SECOND DIVISION

[G.R. No. 148496. March 19, 2002]

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.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated May 31, 2001, of
the Court of Appeals, affirming the decision[2] of the Regional Trial
Court, Makati City, Branch 148, which ordered petitioner to pay
respondent, as subrogee, the amount of P93,112.00 with legal interest,
representing the value of damaged cargo handled by petitioner, 25%
thereof as attorneys fees, and the cost of the suit.
The facts are as follows:
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
SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita,
Manila. The cargo was insured by respondent UCPB General Insurance
Co., Inc.
On July 14, 1990, 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. From July 23 to July 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo from
the arrastre operator and delivered it to SMCs warehouse in Ermita,
Manila. On July 25, 1990, 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 the Regional Trial
Court, Branch 148, Makati City, which, on December 20, 1995,
rendered judgment finding petitioner liable to respondent for the
damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage
while in the custody of defendants. Evidence such as the Warehouse
Entry Slip (Exh. E); the Damage Report (Exh. F) with entries appearing
therein, classified as TED and TSN, which the claims processor, Ms.
Agrifina De Luna, claimed to be tearrage at the end and tearrage at the
middle of the subject damaged cargoes respectively, coupled with the
Marine Cargo Survey Report (Exh. H - H-4-A) confirms the fact of the
damaged condition of the subject cargoes. The surveyor[s] report (Exh.
H-4-A) in particular, which provides among others that:
. . . we opine that damages sustained by shipment is attributable to
improper handling in transit presumably whilst in the custody of the
broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her]
defense that [she is] are not liable. Defendant by reason of the nature
of [her] business should have devised ways and means in order to
prevent the damage to the cargoes which it is under obligation to take
custody of and to forthwith deliver to the consignee. Defendant did not
present any evidence on what precaution [she] performed to prevent
[the] said incident, hence the presumption is that the moment the
defendant accepts the cargo [she] shall perform such extraordinary
diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods
are proved to have been lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is shifted to the
carrier to prove that he has exercised the extraordinary diligence
required by law. Thus, it has been held that the mere proof of delivery
of goods in good order to a carrier, and of their arrival at the place of
destination in bad order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how the injury occurred,
the carrier must be held responsible. It is incumbent upon the carrier to
prove that the loss was due to accident or some other circumstances
inconsistent with its liability. (cited in Commercial Laws of the
Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
2

Defendant, being a customs brother, warehouseman and at the same

time a common carrier is supposed [to] exercise [the] extraordinary
diligence required by law, hence the extraordinary responsibility lasts
from the time the goods are unconditionally placed in the possession of
and received by the carrier for transportation until the same are
delivered actually or constructively by the carrier to the consignee or
to the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following
amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence
this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED
BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN
INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND
NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS
SERVICES TO THE PUBLIC.[5]
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.
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.
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:
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
4

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 petitioners 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 petitioners business.
Now, as to petitioners 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 (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached
loosened.[10]
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 petitioners 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 SMCs warehouse in
Ermita, Manila, which is a mere thirty-minute drive from the Port Area
where the cargo came from. Thus, the damage to the cargo could not
have taken place while these were in her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the
Marine Cargo Surveyors indicates that when the shipper transferred
the cargo in question to the arrastre operator, these were covered by
clean Equipment Interchange Report (EIR) and, when petitioners
employees withdrew the cargo from the arrastre operator, they did so
without exception or protest either with regard to the condition of
container vans or their contents. The Survey Report pertinently reads
Details of Discharge:
Shipment, provided with our protective supervision was noted
discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14
July 1990, containerized onto 30 x 20 secure metal vans, covered by
clean EIRs. Except for slight dents and paint scratches on side and roof
panels, these containers were deemed to have [been] received in good
condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo containers was
[withdrawn] by Transorient Container Services, Inc. . . . without
exception.
[The cargo] was finally delivered to the consignees storage warehouse
located at Tabacalera Compound, Romualdez Street, Ermita, Manila
from July 23/25, 1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was
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 withdrawn by the defendantappellant from the arrastre still in good order and condition as the
same were received by the former without exception, that is, without
any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant would
report it immediately to the consignee or make an exception on the
delivery receipt or note the same in the Warehouse Entry Slip (WES).
None of these took place. To put it simply, the defendant-appellant
received the shipment in good order and condition and 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 petitioners insistence that the cargo could not have been
damaged while in her custody as she immediately delivered the
containers to SMCs 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 must prove that it used all reasonable means to
ascertain the nature and characteristic of goods tendered for
[transport] and that [it] exercise[d] due care in the handling [thereof].
Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
....
(4) The character of the goods or defects in the packing or in the
containers.
7

