TRANSPORTATION LAW
COMMON CARRIERS IN GENERAL burden to overcome it. Thus, contrary
A. Definition, Liability of Registered Owner
ART. 1732
Common Carrier Defined and Explained
1. BASCOS vs. CA
Facts:
Rodolfo Cipriano, representing CIPTRADE, entered into a
hauling contract with Jibfair Shipping Agency Corporation
whereby the former bound itself to haul the latters
2000m/tons of soya bean meal from Manila to Calamba.
CIPTRADE subcontracted with petitioner Estrellita Bascos
to transport and deliver the 400 sacks of soya beans.
Petitioner failed to deliver the cargo, and as a consequence,
Cipriano paid Jibfair the amount of goods lost in
accordance with their contract. Cipriano demanded
reimbursement from petitioner but the latter refused to
pay. Cipriano filed a complaint for breach of contract of
carriage. Petitioner denied that there was no contract of
carriage since CIPTRADE leased her cargo truck, and that
the hijacking was a force majeure. The trial court ruled
against petitioner.
Issues:
(1) Was petitioner a common carrier?
(2) Was the hijacking referred to a force majeure?
Held:
(1) 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." 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.
(2) 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
1 AGUSTIN, E.P.
private respondent need not introduce
to her assertion,
any evidence to
prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption
conclusive against her.
_____________________________________________________
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO,
respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
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 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."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS
CONCLUSIVE. 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.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY
WHO ALLEGES A FACT. Petitioner presented no other
proof of the existence of the contract of lease. He who
alleges a fact has the burden of proving it.
2 AGUSTIN, E.P.
TRANSPORTATION LAW
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST
EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES.
While the affidavit of Juanito Morden, the truck helper in
the 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.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
CONTRACT IS WHAT LAW DEFINES IT TO BE.
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.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision **
of the Court of Appeals in "RODOLFO A. CIPRIANO, doing
business under the name CIPRIANO TRADING
ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M.
BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216,
the dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the
decision appealed from, which is hereby affirmed in toto.
Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
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 which stated that:
"1. CIPTRADE shall be held liable and answerable for any
loss in bags due to theft, hijacking and non-delivery or
damages to the cargo during transport at market value, . .
." 3
Cipriano demanded reimbursement from petitioner but the
latter refused to pay. Eventually, Cipriano filed a complaint

for a sum of money and damages with writ of preliminary
attachment 4 for breach of a contract of carriage. The
prayer for a Writ of Preliminary Attachment was supported
by an affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in
Sec. 1, Rule 57 the Rules of Court, whereby a writ of
preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or
disposed of his property, or is about to do so, with intent to
defraud his creditors;"
5. That there is no sufficient security for the claim sought
to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled
case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment
on February 17, 1987.
In her answer, petitioner interposed the following defenses:
that 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.
After trial, the trial court rendered a decision *** the
dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of
plaintiff and against defendant ordering the latter to pay
the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND
FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic)
for actual damages with legal interest of 12% per cent per
annum to be counted from December 4, 1986 until fully
paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as
and for attorney's fees; and
3. The costs of the suit.
3 AGUSTIN, E.P.
TRANSPORTATION LAW
The "Urgent Motion To Dissolve/Lift preliminary
Attachment" dated March 10, 1987 filed by defendant is
DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent
Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she
makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT
THE CONTRACTUAL RELATIONSHIP BETWEEN
PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS AND NOT LEASE OF CARGO
TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE
FINDING OF THE RESPONDENT COURT THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER
AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS
IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING
PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS
OF THE CARGO WAS DUE TO FORCE MAJEURE,
NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE
FINDING OF THE TRIAL COURT THAT PETITIONER'S
MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY
ATTACHMENT HAS BEEN RENDERED MOOT AND
ACADEMIC BY THE DECISION OF THE MERITS OF THE
CASE." 7
The petition presents the following issues for resolution: (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 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."
4 AGUSTIN, E.P.
TRANSPORTATION LAW
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
 TRANSPORTATION LAW

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 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.

Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

5 AGUSTIN, E.P.

2. NAT'L STEEL vs. CA
Doctrine:
The stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be
applied to a private carrier.
Facts:
Plaintiff National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered
into a Contract of Voyage Charter Hire whereby NSC hired
VSIs vessel, the MV Vlasons I to make one voyage to load
steel products at Iligan City and discharge them at North
Harbor, Manila. The handling, loading and unloading of the
cargoes were the responsibility of the Charterer.
The skids of tinplates and hot rolled sheets shipped were
allegedly found to be wet and rusty. Plaintiff, alleging
negligence, filed a claim for damages against the defendant
who denied liability claiming that the MV Vlasons I was
seaworthy in all respects for the carriage of plaintiffs 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 its
voyage, the vessel encountered very rough seas.
Issue:
Whether or not the provisions of the Civil Code on common
carriers pursuant to which there exists a presumption of
negligence against the common carrier in case of loss or
damage to the cargo are applicable to a private carrier.
Held:
No. 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.
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 [Mendoza vs. Philippine Airlines, Inc., 90
Phil. 836, 842-843 (1952)]. 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.
Because the MV Vlasons I was a private carrier, the ship
owners 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.
6 AGUSTIN, E.P.
TRANSPORTATION LAW
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 134468 August 29, 2002
NATIONAL STEEL CORPORATION petitioner,
vs.
COURT OF APPEALS, FORMER FIFTH DIVISION, RENE
OFRENEO, in his capacity as Voluntary Arbitrator, and
NSC-HDCTC MONTHLY-DAILY EMPLOYEES
ORGANIZATION-FFW, respondents.
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45
of the Rules of Court seeking the reversal of the Resolution
of the Court of Appeals dated November 25, 1997 1 which
dismissed National Steel Corporations petition for review
on the ground that the verification and certification of non-
forum shopping were signed not by the petitioner but by its
counsel of record, as well as the subsequent Resolution
dated July 2, 19982 which denied petitioners motion for
reconsideration.
The antecedent facts of the case are as follows:
In December of 1993, a dispute arose between petitioner
National Steel Corporation (NSC) and respondent NSC-
HDCTC Monthly/Daily Employees Organization-FFW
(union) regarding the grant of Productivity and Quality
Bonus and the Fiscal Year-End Incentive Award in the
company. Both parties agreed to submit the case for
voluntary arbitration.
On April 3, 1995, representatives of NSC and the union
appeared before Voluntary Arbitrator Rene Ofreneo and
defined the issues of their dispute thus:
"Whether or not there was a diminution of the
1993 Fiscal Year-End Productivity and Quality
Profit-Sharing Incentive Benefit annually granted
by the Company, per CBA, and if there was,
whether or not there was just cause for the
diminution of this benefit by management, and if
without just cause, what should be the remedy."3
The union was of the position that the company violated
Article XII, Section 3 of their CBA when it stopped, since
1993, giving Productivity and Quality Bonus and Fiscal
Year-End Incentive Award. Said CBA provision provides:
"ARTICLE XII
ECONOMIC ADJUSTMENTS
xxx
"SECTION 3. Productivity and Quality Bonus
The COMPANY shall grant productivity and

quality bonus whenever, in the exclusive
determination of the COMPANY, the production
and quality targets for the immediately preceding
period justify the granting of such bonus. The
amount of the bonus shall be left to the sole
discretion of the COMPANY.
"The productivity and quality bonus provided
herein shall be separate from and in addition to
the 13th month pay provided by law and the fiscal
year-end incentive award traditionally granted by
the COMPANY."4
The union claimed that these benefits were demandable
because the granting of such benefits was not only
provided for by the CBA but had also become the practice
in the firm from 1989 to 1993. Also, the incentive pay was
not dependent on the profit situation of the company since
the company gave the incentive pay in 1989 and 1990
despite the latters admission of difficult financial
operations.5
The company on the other hand contended that the matter
of granting productivity and quality bonus was
discretionary on its part consistent with its exercise of
management prerogatives and assessment of production
targets, while the distribution of the Fiscal Year-End
Incentive Award was dependent on corporate performance.6
On July 19, 1996 public respondent Voluntary Arbitrator
Ofreneo issued a decision ruling as follows:
" 1. There is no merit in the demand of the Union
for a productivity and quality bonus in 1993.
" 2. The demand of the Union for the distribution
of the year-end incentive award is in order.
" 3. The said incentive award shall be computed
based on the Companys past practice in the
determination of such award.
"SO ORDERED."7
On August 2, 1996, the NSC filed a Partial Motion for
Reconsideration8 with respect to the award of the year-end
incentive which was denied by Arbitrator Ofreneo.9 On
October 31, 1996, the NSC filed a petition for review with
the Court of Appeals.10
On November 25, 1997, the Court of Appeals issued a
Resolution dismissing the companys petition for review on
the ground that it failed to comply with the requirements of
Revised Circular No. 28-91 and Administrative Circular No.
04-94 on forum shopping. The pertinent portions of the
decision read:
"xxx We hold that Atty. Roberto C. Padilla, one of
the counsels of record, then, of the petitioner is
not a real party in interest or the party who
stands to be benefited or injured by the judgment
in the suit or the party entitled to the avails of the
suit but a retained counsel with mere incidental
7 AGUSTIN, E.P.
TRANSPORTATION LAW
interest and therefore, not the petitioner or
plaintiff, petitioner, applicant or principal party
seeking relief required by law to certify under
oath to the facts and/or undertakings stated in
Revised Circular No. 28-91 and Administrative
Circular No. 04-94."
"Consequently, the Court hereby RESOLVES to
GRANT the `Motion to Dismiss Appellants Petition
for Review.
"SO ORDERED."11
On December 17, 1997, NSC filed a Motion for
Reconsideration12 of the resolution. But this was denied in
a Resolution13 dated July 2, 1998 where the appellate court
found that:
"x x x absent any authority from the petitioner
corporations board of directors to sue in its
behalf, the counsel of record is without
personality to sue x x x.
"xxx xxx xxx
"ACCORDINGLY, the Motion for Reconsideration
filed by the petitioner NATIONAL STEEL
CORPORATION is DENIED.
"SO ORDERED."14
Hence this petition raising the following grounds:
"A. NSCS COUNSEL OF RECORD WAS DULY
AUTHORIZED TO REPRESENT NSC IN THE
PREPARATION OF THE PETITION FOR REVIEW
FILED BEFORE THE COURT OF APPEALS.
"B. THE VERIFICATION CUM CERTIFICATION OF
PETITIONERS COUNSEL OF RECORD WAS
TRUTHFUL IN ALL RESPECTS.
"C. THE DISMISSAL OF THE PETITION FOR
REVIEW BEFORE THE COURT OF APPEALS ON
A PURELY TECHNICAL GROUND VIOLATES
PETITIONERS RIGHT TO DUE PROCESS AND
OPPRESSIVELY DEPRIVED THE LATTER OF
SUBSTANTIVE JUSTICE."15
Simply stated, the pertinent issues of this case are as
follows: (1) May the signature of petitioners counsel be
deemed sufficient for the purposes of Revised Circular No.
28-91 and Administrative Circular No. 04-94; and (2)
granting that the petition a quo should have been allowed,
did the voluntary arbitrator commit any error in granting
the demand of the union for the distribution of the year-
end incentive award?
We will first resolve the issue on the certification against
forum shopping.

Circular No. 28-91 was put in place to deter the practice of
some party-litigants of simultaneously pursuing remedies
in different forums for such practice works havoc upon
orderly judicial procedure.16
In the case at bar, the certification was signed by
petitioners counsel. Petitioner argues that contrary to the
findings of the Court of Appeals, NSCs counsel of record
was duly authorized to represent them not only before the
Voluntary Arbitrator but also to prepare the petition for
review filed before the Court of Appeals. To support this
claim, petitioner attached to its petition before this Court a
Secretarys Certificate dated December 16, 1997 which
states that:
"x x x [B]ased on the records of the Corporation,
Atty. Roberto C. Padilla, with office address at the
2nd floor, Chere Bldg., Del Pilar St., Iligan City is
the legal counsel of the Corporation on a general
retainer and is duly authorized to represent the
latter and to act on its behalf in several cases,
including "National Steel Corporation v. Rene E.
Ofreneo and NSC-HDCTC Monthly-Daily
Employees Organization-FFW", docketed as CA-
G.R. SP No. 42431 before the Fifth Division of the
Court of Appeals."17
Counsel of petitioner, Atty. Padilla also submitted a
Verification cum Certification where he stated that he
prepared the petition upon the explicit instructions of the
VP-Marketing & Resident Manager of petitioner
corporation.18
Petitioner explains that powers of corporations organized
under the Corporation Code shall be exercised by the board
of directors; that the exercise of such powers may be done
indirectly through delegation; that pursuant to the exercise
of its powers, the corporation through its Board of
Directors, may employ such persons as it may need to
carry on the operations of the corporate business; that
hence, with the express authorization by NSCs board of
directors, Atty. Padilla was conferred with enough authority
to sign the Verification cum Certification in the petition for
review filed before the Court of Appeals;19 that assuming
arguendo there is no express authorization from NSC, still
Atty. Padilla is impliedly authorized to file the petition for
review before the Court of Appeals in line with its obligation
to take all steps or do all acts necessary or incidental to the
regular and orderly prosecution or management of the suit;
that respondent union never questioned the authority of
Atty. Padilla to represent NSC in the proceedings before the
Voluntary Arbitrator; that the union is therefore absolutely
estopped from questioning Atty. Padillas authority to file
the petition for review before the Court of Appeals;20 that
the dismissal of the petition for review on a purely
technical ground violated petitioners right to due process
and oppressively deprived it of substantive justice as
enunciated in Section 6, Rule 1, as well as previous rulings
of this Court which upheld the primacy of substantial
justice over technical rules of procedure.21
For its part, respondent union claims that petitioner
violated Rule 13, Section 11 of the Rules of Court anent the
priorities in modes of service and filing;22 that the Court of
Appeals did not err in dismissing NSCs petition for review
because it was not duly verified by the petitioner as
8 AGUSTIN, E.P.
TRANSPORTATION LAW
required by the rules; that the petition filed before the
appellate court did not have a Secretarys Certificate
stating the authority of Atty. Padilla to represent petitioner
corporation; and that it was only after the Court of Appeals
dismissed their petition in a Resolution dated November
25, 1997 that petitioner attached said Certificate dated
December 16, 1997.23
We rule in favor of petitioner and hold that the Court of
Appeals erred in dismissing the petition.
In the case of BA Savings Bank vs. Sia,24 this Court has
ruled that the certificate of non-forum shopping required
by Supreme Court Circular No. 28-91 may be signed, for
and on behalf of a corporation, by a specifically authorized
lawyer who has personal knowledge of the facts required to
be disclosed in such document.
The reason is that:
"Unlike natural persons, corporations may
perform physical actions only through properly
delegated individuals; namely, its officers and/or
agents.
"xxx xxx xxx
"The corporation, such as the petitioner, has no
powers except those expressly conferred on it by
the Corporation Code and those that are implied
by or are incidental to its existence. In turn, a
corporation exercises said powers through its
board of directors and / or its duly authorized
officers and agents. Physical acts, like the signing
of documents, can be performed only by natural
persons duly authorized for the purpose by
corporate by-laws or by specific act of the board of
directors. `All acts within the powers of a
corporation may be performed by agents of its
selection; and, except so far as limitations or
restrictions which may be imposed by special
"charter, by-law, or statutory provisions, the same
general principles of law which govern the relation
of agency for a natural person govern the officer or
agent of a corporation, of whatever status or rank,
in respect to his power to act for the corporation;
and agents once appointed, or members acting in
their stead, are subject to the same rules,
liabilities and incapacities as are agents of
individuals and private persons.
"xxx xxx xxx
"x x x For who else knows of the circumstances
required in the Certificate but its own retained
counsel. Its regular officers, like its board
chairman and president, may not even know the
details required therein."25
While it is admitted that the authorization of petitioners
counsel was submitted to the appellate court only after the
issuance of its Resolution dismissing the petition based on
non-compliance with the aforesaid Circular, we hold that in
view of the peculiar circumstances of the present case and
 TRANSPORTATION LAW

in the interest of substantial justice, the procedural defect Voluntary Arbitrator;31 that the Voluntary Arbitrator
may be set aside, pro hac vice. As held by the Court: committed serious misapprehension of facts when he ruled
"Technical rules of procedure should be used to promote, that the grant of the fiscal year-end incentive award has
not frustrate, justice. While the swift unclogging of court become traditional and has therefore ripened into a
dockets is a laudable objective, the granting of substantial demandable right of private respondent;32 and that for a
justice is an even more urgent ideal."26 By recognizing the period of four (4) years i.e., from 1990 through 1993, the
signature of the authorized counsel in the certification, no fiscal year-end incentive award has been granted only twice
circumvention of the rationale, that is to prevent the ills of -- in 1991 and in 1992.33
forum shopping, is committed.27 As we have held in many
cases:
In his Award, the Voluntary Arbitrator established as a fact
that:
"x x x Circular No. 28-91 was designed to serve as
an instrument to promote and facilitate the
"x x x the Company gave the following benefits to
orderly administration of justice and should not
the workers:
be so interpreted with such absolute literalness as
to subvert its own ultimate and legitimate
objective or the goal of all rules of procedure -- "1. Mid-Year Incentive Pay, which was usually
which is to achieve substantial justice as given as an "advance" for the Year-End Incentive
expeditiously as possible. Bonus. The Company announced the Mid-Year
Incentive Pay through memos issued on the
following dates:
"The fact that the Circular requires that it be
strictly complied with merely underscores its
mandatory nature in that it cannot be dispensed August 25, 1989,
with or its requirements altogether disregarded,
but it does not thereby interdict substantial
August 1, 1990,
compliance with its provisions under justifiable
circumstances."28
August 2, 1991,
We will now delve into the merits of the case.
August 24,1992, and
Petitioner NSC assails the following portions of the award
of the Voluntary Arbitrator: August 31, 1993."34

"In view of the foregoing, therefore, the Voluntary Yet, petitioner complains that despite the above findings
Arbitrator rules as follows: that the Mid-year Incentive Awards were given as advances
to the Year-End Incentive Awards, the Voluntary Arbitrator
still ruled that the NSC was liable to pay respondent Union
"xxx xxx xxx
the Year-End Incentive Pay, explaining that:

"2. The demand of the Union for the distribution

"xxx xxx xxx
of the year-end incentive award is in order.

"In the case of the fiscal year-end incentive award,

"3. The said incentive award shall be computed
the CBA provision has a general proviso which
based on the Companys past practice in the
reads: `The productivity and quality bonus
determination of such award.
provided herein shall be separate from and in
addition to the 13th month pay provided by law
"SO ORDERED."29 and the fiscal year-end incentive award
traditionally granted by the COMPANY. Thus,
unlike in the productivity and quality bonus, the
Petitioner claims that the Voluntary Arbitrator erred when
CBA simply recognizes the fiscal year-end
he ordered petitioner to pay private respondent the 1993
incentive award as one of the benefits accorded to
fiscal year-end incentive award despite his own findings
the workers, just like the 13th month pay. It even
that the mid-year incentive pay already paid by the
added the phrase `traditionally granted by the
petitioner is an advance payment of the fiscal year-end
COMPANY. There were no qualifications or
incentive award;30 that the "Mid-year Incentive Pay"
conditions specified for the granting of this benefit
granted to private respondent is itself a bonus not
similar to those governing the granting of the
demandable upon NSC as it is not provided for in the CBA;
productivity and quality bonus. The Company
that this notwithstanding, it has granted the Mid-year
argued that like the productivity and quality
Incentive Pay to members of respondent union every year
bonus, the granting of year-end incentive award is
in the years 1989, 1990, 1991, 1992, and 1993; that in
a management prerogative and is guided by the
every instance of the grant, petitioner expressly stated that
same conditions, e.g., actual performance versus
the Mid-year Incentive Pay is an advance against the Fiscal
production targets, that it uses when it decides on
Year-end Incentive Pay; that petitioners express
the granting of productivity and quality bonus. As
reservation that the payment of the Mid-year Incentive Pay
"pointed out, the CBA is silent on this. And if
is an advance payment of the fiscal year-end incentive
there are doubts on the interpretation of the
award has been repeatedly brought to the attention of the

9 AGUSTIN, E.P.
 TRANSPORTATION LAW

manner by which benefits like year-end incentive

award shall be given, the Labor Code has long ago
decided that all such doubts shall be interpreted
in favor of Labor.

"Moreover, the capacity of the Company to grant

this incentive pay is also not at issue. A closer
scrutiny of the Company loss for 1993 shows that
the net loss of P36 million registered for that year
was due to the deduction of `expenses paid in
retained earnings amounting to P358 "million
from the original P322 million net income. The
audited data gathered by the Union from the
Commission on Audit also show that while
earnings and incomes declined from 1992 to
1993, the Company still registered a healthy level
of profitability."35

We rule in favor of petitioner.

This Court has stressed that voluntary arbitrators, by the

nature of their functions, act in quasi-judicial capacity.
Hence, as a rule, findings of facts by quasi-judicial bodies
which have acquired expertise because their jurisdiction is
confined to specific matters, are accorded not only respect
but even finality if they are supported by substantial
evidence, even if not overwhelming or preponderant.36
However, in spite of statutory provisions making "final" the
decisions of certain administrative agencies, we have taken
cognizance of petitions questioning such decisions where
want of jurisdiction, grave abuse of discretion, violation of
due process, denial of substantial justice, or erroneous
interpretation of the law were brought to our attention.37

In the present petition for review on certiorari, we find the

award of the 1993 year-end incentive to be patently
erroneous which amounts not only to grave abuse of
discretion but also to denial of substantial justice. The
Voluntary Arbitrator himself found that the mid-year
incentive pay for 1993 was given by petitioner as an
advance payment of the fiscal year-end incentive award for
the same year. Indubitably, to require petitioner to pay
again the same incentive pay at the year-end of 1993 is
obviously a great injustice that would be committed against
petitioner.

WHEREFORE, we SET ASIDE the Resolutions dated

November 25, 1997 and July 2, 1998 of the Court of
Appeals.

The Award of Voluntary Arbitrator Ofreneo dated July 19,

1996 is modified to the effect that the grant of the claim
for the distribution of the 1993 year-end incentive award is
DELETED.

SO ORDERED.

Davide, Jr., Vitug, and Ynares-Santiago, JJ., concur.

10 AGUSTIN, E.P.

3. FIRST PHIL INDUSTRIAL vs. CA
Facts:
Petitioner is a grantee of a pipeline concession under
Republic Act No. 387. Sometime in January 1995,
petitioner applied for mayors permit in Batangas. However,
the Treasurer required petitioner to pay a local tax based
on gross receipts amounting to P956,076.04. In order not
to hamper its operations, petitioner paid the taxes for the
first quarter of 1993 amounting to P239,019.01 under
protest. On January 20, 1994, petitioner filed a letter-
protest to the City Treasurer, claiming that it is exempt
from local tax since it is engaged in transportation
business. The respondent City Treasurer denied the
protest, thus, petitioner filed a complaint before the
Regional Trial Court of Batangas for tax refund.
Respondents assert that pipelines are not included in the
term common carrier which refers solely to ordinary
carriers or motor vehicles. The trial court dismissed the
complaint, and such was affirmed by the Court of Appeals.
Issue:
Whether a pipeline business is included in the term
common carrier so as to entitle the petitioner to the
exemption
Held:
Article 1732 of the Civil Code defines a "common carrier" as
"any person, corporation, firm or association engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public."
The test for determining whether a party is a common
carrier of goods is:
(1) He must be engaged in the business of carrying goods
for others as a public employment, and must hold himself
out as ready to engage in the transportation of goods for
person generally as a business and not as a casual
occupation;
(2) He must undertake to carry goods of the kind to which
his business is confined;
(3) He must undertake to carry by the method by which his
business is conducted and over his established roads; and
(4) The transportation must be for hire.
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.
11
TRANSPORTATION LAW
SECOND DIVISION
[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 mayors
permit with the Office of the Mayor of Batangas City.
However, before the mayors permit could be issued, the
respondent City Treasurer required petitioner to pay a local
tax based on its gross receipts for the fiscal year 1993
pursuant to the Local Government Code. 3 The respondent
City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments
based on the gross receipts for products pumped at GPS-1
for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest
addressed to the respondent City Treasurer, the pertinent
portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator
with a government concession granted under the Petroleum
Act. It is engaged in the business of transporting petroleum
products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our
Company is exempt from paying tax on gross receipts
under Section 133 of the Local Government Code of 1991 .
. .
"Moreover, Transportation contractors are not included in
the enumeration of contractors under Section 131,
Paragraph (h) of the Local Government Code. Therefore, the
authority to impose tax on contractors and other
independent contractors under Section 143, Paragraph (e)
of the Local Government Code does not include the power
to levy on transportation contractors.
AGUSTIN, E.P.

