FIRST PHILIPPINE INDUSTRIAL CORPORATION, FPIC,

vs.
CA and ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.

This petition for review on certiorari assails the Decision of the CA affirming the decision of the RTC,
which dismissed FPICs' complaint for a business tax refund imposed by Batangas City.

FPIC is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install
and operate oil pipelines since 1967.

Sometime in January 1995, FPIC 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 FPIC
to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the LGC3. The
respondent City Treasurer assessed a business tax on the FPIC 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, FPIC paid the tax under protest in
the amount of P239, 019.01 for the first quarter of 1993.

On January 20, 1994, FPIC filed a letter-protest addressed to the respondent City Treasurer, contending
that, “Transportation contractors are not included in the enumeration of contractors under Section 131,
Paragraph (h) of the LGC. Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the LGC does not include the power to levy on
transportation contractors. The fee is already a revenue raising measure, and not a mere regulatory
imposition”.

On March 8, 1994, the respondent City Treasurer denied the protest contending that FPIC cannot be
considered engaged in transportation business, thus it cannot claim exemption.

On June 15, 1994, FPIC filed with the RTC of Batangas City a complaint6 for tax refund with prayer for
writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her
capacity as City Treasurer. In its complaint, FPIC alleged, inter alia, that: (1) the imposition and collection
of the business tax on its gross receipts violates Section 133 of the LGC; (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 FPIC cannot be exempt from taxes under Section
133 (j) of the LGC 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:
 a) Plaintiff is either a contractor or other independent contractor.
b) 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.
c) Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387whose
concession was lately renewed by the Energy Regulatory Board. Yet neither said law nor the
deed of concession grant any tax exemption upon the plaintiff.

Even the LGC 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, . . . 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

FPIC assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we
referred the case to the respondent CA for consideration and adjudication. 10 On November 29, 1995,
the respondent court rendered a decision 11 affirming the trial court's dismissal of FPIC's complaint.
FPIC'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. 13FPIC moved for a reconsideration which was granted by this Court in a Resolution 14 of January
22, 1997. Thus, the petition was reinstated.

FPIC claims that the respondent CA erred in holding that (1) the FPIC is not a common carrier or a
transportation contractor, and (2) the exemption sought for by FPIC 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.

Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must
hold himself out as ready to engage in the transportation of goods for person generally as a business
and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;

3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that FPIC 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 FPIC has a
limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. CA 16we
ruled that:

The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction between a person
or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general population. We think
that Article 1877 deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with
the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended)
which at least partially supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, "public service" includes:

every person that now or hereafter may own, operate. manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done
for general business purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be
its classification, freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system
gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services.
(Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the LGC 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 FPIC, 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

1. Under the Petroleum Act of the Philippines (Republic Act 387), FPIC is considered a "common
carrier." Thus, Article 86 thereof provides that a Pipe line concessionaire as common carrier.
2. Republic Act 387 also regards petroleum operation as a public utility.
3. The Bureau of Internal Revenue likewise considers the FPIC a "common carrier

From the foregoing disquisition, there is no doubt that FPIC is a "common carrier" and, therefore,
exempt from the business tax as provided for in Section 133 (j), of the LGC, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:

(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.

The deliberations conducted in the House of Representatives on the LGC of 1991 are illuminating. 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."

FPIC is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the
National Internal Revenue Code. 19 To tax FPIC again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the LGC.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent CA is REVERSED and SET
ASIDE.

G.R. No. 147246 August 19, 2003

ASIA LIGHTERAGE AND SHIPPING, INC., ASIA Lighterage,

vs.
CA and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.

On appeal is the CA' May 11, 2000 Decision affirming with modification the Decision3 of the RTC of
Manila which found ASIA Lighterage liable to pay PRUDENTIAL GUARANTEE the amount of indemnity
and attorney's fees.

On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.354 was shipped by Marubeni American Corporation of Portland, Oregon on board the
vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila,
evidenced by Bill of Lading No. PTD/Man-4.5The shipment was insured by the PRUDENTIAL GUARANTEE
Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under Marine
Cargo Risk Note RN 11859/90.6

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of
the ASIA Lighterage and Shipping, Inc. ASIA Lighterage was contracted by the consignee as carrier to
deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.

On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by
Lighterage Receipt No. 03647 for delivery to consignee. The cargo did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an
incoming typhoon. On August 22, 1990, the ASIA Lighterage proceeded to pull the barge to Engineering
Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges
which arrived ahead of it while weathering out the storm that night. A few days after, the barge
developed a list because of a hole it sustained after hitting an unseen protuberance underneath the
water. The ASIA Lighterage filed a Marine Protest on August 28, 1990.8 It likewise secured the services of
Gaspar Salvaging Corporation which refloated the barge.9 The hole was then patched with clay and
cement.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on
September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong
current. To avoid the complete sinking of the barge, a portion of the goods was transferred to three
other barges.10

The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the
total loss of the remaining cargo.11 A second Marine Protest was filed on September 7, 1990.12

On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and
loaded on the three other barges.13 The total proceeds from the sale of the salvaged cargo
was P201,379.75.14 On the same date, September 14, 1990, consignee sent a claim letter to the ASIA
Lighterage, and another letter dated September 18, 1990 to the PRUDENTIAL GUARANTEE for the value
of the lost cargo.

