Common Carriers Introduction
Pablo by ALITALIA until eleven (11) months later, and four (4) months after
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and
FELIPA E. PABLO, Respondents.
NARVASA, J.:
FACTS Dr. Felipa Pablo — an associate professor in the University of the
Philippines, 1 and a research grantee of the Philippine Atomic Energy
Agency — was invited to take part at a meeting of the Department of
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in
Food and Agriculture of the United Nations in Ispra, Italy. 2 She was invited
in view of her specialized knowledge in "foreign substances in food and the
agriculture environment." She accepted the invitation. The program
announced that she would be the second speaker on the first day of the
meeting. 4 Dr. Pablo booked passage on petitioner airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the
itinerary and time table set for her by ALITALIA. She was however told by
the ALITALIA personnel there at Milan that her luggage was "delayed
inasmuch as the same . . . (was) in one of the succeeding flights from Rome
to Milan." 5 Her luggage consisted of two (2) suitcases: one contained her
clothing and other personal items; the other, her scientific papers, slides
and other research material. But the other flights arriving from Rome did
not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags
herself. There, she inquired about her suitcases in the domestic and
international airports, and filled out the forms prescribed by ALITALIA for
people in her predicament. However, her baggage could not be found.
Completely distraught and discouraged, she returned to Manila without
attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make reparation for the
damages thus suffered by her. ALITALIA offered her "free airline tickets to
compensate her for any alleged damages. . . ." She rejected the offer, and
forthwith commenced the action 6 which has given rise to the present
appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded
to Ispra, 7 Italy, but only on the day after her scheduled appearance and
participation at the U.N. meeting there. 8 Of course Dr. Pablo was no longer
there to accept delivery; she was already on her way home to Manila. And
for some reason or other, the suitcases were not actually restored to Prof.
institution of her action. 9
CFI: rendered judgment in Dr. Pablo's favor: 20k for nominal damages; 5k
for attorney's fees; Ordering the defendant to pay the costs of the suit."
Intermediate Appellate Court: not only affirmed the Trial Court's decision
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
under present inflationary conditions as awarded . . . to the plaintiff as
nominal damages, is too little to make up for the plaintiff's frustration and
disappointment in not being able to appear at said conference; and for the
embarrassment and humiliation she suffered from the academic
community for failure to carry out an official mission for which she was
singled out by the faculty to represent her institution and the country.
Hence, ALITALIA’s appeal on Certiorari. It contends that (1) the Warsaw
Convention should have been applied to limit ALITALIA'S liability; and (2)
that there is no warrant in fact or in law for the award to Dr. Pablo of nominal
damages and attorney's fees. 14
ISSUE W/N the compensation for the injury suffered by Dr. Pablo can be
restricted to that prescribed by the Warsaw Convention for delay in the
transport of baggage
RULING --- NO.
Under the Warsaw Convention, 16 an air carrier is made liable for damages
for:
1) the death, wounding or other bodily injury of a passenger if the
accident causing it took place on board the aircraft or in the course
of its operations of embarking or disembarking; 17
2) the destruction or loss of, or damage to, any registered luggage
or goods, if the occurrence causing it took place during the carriage
by air;" 18 and
3) delay in the transportation by air of passengers, luggage or
goods. 19
In these cases, it is provided in the Convention that the "action for
damages, however, founded, can only be brought subject to conditions and
limits set out" therein. 20
The Convention also purports to limit the liability of the carriers in the
following manner: 21
1
 1. In the carriage of passengers the liability of the carrier for each
passenger is limited to the sum of 250,000 francs . . . Nevertheless,
by special contract, the carrier and the passenger may agree to a
higher limit of liability.: nad
2. a) In the carriage of registered baggage and of cargo, the liability
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
package was handed over to the carrier, a special declaration of
interest in delivery at destination and has paid a supplementary
sum if the case so requires. In that case the carrier will be liable to
pay a sum not exceeding the declared sum, unless he proves that
sum is greater than the actual value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered
baggage or cargo, or of any object contained therein, the weight to
be taken into consideration in determining the amount to which the
carrier's liability is limited shall be only the total weight of the
package or packages concerned. Nevertheless, when the loss,
damage or delay of a part of the registered baggage or cargo, or
of an object contained therein, affects the value of other packages
covered by the same baggage check or the same air way bill, the
total weight of such package or packages shall also be taken into
consideration in determining the limit of liability.
3. As regards objects of which the passenger takes charge himself
the liability of the carrier is limited to 5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from
awarding, in accordance with its own law, in addition, the whole or
part of the court costs and of the other expenses of litigation
incurred by the plaintiff. The foregoing provision shall not apply if
the amount of the damages awarded, excluding court costs and
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
months from the date of the occurrence causing the damage, or
before the commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the
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
law of the court seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any agent of the
carrier acting within the scope of his employment." 22 The Hague Protocol
amended the Warsaw Convention by removing the provision that if the
airline took all necessary steps to avoid the damage, it could exculpate itself
completely, 23 and declaring the stated limits of liability not applicable "if it
is proved that the damage resulted from an act or omission of the carrier,
its servants or agents, done with intent to cause damage or recklessly and
with knowledge that damage would probably result." The same deletion
was effected by the Montreal Agreement of 1966, with the result that a
passenger could recover unlimited damages upon proof of wilful
misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit of the extent of that
liability. Such a proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier time, pointed out. 25
Moreover, slight reflection readily leads to the conclusion that it should be
deemed a limit of liability only in those cases where the cause of the death
or injury to person, or destruction, loss or damage to property or delay in
its transport is not attributable to or attended by any wilful misconduct, bad
faith, recklessness, or otherwise improper conduct on the part of any official
or employee for which the carrier is responsible, and there is otherwise no
special or extraordinary form of resulting injury. The Convention's
provisions, in short, do not "regulate or exclude liability for other breaches
of contract by the carrier" 26 or misconduct of its officers and employees,
or for some particular or exceptional type of damage. Otherwise, "an air
carrier would be exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract of carriage, which
is absurd." 27 Nor may it for a moment be supposed that if a member of
the aircraft complement should inflict some physical injury on a passenger,
or maliciously destroy or damage the latter's property, the Convention
might successfully be pleaded as the sole gauge to determine the carrier's
liability to the passenger. Neither may the Convention be invoked to justify
the disregard of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the limits set by said
Convention. It is in this sense that the Convention has been applied, or
ignored, depending on the peculiar facts presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw
Convention was applied as regards the limitation on the carrier's liability,
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
special injury sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held
inapplicable, or as not restrictive of the carrier's liability, where there was
satisfactory evidence of malice or bad faith attributable to its officers and
employees. 29 Thus, an air carrier was sentenced to pay not only
compensatory but also moral and exemplary damages, and attorney's fees,
for instance, where its employees rudely put a passenger holding a first-
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
passenger with a confirmed reservation to another, 32 or subjected a
passenger to extremely rude, even barbaric treatment, as by calling him a
"monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be
ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was
eventually returned to her, belatedly, it is true, but without appreciable
damage. The fact is, nevertheless, that some 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
paper and make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had painstakingly
labored over, at the prestigious international conference, to attend which
she had traveled hundreds of miles, to her chagrin and embarrassment and
the disappointment and annoyance of the organizers. She felt, not
unreasonably, that the invitation for her to participate at the conference,
extended by the Joint FAO/IAEA Division of Atomic Energy in Food and
Agriculture of the United Nations, was a singular honor not only to herself,
but to the University of the Philippines and the country as well, an
opportunity to make some sort of impression among her colleagues in that
field of scientific activity. The opportunity to claim this honor or distinction
was irretrievably lost to her because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound
distress and anxiety, which gradually turned to panic and finally despair,
from the time she learned that her suitcases were missing up to the time
when, having gone to Rome, she finally realized that she would no longer
be able to take part in the conference. As she herself put it, she "was really
shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot
under the circumstances be restricted to that prescribed by the Warsaw
Convention for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her
luggage. As already mentioned, her baggage was ultimately delivered to
her in Manila, tardily but safely. She is however entitled to nominal
damages — which, as the law says, is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant, may be
vindicated and recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered — and this Court agrees that the respondent
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
is precluded by her omission to include a specific claim therefor in her
complaint, it suffices to draw attention to her general prayer, following her
plea for moral and exemplary damages and attorney's fees, "for such other
and further just and equitable relief in the premises," which certainly is
broad enough to comprehend an application as well for nominal damages.
Besides, petitioner should have realized that the explicit assertion, and
proof, that Dr. Pablo's right had been violated or invaded by it — absent
any claim for actual or compensatory damages, the prayer thereof having
been voluntarily deleted by Dr. Pablo upon the return to her of her baggage
— necessarily raised the issue of nominal damages.: rd
G.R. No. 94149 May 5, 1992
AMERICAN HOME ASSURANCE, COMPANY, petitioner,
vs.
THE COURT OF APPEALS and NATIONAL MARINE CORPORATION
and/or NATIONAL MARINE CORPORATION (Manila), respondents.
PARAS, J.:
FACTS Both petitioner American Home Assurance Co. and the
respondent National Marine Corporation are foreign corporations licensed
to do business in the Philippines, the former through its branch. The
American Home Assurance Company (Philippines), Inc. and the latter
through its branch. The National Marine Corporation (Manila) (Rollo, p.
20, Annex L, p.1).
Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of
bleached kraft pulp from Haulien, Taiwan on board "SS Kaunlaran", which
is owned and operated by National Marine Corporation with Registration
No. PID-224. The said shipment was consigned to Mayleen Paper, Inc. of
Manila, which insured the shipment with American Home Assurance Co.
as evidenced by Bill of Lading No. HLMN-01.
The shipment arrived in Manila and was discharged into the custody of
the Marina Port Services, Inc., for eventual delivery to the consignee-
assured. However, upon delivery of the shipment to Mayleen Paper, Inc.,
it was found that 122 bales had either been damaged or lost. The loss
was calculated to be 4,360 kilograms with an estimated value of
P61,263.41.
Mayleen Paper, Inc. then duly demanded indemnification from respondent
National Marine Corporation for the aforesaid damages/losses in the
3
shipment but, for apparently no justifiable reason, said demand was not
heeded (Petition, p. 4).
As the shipment was insured with petitioner in the amount of
US$837,500.00, Mayleen Paper, Inc. sought recovery from the former.
Upon demand and submission of proper documentation, American Home
Assurance paid Mayleen Paper, Inc. the adjusted amount of P31,506.75
for the damages/losses suffered by the shipment, hence, the former was
subrogated to the rights and interests on Mayleen Paper, Inc.
The petitioner, as subrogee, then brought suit against respondent for the
recovery of the amount of P31.506.75 and 25% of the total amount due
as attorney's fees, by filing a complaint for recovery of sum of money
(Petition, p. 4).
National Marine Corporation --- motion to dismiss --- stating that American
Home Assurance Company had no cause of action based on Article 848
of the Code of Commerce which provides "that claims for averages shall
not be admitted if they do not exceed 5% of the interest which the
claimant may have in the vessel or in the cargo if it be gross average and
1% of the goods damaged if particular average, deducting in both cases
the expenses of appraisal, unless there is an agreement to the contrary."
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
P17,420,000.00, the total value of the cargo.
On the other hand, petitioner countered that Article 848 does not apply as
it refers to averages and that a particular average presupposes that the
loss or damages is due to an inherent defect of the goods, an accident of
the sea, or a force majeure or the negligence of the crew of the carrier,
while claims for damages due to the negligence of the common carrier
are governed by the Civil Code provisions on Common Carriers.
RTC: sustained private respondent's contention and dismissed
petitioner’s complaint for lack of cause of action.
CA: dismissed on the ground that petitioner utilized the improper remedy
of appeal
Hence, this petition.
ISSUE Application of the law on averages (Articles 806, 809 and 848 of
the Code of Commerce)
RULING Petitioner: that respondent court failed to consider that
respondent National Marine Corporation being a common carrier, in
conducting its business is regulated by the Civil Code primarily and
suppletorily by the Code of Commerce; and that respondent court refused
to consider the Bill of Lading as the law governing the parties.
Private respondent: countered that in all matters not covered by the Civil
Code, the rights and obligations of the parties shall be governed by the
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
should be applied suppletorily as they provide for the extent of the
common carriers' liability.
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
the country to which the goods are to be transported persons the liability
of the common carrier in case of their loss, destruction or deterioration."
(Article 1753, Civil Code). Thus, for cargoes transported to the Philippines
as in the case at bar, the liability of the carrier is governed primarily by the
Civil Code and in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of
Commerce and by special laws (Article 1766, Civil Code).
Under Article 1733 of the Civil Code, common carriers from the nature of
their business and for reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety
of passengers transported by them according to all circumstances of each
case. Thus, under Article 1735 of the same Code, in all cases other than
those mentioned in Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by law
(Ibid., p. 595).
Common carriers cannot limit their liability for injury or loss of goods
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).
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
on the extent of liability may be applied.
4
The records show that upon delivery of the shipment in question of
Mayleen's warehouse in Manila, 122 bales were found to be
damaged/lost with straps cut or loose, calculated by the so-called
"percentage method" at 4,360 kilograms and amounting to P61,263.41
(Rollo, p. 68). Instead of presenting proof of the exercise of extraordinary
diligence as required by law, National Marine Corporation (NMC) filed its
Motion to Dismiss dated August 7, 1989, hypothetically admitting the truth
of the facts alleged in the complaint to the effect that the loss or damage
to the 122 bales was due to the negligence or fault of NMC (Rollo, p.
179). As ruled by this Court, the filing of a motion to dismiss on the
ground of lack of cause of action carries with it the admission of the
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
the Code of Commerce provisions on averages cannot apply.
On the other hand, Article 1734 of the Civil Code provides that common
carriers are responsible for loss, destruction or deterioration of the goods,
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
Home Assurance Company is entitled to reimbursement of what it paid to
Mayleen Paper, Inc. as insurer.
[G.R. No. 166250 : July 26, 2010]
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC.,
PETITIONER, vs. COURT OF APPEALS AND PIONEER INSURANCE
AND SURETY CORPORATION, RESPONDENTS.
NACHURA, J.:
FACTS On August 31, 1992, the shipper Sylvex Purchasing Corporation
delivered to UTI a shipment of 27 drums of various raw materials for
pharmaceutical manufacturing, consisting of: "1) 3 drums (of) extracts,
flavoring liquid, flammable liquid x x x banana flavoring; 2) 2 drums (of)
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
of Lading No. C320/C15991-2,5 covering the aforesaid shipment. The
subject shipment was insured with private respondent Pioneer Insurance
and Surety Corporation in favor of Unilab against all risks in the amount of
P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM
UL 0627 926 and Open Cargo Policy No. HO-022-RIU.7
On the same day that the bill of lading was issued, the shipment was
loaded in a sealed 1x40 container van, with no. APLU-982012, boarded
on APL's vessel M/V "Pres. Jackson," Voyage 42, and transshipped to
APL's M/V "Pres. Taft"8 for delivery to petitioner in favor of the consignee
United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of Manila. On
October 6, 1992, petitioner received the said shipment in its warehouse
after it stamped the Permit to Deliver Imported Goods9 procured by the
Champs Customs Brokerage.10 Three days thereafter, Oceanica Cargo
Marine Surveyors Corporation (OCMSC) conducted a stripping survey of
the shipment located in petitioner's warehouse. The survey results stated:
2-pallets STC 40 bags Dried Yeast, both in good order condition and
properly sealed
19- steel drums STC Vitamin B Complex Extract, all in good order
condition and properly sealed
1-steel drum STC Vitamin B Complex Extract with cut/hole on side, with
approx. spilling of 1%11
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.
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
pass.14On the same day, the shipment arrived in Unilab's warehouse and
was immediately surveyed by an independent surveyor, J.G. Bernas
Adjusters & Surveyors, Inc. (J.G. Bernas). The Report stated:
1-p/bag torn on side contents partly spilled
1-s/drum #7 punctured and retaped on bottom side content lacking
5-drums shortship/short delivery15
On October 23 and 28, 1992, the same independent surveyor conducted
final inspection surveys which yielded the same results. Consequently,
Unilab's quality control representative rejected one paper bag containing
dried yeast and one steel drum containing Vitamin B Complex as unfit for
the intended purpose.16
Unilab filed a formal claim 17 for the damage against private respondent
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
respondent paid the claimed amount on March 23, 1993. By virtue of the
Loss and Subrogation Receipt18 issued by Unilab in favor of private
respondent, the latter filed a complaint for Damages against APL, UTI and
petitioner with the RTC.