....
For this provision to apply, the rule is that if the improper packing or, in
this case, the defect/s in the container, is/are known to the carrier or
his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom.[14] In this case, petitioner accepted the
cargo without exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove that she
exercised extraordinary diligence in the carriage of goods in this case
or that she is exempt from liability, the presumption of negligence as
provided under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001,
is AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

SECOND DIVISION
8

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

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF
APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional
Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed
petitioners' complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended,
to contract, install and operate oil pipelines. The original pipeline concession was granted
in 1967[1] and renewed by the Energy Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local Government Code.[3] The respondent City
Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in
four installments based on the gross receipts for products pumped at GPS-1 for the fiscal
year 1993 which amounted to P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of
1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government
concessiongrantedunderthePetroleumAct.Itisengagedinthebusinessoftransporting
petroleumproductsfromtheBatangasrefineries,viapipeline,toSucatandJTFPandacan
Terminals.Assuch,ourCompanyisexemptfrompayingtaxongrossreceiptsunder
Section133oftheLocalGovernmentCodeof1991xxxx
"Moreover,Transportationcontractorsarenotincludedintheenumerationofcontractors
underSection131,Paragraph(h)oftheLocalGovernmentCode.Therefore,theauthority
toimposetax'oncontractorsandotherindependentcontractors'underSection143,
Paragraph(e)oftheLocalGovernmentCodedoesnotincludethepowertolevyon
transportationcontractors.
"Theimpositionandassessmentcannotbecategorizedasamerefeeauthorizedunder
Section147oftheLocalGovernmentCode.Thesaidsectionlimitstheimpositionoffees
andchargesonbusinesstosuchamountsasmaybecommensuratetothecostof
9

regulation,inspection,andlicensing.Hence,assumingarguendothatFPICisliablefor
thelicensefee,theimpositionthereofbasedongrossreceiptsisviolativeofthe
aforecitedprovision.TheamountofP956,076.04(P239,019.01perquarter)isnot
commensuratetothecostofregulation,inspectionandlicensing.Thefeeisalreadya
revenueraisingmeasure,andnotamereregulatoryimposition."[4]
OnMarch8,1994,therespondentCityTreasurerdeniedtheprotestcontendingthat
petitionercannotbeconsidered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint[6] for tax refund with prayer for a writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer.
In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the
business tax on its gross receipts violates Section 133 of the Local Government Code; (2)
the authority of cities to impose and collect a tax on the gross receipts of "contractors and
independent contractors" under Sec. 141 (e) and 151 does not include the authority to
collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the
term "contractors" excludes transportation contractors; and, (3) the City Treasurer
illegally and erroneously imposed and collected the said tax, thus meriting the immediate
refund of the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies only
to "transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers solely to ordinary carriers such as
trucks, trains, ships and the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or manner by which a product is
delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling
in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax
exemptions are to be strictly construed against the taxpayer,taxesbeingthelifebloodof
thegovernment.Exemptionmaythereforebegrantedonlybyclearandunequivocal
provisionsoflaw.
"PlaintiffclaimsthatitisagranteeofapipelineconcessionunderRepublicAct387,
(ExhibitA)whoseconcessionwaslatelyrenewedbytheEnergyRegulatoryBoard
(ExhibitB).Yetneithersaidlawnorthedeedofconcessiongrantanytaxexemption
upontheplaintiff.

