Republic of the Philippines for damages arising from the incident subject matter of the complaint when he executed
SUPREME COURT the following "Release of Claims":
Manila
SECOND DIVISION
G.R. No. 80447 January 31, 1989
BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ
and GEORGE L. CAILIPAN, respondents.
Sta. Maria & Associates for petitioner.
Punzalan and Associates Law Office for respondents.
MELENCIO-HERRERA, J.:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was
filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and
their son George, of legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The
Complaint alleged that George, who was a paying passenger on a Baliwag bus on 17
December 1984, suffered multiple serious physical injuries when he was thrown off said
bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus
driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was confined in the
hospital for treatment, incurring medical expenses, which were borne by his parents, the
respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses of
about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries
sustained by George was solely attributable to his own voluntary act in that, without
warning and provocation, he suddenly stood up from his seat and headed for the door of
the bus as if in a daze, opened it and jumped off while said bus was in motion, in spite of
the protestations by the driver and without the knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company,
Inc., on its third-party liability insurance in the amount of P50,000.00. In its Answer,
Fortune Insurance claimed limited liability, the coverage being subject to a Schedule of
Indemnities forming part of the insurance policy.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and
Baliwag each filed Motions to Dismiss on the ground that George, in consideration of the
sum of P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These Motions
were denied by the Trial Court in an Order dated 13 January 1986 as they were filed
beyond the time for pleading and after the Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted
by the Trial Court. The Amended Answer incorporated the affirmative defense in the
Motion to Dismiss to the effect that on 16 May 1985, George bad been paid all his claims
For and in consideration of the payment to me/us of the sum of EIGHT
THOUSAND TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of
which is hereby acknowledged, I/we, being of lawful age, do hereby release,
acquit and forever discharge Fortune Insurance and/or Baliwag transit, Inc.
his/her heirs, executors and assigns, from any and all liability now accrued or
hereafter to accrue on account of any and all claims or causes of action which
I/we now or may here after have for personal injuries, damage to property, loss of
services, medical expenses, losses or damages of any and every kind or nature
whatsoever, now known or what may hereafter develop by me/us sustained or
received on or about 17th day of December, 1984 through Reckless Imprudence
Resulting to Physical Injuries, and I/we hereby declare that I/we fully understand
the terms of this settlement and voluntarily accept said sum for the purpose of
making a full and final compromise adjustment and settlement of the injuries and
damages, expenses and inconvenience above mentioned. (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived
the presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release
of Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed
engineer.
By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr.
testified that be is the father of George, who at the time of the incident was a student, living
with his parents and totally dependent on them for their support; that the expenses for his
hospitalization were shouldered by his parents; and that they had not signed the "Release
of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch
20, 1 dismissed the Complaint and Third-party Complaint, ruling that since the contract of
carriage is between Baliwag and George L. Cailipan, the latter, who is of legal age, had the
exclusive right to execute the Release of Claims despite the fact that he is still a student
and dependent on his parents for support. Consequently, the execution by George of the
Release of Claims discharges Baliwag and Fortune Insurance.
Aggrieved, the Spouses appealed to respondent Court of Appeals.
On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed
Order and holding that the "Release of Claims" cannot operate as a valid ground for the
dismissal of the case because it does not have the conformity of all the parties, particularly
George's parents, who have a substantial interest in the case as they stand to be
prejudiced by the judgment because they spent a sizeable amount for the medical bills of
their son; that the Release of Claims was secured by Fortune Insurance for the
consideration of P8,020.50 as the full and final settlement of its liability under the insurance
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 1
policy and not for the purpose of releasing Baliwag from its liability as a carrier in this suit
for breach of contract. The Appellate Court also ordered the remand of the case to the
lower Court for trial on the merits and for George to return the amount of P8,020.50 to
Fortune Insurance.
Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court
judgment.
The issue brought to the fore is the legal effect of the Release of Claims executed by
George during the pendency of this case.
We hold that since the suit is one for breach of contract of carriage, the Release of Claims
executed by him, as the injured party, discharging Fortune Insurance and Baliwag from
any and all liability is valid. He was then of legal age, a graduating student of Agricultural
Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to
Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his
parents.
Significantly, the contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to
carry its passengers safely as far as human care and foresight could provide, and is liable
for injuries to them through the negligence or wilful acts of its employees (Articles 1755
and 1759, Civil Code). Thus, George had the right to be safely brought to his destination
and Baliwag had the correlative obligation to do so. Since a contract may be violated only
by the parties thereto, as against each other, in an action upon that contract, the real
parties in interest, either as plaintiff or as defendant, must be parties to said contract
(Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14,
1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a
real party-in-interest-defendant is one who has a correlative legal obligation whose act or
omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May
28, 1988). In the absence of any contract of carriage between Baliwag and George's
parents, the latter are not real parties-in-interest in an action for breach of that contract.
The general rule of the common law is that every action must be brought in the
name of the party whose legal right has been invaded or infringed. 15 Enc. P1. &
Pr. p. 484. "For the immediate wrong and damage the person injured is the only
one who can maintain the action." Id. p. 578. The person who sustains an injury
is the person to bring an action for the injury against the wrongdoer." Dicey
parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S.
667).
There is no question regarding the genuineness and due execution of the Release of
Claims. It is a duly notarized public document. It clearly stipulates that the consideration of
P8,020.50 received by George was "to release and forever discharge Fortune Insurance
and/or Baliwag from any and all liabilities now accrued or to accrue on account of any and
all claims or causes of action ... for personal injuries, damage to property, loss of services,
medical expenses, losses or damages of any and every kind or nature whatsoever,
sustained by him on 17 December 1984 thru Reckless Imprudence Resulting to Physical
Injuries." Consequently, the ruling of respondent Appellate Court that the "Release of
Claims" was intended only as the full and final settlement of a third-party liability for bodily
injury claim and not for the purpose of releasing Baliwag from its liability, if any, in a breach
of a contract of carriage, has to be rejected for being contrary to the very terms thereof. If
the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code). The
phraseology "any and all claims or causes of action" is broad enough to include all
damages that may accrue to the injured party arising from the unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered into
for the purpose of making a full and final compromise adjustment and settlement of the
cause of action involved. A compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced (Article
2028, Civil Code). The Release of Claims executed by the injured party himself wrote
finish to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is
SET ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is
REINSTATED, and the Complaint and Third-Party Complaint are hereby ordered
DISMISSED. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y
MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY,
FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE
CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late
Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.
Francisco S. Reyes Law Office for petitioners.
Antonio C. de Guzman for private respondents.
REGALADO, J.:
On May 13, 1985, private respondents filed a complaint 1 for damages against
petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which
occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 2
alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger
bus belonging to petitioner corporation in a reckless and imprudent manner and without
due regard to traffic rules and regulations and safety to persons and property, it ran over
its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the
nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the
victim, first brought his other passengers and cargo to their respective destinations before
banging said victim to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe
the extraordinary diligence required in the operation of the transportation company and the
supervision of the employees, even as they add that they are not absolute insurers of the
safety of the public at large. Further, it was alleged that it was the victim's own
carelessness and negligence which gave rise to the subject incident, hence they prayed
for the dismissal of the complaint plus an award of damages in their favor by way of a
counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with
this decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that
Pedrito Cudiamat was negligent, which negligence was the proximate cause of
his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs
of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount
defendants initially offered said heirs for the amicable settlement of the case. No
costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a
decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the
decision of the lower court, and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for
death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as
actual and compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution
dated October 4, 1990, 5 hence this petition with the central issue herein being whether
respondent court erred in reversing the decision of the trial court and in finding petitioners
negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are
final and may not be reviewed by this Court on appeal. However, this is subject to settled
exceptions, one of which is when the findings of the appellate court are contrary to those of
the trial court, in which case a reexamination of the facts and evidence may be
undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to
who between the petitioners an the victim is guilty of negligence. Perforce, we have had to
conduct an evaluation of the evidence in this case for the prope calibration of their
conflicting factual findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a
moving vehicle, especially with one of his hands holding an umbrella. And,
without having given the driver or the conductor any indication that he wishes to
board the bus. But defendants can also be found wanting of the necessary
diligence. In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door was open
instead of being closed. This should be so, for it is hard to believe that one would
even attempt to board a vehicle (i)n motion if the door of said vehicle is closed.
Here lies the defendant's lack of diligence. Under such circumstances, equity
demands that there must be something given to the heirs of the victim to
assuage their feelings. This, also considering that initially, defendant common
carrier had made overtures to amicably settle the case. It did offer a certain
monetary consideration to the victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it
is evident that the subject bus was at full stop when the victim Pedrito Cudiamat
boarded the same as it was precisely on this instance where a certain Miss
Abenoja alighted from the bus. Moreover, contrary to the assertion of the
appellees, the victim did indicate his intention to board the bus as can be seen
from the testimony of the said witness when he declared that Pedrito Cudiamat
was no longer walking and made a sign to board the bus when the latter was still
at a distance from him. It was at the instance when Pedrito Cudiamat was closing
his umbrella at the platform of the bus when the latter made a sudden jerk
movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-
driver in prematurely stepping on the accelerator and in not waiting for the
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 3
 passenger to first secure his seat especially so when we take into account that
the platform of the bus was at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their duty and obligation as
common carrier to the end that they should observe extra-ordinary diligence in
the vigilance over the goods and for the safety of the passengers transported by
them according to the circumstances of each case (Article 1733, New Civil
Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above
holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of
petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as
follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of
the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses.
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this
Honorable Court if there was anv unusual incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there
between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in
Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver.
When we stopped we went out because I saw an umbrella about a split second
and I signalled again the driver, so the driver stopped and we went down and we
saw Pedrito Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him
lying down from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus,
was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of
the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of
the Court of Appeals that the bus was at full stop when the victim boarded the same is
orrect. They further confirm the conclusion that the victim fell from the platform of the bus
when it suddenly accelerated forward and was run over by the rear right tires of the
vehicle, as shown by the physical evidence on where he was thereafter found in relation to
the bus when it stopped. Under such circumstances, it cannot be said that the deceased
was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the
victim would ride on the bus, since the latter had supposedly not manifested his intention
to board the same, does not merit consideration. When the bus is not in motion there is no
necessity for a person who wants to ride the same to signal his intention to board. A public
utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it
becomes the duty of the driver and the conductor, every time the bus stops, to do no act
that would have the effect of increasing the peril to a passenger while he was attempting to
board the same. The premature acceleration of the bus in this case was a breach of such
duty.
It is the duty of common carriers of passengers, including common carriers by railroad
train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order
to afford passengers an opportunity to board and enter, and they are liable for injuries
suffered by boarding passengers resulting from the sudden starting up or jerking of their
conveyances while they are doing so.