"The imposition and assessment cannot be categorized as a
mere fee authorized under Section 147 of the Local
Government Code. The said section limits the imposition of
fees and charges on business to such amounts as may be
commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for
the license fee, the imposition thereof based on gross
receipts is violative of the aforecited provision. The amount
of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and
licensing. The fee is already a revenue raising measure, and
not a mere regulatory imposition." 4
On March 8, 1994, the respondent City Treasurer denied
the protest contending that petitioner cannot be considered
engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government
Code. 5
On June 15, 1994, petitioner filed with the Regional Trial
Court of Batangas City a complaint 6 for tax refund with
prayer for 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:
". . . Plaintiff is either a contractor or other independent
contractor.
. . . the exemption to tax claimed by the plaintiff has
become unclear. It is a rule that tax exemptions are to be
strictly construed against the taxpayer, taxes being the
lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession
under Republic Act 387, (Exhibit A) whose concession was
lately renewed by the Energy Regulatory Board (Exhibit B).
Yet neither said law nor the deed of concession grant any
tax exemption upon the plaintiff.
12
TRANSPORTATION LAW
"Even the Local Government Code imposes a tax on
franchise holders under Sec. 137 of the Local Tax Code.
Such being the situation obtained in this case (exemption
being unclear and equivocal) resort to distinctions or other
considerations may be of help:chanrob1es virtual 1aw
library
1. That the exemption granted under Sec. 133 (j)
encompasses only common carriers so as not to
overburden the riding public or commuters with taxes.
Plaintiff is not a common carrier, but a special carrier
extending its services and facilities to a single specific or
"special customer" under a "special contract."cralaw
virtua1aw library
2. The Local Tax Code of 1992 was basically enacted to give
more and effective local autonomy to local governments
than the previous enactments, to make them economically
and financially viable to serve the people and discharge
their functions with a concomitant obligation to accept
certain devolution of powers, . . . So, consistent with this
policy even franchise grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143 (e) and 151 of
the Code." 9
Petitioner assailed the aforesaid decision before this Court
via a petition for review. On February 27, 1995, we referred
the case to the respondent Court of Appeals for
consideration and adjudication. 10 On November 29, 1995,
the respondent court rendered a decision 11 affirming the
trial courts dismissal of petitioners complaint. Petitioners
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 22, 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."cralaw virtua1aw
library
The test for determining whether a party is a common
carrier of goods is:chanrob1es virtual 1aw library
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
AGUSTIN, E.P.

occupation;
2. He must undertake to carry goods of the kind to which
his business is confined;
3. He must undertake to carry by the method by which his
business is conducted and over his established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is
no doubt that petitioner is a common carrier. It is engaged
in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to
all persons who choose to employ its services, and
transports the goods by land and for compensation. The
fact that petitioner has a limited clientele does not exclude
it from the definition of a common carrier. In De Guzman v.
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 . . . avoids making any
distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the general
public, i.e., the general community or population, and one
who offers services or solicits business only from a narrow
segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.
So understood, the concept of common carrier under
Article 1732 may be seen to coincide neatly with the notion
of public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth
in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, public service includes:
every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric
light heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other
similar public services." (Emphasis supplied)
Also, respondents argument that the term "common
carrier" as used in Section 133 (j) of the Local Government
Code refers only to common carriers transporting goods
13
TRANSPORTATION LAW
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 obliged 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
change without discrimination such rates as may have
been approved by the Secretary of Agriculture and Natural
Resources."cralaw virtua1aw library
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof
provides:jgc:chanrobles.com.ph
"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:jgc:chanrobles.com.ph
". . . 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 as provided for in Section 133 (j), of
the Local Government Code, to wit:jgc:chanrobles.com.ph
"Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units. Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:chanrob1es virtual 1aw library
x x x
(j.) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code."cralaw
virtua1aw library
The deliberations conducted in the House of
AGUSTIN, E.P.
 TRANSPORTATION LAW

Representatives on the Local Government Code of 1991 are

illuminating:jgc:chanrobles.com.ph

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

Mr. Speaker, we would like to proceed to page 95, line 1. It

states: "SEC. 121 (now Sec. 131). Common Limitations on
the Taxing Powers of Local Government Units.." . .

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

Still on page 95, subparagraph 5, on taxes on the business

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

MR. JAVIER (E.). Mr. Speaker, there is an exception

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

Now, Mr. Speaker, if the Gentleman would care to go to

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

What we want to guard against here, Mr. Speaker is the

imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top
of what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers
tax." We do not want a duplication of this tax, so we just
provided for an exception under Section 125 (now Section
137) that a province may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr.

Speaker. . . .18

It is clear that the legislative intent in excluding from the

taxing power of the local government unit the imposition of
business tax against common carriers is to prevent a
duplication of the so-called "common carriers tax."cralaw
virtua1aw library

Petitioner is already paying three (3%) percent common

carriers tax on its gross sales/earnings under the National
Internal Revenue Code. 19 To tax petitioner again on its
gross receipts in its transportation of petroleum business
would defeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The

decision of the respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No. 36801 is
REVERSED and SET ASIDE.

SO ORDERED.chanroblesvirtual|awlibrary

Bellosillo, Puno and Mendoza, JJ., concur.

14 AGUSTIN, E.P.
 TRANSPORTATION LAW

4. CALVO vs. UCPB o Calvo: Art. 1734(4) The character of the

goods or defects in the packing or in the
Facts: A contract was entered into between Calvo and San containers
Miguel Corporation (SMC) for the transfer of certain
spoilage or wettage" took place
cargoes from the port area in Manila to the warehouse of
SMC. The cargo was insured by UCPB General Insurance while the goods were in the
Co., Inc. When the shipment arrived and unloaded from custody of either the carrying
the vessel, Calvo withdrew the cargo from the arrastre vessel "M/V Hayakawa Maru,"
operator and delivered the same to SMCs warehouse. which transported the cargo to
When it was inspected, it was found out that some of the Manila, or the arrastre
goods were torn. UCPB, being the insurer, paid for the operator, to whom the goods
amount of the damages and as subrogee thereafter, filed a
were unloaded and who
suit against Calvo.
allegedly kept them in open air
Petitioner, on the other hand, contends that it is a private for 9 days notwithstanding the
carrier not required to observe such extraordinary diligence fact that some of the containers
in the vigilance over the goods. were deformed, cracked, or
otherwise damaged
As customs broker, she does not indiscriminately hold her
services out to the public but only to selected parties. Trial Court: Calvo liable
CA: affirmed
Issue: Whether or not Calvo is a common carrier liable for
the damages for failure to observe extraordinary diligence
in the vigilance over the goods. ISSUE: W/N Calvo can be exempted from liability
under Art. 1734(4)

Held: The law makes no distinction between a carrier
offering its services to the general community or solicits
business only from a narrow segment of the general
population. Note that the transportation of goods holds an
integral part of Calvos business, it cannot indeed be
doubted that it is a common carrier.
______________________________________________________
FACTS:
At the time material to this case, Transorient
Container Terminal Services, Inc. (TCTSI) owned
by Virgines Calvo 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.
o The cargo was insured by respondent
UCPB General Insurance Co., Inc.
July 14, 1990: arrived in Manila on board "M/V
Hayakawa Maru" and later on unloaded from the
vessel to the custody of the arrastre operator,
Manila Port Services, Inc
July 23 to July 25, 1990: Calvo withdrew the
cargo from the arrastre operator and delivered it
to SMC's warehouse in Ermita, Manila
July 25, 1990: 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
SMC collected payment from UCPB the total
damage of P93,112 under its insurance contract
UCPB brought suit against Calvo as subrogee of
SMC
HELD: NO. CA AFFIRMED.
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
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
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

15 AGUSTIN, E.P.

business only from a narrow segment of the
general population.
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"
when Calvo's 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
Calvo 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 exercised due care in the
handling
16
TRANSPORTATION LAW
Republic of the Philippines
SUPREME COURT
Manila
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.
MENDOZA, J.:
This is a petition for review of the decision,1 dated May 31,
2001, of the Court of Appeals, affirming the decision2 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 attorney's fees, and the cost of the suit.1wphi1.nt
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 SMC's 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 SMC's
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
AGUSTIN, E.P.
 TRANSPORTATION LAW

defendants. Evidence such as the Warehouse the goods are unconditionally placed in the
Entry Slip (Exh. "E"); the Damage Report (Exh. possession of and received by the carrier for
"F") with entries appearing therein, classified as transportation until the same are delivered
"TED" and "TSN", which the claims processor, Ms. actually or constructively by the carrier to the
Agrifina De Luna, claimed to be tearrage at the consignee or to the person who has the right to
end and tearrage at the middle of the subject receive the same.3
damaged cargoes respectively, coupled with the
Marine Cargo Survey Report (Exh. "H" - "H-4-A")
Accordingly, the trial court ordered petitioner to pay the
confirms the fact of the damaged condition of the
following amounts --
subject cargoes. The surveyor[s'] report (Exh. "H-
4-A") in particular, which provides among others
that: 1. The sum of P93,112.00 plus interest;

" . . . we opine that damages sustained 2. 25% thereof as lawyer's fee;

by shipment is attributable to improper
handling in transit presumably whilst in
3. Costs of suit.4
the custody of the broker . . . ."

The decision was affirmed by the Court of Appeals on

is a finding which cannot be traversed and
appeal. Hence this petition for review on certiorari.
overturned.

Petitioner contends that:

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 I. THE COURT OF APPEALS COMMITTED
[her] business should have devised ways and SERIOUS AND REVERSIBLE ERROR [IN]
means in order to prevent the damage to the DECIDING THE CASE NOT ON THE EVIDENCE
cargoes which it is under obligation to take PRESENTED BUT ON PURE SURMISES,
custody of and to forthwith deliver to the SPECULATIONS AND MANIFESTLY MISTAKEN
consignee. Defendant did not present any INFERENCE.
evidence on what precaution [she] performed to
prevent [the] said incident, hence the presumption
II. THE COURT OF APPEALS COMMITTED
is that the moment the defendant accepts the
SERIOUS AND REVERSIBLE ERROR IN
cargo [she] shall perform such extraordinary
CLASSIFYING THE PETITIONER AS A COMMON
diligence because of the nature of the cargo.
CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES
.... TO THE PUBLIC.5

Generally speaking under Article 1735 of the Civil It will be convenient to deal with these contentions in the
Code, if the goods are proved to have been lost, inverse order, for if petitioner is not a common carrier,
destroyed or deteriorated, common carriers are although both the trial court and the Court of Appeals held
presumed to have been at fault or to have acted otherwise, then she is indeed not liable beyond what
negligently, unless they prove that they have ordinary diligence in the vigilance over the goods
observed the extraordinary diligence required by transported by her, would require.6 Consequently, any
law. The burden of the plaintiff, therefore, is to damage to the cargo she agrees to transport cannot be
prove merely that the goods he transported have presumed to have been due to her fault or negligence.
been lost, destroyed or deteriorated. Thereafter,
the burden is shifted to the carrier to prove that
Petitioner contends that contrary to the findings of the trial
he has exercised the extraordinary diligence
court and the Court of Appeals, she is not a common
required by law. Thus, it has been held that the
carrier but a private carrier because, as a customs broker
mere proof of delivery of goods in good order to a
and warehouseman, she does not indiscriminately hold her
carrier, and of their arrival at the place of
services out to the public but only offers the same to select
destination in bad order, makes out a prima facie
parties with whom she may contract in the conduct of her
case against the carrier, so that if no explanation
business.
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 The contention has no merit. In De Guzman v. Court of
accident or some other circumstances Appeals,7 the Court dismissed a similar contention and
inconsistent with its liability." (cited in held the party to be a common carrier, thus -
Commercial Laws of the Philippines by Agbayani,
p. 31, Vol. IV, 1989 Ed.)
The Civil Code defines "common carriers" in the following
terms:
Defendant, being a customs brother,
warehouseman and at the same time a common
"Article 1732. Common carriers are persons,
carrier is supposed [to] exercise [the]
corporations, firms or associations engaged in the
extraordinary diligence required by law, hence the
business of carrying or transporting passengers or
extraordinary responsibility lasts from the time

17 AGUSTIN, E.P.
 TRANSPORTATION LAW

goods or both, by land, water, or air for Now, as to petitioner's liability, Art. 1733 of the Civil Code
compensation, offering their services to the provides:
public."
Common carriers, from the nature of their
The above article makes no distinction between business and for reasons of public policy, are
one whose principal business activity is the bound to observe extraordinary diligence in the
carrying of persons or goods or both, and one who vigilance over the goods and for the safety of the
does such carrying only as an ancillary activity . . passengers transported by them, according to all
. Article 1732 also carefully avoids making any the circumstances of each case. . . .
distinction between a person or enterprise offering
transportation service on a regular or scheduled
In Compania Maritima v. Court of Appeals,9 the meaning of
basis and one offering such service on an
"extraordinary diligence in the vigilance over goods" was
occasional, episodic or unscheduled basis. Neither
explained thus:
does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the
general community or population, and one who The extraordinary diligence in the vigilance over
offers services or solicits business only from a the goods tendered for shipment requires the
narrow segment of the general population. We common carrier to know and to follow the
think that Article 1732 deliberately refrained from required precaution for avoiding damage to, or
making such distinctions. destruction of the goods entrusted to it for sale,
carriage and delivery. It requires common carriers
to render service with the greatest skill and
So understood, the concept of "common carrier"
foresight and "to use all reasonable means to
under Article 1732 may be seen to coincide neatly
ascertain the nature and characteristic of goods
with the notion of "public service," under the
tendered for shipment, and to exercise due care in
Public Service Act (Commonwealth Act No. 1416,
the handling and stowage, including such
as amended) which at least partially supplements
methods as their nature requires."
the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes: 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
" x x x every person that now or hereafter
carrying vessel "M/V Hayakawa Maru," which transported
may own, operate, manage, or control in
the cargo to Manila, or the arrastre operator, to whom the
the Philippines, for hire or
goods were unloaded and who allegedly kept them in open
compensation, with general or limited
air for nine days from July 14 to July 23, 1998
clientele, whether permanent, occasional
notwithstanding the fact that some of the containers were
or accidental, and done for general
deformed, cracked, or otherwise damaged, as noted in the
business purposes, any common carrier,
Marine Survey Report (Exh. H), to wit:
railroad, street railway, traction railway,
subway motor vehicle, either for freight
or passenger, or both, with or without MAXU-2062880 - rain gutter
fixed route and whatever may be its deformed/cracked
classification, freight or carrier service of
any class, express service, steamboat, or
ICSU-363461-3 - left side rubber gasket on
steamship line, pontines, ferries and
door distorted/partly loose
water craft, engaged in the
transportation of passengers or freight or
both, shipyard, marine repair shop, PERU-204209-4 - with pinholes on roof
wharf or dock, ice plant, ice-refrigeration panel right portion
plant, canal, irrigation system, gas,
electric light, heat and power, water
TOLU-213674-3 - wood flooring we[t]
supply and power petroleum, sewerage
and/or with signs of water soaked
system, wire or wireless communications
systems, wire or wireless broadcasting
stations and other similar public MAXU-201406-0 - with dent/crack on roof
services. x x x" 8 panel

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.
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 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

18 AGUSTIN, E.P.
 TRANSPORTATION LAW

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 petitioner's 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 petitioner's 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.
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 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.
....

[The cargo] was finally delivered to the consignee's For this provision to apply, the rule is that if the improper
storage warehouse located at Tabacalera packing or, in this case, the defect/s in the container,
Compound, Romualdez Street, Ermita, Manila is/are known to the carrier or his employees or apparent
from July 23/25, 1990.12 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
As found by the Court of Appeals:
therefrom.14 In this case, petitioner accepted the cargo
without exception despite the apparent defects in some of
From the [Survey Report], it [is] clear that the the container vans. Hence, for failure of petitioner to prove
shipment was discharged from the vessel to the that she exercised extraordinary diligence in the carriage of
arrastre, Marina Port Services Inc., in good order goods in this case or that she is exempt from liability, the
and condition as evidenced by clean Equipment presumption of negligence as provided under Art. 1735 15
Interchange Reports (EIRs). Had there been any holds.
damage to the shipment, there would have been a
report to that effect made by the arrastre operator.
WHEREFORE, the decision of the Court of Appeals, dated
The cargoes were withdrawn by the defendant-
May 31, 2001, is AFFIRMED.1wphi1.nt
appellant 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 SO ORDERED.
damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the
Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.
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

19 AGUSTIN, E.P.

5. FGU INSURANCE vs. G.P. SARMIENTO
FACTS:
GPS is an exclusive contractor and hauler of Concepcion Industries, Inc.
One day, it was to deliver certain goods of Concepcion Industries, Inc.
aboard one of its trucks. On its way, the truck collided with an
unidentified truck, resulting in damage to the cargoes.FGU, insurer of the
shipment paid to Concepcion Industries, Inc. the amount of the damage
and filed a suit against GPS. GPS filed a motion to dismiss for failure to
prove that it was a common carrier.
Issue: Whether or not GPS falls under the category of a common carrier.
Held: Note that GPS is an exclusive contractor and hauler of Concepcion
Industries, Inc. offering its service to no other individual or entity. A
common carrier is one which offers its services whether to the public in
general or to a limited clientele in particular but never on an exclusive
basis. Therefore, GPS does not fit the category of a common carrier
although it is not freed from its liability based on culpa contractual.
_________________________________________________________________
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 141910 August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and
LAMBERT M. EROLES, respondents.
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
20
TRANSPORTATION LAW
it was not so engaged in business as a common carrier.
Respondents further claimed that the cause of damage was
purely accidental.1wphi1.nt
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 Rule 131 of the Rules of
Court, it is provided that Each party must prove
his own affirmative allegation, xxx.
"In the instant case, plaintiff did not present any
single evidence that would prove that defendant is
a common carrier.
"x x x xxx xxx
"Accordingly, the application of the law on
common carriers is not warranted and the
presumption of fault or negligence on the part of a
common carrier in case of loss, damage or
deterioration of goods during transport under
1735 of the Civil Code is not availing.
"Thus, the laws governing the contract between
the owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which
transports the cargo are the laws on obligation
and contract of the Civil Code as well as the law
on quasi delicts.
"Under the law on obligation and contract,
negligence or fault is not presumed. The law on
quasi delict provides for some presumption of
negligence but only upon the attendance of some
circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the
contrary, it is presumed that a person
driving a motor vehicle has been
negligent if at the time of the mishap, he
was violating any traffic regulation.
"Evidence for the plaintiff shows no proof that
defendant was violating any traffic regulation.
Hence, the presumption of negligence is not
obtaining.
"Considering that plaintiff failed to adduce
evidence that defendant is a common carrier and
defendants driver was the one negligent,
defendant cannot be made liable for the damages
of the subject cargoes."2
AGUSTIN, E.P.

The subsequent motion for reconsideration having 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 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 (Article 1735, Civil Code) to arise, the
appellant must first prove that the appellee is a
common carrier. Should the appellant fail to prove
that the appellee is a common carrier, the
presumption would not arise; consequently, the
appellant would have to prove that the carrier was
negligent.
"x x x xxx xxx
"Because it is the appellant who insists that the
appellees can still be considered as a common
carrier, despite its `limited clientele, (assuming it
was really a common carrier), it follows that it
(appellant) has the burden of proving the same. It
(plaintiff-appellant) `must establish his case by a
preponderance of evidence, which means that the
evidence as a whole adduced by one side is
superior to that of the other. (Summa Insurance
Corporation vs. Court of Appeals, 243 SCRA 175).
This, unfortunately, the appellant failed to do --
hence, the dismissal of the plaintiffs complaint by
the trial court is justified.
"x x x xxx xxx
"Based on the foregoing disquisitions and
considering the circumstances that the appellee
trucking corporation has been `its exclusive
contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its
principal, the inevitable conclusion is that the
appellee is a private carrier.
"x x x xxx xxx
"x x x the lower court correctly ruled that 'the
application of the law on common carriers is not
warranted and the presumption of fault or
negligence on the part of a common carrier in case
of loss, damage or deterioration of good[s] during
transport under [article] 1735 of the Civil Code is
not availing.' x x x.
"Finally, We advert to the long established rule
that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and
should not be disturbed unless for strong and
valid reasons."5
21
TRANSPORTATION LAW
Petitioner's motion for reconsideration was likewise
denied;6 hence, the instant petition,7 raising the following
issues:
I
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 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.
III
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.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
AGUSTIN, E.P.
 TRANSPORTATION LAW

being put in as good a position as he would have been in attributable to one of several causes, for some of which the
had the contract not been made; or his "restitution defendant could not be responsible.22
interest," which is his interest in having restored to him
any benefit that he has conferred on the other party.14
Res ipsa loquitur generally finds relevance whether or not a
Indeed, agreements can accomplish little, either for their
contractual relationship exists between the plaintiff and the
makers or for society, unless they are made the basis for
defendant, for the inference of negligence arises from the
action.15 The effect of every infraction is to create a new
circumstances and nature of the occurrence and not from
duty, that is, to make recompense to the one who has been
the nature of the relation of the parties.23 Nevertheless, the
injured by the failure of another to observe his contractual
requirement that responsible causes other than those due
obligation16 unless he can show extenuating
to defendants conduct must first be eliminated, for the
circumstances, like proof of his exercise of due diligence
doctrine to apply, should be understood as being confined
(normally that of the diligence of a good father of a family
only to cases of pure (non-contractual) tort since obviously
or, exceptionally by stipulation or by law such as in the
the presumption of negligence in culpa contractual, as
case of common carriers, that of extraordinary diligence) or
previously so pointed out, immediately attaches by a failure
of the attendance of fortuitous event, to excuse him from
of the covenant or its tenor. In the case of the truck driver,
his ensuing liability.
whose liability in a civil action is predicated on culpa
acquiliana, while he admittedly can be said to have been in
Respondent trucking corporation recognizes the existence control and management of the vehicle which figured in the
of a contract of carriage between it and petitioners accident, it is not equally shown, however, that the
assured, and admits that the cargoes it has assumed to accident could have been exclusively due to his negligence,
deliver have been lost or damaged while in its custody. In a matter that can allow, forthwith, res ipsa loquitur to work
such a situation, a default on, or failure of compliance against him.
with, the obligation in this case, the delivery of the goods
in its custody to the place of destination - gives rise to a
If a demurrer to evidence is granted but on appeal the
presumption of lack of care and corresponding liability on
order of dismissal is reversed, the movant shall be deemed
the part of the contractual obligor the burden being on him
to have waived the right to present evidence.24 Thus,
to establish otherwise. GPS has failed to do so.
respondent corporation may no longer offer proof to
establish that it has exercised due care in transporting the
Respondent driver, on the other hand, without concrete cargoes of the assured so as to still warrant a remand of
proof of his negligence or fault, may not himself be ordered the case to the trial court.1wphi1.nt
to pay petitioner. The driver, not being a party to the
contract of carriage between petitioners principal and
WHEREFORE, the order, dated 30 April 1996, of the
defendant, may not be held liable under the agreement. A
Regional Trial Court, Branch 66, of Makati City, and the
contract can only bind the parties who have entered into it
decision, dated 10 June 1999, of the Court of Appeals, are
or their successors who have assumed their personality or
AFFIRMED only insofar as respondent Lambert M. Eroles
their juridical position.17 Consonantly with the axiom res
is concerned, but said assailed order of the trial court and
inter alios acta aliis neque nocet prodest, such contract can
decision of the appellate court are REVERSED as regards
neither favor nor prejudice a third person. Petitioners civil
G.P. Sarmiento Trucking Corporation which, instead, is
action against the driver can only be based on culpa
hereby ordered to pay FGU Insurance Corporation the
aquiliana, which, unlike culpa contractual, would require
value of the damaged and lost cargoes in the amount of
the claimant for damages to prove negligence or fault on
P204,450.00. No costs.
the part of the defendant.18