RTC: decided in favor of private respondent and against APL, UTI and
petitioner, ordering the latter to pay, jointly and severally, the former the
(Php76,231.27) with interest as actual damages; The amount equivalent
to 25% of the total sum as attorney's fees; Cost of this litigation.
CA: affirmed the RTC decision.
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
acknowledged receipt of the goods and agreed to transport and deliver
them at a specific place to a person named or his order; upon the delivery
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
diligence in the care of the goods; petitioner failed to exercise the required
diligence; rejected petitioner's claim that its liability should be limited to
$500 per package pursuant to the Carriage of Goods by Sea Act
(COGSA) considering that the value of the shipment was declared
pursuant to the letter of credit and the pro forma invoice. As to APL, the
court considered it as a common carrier notwithstanding the non-issuance
of a bill of lading inasmuch as a bill of lading is not indispensable for the
execution of a contract of carriage.21
ISSUE Petitioner admits that it is a forwarder but disagrees with the CA's
conclusion that it is a common carrier. It also questions the appellate
court's findings that it failed to establish that it exercised extraordinary or
ordinary diligence in the vigilance over the subject shipment. As to the
damages allegedly suffered by private respondent, petitioner counters
that they were not sufficiently proven. Lastly, it insists that its liability, in
any event, should be limited to $500 pursuant to the package limitation
rule.
RULING The petition is partly meritorious.
Admittedly, petitioner is a freight forwarder. The term "freight forwarder"
refers to a firm holding itself out to the general public (other than as a
pipeline, rail, motor, or water carrier) to provide transportation of property
for compensation and, in the ordinary course of its business, (1) to
assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for break-bulk and
distribution operations of the shipments; (2) to assume responsibility for
the transportation of goods from the place of receipt to the place of
destination; and (3) to use for any part of the transportation a carrier
subject to the federal law pertaining to common carriers.23
A freight forwarder's liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however, where
the forwarder contracts to deliver goods to their destination instead of
merely arranging for their transportation, it becomes liable as a common
carrier for loss or damage to goods. A freight forwarder assumes the
responsibility of a carrier, which actually executes the transport, even
though the forwarder does not carry the merchandise itself.24
It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant
thereto, petitioner undertook to transport, ship, and deliver the 27 drums
of raw materials for pharmaceutical manufacturing to the consignee.
A bill of lading is a written acknowledgement of the receipt of goods and
an agreement to transport and to deliver them at a specified place to a
person named or on his or her order.25It operates both as a receipt and as
a contract. It is a receipt for the goods shipped and a contract to transport
and deliver the same as therein stipulated. As a receipt, it recites the date
and place of shipment, describes the goods as to quantity, weight,
dimensions, identification marks, condition, quality, and value. As a
contract, it names the contracting parties, which include the consignee;
fixes the route, destination, and freight rate or charges; and stipulates the
rights and obligations assumed by the parties.26
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a
general rule, are presumed to have been at fault or negligent if the goods
they transported deteriorated or got lost or destroyed. That is, unless they
prove that they exercised extraordinary diligence in transporting the
goods. In order to avoid responsibility for any loss or damage, therefore,
they have the burden of proving that they observed such diligence.27 Mere
proof of delivery of the goods in good order to a common carrier and of
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
given as to how the deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible.28
As correctly found by the RTC and the CA, petitioner failed to rebut the
prima facie presumption of negligence in the carriage of the subject
shipment.
6
First, as stated in the bill of lading, the subject shipment was received by
UTI in apparent good order and condition in New York, United States of
America. Second, the OCMSC Survey Report stated that one steel drum
STC Vitamin B Complex Extract was discovered to be with a cut/hole on
the side, with approximate spilling of 1%. Third, though Gate Pass No.
7614, issued by Jardine, noted that the subject shipment was in good
order and condition, it was specifically stated that there were 22 (should
be 27 drums per Bill of Lading No. C320/C15991-2) drums of raw
materials for pharmaceutical manufacturing. Last, J.G. Bernas' Survey
Report stated that "1-s/drum was punctured and retaped on the bottom
side and the content was lacking, and there was a short delivery of 5-
drums."
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
explain the reason for the damage. Further, petitioner failed to prove that
it observed the extraordinary diligence and precaution which the law
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
delivery.29
However, we affirm the applicability of the Package Limitation Rule under
the COGSA
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
regulated by the Civil Code, the rights and obligations of common carriers
are governed by the Code of Commerce and special laws. Thus, the
COGSA supplements the Civil Code by establishing a provision limiting
the carrier's liability in the absence of a shipper's declaration of a higher
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
for any loss or damage to or in connection with the transportation of
goods in an amount exceeding $500 per package of lawful money of the
United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This declaration,
if embodied in the bill of lading, shall be prima facie evidence, but shall
not be conclusive on the carrier.
In the present case, the shipper did not declare a higher valuation of the
goods to be shipped. Contrary to the CA's conclusion, the insertion of the
words "L/C No. LC No. 1-187-008394/ NY 69867 covering shipment of
raw materials for pharmaceutical Mfg. x x x" cannot be the basis of
petitioner's liability.31 Furthermore, the insertion of an invoice number
does not in itself sufficiently and convincingly show that petitioner had
knowledge of the value of the cargo.32
In light of the foregoing, petitioner's liability should be limited to $500 per
steel drum. In this case, as there was only one drum lost, private
respondent is entitled to receive only $500 as damages for the loss.
G.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness
of private carrier, its owner's responsibility for damage to the cargo and its
liability for demurrage and attorney's fees.
FACTS The MV Vlasons I is a vessel which renders tramping service
and, as such, does not transport cargo or shipment for the general public.
Its services are available only to specific persons who enter into a special
contract of charter party with its owner. It is undisputed that the ship is a
private carrier. And it is in the capacity that its owner, Vlasons Shipping,
Inc., entered into a contract of affreightment or contract of voyage charter
hire with National Steel Corporation.
(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
one (1) voyage to load steel products at Iligan City and discharge
them at North Harbor, Manila, under the following terms and
conditions, viz:
2. Cargo: Full cargo of steel products of not less than 2,500 MT,
10% more or less at Master's option.
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment
upon presentation of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
(Weather Working Day of 24 consecutive hours, Sundays and
Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
9. Cargo Insurance: Charterer's and/or Shipper's must insure the
cargoes. Shipowners not responsible for losses/damages except
on proven willful negligence of the officers of the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic]
or other internationally recognized Charter Party Agreement shall
form part of this Contract.
xxx xxx xxx
The terms "F.I.O.S.T." which is used in the shipping business is a
standard provision in the NANYOZAI Charter Party which stands
for "Freight In and Out including Stevedoring and Trading", which
means that the handling, loading and unloading of the cargoes
are the responsibility of the Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states, "Charterers to load, stow and
discharge the cargo free of risk and expenses to owners. . . .
(Emphasis supplied).
Under paragraph 10 thereof, it is provided that "(o)wners shall,
before and at the beginning of the voyage, exercise due diligence
to make the vessel seaworthy and properly manned, equipped
and supplied and to make the holds and all other parts of the
vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation. Owners shall not be liable for loss of or
damage of the cargo arising or resulting from: unseaworthiness
unless caused by want of due diligence on the part of the owners
to make the vessel seaworthy, and to secure that the vessel is
properly manned, equipped and supplied and to make the holds
and all other parts of the vessel in which cargo is carried, fit and
safe for its reception, carriage and preservation; . . . ; perils,
dangers and accidents of the sea or other navigable waters; . . . ;
wastage in bulk or weight or any other loss or damage arising
from inherent defect, quality or vice of the cargo; insufficiency of
packing; . . . ; latent defects not discoverable by due diligence;
any other cause arising without the actual fault or privity of
Owners or without the fault of the agents or servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides that
"(o)wners shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of the master
and crew."
(2) in accordance with the Contract of Voyage Charter Hire, the
MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's
shipment of 1,677 skids of tinplates and 92 packages of hot rolled
sheets or a total of 1,769 packages with a total weight of about
2,481.19 metric tons for carriage to Manila. The shipment was
placed in the three (3) hatches of the ship. Chief Mate Gonzalo
Sabando, acting as agent of the vessel[,] acknowledged receipt of
the cargo on board and signed the corresponding bill of lading,
B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor,
Manila, on August 12, 1974. The following day, August 13, 1974,
when the vessel's three (3) hatches containing the shipment were
opened by plaintiff's agents, nearly all the skids of tinplates and
hot rolled sheets were allegedly found to be wet and rusty. The
cargo was discharged and unloaded by stevedores hired by the
Charterer. Unloading was completed only on August 24, 1974
after incurring a delay of eleven (11) days due to the heavy rain
which interrupted the unloading operations. (Exhibit "E")
(4) To determine the nature and extent of the wetting and rusting,
NSC called for a survey of the shipment by the Manila Adjusters
and Surveyors Company (MASCO). In a letter to the NSC dated
March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular
inspection conducted on the cargo, both while it was still on board
8
the vessel and later at the NDC warehouse in Pureza St., Sta.
Mesa, Manila where the cargo was taken and stored. MASCO
reported that it found wetting and rusting of the packages of hot
rolled sheets and metal covers of the tinplates; that tarpaulin
hatch covers were noted torn at various extents; that
container/metal casings of the skids were rusting all over.
MASCO ventured the opinion that "rusting of the tinplates was
caused by contact with SEA WATER sustained while still on
board the vessel as a consequence of the heavy weather and
rough seas encountered while en route to destination (Exhibit
"F"). It was also reported that MASCO's surveyors drew at
random samples of bad order packing materials of the tinplates
and delivered the same to the M.I.T. Testing Laboratories for
analysis. On August 31, 1974, the M.I.T. Testing Laboratories
issued Report No. 1770 (Exhibit "I") which in part, states, "The
analysis of bad order samples of packing materials . . . shows
that wetting was caused by contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid Report
No. 1770, plaintiff filed with the defendant its claim for damages
suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18. Then on October 3, 1974, plaintiff
formally demanded payment of said claim but defendant VSI
refused and failed to pay. Plaintiff filed its complaint against
defendant on April 21, 1976 which was docketed as Civil Case
No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the
aforesaid amount of P941,145.18 as a result of the act, neglect
and default of the master and crew in the management of the
vessel as well as the want of due diligence on the part of the
defendant to make the vessel seaworthy and to make the holds
and all other parts of the vessel in which the cargo was carried, fit
and safe for its reception, carriage and preservation — all in
violation of defendant's undertaking under their Contract of
Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged
damage claiming that the MV "VLASONS I" was seaworthy in all
respects for the carriage of plaintiff's cargo; that said vessel was
not a "common carrier" inasmuch as she was under voyage
charter contract with the plaintiff as charterer under the charter
party; that in the course of the voyage from Iligan City to Manila,
the MV "VLASONS I" encountered very rough seas, strong winds
and adverse weather condition, causing strong winds and big
waves to continuously pound against the vessel and seawater to
overflow on its deck and hatch covers, that under the Contract of
Voyage Charter Hire, defendant shall not be responsible for
losses/damages except on proven willful negligence of the
officers of the vessel, that the officers of said MV "VLASONS I"
exercised due diligence and proper seamanship and were not
willfully negligent; that furthermore the Voyage Charter Party
provides that loading and discharging of the cargo was on FIOST
terms which means that the vessel was free of risk and expense
in connection with the loading and discharging of the cargo; that
the damage, if any, was due to the inherent defect, quality or vice
of the cargo or to the insufficient packing thereof or to latent
defect of the cargo not discoverable by due diligence or to any
other cause arising without the actual fault or privity of defendant
and without the fault of the agents or servants of defendant;
consequently, defendant is not liable; that the stevedores of
plaintiff who discharged the cargo in Manila were negligent and
did not exercise due care in the discharge of the cargo; land that
the cargo was exposed to rain and seawater spray while on the
pier or in transit from the pier to plaintiff's warehouse after
discharge from the vessel; and that plaintiff's claim was highly
speculative and grossly exaggerated and that the small stain
marks or sweat marks on the edges of the tinplates were
magnified and considered total loss of the cargo. Finally,
defendant claimed that it had complied with all its duties and
obligations under the Voyage Charter Hire Contract and had no
responsibility whatsoever to plaintiff. In turn, it alleged the
following counterclaim:
(a) That despite the full and proper performance
by defendant of its obligations under the Voyage
Charter Hire Contract, plaintiff failed and refused
to pay the agreed charter hire of P75,000.00
despite demands made by defendant;
(b) That under their Voyage Charter Hire
Contract, plaintiff had agreed to pay defendant
the sum of P8,000.00 per day for demurrage. The
vessel was on demurrage for eleven (11) days in
Manila waiting for plaintiff to discharge its cargo
from the vessel. Thus, plaintiff was liable to pay
defendant demurrage in the total amount of
P88,000.00.
9
 (c) For filing a clearly unfounded civil action
against defendant, plaintiff should be ordered to
pay defendant attorney's fees and all expenses
of litigation in the amount of not less than
P100,000.00.
(8) From the evidence presented by both parties, the RTC came
out with the following findings which were set forth in its decision:
(a) The MV "VLASONS I" is a vessel of Philippine
registry engaged in the tramping service and is
available for hire only under special contracts of
charter party as in this particular case.
(b) That for purposes of the voyage covered by
the Contract of Voyage Charter Hire (Exh. "1"),
the MV VLASONS I" was covered by the required
seaworthiness certificates including the
Certification of Classification issued by an
international classification society, the NIPPON
KAIJI KYOKAI (Exh. "4"); Coastwise License
from the Board of Transportation (Exh. "5");
International Loadline Certificate from the
Philippine Coast Guard (Exh. "6"); Cargo Ship
Safety Equipment Certificate also from the
Philippine Coast Guard (Exh. "7"); Ship Radio
Station License (Exh. "8"); Certificate of
Inspection by the Philippine Coast Guard (Exh.
"12"); and Certificate of Approval for Conversion
issued by the Bureau of Customs (Exh. "9"). That
being a vessel engaged in both overseas and
coastwise trade, the MV "VLASONS I" has a
higher degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform
the voyage called for by the Contract of Voyage
Charter Hire, the MV "VLASONS I" underwent
drydocking in Cebu and was thoroughly
inspected by the Philippine Coast Guard. In fact,
subject voyage was the vessel's first voyage after
the drydocking. The evidence shows that the MV
"VLASONS I" was seaworthy and properly
manned, equipped and supplied when it
undertook the voyage. It has all the required
certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in
three (3) hatches of the ship. The hatch openings
were covered by hatchboards which were in turn
covered by two or double tarpaulins. The hatch
covers were water tight. Furthermore, under the
hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant
violated the contract of carriage is not supported
by evidence. The provisions of the Civil Code on
common carriers pursuant to which there exists a
presumption of negligence in case of loss or
damage to the cargo are not applicable. As to the
damage to the tinplates which was allegedly due
to the wetting and rusting thereof, there is
unrebutted testimony of witness Vicente
Angliongto that tinplates "sweat" by themselves
when packed even without being in contract (sic)
with water from outside especially when the
weather is bad or raining. The trust caused by
sweat or moisture on the tinplates may be
considered as a loss or damage but then,
defendant cannot be held liable for it pursuant to
Article 1734 of the Civil Case which exempts the
carrier from responsibility for loss or damage
arising from the "character of the goods . . ." All
the 1,769 skids of the tinplates could not have
been damaged by water as claimed by plaintiff. It
was shown as claimed by plaintiff that the
tinplates themselves were wrapped in kraft paper
lining and corrugated cardboards could not be
affected by water from outside.
(f) The stevedores hired by the plaintiff to
discharge the cargo of tinplates were negligent in
not closing the hatch openings of the MV
"VLASONS I" when rains occurred during the
discharging of the cargo thus allowing rainwater
to enter the hatches. It was proven that the
stevedores merely set up temporary tents to
cover the hatch openings in case of rain so that it
10
would be easy for them to resume work when the
rains stopped by just removing the tent or
canvas. Because of this improper covering of the
hatches by the stevedores during the discharging
and unloading operations which were interrupted
by rains, rainwater drifted into the cargo through
the hatch openings. Pursuant to paragraph 5 of
the NANYOSAI [sic] Charter Party which was
expressly made part of the Contract of Voyage
Charter Hire, the loading, stowing and
discharging of the cargo is the sole responsibility
of the plaintiff charterer and defendant carrier has
no liability for whatever damage may occur or
maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel
encountered rough seas and bad weather while
en route from Iligan City to Manila causing sea
water to splash on the ship's deck on account of
which the master of the vessel (Mr. Antonio C.