Further, even assuming that the bus was moving, the act of the victim in boarding the
same cannot be considered negligent under the circumstances. As clearly explained in the
testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just
started" and "was still in slow motion" at the point where the victim had boarded and was
on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or
streetcar which is moving slowly. An ordinarily prudent person would have made the
attempt board the moving conveyance under the same or similar circumstances. The fact
that passengers board and alight from slowly moving vehicle is a matter of common
experience both the driver and conductor in this case could not have been unaware of
such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already
considered a passenger and is entitled all the rights and protection pertaining to such a
contractual relation. Hence, it has been held that the duty which the carrier passengers
owes to its patrons extends to persons boarding cars as well as to those alighting
therefrom.
Common carriers, from the nature of their business and reasons of public policy, are
bound to observe extraordina diligence for the safety of the passengers transported by the
according to all the circumstances of each case. A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost
diligence very cautious persons, with a due regard for all the circumstances. 17
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 4
It has also been repeatedly held that in an action based on a contract of carriage, the court
need not make an express finding of fault or negligence on the part of the carrier in order
to hold it responsible to pay the damages sought by the passenger. By contract of
carriage, the carrier assumes the express obligation to transport the passenger to his
destination safely and observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier. This is an exception to the general rule
that negligence must be proved, and it is therefore incumbent upon the carrier to prove
that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the
Civil Code.
Moreover, the circumstances under which the driver and the conductor failed to bring the
gravely injured victim immediately to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference. The evidence shows that after the accident the bus
could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead
opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a
refrigerator, despite the serious condition of the victim. The vacuous reason given by
petitioners that it was the wife of the deceased who caused the delay was tersely and
correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they
had to wait for about twenty minutes for Inocencia Cudiamat to get dressed
deserves scant consideration. It is rather scandalous and deplorable for a wife
whose husband is at the verge of dying to have the luxury of dressing herself up
for about twenty minutes before attending to help her distressed and helpless
husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk
70 was to inform the victim's family of the mishap, since it was not said bus driver nor the
conductor but the companion of the victim who informed his family thereof. 20 In fact, it
was only after the refrigerator was unloaded that one of the passengers thought of sending
somebody to the house of the victim, as shown by the testimony of Virginia Abalos again,
to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house
and when I went down and asked somebody to bring down the refrigerator, I also
asked somebody to call the family of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the
family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir.
With respect to the award of damages, an oversight was, however, committed by
respondent Court of Appeals in computing the actual damages based on the gross income
of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not
the loss of the entire earnings, but rather the loss of that portion of the earnings which the
beneficiary would have received. In other words, only net earnings, not gross earnings, are
to be considered, that is, the total of the earnings less expenses necessary in the creation
of such earnings or income and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may
fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the
actual or compensatory damages, respondent court found that the deceased was 48 years
old, in good health with a remaining productive life expectancy of 12 years, and then
earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying
the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on
computation based on the net earnings, said award must be, as it hereby is, rectified and
reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death
indemnity is hereby increased to P50,000.00.
WHEREFORE, subject to the above modifications, the challenged judgment and resolution
of respondent Court of Appeals are hereby AFFIRMED in all other respects.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and
scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material,
respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler
trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan,
respondent would load his vehicles with cargo which various merchants wanted delivered
to differing establishments in Pangasinan. For that service, respondent charged freight
rates which were commonly lower than regular commercial rates.
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 5
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized
dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted
with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of
General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by
Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with
them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court
of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of
the lost merchandise, plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the extraordinary
diligence required of him by the law, should be held liable for the value of the undelivered
goods.
In his Answer, private respondent denied that he was a common carrier and argued that
he could not be held responsible for the value of the lost goods, such loss having been due
to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to
be a common carrier and holding him liable for the value of the undelivered goods (P
22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking
services to the public; in not exempting him from liability on the ground of force
majeure; and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana may,
under the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population.
We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common
carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such back-hauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation
was not the carriage of goods for others. There is no dispute that private respondent
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 6
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.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are
held to a very high degree of care and diligence ("extraordinary diligence") in the carriage
of goods as well as of passengers. The specific import of extraordinary diligence in the
care of goods transported by a common carrier is, according to Article 1733, "further
expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any
of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration
which exempt the common carrier for responsibility therefor, is a closed list. Causes falling
outside the foregoing list, even if they appear to constitute a species of force majeure fall
within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
alleged in the instant case the hijacking of the carrier's truck does not fall within any
of the five (5) categories of exempting causes listed in Article 1734. It would follow,
therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions
of Article 1735, in other words, that the private respondent as common carrier is presumed
to have been at fault or to have acted negligently. This presumption, however, may be
overthrown by proof of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the
care of petitioner's goods. Petitioner argues that in the circumstances of this case, private
respondent should have hired a security guard presumably to ride with the truck carrying
the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case,
the standard of extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the risk of his own life
and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of
hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under
Article 1733, given additional specification not only by Articles 1734 and 1735 but also by
Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or
of robbers who donot act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment used in
the contract of carriage. (Emphasis supplied)
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 7
Under Article 1745 (6) above, a common carrier is held responsible and will not be
allowed to divest or to diminish such responsibility even for acts of strangers like thieves
or robbers, except where such thieves or robbers in fact acted "with grave or irresistible
threat, violence or force." We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent
which carried petitioner's cargo. The record shows that an information for robbery in band
was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198
entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina,
Oscar Oria and one John Doe." There, the accused were charged with willfully and
unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada
and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's
store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused
acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-
uppers were armed with firearms. The robbers not only took away the truck and its cargo
but also kidnapped the driver and his helper, detaining them for several days and later
releasing them in another province (in Zambales). The hijacked truck was subsequently
found by the police in Quezon City. The Court of First Instance convicted all the accused of
robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made absolute
insurers against all risks of travel and of transport of goods, and are not held liable for acts
or events which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise which was
lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision
of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
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 mayor's permit with the Office of
the Mayor of Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local Government Code.[3] The respondent City
Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in
four installments based on the gross receipts for products pumped at GPS-1 for the fiscal
year 1993 which amounted to P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of
1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent
City Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government
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 x x x x
"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.
"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]
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 8
 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 a writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In
its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the
business tax on its gross receipts violates Section 133 of the Local Government Code; (2)
the authority of cities to impose and collect a tax on the gross receipts of "contractors and
independent contractors" under Sec. 141 (e) and 151 does not include the authority to
collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the
term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally
and erroneously imposed and collected the said tax, thus meriting the immediate refund of
the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot be exempt
from taxes under Section 133 (j) of the Local Government Code as said exemption applies
only to "transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers solely to ordinary carriers such as
trucks, trains, ships and the like. Respondents further posit that the term "common carrier"
under the said code pertains to the mode or manner by which a product is delivered to its
destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint,
ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax
exemptions are to be strictly construed against the taxpayer, 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.
"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:
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."
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, x x x 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 court's dismissal of petitioner's complaint. Petitioner's motion
for reconsideration was denied on July 18, 1996. [12]
Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996.[13] Petitioner moved for a reconsideration which was granted by this
Court in a Resolution[14]of January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the
petitioner is not a common carrier or a transportation contractor, and (2) the exemption
sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the
public as engaged in the business of transporting persons or property from place to place,
for compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation;
2. He must undertake to carry goods of the kind to which his business is
confined;
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 9
 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 vs.
Court of Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x
x avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such
service on an occasional, 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.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133
(j) of the Local Government Code refers only to common carriers transporting goods and
passengers through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil
Code makes no distinction as to the means of transporting, as long as it is by land, water
or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil pipe line operators are considered common
carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by him,
but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport, and to
charge without discrimination such rates as may have been approved by the Secretary of
Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent
portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x x and
everything relating to the manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public utility." (Underscoring
Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:
"x x x 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 x x
x. 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:
"Section 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 :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and
common carriers by air, land or water, except as provided in this Code."
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 10
 The deliberations conducted in the House of Representatives on the Local
Government Code of 1991 are illuminating:
"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." x x x
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 Sec. 137] that a province may
impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. [19] To tax petitioner again on its
gross receipts in its transportation of petroleum business would defeat the purpose of the
Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent
Court of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and
SET ASIDE.
SO ORDERED.
Bellosillo, (Chairman), Puno, and Mendoza, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.
BELLOSILLO, J.:
Does a charter-party1 between a shipowner and a charterer transform a common carrier
into a private one as to negate the civil law presumption of negligence in case of loss or
damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer
which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum"
owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska,
U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading
No. KP-1 signed by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid
charter-party starting from par. 16 to 40 were attached to the pre-printed agreement.
Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on
the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which reads:
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 11