10

"EventheLocalGovernmentCodeimposesataxonfranchiseholdersunderSec.137of
theLocalTaxCode.Suchbeingthesituationobtainedinthiscase(exemptionbeing
unclearandequivocal)resorttodistinctionsorotherconsiderationsmaybeofhelp:
1.ThattheexemptiongrantedunderSec.133(j)encompassesonlycommoncarriersso
asnottooverburdentheridingpublicorcommuterswithtaxes.Plaintiffisnotacommon
carrier,butaspecialcarrierextendingitsservicesandfacilitiestoasinglespecificor
"specialcustomer"undera"specialcontract."
2.TheLocalTaxCodeof1992wasbasicallyenactedtogivemoreandeffectivelocal
autonomytolocalgovernmentsthanthepreviousenactments,tomakethem
economicallyandfinanciallyviabletoservethepeopleanddischargetheirfunctionswith
aconcomitantobligationtoacceptcertaindevolutionofpowers,xxxSo,consistentwith
thispolicyevenfranchisegranteesaretaxed(Sec.137)andcontractorsarealsotaxed
underSec.143(e)and151oftheCode."[9]
PetitionerassailedtheaforesaiddecisionbeforethisCourtviaapetitionforreview.On
February27,1995,wereferredthecasetotherespondentCourtofAppealsfor
considerationandadjudication.[10]OnNovember29,1995,therespondent court
rendered a decision[11] affirming the trial court's dismissal of petitioner's complaint.
Petitioner's motion for reconsideration was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996.[13] Petitioner moved for a reconsideration which was granted by
this Court in a Resolution[14] of January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the
petitioner is not a common carrier or a transportation contractor, and (2) the exemption
sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public
as engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation,
firm or association engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, offering their services to the
public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of goods
for person generally as a business and not as a casual occupation;
11

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 businessisconductedandover
hisestablishedroads;and
4.Thetransportationmustbeforhire.[15]
Basedontheabovedefinitionsandrequirements,thereisnodoubtthatpetitionerisa
commoncarrier.Itisengagedinthebusinessoftransportingorcarryinggoods,i.e.
petroleumproducts,forhireasapublicemployment.Itundertakestocarryforallpersons
indifferently,thatis,toallpersonswhochoosetoemployitsservices,andtransportsthe
goodsbylandandforcompensation.Thefactthat petitioner has a limited clientele does
not exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x
x avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodicorunscheduledbasis.NeitherdoesArticle1732distinguishbetweenacarrier
offeringitsservicestothe'generalpublic,'i.e.,thegeneralcommunityorpopulation,and
onewhooffersservicesorsolicitsbusinessonlyfromanarrowsegmentofthegeneral
population.WethinkthatArticle1877deliberatelyrefrainedfrommakingsuch
distinctions.
Sounderstood,theconceptof'commoncarrier'underArticle1732maybeseento
coincideneatlywiththenotionof'publicservice,'underthePublicServiceAct
(CommonwealthActNo.1416,asamended)whichatleastpartiallysupplementsthe
lawoncommoncarrierssetforthintheCivilCode.UnderSection13,paragraph(b)
ofthePublicServiceAct,'publicservice'includes:
'everypersonthatnoworhereaftermayown,operate,manage,orcontrolinthe
Philippines,forhireorcompensation,withgeneralorlimitedclientele,whether
permanent,occasionaloraccidental,anddoneforgeneralbusinesspurposes,any
commoncarrier,railroad,streetrailway,tractionrailway,subwaymotorvehicle,either
forfreightorpassenger,orboth,withorwithoutfixedrouteandwhatevermaybeits
classification,freightorcarrierserviceofanyclass,expressservice,steamboat,or
steamshipline,pontines,ferriesandwatercraft,engagedinthetransportationof
passengersorfreightorboth,shipyard,marinerepairshop,wharfordock,iceplant,
icerefrigerationplant,canal,irrigationsystemgas,electriclightheatandpower,water
supplyandpowerpetroleum,seweragesystem,wireorwirelesscommunications