Dumlao) filed a "Marine Protest" on August 13,
1974 (Exh. "15"); which can be invoked by
defendant as a force majeure that would exempt
the defendant from liability.
(h) Plaintiff did not comply with the requirement
prescribed in paragraph 9 of the Voyage Charter
Hire contract that it was to insure the cargo
because it did not. Had plaintiff complied with the
requirement, then it could have recovered its loss
or damage from the insurer. Plaintiff also violated
the charter party contract when it loaded not only
"steel products", i.e. steel bars, angular bars and
the like but also tinplates and hot rolled sheets
which are high grade cargo commanding a higher
freight. Thus plaintiff was able to ship grade
cargo at a lower freight rate.
(i) As regards defendant's counterclaim, the
contract of voyage charter hire under Paragraph
4 thereof, fixed the freight at P30.00 per metric
ton payable to defendant carrier upon
presentation of the bill of lading within fifteen (15)
days. Plaintiff has not paid the total freight due of
P75,000.00 despite demands. The evidence also
showed that the plaintiff was required and bound
under paragraph 7 of the same Voyage Charter
Hire contract to pay demurrage of P8,000.00 per
day of delay in the unloading of the cargoes. The
delay amounted to eleven (11) days thereby
making plaintiff liable to pay defendant for
demurrage in the amount of P88,000.00.
CA: modified the decision of the trial court by reducing the demurrage
from P88,000.00 to P44,000.00 and deleting the award of attorneys fees
and expenses of litigation.
NSC and VSI filed their respective petitions for review before this Court.
Petitions were consolidated.
ISSUE I. Whether or not the provisions of the Civil Code of the Philippines
on common carriers pursuant to which there exist[s] a presumption of
negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier.
RULING --- NO.
The Court affirms the assailed Decision of the Court of Appeals, except in
respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted with NSC
as a common carrier or as a private carrier. The resolution of this
preliminary question determines the law, standard of diligence and burden
of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as "persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public." It has been held that
the true test of a common carrier is the carriage of passengers or goods,
provided it has space, for all who opt to avail themselves of its
transportation service for a fee.11 A carrier which does not qualify under
the above test is deemed a private carrier. "Generally, private carriage is
undertaken by special agreement and the carrier does not hold himself
out to carry goods for the general public. The most typical, although not
11
the only form of private carriage, is the charter party, a maritime contract
by which the charterer, a party other than the shipowner, obtains the use
and service of all or some part of a ship for a period of time or a voyage or
voyages."12
In the instant case, it is undisputed that VSI did not offer its services to the
general public. As found by the Regional Trial Court, it carried passengers
or goods only for those it chose under a "special contract of charter
party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons
I "was not a common but a private carrier."14Consequently, the rights and
obligations of VSI and NSC, including their respective liability for damage
to the cargo, are determined primarily by stipulations in their contract of
private carriage or charter party.15 Recently, in Valenzuela Hardwood and
Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping
Corporation,16 the Court ruled:
. . . in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be
binding on them. Unlike in a contract involving a common carrier,
private carriage does not involve the general public. Hence, the
stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a
ship transporting commercial goods as a private carrier.
Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or
remove the protection given by law in contracts involving common
carriers.17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire, dated July
17, 1974, that VSI "shall not be responsible for losses except on proven
willful negligence of the officers of the vessel." The NANYOZAI Charter
Party, which was incorporated in the parties' contract of transportation
further provided that the shipowner shall not be liable for loss of or a
damage to the cargo arising or resulting from unseaworthiness, unless
the same was caused by its lack of due diligence to make the vessel
seaworthy or to ensure that the same was "properly manned, equipped
and supplied," and to "make the holds and all other parts of the vessel in
which cargo [was] carried, fit and safe for its reception, carriage and
preservation."18 The NANYOZAI Charter Party also provided that
"[o]wners shall not be responsible for split, chafing and/or any damage
unless caused by the negligence or default of the master or crew."19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove
that the damage to its shipment was caused by VSI's willful negligence or
failure to exercise due diligence in making MV Vlasons I seaworthy and fit
for holding, carrying and safekeeping the cargo. Ineluctably, the burden of
proof was placed on NSC by the parties' agreement.
Because the MV Vlasons I was a private carrier, the shipowner's
obligations are governed by the foregoing provisions of the Code of
Commerce and not by the Civil Code which, as a general rule, places
the prima facie presumption of negligence on a common carrier. It is a
hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo,
the burden is on the plaintiff to prove that the carrier was
negligent or unseaworthy, and the fact that the goods were lost or
damaged while in the carrier's custody does not put the burden of
proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes only to
exercise due care in the protection of the goods committed to its
care, the burden of proving negligence or a breach of that duty
rests on plaintiff and proof of loss of, or damage to, cargo while in
the carrier's possession does not cast on it the burden of proving
proper care and diligence on its part or that the loss occurred
from an excepted cause in the contract or bill of lading. However,
in discharging the burden of proof, plaintiff is entitled to the
benefit of the presumptions and inferences by which the law aids
the bailor in an action against a bailee, and since the carrier is in
a better position to know the cause of the loss and that it was not
one involving its liability, the law requires that it come forward with
the information available to it, and its failure to do so warrants an
inference or presumption of its liability. However, such inferences
and presumptions, while they may affect the burden of coming
forward with evidence, do not alter the burden of proof which
remains on plaintiff, and, where the carrier comes forward with
evidence explaining the loss or damage, the burden of going
forward with the evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of
seaworthiness, the burden of proving a breach thereof and that
such breach was the proximate cause of the damage rests on
plaintiff, and proof that the goods were lost or damaged while in
12
 the carrier's possession does not cast on it the burden of proving
seaworthiness. . . . Where the contract of carriage exempts the
carrier from liability for unseaworthiness not discoverable by due
diligence, the carrier has the preliminary burden of proving the
exercise of due diligence to make the vessel seaworthy. 20
In the instant case, the Court of Appeals correctly found the NSC "has not
taken the correct position in relation to the question of who has the
burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and
Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-
appellant's [NSC's] interpretation of Clause 12 is not even correct), it
argues that 'a careful examination of the evidence will show that VSI
miserably failed to comply with any of these obligation's as if defendant-
appellee [VSI] had the burden of
proof."21
G.R. No. 184300 July 11, 2012
MALAYAN INSURANCE CO., INC., Petitioner,
vs.
PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE
FORWARDER SERVICES, INC., Respondents.
REYES, J.:
FACTS Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent
Reputable Forwarder Services, Inc. (Reputable) had been annually
executing a contract of carriage, whereby the latter undertook to transport
and deliver the former’s products to its customers, dealers or salesmen.3
Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from
respondent Philippines First Insurance Co., Inc. (Philippines First) to
secure its interest over its own products. Philippines First thereby insured
Wyeth’s nutritional, pharmaceutical and other products usual or incidental
to the insured’s business while the same were being transported or
shipped in the Philippines. The policy covers all risks of direct physical
loss or damage from any external cause, if by land, and provides a limit of
P6,000,000.00 per any one land vehicle.
Wyeth executed its annual contract of carriage with Reputable. It turned
out, however, that the contract was not signed by Wyeth’s
representative/s.4 Nevertheless, it was admittedly signed by Reputable’s
representatives, the terms thereof faithfully observed by the parties and,
as previously stated, the same contract of carriage had been annually
executed by the parties every year since 1989.5
Under the contract, Reputable undertook to answer for "all risks with
respect to the goods and shall be liable to the COMPANY (Wyeth), for the
loss, destruction, or damage of the goods/products due to any and all
causes whatsoever, including theft, robbery, flood, storm, earthquakes,
lightning, and other force majeure while the goods/products are in transit
and until actual delivery to the customers, salesmen, and dealers of the
COMPANY".6
The contract also required Reputable to secure an insurance policy on
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
received from Wyeth 1,000 boxes of Promil infant formula worth
P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation
in Libis, Quezon City. Unfortunately, the truck carrying Wyeth’s products
was hijacked by about 10 armed men. They threatened to kill the truck
driver and two of his helpers should they refuse to turn over the truck and
its contents to the said highway robbers. The hijacked truck was
recovered two weeks later without its cargo.
Philippines First, after due investigation and adjustment, and pursuant to
the Marine Policy, paid Wyeth P2,133,257.00 as indemnity. Philippines
First then demanded reimbursement from Reputable, having been
subrogated to the rights of Wyeth by virtue of the payment. The latter,
however, ignored the demand.
Consequently, Philippines First instituted an action for sum of money
against Reputable on August 12, 1996.8 In its complaint, Philippines First
stated that Reputable is a "private corporation engaged in the business of
a common carrier." In its answer,9 Reputable claimed that it is a private
carrier. It also claimed that it cannot be made liable under the contract of
carriage with Wyeth since the contract was not signed by Wyeth’s
representative and that the cause of the loss was force majeure, i.e., the
hijacking incident.
Subsequently, Reputable impleaded Malayan as third-party defendant in
an effort to collect the amount covered in the SR Policy. According to
13
Reputable, "it was validly insured with Malayan for P1,000,000.00 with
respect to the lost products under the latter’s Insurance Policy No. SR-
0001-02577 effective February 1, 1994 to February 1, 1995" and that the
SR Policy covered the risk of robbery or hijacking.10
Disclaiming any liability, Malayan argued, among others, that under
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
damage is insured by any marine policy and that the SR Policy expressly
excluded third-party liability.
RTC: found Reputable liable to Philippines First for the amount of
indemnity it paid to Wyeth, among others. In turn, Malayan was found by
the RTC to be liable to Reputable to the extent of the policy coverage.
CA: rendered the assailed decision sustaining the ruling of the RTC
The CA ruled, among others, that: (1) Reputable is estopped from
assailing the validity of the contract of carriage on the ground of lack of
signature of Wyeth’s representative/s; (2) Reputable is liable under the
contract for the value of the goods even if the same was lost due to
fortuitous event; and (3) Section 12 of the SR Policy prevails over Section
5, it being the latter provision; however, since the ratable proportion
provision of Section 12 applies only in case of double insurance, which is
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
Hence, this petition.
Malayan insists that the CA failed to properly resolve the issue on the
"statutory limitations on the liability of common carriers" and the
"difference between an ‘other insurance clause’ and an ‘over insurance
clause’."
Malayan also contends that the CA erred when it held that Reputable is a
private carrier and should be bound by the contractual stipulations in the
contract of carriage. This argument is based on its assertion that
Philippines First judicially admitted in its complaint that Reputable is a
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
not liable for the loss, then there is no reason to hold Malayan liable to
Reputable.
Further, Malayan posits that there resulted in an impairment of contract
when the CA failed to apply the express provisions of Section 5 (referred
to by Malayan as over insurance clause) and Section 12 (referred to by
Malayan as other insurance clause) of its SR Policy as these provisions
could have been read together there being no actual conflict between
them.
Reputable, meanwhile, contends that it is exempt from liability for acts
committed by thieves/robbers who act with grave or irresistible threat
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
Philippines First for the full amount of its policy coverage and not merely a
ratable portion thereof under Section 12 of the SR Policy.
Finally, Philippines First contends that the factual finding that Reputable is
a private carrier should be accorded the highest degree of respect and
must be considered conclusive between the parties, and that a review of
such finding by the Court is not warranted under the circumstances. As to
its alleged judicial admission that Reputable is a common carrier,
Philippines First proffered the declaration made by Reputable that it is a
private carrier. Said declaration was allegedly reiterated by Reputable in
its third party complaint, which in turn was duly admitted by Malayan in its
answer to the said third-party complaint. In addition, Reputable even
presented evidence to prove that it is a private carrier.
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
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
Policy after deducting P2,000.00 under Section 10 of the said SR Policy.17
ISSUES 1) Whether Reputable is a private carrier;
2) Whether Reputable is strictly bound by the stipulations in its
contract of carriage with Wyeth, such that it should be liable for
any risk of loss or damage, for any cause whatsoever, including
that due to theft or robbery and other force majeure;
RULING On the first issue – Reputable is a private carrier.
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
the highest degree of respect and considered conclusive between the
parties, save for certain exceptional and meritorious circumstances, none
of which are present in this case.18
Malayan relies on the alleged judicial admission of Philippines First in its
complaint that Reputable is a common carrier.19 Invoking Section 4, Rule
129 of the Rules on Evidence that "an admission verbal or written, made
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
ruled that
Reputable is a common carrier. Consequently, pursuant to Article 1745(6)
of the Civil Code, the liability of Reputable for the loss of Wyeth’s goods
should be dispensed with, or at least diminished.
It is true that judicial admissions, such as matters alleged in the pleadings
do not require proof, and need not be offered to be considered by the
court. "The court, for the proper decision of the case, may and should
consider, without the introduction of evidence, the facts admitted by the
parties."20 The rule on judicial admission, however, also states that such
allegation, statement, or admission is conclusive as against the
pleader,21 and that the facts alleged in the complaint are deemed
admissions of the plaintiff and binding upon him.22 In this case, the
pleader or the plaintiff who alleged that Reputable is a common carrier
was Philippines First. It cannot, by any stretch of imagination, be made
conclusive as against Reputable whose nature of business is in question.
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
of Wyeth to collect from Reputable under the terms of the contract of
carriage. Philippines First is not in any position to make any admission,
much more a definitive pronouncement, as to the nature of Reputable’s
business and there appears no other connection between Philippines
First and Reputable which suggests mutual familiarity between them.
Moreover, records show that the alleged judicial admission of Philippines
First was essentially disputed by Reputable when it stated in paragraphs
2, 4, and 11 of its answer that it is actually a private or special carrier.23 In
addition, Reputable stated in paragraph 2 of its third-party complaint that
it is "a private carrier engaged in the carriage of goods."24 Such allegation
was, in turn, admitted by Malayan in paragraph 2 of its answer to the
third-party complaint.25 There is also nothing in the records which show
that Philippines First persistently maintained its stance that Reputable is a
common carrier or that it even contested or proved otherwise Reputable’s
position that it is a private or special carrier.
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
reduced to nothing more than mere allegation, which must be proved for it
to be given any weight or value. The settled rule is that mere allegation is
not proof.26
More importantly, the finding of the RTC and CA that Reputable is a
special or private carrier is warranted by the evidence on record,
primarily, the unrebutted testimony of Reputable’s Vice President and
General Manager, Mr. William Ang Lian Suan, who expressly stated in
open court that Reputable serves only one customer, Wyeth.27
Under Article 1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the business of carrying or
transporting passenger or goods, or both by land, water or air for
compensation, offering their services to the public. On the other hand, a
private carrier is one wherein the carriage is generally undertaken by
special agreement and it does not hold itself out to carry goods for the
general public.28 A common carrier becomes a private carrier when it
undertakes to carry a special cargo or chartered to a special person
only.29 For all intents and purposes, therefore, Reputable operated as a
private/special carrier with regard to its contract of carriage with Wyeth.
On the second issue – Reputable is bound by the terms of the contract of
carriage.
The extent of a private carrier’s obligation is dictated by the stipulations of
a contract it entered into, provided its stipulations, clauses, terms and
conditions are not contrary to law, morals, good customs, public order, or
public policy. "The Civil Code provisions on common carriers should not
be applied where the carrier is not acting as such but as a private carrier.
Public policy governing common carriers has no force where the public at
large is not involved."30
Thus, being a private carrier, the extent of Reputable’s liability is fully
governed by the stipulations of the contract of carriage, one of which is
that it shall be liable to Wyeth for the loss of the goods/products due to
any and all causes whatsoever, including theft, robbery and other force
majeure while the goods/products are in transit and until actual delivery to
Wyeth’s customers, salesmen and dealers.31
15

BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP
MAHTANI, and PHILIPPINE AIRLINES, respondents. G.R. No. 121824
January 29, 1998
ROMERO, J.:
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.
Since BA had no direct flights from Manila to Bombay, Mahtani had to
take a flight to Hongkong via PAL, and upon arrival in Hongkong he had
to take a connecting flight to Bombay on board BA.