SO ORDERED.
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 Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-
under the latters management and the accident is such Martinez, JJ., concur.
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

22 AGUSTIN, E.P.
 TRANSPORTATION LAW

Can a Common Carrier Become a Private carrier must have exercised due diligence to prevent or
Carrier minimize the loss before, during and after the occurrence of
the fortuitous event. Such was not observed by the
common carrier, the captain knew that there was a
1. ARADA vs. CA typhoon before it departed, it was given clearance on the
departure day but the captain should have checked where
Facts: the typhoon was headed, neither did the captain of the
Alejandro Arada was the proprietor and operator vessel monitor and record the weather conditions everyday
of the firm South Negros as required by Art, 612 of the Code of Commerce. It was
Enterprises engaged in the business of small scale shipping also found that the crew were unlicensed. The carrier is
as a common carrier. On 24 March 1982, Arada entered therefore liable for the damages it caused to the
into a contract with San Miguel Corporation (SMC) to safely respondents as it failed to observe due diligence.
transport cargoes of the latter to Mandaue City using one As to the Board decision, it only exonerated the
of Aradas vessels, M/L Maya. On the same day it applied petitioner and the crew and officers of the M/V Maya from
for a clearance with the Philippine Coast Guard for M/L administrative liability which is not equal to the
but due to a typhoon, it was denied clearance. M/L Maya exoneration of the petitioners liability as a common carrier
was given clearance on the next day as there was no storm for his failure to observe extraordinary diligence in the
and the sea was calm. Hence, said vessel left for Mandaue vigilance over the goods it was transporting and for the
City. While it was navigating towards Cebu, a typhoon negligent acts or commissions of his employees. Such is
developed and hit the vessel; as a result the vessel sank the function of the Court, not the Special Board of Marine
with whatever was left of its cargoes. The crew was rescued Inquiry.
by a passing pump boat. A marine protest was filed by the
captain and on the basis of such marine protest; the Board
of Marine Inquiry conducted a hearing of the sinking of
M/L Maya wherein SMC was duly represented. Said Board
made it findings and recommendation absolving the
owner/operator, officers and crew of M/L Maya from any
administrative liability. The Boards report containing its
findings and recommendation was then forwarded to the
headquarters of the Philippine Coast Guard for appropriate
action. On the basis of such report, the Commandant of
the Philippine Coast Guard rende red a decision
exonerating the owner/operator officers and crew of the ill-
fated vessel from any administrative liability on account of
said incident.
SMC then filed an action for the recovery of the
value of the cargoes anchored in breach of contract of
carriage. The trial court held that there was no showing of
negligence on the part of the defendant nor did it fail to
observe diligence over the cargoes and that the sinking was
due to a fortuitous event. The CA decided otherwise, hence
this petition.

Issue:
Whether or not petitioner is liable for the loss of
the cargoes

Held:
Petitioner contends that it was only a private
carrier so it need not exercise extraordinary diligence over
the care of the respondents cargoes and that and that the
factual findings of the Board of Marine Inquiry are binding
and conclusive on the court.
The SC ruled that that petitioners vessel is a
common carrier and should have exercised extraordinary
diligence in the vigilance over the ensuring of safety of the
cargoes transported by it. In order that it may be exempted
from responsibility due to fortuitous events, it must prove
that the fortuitous event is the proximate cause and only
cause of the loss or destruction of goods and the common

23 AGUSTIN, E.P.

SECOND DIVISION
[G.R. No. 98243. July 1, 1992.]
ALEJANDRO ARADA, doing business under the name
and style "SOUTH NEGROS ENTERPRISES", Petitioner,
v.
HONORABLE COURT OF APPEALS, SAN MIGUEL
CORPORATION, Respondents.
Vicente R. Acsay for Petitioner.
SYLLABUS
1. CIVIL LAW; COMMON CARRIER; DEFINED.
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
(Art. 1732 of the New Civil Code).
2. ID.; ID.; BURDENED WITH THE DUTY OF
EXERCISING EXTRAORDINARY DILIGENCE TO
ENSURE THE SAFETY OF PASSENGER AND GOODS
TRANSPORTED BY IT. A common carrier, both from
the nature of its business and for insistent reasons of
public policy is burdened by law with the duty of exercising
extraordinary diligence not only in ensuring the safety of
passengers, but in caring for the goods transported by it.
3. ID.; ID.; PRESUMED NEGLIGENT IN CASE OF LOSS
OR DESTRUCTION OR DETERIORATION OF THE GOOD
TRANSPORTED BY IT; EXCEPTION. The loss or
destruction or deterioration of goods turned over to the
common carrier for the conveyance to a designated
destination raises instantly a presumption of fault or
negligence on the part of the carrier, save only where such
loss, destruction of damage arises from extreme
circumstances such as a natural disaster or calamity . . .
(Benedicto v. IAC, G.R. No. 70876, July 19, 1990, 187
SCRA 547).
4. ID.; ID.; ID.; ID.; NATURAL DISASTER AS A GROUND
FOR EXEMPTION; MUST HAVE BEEN THE PROXIMATE
AND ONLY CAUSE OF THE LOSS. In order that the
common carrier may be exempted from responsibility, the
natural disaster must have been the proximate and only
cause of the loss. However, the common carrier must
exercise due diligence to prevent or minimize the loss
before, during and after the occurrence of flood, storm or
other natural disaster in order that the common carrier
may be exempted from liability for the destruction or
deterioration of the foods (Art. 1739, New Civil Code).
DECISION
PARAS, J.:
This is a petition for review on certiorari which seeks to
annul and set aside the decision * of the Court of Appeals
24
TRANSPORTATION LAW
dated April 8, 1991 in CA-G.R. CV No. 20597 entitled "San
Miguel Corporation v. Alejandro Arada, doing business
under the name and style "South Negros Enterprises",
reversing the decision of the RTC, Seventh Judicial Region,
Branch XII, Cebu City ordering petitioner to pay the private
respondent the amount of P172,284.80 representing the
value of the cargo lost on board the ill-fated, M/L Maya
with interest thereon at the legal rate from the date of the
filing of the complaint on March 25, 1983 until fully paid,
and the costs.chanrobles virtual lawlibrary
The undisputed facts of the case are as follows:chanrob1es
virtual 1aw library
Alejandro Arada, herein petitioner, is the proprietor and
operator of the firm South Negros Enterprises which has
been organized and established for more than ten (10)
years. It is engaged in the business of small scale shipping
as a common carrier, servicing the hauling of cargoes of
different corporations and companies with the five (5)
vessels it was operating (Rollo, p. 121).
On March 24, 1982, petitioner entered into a contract with
private respondent to safely transport as a common carrier,
cargoes of the latter from San Carlos City, Negros
Occidental to Mandaue City using one of petitioners
vessels, M/L Maya. The cargoes of private respondent
consisted of 9,824 cases of beer empties valued at
P176,824.80, were itemized as follows:chanrob1es virtual
1aw library
NO. OF CASES CARGO VALUE
7,515 CS PPW STENIE MTS P136,773.00
1,542 CS PLW GRANDE MTS 23,438.40
58 CS G.E. PLASTIC MTS 1,276.00
24 CS PLP MTS 456.00
37 CS CS WOODEN MTS 673.40
8 CS LAGERLITE PLASTIC MTS 128.00
640 CS STENEI PLASTIC MTS 14,080.00
9,824 CS P176,824.80
On March 24, 1982, petitioner thru its crew master, Mr.
Vivencio Babao, applied for a clearance with the Philippine
Coast Guard for M/L Maya to leave the port of San Carlos
City, but due to a typhoon, it was denied clearance by SNI
Antonio Prestado PN who was then assigned at San Carlos
City Coast Guard Detachment (Rollo, p. 122).
On March 25, 1982 M/L Maya was given clearance as there
was no storm and the sea was calm. Hence, said vessel left
for Mandaue City. While it was navigating towards Cebu, a
typhoon developed and said vessel was buffeted on all its
sides by big waves. Its rudder was destroyed and it drifted
for sixteen (16) hours although its engine was running.
On March 27, 1982 at about 4:00 a.m., the vessel sank
AGUSTIN, E.P.

with whatever was left of its cargoes. The crew was rescued
by a passing pump boat and was brought to Calanggaman
Island. Later in the afternoon, they were brought to
Palompon, Leyte, where Vivencio Babao filed a marine
protest (Rollo, p. 10).
On the basis of such marine protest, the Board of Marine
Inquiry conducted a hearing of the sinking of M/L Maya
wherein private respondent was duly represented. Said
Board made it findings and recommendation dated
November 7, 1983, the dispositive portion of which reads
as:jgc:chanrobles.com.ph
"WHEREFORE, premises considered, this Board
recommends as it is hereby recommended that the
owner/operator, officers and crew of M/L Maya be
exonerated or absolved from any administrative liability on
account of this incident" (Exh. 1).
The Boards report containing its findings and
recommendation was then forwarded to the headquarters
of the Philippine Coast Guard for appropriate action. On
the basis of such report, the Commandant of the Philippine
Coast Guard rendered a decision dated December 21, 1984
in SBMI Adm. Case No. 88-82 exonerating the
owner/operator officers and crew of the ill-fated M/L Maya
from any administrative liability on account of said incident
(Exh. 2).
On March 25, 1983, private respondent filed a complaint in
the Regional Trial Court its first cause of action being for
the recovery of the value of the cargoes anchored on breach
of contract of carriage. After due hearing, said court
rendered a decision dated July 18, 1988, the dispositive
portion of which reads
"WHEREFORE, judgment is hereby rendered as
follows:chanrob1es virtual 1aw library
(1) With respect to the first cause of action, claim of
plaintiff is hereby dismissed;
(2) Under the second cause of action, defendant must pay
plaintiff the sum of P2,000.00;
(3) In the third cause of action, the defendant must pay
plaintiff the sum of P2,849.20;
(4) Since the plaintiff has withheld the payment of
P12,997.47 due the defendant, the plaintiff should deduct
the amount of P4,849.20 from the P12,997.47 and the
balance of P8,148.27 must be paid to the defendant; and
(5) Defendants counterclaim not having been
substantiated by evidence, is likewise dismissed. NO
COSTS." (Orig. Record, pp. 193-195).
Thereafter, private respondent appealed said decision to
the Court of Appeals claiming that the trial court erred in
(1) holding that nothing was shown that the defendant, or
any of his employees who manned the M/L Maya was
negligent in any way nor did they fail to observe
extraordinary diligence over the cargoes of the plaintiff; and
25
TRANSPORTATION LAW
(2) holding that the sinking of said vessel was caused by
the storm, consequently, dismissing the claim of plaintiff in
its first cause of action for breach of contract of carriage of
goods (Rollo, pp. 33-34; Decision, pp. 3-4).
In its decision promulgated on April 8, 1991, the Court of
Appeals reversed the decision of the court a quo, the
dispositive portion and the dispositive part of its decision
reads as:jgc:chanrobles.com.ph
"WHEREFORE, that part of the judgment appealed from is
REVERSED and the appellee Alejandro Arada, doing
business by the name and style, "South Negros
Enterprises", ordered (sic) to pay unto the appellant San
Miguel Corporation the amount of P176,824.80
representing the value of the cargo lost on board the ill-
fated vessel, M/L Maya, with interest thereon at the legal
rate from date of the filing of the complaint on March 25,
1983, until fully paid, and the costs." (Rollo, p. 37)
The Court of Appeals ruled that "in view of his failure to
observe extraordinary diligence over the cargo in question
and his negligence previous to the sinking of the carrying
vessel, as above shown, the appellee is liable to the
appellant for the value of the lost cargo.cralawnad
Hence, the present recourse.
On November 20, 1991, this Court gave due course to the
petition.
The pivotal issue to be resolved is whether or not petitioner
is liable for the value of the lost cargoes.
Petitioner contends that it was not in the exercise of its
function as a common carrier when it entered into a
contract with private respondent, but was then acting as a
private carrier not bound by the requirement of
extraordinary diligence (Rollo, p. 15) and that the factual
findings of the Board of Marine Inquiry and the Special
Board of Marine Inquiry are binding and conclusive on the
Court (Rollo, pp. 16-17).
Private respondent counters that M/L Maya was in the
exercise of its function as a common carrier and its failure
to observe the extraordinary diligence required of it in the
vigilance over their cargoes makes petitioner liable for the
value of said cargoes.
The petition is devoid of merit.
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
(Art. 1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was
exercising its function as a common carrier when it entered
into a contract with private respondent to carry and
transport the latters cargoes. This fact is best supported by
the admission of petitioners son, Mr. Eric Arada, who
testified as the officer-in-charge for operations of South
Negros Enterprises in Cebu City. In substance his
testimony on January 14, 1985 is as follows:chanrob1es
virtual 1aw library
AGUSTIN, E.P.

Q How many vessels are you operating?
A There were all in all around five (5).
Q And you were entering to service hauling of cargoes to
different companies, is that correct?
A Yes, sir.
Q In one word, the South Negros Enterprises is engaged in
the business of common carriers, is that correct?
A Yes, sir
Q And in fact, at the time of the hauling of the San Miguel
Beer, it was also in the same category as a common
carrier?
A Yes, sir.
(TSN, pp. 3-4, Jan. 29, 1985)
A common carrier, both from the nature of its business and
for insistent reasons of public policy is burdened by law
with the duty of exercising extraordinary diligence not only
in ensuring the safety of passengers, but in caring for the
goods transported by it. The loss or destruction or
deterioration of goods turned over to the common carrier
for the conveyance to a designated destination raises
instantly a presumption of fault or negligence on the part of
the carrier, save only where such loss, destruction or
damage arises from extreme circumstances such as a
natural disaster or calamity . . . (Benedicto v. IAC, G.R. No.
70876, July 19, 1990, 187 SCRA 547) (Emphasis supplied).
In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the
common carrier must exercise due diligence to prevent or
minimize the loss before, during and after the occurrence of
flood, storm or other natural disaster in order that the
common carrier may be exempted from liability for the
destruction or deterioration of the goods (Article 1739, New
Civil Code).
In the instant case, the appellate court was correct in
finding that petitioner failed to observe the extraordinary
diligence over the cargo in question and he or the master in
his employ was negligent previous to the sinking of the
carrying vessel. In substance, the decision
reads:jgc:chanrobles.com.ph
". . . VIVENCIO BABAO, the master of the carrying vessel,
knew that there was a typhoon coming before his departure
but did not check where it was.
x x x
"If only for the fact that he was first denied clearance to
depart on March 24, 1982, obviously because of a typhoon
coming, Babao, as master of the vessel, should have
verified first where the typhoon was before departing on
March 25, 1982. True, the sea was calm at departure time.
But that might be the calm before the storm. Prudence
26
TRANSPORTATION LAW
dictates that he should have ascertained first where the
storm was before departing as it might be on his
path."cralaw virtua1aw library
(Rollo, pp. 35-36)
Respondent courts conclusion as to the negligence of
petitioner is supported by evidence. It will be noted that
Vivencio Babao knew of the impending typhoon on March
24, 1982 when the Philippine Coast Guard denied M/L
Maya the issuance of a clearance to sail. Less than 24
hours elapsed since the time of the denial of said clearance
and the time a clearance to sail was finally issued on
March 25, 1982. Records will show that Babao did not
ascertain where the typhoon was headed by the use of his
vessels barometer and radio (Rollo, p. 142). Neither did the
captain of the vessel monitor and record the weather
conditions everyday as required by Art. 612 of the Code of
Commerce (Rollo, pp. 142-143). Had he done so while
navigating for 31 hours, he could have anticipated the
strong winds and big waves and taken shelter (Rollo, pp.
36; 145). His testimony on May 4, 1982 is as
follows:chanrobles.com.ph : virtual law library
Q Did you not check on your own where the typhoon was?
A No, sir. (TSN, May 4, 1982, pp. 58-59)
Noteworthy is the fact that as per official records of the
Climatological Division of the Philippine Atmospheric,
Geophysical and Astronomical Services Administration
(PAG-ASA for brevity) issued by its Chief of Climatological
Division, Primitivo G. Ballan, Jr. as to the weather and sea
conditions that prevailed in the vicinity of Catmon, Cebu
during the period March 25-27, 1982, the sea conditions
on March 25, 1982 were slight to rough and the weather
conditions then prevailing during those times were cloudy
skies with rainshowers and the small waves grew larger
and larger, to wit:chanrob1es virtual 1aw library
SPEED WAVE HT. SEA WEATHER
KNOTS (METERS) CONDITIONS
March25cralaw:red
8 AM 15 1-2 slight cloudy skies
w/rainshowers
2 PM 20-25 2.0-3.0 moderate overcast skies
to rough w/ some rains.
8 PM 30 3.7 rough sea heaps up
white foam
from breaking
waves begin to be
blown in streaks
along the direction
of the wind;
Spind-rift begins
AGUSTIN, E.P.
 TRANSPORTATION LAW

2 AM 30 3.7 rough sea heaps up limiting the jurisdiction of the Board of Marine Inquiry and
Special Board of Marine Inquiry to the administrative
white foam aspect of marine casualties in so far as it involves the
shipowners and officers.
from breaking

waves begin to be PREMISES CONSIDERED, the appealed decision is

AFFIRMED.
blownin streaks
SO ORDERED.
along the direction
Narvasa, C.J., Regalado and Nocon, JJ., concur.
of the wind; Spind-

rift begins.

(Exh. 3)

A common carrier is obliged to observe extraordinary

diligence and the failure of Babao to ascertain the direction
of the storm and the weather condition of the path they
would be traversing, constitute lack of foresight and
minimum vigilance over its cargoes taking into account the
surrounding circumstances of the case.

While the goods are in the possession of the carrier, it is

but fair that it exercises extraordinary diligence in
protecting them from loss or damage, and if loss occurs,
the law presumes that it was due to the carriers fault or
negligence; that is necessary to protect the interest of the
shipper which is at the mercy of the carrier (Art. 1756, Civil
Code, Aboitiz Shipping Corporation v. Court of Appeals,
G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).

Furthermore, the records show that the crew of M/L Maya

did not have the required qualifications provided for in P.D.
No. 97 or the Philippine Merchant Marine Officers Law, all
of whom were unlicensed. While it is true that they were
given special permit to man the vessel, such permit was
issued at the risk and responsibility of the owner (Rollo, p.
36).cralawnad

Finally, petitioner claims that the factual findings of the

Special Board of Marine Inquiry exonerating the
owner/operator, crew officers of the ill-fated vessel M/L
Maya from any administrative liability is binding on the
court.

In rejecting petitioners claim, respondent court was correct

in ruling that "such exoneration was but with respect to
the administrative liability of the "owner/operator, officers
and crew of the ill-fated" vessel. It could not have meant
exoneration of appellee from liability as a common carrier
for his failure to observe extraordinary diligence in the
vigilance over the goods it was transporting and for the
negligent acts or omissions of his employees. Such is the
function of the Court, not the Special Board of Marine
Inquiry." (Rollo, p. 37, Annex A, p. 7)

The Philippine Merchant Marine Rules and Regulations

particularly Chapter XVI thereof entitled "Marine
Investigation and Suspension and Revocation Proceedings"
prescribes the Rules governing maritime casualties or
accidents, the rules and procedures in administrative
investigation of all maritime cases within the jurisdiction or
cognizance of the Philippine Coast Guard and the grounds
for suspension and revocation of licenses/certificates of
marine officers and seamen (1601 SCOPE); clearly,

27 AGUSTIN, E.P.

2. VLASONS SHIPPING vs. CA
Facts:
The MV Vlasons(Owner) 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.
NSC(Charterer) 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. 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.
When the vessel arrived with the cargo at Pier 12, North
Harbor, Manila, nearly all the skids of tinplates and hot
rolled sheets were allegedly found to be wet and rusty.
NSC filed its complaint against defendant before the CFI
wherein it claimed that it sustained losses 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 -- all in violation of defendants undertaking
under their Contract of Voyage Charter Hire.
The defendant denied liability for the alleged damage
claiming that the MV VLASONS I was seaworthy in all
respects for the carriage of plaintiffs 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.
CFI Rizal ruled in favor of the petitioner and was affirmed
by the CA on appeal.
Issue: Is MV VLasons a private carrier?
Held: YES. 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. As correctly concluded by the Court of Appeals, the
MV Vlasons I was not a common but a private carrier.
Consequently, 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.
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
28
TRANSPORTATION LAW
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. A
carrier which does not qualify under the above test is
deemed a private carrier.
______________________________________________________
VLASONS SHIPPING, INC vs. CA and NATIONAL STEEL
CORPORATION
[G.R. No. 112350. December 12, 1997]
NATIONAL STEEL CORPORATION vs. CA and VLASONS
SHIPPING, INC.
[G.R. No. 112287. December 12, 1997]
FACTS:
National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered
into a Contract of Voyage Charter Hire (Affreightment)
whereby NSC hired VSIs vessel, the MV VLASONS I to
make one (1) voyage to load steel products at Iligan City
and discharge them at North Harbor, Manila. VSI carried
passengers or goods only for those it chose under a special
contract of charter party.
The vessel arrived with the cargo in Manila, but when the
vessels three (3) hatches containing the shipment were
opened, nearly all the skids of tin plates and hot rolled
sheets were allegedly found to be wet and rusty.
NSC filed its complaint against defendant before the CFI
wherein it claimed that it sustained losses 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 -- all in violation of defendants undertaking
under their Contract of Voyage Charter Hire.
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 plaintiffs 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.
The trial court ruled in favor of VSI; it was affirmed by the
CA on appeal.
ISSUE:
Whether or not Vlazons is a private carrier.
HELD:
Yes.
At the outset, it is essential to establish whether VSI
AGUSTIN, E.P.
 TRANSPORTATION LAW

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. 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 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.

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. As
correctly concluded by the Court of Appeals, the MV
Vlasons I was not a common but a private carrier.
Consequently, 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. Recently, in Valenzuela
Hardwood and Industrial Supply, Inc., vs. Court of Appeals
and Seven Brothers Shipping Corporation, the Court ruled:

x x x [I]n 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
carrier.

29 AGUSTIN, E.P.
 TRANSPORTATION LAW

3. VALENZUELA HARDWOOD vs. CA
FACTS:
Plaintiff shipped at Maconcon Port, Isabela 940 round logs
on board M/V Seven Ambassador, a vessel owned by
defendant Seven Brothers Shipping Corporation. Plaintiff
insured the logs against loss and/or damage with
defendant South Sea Surety and Insurance Co., Inc. for
P2M and the latter issued its Marine Cargo Insurance
Policy on said date. In the meantime, the M/V Seven
Ambassador sank resulting in the loss of the plaintiffs
insured logs.
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 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.

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.
Court of Appeals 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.
ISSUE:
Whether defendants shipping corporation and the surety
company are liable to the plaintiff for the latters lost logs.
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 only 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 use of a single party.
(Home Insurance Co. vs. American Steamship Agencies
Inc., 23 SCRA 24, April 4, 1968)

HELD:

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 VALID

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.
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.