12

systems,wireorwirelessbroadcastingstationsandothersimilarpublicservices.'
"(UnderscoringSupplied)
Also,respondent'sargumentthattheterm"commoncarrier"asusedinSection133(j)
oftheLocalGovernmentCoderefersonlytocommoncarrierstransportinggoodsand
passengersthroughmovingvehiclesorvesselseitherbyland,seaorwater,iserroneous.
Ascorrectlypointedoutbypetitioner,thedefinitionof"commoncarriers"intheCivil
Codemakesnodistinctionastothemeansoftransporting,aslongasitisbyland, water
or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil pipe line operators are considered
common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by him,
but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport, and to
charge without discrimination such rates as may have been approved by the Secretary of
Agriculture and NaturalResources."
RepublicAct387alsoregardspetroleumoperationasapublicutility.Pertinentportion
ofArticle7thereofprovides:
"thateverythingrelatingtotheexplorationforandexploitationofpetroleumxxand
everythingrelatingtothemanufacture,refining,storage,ortransportationbyspecial
methodsofpetroleum,isherebydeclaredtobeapublicutility."(UnderscoringSupplied)
TheBureauofInternalRevenuelikewiseconsidersthepetitionera"common carrier." In
BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engagedonlyintransporting
petroleumproducts,itisconsideredacommoncarrierunderRepublicActNo.387xxx.
Suchbeingthecase,itisnotsubjecttowithholdingtaxprescribedbyRevenue
RegulationsNo.1378,asamended."
Fromtheforegoingdisquisition, there is no doubt that petitioner is a "common carrier"
and, therefore, exempt from the business tax as provided for in Section133(j),ofthe
LocalGovernmentCode,towit:

13

"Section133.CommonLimitationsontheTaxingPowersofLocalGovernmentUnits.
Unlessotherwiseprovidedherein,theexerciseofthetaxingpowersofprovinces,cities,
municipalities,andbarangaysshallnotextendtothelevyofthefollowing :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
exceptasprovidedinthisCode."
ThedeliberationsconductedintheHouseofRepresentativesontheLocalGovernment
Codeof1991areilluminating:
"MR.AQUINO(A).Thankyou,Mr.Speaker.
Mr.Speaker,wewouldliketoproceedtopage95,line1. It states : "SEC.121[nowSec.
131].CommonLimitationsontheTaxingPowersofLocalGovernmentUnits."xxx
MR.AQUINO(A.).ThankyouMr.Speaker.
Stillonpage95,subparagraph5,ontaxesonthebusinessoftransportation.This appears
to be one of those being deemed to be exempted from the taxing powers of the local
government units. Mayweknowthereasonwhythetransportationbusinessisbeing
excludedfromthetaxingpowersofthelocalgovernmentunits?
MR.JAVIER(E.).Mr.Speaker,thereisanexceptioncontainedinSection121(nowSec.
131),line16,paragraph5.Itstatesthatlocalgovernmentunitsmaynotimposetaxeson
thebusinessoftransportation,exceptasotherwiseprovidedinthiscode.
Now,Mr.Speaker,iftheGentlemanwouldcaretogotopage98ofBookII,onecansee
therethatprovinceshavethepowertoimposeataxonbusinessenjoyingafranchise
attherateofnotmorethanonehalfof1percentofthegrossannualreceipts.So,
transportationcontractorswhoareenjoyingafranchisewouldbesubjecttotaxbythe
province.Thatistheexception,Mr.Speaker.
Whatwewanttoguardagainsthere,Mr.Speaker,istheimpositionoftaxesbylocal
governmentunitsonthecarrierbusiness.Localgovernmentunitsmayimposetaxeson
topofwhatisalreadybeingimposedbytheNationalInternalRevenueCodewhichisthe
socalled"commoncarrierstax."Wedonotwantaduplicationofthistax,sowejust
providedforanexceptionunderSection125[nowSec.137]thataprovincemayimpose
thistaxataspecificrate.
MR.AQUINO(A.).Thankyouforthatclarification,Mr.Speaker.xxx[18]

14

Itisclearthatthelegislativeintentinexcludingfromthetaxingpowerofthelocal
governmentunittheimpositionofbusinesstaxagainstcommoncarriersistopreventa
duplicationofthesocalled"commoncarrier'stax."
Petitionerisalreadypayingthree(3%)percentcommoncarrier'staxonitsgross
sales/earningsundertheNationalInternalRevenueCode.[19]Totaxpetitioneragainon
itsgrossreceiptsinitstransportationofpetroleumbusinesswould defeat the purpose of
the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court
of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET
ASIDE.
SO ORDERED.
FIRST DIVISION
[G.R. No. 141910. August 6, 2002]
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO
TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
DECISION
VITUG, J.:
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 with the Regional Trial Court, Branch 66, of Makati
City. In its answer, 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.