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
the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his
luggage was missing and that upon inquiry from the BA representatives,
he was told that the same might have been diverted to London. After
patiently waiting for his luggage for one week, BA finally advised him to
file a claim by accomplishing the "Property Irregularity Report."4
Back in the Philippines, Mahtani filed his complaint for damages and
attorney's fees 5 against BA and Mr. Gumar before the trial court
BA: Mahtani did not have a cause of action against it. Likewise, BA filed a
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,
thus leaving hardly any time for the proper transfer of Mahtani's luggage
to the BA aircraft bound for Bombay.
PAL: disclaimed any liability, arguing that there was, in fact, adequate
time to transfer the luggage to BA facilities in Hongkong. Furthermore, the
transfer of the luggage to Hongkong authorities should be considered as
transfer to BA.8
RTC: rendered its decision in favor of Mahtani
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
Hundred U.S. ($400.00) Dollars representing the value of the
contents of plaintiff's luggage; Fifty Thousand (P50,000.00) Pesos
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.
CA AFFIRMED in toto the dec of RTC:
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
RULING Regarding the first assigned issue, BA asserts that the award of
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:
8. On the said travel, plaintiff took with him the following items
and its corresponding value, to wit:
1. personal belonging P10,000.00
2. gifts for his parents and relatives $5,000.00
Moreover, he failed to declare a higher valuation with respect to his
luggage, a condition provided for in the ticket, which reads:13
Liability for loss, delay, or damage to baggage is limited unless a
higher value is declared in advance and additional charges are
paid:
1. For most international travel (including domestic corporations
of international journeys) the liability limit is approximately U.S.
$9.07 per pound (U.S. $20.000) per kilo for checked baggage and
U.S. $400 per passenger for unchecked baggage.
Before we resolve the issues raised by BA, it is needful to state that the
nature of an airline's contract of carriage partakes of two types, namely: a
contract to deliver a cargo or merchandise to its destination and a
contract to transport passengers to their destination. A business intended
to serve the 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
predictably furnish bases for an action for damages.15
In the instant case, it is apparent that the contract of carriage was
between Mahtani and BA. Moreover, it is indubitable that his luggage
never arrived in Bombay on time. Therefore, as in a number of cases 16 we
have assessed the airlines' culpability in the form of damages for breach
of contract involving misplaced luggage.
In determining the amount of compensatory damages in this kind of
cases, it is vital that the claimant satisfactorily prove during the trial the
existence of the factual basis of the damages and its causal connection to
defendant's acts.17
In this regard, the trial court granted the following award as compensatory
damages:
Since plaintiff did not declare the value of the contents in his
luggage and even failed to show receipts of the alleged gifts for
the members of his family in Bombay, the most that can be
expected for compensation of his lost luggage (2 suit cases) is
Twenty U.S. Dollars ($20.00) per kilo, or combined value of Four
Hundred ($400.00) U.S. Dollars for Twenty kilos representing the
contents plus Seven Thousand (P7,000.00) Pesos representing
the purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that there should have
been no separate award for the luggage and the contents thereof since
Mahtani failed to declare a separate higher valuation for the
luggage,18 and therefore, its liability is limited, at most, only to the amount
stated in the ticket.
Considering the facts of the case, we cannot assent to such specious
argument.
Admittedly, in a contract of air carriage a declaration by the passenger of
a higher value is needed to recover a greater amount. Article 22(1) of the
Warsaw Convention,19 provides as follows:
xxx xxx xxx
(2) In the transportation of checked baggage and goods, the
liability of the carrier shall be limited to a sum of 250 francs per
kilogram, unless the consignor has made, at time the package
was handed over to the carrier, a special declaration of the value
at delivery and has paid a supplementary sum if the case so
requires. In that case the carrier will be liable to pay a sum not
exceeding the declared sum, unless he proves that the sum is
greater than the actual value to the consignor at delivery.
American jurisprudence provides that an air carrier is not liable for the
loss of baggage in an amount in excess of the limits specified in the tariff
which was filed with the proper authorities, such tariff being binding, on
the passenger regardless of the passenger's lack of knowledge thereof or
assent thereto.20 This doctrine is recognized in this jurisdiction.21
Notwithstanding the foregoing, we have, nevertheless, ruled against blind
reliance on adhesion contracts where the facts and circumstances justify
that they should be disregarded.22
In addition, we have held that benefits of limited liability are subject to
waiver such as when the air carrier failed to raise timely objections during
the trial when questions and answers regarding the actual claims and
damages sustained by the passenger were asked.23
Given the foregoing postulates, the inescapable conclusion is that BA had
waived the defense of limited liability when it allowed Mahtani to testify as
to the actual damages he incurred due to the misplacement of his
luggage, without any objection.
As to the issue of the dismissal of BA's third-party complaint against PAL,
Undeniably, for the loss of his luggage, Mahtani is entitled to damages
from BA, in view of their contract of carriage. Yet, BA adamantly
disclaimed its liability and instead imputed it to PAL which the latter
naturally denies. In other words, BA and PAL are blaming each other for
the incident.
In resolving this issue, it is worth observing that the contract of air
transportation was exclusively between Mahtani and BA, the latter merely
endorsing the Manila to Hongkong leg of the former's journey to PAL, as
its subcontractor or agent. In fact, the fourth paragraph of the "Conditions
of Contracts" of the ticket32issued by BA to Mahtani confirms that the
contract was one of continuous air transportation from Manila to Bombay.
17
 4. . . . carriage to be performed hereunder by several successive
carriers is regarded as a single operation.
Prescinding from the above discussion, it is undisputed that PAL, in
transporting Mahtani from Manila to Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the
well-settled rule that an agent is also responsible for any negligence in the
performance of its function.33 and is liable for damages which the principal
may suffer by reason of its negligent act.34 Hence, the Court of Appeals
erred when it opined that BA, being the principal, had no cause of action
against PAL, its agent or sub-contractor.
Also, it is worth mentioning that both BA and PAL are members of the
International Air Transport Association (IATA), wherein member airlines
are regarded as agents of each other in the issuance of the tickets and
other matters pertaining to their relationship. 35 Therefore, in the instant
case, the contractual relationship between BA and PAL is one of agency,
the former being the principal, since it was the one which issued the
confirmed ticket, and the latter the agent.
Our pronouncement that BA is the principal is consistent with our ruling
in Lufthansa German Airlines v.Court of Appeals.36 In that case,
Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg
trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines
which was to carry Antiporda to a specific destination "bumped" him off.
An action for damages was filed against Lufthansa which, however,
denied any liability, contending that its responsibility towards its
passenger is limited to the occurrence of a mishap on its own line.
Consequently, when Antiporda transferred to Air Kenya, its obligation as a
principal in the contract of carriage ceased; from there on, it merely acted
as a ticketing agent for Air Kenya.
In rejecting Lufthansa's argument, we ruled:
In the very nature of their contract, Lufthansa is clearly the
principal in the contract of carriage with Antiporda and remains to
be so, regardless of those instances when actual carriage was to
be performed by various carriers. The issuance of confirmed
Lufthansa ticket in favor of Antiporda covering his entire five-leg
trip abroad successive carriers concretely attest to this.
Since the instant petition was based on breach of contract of carriage,
Mahtani can only sue BA alone, and not PAL, since the latter was not a
party to the contract. However, this is not to say that PAL is relieved from
any liability due to any of its negligent acts. In China Air Lines,
Ltd. v. Court of Appeals,37 while not exactly in point, the case, however,
illustrates the principle which governs this particular situation. In that
case, we recognized that a carrier (PAL), acting as an agent of another
carrier, is also liable for its own negligent acts or omission in the
performance of its duties.
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and
ERNESTO CENDANA, respondents. G.R. No. L-47822 December 22,
1988
FELICIANO, J.:
FACTS Respondent Ernesto Cendana, a junk dealer, was engaged in
buying up used bottles and scrap metal in Pangasinan. Upon gathering
sufficient quantities of such scrap material, respondent would bring such
material to Manila for resale. He utilized two (2) six-wheeler trucks which
he owned for hauling the material to Manila. On the return trip to
Pangasinan, respondent would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan.
For that service, respondent charged freight rates which were commonly
lower than regular commercial rates.
petitioner Pedro de Guzman a merchant and authorized dealer of General
Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted
with respondent for the hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to petitioner's establishment
in Urdaneta on or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to his trucks: 150
cartons were loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven by Manuel
Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The
other 600 boxes never reached petitioner, since the truck which carried
these boxes was hijacked somewhere along the MacArthur Highway in
18
Paniqui, Tarlac, by armed men who took with them the truck, its driver, his
helper and the cargo.
petitioner commenced action against private respondent before CFI,
demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that
private respondent, being a common carrier, and having failed to exercise
the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods.
private respondent: denied that he was a common carrier and argued that
he could not be held responsible for the value of the lost goods, such loss
having been due to force majeure.
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
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
CA reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common
carrier.
ISSUES 1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force
majeure; and
3. that respondent was not liable for the value of the
undelivered cargo. (Rollo, p. 111)
RULING The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to
the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in local
Idiom as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population.
We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may
be seen to coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the
Civil Code. Under Section 13, paragraph (b) of the Public Service Act,
"public service" includes:
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight
or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or
dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. ... (Emphasis
supplied)
It appears to the Court that private respondent is properly characterized
as a common carrier even though he merely "back-hauled" goods for
other merchants from Manila to Pangasinan, although such back-hauling
was done on a periodic or occasional rather than regular or scheduled
manner, and even though private respondent's principal occupation was
not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee
frequently fell below commercial freight rates is not relevant here.
19
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common
carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or
firm acts as a common carrier, without regard to whether or not such
carrier has also complied with the requirements of the applicable
regulatory statute and implementing regulations and has been granted a
certificate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not
secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory
requirements. The business of a common carrier impinges directly and
intimately upon the safety and well being and property of those members
of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a
common carrier to render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of
public policy" 2 are held to a very high degree of care and diligence
("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care of
goods transported by a common carrier is, according to Article 1733,
"further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7"
of the Civil Code.
Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods which
they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or
other natural disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act or omission of the shipper or
owner of the goods;
(4) The character-of the goods or defects
in the packing or-in the containers; and
(5) Order or act of competent public
authority.
It is important to point out that the above list of causes of loss, destruction
or deterioration which exempt the common carrier for responsibility
therefor, is a closed list. Causes falling outside the foregoing list, even if
they appear to constitute a species of force majeure fall within the scope
of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2,
3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the
specific cause alleged in the instant case — the hijacking of the carrier's
truck — does not fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore, that the hijacking
of the carrier's vehicle must be dealt with under the provisions of Article
1735, in other words, that the private respondent as common carrier is
presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary
diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary
diligence in the care of petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent should have hired a
security guard presumably to ride with the truck carrying the 600 cartons
of Liberty filled milk. We do not believe, however, that in the instant case,
the standard of extraordinary diligence required private respondent to
retain a security guard to ride with the truck and to engage brigands in a
firelight at the risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific
requirements of the duty of extraordinary diligence in the vigilance over
the goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over
goods is, under Article 1733, given additional specification not only by
20
Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6,
Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public
policy:
xxx xxx xxx
(5) that the common carrier shall not be
responsible for the acts or omissions of
his or its employees;
(6) that the common carrier's liability for
acts committed by thieves, or of
robbers who donot act with grave or
irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not
responsible for the loss, destruction or
deterioration of goods on account of the
defective condition of the car vehicle,
ship, airplane or other equipment used in
the contract of carriage. (Emphasis
supplied)
Under Article 1745 (6) above, a common carrier is held responsible —
and will not be allowed to divest or to diminish such responsibility — even
for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave or irresistible threat, violence or force."
We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an
information for robbery in band was filed in the Court of First Instance of
Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina,
Oscar Oria and one John Doe." There, the accused were charged with
willfully and unlawfully taking and carrying away with them the second
truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that the accused acted
with grave, if not irresistible, threat, violence or force.3 Three (3) of the five
(5) hold-uppers were armed with firearms. The robbers not only took
away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another
province (in Zambales). The hijacked truck was subsequently found by
the police in Quezon City. The Court of First Instance convicted all the
accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to
recall that even common carriers are not made absolute insurers against
all risks of travel and of transport of goods, and are not held liable for acts
or events which cannot be foreseen or are inevitable, provided that they
shall have complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that
private respondent Cendana is not liable for the value of the undelivered
merchandise which was lost because of an event entirely beyond private
respondent's control.
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her official
capacity as City Treasurer of Batangas, respondents. G.R. No.
125948 December 29, 1998
21

MARTINEZ, J.:
FACTS Petitioner is a grantee of a pipeline concession under Republic
Act No. 387, as amended, to contract, install and operate oil pipelines.
The original pipeline concession was granted in 19671 and renewed by
the Energy Regulatory Board in 1992. 2
petitioner applied for a mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on
its gross receipts for the fiscal year 1993 pursuant to the Local
Government 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
1993.
petitioner filed a letter-protest addressed to the respondent City
Treasurer. It claimed that Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is engaged in
the business of transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such,
our Company is exempt from paying tax on gross receipts under Section
133 of the Local Government Code of 1991
respondent City Treasurer denied the protest contending that petitioner
cannot be considered engaged in transportation business, thus it cannot
claim exemption under Section 133 (j) of the Local Government Code.5
petitioner filed with the Regional Trial Court of Batangas City a
complaint6 for tax refund with prayer for writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her
capacity as City Treasurer. In its complaint, petitioner alleged, inter alia,
that: (2) the authority of cities to impose and collect a tax on the gross
receipts of "contractors and independent contractors" under Sec. 141 (e)
and 151 does not include the authority to collect such taxes on
transportation contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors, among others
respondents argued that petitioner cannot be exempt from taxes under
Section 133 (j) of the Local Government Code as said exemption applies
only to "transportation contractors and persons engaged in the
transportation by hire and common carriers by air, land and water."
Respondents assert that pipelines are not included in the term "common
carrier" which refers solely to ordinary carriers such as trucks, trains,
ships and the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or manner by which a
product is delivered to its destination.8
RTC: rendered a decision dismissing the complaint:hat the exemption
granted under Sec. 133 (j) encompasses only common carriers so as not
to overburden the riding public or commuters with taxes. Plaintiff is not a
common carrier, but a special carrier extending its services and facilities
to a single specific or "special customer" under a "special contract."
CA: affirmed the trial court's dismissal of petitioner's complaint.
Hence, this petition. At first, the petition was denied due course in a
Resolution dated November 11, 1996. 13Petitioner moved for a
reconsideration which was granted by this Court in a Resolution 14 of
January 22, 1997. Thus, the petition was reinstated.
ISSUE W/N the petitioner is a common carrier or a transportation
contractor thus entitled to business tax exemption
RULING There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself
out to the public as engaged in the business of transporting persons or
property from place to place, for compensation, offering his services to
the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation; 2. He must undertake to carry goods of the kind to
which his business is confined; 3. He must undertake to carry by the
method by which his business is conducted and over his established
roads; and 4. The transportation must be for hire. 15
22
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons indifferently, that is, to
all persons who choose to employ its services, and transports the goods
by land and for compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a common carrier. In De
Guzman vs. Court of Appeals 16we ruled that: The above article (Art.
1732, Civil Code) makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 . . . avoids making any distinction between a
person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained from making
such distinctions. So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes: every person that now or
hereafter may own, operate. manage, or control in the Philippines, for hire
or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system gas, electric light heat and power, water
supply 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
carriers transporting goods and passengers through moving vehicles or
vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers"
in the Civil Code makes no distinction as to the means of transporting, as
long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In
fact, in the United States, oil pipe line operators are considered common
carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner
is considered a "common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall
have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to charge
without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility.
Pertinent portion of Article 7 thereof provides: that everything relating to
the exploration for and exploitation of petroleum . . . and everything
relating to the manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a
"common carrier." In BIR Ruling No. 069-83, it declared: . . . since
[petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 . . . . Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as
amended.
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax
G.R. No. 147246 August 19, 2003
23
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents. G.R. No. 147246 August 19, 2003
PUNO, J.:
FACTS 3,150 metric tons of Better Western White Wheat in bulk, valued
at US$423,192.354 was shipped by Marubeni American Corporation of
Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for
delivery to the consignee, General Milling Corporation in Manila,
evidenced by Bill of Lading No. PTD/Man-4.5The shipment was insured
by the private respondent Prudential Guarantee and Assurance, Inc.
against loss or damage for P14,621,771.75 under Marine Cargo Risk
Note RN 11859/90.6
the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner
was contracted by the consignee as carrier to deliver the cargo to
consignee's warehouse at Bo. Ugong, Pasig City.