 16. . . . At loading port, notice of readiness to be accomplished by certificate from
National Cargo Bureau inspector or substitute appointed by charterers for his
account certifying the vessel's readiness to receive cargo spaces. The vessel's
hold to be properly swept, cleaned and dried at the vessel's expense and the
vessel to be presented clean for use in bulk to the satisfaction of the inspector
before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with
three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and
tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches
were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the
holds into its steelbodied dump trucks which were parked alongside the berth, using metal
scoops attached to the ship, pursuant to the terms and conditions of the charter-partly
(which provided for an F.I.O.S. clause). 6 The hatches remained open throughout the
duration of the discharge.7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it
was transported to the consignee's warehouse located some fifty (50) meters from the
wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of ascertaining the net weight of the
cargo. The port area was windy, certain portions of the route to the warehouse were sandy
and the weather was variable, raining occasionally while the discharge was in
progress.8 The petitioner's warehouse was made of corrugated galvanized iron (GI)
sheets, with an opening at the front where the dump trucks entered and unloaded the
fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and
alongside the trucks to contain spillages of the ferilizer.9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except
July 12th, 14th and 18th).10A private marine and cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by
taking draft readings of the vessel prior to and after discharge. 11 The survey report
submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the
cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the
cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship
Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the
cost of the alleged shortage in the goods shipped and the diminution in value of that
portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for
shortlanded certificate and not a formal claim, and that this "request" was denied by them
because they "had nothing to do with the discharge of the shipment." 14 Hence, on 18 July
1975, PPI filed an action for damages with the Court of First Instance of Manila. The
defendant carrier argued that the strict public policy governing common carriers does not
apply to them because they have become private carriers by reason of the provisions of
the charter-party. The court a quo however sustained the claim of the plaintiff against the
defendant carrier for the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that
a shipper has to do in a suit to recover for loss or damage is to show receipt by
the carrier of the goods and to delivery by it of less than what it received. After
that, the burden of proving that the loss or damage was due to any of the causes
which exempt him from liability is shipted to the carrier, common or private he
may be. Even if the provisions of the charter-party aforequoted are deemed valid,
and the defendants considered private carriers, it was still incumbent upon them
to prove that the shortage or contamination sustained by the cargo is attributable
to the fault or negligence on the part of the shipper or consignee in the loading,
stowing, trimming and discharge of the cargo. This they failed to do. By this
omission, coupled with their failure to destroy the presumption of negligence
against them, the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier
from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968
case of Home Insurance Co. v. American Steamship Agencies, Inc.,17 the appellate court
ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a
private carrier and not a common carrier by reason of the time charterer-party.
Accordingly, the Civil Code provisions on common carriers which set forth a presumption
of negligence do not find application in the case at bar. Thus
. . . In the absence of such presumption, it was incumbent upon the plaintiff-
appellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to show
in a satisfactory manner the facts upon which he bases his claim, the defendant
is under no obligation to prove his exception or defense (Moran, Commentaries
on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis
of its cause of action, i.e. the alleged negligence of defendant carrier. It appears
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 12
 that the plaintiff was under the impression that it did not have to establish
defendant's negligence. Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing that defendant
carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the
Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the
present controversy because the issue raised therein is the validity of a stipulation in the
charter-party delimiting the liability of the shipowner for loss or damage to goods cause by
want of due deligence on its part or that of its manager to make the vessel seaworthy in all
respects, and not whether the presumption of negligence provided under the Civil Code
applies only to common carriers and not to private carriers. 19 Petitioner further argues that
since the possession and control of the vessel remain with the shipowner, absent any
stipulation to the contrary, such shipowner should made liable for the negligence of the
captain and crew. In fine, PPI faults the appellate court in not applying the presumption of
negligence against respondent carrier, and instead shifting the onus probandi on the
shipper to show want of due deligence on the part of the carrier, when he was not even at
hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative, whether the shipowner in the instant
case was able to prove that he had exercised that degree of diligence required of him
under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This
being so, we find it fitting to first define important terms which are relevant to our
discussion.
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; 20 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; 21 Charter parties are of two types: (a) contract of
affreightment which involves the use of shipping space on vessels leased by the owner in
part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat
charter, by the terms of which the whole vessel is let to the charterer with a transfer to him
of its entire command and possession and consequent control over its navigation,
including the master and the crew, who are his servants. 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. 22 In both cases,
the charter-party provides for the hire of vessel only, either for a determinate period of time
or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the
wages of the master and 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. 23 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. The distinction
between a "common or public carrier" and a "private or special carrier" lies in the character
of the business, such that if the undertaking is a single transaction, not a part of the
general business or occupation, although involving the carriage of goods for a fee, the
person or corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance over the
goods they carry.25 In the case of private carriers, however, the exercise of ordinary
diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to have been at fault or to have
acted negligently, and the burden of proving otherwise rests on them.26 On the contrary, no
such presumption applies to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner
chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were
under the employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any
control of the means in doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner. 27
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 ship only, as in the case of a time-charter or voyage-charter. It is only when
the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the
property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American
Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy
therein was the validity of a stipulation in the charter-party exempting the shipowners from
liability for loss due to the negligence of its agent, and not the effects of a special charter
on common carriers. At any rate, the rule in the United States that a ship chartered by a
single shipper to carry special cargo is not a common carrier, 29 does not find application in
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 13
our jurisdiction, for we have observed that the growing concern for safety in the
transportation of passengers and /or carriage of goods by sea requires a more exacting
interpretation of admiralty laws, more particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-
law 30
As a matter of principle, it is difficult to find a valid distinction between cases in
which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and control
of her, the case is different; the shipowner is not then a carrier. But where her
services only are let, the same grounds for imposing a strict responsibility exist,
whether he is employed by one or many. The master and the crew are in each
case his servants, the freighter in each case is usually without any representative
on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or
damage while the same was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss, damage or deterioration of the
cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April
1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo,
Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were
cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's
holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches
remained close and tightly sealed while the ship was in transit as the weight of the steel
covers made it impossible for a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition,
foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside
the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place,
representatives of the consignee boarded, and in the presence of a representative of the
shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened
the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded
the cargo under the watchful eyes of the shipmates who were overseeing the whole
operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant carrier was not negligent
in performing its obligations. Particularly, the following testimonies of plaintiff-
appellee's own witnesses clearly show absence of negligence by the defendant
carrier; that the hull of the vessel at the time of the discharge of the cargo was
sealed and nobody could open the same except in the presence of the owner of
the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that
the cover of the hatches was made of steel and it was overlaid with tarpaulins,
three layers of tarpaulins and therefore their contents were protected from the
weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals
would have to be broken, all the seals were found to be intact (TSN, 20 July
1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally placed
in its charge after the vessel's holds were duly inspected and passed scrutiny by the
shipper, up to and until the vessel reached its destination and its hull was reexamined by
the consignee, but prior to unloading. This is clear from the limitation clause agreed upon
by the parties in the Addendum to the standard "GENCON" time charter-party which
provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the
cargo was to be done by the charterer, free from all risk and expense to the
carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper
stowage only when the stowing is done by stevedores employed by him, and therefore
under his control and supervision, not when the same is done by the consignee or
stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for
the loss, destruction or deterioration of the goods if caused by the charterer of the goods or
defects in the packaging or in the containers. The Code of Commerce also provides that all
losses and deterioration which the goods may suffer during the transportation by reason of
fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account
and risk of the shipper, and that proof of these accidents is incumbent upon the
carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from
the preceding causes if it is proved, as against him, that they arose through his negligence
or by reason of his having failed to take the precautions which usage has established
among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical
engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting
mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 14
also contains 46% nitrogen and is highly soluble in water. However, during storage, hand, no proof was adduced by the petitioner showing that the carrier was remise in the
nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the exercise of due diligence in order to minimize the loss or damage to the goods it carried.
temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr.
Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals,
losses due to spillage during such operation amounting to one percent (1%) against the bill which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the
of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is
clamped shell which does not seal very tightly. Also, the wind tends to blow away some of hereby DISMISSED.
the materials during the unloading process.
Costs against petitioner.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an
extremely high temperature in its place of storage, or when it comes in contact with water.
SO ORDERED.
When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But
the salvaged portion which is in liquid form still remains potent and usable although no
longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various
pieces of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea
water to seep into the vessel's holds during the voyage since the hull of the vessel was in
good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun
Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss
or contamination of the cargo, it was more likely to have occurred while the same was
being transported from the ship to the dump trucks and finally to the consignee's
warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order
cargo" as contained in their report to PPI was just an approximation or estimate made by
them after the fertilizer was discharged from the vessel and segregated from the rest of the
cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded
her cargo. It rained from time to time at the harbor area while the cargo was being
discharged according to the supply officer of PPI, who also testified that it was windy at the
waterfront and along the shoreline where the dump trucks passed enroute to the
consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather
condition prevalent during its unloading, as was the case at bar. This is a risk the shipper
or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved
the inherent character of the goods which makes it highly vulnerable to deterioration; as
well as the inadequacy of its packaging which further contributed to the loss. On the other
SECOND DIVISION
[G.R. No. 111127. July 26, 1996]
MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs. COURT
OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP,
INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES,
VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO
ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA
CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO,
ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR
GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL,
ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES,
MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO,
TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO,
CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals [1] in
CA-GR No. 28245, dated September 30, 1992, which affirmed with modification the
decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and
severally to pay damages to private respondent Amyline Antonio, and its resolution which
denied petitioners motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school children
which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired
in 1981, after trying him out for two weeks. His job was to take school children to and from
the St. Scholasticas College in Malate, Manila.

BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 15

 On November 2, 1984 private respondent Word for the World Christian Fellowship
Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its Young
Adults Ministry from Manila to La Union and back in consideration of which private
respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did not leave the
Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in the
evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the
bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the
area (it being his first trip to La Union), was forced to take a detour through the town of Ba-
ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve
on the highway, running on a south to east direction, which he described as siete. The
road was slippery because it was raining, causing the bus, which was running at the speed
of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel
brace and sign along the road and rammed the fence of one Jesus Escano, then turned
over and landed on its left side, coming to a full stop only after a series of impacts. The bus
came to rest off the road. A coconut tree which it had hit fell on it and smashed its front
portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown
on the floor of the bus and pinned down by a wooden seat which came off after being
unscrewed. It took three persons to safely remove her from this position. She was in great
pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He
said he was not familiar with the area and he could not have seen the curve despite the
care he took in driving the bus, because it was dark and there was no sign on the road. He
said that he saw the curve when he was already within 15 to 30 meters of it. He allegedly
slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On
the basis of their finding they filed a criminal complaint against the driver, Porfirio
Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre
paid Jesus Escano P1,500.00 for the damage to the latters fence. On the basis of Escanos
affidavit of desistance the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati,
Metro Manila. As a result of the accident, she is now suffering from paraplegia and is
permanently paralyzed from the waist down. During the trial she described the operations
she underwent and adduced evidence regarding the cost of her treatment and
therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Ba-ay,
Lingayen. As this hospital was not adequately equipped, she was transferred to the Sto.
Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was
taken and the damage to her spine was determined to be too severe to be treated
there. She was therefore brought to Manila, first to the Philippine General Hospital and
later to the Makati Medical Center where she underwent an operation to correct the
dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a
long distance trip and that the driver was properly screened and tested before being
admitted for employment. Indeed, all the evidence presented have shown the negligent act
of the defendants which ultimately resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for damages,
the Court is therefore not in a position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against
defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles
2176 and 2180 of the Civil Code of the Philippines and said defendants are ordered to pay
jointly and severally to the plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff
Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline
Antonio but dismissed it with respect to the other plaintiffs on the ground that they failed to
prove their respective claims. The Court of Appeals modified the award of damages as
follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 16
 5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to
exercise due care and precaution in the operation of his vehicle considering the time and
the place of the accident. The Court of Appeals held that the Fabres were themselves
presumptively negligent. Hence, this petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES
SUFFERED BY PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE
POSITIVE, UP TO WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the
amount of P600,000.00. It is insisted that, on the assumption that petitioners are liable, an
award of P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified
that she was a casual employee of a company called Suaco, earning P1,650.00 a month,
and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners
contend that as casual employees do not have security of tenure, the award of
P600,000.00, considering Amyline Antonios earnings, is without factual basis as there is
no assurance that she would be regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on
the theory that petitioners are liable for breach of contract of carriage or culpa
contractual or on the theory of quasi delict or culpa aquiliana as both the Regional Trial
Court and the Court of Appeals held, for although the relation of passenger and carrier is
contractual both in origin and nature, nevertheless the act that breaks the contract may be
also a tort.[2] In either case, the question is whether the bus driver, petitioner Porfirio Cabil,
was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who
owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee is fully supported by the evidence on
record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in
question, it was raining, and, as a consequence, the road was slippery, and it was dark. He
averred these facts to justify his failure to see that there lay a sharp curve
ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per
hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. [3] By
then it was too late for him to avoid falling off the road. Given the conditions of the road
and considering that the trip was Cabils first one outside of Manila, Cabil should have
driven his vehicle at a moderate speed. There is testimony[4] that the vehicles passing on
that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that
it was dark, that he drove his bus at 50 kilometers an hour when even on a good day the
normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain,
Cabil was grossly negligent and should be held liable for the injuries suffered by private
respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the selection
and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional drivers license. The employer should also examine the applicant
for his qualifications, experience and record of service. [5] Due diligence in supervision, on
the other hand, requires the formulation of rules and regulations for the guidance of
employees and the issuance of proper instructions as well as actual implementation and
monitoring of consistent compliance with the rules. [6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union,
apparently did not consider the fact that Cabil had been driving for school children only,
from their homes to the St. Scholasticas College in Metro Manila. [7] They had hired him
only after a two-week apprenticeship. They had tested him for certain matters, such as
whether he could remember the names of the children he would be taking to school, which
were irrelevant to his qualification to drive on a long distance travel, especially considering
that the trip to La Union was his first.The existence of hiring procedures and supervisory
policies cannot be casually invoked to overturn the presumption of negligence on the part
of an employer.[8]
Petitioners argue that they are not liable because (1) an earlier departure (made
impossible by the congregations delayed meeting) could have averted the mishap and (2)
under the contract, the WWCF was directly responsible for the conduct of the trip. Neither
of these contentions hold water. The hour of departure had not been fixed. Even if it had
been, the delay did not bear directly on the cause of the accident. With respect to the
second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to
which he wishes to be conveyed, but exercises no other control over the conduct of the
driver, is not responsible for acts of negligence of the latter or prevented from recovering
for injuries suffered from a collision between the automobile and a train, caused by the
negligence either of the locomotive engineer or the automobile driver. [9]
As already stated, this case actually involves a contract of carriage. Petitioners, the
Fabres, did not have to be engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to apply to them. As this Court has
held:[10]
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 17
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 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.
As common carriers, the Fabres were bound to exercise extraordinary diligence for the
safe transportation of the passengers to their destination. This duty of care is not excused
by proof that they exercised the diligence of a good father of the family in the selection and
supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the formers employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their
employees.
The same circumstances detailed above, supporting the finding of the trial court and
of the appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict,
fully justify finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and
1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However,
we think the Court of Appeals erred in increasing the amount of compensatory damages
because private respondents did not question this award as inadequate. [11] To the contrary,
the award of P500,000.00 for compensatory damages which the Regional Trial Court
made is reasonable considering the contingent nature of her income as a casual employee
of a company and as distributor of beauty products and the fact that the possibility that she
might be able to work again has not been foreclosed. In fact she testified that one of her
previous employers had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court
of Appeals do not sufficiently indicate the factual and legal basis for them, we find that they
are nevertheless supported by evidence in the records of this case. Viewed as an action
for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for the
payment of moral damages in cases of quasi delict. On the theory that petitioners are
liable for breach of contract of carriage, the award of moral damages is authorized by Art.
1764, in relation to Art. 2220, since Cabils gross negligence amounted to bad
faith.[12] Amyline Antonios testimony, as well as the testimonies of her father and co-
passengers, fully establish the physical suffering and mental anguish she endured as a
result of the injuries caused by petitioners negligence.
The award of exemplary damages and attorneys fees was also properly
made. However, for the same reason that it was error for the appellate court to increase
the award of compensatory damages, we hold that it was also error for it to increase the
award of moral damages and reduce the award of attorneys fees, inasmuch as private
respondents, in whose favor the awards were made, have not appealed. [13]
As above stated, the decision of the Court of Appeals can be sustained either on the
theory of quasi delict or on that of breach of contract. The question is whether, as the two
courts below held, petitioners, who are the owners and driver of the bus, may be made to
respond jointly and severally to private respondent. We hold that they may be. In Dangwa
Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to those in this case, this Court held
the bus company and the driver jointly and severally liable for damages for injuries
suffered by a passenger.Again, in Bachelor Express, Inc. v. Court of Appeals [15] a driver
found negligent in failing to stop the bus in order to let off passengers when a fellow
passenger ran amuck, as a result of which the passengers jumped out of the speeding bus
and suffered injuries, was held also jointly and severally liable with the bus company to the
injured passengers.
The same rule of liability was applied in situations where the negligence of the driver
of the bus on which plaintiff was riding concurred with the negligence of a third party who
was the driver of another vehicle, thus causing an accident. In Anuran v. Buo,[16] Batangas
Laguna Tayabas Bus Co. v. Intermediate Appellate Court,[17] and Metro Manila Transit
Corporation v. Court of Appeals,[18] the bus company, its driver, the operator of the other
vehicle and the driver of the vehicle were jointly and severally held liable to the injured
passenger or the latters heirs. The basis of this allocation of liability was explained
in Viluan v. Court of Appeals,[19] thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises from quasi-
delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in
case of injury to a passenger due to the negligence of the driver of the bus on which he
was riding and of the driver of another vehicle, the drivers as well as the owners of the two
vehicles are jointly and severally liable for damages. Some members of the Court, though,
are of the view that under the circumstances they are liable on quasi-delict.[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals [21] this Court
exonerated the jeepney driver from liability to the injured passengers and their families
while holding the owners of the jeepney jointly and severally liable, but that is because that
case was expressly tried and decided exclusively on the theory of culpa contractual. As
this Court there explained:
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 18
The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune LOADSTAR SHIPPING CO., INC., G.R. No. 157481
and Carreon [the jeepney owners] were negligent. However, its ruling that spouses Petitioner,
Mangune and Carreon are jointly and severally liable with Manalo is erroneous. The driver Present:
cannot be held jointly and severally liable with the carrier in case of breach of the contract
of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage Quisumbing, J.,
is between the carrier and the passenger, and in the event of contractual liability, the - versus - (Chairman),
carrier is exclusively responsible therefore to the passenger, even if such breach be due to Carpio,
the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477- Carpio Morales, and
81, April 29, 1966, 16 SCRA 742) . . .[22] Tinga, JJ.

As in the case of BLTB, private respondents in this case and her co-plaintiffs did not
stake out their claim against the carrier and the driver exclusively on one theory, much less
on that of breach of contract alone. After all, it was permitted for them to allege alternative
causes of action and join as many parties as may be liable on such causes of action [23] so
long as private respondent and her co-plaintiffs do not recover twice for the same
injury. What is clear from the cases is the intent of the plaintiff there to recover from both
the carrier and the driver, thus justifying the holding that the carrier and the driver were
jointly and severally liable because their separate and distinct acts concurred to produce
the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION as to the award of damages. Petitioners are ORDERED to PAY jointly
and severally the private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff
Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
PIONEER ASIA INSURANCE CORP., Promulgated:
Respondent.
January 24, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari are (1) the Decision[1] dated October 15, 2002 and (2)
the Resolution[2] dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No.
40999, which affirmed with modification the Decision [3] dated February 15, 1993 of the
Regional Trial Court of Manila, Branch 8 in Civil Case No. 86-37957.
The pertinent facts are as follows:
Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered
owner and operator of the vessel M/V Weasel. It holds office at 1294 Romualdez St.,
Paco, Manila.
On June 6, 1984, Loadstar entered into a voyage-charter with Northern
Mindanao Transport Company, Inc. for the carriage of 65,000 bags of cement
from Iligan City to Manila. The shipper was Iligan Cement Corporation, while the consignee
in Manila was Market Developers, Inc.
On June 24, 1984, 67,500 bags of cement were loaded on board M/V
Weasel and stowed in the cargo holds for delivery to the consignee. The shipment was
covered by petitioners Bill of Lading[4] dated June 23, 1984.

Prior to the voyage, the consignee insured the shipment of cement with
respondent Pioneer Asia Insurance Corporation for P1,400,000, for which respondent
issued Marine Open Policy No. MOP-006 dated September 17, 1980, covering all
shipments made on or after September 30, 1980.[5]

THIRD DIVISION
At 12:50 in the afternoon of June 24, 1984, M/V
Weasel left Iligan City for Manila in good weather. However, at 4:31 in the morning of June
25, 1984, Captain Vicente C. Montera, master of M/V Weasel, ordered the vessel to be
forced aground. Consequently, the entire shipment of cement was good as gone due to

BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 19

exposure to sea water. Petitioner thus failed to deliver the goods to the consignee
in Manila.
The consignee demanded from petitioner full reimbursement of the cost of the
lost shipment. Petitioner, however, refused to reimburse the consignee despite repeated
demands.
Nonetheless, on March 11, 1985, respondent insurance company paid the
consignee P1,400,000 plus an additional amount of P500,000, the value of the lost
shipment of cement. In return, the consignee executed a Loss and Subrogation Receipt in
favor of respondent concerning the latters subrogation rights against petitioner.
Hence, on October 15, 1986, respondent filed a complaint docketed as Civil
Case No. 86-37957, against petitioner with the Regional Trial Court of Manila, Branch 8. It
alleged that: (1) the M/V Weasel was not seaworthy at the commencement of the voyage;
(2) the weather and sea conditions then prevailing were usual and expected for that time of
the year and as such, was an ordinary peril of the voyage for which the M/V Weasel should
have been normally able to cope with; and (3) petitioner was negligent in the selection and
supervision of its agents and employees then manning the M/V Weasel.
In its Answer, petitioner alleged that no fault nor negligence could be attributed to
it because it exercised due diligence to make the ship seaworthy, as well as properly
manned and equipped. Petitioner insisted that the failure to deliver the subject cargo to the
consignee was due to force majeure. Petitioner claimed it could not be held liable for an
act or omission not directly attributable to it.
On February 15, 1993, the RTC rendered a Decision in favor of respondent, to
wit:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered in favor of plaintiff and against defendant Loadstar Shipping
Co., Inc. ordering the latter to pay as follows:
1. To pay plaintiff the sum of P1,900,000.00 with legal rate
of interest per annum from date of complaint until fully paid;
2. To pay the sum equal to 25% of the claim as and for
attorneys fees and litigation expenses; and,
3. To pay the costs of suit.
IT IS SO ORDERED.[6]
The RTC reasoned that petitioner, as a common carrier, bears the burden of
proving that it exercised extraordinary diligence in its vigilance over the goods it
transported. The trial court explained that in case of loss or destruction of the goods, a
statutory presumption arises that the common carrier was negligent unless it could prove
that it had observed extraordinary diligence.
Petitioners defense of force majeure was found bereft of factual basis. The RTC
called attention to the PAG-ASA report that at the time of the incident, tropical
storm Asiang had moved away from the Philippines. Further, records showed that the sea
and weather conditions in the area of Hinubaan, Negros Occidental from 8:00 p.m. of June
24, 1984 to 8:00 a.m. the next day were slight and smooth. Thus, the trial court concluded
that the cause of the loss was not tropical storm Asiang or any other force majeure, but
gross negligence of petitioner.
Petitioner appealed to the Court of Appeals.
In its Decision dated October 15, 2002, the Court of Appeals affirmed the RTC
Decision with modification that Loadstar shall only pay the sum of 10% of the total claim for
attorneys fees and litigation expenses. It ruled,
WHEREFORE, premises considered, the Decision dated
February 15, 1993, of the Regional Trial Court of Manila, National
Capital Judicial Region, Branch 8, in Civil Case No. 86-37957 is hereby
AFFIRMED with the MODIFICATION that the appellant shall only pay
the sum of 10% of the total claim as and for attorneys fees and litigation
expenses. Costs against the appellant.
SO ORDERED.[7]
Petitioners Motion for Reconsideration was denied. [8]
The instant petition is anchored now on the following assignments of error:
I
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER IS A COMMON CARRIER UNDER ARTICLE 1732 OF
THE CIVIL CODE.
II
ASSUMING ARGUENDO THAT PETITIONER IS A COMMON
CARRIER, THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PROXIMATE CAUSE OF THE LOSS OF
CARGO WAS NOT A FORTUITOUS EVENT BUT WAS ALLEGEDLY
DUE TO THE FAILURE OF PETITIONER TO EXERCISE
EXTRAORDINARY DILIGENCE.
III
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING
THE AWARD BY THE TRIAL COURT OF ATTORNEYS FEES AND
LITIGATION EXPENSES IN FAVOR OF HEREIN RESPONDENT.[9]
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 20
 On the first and second issues, petitioner contends that at the time of the voyage
the carriers voyage-charter with the shipper converted it into a private carrier. Thus, the
presumption of negligence against common carriers could not apply. Petitioner further
avers that the stipulation in the voyage-charter holding it free from liability is valid and
binds the respondent. In any event, petitioner insists that it had exercised extraordinary
diligence and that the proximate cause of the loss of the cargo was a fortuitous event.
With regard to the third issue, petitioner points out that the award of attorneys
fees and litigation expenses appeared only in the dispositive portion of the RTC Decision
with nary a justification. Petitioner maintains that the Court of Appeals thus erred in
affirming the award.
For its part, respondent dismisses as factual issues the inquiry on (1) whether the
loss of the cargo was due to force majeure or due to petitioners failure to exercise
extraordinary diligence; and (2) whether respondent is entitled to recover attorneys fees
and expenses of litigation.
Respondent further counters that the Court of Appeals was correct when it held
that petitioner was a common carrier despite the charter of the whole vessel, since the
charter was limited to the ship only.
Prefatorily, we stress that the finding of fact by the trial court, when affirmed by
the Court of Appeals, is not reviewable by this Court in a petition for review on certiorari.
However, the conclusions derived from such factual finding are not necessarily pure issues
of fact when they are inextricably intertwined with the determination of a legal issue. In
such instances, the conclusions made may be raised in a petition for review before this
Court.[10]
The threshold issues in this case are: (1) Given the circumstances of this case, is
petitioner a common or a private carrier? and (2) In either case, did petitioner exercise the
required diligence i.e., the extraordinary diligence of a common carrier or the ordinary
diligence of a private carrier?
Article 1732 of the Civil Code defines a common carrier as follows:
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.
Petitioner is a corporation engaged in the business of transporting cargo by water and for
compensation, offering its services indiscriminately to the public. Thus, without doubt, it is
a common carrier. However, petitioner entered into a voyage-charter with the Northern
Mindanao Transport Company, Inc. Now, had the voyage-charter converted petitioner into
a private carrier?
We think not. The voyage-charter agreement between petitioner and Northern Mindanao
Transport Company, Inc. 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[11] where we ruled that:
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 ship only, as
in the case of a time-charter or voyage-charter. It is only when the
charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a
shipowner in a time or voyage charter retains possession and control of
the ship, although her holds may, for the moment, be the property of
the charterer.[12]
Conformably, petitioner remains a common carrier notwithstanding the existence
of the charter agreement with the Northern Mindanao Transport Company, Inc. since the
said charter is limited to the ship only and does not involve both the vessel and its crew. As
elucidated in Planters Products, its charter is only a voyage-charter, not a bareboat
charter.
As a common carrier, petitioner is required to observe extraordinary diligence in
the vigilance over the goods it transports. [13] When the goods placed in its care are lost,
petitioner is presumed to have been at fault or to have acted negligently. Petitioner
therefore has the burden of proving that it observed extraordinary diligence in order to
avoid responsibility for the lost cargo.[14]
In Compania Maritima v. Court of Appeals,[15] we said:
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.[16]
Article 1734 enumerates the instances when a carrier might be exempt from
liability for the loss of the goods. These are:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 21
 (2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers; and
(5) Order or act of competent public authority.[17]
Petitioner claims that the loss of the goods was due to a fortuitous event under
paragraph 1. Yet, its claim is not substantiated. On the contrary, we find supported by
evidence on record the conclusion of the trial court and the Court of Appeals that the loss
of the entire shipment of cement was due to the gross negligence of petitioner.
Records show that in the evening of June 24, 1984, the sea and weather
conditions in the vicinity of Negros Occidental were calm. The records reveal that petitioner
took a shortcut route, instead of the usual route, which exposed the voyage to unexpected
hazard. Petitioner has only itself to blame for its misjudgment.
Petitioner heavily relies on Home Insurance Co. v. American Steamship
Agencies, Inc.[18] and Valenzuela Hardwood and Industrial Supply, Inc. v. Court of
Appeals.[19]The said cases involved a private carrier, not a common carrier. Moreover, the
issue in both cases is not the effect of a voyage-charter on a common carrier, but the
validity of a stipulation absolving the private carrier from liability in case of loss of the cargo
attributable to the negligence of the private carrier.
Lastly, on the third issue, we find consistent with law and prevailing jurisprudence
the Court of Appeals award of attorneys fees and expenses of litigation equivalent to ten
percent (10%) of the total claim. The contract between the parties in this case contained a
stipulation that in case of suit, attorneys fees and expenses of litigation shall be limited to
only ten percent (10%) of the total monetary award. Given the circumstances of this case,
we deem the said amount just and equitable.
WHEREFORE, the petition is DENIED. The assailed Decision dated October 15,
2002 and the Resolution dated February 27, 2003, of the Court of Appeals in CA-G.R. CV
No. 40999, are AFFIRMED.
Costs against petitioner.
SO ORDERED.
FIRST DIVISION
[G.R. No. 149038. April 9, 2003]
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner, vs. PKS
SHIPPING COMPANY, respondent.
DECISION
VITUG, J.:
The petition before the Court seeks a review of the decision of the Court of Appeals
in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has affirmed in toto the
judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the
complaint for damages filed by petitioner insurance corporation against respondent
shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent
PKS Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-five
thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five
Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value with petitioner
Philippine American General Insurance Company (Philamgen). The goods were loaded
aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22
December 1988, about nine oclock, while Limar I was being towed by respondents
tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa Point,
in Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought reimbursement from PKS
Shipping of the sum paid to DUMC but the shipping company refused to pay, prompting
Philamgen to file suit against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo could
have been caused either by a fortuitous event, in which case the ship owner was not liable,
or through the negligence of the captain and crew of the vessel and that, under Article 587
of the Code of Commerce adopting the Limited Liability Rule, the ship owner could free
itself of liability by abandoning, as it apparently so did, the vessel with all her equipment
and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the
decision of the trial court. The appellate court ruled that evidence to establish that PKS
Shipping was a common carrier at the time it undertook to transport the bags of cement
was wanting because the peculiar method of the shipping companys carrying goods for
others was not generally held out as a business but as a casual occupation. It then
concluded that PKS Shipping, not being a common carrier, was not expected to observe
the stringent extraordinary diligence required of common carriers in the care of goods. The
appellate court, moreover, found that the loss of the goods was sufficiently established as
having been due to fortuitous event, negating any liability on the part of PKS Shipping to
the shipper.
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 22
 In the instant appeal, Philamgen contends that the appellate court has committed a
patent error in ruling that PKS Shipping is not a common carrier and that it is not liable for
the loss of the subject cargo. The fact that respondent has a limited clientele, petitioner
argues, does not militate against respondents being a common carrier and that the only
way by which such carrier can be held exempt for the loss of the cargo would be if the loss
were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG" has
not entered the Philippine area of responsibility and that, even if it did, respondent would
not be exempt from liability because its employees, particularly the tugmaster, have failed
to exercise due diligence to prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because what
Philamgen seeks is not a review on points or errors of law but a review of the undisputed
factual findings of the RTC and the appellate court. In any event, PKS Shipping points out,
the findings and conclusions of both courts find support from the evidence and applicable
jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to the
question of whether it is a private carrier or a common carrier and, in either case, to the
other question of whether or not it has observed the proper diligence (ordinary, if a private
carrier, or extraordinary, if a common carrier) required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly when such findings
are consistent with those of the trial court, may not at liberty be reviewed by this Court in a
petition for review under Rule 45 of the Rules of Court. [1] The conclusions derived from
those factual findings, however, are not necessarily just matters of fact as when they are
so linked to, or inextricably intertwined with, a requisite appreciation of the applicable
law. In such instances, the conclusions made could well be raised as being appropriate
issues in a petition for review before this Court. Thus, an issue whether a carrier is private
or common on the basis of the facts found by a trial court or the appellate court can be a
valid and reviewable question of law.
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
Complementary to the codal definition is Section 13, paragraph (b), of the Public Service
Act; it defines public service to be
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, 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, 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 communication systems, wire or wireless broadcasting stations and other
similar public services. x x x. (Underscoring supplied).
The prevailing doctrine on the question is that enunciated in the leading case of De
Guzman vs. Court of Appeals.[2] Applying Article 1732 of the Code, in conjunction with
Section 13(b) of the Public Service Act, this Court has held:
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.
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.
Much of the distinction between a common or public carrier and a private or special
carrier lies in the character of the business, such that if the undertaking is an isolated
transaction, not a part of the business or occupation, and the carrier does not hold itself
out to carry the goods for the general public or to a limited clientele, although involving the
carriage of goods for a fee,[3] the person or corporation providing such service could very
well be just a private carrier. A typical case is that of a charter party which includes both
the vessel and its crew, such as in a bareboat or demise, where the charterer obtains the
use and service of all or some part of a ship for a period of time or a voyage or
voyages[4] and gets the control of the vessel and its crew. [5] Contrary to the conclusion
made by the appellate court, its factual findings indicate that PKS Shipping has engaged
itself in the business of carrying goods for others, although for a limited clientele,
undertaking to carry such goods for a fee. The regularity of its activities in this area
indicates more than just a casual activity on its part. [6] Neither can the concept of a
common carrier change merely because individual contracts are executed or entered into
with patrons of the carrier. Such restrictive interpretation would make it easy for a common
carrier to escape liability by the simple expedient of entering into those distinct agreements
with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the proper
diligence demanded of common carriers, Article 1733 of the Civil Code requires common
carriers to observe extraordinary diligence in the vigilance over the goods they carry. In
case of loss, destruction or deterioration of goods, common carriers are presumed to have
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 23
been at fault or to have acted negligently, and the burden of proving otherwise rests on
them.[7] The provisions of Article 1733, notwithstanding, common carriers are exempt from
liability for loss, destruction, or deterioration of the goods due to any of the following
causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
and
(5) Order or act of competent public authority. [8]
The appellate court ruled, gathered from the testimonies and sworn marine protests
of the respective vessel masters of Limar I and MT Iron Eagle, that there was no way by
which the barges or the tugboats crew could have prevented the sinking of Limar I. The
vessel was suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and
buffeted by strong winds of 1.5 knots resulting in the entry of water into the barges
hatches. The official Certificate of Inspection of the barge issued by the Philippine
Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness
of Limar I and should strengthen the factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the
recognized exceptions from the rule - (1) when the factual findings of the Court of Appeals
and the trial court are contradictory; (2) when the conclusion is a finding grounded entirely
on speculation, surmises, or conjectures; (3) when the inference made by the Court of
Appeals from its findings of fact is manifestly mistaken, absurd, or impossible; (4) when
there is a grave abuse of discretion in the appreciation of facts; (5) when the appellate
court, in making its findings, went beyond the issues of the case and such findings are