Private respondent had acted as a private carrier in

transporting petitioners 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.

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 of the Civil
Code, such stipulation is valid because it is freely entered

30 AGUSTIN, E.P.
 TRANSPORTATION LAW

Republic of the Philippines concerned which is hereby REVERSED

SUPREME COURT and SET ASIDE. 3
Manila
The Facts
THIRD DIVISION
The factual antecedents of this case as narrated in the
G.R. No. 102316 June 30, 1997 Court of Appeals Decision are as follows:

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY It appears that on 16 January 1984,

INC., petitioner, plaintiff (Valenzuela Hardwood and
vs. Industrial Supply, Inc.) entered into an
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING agreement with the defendant Seven
CORPORATION, respondents. Brothers (Shipping Corporation) whereby
the latter undertook to load on board its
vessel M/V Seven Ambassador the
PANGANIBAN, J.:
former's lauan round logs numbering
940 at the port of Maconacon, Isabela for
Is a stipulation in a charter party that the "(o)wners shall shipment to Manila.
not be responsible for loss, split, short-landing, breakages
and any kind of damages to the cargo" 1 valid? This is the
On 20 January 1984, plaintiff insured
main question raised in this petition for review assailing
the logs against loss and/or damage with
the Decision of Respondent Court of Appeals 2 in CA-G.R.
defendant South Sea Surety and
No. CV-20156 promulgated on October 15, 1991. The
Insurance Co., Inc. for P2,000,000.00
Court of Appeals modified the judgment of the Regional
and the latter issued its Marine Cargo
Trial Court of Valenzuela, Metro Manila, Branch 171, the
Insurance Policy No. 84/24229 for
dispositive portion of which reads:
P2,000,000.00 on said date.

WHEREFORE, Judgment is hereby

On 24 January 1984, the plaintiff gave
rendered ordering South Sea Surety and
the check in payment of the premium on
Insurance Co., Inc. to pay plaintiff the
the insurance policy to Mr. Victorio
sum of TWO MILLION PESOS
Chua.
(P2,000,000.00) representing the value of
the policy of the lost logs with legal
interest thereon from the date of demand In the meantime, the said vessel M/V
on February 2, 1984 until the amount is Seven Ambassador sank on 25 January
fully paid or in the alternative, defendant 1984 resulting in the loss of the
Seven Brothers Shipping Corporation to plaintiff's insured logs.
pay plaintiff the amount of TWO
MILLION PESOS (2,000,000.00)
On 30 January 1984, a check for
representing the value of lost logs plus
P5,625.00 (Exh. "E") to cover payment of
legal interest from the date of demand on
the premium and documentary stamps
April 24, 1984 until full payment thereof;
due on the policy was tendered due to
the reasonable attorney's fees in the
the insurer but was not accepted.
amount equivalent to five (5) percent of
Instead, the South Sea Surety and
the amount of the claim and the costs of
Insurance Co., Inc. cancelled the
the suit.
insurance policy it issued as of the date
of the inception for non-payment of the
Plaintiff is hereby ordered to pay premium due in accordance with Section
defendant Seven Brothers Shipping 77 of the Insurance Code.
Corporation the sum of TWO HUNDRED
THIRTY THOUSAND PESOS
On 2 February 1984, plaintiff demanded
(P230,000.00) representing the balance
from defendant South Sea Surety and
of the stipulated freight charges.
Insurance Co., Inc. the payment of the
proceeds of the policy but the latter
Defendant South Sea Surety and denied liability under the policy. Plaintiff
Insurance Company's counterclaim is likewise filed a formal claim with
hereby dismissed. defendant Seven Brothers Shipping
Corporation for the value of the lost logs
but the latter denied the claim.
In its assailed Decision, Respondent Court of Appeals held:

After due hearing and trial, the court a

WHEREFORE, the appealed judgment is
quo rendered judgment in favor of
hereby AFFIRMED except in so far (sic)
plaintiff and against defendants. Both
as the liability of the Seven Brothers
defendants shipping corporation and the
Shipping Corporation to the plaintiff is
surety company appealed.

31 AGUSTIN, E.P.

Defendant-appellant Seven Brothers
Shipping Corporation impute (sic) to the
court a quo the following assignment of
errors, to wit:
A. The lower court erred in holding that
the proximate cause of the sinking of the
vessel Seven Ambassadors, was not due
to fortuitous event but to the negligence
of the captain in stowing and securing
the logs on board, causing the iron
chains to snap and the logs to roll to the
portside.
B. The lower court erred in declaring
that the non-liability clause of the Seven
Brothers Shipping Corporation from logs
(sic) of the cargo stipulated in the charter
party is void for being contrary to public
policy invoking article 1745 of the New
Civil Code.
C. The lower court erred in holding
defendant-appellant Seven Brothers
Shipping Corporation liable in the
alternative and ordering/directing it to
pay plaintiff-appellee the amount of two
million (2,000,000.00) pesos
representing the value of the logs plus
legal interest from date of demand until
fully paid.
D. The lower court erred in ordering
defendant-appellant Seven Brothers
Shipping Corporation to pay appellee
reasonable attorney's fees in the amount
equivalent to 5% of the amount of the
claim and the costs of the suit.
E. The lower court erred in not awarding
defendant-appellant Seven Brothers
Corporation its counter-claim for
attorney's fees.
F. The lower court erred in not
dismissing the complaint against Seven
Brothers Shipping Corporation.
Defendant-appellant South Sea Surety and Insurance Co.,
Inc. assigns the following errors:
A. The trial court erred in holding that
Victorio Chua was an agent of
defendant-appellant South Sea Surety
and Insurance Company, Inc. and
likewise erred in not holding that he was
the representative of the insurance
broker Columbia Insurance Brokers, Ltd.
B. The trial court erred in holding that
Victorio Chua received
compensation/commission on the
premiums paid on the policies issued by
32
TRANSPORTATION LAW
the defendant-appellant South Sea
Surety and Insurance Company, Inc.
C. The trial court erred in not applying
Section 77 of the Insurance Code.
D. The trial court erred in disregarding
the "receipt of payment clause" attached
to and forming part of the Marine Cargo
Insurance Policy No. 84/24229.
E. The trial court in disregarding the
statement of account or bill stating the
amount of premium and documentary
stamps to be paid on the policy by the
plaintiff-appellee.
F. The trial court erred in disregarding
the endorsement of cancellation of the
policy due to non-payment of premium
and documentary stamps.
G. The trial court erred in ordering
defendant-appellant South Sea Surety
and Insurance Company, Inc. to pay
plaintiff-appellee P2,000,000.00
representing value of the policy with
legal interest from 2 February 1984 until
the amount is fully paid,
H. The trial court erred in not awarding
to the defendant-appellant the attorney's
fees alleged and proven in its
counterclaim.
The primary issue to be resolved before
us is whether defendants shipping
corporation and the surety company are
liable to the plaintiff for the latter's lost
logs. 4
The Court of Appeals 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 In modifying the RTC
judgment, the respondent appellate court ratiocinated
thus:
It appears that there is a stipulation in
the charter party that the ship owner
would be exempted from liability in case
of loss.
The court a quo erred in applying the
provisions of the Civil Code on common
carriers to establish the liability of the
shipping corporation. The provisions on
common carriers should not be applied
where the carrier is not acting as such
but as a private carrier.
AGUSTIN, E.P.

Under American jurisprudence, a transport the cargo of Petitioner Valenzuela. Even the latter
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 even
for the negligence of its agent is valid
(Home Insurance Company, Inc. vs.
American Steamship Agencies, Inc., 23
SCRA 24).
The shipping corporation should not
therefore be held liable for the loss of the
logs. 6
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.
The 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
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
33
TRANSPORTATION LAW
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
AGUSTIN, E.P.

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 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
34
TRANSPORTATION LAW
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
Other Arguments
On the basis of the foregoing alone, the present petition
may already be denied; the Court, however, will discuss the
other arguments of petitioner for the benefit and
satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
AGUSTIN, E.P.

Petitioner Valenzuela insists that the charter party
stipulation is contrary to Articles 586 and 587 of the Code
of Commerce which confer on petitioner the right to recover
damages from the shipowner and ship agent for the acts or
conduct of the captain. 25 We are not persuaded. Whatever
rights petitioner may have under the aforementioned
statutory provisions were waived when it entered into the
charter party.
Article 6 of the Civil Code provides that "(r)ights may be
waived, unless the waiver is contrary to law, public order,
public policy, morals, or good customs, or prejudicial to a
person with a right recognized by law." As a general rule,
patrimonial rights may be waived as opposed to rights to
personality and family rights which may not be made the
subject of waiver. 26 Being patently and undoubtedly
patrimonial, petitioner's right conferred under said articles
may be waived. This, the petitioner did by acceding to the
contractual stipulation that it is solely responsible or any
damage to the cargo, thereby exempting the private carrier
from any responsibility for loss or damage thereto.
Furthermore, as discussed above, the contract of private
carriage binds petitioner and private respondent alone; it is
not imbued with public policy considerations for the
general public or third persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of
this controversy is void for being contrary to Articles 1170
and 1173 of the Civil Code 27 which read:
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 2201, shall apply.
If the law 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.
The Court notes that the foregoing articles are applicable
only to the obligor or the one with an obligation to perform.
In the instant case, Private Respondent Seven Brothers is
not an obligor in respect of the cargo, for this obligation to
bear the loss was shifted to petitioner by virtue of the
charter party. This shifting of responsibility, as earlier
observed, is not void. The provisions cited by petitioner are,
therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify
the application of the second paragraph of Article 1173 of
the Civil Code which prescribes the standard of diligence to
be observed in the event the law or the contract is silent. In
35
TRANSPORTATION LAW
the instant case, Article 362 of the Code of Commerce 28
provides the standard of ordinary diligence for the carriage
of goods by a carrier. The standard of diligence under this
statutory provision may, however, be modified in a contract
of private carriage as the petitioner and private respondent
had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29
which, in turn, quoted Juan Ysmael & Co. vs. Gabino
Barreto & Co. 30 and argues that the public policy
considerations stated there vis-a-vis contractual
stipulations limiting the carrier's liability be applied "with
equal force" to this case. 31 It also cites Manila Railroad Co.
vs. Compaia Transatlantica 32 and contends that
stipulations exempting a party from liability for damages
due to negligence "should not be countenanced" and
should be "strictly construed" against the party claiming its
benefit. 33 We disagree.
The cases of Shewaram and Ysmael both involve a common
carrier; thus, they necessarily justify the application of
such policy considerations and concomitantly stricter
rules. As already discussed above, the public policy
considerations behind the rigorous treatment of common
carriers are absent in the case of private carriers. Hence,
the stringent laws applicable to common carriers are not
applied to private carries. The case of Manila Railroad is
also inapplicable because the action for damages there
does not involve a contract for transportation.
Furthermore, the defendant therein made a "promise to use
due care in the lifting operations" and, consequently, it was
"bound by its undertaking"'; besides, the exemption was
intended to cover accidents due to hidden defects in the
apparatus or other unforseeable occurrences" not caused
by its "personal negligence." This promise was thus
constructed to make sense together with the stipulation
against liability for damages. 34 In the present case, we
stress that the private respondent made no such promise.
The agreement of the parties to exempt the shipowner from
responsibility for any damage to the cargo and place
responsibility over the same to petitioner is the lone
stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York
vs. Lopez Costelo, 35 Walter A. Smith & Co. vs. Cadwallader
Gibson Lumber Co., 36 N. T . Hashim and Co. vs. Rocha and
Co., 37 Ohta Development Co. vs. Steamship "Pompey" 38 and
Limpangco Sons vs. Yangco Steamship Co. 39 in support of
its contention that the shipowner be held liable for
damages. 40 These however are not on all fours with the
present case because they do not involve a similar factual
milieu or an identical stipulation in the charter party
expressly exempting the shipowner form responsibility for
any damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner
has no cause of action against it because this Court has
earlier affirmed the liability of South Sea for the loss
suffered by petitioner. Private respondent submits that
petitioner is not legally entitled to collect twice for a single
loss. 41 In view of the above disquisition upholding the
validity of the questioned charter party stipulation and
AGUSTIN, E.P.
 TRANSPORTATION LAW

holding that petitioner may not recover from private

respondent, the present issue is moot and academic. It
suffices to state that the Resolution of this Court dated
June 2, 1995 42 affirming the liability of South Sea does
not, by itself, necessarily preclude the petitioner from
proceeding against private respondent. An aggrieved party
may still recover the deficiency for the person causing the
loss in the event the amount paid by the insurance
company does not fully cover the loss. Article 2207 of the
Civil Code provides:

Art. 2207. If the plaintiff's property has

been insured, and he has received
indemnity for the insurance company for
the injury or loss arising out of the
wrong or breach of contract complained
of, the insurance company shall be
subrogated to the rights of the insured
against the wrongdoer or the person who
has violated the contract. If the amount
paid by the insurance company does not
fully cover the injury or loss, the
aggrieved party shall be entitled to
recover the deficiency form the person
causing the loss or injury.

WHEREFORE, premises considered, the petition is hereby

DENIED for its utter failure to show any reversible error on
the part of Respondent Court. The assailed Decision is
AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

36 AGUSTIN, E.P.

Registered Owner Liable for Operation of
Common Carrier
1. BENEDICTO vs. IAC
FACTS:
Gree nhills Wood Industri e s - bound itse lf to se ll
and de live r to Blue Star Mahogany , Inc. 100,000
board feet of sawn lumber with the understanding that an
initial delivery would be made.
Greenhills resident manager in Maddela, Dominador Cruz,
contracted Virgilio Licuden, the d r i v e r o f a c a r g o
truck, to transport its sawn lumber to the
c o n s i g n e e B l u e S t a r i n Valenzuela, Bulacan; this
cargo truck was registered in the name of Ma. Luisa
Benedicto, the proprietor of Macoven Trucking, a business
enterprise engaged in hauling freight.
The Manage r of Blue Star calle d up Gree nhills
pre side nt informin g him that the sawn lumbe r on
board the subje ct cargo truck had not ye t a rrive d
in Vale nzue la, Bulacan; because of the delay in
delivery Blue Star was constrained to look for other
suppliers.
Greenhills filed criminal case against
driver Licuden for estafa; and a civil case
f o r recovery of the value of the lost sawn lumber plus
damages against Benedicto.
Benedicto denied liability as she was a complete stranger to
the contract of carriage, the subject truck having been
earlier sold by her to Benjamin Tee; but the truck had
remained re giste re d in he r name be cause Tee have
not ye t fully paid the amo unt o f the truck; be that
as it may , Te e had bee n ope rating the said truck
in Ce ntral Luzon from that a nd Licuden was Tees
employee and not hers.
ISSUE:
WON Benedicto, being the registered owner of the carrier,
should be held liable for the value of the undelivered or lost
sawn lumber.
HELD:
Yes. The registered owner liable for consequences flowing
from the operations of the carrie r, e ve n though the
spe cific ve hicle involve d may al re ady have bee n
trans fe rre d to a n o t h e r p e r s o n . T h i s d o c t r i n e
rests upon the principle that in dealing
with vehicles registered under the Public
Service Law, the public has the right to
a s s u m e t h a t t h e re giste re d owne r is the actual
or la wful owne r the re of It would be ve ry di fficul t
and ofte n impossible as a practical matter, for members
of the general public to enforce the rights of action that
they may have for injuries inflicted by the vehicles being
negligently operated if they should be required to prove
who the actual owner is. Greenhills is not required to go
beyond the vehicles certificate of registration to ascertain
the owner of the carrier.
37
TRANSPORTATION LAW
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 70876 July 19, 1990
MA. LUISA BENEDICTO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and
GREENHILLS WOOD INDUSTRIES COMPANY, INC.
respondents.
Britanico, Panganiban, Benitez, Africa, Linsangan and
Barinaga for petitioner.
Abelardo V. Viray for private respondent.
FELICIANO, J.:
This Petition for Review asks us to set aside the Decision of
the then Intermediate Appellate Court dated 30 January
1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the
decision of the Regional Trial Court ("RTC") of Dagupan
City in Civil Case No. 5206. There, the RTC held petitioner
Ma. Luisa Benedicto liable to pay private respondent
Greenhills Wood Industries Company, Inc. ("Greenhills")
the amounts of P16,016.00 and P2,000.00 representing the
cost of Greenhills' lost sawn lumber and attorney's fees,
respectively.
Private respondent Greenhills, a lumber manufacturing
firm with business address at Dagupan City, operates
sawmill in Maddela, Quirino.
Sometime in May 1980, private respondent bound itself to
sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") a
company with business operations in Valenzuela, Bulacan
100,000 board feet of sawn lumber with the understanding
that an initial delivery would be made on 15 May 1980. 1
To effect its first delivery, private respondent's resident
manager in Maddela, Dominador Cruz, contracted Virgilio
Licuden, the driver of a cargo truck bearing Plate No. 225
GA TH to transport its sawn lumber to the consignee Blue
Star in Valenzuela, Bulacan. This cargo truck was
registered in the name of petitioner Ma. Luisa Benedicto,
the proprietor of Macoven Trucking, a business enterprise
engaged in hauling freight, with main office in B.F. Homes,
Paraaque.
On 15 May 1980, Cruz in the presence and with the
consent of driver Licuden, supervised the loading of 7,690
board feet of sawn lumber with invoice value of P16,918.00
aboard the cargo truck. Before the cargo truck left Maddela
for Valenzuela, Bulacan, Cruz issued to Licuden Charge
Invoices Nos. 3259 and 3260 both of which were initialed
by the latter at the bottom left corner. 2 The first invoice
was for the amount of P11,822.80 representing the value of
5,374 board feet of sawn lumber, while the other set out
the amount of P5,095.20 as the value of 2,316 board feet.
Cruz instructed Licuden to give the original copies of the
two (2) invoices to the consignee upon arrival in
Valenzuela, Bulacan 3 and to retain the duplicate copies in
AGUSTIN, E.P.

order that he could afterwards claim the freightage from
private respondent's Manila office. 4
On 16 May 1980, the Manager of Blue Star called up by
long distance telephone Greenhills' president, Henry Lee
Chuy, informing him that the sawn lumber on board the
subject cargo truck had not yet arrived in Valenzuela,
Bulacan. The latter in turn informed Greenhills' resident
manager in its Maddela saw-mill of what had happened. In
a letter 5 dated 18 May 1980, Blue Star's administrative
and personnel manager, Manuel R. Bautista, formally
informed Greenhills' president and general manager that
Blue Star still had not received the sawn lumber which was
supposed to arrive on 15 May 1980 and because of this
delay, "they were constrained to look for other suppliers."
On 25 June 1980, after confirming the above with Blue
Star and after trying vainly to persuade it to continue with
their contract, private respondent Greenhill's filed Criminal
Case No. 668 against driver Licuden for estafa. Greenhills
also filed against petitioner Benedicto Civil Case No. D-
5206 for recovery of the value of the lost sawn lumber plus
damages before the RTC of Dagupan City.
In her answer, 6 petitioner Benedicto denied liability
alleging that she was a complete stranger to the contract of
carriage, the subject truck having been earlier sold by her
to Benjamin Tee, on 28 February 1980 as evidenced by a
deed of sale. 7 She claimed that the truck had remained
registered in her name notwithstanding its earlier sale to
Tee because the latter had paid her only P50,000.00 out of
the total agreed price of P68,000.00 However, she averred
that Tee had been operating the said truck in Central
Luzon from that date (28 February 1980) onwards, and
that, therefore, Licuden was Tee's employee and not hers.
On 20 June 1983, based on the finding that petitioner
Benedicto was still the registered owner of the subject
truck, and holding that Licuden was her employee, the trial
court adjudged as follows:
WHEREFORE, in the light of the
foregoing considerations, this Court
hereby renders judgment against
defendant Maria Luisa Benedicto,
ordering her to pay the Greenhills Wood
Industries Co. Inc., thru its President
and General Manager, the amount of
P16,016 cost of the sawn lumber loaded
on the cargo truck, with legal rate of
interest from the filing of the complaint
to pay attorney's fees in the amount of
P2,000.00; and to pay the costs of this
suit.
SO ORDERED. 8
On 30 January 1985, upon appeal by petitioner, the
Intermediate Appellate Court affirmed 9 the decision of the
trial court in toto. Like the trial court, the appellate court
held that since petitioner was the registered owner of the
subject vehicle, Licuden the driver of the truck, was her
employee, and that accordingly petitioner should be
responsible for the negligence of said driver and bear the
38
TRANSPORTATION LAW
loss of the sawn lumber plus damages. Petitioner moved for
reconsideration, without success. 10
In the present Petition for Review, the sole issue raised is
whether or not under the facts and applicable law, the
appellate court was correct in finding that petitioner, being
the registered owner of the carrier, should be held liable for
the value of the undelivered or lost sawn lumber.
Petitioner urges that she could not be held answerable for
the loss of the cargo, because the doctrine which makes the
registered owner of a common carrier vehicle answerable to
the public for the negligence of the driver despite the sale of
the vehicle to another person, applies only to cases
involving death of or injury to passengers. What applies in
the present case, according to petitioner, is the rule that a
contract of carriage requires proper delivery of the goods to
and acceptance by the carrier. Thus, petitioner contends
that the delivery to a person falsely representing himself to
be an agent of the carrier prevents liability from attaching
to the registered owner.
The Court considers that petitioner has failed to show that
appellate court committed reversible error in affirming the
trial court's holding that petitioner was liable for the cost of
the sawn lumber plus damages.
There is no dispute that petitioner Benedicto has been
holding herself out to the public as engaged in the business
of hauling or transporting goods for hire or compensation.
Petitioner Benedicto is, in brief, a common carrier.
The prevailing doctrine on common carriers makes the
registered owner liable for consequences flowing from the
operations of the carrier, even though the specific vehicle
involved may already have been transferred to another
person. This doctrine rests upon the principle that in
dealing with vehicles registered under the Public Service
Law, the public has the right to assume that the registered
owner is the actual or lawful owner thereof It would be very
difficult and often impossible as a practical matter, for
members of the general public to enforce the rights of
action that they may have for injuries inflicted by the
vehicles being negligently operated if they should be
required to prove who the actual owner is. 11 The registered
owner is not allowed to deny liability by proving the identity
of the alleged transferee. Thus, contrary to petitioner's
claim, private respondent is not required to go beyond the
vehicle's certificate of registration to ascertain the owner of
the carrier. In this regard, the letter presented by petitioner
allegedly written by Benjamin Tee admitting that Licuden
was his driver, had no evidentiary value not only because
Benjamin Tee was not presented in court to testify on this
matter but also because of the aforementioned doctrine. To
permit the ostensible or registered owner to prove who the
actual owner is, would be to set at naught the purpose or
public policy which infuses that doctrine.
In fact, private respondent had no reason at all to doubt
the authority of Licuden to enter into a contract of carriage
on behalf of the registered owner. It appears that, earlier, in
the first week of May 1980, private respondent Greenhills
had contracted Licuden who was then driving the same
cargo truck to transport and carry a load of sawn lumber
from the Maddela sawmill to Dagupan City. 12 No one came
AGUSTIN, E.P.
 TRANSPORTATION LAW

forward to question that contract or the authority of
Licuden to represent the owner of the carrier truck.
Moreover, assuming the truth of her story, petitioner
Benedicto retained registered ownership of the freight truck
for her own benefit and convenience, that is, to secure the
payment of the balance of the selling price of the truck. She
may have been unaware of the legal security device of
chattel mortgage; or she, or her buyer, may have been
unwilling to absorb the expenses of registering a chattel
mortgage over the truck. In either case, considerations
both of public policy and of equity require that she bear the
consequences flowing from registered ownership of the
subject vehicle.
Petitioner Benedicto, however, insists that the said
principle should apply only to cases involving negligence
and resulting injury to or death of passengers, and not to
cases involving merely carriage of goods. We believe
otherwise.
A common carrier, both from the nature of its business and
for insistent reasons of public policy, is burdened by the
law with the duty of exercising extraordinary diligence not
only in ensuring the safety of passengers but also in caring
for goods transported by it. 13 The loss or destruction or
deterioration of goods turned over to the common carrier
for conveyance to a designated destination, raises instantly
a presumption of fault or negligence on the part of the
carrier, save only where such loss, destruction or damage
arises from extreme circumstances such as a natural
disaster or calamity or act of the public enemy in time of
war, or from an act or omission of the shipper himself or
from the character of the goods or their packaging or
container. 14
matter).itc-asl Driver Licuden, under the circumstances,
was clothed with at least implied authority to contract to
carry goods and to accept delivery of such goods for
carriage to a specified destination. That the freight to be
paid may-not have been fixed before loading and carriage,
did not prevent the contract of carriage from arising, since
the freight was at least determinable if not fixed by the
tariff schedules in petitioner's main business office. Put in
somewhat different terms, driver Licuden is in law regarded
as the employee and agent of the petitioner, for whose acts
petitioner must respond. A contract of carriage of goods
was shown; the sawn lumber was loaded on board the
freight truck; loss or non-delivery of the lumber at Blue
Star's premises in Valenzuela, Bulacan was also proven;
and petitioner has not proven either that she had exercised
extraordinary diligence to prevent such loss or non-delivery
or that the loss or non-delivery was due to some casualty
or force majeure inconsistent with her liability. 16
Petitioner's liability to private respondent Greenhills was
thus fixed and complete, without prejudice to petitioner's
right to proceed against her putative transferee Benjamin
Tee and driver Licuden for reimbursement or contribution.
17
WHEREFORE, the Petition for Review is DENIED for lack of
merit and the Decision of the former Intermediate Appellate
Court dated 30 January 1985 is hereby AFFIRMED. Costs
against petitioner.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., and Cortes, JJ., concur.
Bidin, J., took no part.