900 metric tons of the shipment was loaded on barge PSTSI III,
evidenced by Lighterage Receipt No. 03647 for delivery to consignee. The
cargo did not reach its destination.
It appears that the transport of said cargo was suspended due to a
warning of an incoming typhoon. the petitioner proceeded to pull the
barge to Engineering Island off Baseco to seek shelter from the
approaching typhoon. PSTSI III was tied down to other barges which
arrived ahead of it while weathering out the storm that night. A few days
after, the barge developed a list because of a hole it sustained after hitting
an unseen protuberance underneath the water. The petitioner filed a
Marine Protest. It likewise secured the services of Gaspar Salvaging
Corporation which refloated the barge. 9 The hole was then patched with
clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed
towards the consignee's wharf. Upon reaching the Sta. Mesa spillways,
the barge again ran aground due to strong current. To avoid the complete
sinking of the barge, a portion of the goods was transferred to three other
barges.10
The next day, the towing bits of the barge broke. It sank completely,
resulting in the total loss of the remaining cargo.11 A second Marine
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
the salvaged cargo was P201,379.75.14
consignee sent a claim letter to the petitioner, and another letter on a
separate date to the private respondent for the value of the lost cargo.
the private respondent indemnified the consignee in the amount
of P4,104,654.22.15Thereafter, as subrogee, it sought recovery of said
amount from the petitioner, but to no avail.
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
filed its answer with counterclaim.17
RTC: ruled in favor of the private respondent, ordering defendant Asia
Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee &
Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date
complaint was filed on July 3, 1991 until fully satisfied plus 10% of the
amount awarded as and for attorney's fees.
CA: affirmed the decision of the trial court with modification in the sense
that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22.
ISSUES
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it
exercised extraordinary diligence in its care and custody of the
consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons,
corporations, firms or associations engaged in the business of carrying or
24
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier.
Allegedly, it has no fixed and publicly known route, maintains no
terminals, and issues no tickets. It points out that it is not obliged to carry
indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general public. 20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the definition
of common carriers in Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary
activity. We also did not distinguish between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis.
Further, we ruled that Article 1732 does not distinguish between a carrier
offering its services to the general public, and one who offers services or
solicits business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of
lighterage and drayage22 and it offers its barges to the public for carrying
or transporting goods by water for compensation. Petitioner is clearly a
common carrier. In De Guzman, supra,23 we considered private
respondent Ernesto Cendaña to be a common carrier even if his principal
occupation was not the carriage of goods for others, but that of buying
used bottles and scrap metal in Pangasinan and selling these items in
Manila.
We therefore hold that petitioner is a common carrier whether its carrying
of goods is done on an irregular rather than scheduled manner, and with
an only limited clientele. A common carrier need not have fixed and
publicly known routes. Neither does it have to maintain terminals or issue
tickets.
To be sure, petitioner fits the test of a common carrier as laid down
in Bascos vs. Court of Appeals.24 The test to determine a common
carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as
his occupation rather than the quantity or extent of the business
transacted."25 In the case at bar, the petitioner admitted that it is engaged
in the business of shipping and lighterage,26 offering its barges to the
public, despite its limited clientele for carrying or transporting goods by
water for compensation.27
On the second issue, we uphold the findings of the lower courts that
petitioner failed to exercise extraordinary diligence in its care and custody
of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the
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,
destroyed or deteriorated.29 To overcome the presumption of negligence
in the case of loss, destruction or deterioration of the goods, the common
carrier must prove that it exercised extraordinary diligence. There are,
however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not
attach:
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international
or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing
or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke,
resulting in the total loss of its cargo. Petitioner claims that this was
caused by a typhoon, hence, it should not be held liable for the loss of the
cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has
exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss.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
Engineering Island. It even suffered a hole. Clearly, this could not be
solely attributed to the typhoon. The partly-submerged vessel was
refloated but its hole was patched with only clay and cement. The patch
work was merely a provisional remedy, not enough for the barge to sail
safely. Thus, when petitioner persisted to proceed with the voyage, it
recklessly exposed the cargo to further damage.
Petitioner still headed to the consignee's wharf despite knowledge of an
incoming typhoon. During the time that the barge was heading towards
the consignee's wharf on September 5, 1990, typhoon "Loleng" has
already entered the Philippine area of responsibility.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon
as force majeure to escape liability for the loss sustained by the private
respondent. Surely, meeting a typhoon head-on falls short of due
diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing
bits of the vessel broke that caused its sinking and the total loss of the
cargo upon reaching the Pasig River, it was no longer affected by the
typhoon. The typhoon then is not the proximate cause of the loss of the
cargo; a human factor, i.e., negligence had intervened.
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and
RODOLFO A. CIPRIANO, respondents. G.R. No. 101089. April 7, 1993
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE
COMMON CARRIER. — Article 1732 of the Civil Code defines a common
carrier as "(a) person, corporation or firm, or association engaged in the
business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public." The
test to determine a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to
the general public as his occupation rather than the quantity or extent of
the business transacted." . . . The holding of the Court in De Guzman vs.
Court of Appeals is instructive. In referring to Article 1732 of the Civil
Code, it held thus: "The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in local
idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguished between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making
such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS
TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
ABSOLUTE. — Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them.
Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. There are very
few instances when the presumption of negligence does not attach and
these instances are enumerated in Article 1734. In those cases where the
presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption . . . The
presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED
NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In De
Guzman vs. Court of Appeals, the Court held that hijacking, not being
included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to
have been at fault or negligent. To exculpate the carrier from liability
arising from hijacking, he must prove that the robbers or the hijackers
acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides: "Art. 1745.
Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy . . . (6) That the
common carrier's liability for acts committed by thieves, or of robbers who
do not act with grave or irresistible threat, violences or force, is dispensed
with or diminished"; In the same case, the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible —
26
and will not be allowed to divest or to diminish such responsibility — even
for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave of irresistible threat, violence of force,"
We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
FACTS Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE for short) entered into a hauling contract 2 with Jibfair
Shipping Agency Corporation whereby the former bound itself to haul the
latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan,
Manila to the warehouse of Purefoods Corporation in Calamba, Laguna.
To carry out its obligation, CIPTRADE, through Rodolfo Cipriano,
subcontracted with Estrellita Bascos (petitioner) to transport and to deliver
400 sacks of soya bean meal worth P156,404.00 from the Manila Port
Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner
failed to deliver the said cargo. As a consequence of that failure, Cipriano
paid Jibfair Shipping Agency the amount of the lost goods in accordance
with the contract.
Petitioner: there was no contract of carriage since CIPTRADE leased her
cargo truck to load the cargo from Manila Port Area to Laguna; that
CIPTRADE was liable to petitioner in the amount of P11,000.00 for
loading the cargo; that the truck carrying the cargo was hijacked along
Canonigo St., Paco, Manila on the night of October 21, 1988; that the
hijacking was immediately reported to CIPTRADE and that petitioner and
the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were
filed against Jose Opriano, et al.; and that hijacking, being a force
majeure, exculpated petitioner from any liability to CIPTRADE.
RTC: rendered a decision in favor of plaintiff and against defendant
ordering the latter to pay the former
CA: affirmed the trial court's judgment.
ISSUES (1) was petitioner a common carrier?; and (2) was the hijacking
referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier,
found that she admitted in her answer that she did business under the
name A.M. Bascos Trucking and that said admission dispensed with the
presentation by private respondent, Rodolfo Cipriano, of proofs that
petitioner was a common carrier. The respondent Court also adopted in
toto the trial court's decision that petitioner was a common carrier,
Moreover, both courts appreciated the following pieces of evidence as
indicators that petitioner was a common carrier: the fact that the truck
driver of petitioner, Maximo Sanglay, received the cargo consisting of 400
bags of soya bean meal as evidenced by a cargo receipt signed by
Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also
an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner
was a common carrier, she alleged in this petition that the contract
between her and Rodolfo A. Cipriano, representing CIPTRADE, was
lease of the truck. She cited as evidence certain affidavits which referred
to the contract as "lease". These affidavits were made by Jesus Bascos 8
and by petitioner herself. 9 She further averred that Jesus Bascos
confirmed in his testimony his statement that the contract was a lease
contract. 10 She also stated that: she was not catering to the general
public. Thus, in her answer to the amended complaint, she said that she
does business under the same style of A.M. Bascos Trucking, offering her
trucks for lease to those who have cargo to move, not to the general
public but to a few customers only in view of the fact that it is only a small
business. 11
We agree with the respondent Court in its finding that petitioner is a
common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business
transacted." 12 In this case, petitioner herself has made the admission
that she was in the trucking business, offering her trucks to those with
cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same. 13
But petitioner argues that there was only a contract of lease because they
offer their services only to a select group of people and because the
private respondents, plaintiffs in the lower court, did not object to the
27
presentation of affidavits by petitioner where the transaction was referred
to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs.
Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil
Code, it held thus:
"The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making such
distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial
and appellate courts have dismissed them as self-serving and petitioner
contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving,
the same were not sufficient to prove that the contract was one of lease. It
must be understood that a contract is what the law defines it to be and not
what it is called by the contracting parties. 15 Furthermore, petitioner
presented no other proof of the existence of the contract of lease. He who
alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of
the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. 17 Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods
are lost, destroyed or deteriorated. 18 There are very few instances when
the presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure
which exculpated her from liability for the loss of the cargo. In De Guzman
vs. Court of Appeals, 20 the Court held that hijacking, not being included
in the provisions of Article 1734, must be dealt with under the provisions
of Article 1735 and thus, the common carrier is presumed to have been at
fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave
or irresistible threat, violence, or force. This is in accordance with Article
1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force,
is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible —
and will not be allowed to divest or to diminish such responsibility — even
for acts of strangers like thieves or robbers except where such thieves or
robbers in fact acted with grave or irresistible threat, violence or force. We
believe and so hold that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost
as a result of a robbery which is attended by "grave or irresistible threat,
violence or force."
To establish grave and irresistible force, petitioner presented her
accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's
24 "Salaysay". However, both the trial court and the Court of Appeals
have concluded that these affidavits were not enough to overcome the
presumption. Petitioner's affidavit about the hijacking was based on what
had been told her by Juanito Morden. It was not a first-hand account.
While it had been admitted in court for lack of objection on the part of
private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the appellate
court. In a petition for review on certiorari, We are not to determine the
probative value of evidence but to resolve questions of law. Secondly, the
affidavit of Jesus Bascos did not dwell on how the hijacking took place.
Thirdly, while the affidavit of Juanito Morden, the truck helper in the
28
hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits
are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and
robbery against the accused named in said affidavits did not necessarily
mean that the contents of the affidavits were true because they were yet
to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial
issues involved, We find no reason to disturb the conclusion that the
motion to lift/dissolve the writ of preliminary attachment has been
rendered moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's
claim cannot be sustained. The petition is DISMISSED and the decision
of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
VIRGINES CALVO doing business under the name and style
TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly
Allied Guarantee Ins. Co., Inc.) respondent. G.R. No. 148496 March 19,
2002
MENDOZA, J.:
FACTS Petitioner Virgines Calvo is the owner of Transorient Container
Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. At
the time material to this case, petitioner entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical
fluting paper and 124 reels of kraft liner board from the Port Area in
Manila to SMC's warehouse at the Tabacalera Compound, Romualdez
St., Ermita, Manila. The cargo was insured by respondent UCPB General
Insurance Co., Inc.
the shipment in question, contained in 30 metal vans, arrived in Manila on
board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the
vessel to the custody of the arrastre operator, Manila Port Services, Inc.
petitioner, pursuant to her contract with SMC, withdrew the cargo from the
arrastre operator and delivered it to SMC's warehouse in Ermita, Manila.
the goods were inspected by Marine Cargo Surveyors, who found that 15
reels of the semi-chemical fluting paper were "wet/stained/torn" and 3
reels of kraft liner board were likewise torn. The damage was placed
at P93,112.00.
SMC collected payment from respondent UCPB under its insurance
contract for the aforementioned amount. In turn, respondent, as subrogee
of SMC, brought suit against petitioner in…
RTC Makati: which rendered judgment finding petitioner liable to
respondent for the damage to the shipment.
CA: affirmed the decision on appeal. Hence this petition for review
on certiorari.
Petitioner contends that contrary to the findings of the trial court and the
Court of Appeals, she is not a common carrier but a private carrier
because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the
same to select parties with whom she may contract in the conduct of her
business.
ISSUE W/n petitioner is a common carrier
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
and the Court of Appeals held otherwise, then she is indeed not liable
beyond what ordinary diligence in the vigilance over the goods
transported by her, would require.6 Consequently, any damage to the
cargo she agrees to transport cannot be presumed to have been due to
her fault or negligence.
The contention has no merit. In De Guzman v. Court of Appeals,7 the
Court dismissed a similar contention and held the party to be a common
carrier, thus -
The Civil Code defines "common carriers" in the following terms:
29
"Article 1732. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public."
The above article makes no distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity . . . Article 1732 also carefully avoids making
any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making
such distinctions.
So understood, the concept of "common carrier" under Article
1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight
or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. x x x" 8
There is greater reason for holding petitioner to be a common carrier
because the transportation of goods is an integral part of her business. To
uphold petitioner's contention would be to deprive those with whom she
contracts the protection which the law affords them notwithstanding the
fact that the obligation to carry goods for her customers, as already noted,
is part and parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the
circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary
diligence in the vigilance over goods" was explained thus:
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the
greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo.
She claims that the "spoilage or wettage" took place while the goods were
in the custody of either the carrying vessel "M/V Hayakawa Maru," which
transported the cargo to Manila, or the arrastre operator, to whom the
goods were unloaded and who allegedly kept them in open air for nine
days from July 14 to July 23, 1998 notwithstanding the fact that some of
the containers were deformed, cracked, or otherwise damaged, as noted
in the Marine Survey Report
In addition, petitioner claims that Marine Cargo Surveyor Ernesto
Tolentino testified that he has no personal knowledge on whether the
container vans were first stored in petitioner's warehouse prior to their
delivery to the consignee. She likewise claims that after withdrawing the
container vans from the arrastre operator, her driver, Ricardo Nazarro,
immediately delivered the cargo to 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
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners,
vs. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, Respondents. G.R. No. 150255.
April 22, 2005
CARPIO-MORALES, J.:
FACTS On September 25, 1991, SYTCO Pte Ltd. Singapore shipped
from the port of Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a
vessel of Russian registry and owned by Black Sea) 545 hot rolled steel
sheets in coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of
the consignee, Little Giant Steel Pipe Corporation (Little Giant),4 were
insured against all risks with Industrial Insurance Company Ltd. (Industrial
Insurance) under Marine Policy No. M-91-3747-TIS.5
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
South Harbor.6
Schmitz Transport, whose services the consignee engaged to secure the
requisite clearances, to receive the cargoes from the shipside, and to
deliver them to its (the consignee’s) warehouse at Cainta, Rizal,7 in turn
engaged the services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the
barge "Erika V" to shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the
barge alongside the vessel, left and returned to the port terminal.9 At 9:00
p.m., arrastre operator Ocean Terminal Services Inc. commenced to
unload 37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition
had become inclement due to an approaching storm, the unloading unto
the barge of the 37 coils was accomplished.10 No tugboat pulled the barge
back to the pier, however.
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
pitched and rolled with the waves and eventually capsized, washing the
37 coils into the sea.12 At 7:00 a.m., a tugboat finally arrived to pull the
already empty and damaged barge back to the pier.13
Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.14
Little Giant thus filed a formal claim against Industrial Insurance which
paid it the amount of ₱5,246,113.11. Little Giant thereupon executed a
subrogation receipt15 in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI,
and Black Sea through its representative Inchcape (the defendants)
before the RTC Manila , for the recovery of the amount it paid to Little
Giant plus adjustment fees, attorney’s fees, and litigation expenses.16
Industrial Insurance faulted the defendants for undertaking the unloading
of the cargoes while typhoon signal No. 1 was raised in Metro Manila.17
RTC: held all the defendants negligent for unloading the cargoes outside
of the breakwater notwithstanding the storm signal.