15

The issues having thus been joined, FGU presented its evidence, establishing
the extent of damage to the cargoes and the amount it had paid to the assured.
GPS, instead of submitting its evidence, 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.
The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss,
explaining thusly:
Under Section 1 of Rule131oftheRulesofCourt,itisprovidedthatEachpartymust
provehisownaffirmativeallegation,xxx.
Intheinstantcase,plaintiffdidnotpresentanysingleevidencethatwouldprovethat
defendantisacommoncarrier.
xxxxxxxxx
Accordingly,theapplicationofthelawoncommoncarriersisnotwarrantedandthe
presumptionoffaultornegligenceonthepartofacommoncarrierincaseofloss,
damageordeteriorationofgoodsduringtransportunder1735oftheCivilCodeisnot
availing.
Thus,thelawsgoverningthecontractbetweentheownerofthecargotowhomthe
plaintiffwassubrogatedandtheownerofthevehiclewhichtransportsthecargoarethe
lawsonobligationandcontractoftheCivilCodeaswellasthelawonquasidelicts.
Underthelawonobligationandcontract,negligenceorfaultisnotpresumed.Thelawon
quasidelictprovidesforsomepresumptionofnegligencebutonlyupontheattendanceof
somecircumstances.Thus,Article2185provides:
Art.2185.Unlessthereisprooftothecontrary,itispresumedthatapersondrivinga
motorvehiclehasbeennegligentifatthetimeofthemishap,hewasviolatinganytraffic
regulation.
Evidencefortheplaintiffshowsnoproofthatdefendantwasviolatinganytraffic
regulation.Hence,thepresumptionofnegligenceisnotobtaining.
Consideringthatplaintifffailedtoadduceevidencethatdefendantisacommoncarrier
anddefendantsdriverwastheonenegligent,defendantcannotbemadeliableforthe
damagesofthesubjectcargoes.[2]
Thesubsequentmotionforreconsiderationhaving been denied,[3] plaintiff interposed
an appeal to the Court of Appeals, contending that the trial court had erred (a) in
holding that the appellee corporation was not a common carrier defined under

16

the law and existing jurisprudence; and (b) in dismissing the complaint on a
demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS.
The appellate court, in its decision of 10 June 1999, [4] discoursed, among other
things, that "x x x in order for the presumption of negligence provided for under the law
governing common carrier(Article1735,CivilCode)toarise,theappellantmustfirst
provethattheappelleeisacommoncarrier.Shouldtheappellantfailtoprovethatthe
appelleeisacommoncarrier,thepresumptionwouldnotarise;consequently,the
appellantwouldhavetoprovethatthecarrierwasnegligent.
"xxxxxxxxx
"Becauseitistheappellantwhoinsiststhattheappelleescanstillbeconsideredasa
commoncarrier,despiteits`limitedclientele,(assumingitwasreallyacommoncarrier),
itfollowsthatit(appellant)hastheburdenofprovingthesame.It(plaintiffappellant)
`mustestablishhiscasebyapreponderanceofevidence,whichmeansthattheevidence
asawholeadducedbyonesideissuperiortothatoftheother.(SummaInsurance
Corporationvs.CourtofAppeals,243SCRA175).This,unfortunately,theappellant
failedtodohence,thedismissaloftheplaintiffscomplaintbythetrialcourtisjustified.
"xxxxxxxxx
"Basedontheforegoingdisquisitionsandconsideringthecircumstancesthattheappellee
truckingcorporationhasbeen`itsexclusivecontractor,haulersince1970,defendanthas
nochoicebuttocomplywiththedirectiveofitsprincipal,theinevitableconclusionis
thattheappelleeisaprivatecarrier.
"xxxxxxxxx
"xxxthelowercourtcorrectlyruledthat'theapplicationofthelawoncommoncarriers
isnotwarrantedandthepresumptionoffaultornegligenceonthepartofacommon
carrierincaseofloss,damageordeteriorationofgood[s]duringtransportunder[article]
1735oftheCivilCodeisnotavailing.'xxx.
"Finally,Weadverttothelongestablishedrulethatconclusionsandfindingsoffactofa
trialcourtareentitledtogreatweightonappealandshouldnotbedisturbedunlessfor
strongandvalidreasons."[5]
Petitioner'smotionforreconsiderationwaslikewisedenied;[6]hence,theinstantpetition,
[7]raisingthefollowingissues:
I
17

