Even the latter
admits this in its petition. 12 The Court is not persuaded. As adverted to earlier, it is undisputed that
private respondent had acted as a private carrier in transporting
The trial court deemed the charter party stipulation void for being contrary petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions
to public policy, 13 citing Article 1745 of the Civil Code which provides: on common carriers which were cited by petitioner may not be applied
unless expressly stipulated by the parties in their charter party. 16
Art. 1745. Any of the following or similar stipulations shall
be considered unreasonable, unjust and contrary to In a contract of private carriage, the parties may validly stipulate that
public policy: responsibility for the cargo rests solely on the charterer, exempting the
shipowner from liability for loss of or damage to the cargo caused even by
the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil
(1) That the goods are transported at the risk of the
owner or shipper; Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public
order, or public policy. Indeed, their contract of private carriage is not
(2) That the common carrier will not be liable for any loss, even a contract of adhesion. We stress that in a contract of private
destruction, or deterioration of the goods; carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a
(3) That the common carrier need not observe any common carrier, private carriage does not involve the general public.
diligence in the custody of the goods; Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship
(4) That the common carrier shall exercise a degree of transporting commercial goods as a private carrier. Consequently, the
diligence less than that of a good father of a family, or of public policy embodied therein is not contravened by stipulations in a
a man of ordinary prudence in the vigilance over the charter party that lessen or remove the protection given by law in
movables transported; contracts involving common carriers.

(5) That the common carrier shall not be responsible for The issue posed in this case and the arguments raised by petitioner are
the acts or omissions of his or its employees; not novel; they were resolved long ago by this Court in Home Insurance
Co. vs. American Steamship Agencies, Inc. 18 In that case, the trial court
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similarly nullified a stipulation identical to that involved in the present case on common carriers. When the charterer decides to exercise this option,
for being contrary to public policy based on Article 1744 of the Civil Code he takes a normal business risk.
and Article 587 of the Code of Commerce. Consequently, the trial court
held the shipowner liable for damages resulting for the partial loss of the Petitioner contends that the rule in Home Insurance is not applicable to
cargo. This Court reversed the trial court and laid down, through Mr. the present case because it "covers only a stipulation exempting a private
Justice Jose P. Bengzon, the following well-settled observation and carrier from liability for the negligence of his agent, but it does not apply to
doctrine: a stipulation exempting a private carrier like private respondent from the
negligence of his employee or servant which is the situation in this
The provisions of our Civil Code on common carriers case." 20 This contention of petitioner is bereft of merit, for it raises a
were taken from Anglo-American law. Under American distinction without any substantive difference. The case Home
jurisprudence, a common carrier undertaking to carry a Insurance specifically dealt with "the liability of the shipowner for acts or
special cargo or chartered to a special person only, negligence of its captain and crew" 21 and a charter party stipulation which
becomes a private carrier. As a private carrier, a "exempts the owner of the vessel from any loss or damage or delay
stipulation exempting the owner from liability for the arising from any other source, even from the neglect or fault of the captain
negligence of its agent is not against public policy, and is or crew or some other person employed by the owner on
deemed valid. board, for whose acts the owner would ordinarily be liable except for said
paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at
Such doctrine We find reasonable. The Civil Code bar.
provisions on common carriers should not be applied
where the carrier is not acting as such but as a private The naked assertion of petitioner that the American rule enunciated
carrier. The stipulation in the charter party absolving the in Home Insurance is not the rule in the Philippines 23 deserves scant
owner from liability for loss due to the negligence of its consideration. The Court there categorically held that said rule was
agent would be void if the strict public policy governing "reasonable" and proceeded to apply it in the resolution of that case.
common carriers is applied. Such policy has no force Petitioner miserably failed to show such circumstances or arguments
where the public at large is not involved, as in this case of which would necessitate a departure from a well-settled rule.
a ship totally chartered for the used of a single Consequently, our ruling in said case remains a binding judicial precedent
party. 19(Emphasis supplied.) based on the doctrine of stare decisis and Article 8 of the Civil Code
which provides that "(j)udicial decisions applying or interpreting the laws
Indeed, where the reason for the rule ceases, the rule itself does not or the Constitution shall form part of the legal system of the Philippines."
apply. The general public enters into a contract of transportation with
common carriers without a hand or a voice in the preparation thereof. The In fine, the respondent appellate court aptly stated that "[in the case of] a
riding public merely adheres to the contract; even if the public wants to, it private carrier, a stipulation exempting the owner from liability even for the
cannot submit its own stipulations for the approval of the common carrier. negligence of its agents is valid." 24
Thus, the law on common carriers extends its protective mantle against
one-sided stipulations inserted in tickets, invoices or other documents
over which the riding public has no understanding or, worse, no choice.
Compared to the general public, a charterer in a contract of private
carriage is not similarly situated. It can — and in fact it usually does —
enter into a free and voluntary agreement. In practice, the parties in a
contract of private carriage can stipulate the carrier's obligations and
liabilities over the shipment which, in turn, determine the price or
consideration of the charter. Thus, a charterer, in exchange for
convenience and economy, may opt to set aside the protection of the law

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