CA: affirmed in toto the decision of the trial court, 22 it finding that all the
defendants were common carriers — Black Sea and TVI for engaging in
the transport of goods and cargoes over the seas as a regular business
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
for a fee.24
In holding all the defendants solidarily liable, the appellate court ruled that
"each one was essential such that without each other’s contributory
negligence the incident would not have happened and so much so that
the person principally liable cannot be distinguished with sufficient
accuracy."25
In discrediting the defense of fortuitous event, the appellate court held
that "although defendants obviously had nothing to do with the force of
nature, they however had control of where to anchor the vessel, where
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
acting for its principal, consignee Little Giant, hence, the transportation
contract was by and between Little Giant and TVI.28
Black Sea: argued that the cargoes were received by the consignee
through petitioner in good order, hence, it cannot be faulted, it having had
no control and supervision thereover.30
TVI: maintained that it acted as a passive party as it merely received the
cargoes and transferred them unto the barge upon the instruction of
petitioner.31
ISSUES (1) Whether the loss of the cargoes was due to a fortuitous
event, independent of any act of negligence on the part of petitioner Black
Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to
Black Sea, petitioner and TVI.
RULING When a fortuitous event occurs, Article 1174 of the Civil Code
absolves any party from any and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were
inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of
the unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligation, must be independent of human will; (2) it must
be impossible to foresee the event which constitute the caso fortuito, or if
it can be foreseen it must be impossible to avoid; (3) the occurrence must
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
aggravation of the injury resulting to the creditor.32
[T]he principle embodied in the act of God doctrine strictly requires that
the act must be occasioned solely by the violence of nature. Human
intervention is to be excluded from creating or entering into the cause of
the mischief. When the effect is found to be in part the result of the
participation of man, whether due to his active intervention or neglect or
failure to act, the whole occurrence is then humanized and removed from
the rules applicable to the acts of God.33
The appellate court, in affirming the finding of the trial court that human
intervention in the form of contributory negligence by all the defendants
resulted to the loss of the cargoes,34 held that unloading outside the
breakwater, instead of inside the breakwater, while a storm signal was up
constitutes negligence.35 It thus concluded that the proximate cause of the
loss was Black Sea’s negligence in deciding to unload the cargoes at an
unsafe place and while a typhoon was approaching.36
From a review of the records of the case, there is no indication that there
was greater risk in loading the cargoes outside the breakwater. As the
defendants proffered, the weather on October 26, 1991 remained normal
with moderate sea condition such that port operations continued and
proceeded normally.37
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
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
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
cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were
completely loaded by 12:30 in the morning39 is, however, a material fact
which the appellate court failed to properly consider and
appreciate40 — the proximate cause of the loss of the cargoes. Had the
barge been towed back promptly to the pier, the deteriorating sea
conditions notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at 5:30 a.m.,
causing it to sink along with the cargoes.41 The loss thus falls outside the
"act of God doctrine."
The proximate cause of the loss having been determined, who among the
parties is/are responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the appellate court,
finds that petitioner is a common carrier. For it undertook to transport the
cargoes from the shipside of "M/V Alexander Saveliev" to the consignee’s
warehouse at Cainta, Rizal. As the appellate court put it, "as long as a
person or corporation holds [itself] to the public for the purpose of
33
transporting goods as [a] business, [it] is already considered a common
carrier regardless if [it] owns the vehicle to be used or has to hire
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
to its clients as a brokerage firm includes the transportation of cargoes
reflects so.
It is settled that under a given set of facts, a customs broker may be
regarded as a common carrier. Thus, this Court, in A.F. Sanchez
Brokerage, Inc. v. The Honorable Court of Appeals,44 held:
The appellate court did not err in finding petitioner, a customs broker, to
be also a common carrier, as defined under Article 1732 of the Civil Code,
to wit,
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as
an ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents
as required by law is bereft of merit. It suffices that petitioner undertakes
to deliver the goods for pecuniary consideration.45
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
customs broker is also a common carrier. For to declare otherwise "would
be to deprive those with whom [it] contracts the protection which the law
affords them notwithstanding the fact that the obligation to carry goods for
[its] customers, is part and parcel of petitioner’s business."47
As for petitioner’s argument that being the agent of Little Giant, any
negligence it committed was deemed the negligence of its principal, it
does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the
release of the cargoes. In effecting the transportation of the cargoes from
the shipside and into Little Giant’s warehouse, however, petitioner was
discharging its own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services
of TVI as handler48 to provide the barge and the tugboat. In their Service
Contract,49 while Little Giant was named as the consignee, petitioner did
not disclose that it was acting on commission and was chartering the
vessel for Little Giant.50 Little Giant did not thus automatically become a
party to the Service Contract and was not, therefore, bound by the terms
and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue
TVI based thereon but it can maintain a cause of action for negligence.51
In the case of TVI, while it acted as a private carrier for which it was under
no duty to observe extraordinary diligence, it was still required to observe
ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission
of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171
and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed
in the performance, that which is expected of a good father of a family
shall be required.
Was the reasonable care and caution which an ordinarily prudent person
would have used in the same situation exercised by TVI?52
This Court holds not.
TVI’s failure to promptly provide a tugboat did not only increase the risk
that might have been reasonably anticipated during the shipside
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
considerable number of hours, at such a precarious time, and in the open
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,
therefore, the members of the crew of a tugboat would be charging
overtime pay did not excuse TVI from calling for one such tugboat.
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
or minimize the loss, before, during and after the occurrence of the storm
in order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers54 and a supervisor55 on board the vessel to
counter-check the operations of TVI, it failed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to
arrange for the prompt towage of the barge despite the deteriorating sea
conditions, it should have summoned the same or another tugboat to
extend help, but it did not.
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:
The foundation of LRTA’s liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that contract
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
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only
be for tort under the provisions of Article 2176 and related provisions, in
conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask
further, how then must the liability of the common carrier, on one hand,
and an independent contractor, on the other hand, be described? It would
be solidary. A contractual obligation can be breached by tort and when
the same act or omission causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana, Article 2194 of the Civil Code
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
act which constitutes a breach of contract would have itself constituted
the source of a quasi-delictual liability had no contract existed between
the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.57
As for Black Sea, its duty as a common carrier extended only from the
time the goods were surrendered or unconditionally placed in its
possession and received for transportation until they were delivered
actually or constructively to consignee Little Giant.58
Parties to a contract of carriage may, however, agree upon a definition of
delivery that extends the services rendered by the carrier. In the case at
bar, Bill of Lading No. 2 covering the shipment provides that delivery be
made "to the port of discharge or so near thereto as she may safely get,
always afloat."59 The delivery of the goods to the consignee was not from
"pier to pier" but from the shipside of "M/V Alexander Saveliev" and into
barges, for which reason the consignee contracted the services of
petitioner. Since Black Sea had constructively delivered the cargoes to
Little Giant, through petitioner, it had discharged its duty. 60
In fine, no liability may thus attach to Black Sea.
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT
OF APPEALS and FGU INSURANCE CORPORATION, respondents.
G.R. No. 147079 December 21, 2004
CARPIO MORALES, J.:
FACTS Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal
Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of
86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and
42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the
consignee, Wyeth-Suaco Laboratories, Inc.2The Femenal tablets were
placed in 124 cartons and the Nordiol tablets were placed in 20 cartons
which were packed together in one (1) LD3 aluminum container, while the
Trinordial tablets were packed in two pallets, each of which contained 30
cartons.3
Wyeth-Suaco insured the shipment against all risks with FGU Insurance
which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy
No. 138.4
35
Upon arrival of the shipment at the Ninoy Aquino International Airport
(NAIA),5 it was discharged "without exception"6 and delivered to the
warehouse of the Philippine Skylanders, Inc. (PSI) located also at the
NAIA for safekeeping.7
In order to secure the release of the cargoes from the PSI and the Bureau
of Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage
which had been its licensed broker since 1984.8 As its customs broker,
Sanchez Brokerage calculates and pays the customs duties, taxes and
storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.9
Mitzi Morales and Ernesto Mendoza, representatives of Sanchez
Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for
which, Official Receipt No. 016992,10 was issued. On the receipt, another
representative of Sanchez Brokerage, M. Sison,11 acknowledged that he
received the cargoes consisting of three pieces in good condition.12
Wyeth-Suaco being a regular importer, the customs examiner did not
inspect the cargoes13 which were thereupon stripped from the aluminum
containers14 and loaded inside two transport vehicles hired by Sanchez
Brokerage.15
Among those who witnessed the release of the cargoes from the PSI
warehouse were Ruben Alonso and Tony Akas,16 employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo
surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on
behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. in Antipolo City for quality control check. 17 The delivery
receipt indicated that the delivery consisted of one container with 144
cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.18
Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the
delivery of the cargoes by affixing his signature on the delivery
receipt.19 Upon inspection, however, he, together with Ruben Alonzo of
Elite Surveyors, discovered that 44 cartons containing Femenal and
Nordiol tablets were in bad order.20 He thus placed a note above his
signature on the delivery receipt stating that 44 cartons of oral
contraceptives were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a
survey report21 stating that 41 cartons of Femenal tablets and 3 cartons
of Nordiol tablets were "wetted" (sic).22
The Elite Surveyors later issued Certificate No. CS-0731-
1538/9223 attached to which was an "Annexed Schedule" whereon it was
indicated that prior to the loading of the cargoes to the broker’s trucks at
the NAIA, they were inspected and found to be in "apparent good
condition."24 Also noted was that at the time of delivery to the warehouse
of Hizon Laboratories Inc., slight to heavy rains fell, which could account
for the wetting of the 44 cartons of Femenal and Nordiol tablets.25
the Hizon Laboratories Inc. issued a Destruction Report26 confirming that
38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of
Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily
damaged with water and emitted foul smell.
Wyeth-Suaco issued a Notice of Materials Rejection27 of 38 cartons of
Femenal and 3 cartons of Nordiol on the ground that they were "delivered
to Hizon Laboratories with heavy water damaged (sic) causing the
cartons to sagged (sic) emitting a foul order and easily attracted flies."28
Wyeth-Suaco later demanded, by letter29 from Sanchez Brokerage the
payment of P191,384.25 representing the value of its loss arising from the
damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco
filed an insurance claim against FGU Insurance which paid Wyeth-Suaco
the amount of P181,431.49 in settlement of its claim under Marine Risk
Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU
Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49
it paid Wyeth-Suaco, Sanchez Brokerage, by letter, disclaimed liability for
the damaged goods, positing that the damage was due to improper and
insufficient export packaging; that when the sealed containers were
opened outside the PSI warehouse, it was discovered that some of the
loose cartons were wet,32 prompting its (Sanchez Brokerage’s)
representative Morales to inform the Import-Export Assistant of Wyeth-
Suaco, Ramir Calicdan, about the condition of the cargoes but that the
36
latter advised to still deliver them to Hizon Laboratories where an adjuster
would assess the damage.33
Hence, the filing by FGU Insurance of a complaint for damages before the
RTC Makati against the Sanchez Brokerage.
RTC: dismissed the complaint, holding that the Survey Report prepared
by the Elite Surveyors is bereft of any evidentiary support and a mere
product of pure guesswork.35
CA: reversed the decision of the trial court, holding that the Sanchez
Brokerage engaged not only in the business of customs brokerage but
also in the transportation and delivery of the cargo of its clients, hence, a
common carrier within the context of Article 1732 of the New Civil Code;
held that Sanchez Brokerage is presumed negligent and upon it rested
the burden of proving that it exercised extraordinary negligence not only
in instances when negligence is directly proven but also in those cases
when the cause of the damage is not known or unknown.37
ISSUE/CONTENTION In the main, petitioner asserts that the appellate
court committed grave and reversible error tantamount to abuse of
discretion when it found petitioner a "common carrier" within the context
of Article 1732 of the New Civil Code.
RULING --- No. The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined under Article
1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez
Brokerage, himself testified that the services the firm offers include the
delivery of goods to the warehouse of the consignee or importer.
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as
an ancillary activity.44 The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents
as required by law is bereft of merit. It suffices that petitioner undertakes
to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under
Article 173345 of the Civil Code, extraordinary diligence in the vigilance
over the goods it transports according to all the circumstances of each
case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently, unless it
proves that it observed extraordinary diligence.46
The concept of "extra-ordinary diligence" was explained in Compania
Maritima v. Court of Appeals:47
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the
greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristics of goods tendered for
shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."48
In the case at bar, it was established that petitioner received the cargoes
from the PSI warehouse in NAIA in good order and condition;49 and that
upon delivery by petitioner to Hizon Laboratories Inc., some of the
cargoes were found to be in bad order, as noted in the Delivery
Receipt50 issued by petitioner, and as indicated in the Survey Report of
Elite Surveyors51 and the Destruction Report of Hizon Laboratories, Inc.52
In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of
the shipper for failing to properly pack them and to the inherent
characteristics of the goods53 ; and that it should not be faulted for
following the instructions of Calicdan of Wyeth-Suaco to proceed with the
delivery despite information conveyed to the latter that some of the
cartons, on examination outside the PSI warehouse, were found to be
wet.54
While paragraph No. 4 of Article 173455 of the Civil Code exempts a
common carrier from liability if the loss or damage is due to the character
of the goods or defects in the packing or in the containers, the rule is that
if the improper packing is known to the carrier or his employees or is
37
apparent upon ordinary observation, but he nevertheless accepts the
same without protest or exception notwithstanding such condition, he is
not relieved of liability for the resulting damage.56
If the claim of petitioner that some of the cartons were already damaged
upon delivery to it were true, then it should naturally have received the
cargo under protest or with reservations duly noted on the receipt issued
by PSI. But it made no such protest or reservation.57
Moreover, as observed by the appellate court, if indeed petitioner’s
employees only examined the cargoes outside the PSI warehouse and
found some to be wet, they would certainly have gone back to PSI,
showed to the warehouseman the damage, and demanded then and
there for Bad Order documents or a certification confirming the
damage.58 Or, petitioner would have presented, as witness, the
employees of the PSI from whom Morales and Domingo took delivery of
the cargo to prove that, indeed, part of the cargoes was already damaged
when the container was allegedly opened outside the warehouse.59
Petitioner goes on to posit that contrary to the report of Elite Surveyors,
no rain fell that day. Instead, it asserts that some of the cargoes were
already wet on delivery by PSI outside the PSI warehouse but such
notwithstanding Calicdan directed Morales to proceed with the delivery to
Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of
Morales on July 29, 1992, he failed to specifically declare what time he
received the call. As to whether the call was made at the PSI warehouse
when the shipment was stripped from the airport containers, or when the
cargoes were already in transit to Antipolo, it is not determinable. Aside
from that phone call, petitioner admitted that it had no documentary
evidence to prove that at the time it received the cargoes, a part of it was
wet, damaged or in bad condition.60
The 4-page weather data furnished by PAGASA61 on request of Sanchez
Brokerage hardly impresses, no witness having identified it and
interpreted the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories,
Inc., the oral contraceptives were damaged by rainwater while in transit to
Antipolo City is more likely then. Sanchez himself testified that in the past,
there was a similar instance when the shipment of Wyeth-Suaco was also
found to be wet by rain.
Since petitioner received all the cargoes in good order and condition at
the time they were turned over by the PSI warehouseman, and upon their
delivery to Hizon Laboratories, Inc. a portion thereof was found to be in
bad order, it was incumbent on petitioner to prove that it exercised
extraordinary diligence in the carriage of the goods. It did not, however.
Hence, its presumed negligence under Article 1735 of the Civil Code
remains unrebutted.
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO
TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
G.R. No. 141910 August 6, 2002
VITUG, J.:
FACTS G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver
on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators
aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site
of Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While the
truck was traversing the north diversion road along McArthur highway in
Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck,
causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to
Concepcion Industries, Inc., the value of the covered cargoes in the sum
of P204,450.00. FGU, in turn, being the subrogee of the rights and
interests of Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the trucking company
failed to heed the claim, FGU filed a complaint for damages and breach of
contract of carriage against GPS and its driver Lambert Eroles RTC
makati. respondents asserted that GPS was the exclusive hauler only of
Concepcion Industries, Inc., since 1988, and it was not so engaged in
business as a common carrier. Respondents further claimed that the
cause of damage was purely accidental.
GPS filed with leave of court a motion to dismiss the complaint by way of
demurrer to evidence on the ground that petitioner had failed to prove that
it was a common carrier.
38
RTC: granted the motion to dismiss
CA: rejected the appeal of petitioner and ruled in favor of GPS.
ISSUES
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A
COMMON CARRIER AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.