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON

CARRIER AS DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A
PRIVATECARRIER,MAYBEPRESUMEDTOHAVEBEENNEGLIGENTWHEN
THEGOODSITUNDERTOOKTOTRANSPORTSAFELYWERE
SUBSEQUENTLYDAMAGEDWHILEINITSPROTECTIVECUSTODYAND
POSSESSION.
III
WHETHERTHEDOCTRINEOFRESIPSALOQUITURISAPPLICABLEINTHE
INSTANTCASE.
Onthefirstissue,theCourtfindstheconclusionofthetrialcourtandtheCourtof
Appealstobeamplyjustified.GPS,beinganexclusivecontractorandhaulerof
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.[10] Given 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
18

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 obligation[16] 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 petitioners 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 petitioners 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. Petitioners 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]
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 latters 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

19

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 defendants 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.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court,
Branch 66, of Makati City, and the decision, dated 10 June 1999, of the Court of
Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is
concerned, but said assailed order of the trial court and decision of the appellate
court are REVERSED as regards G.P. Sarmiento Trucking Corporation which,
instead, is hereby ordered to pay FGU Insurance Corporation the value of the
damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47822

December 22, 1988

20

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.

FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used
bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of
such scrap material, respondent would bring such material to Manila for resale.
He utilized two (2) six-wheeler trucks which he owned for hauling the material to
Manila. On the return trip to Pangasinan, respondent would load his vehicles with
cargo which various merchants wanted delivered to differing establishments in
Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty
filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati the merchandise on to his trucks:
150 cartons were loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven by Manuel
Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was
hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed
men who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in
the Court of First Instance of Pangasinan, demanding payment of P 22,150.00,
the claimed value of the lost merchandise, plus damages and attorney's fees.
Petitioner argued that private respondent, being a common carrier, and having
failed to exercise the extraordinary diligence required of him by the law, should
be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and
argued that he could not be held responsible for the value of the lost goods, such
loss having been due to force majeure.

21

On 10 December 1975, the trial court rendered a Decision 1 finding private

respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had
erred in considering him a common carrier; in finding that he had habitually
offered trucking services to the public; in not exempting him from liability on the
ground of force majeure; and in ordering him to pay damages and attorney's
fees.
The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors
the following conclusions of the Court of Appeals:
1.

that private respondent was not a common carrier;

2.

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

3.
that respondent was not liable for the value of the undelivered cargo.
(Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto
Cendana may, under the facts earlier set forth, be properly characterized as a
common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think
that Article 1733 deliberaom making such distinctions.

22

So understood, the concept of "common carrier" under Article 1732 may be seen
to coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such back-hauling was done on a periodic
or occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There
is no dispute that private respondent charged his customers a fee for hauling
their goods; that fee frequently fell below commercial freight rates is not relevant
here.
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for the
incurring of liability under the Civil Code provisions governing common carriers.
That liability arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations
and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he
has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements. The
business of a common carrier impinges directly and intimately upon the safety
and well being and property of those members of the general community who
happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services
and the law cannot allow a common carrier to render such duties and liabilities

23

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)
(2)
(3)
(4)
and
(5)

Flood, storm, earthquake, lightning or other natural disaster or calamity;

Act of the public enemy in war, whether international or civil;
Act or omission of the shipper or owner of the goods;
The character-of the goods or defects in the packing or-in the containers;
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