This presumption may be overcome only by proof of

extraordinary diligence on the part of the carrier. 15 Clearly,
to permit a common carrier to escape its responsibility for
the passengers or goods transported by it by proving a
prior sale of the vehicle or means of transportation to an
alleged vendee would be to attenuate drastically the
carrier's duty of extraordinary diligence. It would also open
wide the door to collusion between the carrier and the
supposed vendee and to shifting liability from the carrier to
one without financial capability to respond for the resulting
damages. In other words, the thrust of the public policy
here involved is as sharp and real in the case of carriage of
goods as it is in the transporting of human beings. Thus, to
sustain petitioner Benedicto's contention, that is, to require
the shipper to go behind a certificate of registration of a
public utility vehicle, would be utterly subversive of the
purpose of the law and doctrine.

Petitioner further insists that there was no perfected

contract of carriage for the reason that there was no proof
that her consent or that of Tee had been obtained; no proof
that the driver, Licuden was authorized to bind the
registered owner; and no proof that the parties had agreed
on the freightage to be paid.

Once more, we are not persuaded by petitioner's arguments

which appear to be a transparent attempt to evade
statutory responsibilities. Driver Licuden was entrusted
with possession and control of the freight truck by the
registered owner (and by the alleged secret owner, for that

39 AGUSTIN, E.P.
 TRANSPORTATION LAW

ART. 1733

Nature and Basis of Liability
1. CANGCO vs. MANILA RAILROAD
On January 20, 1915, Cangco was riding the train of
Manila Railroad Co (MRC). He was an employee of the latter
and he was given a pass so that he could ride the train for
free. When he was nearing his destination at about 7pm,
he arose from his seat even though the train was not at full
stop. When he was about to alight from the train (which
was still slightly moving) he accidentally stepped on a sack
of watermelons which he failed to notice due to the fact
that it was dim. This caused him to lose his balance at the
door and he fell and his arm was crushed by the train and
he suffered other serious injuries. He was dragged a few
meters more as the train slowed down.
It was established that the employees of MRC were
negligent in piling the sacks of watermelons. MRC raised as
a defense the fact that Cangco was also negligent as he
failed to exercise diligence in alighting from the train as he
did not wait for it to stop.
ISSUE: Whether or not Manila Railroad Co is liable for
damages.
NOTES: But, if the master has not been guilty of any
negligence whatever in the selection and direction of the
servant, he is not liable for the acts of the latter, whatever
done within the scope of his employment or not, if the
damage done by the servant does not amount to a breach
of the contract between the master and the person injured.
The liability arising from extra-contractual culpa is always
based upon a voluntary act or omission which, without
willful intent, but by mere negligence or inattention, has
caused damage to another.
These two fields, figuratively speaking, concentric; that is
to say, the mere fact that a person is bound to another by
contract does not relieve him from extra-contractual
liability to such person. When such a contractual relation
exists the obligor may break the contract under such
conditions that the same act which constitutes the source
of an extra-contractual obligation had no contract existed
between the parties.
Manresa: Whether negligence occurs an incident in the
course of the performance of a contractual undertaking or
in itself the source of an extra-contractual undertaking
obligation, its essential characteristics are identical.

Vinculum Juris: (def) It means an obligation of law, or

HELD: Yes. Alighting from a moving train while it is
the right of the obligee to enforce a civil matter in a court of
slowing down is a common practice and a lot of people are
law.
doing so every day without suffering injury. Cangco has the
vigor and agility of young manhood, and it was by no
means so risky for him to get off while the train was yet
moving as the same act would have been in an aged or
feeble person. He was also ignorant of the fact that sacks of
watermelons were there as there were no appropriate
warnings and the place was dimly lit.

The Court also elucidated on the distinction between the

liability of employers under Article 2180 and their liability
for breach of contract [of carriage]:

40 AGUSTIN, E.P.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12191 October 14, 1918
JOSE CANGCO, plaintiff-appellant,
vs.
MANILA RAILROAD CO., defendant-appellee.
Ramon Sotelo for appellant.
Kincaid & Hartigan for appellee.
FISHER, J.:
At the time of the occurrence which gave rise to this
litigation the plaintiff, Jose Cangco, was in the employment
of Manila Railroad Company in the capacity of clerk, with a
monthly wage of P25. He lived in the pueblo of San Mateo,
in the province of Rizal, which is located upon the line of
the defendant railroad company; and in coming daily by
train to the company's office in the city of Manila where he
worked, he used a pass, supplied by the company, which
entitled him to ride upon the company's trains free of
charge. Upon the occasion in question, January 20, 1915,
the plaintiff arose from his seat in the second class-car
where he was riding and, making, his exit through the
door, took his position upon the steps of the coach, seizing
the upright guardrail with his right hand for support.
On the side of the train where passengers alight at the San
Mateo station there is a cement platform which begins to
rise with a moderate gradient some distance away from the
company's office and extends along in front of said office
for a distance sufficient to cover the length of several
coaches. As the train slowed down another passenger,
named Emilio Zuiga, also an employee of the railroad
company, got off the same car, alighting safely at the point
where the platform begins to rise from the level of the
ground. When the train had proceeded a little farther the
plaintiff Jose Cangco stepped off also, but one or both of
his feet came in contact with a sack of watermelons with
the result that his feet slipped from under him and he fell
violently on the platform. His body at once rolled from the
platform and was drawn under the moving car, where his
right arm was badly crushed and lacerated. It appears that
after the plaintiff alighted from the train the car moved
forward possibly six meters before it came to a full stop.
The accident occurred between 7 and 8 o'clock on a dark
night, and as the railroad station was lighted dimly by a
single light located some distance away, objects on the
platform where the accident occurred were difficult to
discern especially to a person emerging from a lighted car.
41
TRANSPORTATION LAW
The explanation of the presence of a sack of melons on the
platform where the plaintiff alighted is found in the fact
that it was the customary season for harvesting these
melons and a large lot had been brought to the station for
the shipment to the market. They were contained in
numerous sacks which has been piled on the platform in a
row one upon another. The testimony shows that this row
of sacks was so placed of melons and the edge of platform;
and it is clear that the fall of the plaintiff was due to the
fact that his foot alighted upon one of these melons at the
moment he stepped upon the platform. His statement that
he failed to see these objects in the darkness is readily to
be credited.
The plaintiff was drawn from under the car in an
unconscious condition, and it appeared that the injuries
which he had received were very serious. He was therefore
brought at once to a certain hospital in the city of Manila
where an examination was made and his arm was
amputated. The result of this operation was unsatisfactory,
and the plaintiff was then carried to another hospital where
a second operation was performed and the member was
again amputated higher up near the shoulder. It appears in
evidence that the plaintiff expended the sum of P790.25 in
the form of medical and surgical fees and for other
expenses in connection with the process of his curation.
Upon August 31, 1915, he instituted this proceeding in the
Court of First Instance of the city of Manila to recover
damages of the defendant company, founding his action
upon the negligence of the servants and employees of the
defendant in placing the sacks of melons upon the platform
and leaving them so placed as to be a menace to the
security of passenger alighting from the company's trains.
At the hearing in the Court of First Instance, his Honor, the
trial judge, found the facts substantially as above stated,
and drew therefrom his conclusion to the effect that,
although negligence was attributable to the defendant by
reason of the fact that the sacks of melons were so placed
as to obstruct passengers passing to and from the cars,
nevertheless, the plaintiff himself had failed to use due
caution in alighting from the coach and was therefore
precluded form recovering. Judgment was accordingly
entered in favor of the defendant company, and the plaintiff
appealed.
It can not be doubted that the employees of the railroad
company were guilty of negligence in piling these sacks on
the platform in the manner above stated; that their
presence caused the plaintiff to fall as he alighted from the
train; and that they therefore constituted an effective legal
cause of the injuries sustained by the plaintiff. It
necessarily follows that the defendant company is liable for
the damage thereby occasioned unless recovery is barred
by the plaintiff's own contributory negligence. In resolving
this problem it is necessary that each of these conceptions
of liability, to-wit, the primary responsibility of the
defendant company and the contributory negligence of the
plaintiff should be separately examined.
AGUSTIN, E.P.

It is important to note that the foundation of the legal
liability of the defendant is the contract of carriage, and
that the obligation to respond for the damage which
plaintiff has suffered arises, if at all, from the breach of
that contract by reason of the failure of defendant to
exercise due care in its performance. That is to say, its
liability is direct and immediate, differing essentially, in
legal viewpoint from that presumptive responsibility for the
negligence of its servants, imposed by article 1903 of the
Civil Code, which can be rebutted by proof of the exercise
of due care in their selection and supervision. Article 1903
of the Civil Code is not applicable to obligations arising ex
contractu, but only to extra-contractual obligations or to
use the technical form of expression, that article relates
only to culpa aquiliana and not to culpa contractual.
Manresa (vol. 8, p. 67) in his commentaries upon articles
1103 and 1104 of the Civil Code, clearly points out this
distinction, which was also recognized by this Court in its
decision in the case of Rakes vs. Atlantic, Gulf and Pacific
Co. (7 Phil. rep., 359). In commenting upon article 1093
Manresa clearly points out the difference between "culpa,
substantive and independent, which of itself constitutes
the source of an obligation between persons not formerly
connected by any legal tie" and culpa considered as an
accident in the performance of an obligation already
existing . . . ."
In the Rakes case (supra) the decision of this court was
made to rest squarely upon the proposition that article
1903 of the Civil Code is not applicable to acts of
negligence which constitute the breach of a contract.
Upon this point the Court said:
The acts to which these articles [1902 and 1903 of
the Civil Code] are applicable are understood to be
those not growing out of pre-existing duties of the
parties to one another. But where relations
already formed give rise to duties, whether
springing from contract or quasi-contract, then
breaches of those duties are subject to article
1101, 1103, and 1104 of the same code. (Rakes
vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359
at 365.)
This distinction is of the utmost importance. The liability,
which, under the Spanish law, is, in certain cases imposed
upon employers with respect to damages occasioned by the
negligence of their employees to persons to whom they are
not bound by contract, is not based, as in the English
Common Law, upon the principle of respondeat superior
if it were, the master would be liable in every case and
unconditionally but upon the principle announced in
article 1902 of the Civil Code, which imposes upon all
persons who by their fault or negligence, do injury to
another, the obligation of making good the damage caused.
One who places a powerful automobile in the hands of a
42
TRANSPORTATION LAW
servant whom he knows to be ignorant of the method of
managing such a vehicle, is himself guilty of an act of
negligence which makes him liable for all the consequences
of his imprudence. The obligation to make good the damage
arises at the very instant that the unskillful servant, while
acting within the scope of his employment causes the
injury. The liability of the master is personal and direct.
But, if the master has not been guilty of any negligence
whatever in the selection and direction of the servant, he is
not liable for the acts of the latter, whatever done within
the scope of his employment or not, if the damage done by
the servant does not amount to a breach of the contract
between the master and the person injured.
It is not accurate to say that proof of diligence and care in
the selection and control of the servant relieves the master
from liability for the latter's acts on the contrary, that
proof shows that the responsibility has never existed. As
Manresa says (vol. 8, p. 68) the liability arising from extra-
contractual culpa is always based upon a voluntary act or
omission which, without willful intent, but by mere
negligence or inattention, has caused damage to another. A
master who exercises all possible care in the selection of
his servant, taking into consideration the qualifications
they should possess for the discharge of the duties which it
is his purpose to confide to them, and directs them with
equal diligence, thereby performs his duty to third persons
to whom he is bound by no contractual ties, and he incurs
no liability whatever if, by reason of the negligence of his
servants, even within the scope of their employment, such
third person suffer damage. True it is that under article
1903 of the Civil Code the law creates a presumption that
he has been negligent in the selection or direction of his
servant, but the presumption is rebuttable and yield to
proof of due care and diligence in this respect.
The supreme court of Porto Rico, in interpreting identical
provisions, as found in the Porto Rico Code, has held that
these articles are applicable to cases of extra-contractual
culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico
Reports, 215.)
This distinction was again made patent by this Court in its
decision in the case of Bahia vs. Litonjua and Leynes, (30
Phil. rep., 624), which was an action brought upon the
theory of the extra-contractual liability of the defendant to
respond for the damage caused by the carelessness of his
employee while acting within the scope of his employment.
The Court, after citing the last paragraph of article 1903 of
the Civil Code, said:
From this article two things are apparent: (1) That
when an injury is caused by the negligence of a
servant or employee there instantly arises a
presumption of law that there was negligence on
the part of the master or employer either in
selection of the servant or employee, or in
supervision over him after the selection, or both;
AGUSTIN, E.P.

and (2) that that presumption is juris tantum and
not juris et de jure, and consequently, may be
rebutted. It follows necessarily that if the
employer shows to the satisfaction of the court
that in selection and supervision he has exercised
the care and diligence of a good father of a family,
the presumption is overcome and he is relieved
from liability.
This theory bases the responsibility of the master
ultimately on his own negligence and not on that
of his servant. This is the notable peculiarity of
the Spanish law of negligence. It is, of course, in
striking contrast to the American doctrine that, in
relations with strangers, the negligence of the
servant in conclusively the negligence of the
master.
The opinion there expressed by this Court, to the effect that
in case of extra-contractual culpa based upon negligence, it
is necessary that there shall have been some fault
attributable to the defendant personally, and that the last
paragraph of article 1903 merely establishes a rebuttable
presumption, is in complete accord with the authoritative
opinion of Manresa, who says (vol. 12, p. 611) that the
liability created by article 1903 is imposed by reason of the
breach of the duties inherent in the special relations of
authority or superiority existing between the person called
upon to repair the damage and the one who, by his act or
omission, was the cause of it.
On the other hand, the liability of masters and employers
for the negligent acts or omissions of their servants or
agents, when such acts or omissions cause damages which
amount to the breach of a contact, is not based upon a
mere presumption of the master's negligence in their
selection or control, and proof of exercise of the utmost
diligence and care in this regard does not relieve the master
of his liability for the breach of his contract.
Every legal obligation must of necessity be extra-
contractual or contractual. Extra-contractual obligation
has its source in the breach or omission of those mutual
duties which civilized society imposes upon it members, or
which arise from these relations, other than contractual, of
certain members of society to others, generally embraced in
the concept of status. The legal rights of each member of
society constitute the measure of the corresponding legal
duties, mainly negative in character, which the existence of
those rights imposes upon all other members of society.
The breach of these general duties whether due to willful
intent or to mere inattention, if productive of injury, give
rise to an obligation to indemnify the injured party. The
fundamental distinction between obligations of this
character and those which arise from contract, rests upon
the fact that in cases of non-contractual obligation it is the
wrongful or negligent act or omission itself which creates
the vinculum juris, whereas in contractual relations the
43
TRANSPORTATION LAW
vinculum exists independently of the breach of the
voluntary duty assumed by the parties when entering into
the contractual relation.
With respect to extra-contractual obligation arising from
negligence, whether of act or omission, it is competent for
the legislature to elect and our Legislature has so elected
whom such an obligation is imposed is morally culpable,
or, on the contrary, for reasons of public policy, to extend
that liability, without regard to the lack of moral
culpability, so as to include responsibility for the
negligence of those person who acts or mission are
imputable, by a legal fiction, to others who are in a position
to exercise an absolute or limited control over them. The
legislature which adopted our Civil Code has elected to
limit extra-contractual liability with certain well-defined
exceptions to cases in which moral culpability can be
directly imputed to the persons to be charged. This moral
responsibility may consist in having failed to exercise due
care in the selection and control of one's agents or
servants, or in the control of persons who, by reason of
their status, occupy a position of dependency with respect
to the person made liable for their conduct.
The position of a natural or juridical person who has
undertaken by contract to render service to another, is
wholly different from that to which article 1903 relates.
When the sources of the obligation upon which plaintiff's
cause of action depends is a negligent act or omission, the
burden of proof rests upon plaintiff to prove the negligence
if he does not his action fails. But when the facts averred
show a contractual undertaking by defendant for the
benefit of plaintiff, and it is alleged that plaintiff has failed
or refused to perform the contract, it is not necessary for
plaintiff to specify in his pleadings whether the breach of
the contract is due to willful fault or to negligence on the
part of the defendant, or of his servants or agents. Proof of
the contract and of its nonperformance is sufficient prima
facie to warrant a recovery.
As a general rule . . . it is logical that in case of
extra-contractual culpa, a suing creditor should
assume the burden of proof of its existence, as the
only fact upon which his action is based; while on
the contrary, in a case of negligence which
presupposes the existence of a contractual
obligation, if the creditor shows that it exists and
that it has been broken, it is not necessary for
him to prove negligence. (Manresa, vol. 8, p. 71
[1907 ed., p. 76]).
As it is not necessary for the plaintiff in an action for the
breach of a contract to show that the breach was due to the
negligent conduct of defendant or of his servants, even
though such be in fact the actual cause of the breach, it is
obvious that proof on the part of defendant that the
negligence or omission of his servants or agents caused the
breach of the contract would not constitute a defense to the
AGUSTIN, E.P.

action. If the negligence of servants or agents could be
invoked as a means of discharging the liability arising from
contract, the anomalous result would be that person acting
through the medium of agents or servants in the
performance of their contracts, would be in a better
position than those acting in person. If one delivers a
valuable watch to watchmaker who contract to repair it,
and the bailee, by a personal negligent act causes its
destruction, he is unquestionably liable. Would it be logical
to free him from his liability for the breach of his contract,
which involves the duty to exercise due care in the
preservation of the watch, if he shows that it was his
servant whose negligence caused the injury? If such a
theory could be accepted, juridical persons would enjoy
practically complete immunity from damages arising from
the breach of their contracts if caused by negligent acts as
such juridical persons can of necessity only act through
agents or servants, and it would no doubt be true in most
instances that reasonable care had been taken in selection
and direction of such servants. If one delivers securities to
a banking corporation as collateral, and they are lost by
reason of the negligence of some clerk employed by the
bank, would it be just and reasonable to permit the bank to
relieve itself of liability for the breach of its contract to
return the collateral upon the payment of the debt by
proving that due care had been exercised in the selection
and direction of the clerk?
This distinction between culpa aquiliana, as the source of
an obligation, and culpa contractual as a mere incident to
the performance of a contract has frequently been
recognized by the supreme court of Spain. (Sentencias of
June 27, 1894; November 20, 1896; and December 13,
1896.) In the decisions of November 20, 1896, it appeared
that plaintiff's action arose ex contractu, but that defendant
sought to avail himself of the provisions of article 1902 of
the Civil Code as a defense. The Spanish Supreme Court
rejected defendant's contention, saying:
These are not cases of injury caused, without any
pre-existing obligation, by fault or negligence, such
as those to which article 1902 of the Civil Code
relates, but of damages caused by the defendant's
failure to carry out the undertakings imposed by
the contracts . . . .
A brief review of the earlier decision of this court involving
the liability of employers for damage done by the negligent
acts of their servants will show that in no case has the
court ever decided that the negligence of the defendant's
servants has been held to constitute a defense to an action
for damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the
court held that the owner of a carriage was not liable for
the damages caused by the negligence of his driver. In that
case the court commented on the fact that no evidence had
been adduced in the trial court that the defendant had
44
TRANSPORTATION LAW
been negligent in the employment of the driver, or that he
had any knowledge of his lack of skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania
Maritima (6 Phil. Rep., 215), the plaintiff sued the
defendant for damages caused by the loss of a barge
belonging to plaintiff which was allowed to get adrift by the
negligence of defendant's servants in the course of the
performance of a contract of towage. The court held, citing
Manresa (vol. 8, pp. 29, 69) that if the "obligation of the
defendant grew out of a contract made between it and the
plaintiff . . . we do not think that the provisions of articles
1902 and 1903 are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374),
plaintiff sued the defendant to recover damages for the
personal injuries caused by the negligence of defendant's
chauffeur while driving defendant's automobile in which
defendant was riding at the time. The court found that the
damages were caused by the negligence of the driver of the
automobile, but held that the master was not liable,
although he was present at the time, saying:
. . . unless the negligent acts of the driver are
continued for a length of time as to give the owner
a reasonable opportunity to observe them and to
direct the driver to desist therefrom. . . . The act
complained of must be continued in the presence
of the owner for such length of time that the
owner by his acquiescence, makes the driver's
acts his own.
In the case of Yamada vs. Manila Railroad Co. and
Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it is true
that the court rested its conclusion as to the liability of the
defendant upon article 1903, although the facts disclosed
that the injury complaint of by plaintiff constituted a
breach of the duty to him arising out of the contract of
transportation. The express ground of the decision in this
case was that article 1903, in dealing with the liability of a
master for the negligent acts of his servants "makes the
distinction between private individuals and public
enterprise;" that as to the latter the law creates a
rebuttable presumption of negligence in the selection or
direction of servants; and that in the particular case the
presumption of negligence had not been overcome.
It is evident, therefore that in its decision Yamada case, the
court treated plaintiff's action as though founded in tort
rather than as based upon the breach of the contract of
carriage, and an examination of the pleadings and of the
briefs shows that the questions of law were in fact
discussed upon this theory. Viewed from the standpoint of
the defendant the practical result must have been the same
in any event. The proof disclosed beyond doubt that the
defendant's servant was grossly negligent and that his
negligence was the proximate cause of plaintiff's injury. It
also affirmatively appeared that defendant had been guilty
AGUSTIN, E.P.