WHETHER RESPONDENT GPS, EITHER AS A COMMON
CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO
HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE
SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE
CUSTODY AND POSSESSION.
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS
APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the
Court of Appeals to be amply justified. GPS, being an exclusive contractor
and hauler of Concepcion Industries, Inc., rendering or offering its
services to no other individual or entity, cannot be considered a common
carrier. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for hire or compensation, offering their
services to the public,8 whether to the public in general or to a limited
clientele in particular, but never on an exclusive basis. 9 The true test of a
common carrier is the carriage of passengers or goods, providing space
for those who opt to avail themselves of its transportation service for a
fee.10Given accepted standards, GPS scarcely falls within the term
"common carrier."
The above conclusion nothwithstanding, GPS cannot escape from
liability.
In culpa contractual, upon which the action of petitioner rests as being the
subrogee of Concepcion Industries, Inc., the mere proof of the existence
of the contract and the failure of its compliance justify, prima facie, a
corresponding right of relief.11 The law, recognizing the obligatory force of
contracts,12 will not permit a party to be set free from liability for any kind
of misperformance of the contractual undertaking or a contravention of
the tenor thereof.13 A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been lost or
suffered. The remedy serves to preserve the interests of the promisee
that may include his "expectation interest," which is his interest in having
the benefit of his bargain by being put in as good a position as he would
have been in had the contract been performed, or his "reliance interest,"
which is his interest in being reimbursed for loss caused by reliance on
the contract by being put in as good a position as he would have been in
had the contract not been made; or his "restitution interest," which is his
interest in having restored to him any benefit that he has conferred on the
other party.14 Indeed, agreements can accomplish little, either for their
makers or for society, unless they are made the basis for action.15 The
effect of every infraction is to create a new duty, that is, to make
recompense to the one who has been injured by the failure of another to
observe his contractual obligation16 unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that of
the diligence of a good father of a family or, exceptionally by stipulation or
by law such as in the case of common carriers, that of extraordinary
diligence) or of the attendance of fortuitous event, to excuse him from his
ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of
carriage between it and petitioner’s assured, and admits that the cargoes
it has assumed to deliver have been lost or damaged while in its custody.
In such a situation, a default on, or failure of compliance with, the
obligation – in this case, the delivery of the goods in its custody to the
place of destination - gives rise to a presumption of lack of care and
corresponding liability on the part of the contractual obligor the burden
being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his
negligence or fault, may not himself be ordered to pay petitioner. The
driver, not being a party to the contract of carriage between petitioner’s
principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their
successors who have assumed their personality or their juridical
position.17 Consonantly with the axiom res inter alios acta aliis neque
nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioner’s civil action against the driver can only be based
on culpa aquiliana, which, unlike culpa contractual, would require the
claimant for damages to prove negligence or fault on the part of the
defendant.18
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
the accident is such that, in the ordinary course of things, cannot be
expected to happen if those who have its management or control use
proper care. It affords reasonable evidence, in the absence of explanation
by the defendant, that the accident arose from want of care.19 It is not a
rule of substantive law and, as such, it does not create an independent
ground of liability. Instead, it is regarded as a mode of proof, or a mere
procedural convenience since it furnishes a substitute for, and relieves
the plaintiff of, the burden of producing specific proof of negligence. The
maxim simply places on the defendant the burden of going forward with
the proof.20 Resort to the doctrine, however, may be allowed only when
(a) the event is of a kind which does not ordinarily occur in the absence of
negligence; (b) other responsible causes, including the conduct of the
plaintiff and third persons, are sufficiently eliminated by the evidence; and
(c) the indicated negligence is within the scope of the defendant's duty to
the plaintiff.21 Thus, it is not applicable when an unexplained accident may
be attributable to one of several causes, for some of which the defendant
could not be responsible.22
Res ipsa loquitur generally finds relevance whether or not a contractual
relationship exists between the plaintiff and the defendant, for the
inference of negligence arises from the circumstances and nature of the
occurrence and not from the nature of the relation of the
parties.23 Nevertheless, the requirement that responsible causes other
than those due to defendant’s conduct must first be eliminated, for the
doctrine to apply, should be understood as being confined only to cases
of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately
attaches by a failure of the covenant or its tenor. In the case of the truck
driver, whose liability in a civil action is predicated on culpa acquiliana,
while he admittedly can be said to have been in control and management
of the vehicle which figured in the accident, it is not equally shown,
however, that the accident could have been exclusively due to his
negligence, a matter that can allow, forthwith, res ipsa loquitur to work
against him.
If a demurrer to evidence is granted but on appeal the order of dismissal
is reversed, the movant shall be deemed to have waived the right to
present evidence.24 Thus, respondent corporation may no longer offer
proof to establish that it has exercised due care in transporting the
cargoes of the assured so as to still warrant a remand of the case to the
trial court.1âwphi1.nêt
ESTELA L. CRISOSTOMO, Petitioner, vs. The Court of Appeals and
CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.
G.R. No. 138334 August 25, 2003
YNARES-SANTIAGO, J.:
FACTS In May 1991, petitioner Estela L. Crisostomo contracted the
services of respondent Caravan Travel and Tours International, Inc. to
arrange and facilitate her booking, ticketing and accommodation in a tour
dubbed "Jewels of Europe". The package tour included the countries of
England, Holland, Germany, Austria, Liechstenstein, Switzerland and
France at a total cost of P74,322.70. Petitioner was given a 5% discount
on the amount, which included airfare, and the booking fee was also
waived because petitioner’s niece, Meriam Menor, was respondent
company’s ticketing manager.
Pursuant to said contract, Menor went to her aunt’s residence on June 12,
1991 – a Wednesday – to deliver petitioner’s travel documents and plane
tickets. Petitioner, in turn, gave Menor the full payment for the package
tour. Menor then told her to be at the Ninoy Aquino International Airport
(NAIA) on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on
Saturday, June 15, 1991, to take the flight for the first leg of her journey
from Manila to Hongkong. To petitioner’s dismay, she discovered that the
flight she was supposed to take had already departed the previous day.
She learned that her plane ticket was for the flight scheduled on June 14,
1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour – the
"British Pageant" – which included England, Scotland and Wales in its
itinerary. For this tour package, petitioner was asked anew to pay
US$785.00 or P20,881.00 (at the then prevailing exchange rate of
P26.60). She gave respondent US$300 or P7,980.00 as partial payment
and commenced the trip in July 1991.
Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the
sum she paid for "Jewels of Europe" and the amount she owed
40
respondent for the "British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount, contending that
the same was non-refundable.1 Petitioner was thus constrained to file a
complaint against respondent for breach of contract of carriage and
damages, RTC Makati
Petitioner: alleged that her failure to join "Jewels of Europe" was due to
respondent’s fault since it did not clearly indicate the departure date on
the plane ticket. Respondent was also negligent in informing her of the
wrong flight schedule through its employee Menor. She insisted that the
"British Pageant" was merely a substitute for the "Jewels of Europe" tour,
such that the cost of the former should be properly set-off against the sum
paid for the latter.
respondent company: through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioner’s failure to join the first tour.
Chipeco insisted that petitioner was informed of the correct departure
date, which was clearly and legibly printed on the plane ticket. The travel
documents were given to petitioner two days ahead of the scheduled trip.
Petitioner had only herself to blame for missing the flight, as she did not
bother to read or confirm her flight schedule as printed on the ticket; that it
can no longer reimburse the amount paid for "Jewels of Europe",
considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if
petitioner did not join the tour. Lotus’ European tour organizer, Insight
International Tours Ltd., determines the cost of a package tour based on
a minimum number of projected participants. For this reason, it is
accepted industry practice to disallow refund for individuals who failed to
take a booked tour; that the "British Pageant" was not a substitute for the
package tour that petitioner missed. This tour was independently
procured by petitioner after realizing that she made a mistake in missing
her flight for "Jewels of Europe". Petitioner was allowed to make a partial
payment of only US$300.00 for the second tour because her niece was
then an employee of the travel agency. Consequently, respondent prayed
that petitioner be ordered to pay the balance of P12,901.00 for the "British
Pageant" package tour.
RTC rendered a decision in favor of petitioner; respondent was negligent
in erroneously advising petitioner of her departure date through its
employee, Menor, who was not presented as witness to rebut petitioner’s
testimony. However, petitioner should have verified the exact date and
time of departure by looking at her ticket and should have simply not
relied on Menor’s verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and accordingly, deducted
10% from the amount being claimed as refund.
CA: likewise found both parties to be at fault. However, the appellate
court held that petitioner is more negligent than respondent because as a
lawyer and well-traveled person, she should have known better than to
simply rely on what was told to her. This being so, she is not entitled to
any form of damages. Petitioner also forfeited her right to the "Jewels of
Europe" tour and must therefore pay respondent the balance of the price
for the "British Pageant" tour.
ISSUE/CONTENTION Petitioner: contends that respondent did not
observe the standard of care required of a common carrier when it
informed her wrongly of the flight schedule. She could not be deemed
more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation. If she
were negligent at all, the same is merely contributory and not the
proximate cause of the damage she suffered. Her loss could only be
attributed to respondent as it was the direct consequence of its
employee’s gross negligence.
RULING Petitioner’s contention has no merit.
By definition, a contract of carriage or transportation is one whereby a
certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price.9 Such
person or association of persons are regarded as carriers and are
classified as private or special carriers and common or public carriers.10 A
common carrier is defined under Article 1732 of the Civil Code as
persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or
air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity
engaged in the business of transporting either passengers or goods and
is therefore, neither a private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another since its
covenant with its customers is simply to make travel arrangements in their
behalf. Respondent’s services as a travel agency include procuring tickets
and facilitating travel permits or visas as well as booking customers for
tours.
41
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a
common carrier. At most, respondent acted merely as an agent of the
airline, with whom petitioner ultimately contracted for her carriage to
Europe. Respondent’s obligation to petitioner in this regard was simply to
see to it that petitioner was properly booked with the airline for the
appointed date and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline.
The object of petitioner’s contractual relation with respondent is the
latter’s service of arranging and facilitating petitioner’s booking, ticketing
and accommodation in the package tour. In contrast, the object of a
contract of carriage is the transportation of passengers or goods. It is in
this sense that the contract between the parties in this case was an
ordinary one for services and not one of carriage. Petitioner’s submission
is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent
is determinative of the degree of care required in the performance of the
latter’s obligation under the contract. For reasons of public policy, a
common carrier in a contract of carriage is bound by law to carry
passengers as far as human care and foresight can provide using the
utmost diligence of very cautious persons and with due regard for all the
circumstances.11 As earlier stated, however, respondent is not a common
carrier but a travel agency. It is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation, as petitioner
claims.
Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family
under Article 1173 of the Civil Code.12
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE,
NATIONAL RAILWAYS, and the COURT OF APPEALS Respondents.
G.R. No. 157917 August 29, 2012
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of
the law. He is bound to observe extraordinary diligence in the conduct of
his business. He is presumed to be negligent when death occurs to a
passenger. His liability may include indemnity for loss of earning capacity
even if the deceased passenger may only be an unemployed high school
student at the time of the accident.
Antecedents The Pereñas were engaged in the business of transporting
students from their respective residences in Parañaque City to Don Bosco
in Pasong Tamo, Makati City, and back. In their business, the Pereñas
used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated
in the front beside the driver, and the others in the rear, with six students
on either side. They employed Clemente Alfaro (Alfaro) as driver of the
van.
the Zarates contracted the Pereñas to transport Aaron to and from Don
Bosco. On August 22, 1996, as on previous school days, the van picked
Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his
place on the left side of the van near the rear door. The van, with its air-
conditioning unit turned on and the stereo playing loudly, ultimately
carried all the 14 student riders on their way to Don Bosco. Considering
that the students were due at Don Bosco by 7:15 a.m., and that they were
already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45
a.m. by traversing the narrow path underneath the Magallanes
Interchange that was then commonly used by Makati-bound vehicles as a
short cut into Makati. At the time, the narrow path was marked by piles of
construction materials and parked passenger jeepneys, and the railroad
crossing in the narrow path had no railroad warning signs, or watchmen,
or other responsible persons manning the crossing. In fact, the bamboo
barandilla was up, leaving the railroad crossing open to traversing
motorists.
At about the time the van was to traverse the railroad crossing, PNR
Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the
vicinity of the Magallanes Interchange travelling northbound. As the train
neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on
its left side. The train blew its horn to warn motorists of its approach.
When the train was about 50 meters away from the passenger bus and
the van, Alano applied the ordinary brakes of the train. He applied the
emergency brakes only when he saw that a collision was imminent. The
42
passenger bus successfully crossed the railroad tracks, but the van driven
by Alfaro did not. The train hit the rear end of the van, and the impact
threw nine of the 12 students in the rear, including Aaron, out of the van.
Aaron landed in the path of the train, which dragged his body and severed
his head, instantaneously killing him. Alano fled the scene on board the
train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates
commenced this action for damages against Alfaro, the Pereñas, PNR
and Alano. The Pereñas and PNR filed their respective answers, with
cross-claims against each other, but Alfaro could not be served with
summons.
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the
vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by
PNR was an internal arrangement between the former and its
project contractor; and
(12) The site of the vehicular/train collision was within the vicinity
or less than 100 meters from the Magallanes station of PNR.
B. ISSUES
(3) Whether or not defendant Philippine National Railways being
the operator of the railroad system is liable for negligence in
failing to provide adequate safety warning signs and railings in
the area commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular collision which
resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for
breach of the contract of carriage with plaintiff-spouses in failing
to provide adequate and safe transportation for the latter's son;
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
based on quasi-delict under Article 2176, Civil Code.
Pereñas: adduced evidence to show that they had exercised the diligence
of a good father of the family in the selection and supervision of Alfaro, by
making sure that Alfaro had been issued a driver’s license and had not
been involved in any vehicular accident prior to the collision; that their
own son had taken the van daily; and that Teodoro Pereña had
sometimes accompanied Alfaro in the van’s trips transporting the students
to school.
PNR: tended to show that the proximate cause of the collision had been
the reckless crossing of the van whose driver had not first stopped,
looked and listened; and that the narrow path traversed by the van had
not been intended to be a railroad crossing for motorists.
Ruling of the RTC judgment is hereby rendered in favor of the plaintiff
and against the defendants ordering them to jointly and severally pay the
plaintiffs
The CA’s Ruling CA promulgated its decision, affirming the findings of
the RTC, but limited the moral damages to ₱ 2,500,000.00; and deleted
the attorney’s fees because the RTC did not state the factual and legal
bases
Issues In this appeal, the Pereñas list the following as the errors
committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding
the petitioners jointly and severally liable to pay damages with Philippine
National Railways and dismissing their cross-claim against the latter.
Ruling The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the
Pereñas and the PNR, basing their claim against the Pereñas on breach
of contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the
findings.
We concur with the CA.
43
To start with, the Pereñas’ defense was that they exercised the diligence
of a good father of the family in the selection and supervision of Alfaro,
the van driver, by seeing to it that Alfaro had a driver’s license and that he
had not been involved in any vehicular accident prior to the fatal collision
with the train; that they even had their own son travel to and from school
on a daily basis; and that Teodoro Pereña himself sometimes
accompanied Alfaro in transporting the passengers to and from school.
The RTC gave scant consideration to such defense by regarding such
defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower
courts that the Pereñas operated as a common carrier; and that their
standard of care was extraordinary diligence, not the ordinary diligence of
a good father of a family.