24

circumstances of this case, private respondent should have hired a security

guard presumably to ride with the truck carrying the 600 cartons of Liberty filled
milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to
ride with the truck and to engage brigands in a firelight at the risk of his own life
and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of
the duty of extraordinary diligence in the vigilance over the goods carried in the
specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is,
under Article 1733, given additional specification not only by Articles 1734 and
1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in
relevant part:
Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx

xxx

xxx

(5)
that the common carrier shall not be responsible for the acts or omissions
of his or its employees;
(6)
that the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violence or force, is
dispensed with or diminished; and
(7)
that the common carrier shall not responsible for the loss, destruction or
deterioration of goods on account of the defective condition of the car vehicle,
ship, airplane or other equipment used in the contract of carriage. (Emphasis
supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will
not be allowed to divest or to diminish such responsibility even for acts of
strangers like thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
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."

25

There, the accused were charged with willfully and unlawfully taking and carrying
away with them the second truck, driven by Manuel Estrada and loaded with the
600 cartons of Liberty filled milk destined for delivery at petitioner's store in
Urdaneta, Pangasinan. The decision of the trial court shows that the accused
acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the
five (5) hold-uppers were armed with firearms. The robbers not only took away
the truck and its cargo but also kidnapped the driver and his helper, detaining
them for several days and later releasing them in another province (in
Zambales). The hijacked truck was subsequently found by the police in Quezon
City. The Court of First Instance convicted all the accused of robbery, though not
of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably
be regarded as quite beyond the control of the common carrier and properly
regarded as a fortuitous event. It is necessary to recall that even common
carriers are not made absolute insurers against all risks of travel and of transport
of goods, and are not held liable for acts or events which cannot be foreseen or
are inevitable, provided that they shall have complied with the rigorous standard
of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise
which was lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the
Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
FIRST DIVISION
[G.R. No. 138334. August 25, 2003]
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and
CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
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

26

fee was also waived because petitioners niece, Meriam Menor, was respondent
companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners 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 petitioners 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 petitioners 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 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, which was docketed as Civil Case No. 92133 and raffled to Branch 59 of the Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe
was due to respondents 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.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners 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.

27

Respondent explained 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.[3]
Lastly, respondent maintained 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.
After due proceedings, the trial court rendered a decision,[4] the dispositive part
of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to returnand/orrefundtotheplaintifftheamountofFifty
ThreeThousandNineHundredEightyNinePesosandFortyThreeCentavos
(P53,989.43)withlegalinterestthereonattherateoftwelvepercent(12%)perannum
startingJanuary16,1992,thedatewhenthecomplaintwasfiled;
2.OrderingthedefendanttopaytheplaintifftheamountofFiveThousand(P5,000.00)
Pesosasandforreasonableattorneysfees;
3.Dismissingthedefendantscounterclaim,forlackofmerit;and
4.Withcostsagainstthedefendant.
SOORDERED.[5]
Thetrialcourtheldthatrespondentwasnegligentinerroneouslyadvisingpetitionerof
herdeparturedatethroughitsemployee, Menor, who was not presented as witness
to rebut petitioners 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 Menors 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.
Respondent appealed to the Court of Appeals, which 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
28