contrary to the admissions of both appellant and appellee; (6) when the judgment of the
Court of Appeals is premised on a misapprehension of facts; (7) when the Court of
Appeals failed to notice certain relevant facts which, if properly considered, would justify a
different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the
findings of fact are conclusions without citation of the specific evidence on which they are
based; and (10) when the findings of fact of the Court of Appeals are premised on the
absence of evidence but such findings are contradicted by the evidence on record would
appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS Shipping
from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur
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.
DECISION
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 complaint until fully paid, P8,000 as attorneys fees, and
the costs of the suit; and (b) its resolution of 19 November 1997, [3] denying LOADSTARs
motion for reconsideration of said decision.
The facts are undisputed.
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 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 LOSS OF 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 pay the insurance proceeds from the
loss of the vessel directly to MIC, said amount to be deducted from MICs claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods and
claimed that the 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.
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 24
 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 LOADSTARs 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.
3) The vessel was not seaworthy because it was undermanned on the day of
the voyage. If it had been seaworthy, it could have withstood the natural
and inevitable action of the sea on 20 November 1984, when the condition
of the sea was moderate. The vessel sank, not because of force majeure,
but because it was not seaworthy. LOADSTARS allegation that the sinking
was probably due to the convergence of the winds, as stated by a PAGASA
expert, was not duly proven at the trial. The limited liability rule, therefore, is
not applicable considering that, in this case, there was an actual finding of
negligence on the part of the carrier.[5]
4) Between MIC and LOADSTAR, the provisions 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 goods insured, it was
subrogated to the latters rights as against the carrier, LOADSTAR.[6]
5) There was a clear breach of the contract of carriage when the shippers
goods never reached their destination. LOADSTARs defense of diligence
of a good father of a family in the training and selection of its crew is
unavailing because this is not a proper or complete defense in culpa
contractual.
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 a 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 classification of the M/V Cherokee
was not timely raised below; hence, it is barred by estoppel. While it is true that the vessel
had on board only the cargo of wood products for delivery to one consignee, it was also
carrying passengers as part of its regular business. Moreover, the bills of lading in this
case made no mention of any charter party but only a statement that the vessel was a
general cargo carrier. Neither was there any special arrangement between LOADSTAR
and the shipper regarding the shipment of the cargo. The singular fact that the vessel was
carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into
a private carrier.
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 upon
MIC.[8]
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage
on 19 November 1984, the vessel 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 fit to undertake a voyage. Its crew at the time was
experienced, licensed and unquestionably competent. With all these precautions, there
could be no other conclusion except that LOADSTAR exercised the diligence of a good
father of a family in ensuring the vessels seaworthiness.
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
Norte, on 19 November 1984, the weather was fine until the next day when the vessel
sank due to strong waves. MICs 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
owners 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 Courts ruling in the case of St. Paul Fire & Marine Insurance Co. v.
Macondray & Co., Inc.,[9] and National Union Fire Insurance Company of Pittsburg v. Stolt-
Nielsen Phils., Inc.[10]
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 25
 Finally, LOADSTAR avers that MICs 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
LOADSTARs 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 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 large 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 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:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a sideline. Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular
or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the general public, i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained from making such distinctions.
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 such backhauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondents 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 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.
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 26
 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 LOADSTARs 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 area
where it sank was determined to be moderate. Since it was remiss 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.
Neither is there merit to the contention that the claim in this case was barred by
prescription. MICs cause of action had not yet prescribed at the time it was
concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a
specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)
which provides for a one-year period of limitation on claims for loss of, or damage to,
cargoes sustained during transit may be applied suppletorily to the case at bar. This one-
year prescriptive period also applies to the insurer of the good. [22] In this case, the period
for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the
one-year period is null and void;[23] it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30
January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs
against petitioner.
SO ORDERED.
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss
of the goods, in utter disregard of this Courts pronouncements in St. Paul Fire & Marine
Ins. Co. v. Macondray & Co., Inc.,[18] and National Union Fire Insurance v. Stolt-Nielsen THIRD DIVISION
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 SPOUSES DANTE CRUZ and G.R. No. 186312
latter. Since the right of the assured in case of loss or damage to the goods is limited or LEONORA CRUZ,
restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is Petitioners, Present:
necessarily subject to the same limitations and restrictions. We do not agree. In the first
place, the cases relied on by LOADSTAR involved a limitation on the carriers liability to an CARPIO MORALES, J.,
amount fixed in the bill of lading which the parties may enter into, provided that the same Chairperson,
was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation BRION,
in the case at bar effectively reduces the common carriers liability for the loss or - versus - BERSAMIN,
destruction of the goods to a degree less than extraordinary (Articles 1744 and 1745), that ABAD,* and
is, the carrier is not liable for any loss or damage to shipments made at owners risk. Such SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
stipulation is obviously null and void for being contrary to public policy.[20] It has been said: Respondent.
Promulgated:
Three kinds of stipulations have often been made in a bill of lading. The first is one June 29, 2010
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 x-------------------------------------------------x
agreed valuation. And the third is one limiting the liability of the carrier to an agreed DECISION
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 CARPIO MORALES, J.:
stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable.[21] Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,
2001[1] against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who
it was subrogated to all the rights which the latter has against the common carrier, perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that
LOADSTAR.
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 27
capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had
stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11,
2000 was by virtue of a tour package-contract with respondent that included transportation
to and from the Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),[2] a scuba diving instructor and one of the survivors, gave his
account of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of September 10, 2000, but was advised to stay for
another night because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them
to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera
and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to
side and the captain to step forward to the front, leaving the wheel to one of the crew
members.
The waves got more unwieldy. After getting hit by two big waves which came one
after the other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon
seeing the captain, Matute and the other passengers who reached the surface asked him
what they could do to save the people who were still trapped under the boat. The captain
replied Iligtas niyo na lang ang sarili niyo (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang,
Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats
were 22 persons, consisting of 18 passengers and four crew members, who were brought
to Pisa Island. Eight passengers, including petitioners son and his wife, died during the
incident.
At the time of Ruelitos death, he was 28 years old and employed as a contractual worker
for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly
salary of $900.[3]
Petitioners, by letter of October 26, 2000,[4] demanded indemnification from respondent for
the death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,[5] denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as earlier reflected,
alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B
Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine
Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early
as 5:00 a.m. of September 11, 2000.[6]
In its Answer,[7] respondent denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew
members.Nonetheless, it claimed that it exercised the utmost diligence in ensuring the
safety of its passengers; contrary to petitioners allegation, there was no storm
on September 11, 2000as the Coast Guard in fact cleared the voyage; and M/B Coco
Beach III was not filled to capacity and had sufficient life jackets for its passengers. By way
of Counterclaim, respondent alleged that it is entitled to an award for attorneys fees and
litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily
requires four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is
calm, (2) there is clearance from the Coast Guard, (3) there is clearance from the captain
and (4) there is clearance from the Resorts assistant manager. [8] He added that M/B Coco
Beach III met all four conditions on September 11, 2000, [9] but a subasco or squall,
characterized by strong winds and big waves, suddenly occurred, causing the boat to
capsize.[10]
By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed petitioners
Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated September 2,
2005,[12] they appealed to the Court of Appeals.
By Decision of August 19, 2008,[13] the appellate court denied petitioners appeal,
holding, among other things, that the trial court correctly ruled that respondent is a private
carrier which is only required to observe ordinary diligence; that respondent in fact
observed extraordinary diligence in transporting its guests on board M/B Coco Beach III;
and that the proximate cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution dated January
16, 2009,[14] they filed the present Petition for Review. [15]
Petitioners maintain the position they took before the trial court, adding that
respondent is a common carrier since by its tour package, the transporting of its guests is
an integral part of its resort business. They inform that another division of the appellate
court in fact held respondent liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to
prove that it is a common carrier; that the Resorts ferry services for guests cannot be
considered as ancillary to its business as no income is derived therefrom; that it exercised
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 28
extraordinary diligence as shown by the conditions it had imposed before allowing M/B
Coco Beach III to sail; that the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case wherein the appellate court
held it liable for damages involved different plaintiffs, issues and evidence. [16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals[17] in characterizing
respondent as a common carrier.
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a sideline). Article 1732 also
carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the general public, i.e., the
general community or population, and one who offers services or
solicits business only from a narrow segment of the general
population. We think that Article 1733 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 . . .[18] (emphasis and
underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with
its main business as to be properly considered ancillary thereto. The constancy of
respondents ferry services in its resort operations is underscored by its having its
own Coco Beach boats. And the tour packages it offers, which include the ferry services,
may be availed of by anyone who can afford to pay the same. These services are thus
available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of
no moment. It would be imprudent to suppose that it provides said services at a loss. The
Court is aware of the practice of beach resort operators offering tour packages to factor the
transportation fee in arriving at the tour package price. That guests who opt not to avail of
respondents ferry services pay the same amount is likewise inconsequential. These guests
may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has
deliberately refrained from making distinctions on whether the carrying of persons or goods
is the carriers principal business, whether it is offered on a regular basis, or whether it is
offered to the general public. The intent of the law is thus to not consider such
distinctions. Otherwise, there is no telling how many other distinctions may be concocted
by unscrupulous businessmen engaged in the carrying of persons or goods in order to
avoid the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence for the safety of the
passengers transported by them, according to all the circumstances of each case. [19] They
are bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all the
circumstances.[20]
When a passenger dies or is injured in the discharge of a contract of carriage, it
is presumed that the common carrier is at fault or negligent. In fact, there is even no need
for the court to make an express finding of fault or negligence on the part of the common
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 29
carrier. This statutory presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence.[21]
Respondent nevertheless harps on its strict compliance with the earlier mentioned
conditions of voyage before it allowed M/B Coco Beach III to sail on September 11,
2000.Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical
cyclone warnings for shipping on September 10 and 11, 2000 advising of tropical
depressions in Northern Luzon which would also affect the province of Mindoro.[22] By the
testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be
expected under such weather condition.[23]
A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other peoples lives at risk. The extraordinary diligence required of
common carriers demands that they take care of the goods or lives entrusted to their
hands as if they were their own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event does
not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
been such as to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the aggravation
of the resulting injury to the creditor. [24]
To fully free a common carrier from any liability, the fortuitous event must have been
the proximate and only cause of the loss. And it should have exercised due diligence to
prevent or minimize the loss before, during and after the occurrence of the fortuitous
event.[25]
Respondent cites the squall that occurred during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls
was expected under the weather condition of September 11, 2000. Moreover, evidence
shows that M/B Coco Beach III suffered engine trouble before it capsized and sank. [26]The
incident was, therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the squall.
Article 1764[27] vis--vis Article 2206[28] of the Civil Code holds the common carrier
in breach of its contract of carriage that results in the death of a passenger liable to pay the
following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral
damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed
at P50,000.[29]
As for damages representing unearned income, the formula for its computation
is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death][30]
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x
[80 age at death]) adopted in the American Expectancy Table of Mortality or the Actuarial
of Combined Experience Table of Mortality. [31]
The second factor is computed by multiplying the life expectancy by the net
earnings of the deceased, i.e., the total earnings less expenses necessary in the creation
of such earnings or income and less living and other incidental expenses. [32] The loss is not
equivalent to the entire earnings of the deceased, but only such portion as he would have
used to support his dependents or heirs. Hence, to be deducted from his gross earnings
are the necessary expenses supposed to be used by the deceased for his own needs.[33]
In computing the third factor necessary living expense, Smith Bell Dodwell
Shipping Agency Corp. v. Borja[34] teaches that when, as in this case, there is no showing
that the living expenses constituted the smaller percentage of the gross income, the living
expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as
follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of
$900[35] which, when converted to Philippine peso applying the annual average exchange
rate of $1 = P44 in 2000,[36] amounts to P39,600. Ruelitos net earning capacity is thus
computed as follows:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 30
 damages may be deemed to have been reasonably ascertained). The
= 35 x (P475,200 - P237,600) actual base for the computation of legal interest shall, in any case, be
= 35 x (P237,600) on the amount finally adjudged.

Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent common carriers
breach of contract of carriage resulted in the death of petitioners son, following Article
1764 vis--vis Article 2206 of the Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence
required of common carriers, it is presumed to have acted recklessly, thus warranting the
award too of exemplary damages, which are granted in contractual obligations if the
defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. [37]
Under the circumstances, it is reasonable to award petitioners the amount
of P100,000 as moral damages and P100,000 as exemplary damages.[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's fees may also be awarded where
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals [40] teaches that when an
obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for payment of interest in the
concept of actual and compensatory damages, subject to the following rules, to wit
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.
(emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the
rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the
immediately cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners
the following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as
indemnity for Ruelitos loss of earning capacity; (3) P100,000 as moral
damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount adjudged
against respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per
annum computed from the finality of this decision until full payment.

1. When the obligation is breached, and it consists in the SO ORDERED.

payment of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance

of money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date
the judgment of the court is made (at which time the quantification of

BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 31

 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 200289 November 25, 2013
WESTWIND SHIPPING CORPORATION, Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
x-----------------------x
G.R. No. 200314
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
DECISION
PERALTA, J.:
These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, September 13, 2011 Decision 1 and January 19, 2012
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and
set aside the January 27, 2006 Decision3 of the Manila City Regional Trial Court Branch
(RTC) 30. The facts, as established by the records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan,
197 metal containers/skids of tin-free steel for delivery to the consignee, San Miguel
Corporation (SMC). The shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded
and received clean on board M/V Golden Harvest Voyage No. 66, a vessel owned and
operated by Westwind Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB)
for US Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and
Ninety-Seven Centavos (US$184,798.97), which, at the time, was equivalent to Philippine
Pesos: Six Million Two Hundred Nine Thousand Two Hundred Forty-Five and Twenty-
Eight Centavos (6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the
custody of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port
Services, Inc.5 During the unloading operation, however, six containers/skids worth
Philippine Pesos: One Hundred Seventeen Thousand Ninety-Three and Twelve Centavos
(117,093.12) sustained dents and punctures from the forklift used by the stevedores of
Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the containers/skids. As a
consequence, the local ship agent of the vessel, Baliwag Shipping Agency, Inc., issued
two Bad Order Cargo Receipt dated September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of
SMC, withdrew from ATI the 197 containers/skids, including the six in damaged condition,
and delivered the same at SMCs warehouse in Calamba, Laguna through J.B. Limcaoco
Trucking (JBL). It was discovered upon discharge that additional nine containers/skids
valued at Philippine Pesos: One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine
and Sixty-Eight Centavos (175,639.68) were also damaged due to the forklift operations;
thus, making the total number of 15 containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI,
and OFII to recover the amount corresponding to the damaged 15 containers/skids. When
UCPB paid the total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven
Hundred Thirty-Two and Eighty Centavos (292,732.80), SMC signed the subrogation
receipt. Thereafter, in the exercise of its right of subrogation, UCPB instituted on August
30, 1994 a complaint for damages against Westwind, ATI, and OFII. 6
After trial, the RTC dismissed UCPBs complaint and the counterclaims of Westwind, ATI,
and OFII. It ruled that the right, if any, against ATI already prescribed based on the
stipulation in the 16 Cargo Gate Passes issued, as well as the doctrine laid down in
International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co.
Inc.7 that a claim for reimbursement for damaged goods must be filed within 15 days from
the date of consignees knowledge. With respect to Westwind, even if the action against it
is not yet barred by prescription, conformably with Section 3 (6) of the Carriage of Goods
by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of Appeals, et
al.8 and Belgian Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co.,
Inc.,9 the court a quo still opined that Westwind is not liable, since the discharging of the
cargoes were done by ATI personnel using forklifts and that there was no allegation that it
(Westwind) had a hand in the conduct of the stevedoring operations. Finally, the trial court
likewise absolved OFII from any liability, reasoning that it never undertook the operation of
the forklifts which caused the dents and punctures, and that it merely facilitated the release
and delivery of the shipment as the customs broker and representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its
September 13, 2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The
Decision dated January 27, 2006 rendered by the court a quo is REVERSED AND SET
ASIDE. Appellee Westwind Shipping Corporation is hereby ordered to pay to the appellant
UCPB General Insurance Co., Inc., the amount of One Hundred Seventeen Thousand and
Ninety-Three Pesos and Twelve Centavos (Php117,093.12), while Orient Freight
International, Inc. is hereby ordered to pay to UCPB the sum of One Hundred Seventy-
Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos (Php175,639.68).
Both sums shall bear interest at the rate of six (6%) percent per annum, from the filing of
the complaint on August 30, 1994 until the judgment becomes final and executory.
Thereafter, an interest rate of twelve (12%) percent per annum shall be imposed from the
time this decision becomes final and executory until full payment of said amounts.
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 32
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it
rendered a contrary view as regards the liability of Westwind and OFII. For the appellate
court, Westwind, not ATI, is responsible for the six damaged containers/skids at the time of
its unloading. In its rationale, which substantially followed Philippines First Insurance Co.,
Inc. v. Wallem Phils. Shipping, Inc.,11 it concluded that the common carrier, not the arrastre
operator, is responsible during the unloading of the cargoes from the vessel and that it is
not relieved from liability and is still bound to exercise extraordinary diligence at the time in
order to see to it that the cargoes under its possession remain in good order and condition.
The CA also considered that OFII is liable for the additional nine damaged
containers/skids, agreeing with UCPBs contention that OFII is a common carrier bound to
observe extraordinary diligence and is presumed to be at fault or have acted negligently for
such damage. Noting the testimony of OFIIs own witness that the delivery of the shipment
to the consignee is part of OFIIs job as a cargo forwarder, the appellate court ruled that
Article 1732 of the New Civil Code (NCC) does not distinguish between one whose
principal business activity is the carrying of persons or goods or both and one who does so
as an ancillary activity. The appellate court further ruled that OFII cannot excuse itself from
liability by insisting that JBL undertook the delivery of the cargoes to SMCs warehouse. It
opined that the delivery receipts signed by the inspector of SMC showed that the
containers/skids were received from OFII, not JBL. At the most, the CA said, JBL was
engaged by OFII to supply the trucks necessary to deliver the shipment, under its
supervision, to SMC.
Only Westwind and OFII filed their respective motions for reconsideration, which the CA
denied; hence, they elevated the case before Us via petitions docketed as G.R. Nos.
200289 and 200314, respectively.
Westwind argues that it no longer had actual or constructive custody of the
containers/skids at the time they were damaged by ATIs forklift operator during the
unloading operations. In accordance with the stipulation of the bill of lading, which
allegedly conforms to Article 1736 of the NCC, it contends that its responsibility already
ceased from the moment the cargoes were delivered to ATI, which is reckoned from the
moment the goods were taken into the latters custody. Westwind adds that ATI, which is a
completely independent entity that had the right to receive the goods as exclusive operator
of stevedoring and arrastre functions in South Harbor, Manila, had full control over its
employees and stevedores as well as the manner and procedure of the discharging
operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI by
overseeing and documenting the turnover and counterchecking if the quantity of the
shipments were in tally with the shipping documents at hand, but without participating in
the physical withdrawal and loading of the shipments into the delivery trucks of JBL.
Assuming that it is a common carrier, OFII insists that there is no need to rely on the
presumption of the law that, as a common carrier, it is presumed to have been at fault or
have acted negligently in case of damaged goods considering the undisputed fact that
the damages to the containers/skids were caused by the forklift blades, and that there is
no evidence presented to show that OFII and Westwind were the owners/operators of the
forklifts. It asserts that the loading to the trucks were made by way of forklifts owned and
operated by ATI and the unloading from the trucks at the SMC warehouse was done by
way of forklifts owned and operated by SMC employees. Lastly, OFII avers that neither the
undertaking to deliver nor the acknowledgment by the consignee of the fact of delivery
makes a person or entity a common carrier, since delivery alone is not the controlling
factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.12 applies,
as it settled the query on which between a common carrier and an arrastre operator should
be responsible for damage or loss incurred by the shipment during its unloading. We
elucidated at length:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods transported by
them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code,
common carriers are responsible for the loss, destruction, or deterioration of the goods.
The extraordinary responsibility of the common carrier 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 a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is
liable for the cargo from the time it is turned over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at
the port of unloading, unless agreed otherwise. In Standard Oil Co. of New York v. Lopez
Castelo, the Court interpreted the ship captains liability as ultimately that of the shipowner
by regarding the captain as the representative of the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by
sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities and liabilities and entitled
to the rights and immunities set forth in the Act. Section 3 (2) thereof then states that
among the carriers responsibilities are to properly and carefully load, handle, stow, carry,
keep, care for, and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee or shipper and the
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 33
ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them over to the party entitled
to their possession.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody.
In Firemans Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the
relationship and responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and warehouseman. The relationship between the consignee and the common
carrier is similar to that of the consignee and the arrastre operator. Since it is the duty of
the ARRASTRE to take good care of the goods that are in its custody and to deliver them
in good condition to the consignee, such responsibility also devolves upon the CARRIER.
Both the ARRASTRE and the CARRIER are therefore charged with and obligated to
deliver the goods in good condition to the consignee. (Emphasis supplied) (Citations
omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court
of Appeals with the clarification that the arrastre operator and the carrier are not always
and necessarily solidarily liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator
and a carrier may not be held solidarily liable at all times. But the precise question is which
entity had custody of the shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers
responsibilities are to properly and carefully load, care for and discharge the goods carried.
The bill of lading covering the subject shipment likewise stipulates that the carriers liability
for loss or damage to the goods ceases after its discharge from the vessel. Article 619 of
the Code of Commerce holds a ship captain liable for the cargo from the time it is turned
over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled
that like the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the
carrier is accordingly responsible for the acts of the master, the crew, the stevedore, and
his other agents. It has also been held that it is ordinarily the duty of the master of a vessel
to unload the cargo and place it in readiness for delivery to the consignee, and there is an
implied obligation that this shall be accomplished with sound machinery, competent hands,
and in such manner that no unnecessary injury shall be done thereto. And the fact that a
consignee is required to furnish persons to assist in unloading a shipment may not relieve
the carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier x x x.13
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co.
(Philippines), Inc.14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court
echoed the doctrine that cargoes, while being unloaded, generally remain under the
custody of the carrier. We cannot agree with Westwinds disputation that "the carrier in
Wallem clearly exercised supervision during the discharge of the shipment and that is why
it was faulted and held liable for the damage incurred by the shipment during such time."
What Westwind failed to realize is that the extraordinary responsibility of the common
carrier lasts until the time the goods are actually or constructively delivered by the carrier
to the consignee or to the person who has a right to receive them. There is actual delivery
in contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove
the goods.16 In this case, since the discharging of the containers/skids, which were
covered by only one bill of lading, had not yet been completed at the time the damage