of negligence in its failure to exercise proper discretion in
the direction of the servant. Defendant was, therefore,
liable for the injury suffered by plaintiff, whether the
breach of the duty were to be regarded as constituting
culpa aquiliana or culpa contractual. As Manresa points out
(vol. 8, pp. 29 and 69) whether negligence occurs an
incident in the course of the performance of a contractual
undertaking or its itself the source of an extra-contractual
undertaking obligation, its essential characteristics are
identical. There is always an act or omission productive of
damage due to carelessness or inattention on the part of
the defendant. Consequently, when the court holds that a
defendant is liable in damages for having failed to exercise
due care, either directly, or in failing to exercise proper care
in the selection and direction of his servants, the practical
result is identical in either case. Therefore, it follows that it
is not to be inferred, because the court held in the Yamada
case that defendant was liable for the damages negligently
caused by its servants to a person to whom it was bound
by contract, and made reference to the fact that the
defendant was negligent in the selection and control of its
servants, that in such a case the court would have held
that it would have been a good defense to the action, if
presented squarely upon the theory of the breach of the
contract, for defendant to have proved that it did in fact
exercise care in the selection and control of the servant.
The true explanation of such cases is to be found by
directing the attention to the relative spheres of contractual
and extra-contractual obligations. The field of non-
contractual obligation is much more broader than that of
contractual obligations, comprising, as it does, the whole
extent of juridical human relations. These two fields,
figuratively speaking, concentric; that is to say, the mere
fact that a person is bound to another by contract does not
relieve him from extra-contractual liability to such person.
When such a contractual relation exists the obligor may
break the contract under such conditions that the same act
which constitutes the source of an extra-contractual
obligation had no contract existed between the parties.
The contract of defendant to transport plaintiff carried with
it, by implication, the duty to carry him in safety and to
provide safe means of entering and leaving its trains (civil
code, article 1258). That duty, being contractual, was direct
and immediate, and its non-performance could not be
excused by proof that the fault was morally imputable to
defendant's servants.
The railroad company's defense involves the assumption
that even granting that the negligent conduct of its
servants in placing an obstruction upon the platform was a
breach of its contractual obligation to maintain safe means
of approaching and leaving its trains, the direct and
proximate cause of the injury suffered by plaintiff was his
own contributory negligence in failing to wait until the train
had come to a complete stop before alighting. Under the
doctrine of comparative negligence announced in the Rakes
case (supra), if the accident was caused by plaintiff's own
45
TRANSPORTATION LAW
negligence, no liability is imposed upon defendant's
negligence and plaintiff's negligence merely contributed to
his injury, the damages should be apportioned. It is,
therefore, important to ascertain if defendant was in fact
guilty of negligence.
It may be admitted that had plaintiff waited until the train
had come to a full stop before alighting, the particular
injury suffered by him could not have occurred. Defendant
contends, and cites many authorities in support of the
contention, that it is negligence per se for a passenger to
alight from a moving train. We are not disposed to
subscribe to this doctrine in its absolute form. We are of
the opinion that this proposition is too badly stated and is
at variance with the experience of every-day life. In this
particular instance, that the train was barely moving when
plaintiff alighted is shown conclusively by the fact that it
came to stop within six meters from the place where he
stepped from it. Thousands of person alight from trains
under these conditions every day of the year, and sustain
no injury where the company has kept its platform free
from dangerous obstructions. There is no reason to believe
that plaintiff would have suffered any injury whatever in
alighting as he did had it not been for defendant's negligent
failure to perform its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to
this subject is that expressed in Thompson's work on
Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the
passenger has been guilty of negligence in
attempting to alight from a moving railway train,
is that of ordinary or reasonable care. It is to be
considered whether an ordinarily prudent person,
of the age, sex and condition of the passenger,
would have acted as the passenger acted under
the circumstances disclosed by the evidence. This
care has been defined to be, not the care which
may or should be used by the prudent man
generally, but the care which a man of ordinary
prudence would use under similar circumstances,
to avoid injury." (Thompson, Commentaries on
Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by
this court in Picart vs. Smith (37 Phil. rep., 809), we may
say that the test is this; Was there anything in the
circumstances surrounding the plaintiff at the time he
alighted from the train which would have admonished a
person of average prudence that to get off the train under
the conditions then existing was dangerous? If so, the
plaintiff should have desisted from alighting; and his
failure so to desist was contributory negligence.1awph!l.net
As the case now before us presents itself, the only fact from
which a conclusion can be drawn to the effect that plaintiff
was guilty of contributory negligence is that he stepped off
AGUSTIN, E.P.
 TRANSPORTATION LAW

the car without being able to discern clearly the condition
of the platform and while the train was yet slowly moving.
In considering the situation thus presented, it should not
be overlooked that the plaintiff was, as we find, ignorant of
the fact that the obstruction which was caused by the
sacks of melons piled on the platform existed; and as the
defendant was bound by reason of its duty as a public
carrier to afford to its passengers facilities for safe egress
from its trains, the plaintiff had a right to assume, in the
absence of some circumstance to warn him to the contrary,
that the platform was clear. The place, as we have already
stated, was dark, or dimly lighted, and this also is proof of
a failure upon the part of the defendant in the performance
of a duty owing by it to the plaintiff; for if it were by any
possibility concede that it had right to pile these sacks in
the path of alighting passengers, the placing of them
adequately so that their presence would be revealed.
mortality tables, is approximately thirty-three years. We are
of the opinion that a fair compensation for the damage
suffered by him for his permanent disability is the sum of
P2,500, and that he is also entitled to recover of defendant
the additional sum of P790.25 for medical attention,
hospital services, and other incidental expenditures
connected with the treatment of his injuries.
The decision of lower court is reversed, and judgment is
hereby rendered plaintiff for the sum of P3,290.25, and for
the costs of both instances. So ordered.
Arellano, C.J., Torres, Street and Avancea, JJ., concur.

As pertinent to the question of contributory negligence on

the part of the plaintiff in this case the following
circumstances are to be noted: The company's platform
was constructed upon a level higher than that of the
roadbed and the surrounding ground. The distance from
the steps of the car to the spot where the alighting
passenger would place his feet on the platform was thus
reduced, thereby decreasing the risk incident to stepping
off. The nature of the platform, constructed as it was of
cement material, also assured to the passenger a stable
and even surface on which to alight. Furthermore, the
plaintiff was possessed of the vigor and agility of young
manhood, and it was by no means so risky for him to get
off while the train was yet moving as the same act would
have been in an aged or feeble person. In determining the
question of contributory negligence in performing such act
that is to say, whether the passenger acted prudently or
recklessly the age, sex, and physical condition of the
passenger are circumstances necessarily affecting the
safety of the passenger, and should be considered. Women,
it has been observed, as a general rule are less capable
than men of alighting with safety under such conditions, as
the nature of their wearing apparel obstructs the free
movement of the limbs. Again, it may be noted that the
place was perfectly familiar to the plaintiff as it was his
daily custom to get on and of the train at this station.
There could, therefore, be no uncertainty in his mind with
regard either to the length of the step which he was
required to take or the character of the platform where he
was alighting. Our conclusion is that the conduct of the
plaintiff in undertaking to alight while the train was yet
slightly under way was not characterized by imprudence
and that therefore he was not guilty of contributory
negligence.

The evidence shows that the plaintiff, at the time of the

accident, was earning P25 a month as a copyist clerk, and
that the injuries he has suffered have permanently disabled
him from continuing that employment. Defendant has not
shown that any other gainful occupation is open to
plaintiff. His expectancy of life, according to the standard

46 AGUSTIN, E.P.

2. LOADSTAR SHIPPING vs. CA
Facts: On 19 November 1984, LOADSTAR received on
board a) 705 bales of lawanit hardwood; b) 27 boxes and
crates of tilewood assemblies and the others ;and c) 49
bundles of mouldings R & W (3) Apitong Bolidenized. On its
way to Manila from the port of Nasipit, Agusan del Norte,
the vessel, along with its cargo, sank off Limasawa Island.
As a result of the total loss of its shipment, the consignee
made a claim with LOADSTAR which, however, ignored the
same. MIC filed a complaint against LOADSTAR and PGAI,
alleging that the sinking of the vessel was due to the fault
and negligence of LOADSTAR and its employees.
LOADSTAR denied any liability for the loss of the shippers
goods and claimed that sinking of its vessel was due to
force majeure. LOADSTAR submits that the vessel was a
private carrier because it was not issued certificate of
public convenience, it did not have a regular trip or
schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo.
Issues: (1) Is the M/V Cherokee a private or a common
carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence
in these premises.
Held: Petition is dismissed: SC hold that LOADSTAR is a
common carrier. It is not necessary that the carrier be
issued a certificate of public convenience, and this public
character is not altered by the fact that the carriage of the
goods in question was periodic, occasional, episodic or
unscheduled. The bills of lading failed to show any special
arrangement, but only a general provision to the effect that
the M/VCherokee was a general cargo carrier. 14
Further, the bare fact that the vessel was carrying a
particular type of cargo for one shipper, which appears to
be purely coincidental, is not reason enough to convert the
vessel from a common to a private carrier, especially where,
as in this case, it was shown that the vessel was also
carrying passengers. Under Article 1732 of the Civil Code
the Civil Code defines common carriers in the following
terms:
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.
On to the second assigned error, we find that the M/V
Cherokee was not seaworthy when it embarked on its
voyage on 19 November 1984. The vessel was not even
sufficiently manned at the time. For a vessel to be
seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers
and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty.
47
TRANSPORTATION LAW
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter
LOADSTAR), in this petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, seeks to
reverse and set aside the following: (a) the 30 January 1997
decision 1 of the Court of Appeals in CA-G.R. CV No.
36401, which affirmed the decision of 4 October 1991 2 of
the Regional Trial Court of Manila, Branch 16, in Civil Case
No. 85-29110, ordering LOADSTAR to pay private
respondent Manila Insurance Co. (hereafter MIC) the
amount of P6,067,178, with legal interest from the filing of
the compliant until fully paid, P8,000 as attorney's fees,
and the costs of the suit; and (b) its resolution of 19
November 1997, 3 denying LOADSTAR's motion for
reconsideration of said decision.
The facts are undisputed.1wphi1.nt
On 19 November 1984, LOADSTAR received on board its
M/V "Cherokee" (hereafter, the vessel) the following goods
for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood
assemblies and the others ;and
c) 49 bundles of mouldings R & W (3)
Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the
same amount with MIC against various risks including
"TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The
vessel, in turn, was insured by Prudential Guarantee &
Assurance, Inc. (hereafter PGAI) for P4 million. On 20
November 1984, on its way to Manila from the port of
Nasipit, Agusan del Norte, the vessel, along with its cargo,
sank off Limasawa Island. As a result of the total loss of its
shipment, the consignee made a claim with LOADSTAR
which, however, ignored the same. As the insurer, MIC
paid P6,075,000 to the insured in full settlement of its
claim, and the latter executed a subrogation receipt
therefor.
On 4 February 1985, MIC filed a complaint against
LOADSTAR and PGAI, alleging that the sinking of the
vessel was due to the fault and negligence of LOADSTAR
and its employees. It also prayed that PGAI be ordered to
AGUSTIN, E.P.
 TRANSPORTATION LAW

pay the insurance proceeds from the loss the vessel directly
to MIC, said amount to be deducted from MIC's claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of
the shipper's goods and claimed that sinking of its vessel
was due to force majeure. PGAI, on the other hand, averred
that MIC had no cause of action against it, LOADSTAR
being the party insured. In any event, PGAI was later
dropped as a party defendant after it paid the insurance
proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment
in favor of MIC, prompting LOADSTAR to elevate the matter
to the court of Appeals, which, however, agreed with the
trial court and affirmed its decision in toto.
In dismissing LOADSTAR's appeal, the appellate court
made the following observations:
1) LOADSTAR cannot be considered a private
carrier on the sole ground that there was a
single shipper on that fateful voyage. The court
noted that the charter of the vessel was limited
to the ship, but LOADSTAR retained control
over its crew. 4
2) As a common carrier, it is the Code of
Commerce, not the Civil Code, which should be
applied in determining the rights and liabilities
of the parties.
6) "Art. 361 (of the Code of Commerce) has been
judicially construed to mean that when goods
are delivered on board a ship in good order and
condition, and the shipowner delivers them to
the shipper in bad order and condition, it then
devolves upon the shipowner to both allege and
prove that the goods were damaged by reason of
some fact which legally exempts him from
liability." Transportation of the merchandise at
the risk and venture of the shipper means that
the latter bears the risk of loss or deterioration
of his goods arising from fortuitous events, force
majeure, or the inherent nature and defects of
the goods, but not those caused by the
presumed negligence or fault of the carrier,
unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a
determination of the following issues:
(1) Is the M/V "Cherokee" a private or a
common carrier?
(2) Did LOADSTAR observe due and/or
ordinary diligence in these premises.
Regarding the first issue, LOADSTAR submits that the
vessel was a private carrier because it was not issued
certificate of public convenience, it did not have a regular
trip or schedule nor a fixed route, and there was only "one
shipper, one consignee for a special cargo."

In refutation, MIC argues that the issue as to the

3) The vessel was not seaworthy because it was
classification of the M/V "Cherokee" was not timely raised
undermanned on the day of the voyage. If it had
below; hence, it is barred by estoppel. While it is true that
been seaworthy, it could have withstood the
the vessel had on board only the cargo of wood products for
"natural and inevitable action of the sea" on 20
delivery to one consignee, it was also carrying passengers
November 1984, when the condition of the sea
as part of its regular business. Moreover, the bills of lading
was moderate. The vessel sank, not because of
in this case made no mention of any charter party but only
force majeure, but because it was not
a statement that the vessel was a "general cargo carrier."
seaworthy. LOADSTAR'S allegation that the
Neither was there any "special arrangement" between
sinking was probably due to the "convergence of
LOADSTAR and the shipper regarding the shipment of the
the winds," as stated by a PAGASA expert, was
cargo. The singular fact that the vessel was carrying a
not duly proven at the trial. The "limited
particular type of cargo for one shipper is not sufficient to
liability" rule, therefore, is not applicable
convert the vessel into a private carrier.
considering that, in this case, there was an
actual finding of negligence on the part of the
carrier. 5 As regards the second error, LOADSTAR argues that as a
private carrier, it cannot be presumed to have been
negligent, and the burden of proving otherwise devolved
4) Between MIC and LOADSTAR, the provisions
upon MIC. 8
of the Bill of Lading do not apply because said
provisions bind only the shipper/consignee and
the carrier. When MIC paid the shipper for the LOADSTAR also maintains that the vessel was seaworthy.
goods insured, it was subrogated to the latter's Before the fateful voyage on 19 November 1984, the vessel
rights as against the carrier, LOADSTAR. 6 was allegedly dry docked at Keppel Philippines Shipyard
and was duly inspected by the maritime safety engineers of
the Philippine Coast Guard, who certified that the ship was
5) There was a clear breach of the contract of
fit to undertake a voyage. Its crew at the time was
carriage when the shipper's goods never
experienced, licensed and unquestionably competent. With
reached their destination. LOADSTAR's defense
all these precautions, there could be no other conclusion
of "diligence of a good father of a family" in the
except that LOADSTAR exercised the diligence of a good
training and selection of its crew is unavailing
father of a family in ensuring the vessel's seaworthiness.
because this is not a proper or complete defense
in culpa contractual.
LOADSTAR further claims that it was not responsible for
the loss of the cargo, such loss being due to force majeure.
It points out that when the vessel left Nasipit, Agusan del

48 AGUSTIN, E.P.

Norte, on 19 November 1984, the weather was fine until
the next day when the vessel sank due to strong waves.
MCI's witness, Gracelia Tapel, fully established the
existence of two typhoons, "WELFRING" and "YOLING,"
inside the Philippine area of responsibility. In fact, on 20
November 1984, signal no. 1 was declared over Eastern
Visayas, which includes Limasawa Island. Tapel also
testified that the convergence of winds brought about by
these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn,
causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier,
any agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was being
shipped at "owner's risk," LOADSTAR was not liable for any
loss or damage to the same. Therefore, the Court of
Appeals erred in holding that the provisions of the bills of
lading apply only to the shipper and the carrier, and not to
the insurer of the goods, which conclusion runs counter to
the Supreme Court's ruling in the case of St. Paul Fire &
Marine Co. v. Macondray & Co., Inc., 9 and National Union
Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils.,
Inc. 10
Finally, LOADSTAR avers that MIC's claim had already
prescribed, the case having been instituted beyond the
period stated in the bills of lading for instituting the same
suits based upon claims arising from shortage, damage,
or non-delivery of shipment shall be instituted within sixty
days from the accrual of the right of action. The vessel
sank on 20 November 1984; yet, the case for recovery was
filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable,
notwithstanding that the loss of the cargo was due to force
majeure, because the same concurred with LOADSTAR's
fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription
in the court below; hence, the same must be deemed
waived.
Thirdly, the " limited liability " theory is not applicable in
the case at bar because LOADSTAR was at fault or
negligent, and because it failed to maintain a seaworthy
vessel. Authorizing the voyage notwithstanding its
knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a
common carrier. It is not necessary that the carrier be
issued a certificate of public convenience, and this public
character is not altered by the fact that the carriage of the
goods in question was periodic, occasional, episodic or
unscheduled.
In support of its position, LOADSTAR relied on the 1968
case of Home Insurance Co. v. American Steamship
Agencies, Inc., 11 where this Court held that a common
carrier transporting special cargo or chartering the vessel
to a special person becomes a private carrier that is not
subject to the provisions of the Civil Code. Any stipulation
in the charter party absolving the owner from liability for
49
TRANSPORTATION LAW
loss due to the negligence of its agent is void only if the
strict policy governing common carriers is upheld. Such
policy has no force where the public at is not involved, as
in the case of a ship totally chartered for the use of a single
party. LOADSTAR also cited Valenzuela Hardwood and
Industrial Supply, Inc. v. Court of Appeals 12 and National
Steel Corp. v. Court of Appeals, 13 both of which upheld the
Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in
the case at bar for the simple reason that the factual
settings are different. The records do not disclose that the
M/V "Cherokee," on the date in question, undertook to
carry a special cargo or was chartered to a special person
only. There was no charter party. The bills of lading failed
to show any special arrangement, but only a general
provision to the effect that the M/V"Cherokee" was a
"general cargo carrier." 14 Further, the bare fact that the
vessel was carrying a particular type of cargo for one
shipper, which appears to be purely coincidental, is not
reason enough to convert the vessel from a common to a
private carrier, especially where, as in this case, it was
shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case,
LOADSTAR fits the definition of a common carrier under
Article 1732 of the Civil Code. In the case of De Guzman v.
Court of Appeals, 15 the Court juxtaposed the statutory
definition of "common carriers" with the peculiar
circumstances of that case, viz.:
The Civil Code defines "common carriers" in the following
terms:
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.
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 ancillary activity (in
local idiom, as "a sideline". Article 1732 also
carefully avoids making any distinction between a
person or enterprise offering transportation
service on a regular or scheduled basis and one
offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services
to the "general public," i.e., the general
community or population, and one who offers
services or solicits business only from a narrow
segment of the general population. We think that
Article 1733 deliberately refrained from making
such distinctions.
xxx xxx xxx
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
AGUSTIN, E.P.

such backhauling was done on a periodic or
occasional rather than regular or scheduled
manner, and eventhough private respondent's
principal occupation was not the carriage of goods
for others. There is no dispute that private
respondent charged his customers a fee for
hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that
private respondent held no certificate of public
convenience, and concluded he was not a
common carrier. This is palpable error. A
certificate of public convenience is not a requisite
for the incurring of liability under the Civil Code
provisions governing common carriers. That
liability arises the moment a person or firm acts
as a common carrier, without regard to whether
or not such carrier has also complied with the
requirements of the applicable regulatory statute
and implementing regulations and has been
granted a certificate of public convenience or
other franchise. To exempt private respondent
from the liabilities of a common carrier because
he has not secured the necessary certificate of
public convenience, would be offensive to sound
public policy; that would be to reward private
respondent precisely for failing to comply with
applicable statutory requirements The business of
a common carrier impinges directly and intimately
upon the safety and well being and property of
those members of the general community who
happen to deal with such carrier. The law imposes
duties and liabilities upon common carriers for
the safety and protection of those who utilize their
services and the law cannot allow a common
carrier to render such duties and liabilities merely
facultative by simply failing to obtain the
necessary permits and authorizations.
Moving on to the second assigned error, we find that the
M/V "Cherokee" was not seaworthy when it embarked on
its voyage on 19 November 1984. The vessel was not even
sufficiently manned at the time. "For a vessel to be
seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers
and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article
1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the
"limited liability" theory should be applied in this case. The
doctrine of limited liability does not apply where there was
negligence on the part of the vessel owner or agent. 17
LOADSTAR was at fault or negligent in not maintaining a
seaworthy vessel and in having allowed its vessel to sail
despite knowledge of an approaching typhoon. In any
event, it did not sink because of any storm that may be
deemed as force majeure, inasmuch as the wind condition
in the performance of its duties, LOADSTAR cannot hide
behind the "limited liability" doctrine to escape
responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in
holding it liable for the loss of the goods, in utter disregard
of this Court's pronouncements in St. Paul Fire & Marine
50
TRANSPORTATION LAW
Ins. Co. v. Macondray & Co., Inc., 18 and National Union Fire
Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these
two cases that after paying the claim of the insured for
damages under the insurance policy, the insurer is
subrogated merely to the rights of the assured, that is, it
can recover only the amount that may, in turn, be
recovered by the latter. Since the right of the assured in
case of loss or damage to the goods is limited or restricted
by the provisions in the bills of lading, a suit by the insurer
as subrogee is necessarily subject to the same limitations
and restrictions. We do not agree. In the first place, the
cases relied on by LOADSTAR involved a limitation on the
carrier's liability to an amount fixed in the bill of lading
which the parties may enter into, provided that the same
was freely and fairly agreed upon (Articles 1749-1750). On
the other hand, the stipulation in the case at bar effectively
reduces the common carrier's liability for the loss or
destruction of the goods to a degree less than extraordinary
(Articles 1744 and 1745), that is, the carrier is not liable for
any loss or damage to shipments made at "owner's risk."
Such stipulation is obviously null and void for being
contrary to public policy." 20 It has been said:
Three kinds of stipulations have often been
made in a bill of lading. The first one
exempting the carrier from any and all liability
for loss or damage occasioned by its own
negligence. The second is one providing for an
unqualified limitation of such liability to an
agreed valuation. And the third is one limiting
the liability of the carrier to an agreed
valuation unless the shipper declares a higher
value and pays a higher rate of. freight.
According to an almost uniform weight of
authority, the first and second kinds of
stipulations are invalid as being contrary to
public policy, but the third is valid and
enforceable. 21
Since the stipulation in question is null and void,
it follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has
against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in
this case was barred by prescription. MIC's cause of action
had not yet prescribed at the time it was concerned.
Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the
matter, the Carriage of Goods by Sea Act (COGSA) which
provides for a one-year period of limitation on claims for
loss of, or damage to, cargoes sustained during transit
may be applied suppletorily to the case at bar. This one-
year prescriptive period also applies to the insurer of the
goods. 22 In this case, the period for filing the action for
recovery has not yet elapsed. Moreover, a stipulation
reducing the one-year period is null and void; 23 it must,
accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the
challenged decision of 30 January 1997 of the Court of
Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs
against petitioner.1wphi1.nt
SO ORDERED.
AGUSTIN, E.P.