Although in this jurisdiction the operator of a school bus service has been
usually regarded as a private carrier,9primarily because he only caters to
some specific or privileged individuals, and his operation is neither open
to the indefinite public nor for public use, the exact nature of the operation
of a school bus service has not been finally settled. This is the occasion to
lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey
goods or persons from one place to another, gratuitously or for hire. The
carrier is classified either as a private/special carrier or as a
common/public carrier.10 A private carrier is one who, without making the
activity a vocation, or without holding himself or itself out to the public as
ready to act for all who may desire his or its services, undertakes, by
special agreement in a particular instance only, to transport goods or
persons from one place to another either gratuitously or for hire.11 The
provisions on ordinary contracts of the Civil Code govern the contract of
private carriage.The diligence required of a private carrier is only ordinary,
that is, the diligence of a good father of the family. In contrast, a common
carrier is a person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering such services to the
public.12 Contracts of common carriage are governed by the provisions on
common carriers of the Civil Code, the Public Service Act,13 and other
special laws relating to transportation. A common carrier is required to
observe extraordinary diligence, and is presumed to be at fault or to have
acted negligently in case of the loss of the effects of passengers, or the
death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the
following terms in United States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of
the public use is not confined to privileged individuals, but is open to the
indefinite public. It is this indefinite or unrestricted quality that gives it its
public character. In determining whether a use is public, we must look not
only to the character of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the owners, or the
public benefit is merely incidental, it is not a public use, authorizing the
exercise of the jurisdiction of the public utility commission. There must be,
in general, a right which the law compels the owner to give to the general
public. It is not enough that the general prosperity of the public is
promoted. Public use is not synonymous with public interest. The true
criterion by which to judge the character of the use is whether the public
may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of
the Civil Code avoided any distinction between a person or an enterprise
offering transportation on a regular or an isolated basis; and has not
distinguished a carrier offering his services to the general public, that is,
the general community or population, from one offering his services only
to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732
of the Civil Code coincides neatly with the notion of public service under
the Public Service Act, which supplements the law on common carriers
found in the Civil Code. Public service, according to Section 13,
paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientèle, whether permanent or occasional, and done for the general
business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, ice-
refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations
and other similar public services. x x x.17
44
Given the breadth of the aforequoted characterization of a common
carrier, the Court has considered as common carriers pipeline
operators,18 custom brokers and warehousemen,19 and barge
operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the
quantity or extent of the business actually transacted, or the number and
character of the conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the carrier that he has
held out to the general public as his business or occupation. If the
undertaking is a single transaction, not a part of the general business or
occupation engaged in, as advertised and held out to the general public,
the individual or the entity rendering such service is a private, not a
common, carrier. The question must be determined by the character of
the business actually carried on by the carrier, not by any secret intention
or mental reservation it may entertain or assert when charged with the
duties and obligations that the law imposes.21
Applying these considerations to the case before us, there is no question
that the Pereñas as the operators of a school bus service were: (a)
engaged in transporting passengers generally as a business, not just as a
casual occupation; (b) undertaking to carry passengers over established
roads by the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited clientèle, the
Pereñas operated as a common carrier because they held themselves out
as a ready transportation indiscriminately to the students of a particular
school living within or near where they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of
the passengers is defined by law. Given the nature of the business and
for reasons of public policy, the common carrier is bound "to observe
extraordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all the circumstances
of each case."22 Article 1755 of the Civil Code specifies that the common
carrier should "carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances." To successfully
fend off liability in an action upon the death or injury to a passenger, the
common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or
acted negligently would stand.23 No device, whether by stipulation, posting
of notices, statements on tickets, or otherwise, may dispense with or
lessen the responsibility of the common carrier as defined under Article
1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense
or reason by which the Court might now reverse the CA’s findings on their
liability. On the contrary, an examination of the records shows that the
evidence fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already
presumed to be negligent at the time of the accident because death had
occurred to their passenger.25 The presumption of negligence, being a
presumption of law, laid the burden of evidence on their shoulders to
establish that they had not been negligent.26 It was the law no less that
required them to prove their observance of extraordinary diligence in
seeing to the safe and secure carriage of the passengers to their
destination. Until they did so in a credible manner, they stood to be held
legally responsible for the death of Aaron and thus to be held liable for all
the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of
their negligence by credible evidence. Their defense of having observed
the diligence of a good father of a family in the selection and supervision
of their driver was not legally sufficient. According to Article 1759 of the
Civil Code, their liability as a common carrier did not cease upon proof
that they exercised all the diligence of a good father of a family in the
selection and supervision of their employee. This was the reason why the
RTC treated this defense of the Pereñas as inappropriate in this action for
breach of contract of carriage.
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
violation of the orders of the common carrier.27 In this connection, the
records showed their driver’s actual negligence. There was a showing, to
begin with, that their driver traversed the railroad tracks at a point at which
the PNR did not permit motorists going into the Makati area to cross the
railroad tracks. Although that point had been used by motorists as a
shortcut into the Makati area, that fact alone did not excuse their driver
into taking that route. On the other hand, with his familiarity with that
shortcut, their driver was fully aware of the risks to his passengers but he
still disregarded the risks. Compounding his lack of care was that loud
music was playing inside the air-conditioned van at the time of the
accident. The loudness most probably reduced his ability to hear the
warning horns of the oncoming train to allow him to correctly appreciate
the lurking dangers on the railroad tracks. Also, he sought to overtake a
passenger bus on the left side as both vehicles traversed the railroad
tracks. In so doing, he lost his view of the train that was then coming from
the opposite side of the passenger bus, leading him to miscalculate his
45
chances of beating the bus in their race, and of getting clear of the train.
As a result, the bus avoided a collision with the train but the van got
slammed at its rear, causing the fatality. Lastly, he did not slow down or
go to a full stop before traversing the railroad tracks despite knowing that
his slackening of speed and going to a full stop were in observance of the
right of way at railroad tracks as defined by the traffic laws and
regulations.28He thereby violated a specific traffic regulation on right of
way, by virtue of which he was immediately presumed to be negligent.29
The omissions of care on the part of the van driver constituted
negligence,30 which, according to Layugan v. Intermediate Appellate
Court,31 is "the omission to do something which a reasonable man, guided
by those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which a prudent and
reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he
failure to observe for the protection of the interests of another person, that
degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.’"33
The test by which to determine the existence of negligence in a particular
case has been aptly stated in the leading case of Picart v.
Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular
case may be stated as follows: Did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is
guilty of negligence. The law here in effect adopts the standard supposed
to be supplied by the imaginary conduct of the discreet paterfamilias of
the Roman law. The existence of negligence in a given case is not
determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in
a given situation must of course be always determined in the light of
human experience and in view of the facts involved in the particular case.
Abstract speculation cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the
circumstances which are before them or known to them. They are not,
and are not supposed to be, omniscient of the future. Hence they can be
expected to take care only when there is something before them to
suggest or warn of danger. Could a prudent man, in the case under
consideration, foresee harm as a result of the course actually pursued? If
so, it was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence
can be held to exist. Stated in these terms, the proper criterion for
determining the existence of negligence in a given case is this: Conduct is
said to be negligent when a prudent man in the position of the tortfeasor
would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was
entirely negligent when he traversed the railroad tracks at a point not
allowed for a motorist’s crossing despite being fully aware of the grave
harm to be thereby caused to his passengers; and when he disregarded
the foresight of harm to his passengers by overtaking the bus on the left
side as to leave himself blind to the approach of the oncoming train that
he knew was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate
Appellate Court,35 where the Court held the PNR solely liable for the
damages caused to a passenger bus and its passengers when its train hit
the rear end of the bus that was then traversing the railroad crossing. But
the circumstances of that case and this one share no similarities. In
Philippine National Railways v. Intermediate Appellate Court, no evidence
of contributory negligence was adduced against the owner of the bus.
Instead, it was the owner of the bus who proved the exercise of
extraordinary diligence by preponderant evidence. Also, the records are
replete with the showing of negligence on the part of both the Pereñas
and the PNR. Another distinction is that the passenger bus in Philippine
National Railways v. Intermediate Appellate Court was traversing the
dedicated railroad crossing when it was hit by the train, but the Pereñas’
school van traversed the railroad tracks at a point not intended for that
purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR
"jointly and severally" liable for damages arising from the death of Aaron.
They had been impleaded in the same complaint as defendants against
whom the Zarates had the right to relief, whether jointly, severally, or in
the alternative, in respect to or arising out of the accident, and questions
of fact and of law were common as to the Zarates.36 Although the basis of
the right to relief of the Zarates (i.e., breach of contract of carriage)
against the Pereñas was distinct from the basis of the Zarates’ right to
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
their respective negligence combining to cause the death of Aaron. As to
the PNR, the RTC rightly found the PNR also guilty of negligence despite
the school van of the Pereñas traversing the railroad tracks at a point not
dedicated by the PNR as a railroad crossing for pedestrians and
motorists, because the PNR did not ensure the safety of others through
the placing of crossbars, signal lights, warning signs, and other
permanent safety barriers to prevent vehicles or pedestrians from
crossing there. The RTC observed that the fact that a crossing guard had
been assigned to man that point from 7 a.m. to 5 p.m. was a good
indicium that the PNR was aware of the risks to others as well as the
need to control the vehicular and other traffic there. Verily, the Pereñas
and the PNR were joint tortfeasors.
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY
INC., petitioner, vs. COURT OF APPEALS AND SEVEN BROTHERS
SHIPPING CORPORATION, respondents. G.R. No. 102316 June 30,
1997
PANGANIBAN, J.:
Is a stipulation in a charter party that the "(o)wners shall not be
responsible for loss, split, short-landing, breakages and any kind of
damages to the cargo" 1 valid?
FACTS It appears that on 16 January 1984, plaintiff (Valenzuela
Hardwood and Industrial Supply, Inc.) entered into an agreement with the
defendant Seven Brothers (Shipping Corporation) whereby the latter
undertook to load on board its vessel M/V Seven Ambassador the
former's lauan round logs numbering 940 at the port of Maconacon,
Isabela for shipment to Manila.
plaintiff insured the logs against loss and/or damage with defendant South
Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter
issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00
on said date.
the plaintiff gave the check in payment of the premium on the insurance
policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25
January 1984 resulting in the loss of the plaintiff's insured logs.
a check for P5,625.00 (Exh. "E") to cover payment of the premium and
documentary stamps due on the policy was tendered due to the insurer
but was not accepted. Instead, the South Sea Surety and Insurance Co.,
Inc. cancelled the insurance policy it issued as of the date of the inception
for non-payment of the premium due in accordance with Section 77 of the
Insurance Code.
plaintiff demanded from defendant South Sea Surety and Insurance Co.,
Inc. the payment of the proceeds of the policy but the latter denied liability
under the policy. Plaintiff likewise filed a formal claim with defendant
Seven Brothers Shipping Corporation for the value of the lost logs but the
latter denied the claim.
RTC: rendered judgment in favor of plaintiff and against defendants. Both
defendants shipping corporation and the surety company appealed.
CA: affirmed in part the RTC judgment by sustaining the liability of South
Sea Surety and Insurance Company ("South Sea"), but modified it by
holding that Seven Brothers Shipping Corporation ("Seven Brothers") was
not liable for the lost cargo. 5
South Sea and herein Petitioner Valenzuela Hardwood and Industrial
Supply, Inc. ("Valenzuela") filed separate petitions for review before this
Court. In a Resolution dated June 2, 1995, this Court denied the petition
of South Sea. 7 There the Court found no reason to reverse the factual
findings of the trial court and the Court of Appeals that Chua was indeed
an authorized agent of South Sea when he received Valenzuela's
premium payment for the marine cargo insurance policy which was thus
binding on the insurer. 8
The Court is now called upon to resolve the petition for review filed by
Valenzuela assailing the CA Decision which exempted Seven Brothers
from any liability for the lost cargo.
ISSUE Petitioner Valenzuela's arguments resolve around a single issue:
"whether or not respondent Court (of Appeals) committed a reversible
error in upholding the validity of the stipulation in the charter party
executed between the petitioner and the private respondent exempting
the latter from liability for the loss of petitioner's logs arising from the
negligence of its (Seven Brothers') captain." 9
47
The Court's Ruling The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent
stipulated that the "(o)wners shall not be responsible for loss, split, short-
landing, breakages and any kind of damages to the cargo." 10 The validity
of this stipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the
parties that the proximate cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo was the "snapping of the
iron chains and the subsequent rolling of the logs to the portside due to
the negligence of the captain in stowing and securing the logs on board
the vessel and not due to fortuitous event." 11 Likewise undisputed is the
status of Private Respondent Seven Brothers as a private carrier when it
contracted to transport the cargo of Petitioner Valenzuela. Even the latter
admits this in its petition. 12
The trial court deemed the charter party stipulation void for being contrary
to public policy, 13 citing Article 1745 of the Civil Code which provides:
Art. 1745. Any of the following or similar stipulations shall
be considered unreasonable, unjust and contrary to
public policy:
(1) That the goods are transported at the risk of the
owner or shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any
diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of
diligence less than that of a good father of a family, or of
a man of ordinary prudence in the vigilance over the
movables transported;
(5) That the common carrier shall not be responsible for
the acts or omissions of his or its employees;
(6) That the common carrier's liability for acts committed
by thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or
diminished;
(7) That the common carrier is not responsible for the
loss, destruction, or deterioration of goods on account of
the defective condition of the car, vehicle, ship, airplane
or other equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to
Articles 586 and 587 of the Code of Commerce 14 and Articles 1170 and
1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409
of the Civil Code, 15 petitioner further contends that said stipulation "gives
no duty or obligation to the private respondent to observe the diligence of
a good father of a family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that
private respondent had acted as a private carrier in transporting
petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions
on common carriers which were cited by petitioner may not be applied
unless expressly stipulated by the parties in their charter party. 16
In a contract of private carriage, the parties may validly stipulate that
responsibility for the cargo rests solely on the charterer, exempting the
shipowner from liability for loss of or damage to the cargo caused even by
the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil
Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public
order, or public policy. Indeed, their contract of private carriage is not
even a contract of adhesion. We stress that in a contract of private
carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship
transporting commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in
contracts involving common carriers.
The issue posed in this case and the arguments raised by petitioner are
not novel; they were resolved long ago by this Court in Home Insurance
Co. vs. American Steamship Agencies, Inc. 18 In that case, the trial court
48
similarly nullified a stipulation identical to that involved in the present case
for being contrary to public policy based on Article 1744 of the Civil Code
and Article 587 of the Code of Commerce. Consequently, the trial court
held the shipowner liable for damages resulting for the partial loss of the
cargo. This Court reversed the trial court and laid down, through Mr.
Justice Jose P. Bengzon, the following well-settled observation and
doctrine:
The provisions of our Civil Code on common carriers
were taken from Anglo-American law. Under American
jurisprudence, a common carrier undertaking to carry a
special cargo or chartered to a special person only,
becomes a private carrier. As a private carrier, a
stipulation exempting the owner from liability for the
negligence of its agent is not against public policy, and is
deemed valid.
Such doctrine We find reasonable. The Civil Code
provisions on common carriers should not be applied
where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the
owner from liability for loss due to the negligence of its
agent would be void if the strict public policy governing
common carriers is applied. Such policy has no force
where the public at large is not involved, as in this case of
a ship totally chartered for the used of a single
party. 19(Emphasis supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not
apply. The general public enters into a contract of transportation with
common carriers without a hand or a voice in the preparation thereof. The
riding public merely adheres to the contract; even if the public wants to, it
cannot submit its own stipulations for the approval of the common carrier.
Thus, the law on common carriers extends its protective mantle against
one-sided stipulations inserted in tickets, invoices or other documents
over which the riding public has no understanding or, worse, no choice.
Compared to the general public, a charterer in a contract of private
carriage is not similarly situated. It can — and in fact it usually does —
enter into a free and voluntary agreement. In practice, the parties in a
contract of private carriage can stipulate the 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
on common carriers. When the charterer decides to exercise this option,
he takes a normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to
the present case because it "covers only a stipulation exempting a private
carrier from liability for the negligence of his agent, but it does not apply to
a stipulation exempting a private carrier like private respondent from the
negligence of his employee or servant which is the situation in this
case." 20 This contention of petitioner is bereft of merit, for it raises a
distinction without any substantive difference. The case Home
Insurance specifically dealt with "the liability of the shipowner for acts or
negligence of its captain and crew" 21 and a charter party stipulation which
"exempts the owner of the vessel from any loss or damage or delay
arising from any other source, even from the neglect or fault of the captain
or crew or some other person employed by the owner on
board, for whose acts the owner would ordinarily be liable except for said
paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at
bar.
The naked assertion of petitioner that the American rule enunciated
in Home Insurance is not the rule in the Philippines 23 deserves scant
consideration. The Court there categorically held that said rule was
"reasonable" and proceeded to apply it in the resolution of that case.
Petitioner miserably failed to show such circumstances or arguments
which would necessitate a departure from a well-settled rule.
Consequently, our ruling in said case remains a binding judicial precedent
based on the doctrine of stare decisis and Article 8 of the Civil Code
which provides that "(j)udicial decisions applying or interpreting the laws
or the Constitution shall form part of the legal system of the Philippines."
In fine, the respondent appellate court aptly stated that "[in the case of] a
private carrier, a stipulation exempting the owner from liability even for the
negligence of its agents is valid." 24
49