occurred, there is no reason to imply that there was already delivery, actual or
constructive, of the cargoes to ATI. Indeed, the earlier case of Delsan Transport Lines, Inc.
v. American Home Assurance Corp.17 serves as a useful guide, thus:
Delsans argument that it should not be held liable for the loss of diesel oil due to backflow
because the same had already been actually and legally delivered to Caltex at the time it
entered the shore tank holds no water. It had been settled that the subject cargo was still
in the custody of Delsan because the discharging thereof has not yet been finished when
the backflow occurred. Since the discharging of the cargo into the depot has not yet been
completed at the time of the spillage when the backflow occurred, there is no reason to
imply that there was actual delivery of the cargo to the consignee. Delsan is straining the
issue by insisting that when the diesel oil entered into the tank of Caltex on shore, there
was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the
extraordinary responsibility of common carrier 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 a person who has the right to receive them. The discharging of oil products to Caltex
Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve
the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a
duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in vigilance over the goods and
for the safety of the passengers transported by them, according to all the circumstances of
each case. The mere proof of delivery of goods in good order to the carrier, and their
arrival in the place of destination in bad order, make out a prima facie case against the
carrier, so that if no explanation is given as to how the injury occurred, the carrier must be
held responsible. It is incumbent upon the carrier to prove that the loss was due to
accident or some other circumstances inconsistent with its liability. 18
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 34
The contention of OFII is likewise untenable. A customs broker has been regarded as a
common carrier because transportation of goods is an integral part of its business. 19 In
Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., 20 the Court already
reiterated: It is settled that under a given set of facts, a customs broker may be regarded
as a common carrier.1wphi1 Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The
Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common
carrier, as defined under Article 1732 of the Civil Code, to wit, Art. 1732. Common carriers
are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering
their services to the public.
xxxx
Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. The
contention, therefore, of petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs declaration and proper shipping
documents as required by law is bereft of merit. It suffices that petitioner undertakes to
deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the
transportation of goods is an integral part of a customs broker, the customs broker is also
a common carrier. For to declare otherwise "would be to deprive those with whom [it]
contracts the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for [its] customers, is part and parcel of petitioners business." 21
That OFII is a common carrier is buttressed by the testimony of its own witness, Mr.
Loveric Panganiban Cueto, that part of the services it offers to clients is cargo forwarding,
which includes the delivery of the shipment to the consignee.22 Thus, for undertaking the
transport of cargoes from ATI to SMCs warehouse in Calamba, Laguna, OFII is
considered a common carrier. As long as a person or corporation holds itself to the public
for the purpose of transporting goods as a business, it is already considered a common
carrier regardless of whether it owns the vehicle to be used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,23 extraordinary diligence in the vigilance over the goods 24 it transports according to
the peculiar circumstances of each case. In the event that the goods are lost, destroyed or
deteriorated, it is presumed to have been at fault or to have acted negligently unless it
proves that it observed extraordinary diligence. 25 In the case at bar it was established that
except for the six containers/skids already damaged OFII received the cargoes from ATI in
good order and condition; and that upon its delivery to SMC additional nine
containers/skids were found to be in bad order as noted in the Delivery Receipts issued by
OFII and as indicated in the Report of Cares Marine Cargo Surveyors. Instead of merely
excusing itself from liability by putting the blame to ATI and SMC it is incumbent upon OFII
to prove that it actively took care of the goods by exercising extraordinary diligence in the
carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of
the Civil Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos.
200289 and 200314 respectively are DENIED. The September 13 2011 Decision and
January 19 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which
reversed and set aside the January 27 2006 Decision of the Manila City Regional Trial
Court Branch 30 are AFFIRMED.
SO ORDERED.
SECOND DIVISION
[G.R. No. 148496. March 19, 2002]
VIRGINES CALVO doing business under the name and style TRANSORIENT
CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL
INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of
Appeals, affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148,
which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00 with
legal interest, representing the value of damaged cargo handled by petitioner, 25% thereof
as attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services,
Inc. (TCTSI), a sole proprietorship customs broker. At the time material to this
case, petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer
of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port
Area in Manila to SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita,
Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in
Manila on board M/V Hayakawa Maru and, after 24 hours, were unloaded from the vessel
to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25,
1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre
operator and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990, the
goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-
chemical fluting paper were wet/stained/torn and 3 reels of kraft liner board were likewise
torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against
petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20,
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 35
1995, rendered judgment finding petitioner liable to respondent for the damage to the
shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report
(Exh. F) with entries appearing therein, classified as TED and TSN, which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the
middle of the subject damaged cargoes respectively, coupled with the Marine Cargo
Survey Report (Exh. H - H-4-A) confirms the fact of the damaged condition of the subject
cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which provides among others
that:
. . . we opine that damages sustained by shipment is attributable to improper handling in
transit presumably whilst in the custody of the broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that [she
is] are not liable. Defendant by reason of the nature of [her] business should have devised
ways and means in order to prevent the damage to the cargoes which it is under obligation
to take custody of and to forthwith deliver to the consignee. Defendant did not present any
evidence on what precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the cargo.
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have
been lost, destroyed or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they have observed the extraordinary
diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the
goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is
shifted to the carrier to prove that he has exercised the extraordinary diligence required by
law. Thus, it has been held that the mere proof of delivery of goods in good order to a
carrier, and of their arrival at the place of destination in bad order, makes out a prima facie
case against the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability. (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the
extraordinary responsibility lasts from the time the goods are unconditionally placed in the
possession of and received by the carrier for transportation until the same are delivered
actually or constructively by the carrier to the consignee or to the person who has the right
to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for
review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE
PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND
MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER
AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD
ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court of Appeals
held otherwise, then she is indeed not liable beyond what ordinary diligence in the
vigilance over the goods transported by her, would require. [6] Consequently, any damage
to the cargo she agrees to transport cannot be presumed to have been due to her fault or
negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs broker
and warehouseman, she does not indiscriminately hold her services out to the public but
only offers the same to select parties with whom she may contract in the conduct of her
business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court
dismissed a similar contention and held the party to be a common carrier, thus
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 36
an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the general public, i.e.,
the general community or population, and one who offers services or solicits business only
from a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions.
So understood, the concept of common carrier under Article 1732 may be seen to coincide
neatly with the notion of public service, under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act,
public service includes:
x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services. x x x [8]
There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioners contention
would be to deprive those with whom she contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for her customers, as
already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all the circumstances of each
case. . . .
In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence
in the vigilance over goods was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to,
or destruction of the goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and to use all
reasonable means to ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods
as their nature requires.
In the case at bar, petitioner denies liability for the damage to the cargo. She claims
that the spoilage or wettage took place while the goods were in the custody of either the
carrying vessel M/V Hayakawa Maru, which transported the cargo to Manila, or the
arrastre operator, to whom the goods were unloaded and who allegedly kept them in open
air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the
containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey
Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened. [10]
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified
that he has no personal knowledge on whether the container vans were first stored in
petitioners warehouse prior to their delivery to the consignee. She likewise claims that after
withdrawing the container vans from the arrastre operator, her driver, Ricardo Nazarro,
immediately delivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere
thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to
the cargo could not have taken place while these were in her custody. [11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo
Surveyors indicates that when the shipper transferred the cargo in question to the arrastre
operator, these were covered by clean Equipment Interchange Report (EIR) and, when
petitioners employees withdrew the cargo from the arrastre operator, they did so without
exception or protest either with regard to the condition of container vans
or their contents. The Survey Report pertinently reads
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to
dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure
metal vans, covered by clean EIRs. Except for slight dents and paint scratches on side and
roof panels, these containers were deemed to have [been] received in good condition.
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by
Transorient Container Services, Inc. . . . without exception.
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 37
[The cargo] was finally delivered to the consignees storage warehouse located at ordinary observation, but he nevertheless accepts the same without protest or exception
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12] notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner accepted the cargo without exception despite
As found by the Court of Appeals: the apparent defects in some of the container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage of goods in this case or that she
is exempt from liability, the presumption of negligence as provided under Art.
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to
1735[15] holds.
the arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean
Equipment Interchange Reports (EIRs). Had there been any damage to the shipment, WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
there would have been a report to that effect made by the arrastre operator. The cargoes AFFIRMED.
were withdrawn by the defendant-appellant from the arrastre still in good order and
condition as the same were received by the former without exception, that is, without any SO ORDERED.
report of damage or loss. Surely, if the container vans were deformed, cracked, distorted
or dented, the defendant-appellant would report it immediately to the consignee or make
an exception on the delivery receipt or note the same in the Warehouse Entry Slip
(WES). None of these took place. To put it simply, the defendant-appellant received the
shipment in good order and condition and delivered the same to the consignee
damaged. We can only conclude that the damages to the cargo occurred while it was in
the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the
possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was
due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this
legal presumption and the presumption of negligence attached to a common carrier in
case of loss or damage to the goods.[13]

Anent petitioners insistence that the cargo could not have been damaged while in her
custody as she immediately delivered the containers to SMCs compound, suffice it to say
that to prove the exercise of extraordinary diligence, petitioner must do more than merely
show the possibility that some other party could be responsible for the damage. It must
prove that it used all reasonable means to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]. Petitioner
failed to do this.

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

Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:

....

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

....

For this provision to apply, the rule is that if the improper packing or, in this case, the
defect/s in the container, is/are known to the carrier or his employees or apparent upon
BENTOR| S.Y.2017-2018 Transportation Law: Atty. Ventura| 38