3. EASTERN SHIPPING vs. NISSHIN FIRE
EASTERN SHIPPING LINES, INC. v. INTERMEDIATE
APPELLATE COURT and DEVELOPMENT INSURANCE &
SURETY CORPORATION
G.R. No. L-69044 May 5, 1987
EASTERN SHIPPING LINES, INC. v. THE NISSHIN FIRE
AND MARINE INSURANCE CO., and DOWA FIRE &
MARINE INSURANCE CO., LTD.
G.R. No. 71478 May 29, 1987
Doctrine: The law of the country to which the goods are to be
transported governs the liability of the common carrier in
case of their loss, destruction or deterioration.
FACTS: These two cases, both for the recovery of the value
of cargo insurance, arose from the same incident, the
sinking of the M/S ASIATICA when it caught fire, resulting
in the total loss of ship and cargo.
Respondent Development Insurance & Surety
Corporation having been subrogated unto the rights of the
two insured companies, filed suit against petitioner Carrier
for the recovery of the amounts it had paid to the insured.
Petitioner-Carrier denied liability mainly on the ground that
the loss was due to an extraordinary fortuitous event.
Hence, it is not liable under the law.
Lower Court Ruling: Judgment was rendered in favor of
Development Insurance.
Appellate Court Ruling: The Court of Appeals affirmed the
judgment of the lower court.
ISSUE:
1. Whether or not petitioner is liable YES
RATIO: The law of the country to which the goods are to be
transported governs the liability of the common carrier in
case of their loss, destruction or deterioration. As the
cargoes in question were transported from Japan to the
Philippines, the liability of Petitioner Carrier is governed
primarily by the Civil Code. However, in all matters not
regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of
Commerce and by special laws. Thus, the Carriage of
Goods by Sea Act, a special law, is suppletory to the
provisions of the Civil Code.
51
TRANSPORTATION LAW
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and
DEVELOPMENT INSURANCE & SURETY CORPORATION,
respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and
DOWA FIRE & MARINE INSURANCE CO., LTD.,
respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo
insurance, arose from the same incident, the sinking of the
M/S ASIATICA when it caught fire, resulting in the total
loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the
M/S ASIATICA, a vessel operated by petitioner Eastern
Shipping Lines, Inc., (referred to hereinafter as Petitioner
Carrier) loaded at Kobe, Japan for transportation to Manila,
5,000 pieces of calorized lance pipes in 28 packages valued
at P256,039.00 consigned to Philippine Blooming Mills Co.,
Inc., and 7 cases of spare parts valued at P92,361.75,
consigned to Central Textile Mills, Inc. Both sets of goods
were insured against marine risk for their stated value with
respondent Development Insurance and Surety
Corporation.
In G.R. No. 71478, during the same period, the same vessel
took on board 128 cartons of garment fabrics and
accessories, in two (2) containers, consigned to Mariveles
Apparel Corporation, and two cases of surveying
instruments consigned to Aman Enterprises and General
Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co.,
for US $46,583.00, and the 2 cases by respondent Dowa
Fire & Marine Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire
and sank, resulting in the total loss of ship and cargo. The
respective respondent Insurers paid the corresponding
marine insurance values to the consignees concerned and
were thus subrogated unto the rights of the latter as the
insured.
G.R. NO. 69044
AGUSTIN, E.P.

On May 11, 1978, respondent Development Insurance &
Surety Corporation (Development Insurance, for short),
having been subrogated unto the rights of the two insured
companies, filed suit against petitioner Carrier for the
recovery of the amounts it had paid to the insured before
the then Court of First instance of Manila, Branch XXX
(Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that
the loss was due to an extraordinary fortuitous event,
hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in
favor of Development Insurance in the amounts of
P256,039.00 and P92,361.75, respectively, with legal
interest, plus P35,000.00 as attorney's fees and costs.
Petitioner Carrier took an appeal to the then Court of
Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review
on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine
Insurance Co. NISSHIN for short), and Dowa Fire & Marine
Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the
insured, filed suit against Petitioner Carrier for the recovery
of the insured value of the cargo lost with the then Court of
First Instance of Manila, Branch 11 (Civil Case No.
116151), imputing unseaworthiness of the ship and non-
observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds
that the fire which caused the sinking of the ship is an
exempting circumstance under Section 4(2) (b) of the
Carriage of Goods by Sea Act (COGSA); and that when the
loss of fire is established, the burden of proving negligence
of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment
in favor of NISSHIN and DOWA in the amounts of US
$46,583.00 and US $11,385.00, respectively, with legal
interest, plus attorney's fees of P5,000.00 and costs. On
appeal by petitioner, the then Court of Appeals on
September 10, 1984, affirmed with modification the Trial
Court's judgment by decreasing the amount recoverable by
DOWA to US $1,000.00 because of $500 per package
limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner
Carrier.
Both Petitions were initially denied for lack of merit. G.R.
No. 69044 on January 16, 1985 by the First Division, and
G. R. No. 71478 on September 25, 1985 by the Second
Division. Upon Petitioner Carrier's Motion for
Reconsideration, however, G.R. No. 69044 was given due
course on March 25, 1985, and the parties were required to
submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier
sought reconsideration of the Resolution denying the
Petition for Review and moved for its consolidation with
52
TRANSPORTATION LAW
G.R. No. 69044, the lower-numbered case, which was then
pending resolution with the First Division. The same was
granted; the Resolution of the Second Division of
September 25, 1985 was set aside and the Petition was
given due course.
At the outset, we reject Petitioner Carrier's claim that it is
not the operator of the M/S Asiatica but merely a charterer
thereof. We note that in G.R. No. 69044, Petitioner Carrier
stated in its Petition:
There are about 22 cases of the
"ASIATICA" pending in various courts
where various plaintiffs are represented
by various counsel representing various
consignees or insurance companies. The
common defendant in these cases is
petitioner herein, being the operator of
said vessel. ... 1
Petitioner Carrier should be held bound to said admission.
As a general rule, the facts alleged in a party's pleading are
deemed admissions of that party and binding upon it. 2
And an admission in one pleading in one action may be
received in evidence against the pleader or his successor-
in-interest on the trial of another action to which he is a
party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law
should govern the Civil Code provisions on Common
carriers or the Carriage of Goods by Sea Act? and (2) who
has the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be
transported governs the liability of the common carrier in
case of their loss, destruction or deterioration. 4 As the
cargoes in question were transported from Japan to the
Philippines, the liability of Petitioner Carrier is governed
primarily by the Civil Code. 5 However, in all matters not
regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of
Commerce and by special laws. 6 Thus, the Carriage of
Goods by Sea Act, a special law, is suppletory to the
provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of
their business and for reasons of public policy, are bound
to observe extraordinary diligence in the vigilance over
goods, according to all the circumstances of each case. 8
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;
xxx xxx xxx 9
AGUSTIN, E.P.
 TRANSPORTATION LAW

Petitioner Carrier claims that the loss of the vessel by fire extraordinary vigilance and care had
exempts it from liability under the phrase "natural disaster been made by the crew to prevent the
or calamity. " However, we are of the opinion that fire may occurrence of the fire. The defendant, as
not be considered a natural disaster or calamity. This must a common carrier, is liable to the
be so as it arises almost invariably from some act of man or consignees for said lack of deligence
by human means. 10 It does not fall within the category of required of it under Article 1733 of the
an act of God unless caused by lightning 11 or by other Civil Code. 15
natural disaster or calamity. 12 It may even be caused by
the actual fault or privity of the carrier. 13
Having failed to discharge the burden of proving that it had
exercised the extraordinary diligence required by law,
Article 1680 of the Civil Code, which considers fire as an Petitioner Carrier cannot escape liability for the loss of the
extraordinary fortuitous event refers to leases of rural cargo.
lands where a reduction of the rent is allowed when more
than one-half of the fruits have been lost due to such
And even if fire were to be considered a "natural disaster"
event, considering that the law adopts a protection policy
within the meaning of Article 1734 of the Civil Code, it is
towards agriculture. 14
required under Article 1739 of the same Code that the
"natural disaster" must have been the "proximate and only
As the peril of the fire is not comprehended within the cause of the loss," and that the carrier has "exercised due
exception in Article 1734, supra, Article 1735 of the Civil diligence to prevent or minimize the loss before, during or
Code provides that all cases than those mention in Article after the occurrence of the disaster. " This Petitioner
1734, the common carrier shall be presumed to have been Carrier has also failed to establish satisfactorily.
at fault or to have acted negligently, unless it proves that it
has observed the extraordinary deligence required by law.
Nor may Petitioner Carrier seek refuge from liability under
the Carriage of Goods by Sea Act, It is provided therein
In this case, the respective Insurers. as subrogees of the that:
cargo shippers, have proven that the transported goods
have been lost. Petitioner Carrier has also proved that the
Sec. 4(2). Neither the carrier nor the ship
loss was caused by fire. The burden then is upon Petitioner
shall be responsible for loss or damage
Carrier to proved that it has exercised the extraordinary
arising or resulting from
diligence required by law. In this regard, the Trial Court,
concurred in by the Appellate Court, made the following
Finding of fact: (b) Fire, unless caused by the actual
fault or privity of the carrier.
The cargoes in question were, according
to the witnesses defendant placed in xxx xxx xxx
hatches No, 2 and 3 cf the vessel,
Boatswain Ernesto Pastrana noticed that
In this case, both the Trial Court and the Appellate Court,
smoke was coming out from hatch No. 2
in effect, found, as a fact, that there was "actual fault" of
and hatch No. 3; that where the smoke
the carrier shown by "lack of diligence" in that "when the
was noticed, the fire was already big;
smoke was noticed, the fire was already big; that the fire
that the fire must have started twenty-
must have started twenty-four (24) hours before the same
four 24) our the same was noticed; that
was noticed; " and that "after the cargoes were stored in the
carbon dioxide was ordered released and
hatches, no regular inspection was made as to their
the crew was ordered to open the hatch
condition during the voyage." The foregoing suffices to
covers of No, 2 tor commencement of fire
show that the circumstances under which the fire
fighting by sea water: that all of these
originated and spread are such as to show that Petitioner
effort were not enough to control the fire.
Carrier or its servants were negligent in connection
therewith. Consequently, the complete defense afforded by
Pursuant to Article 1733, common the COGSA when loss results from fire is unavailing to
carriers are bound to extraordinary Petitioner Carrier.
diligence in the vigilance over the goods.
The evidence of the defendant did not
On the US $500 Per Package Limitation:
show that extraordinary vigilance was
observed by the vessel to prevent the
occurrence of fire at hatches numbers 2 Petitioner Carrier avers that its liability if any, should not
and 3. Defendant's evidence did not exceed US $500 per package as provided in section 4(5) of
likewise show he amount of diligence the COGSA, which reads:
made by the crew, on orders, in the care
of the cargoes. What appears is that after
(5) Neither the carrier nor the ship shall
the cargoes were stored in the hatches,
in any event be or become liable for any
no regular inspection was made as to
loss or damage to or in connection with
their condition during the voyage.
the transportation of goods in an amount
Consequently, the crew could not have
exceeding $500 per package lawful
even explain what could have caused the
money of the United States, or in case of
fire. The defendant, in the Court's mind,
goods not shipped in packages, per
failed to satisfactorily show that
customary freight unit, or the equivalent

53 AGUSTIN, E.P.
 TRANSPORTATION LAW

of that sum in other currency, unless the
nature and value of such goods have
been declared by the shipper before
shipment and inserted in bill of lading.
This declaration if embodied in the bill of
lading shall be prima facie evidence, but
all be conclusive on the carrier.
is likewise the insured value of the cargo (Exhibit "H") and
amount was affirmed to be paid by respondent Court.
however, multiplying seven (7) cases by $500 per package
at the present prevailing rate of P20.44 to US $1 (US
$3,500 x P20.44) would yield P71,540 only, which is the
amount that should be paid by Petitioner Carrier for those
spare parts, and not P92,361.75.

By agreement between the carrier,
master or agent of the carrier, and the
shipper another maximum amount than
that mentioned in this paragraph may be
fixed: Provided, That such maximum
shall not be less than the figure above
named. In no event shall the carrier be
Liable for more than the amount of
damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the
limitations of liability in this wise:
Art. 1749. A stipulation that the common
carrier's liability as limited to the value
of the goods appearing in the bill of
lading, unless the shipper or owner
declares a greater value, is binding.
In G.R. No. 71478, in so far as the two (2) cases of
surveying instruments are concerned, the amount awarded
to DOWA which was already reduced to $1,000 by the
Appellate Court following the statutory $500 liability per
package, is in order.
In respect of the shipment of 128 cartons of garment
fabrics in two (2) containers and insured with NISSHIN, the
Appellate Court also limited Petitioner Carrier's liability to
$500 per package and affirmed the award of $46,583 to
NISSHIN. it multiplied 128 cartons (considered as COGSA
packages) by $500 to arrive at the figure of $64,000, and
explained that "since this amount is more than the insured
value of the goods, that is $46,583, the Trial Court was
correct in awarding said amount only for the 128 cartons,
which amount is less than the maximum limitation of the
carrier's liability."
We find no reversible error. The 128 cartons and not the
two (2) containers should be considered as the shipping
unit.

It is to be noted that the Civil Code does not of itself limit

In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F
the liability of the common carrier to a fixed amount per
2d 807 (1981), the consignees of tin ingots and the shipper
package although the Code expressly permits a stipulation
of floor covering brought action against the vessel owner
limiting such liability. Thus, the COGSA which is
and operator to recover for loss of ingots and floor covering,
suppletory to the provisions of the Civil Code, steps in and
which had been shipped in vessel supplied containers.
supplements the Code by establishing a statutory provision
The U.S. District Court for the Southern District of New
limiting the carrier's liability in the absence of a declaration
York rendered judgment for the plaintiffs, and the
of a higher value of the goods by the shipper in the bill of
defendant appealed. The United States Court of Appeals,
lading. The provisions of the Carriage of Goods by.Sea Act
Second Division, modified and affirmed holding that:
on limited liability are as much a part of a bill of lading as
though physically in it and as much a part thereof as
though placed therein by agreement of the parties. 16 When what would ordinarily be
considered packages are shipped in a
container supplied by the carrier and the
In G.R. No. 69044, there is no stipulation in the respective
number of such units is disclosed in the
Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the
shipping documents, each of those units
carrier's liability for the loss or destruction of the goods.
and not the container constitutes the
Nor is there a declaration of a higher value of the goods.
"package" referred to in liability
Hence, Petitioner Carrier's liability should not exceed US
limitation provision of Carriage of Goods
$500 per package, or its peso equivalent, at the time of
by Sea Act. Carriage of Goods by Sea
payment of the value of the goods lost, but in no case
Act, 4(5), 46 U.S.C.A.& 1304(5).
"more than the amount of damage actually sustained."

Even if language and purposes of

The actual total loss for the 5,000 pieces of calorized lance
Carriage of Goods by Sea Act left doubt
pipes was P256,039 (Exhibit "C"), which was exactly the
as to whether carrier-furnished
amount of the insurance coverage by Development
containers whose contents are disclosed
Insurance (Exhibit "A"), and the amount affirmed to be paid
should be treated as packages, the
by respondent Court. The goods were shipped in 28
interest in securing international
packages (Exhibit "C-2") Multiplying 28 packages by $500
uniformity would suggest that they
would result in a product of $14,000 which, at the current
should not be so treated. Carriage of
exchange rate of P20.44 to US $1, would be P286,160, or
Goods by Sea Act, 4(5), 46 U.S.C.A.
"more than the amount of damage actually sustained."
1304(5).
Consequently, the aforestated amount of P256,039 should
be upheld.
... After quoting the statement in
Leather's Best, supra, 451 F 2d at 815,
With respect to the seven (7) cases of spare parts (Exhibit
that treating a container as a package is
"I-3"), their actual value was P92,361.75 (Exhibit "I"), which

54 AGUSTIN, E.P.

inconsistent with the congressional
purpose of establishing a reasonable
minimum level of liability, Judge Beeks
wrote, 414 F. Supp. at 907 (footnotes
omitted):
Although this approach has not
completely escaped criticism, there
is, nonetheless, much to commend
it. It gives needed recognition to the
responsibility of the courts to
construe and apply the statute as
enacted, however great might be the
temptation to "modernize" or
reconstitute it by artful judicial
gloss. If COGSA's package limitation
scheme suffers from internal illness,
Congress alone must undertake the
surgery. There is, in this regard,
obvious wisdom in the Ninth
Circuit's conclusion in Hartford that
technological advancements,
whether or not forseeable by the
COGSA promulgators, do not
warrant a distortion or artificial
construction of the statutory term
"package." A ruling that these large
reusable metal pieces of transport
equipment qualify as COGSA
packages at least where, as here,
they were carrier owned and
supplied would amount to just
such a distortion.
Certainly, if the individual crates or
cartons prepared by the shipper and
containing his goods can rightly be
considered "packages" standing by
themselves, they do not suddenly
lose that character upon being
stowed in a carrier's container. I
would liken these containers to
detachable stowage compartments
of the ship. They simply serve to
divide the ship's overall cargo
stowage space into smaller, more
serviceable loci. Shippers' packages
are quite literally "stowed" in the
containers utilizing stevedoring
practices and materials analogous
to those employed in traditional on
board stowage.
In Yeramex International v. S.S. Tando,,
1977 A.M.C. 1807 (E.D. Va.) rev'd on
other grounds, 595 F 2nd 943 (4 Cir.
1979), another district with many
maritime cases followed Judge Beeks'
reasoning in Matsushita and similarly
rejected the functional economics test.
Judge Kellam held that when rolls of
polyester goods are packed into
cardboard cartons which are then placed
in containers, the cartons and not the
containers are the packages.
xxx xxx xxx
55
TRANSPORTATION LAW
The case of Smithgreyhound v. M/V Eurygenes, 18 followed
the Mitsui test:
Eurygenes concerned a shipment of
stereo equipment packaged by the
shipper into cartons which were then
placed by the shipper into a carrier-
furnished container. The number of
cartons was disclosed to the carrier in the
bill of lading. Eurygenes followed the
Mitsui test and treated the cartons, not
the container, as the COGSA packages.
However, Eurygenes indicated that a
carrier could limit its liability to $500 per
container if the bill of lading failed to
disclose the number of cartons or units
within the container, or if the parties
indicated, in clear and unambiguous
language, an agreement to treat the
container as the package.
(Admiralty Litigation
in Perpetuum: The
Continuing Saga of
Package Limitations
and Third World
Delivery Problems by
Chester D. Hooper &
Keith L. Flicker,
published in Fordham
International Law
Journal, Vol. 6, 1982-
83, Number 1)
(Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the
following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories
Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly
disclosed the contents of the containers, the number of
cartons or units, as well as the nature of the goods, and
applying the ruling in the Mitsui and Eurygenes cases it is
clear that the 128 cartons, not the two (2) containers
should be considered as the shipping unit subject to the
$500 limitation of liability.
True, the evidence does not disclose whether the containers
involved herein were carrier-furnished or not. Usually,
however, containers are provided by the carrier. 19 In this
case, the probability is that they were so furnished for
Petitioner Carrier was at liberty to pack and carry the
goods in containers if they were not so packed. Thus, at the
dorsal side of the Bill of Lading (Exhibit "A") appears the
following stipulation in fine print:
AGUSTIN, E.P.
 TRANSPORTATION LAW

11. (Use of Container) Where the goods xxx xxx xxx 22

receipt of which is acknowledged on the

face of this Bill of Lading are not already
Petitioner Carrier was afforded ample time to present its
packed into container(s) at the time of
side of the case. 23 It cannot complain now that it was
receipt, the Carrier shall be at liberty to
denied due process when the Trial Court rendered its
pack and carry them in any type of
Decision on the basis of the evidence adduced. What due
container(s).
process abhors is absolute lack of opportunity to be heard.
24

The foregoing would explain the use of the estimate "Say:

Two (2) Containers Only" in the Bill of Lading, meaning
On the Award of Attorney's Fees:
that the goods could probably fit in two (2) containers only.
It cannot mean that the shipper had furnished the
containers for if so, "Two (2) Containers" appearing as the Petitioner Carrier questions the award of attorney's fees. In
first entry would have sufficed. and if there is any both cases, respondent Court affirmed the award by the
ambiguity in the Bill of Lading, it is a cardinal principle in Trial Court of attorney's fees of P35,000.00 in favor of
the construction of contracts that the interpretation of Development Insurance in G.R. No. 69044, and P5,000.00
obscure words or stipulations in a contract shall not favor in favor of NISSHIN and DOWA in G.R. No. 71478.
the party who caused the obscurity. 20 This applies with
even greater force in a contract of adhesion where a
Courts being vested with discretion in fixing the amount of
contract is already prepared and the other party merely
attorney's fees, it is believed that the amount of P5,000.00
adheres to it, like the Bill of Lading in this case, which is
would be more reasonable in G.R. No. 69044. The award of
draw. up by the carrier. 21
P5,000.00 in G.R. No. 71478 is affirmed.

On Alleged Denial of Opportunity to Present Deposition of Its

Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it
sufficient time to take the depositions of its witnesses in
Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full
opportunity to present its evidence but it failed to do so. On
this point, the Trial Court found:
WHEREFORE, 1) in G.R. No. 69044, the judgment is
modified in that petitioner Eastern Shipping Lines shall
pay the Development Insurance and Surety Corporation
the amount of P256,039 for the twenty-eight (28) packages
of calorized lance pipes, and P71,540 for the seven (7)
cases of spare parts, with interest at the legal rate from the
date of the filing of the complaint on June 13, 1978, plus
P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.

xxx xxx xxx SO ORDERED.