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. The dispositive portion of the judgment appealed from reads
as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court
dated October 26, 1995 is hereby REVERSED and SET ASIDE.Anewjudgment
isherebyENTEREDrequiringtheplaintiffappelleetopaytothedefendantappellantthe
amountofP12,901.00,representingthebalanceofthepriceoftheBritishPageant
PackageTour,thesametoearnlegalinterestattherateofSIXPERCENT(6%)per
annum,tobecomputedfromthetimethecounterclaimwasfileduntilthefinalityofthis
decision.Afterthisdecisionbecomesfinalandexecutory,therateofTWELVE
PERCENT(12%)interestperannumshallbeadditionallyimposedonthetotalobligation
untilpaymentthereofissatisfied.TheawardofattorneysfeesisDELETED.Costs
againsttheplaintiffappellee.
SOORDERED.[6]
Upondenialofhermotionforreconsideration,[7]petitionerfiledtheinstantpetition
underRule45onthefollowinggrounds:
I
Itisrespectfullysubmitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court by
ruling that the petitionerisnotentitledtoarefundofthecostofunavailedJewelsof
Europetourshebeingequally,ifnotmore,negligentthantheprivaterespondent,forin
thecontractofcarriagethecommoncarrierisobligedtoobserveutmostcareandextra
ordinarydiligencewhichishigherindegreethantheordinarydiligencerequiredofthe
passenger.Thus,evenifthepetitionerandprivaterespondentwerebothnegligent,the
petitionercannotbeconsideredtobeequally,orworse,moreguiltythantheprivate
respondent.Atbest,petitionersnegligenceisonlycontributorywhiletheprivate
respondent[isguilty]ofgrossnegligencemakingtheprincipleofparidelicto
inapplicableinthecase;
II
TheHonorableCourtofAppealsalsoerredinnotrulingthattheJewelsofEuropetour
wasnotindivisibleandtheamountpaidthereforrefundable;
III
TheHonorableCourterredinnotgrantingtothepetitionertheconsequentialdamages
dueherasaresultofbreachofcontractofcarriage.[8]
29

Petitionercontendsthatrespondentdidnotobservethestandardofcarerequiredofa
commoncarrierwhenitinformedherwronglyoftheflightschedule.Shecouldnotbe
deemedmorenegligentthanrespondent 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 employees gross negligence.
Petitioners 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. Respondents services as a
travel agency include procuring tickets and facilitating travel permits or visas as
well as booking customers for tours.
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. Respondents
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 petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners 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. Petitioners 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 latters

30

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] This connotes reasonable care consistent with
that which an ordinarily prudent person would have observed when confronted
with a similar situation. The test to determine whether negligence attended the
performance of an obligation is: 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.[13]
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since
respondent did not call Menor to the witness stand to refute the allegation. The
lower court applied the presumption under Rule 131, Section 3 (e)[14] of the
Rules of Court that evidence willfully suppressed would be adverse if produced
and thus considered petitioners uncontradicted testimony to be sufficient proof of
her claim.
On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioners assertion is belied by the evidence on record. The
date and time of departure was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so that petitioner could
prepare for the trip. It performed all its obligations to enable petitioner to join the
tour and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony
could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint,[15] thereby making it
physically impossible for respondent to present her as a witness. Then too, even
if it were possible for respondent to secure Menors testimony, the presumption
under Rule 131, Section 3(e) would still not apply. The opportunity and possibility
for obtaining Menors testimony belonged to both parties, considering that Menor
was not just respondents employee, but also petitioners niece. It was thus error
for the lower court to invoke the presumption that respondent willfully suppressed
evidence under Rule 131, Section 3(e). Said presumption would logically be

31

inoperative if the evidence is not intentionally omitted but is simply unavailable, or

when the same could have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menors negligence was not sufficiently proved, considering
that the only evidence presented on this score was petitioners uncorroborated
narration of the events. It is well-settled that the party alleging a fact has the
burden of proving it and a mere allegation cannot take the place of evidence.[17]
If the plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket[19] issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The
travel documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioners hotel accommodation as well
as food, land transfers and sightseeing excursions, in accordance with its
avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care
of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation so
demands.[20] There is no fixed standard of diligence applicable to each and
every contractual obligation and each case must be determined upon its
particular facts. The degree of diligence required depends on the circumstances
of the specific obligation and whether one has been negligent is a question of
fact that is to be determined after taking into account the particulars of each
case.[21]
The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual

32

findings below are generally conclusive upon this court, the rule is subject to
certain exceptions, as when the trial court overlooked, misunderstood, or
misapplied some facts or circumstances of weight and substance which will
affect the result of the case.[22]
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
petitioner is ordered to pay respondent the amount of P12,901.00 representing
the balance of the price of the British Pageant Package Tour, with legal interest
thereon at the rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision. After this Decision
becomes final and executory, the rate of 12% per annum shall be imposed until
the obligation is fully settled, this interim period being deemed to be by then an
equivalent to a forbearance of credit.[23]
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.

33