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

56 AGUSTIN, E.P.

VIGILANCE OVER THE GOODS
ART. 1734
Exemption from Liability
1. TABACALERA vs. NORTH FRONT
SHIPPING
Facts:
Sacks of grains were loaded on board a vessel owned by
North Front Shipping (common carrier); the consignee:
Republic Floor Mills. The vessel was inspected by
representatives of the shipper prior to the transport and
was found fitting to carry the cargo; it was also issued a
Permit to Sail. The goods were successfully delivered but it
was not immediately unloaded by the consignee. There
were a shortage of 23.666 metric tons and some of the
merchandise was already moldy and deteriorating. Hence,
the consignee rejected all the cargo and demanded
payment of damages from the common carrier. Upon
refusal, the insurance companies (petitioners) were obliged
to pay. Petitioners now allege that there was negligence on
the part of the carrier. The trial court ruled that only
ordinary diligence was required since the charter-party
agreement converted North Front Shipping into a private
carrier.
Issues:
WON North Front Shipping is a common carrier. If indeed,
did it fail to exercise the required diligence and thus should
be held liable?
Held:
North Front Shipping is a common carrier. Thus, it has the
burden of proving that it observed extraordinary
diligence in order to avoid responsibility for the lost cargo.
The charter-party agreement between North Front Shipping
Services, Inc., and Republic Flour Mills Corporation did not
in any way convert the common carrier into a private
carrier. A charter-party is defined as a contract by which
an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or usex x x
Having been in the service since 1968, the master of the
vessel would have known at the outset that corn grains
that were farm wet and not properly dried would eventually
deteriorate when stored in sealed and hot compartments as
in hatches of a ship. Equipped with this knowledge, the
master of the vessel and his crew should have undertaken
precautionary measures to avoid or lessen the cargos
possible deterioration as they were presumed
knowledgeable about the nature of such cargo. But none of
such measures was taken.
It did not even endeavor to establish that the loss,
destruction or deterioration of the goods was due to the
57
TRANSPORTATION LAW
following: (a) flood, storm, earthquake, lightning, or other
natural disaster or calamity; (b) act of the public enemy in
war, whether international or civil; act or omission of the
shipper or owner of the goods; (d) the character of the
goods or defects in the packing or in the containers; (e)
order or act of competent public authority. This is a closed
list. If the cause of destruction, loss or deterioration is
other than the enumerated circumstances, then the carrier
is rightly liable therefor.
However, the destruction, loss or deterioration of the cargo
cannot be attributed solely to the carrier. The consignee
Republic Flour Mills Corporation is guilty of contributory
negligence. It was seasonably notified of the arrival of the
barge but did not immediately start the unloading
operations.
________________________________________________________
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 119197 May 16, 1997
TABACALERA INSURANCE CO., PRUDENTIAL
GUARANTEE & ASSURANCE, INC., and NEW ZEALAND
INSURANCE CO., LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT
OF APPEALS, respondents.
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee &
Assurance, Inc., and New Zealand Insurance Co., Ltd., in
this petition for review on certiorari, assail the 22 December
1994 decision of the Court of Appeals and its Resolution of
16 February 1995 which affirmed the 1 June 1993 decision
of the Regional Trial Court dismissing their complaint for
damages against North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at
P3,500,640.00 were shipped on board North Front 777, a
vessel owned by North Front Shipping Services, Inc. The
cargo was consigned to Republic Flour Mills Corporation in
Manila under Bill of Lading No. 001 1 and insured with the
herein mentioned insurance companies. The vessel was
inspected prior to actual loading by representatives of the
shipper and was found fit to carry the merchandise. The
cargo was covered with tarpaulins and wooden boards. The
hatches were sealed and could only be opened by
representatives of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and
arrived Manila on 16 August 1990. Republic Flour Mills
Corporation was advised of its arrival but it did not
immediately commence the unloading operations. There
were days when unloading had to be stopped due to
variable weather conditions and sometimes for no apparent
reason at all. When the cargo was eventually unloaded
there was a shortage of 26.333 metric tons. The remaining
AGUSTIN, E.P.

merchandise was already moldy, rancid and deteriorating.
The unloading operations were completed on 5 September
1990 or twenty (20) days after the arrival of the barge at
the wharf of Republic Flour Mills Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine
the corn grains and determine the cause of deterioration. A
Certificate of Analysis was issued indicating that the corn
grains had 18.56% moisture content and the wetting was
due to contact with salt water. The mold growth was only
incipient and not sufficient to make the corn grains toxic
and unfit for consumption. In fact the mold growth could
still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo
and formally demanded from North Front Shipping
Services, Inc., payment for the damages suffered by it. The
demands however were unheeded. The insurance
companies were perforce obliged to pay Republic Flour
Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies
they were subrogated to the rights of Republic Flour Mills
Corporation. Thusly, they lodged a complaint for damages
against North Front Shipping Services, Inc., claiming that
the loss was exclusively attributable to the fault and
negligence of the carrier. The Marine Cargo Adjusters hired
by the insurance companies conducted a survey and found
cracks in the bodega of the barge and heavy concentration
of molds on the tarpaulins and wooden boards. They did
not notice any seals in the hatches. The tarpaulins were
not brand new as there were patches on them, contrary to
the claim of North Front Shipping Services, Inc., thus
making it possible for water to seep in. They also
discovered that the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation
that it could not be made culpable for the loss and
deterioration of the cargo as it was never negligent. Captain
Solomon Villanueva, master of the vessel, reiterated that
the barge was inspected prior to the actual loading and was
found adequate and seaworthy. In addition, they were
issued a permit to sail by the Coast Guard. The tarpaulins
were doubled and brand new and the hatches were
properly sealed. They did not encounter big waves hence it
was not possible for water to seep in. He further averred
that the corn grains were farm wet and not properly dried
when loaded.
The court below dismissed the complaint and ruled that
the contract entered into between North Front Shipping
Services, Inc., and Republic Flour Mills Corporation was a
charter-party agreement. As such, only ordinary diligence
in the care of goods was required of North Front Shipping
Services, Inc. The inspection of the barge by the shipper
and the representatives of the shipping company before
actual loading, coupled with the Permit to Sail issued by the
Coast Guard, sufficed to meet the degree of diligence
required of the carrier.
On the other hand, the Court of Appeals ruled that as a
common carrier required to observe a higher degree of
diligence North Front 777 satisfactorily complied with all
the requirements hence was issued a Permit to Sail after
proper inspection. Consequently, the complaint was
dismissed and the motion for reconsideration rejected.
58
TRANSPORTATION LAW
The charter-party agreement between North Front Shipping
Services, Inc., and Republic Flour Mills Corporation did not
in any way convert the common carrier into a private
carrier. We have already resolved this issue with finality in
Planters Products, Inc. v. Court of Appeals 2 thus
A "charter-party" is defined as a contract
by which an entire ship, or some
principal part thereof, is let by the owner
to another person for a specified time or
use; a contract of affreightment by which
the owner of a ship or other vessel lets
the whole or a part of her to a merchant
or other person for the conveyance of
goods, on a particular voyage, in
consideration of the payment of freight . .
. Contract of affreightment may either be
time charter, wherein the vessel is leased
to the charterer for a fixed period of time,
or voyage charter, wherein the ship is
leased for a single voyage. In both cases,
the charter-party provides for the hire of
the vessel only, either for a determinate
period of time or for a single or
consecutive voyage, the ship owner to
supply the ship's store, pay for the wages
of the master of the crew, and defray the
expenses for the maintenance of the
ship.
Upon the other hand, the term "common
or public carrier" is defined in Art. 1732
of the Civil Code. The definition extends
to carriers either by land, air or water
which hold themselves out as ready to
engage in carrying goods or transporting
passengers or both for compensation as
a public employment and not as a casual
occupation . . .
It is therefore imperative that a public
carrier shall remain as such,
notwithstanding the charter of the whole
or portion of a vessel by one or more
persons, provided the charter is limited to
the shin only, as in the case of a time-
charter or voyage-charter (emphasis
supplied).
North Front Shipping Services, Inc., is a corporation
engaged in the business of transporting cargo and offers its
services indiscriminately to the public. It is without doubt a
common carrier. As such it is required to observe
extraordinary diligence in its vigilance over the goods it
transports. 3 When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or
to have acted negligently. 4 North Front Shipping Services,
Inc., therefore has the burden of proving that it observed
extraordinary diligence in order to avoid responsibility for
the lost cargo.
North Front Shipping Services, Inc., proved that the vessel
was inspected prior to actual loading by representatives of
the shipper and was found fit to take a load of corn grains.
They were also issued Permit to Sail by the Coast Guard.
The master of the vessel testified that the corn grains were
AGUSTIN, E.P.
 TRANSPORTATION LAW

farm wet when loaded. However, this testimony was
disproved by the clean bill of lading issued by North Front
Shipping Services, Inc., which did not contain a notation
that the corn grains were wet and improperly dried. Having
been in the service since 1968, the master of the vessel
would have known at the outset that corn grains that were
farm wet and not properly dried would eventually
deteriorate when stored in sealed and hot compartments as
in hatches of a ship. Equipped with this knowledge, the
master of the vessel and his crew should have undertaken
precautionary measures to avoid or lessen the cargo's
possible deterioration as they were presumed
knowledgeable about the nature of such cargo. But none of
such measures was taken.
In Compania Maritima v. Court of Appeals 5 we ruled
. . . Mere proof of delivery of the goods in
good order to a common carrier, and of
their arrival at the place of destination in
bad order, makes out prima facie case
against the common carrier, so that if no
explanation is given as to how the loss,
deterioration or destruction of the goods
occurred, the common carrier must be
held responsible. Otherwise stated, it is
incumbent upon the common carrier to
prove that the loss, deterioration or
destruction was due to accident or some
other circumstances inconsistent with its
liability . . .
The extraordinary diligence in the
vigilance over the goods tendered for
shipment requires the common carrier to
know and to follow the required
precaution for avoiding damage to, or
destruction of the goods entrusted to it for
safe carriage and delivery. It requires
common carriers to render service with
the greatest skill and foresight and "to
use all reasonable means to ascertain the
nature and characteristics of goods
tendered for shipment, and to exercise
due care in the handling and stowage,
including such methods as their nature
requires" (emphasis supplied).
already several patches on them, hence, making it highly
probable for water to enter.
Laboratory analysis revealed that the corn grains were
contaminated with salt water. North Front Shipping
Services, Inc., failed to rebut all these arguments. It did not
even endeavor to establish that the loss, destruction or
deterioration of the goods was due to the following: (a)
flood, storm, earthquake, lightning, or other natural
disaster or calamity; (b) act of the public enemy in war,
whether international or civil; (c) act or omission of the
shipper or owner of the goods; (d) the character of the
goods or defects in the packing or in the containers; (e)
order or act of competent public authority. 6 This is a
closed list. If the cause of destruction, loss or deterioration
is other than the enumerated circumstances, then the
carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or
deterioration of the cargo solely to the carrier. We find the
consignee Republic Flour Mills Corporation guilty of
contributory negligence. It was seasonably notified of the
arrival of the barge but did not immediately start the
unloading operations. No explanation was proffered by the
consignee as to why there was a delay of six (6) days. Had
the unloading been commenced immediately the loss could
have been completely avoided or at least minimized. As
testified to by the chemist who analyzed the corn samples,
the mold growth was only at its incipient stage and could
still be arrested by drying. The corn grains were not yet
toxic or unfit for consumption. For its contributory
negligence, Republic Flour Mills Corporation should share
at least 40% of the loss. 7
WHEREFORE, the Decision of the Court of Appeals of 22
December 1994 and its Resolution of 16 February 1995 are
REVERSED and SET ASIDE. Respondent North Front
Shipping Services, Inc., is ordered to pay petitioners
Tabacalera Insurance Co., Prudential Guarantee &
Assurance, Inc., and New Zealand Insurance Co. Ltd.,
P1,313,660.00 which is 60% of the amount paid by the
insurance companies to Republic Flour Mills Corporation,
plus interest at the rate of 12% per annum from the time
this judgment becomes final until full payment.
SO ORDERED.

Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

In fine, we find that the carrier failed to observe the
required extraordinary diligence in the vigilance over the
goods placed in its care. The proofs presented by North Padilla, J., is on leave.
Front Shipping Services, Inc., were insufficient to rebut the
prima facie presumption of private respondent's negligence,
more so if we consider the evidence adduced by petitioners.

It is not denied by the insurance companies that the vessel

was indeed inspected before actual loading and that North
Front 777 was issued a Permit to Sail. They proved the fact
of shipment and its consequent loss or damage while in the
actual possession of the carrier. Notably, the carrier failed
to volunteer any explanation why there was spoilage and
how it occurred. On the other hand, it was shown during
the trial that the vessel had rusty bulkheads and the
wooden boards and tarpaulins bore heavy concentration of
molds. The tarpaulins used were not new, contrary to the
claim of North Front Shipping Services, Inc., as there were

59 AGUSTIN, E.P.

2. FIREMEN'S FUN vs. METRO PORT
SERVICE
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 83613 February 21, 1990
FIREMAN'S FUND INSURANCE CO., petitioner,
vs.
METRO PORT SERVICE, INC., (Formerly E. Razon,
Inc.), respondent.
Dollete, Blanco, Ejercito & Associates for petitioner.
Cruz, Durian, Agabin, Atienza, Alday & Tuason for
respondent.
GUTIERREZ, JR., J.:
This is a petition for review of the decision and resolution
denying reconsideration of the Court of Appeals in CA-G.R.
CV No. 00673 entitled "Fireman's Fund Insurance Co. v.
Maersk Line, Compaia General de Tabacos de Filipinas
and E. Razon, Inc."
The facts are as follows:
Vulcan Industrial and Mining Corporation imported from
the United States several machineries and equipment
which were loaded on board the SIS Albert Maersk at the
port of Philadelphia, U.S.A., and transhipped for Manila
through the vessel S/S Maersk Tempo.
The cargo which was covered by a clean bill of lading
issued by Maersk Line and Compania General de Tabacos
de Filipinas (referred to as the CARRIER) consisted of the
following:
xxx xxx xxx
1 piece truck mounted core drill
1 piece trailer mounted core drill
1 (40') container of 321 pieces steel
tubings
1 (40') container of 170 pieces steel
tubings
1 (40') container of 13 cases, 3 crates, 2
pallets and 26 mining machinery parts.
(Rollo, p. 4)
60
TRANSPORTATION LAW
The shipment arrived at the port of Manila on June 3, 1979
and was turned over complete and in good order condition
to the arrastre operator E. Razon Inc. (now Metro Port
Service Inc. and referred to as the ARRASTRE).
At about 10:20 in the morning of June 8, 1979, a tractor
operator, named Danilo Librando and employed by the
ARRASTRE, was ordered to transfer the shipment to the
Equipment Yard at Pier 3. While Librando was
maneuvering the tractor (owned and provided by Maersk
Line) to the left, the cargo fell from the chassis and hit one
of the container vans of American President Lines. It was
discovered that there were no twist lock at the rear end of
the chassis where the cargo was loaded.
There was heavy damage to the cargo as the parts of the
machineries were broken, denied, cracked and no longer
useful for their purposes.
The value of the damage was estimated at P187,500.00
which amount was paid by the petitioner insurance
company to the consignee, Vulcan Industrial and Mining
Corporation.
The petitioner, under its subrogation rights, then filed a
suit against Maersk Line, Compania General de Tabacos
(as agent) and E. Razon, Inc., for the recovery of the
amount it paid the assured under the covering insurance
policy. On October 26, 1980, the trial court rendered
judgment, the decretal portion of which reads as follows:
xxx xxx xxx
WHEREFORE, judgment is hereby
rendered in favor of the plaintiff and
against the defendants by ordering the
latter to pay, jointly and severally, the
plaintiff the sum of P187,500.00, with
legal interest thereon from August 29,
1980 until full payment thereof.
Defendants are also ordered to pay, in
solidum, the sum of P10,000.00 as
attorney's fees to the plaintiff, and to pay
the costs of this suit.
There shall be no award for exemplary
damages in favor of the plaintiff, for the
reason that defendants are probably
acting in good faith in resisting the
complaint. (Rollo, pp. 45-46)
All the defendants appealed to the Court of Appeals.
Eventually, Maersk Line and Compania General de Tabacos
negotiated with the petitioner for the settlement of the
latter's claim and no longer pursued their appeal.
On the appeal of the ARRASTRE, the Court of Appeals
rendered a decision with the following dispositive portion:
WHEREFORE, foregoing premises
considered, the decision of the court a
quo insofar as herein defendant-
AGUSTIN, E.P.
 TRANSPORTATION LAW

appellant is concerned is REVERSED It xxx xxx xxx

is hereby ordered that the complaint
against herein defendant-appellant be
4. By the management contract
dismissed. No costs. (Rollo, p. 50)
inasmuch as the foreign shipping
company has no tractor operator in its
Reconsideration of the decision was denied in a resolution employ, the arrastre provided the
dated May 23, 1988. operator.

Hence, the present recourse. xxx xxx xxx

The petitioner raises this lone assignment of error: 8. It was likewise the responsibility of the
tractor operator, an employee of the
arrastre operator to inspect the chassis
THE HONORABLE COURT OF APPEALS
and tractor before driving the same, but
ERRED IN LIMITING LIABILITY SOLELY
which obligation the operator failed to
ON CO-DEFENDANT MAERSK LINES,
do.
CONTRARY TO THE FINDINGS OF
FACTS OF THE TRIAL COURT A QUO
AND OTHER FACTORS SHOWING 9. It was also the responsibility of the
CLEAR JOINT LIABILITY OF supervisor in the employ of the arrastre
DEFENDANTS IN SOLIDUM. operator to see that their men complied
with their respective tasks, which
included the examination if the chassis
There is merit in this petition.
has twist lock. (Rollo, pp. 44-45)

This Court has held in a number of cases that findings of

The legal relationship between the consignee and the
fact of the Court of Appeals are, in general, conclusive on
arrastre operator is akin to that of a depositor and
the Supreme Court when supported by the evidence on
warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA
record. The rule is not absolute, however, and allows
5 [1967]). The relationship between the consignee and the
exceptions, which we find present in the case at bar. The
common carrier is similar to that of the consignee and the
respondent court's findings of facts are contrary to those of
arrastre operator (Northern Motors, Inc. v. Prince Line, et
the trial court and appear to be contradicted by the
al., 107 Phil. 253 [1960]). Since it is the duty of the
evidence on record thus calling for our review. (Metro Port
ARRASTRE to take good care of the goods that are in its
Service, Inc. v. Court of Appeals, 131 SCRA 365 [1984]).
custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the
In absolving the ARRASTRE, the respondent Court ruled CARRIER. Both the ARRASTRE and the CARRIER are
that although Librando was an employee of the ARRASTRE, therefore charged with and obligated to deliver the goods in
since he was included in its payroll, he was technically and good condition to the consignee.
strictly an employee of Maersk Line in this particular
instance when he drove the tractor admittedly owned by
In general, the nature of the work of an arrastre operator
the foreign shipping line. The Court ruled that he received
covers the handling of cargoes at piers and wharves
instructions not from Metro Port but from Maersk Line
(Visayan Cebu Terminal Co., Inc. v. Commissioner of
relative to this job. He was performing a duty that properly
Internal Revenue, 13 SCRA 357 [1965]). This is embodied
pertained to Maersk Line which, for lack of a tractor
in the Management Contract drawn between the Bureau of
operator, had to get or hire from the ARRASTRE as per
Customs and E. Razon Inc., as the Arrastre Operator. The
their management contract. Nevertheless, Librando was not
latter agreed to bind itself, to wit:
remiss in his duty as tractor-driver considering that the
proximate and direct cause of the damage was the absence
of twist locks in the rear end of the chassis which Maersk CLAIMS AND LIABILITY FOR LOSSES
Line failed to provide. The respondent court thereby placed AND DAMAGES
the entire burden of liability on the owner of the Chassis
which in this case was the foreign shipping company,
1. Responsibility and
Maersk Line.
Liability for Losses
and Damages;
The foregoing conclusion disregarded the pertinent findings
of facts made by the lower court which are supported by
Claims. The CONTRACTOR shall, at
the evidence on record, to wit:
its own expense handle all merchandise
in the piers and other designated places
1. The accident occurred while the and at its own expense perform all work
cargoes were in the custody of the undertaken by it hereunder diligently
arrastre operator. and in skillful workmanlike and efficient
manner; That the CONTRACTOR shall be
solely responsible as an independent
2. The tractor operator was an employee
CONTRACTOR, and hereby agrees to
of the arrastre operator.
accept liability and to promptly pay to
the s hip company, consignee, consignor

61 AGUSTIN, E.P.
 TRANSPORTATION LAW

or other interested party or parties for is, therefore, inacurrate to state that Librando should be
the loss, damage, or non-delivery of considered an employee of Maersk Line on that specific
cargoes to the extent of the actual occasion.
invoice value of each package which in
no case shall be more than Three
Handling cargo is mainly the s principal work so its
Thousand Five Hundred Pesos
driver/operators, "cargadors", or employees should observe
(P3,500.00) for each package unless the
the stand" and indispensable measures necessary to
value of the importation is otherwise
prevent losses and damage to shipments under its custody.
specified or manifested or communicated
Since the ARRASTRE offered its drivers for the operation of
in writing together with the invoice value
tractors in the handling of cargo and equipment, then the
and supported by a certified packing list
ARRASTRE should see to it that the drivers under its
to the CONTRACTOR by the interested
employ must exercise due diligence in the performance of
party or parties before the discharge of
their work. From the testimonies of witnesses presented,
the goods, as well as all damage that
we gather that driver/operator Librando was remiss in his
may be suffered on account of loss,
duty. Benildez Cepeda, an arrastre-investigator of Metro
damage, or destruction of any
Port admitted that Librando as tractor-operator should first
merchandise while in custody or under
have inspected the chassis and made sure that the cargo
the control of the CONTRACTOR in any
was securely loaded on the chassis. He testified:
pier, shed, warehouse, facility; or other
designated place under the supervision
of the BUREAU, but said CONTRACTOR xxx xxx xxx
shall not be responsible for the condition
of the contents of any package received
Q My question is in your investigation report
nor for the weight, nor for any loss,
including enclosures, the principal reason was
injury or damage to the said cargo before
that the chassis has no rear twist lock?
or while the goods are being received or
remained on the piers, sheds, warehouse
or facility if the loss, injury or damage is A Yes, sir.
caused by force majeure, or other cause
beyond the CONTRACTORS control or
Q Did you investigate whether the driver Librando
capacity to prevent or remedy; ...
inspected the the truck before he operated the
same whether there was rear twist lock or not?
xxx xxx xxx
A I have asked him about that question whether
The CONTRACTOR shall be solely he had inspected the has any rear twist lock and
responsible for any and all injury or the answer he did not inspect, sir.
damage that may arise on account of the
negligence or carelessness of the
Q As a operator, do you agree with me that it is
CONTRACTOR, its agent or employees in
the duty also of Librando to see to it that the
the performance of the undertaking by it
truck is in good condition and fit to travel, is that
to be performed under the terms of the
correct?
contract, and the CONTRACTOR hereby
agree to and hold the BUREAU at all
times harmless therefrom and whole or A Yes, sir.
any part thereof. (Original Records, pp.
110-112; Emphasis supplied)
Q And as a tractor operator it is his duty to see to
it that the van mounted on top of the tractor was
To carry out its duties, the ARRASTRE is required to properly is that correct?
provide cargo handling equipment which includes among
others trailers, chassis for containers. In some cases,
A Yes, sir. (At pp. 18-20, T.S.N., February 17,
however, the shipping line has its own cargo handling 1982)
equipment.

Again Danilo Librando also admitted that it was usually his

In this particular instance, the records reveal that Maersk
practice to inspect not only the tractor but the chassis as
Line provided the chassis and the tractor which carried the
well but failed to do so in this particular instance.
carried the subject shipment. It merely requested the
ARRASTRE to dispatch a tractor operator to drive the
tractor inasmuch as the foreign shipping line did not have xxx xxx xxx
any truck operator in its employ. Such arrangement is
allowed between the ARRASTRE and the CARRIER Q You mentioned of the absence of a twist lock.
pursuant to the Management Contract. It was clearly one of Will you tell us where is this twist lock supposed
the services offered by the ARRASTRE. We agree with the to be located?
petitioner that it is the ARRASTRE which had the sole
discretion and prerogative to hire and assign Librando to
operate the tractor. It was also the ARRASTRE's sole A At the rear end of the chassis.
decision to detail and deploy Librando for the particular
task from among its pool of tractor operators or drivers. It

62 AGUSTIN, E.P.
 TRANSPORTATION LAW

Q Before you operated the tractor which carried
the mounted cord drill truck and trailer did you
examine if the chasiss had any twist locks?
A No, sir, because I presumed that it had twist
locks and I was confident that it had twist locks.
Q As a matter of procedure and according to you,
you examined the tractor, do you not make it a
practice to examine whether the chassis had any
twist locks?
A I used to do that but in that particular instance
I thought it had already its twist locks. (p. 8,
T.S.N., October 5, 1981)
It is true that Maersk Line is also at fault for not providing
twist locks on the chassis. However, we find the testimony
of Manuel Heraldez who is the Motor Pool General
Superintendent of Metro Port rather significant. On cross-
examination, he stated that:
and diligent tractor operator must nevertheless check if the
cargo is securely loaded on the chassis.
We, therefore, find Metro Port Service Inc., solidarily liable
in the instant case for the negligence of its employee. With
respect to the limited liability of the ARRASTRE, the
records disclose that the value of the importation was
relayed to the arrastre operator and in fact processed by its
chief claims examiner based on the documents submitted.
WHEREFORE, the appealed judgment of respondent Court
of Appeals is hereby REVERSED and SET ASIDE and that
of the Court of First Instance of Manila, 6th Judicial
District, Branch II is REINSTATED. No costs.
SO ORDERED.
Fernan, C.J. (Chairman), Feliciano, Bidin and Cortes, JJ.,
concur.

Q In your experience, Mr. witness, do

you know which is ahead of the placing
of the container van or the placing of the
twist lock on the chassis?

A The twist lock is already permanently

attached on the chassis, sir.

Q Earlier, you mentioned that you

cannot see the twist lock if the chassis is
loaded, correct?

A Yes, sir.

Q Do you what to impress upon the

Honorable Court that, by mere looking at
a loaded chassis, the twist lock cannot
be seen by the naked eye? Because the
van contained a hole in which the twist
lock thus entered inside the hold and
locked itself. It is already loaded. So. you
cannot no longer see it.

Q But if you closely examine this chassis

which has a load of container van. You
can see whether a twist lock is present or
not?

A Yes, sir. A twist lock is present.

Q In other words, if the driver of this

tractor closely examined this van, he
could have detected whether or not a
twist lock is present?

A Yes, sir. (pp. 33-35, T.S.N., March 23,

1982; Emphasis supplied)

Whether or not the twist lock can be seen by the naked eye
when the cargo has been loaded on the chassis, an efficient

63 AGUSTIN, E.P.