On January 30, 1991, the PRUDENTIAL GUARANTEE indemnified the consignee in the amount
of P4,104,654.22.15Thereafter, as subrogee, it sought recovery of said amount from the ASIA Lighterage,
but to no avail.

On July 3, 1991, the PRUDENTIAL GUARANTEE filed a complaint against the ASIA Lighterage for recovery
of the amount of indemnity, attorney's fees and cost of suit.16 ASIA Lighterage filed its answer with
counterclaim.17

The RTC ruled in favor of the PRUDENTIAL GUARANTEE. The dispositive portion of its Decision states:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia

Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the
sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fully
 satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's counterclaim
is hereby DISMISSED. With costs against defendant.18

ASIA Lighterage appealed to the CA insisting that it is not a common carrier. The appellate court
affirmed the decision of the trial court with modification. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense
that the salvage value of P201,379.75 shall be deducted from the amount of P4,104,654.22.
Costs against appellant.

SO ORDERED.

ASIA Lighterage's MR dated June 3, 2000 was likewise denied by the appellate .

Hence, this petition. ASIA Lighterage submits the following errors allegedly committed by the appellate
court, viz:19The issues to be resolved are:

(1) Whether the ASIA Lighterage is a common carrier; and,

(2) Assuming the ASIA Lighterage is a common carrier, whether it exercised extraordinary
diligence in its care and custody of the consignee's cargo.

On the first issue, we rule that ASIA Lighterage is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public.

ASIA Lighterage contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed
and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not
obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In
short, it does not hold out its services to the general public.20

We disagree.

In De Guzman vs. CA,21 we held that the definition of common carriers in Article 1732 of the Civil Code
makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity. We also did not distinguish
between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that Article 1732
does not distinguish between a carrier offering its services to the general public, and one who offers
services or solicits business only from a narrow segment of the general population.

In the case at bar, the principal business of the ASIA Lighterage is that of lighterage and drayage22 and it
offers its barges to the public for carrying or transporting goods by water for compensation. ASIA
Lighterage is clearly a common carrier. In De Guzman, supra,23 we considered PRUDENTIAL GUARANTEE
Ernesto Cendaña to be a common carrier even if his principal occupation was not the carriage of goods
for others, but that of buying used bottles and scrap metal in Pangasinan and selling these items in
Manila.

We therefore hold that ASIA Lighterage is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not
have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.

To be sure, ASIA Lighterage fits the test of a common carrier as laid down in Bascos vs. CA.24 The test to
determine a common carrier is "whether the given undertaking is a part of the business engaged in by
the carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business transacted."25 In the case at bar, the ASIA Lighterage admitted that it is engaged
in the business of shipping and lighterage,26 offering its barges to the public, despite its limited clientele
for carrying or transporting goods by water for compensation.27

On the second issue, we uphold the findings of the lower courts that ASIA Lighterage failed to exercise
extraordinary diligence in its care and custody of the consignee's goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.28 They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.29 To overcome the presumption of negligence in the case of
loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

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

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its
cargo. ASIA Lighterage claims that this was caused by a typhoon, hence, it should not be held liable for
the loss of the cargo. However, ASIA Lighterage failed to prove that the typhoon is the proximate and
only cause of the loss of the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss.30 The evidence show that, even before the
towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object
while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely
attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only
clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail
safely. Thus, when ASIA Lighterage persisted to proceed with the voyage, it recklessly exposed the cargo
to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue
Adjustment Co., Inc., states:

q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?

a - Mostly it was related to the first accident because there was already a whole (sic) on the
bottom part of the barge.

This is not all. ASIA Lighterage still headed to the consignee's wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee's wharf on September 5,
1990, typhoon "Loleng" has already entered the Philippine area of responsibility.32 A part of the
testimony of Robert Boyd, Cargo Operations Supervisor of the ASIA Lighterage, reveals

q - And yet as a standard operating procedure of your Company, you have to secure a sort
of Certification to determine the weather condition, am I correct?

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are
already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the ASIA Lighterage cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the PRUDENTIAL GUARANTEE. Surely, meeting a typhoon head-
on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of ASIA Lighterage admitted that when the towing bits of the vessel
broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no
longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a
human factor, i.e., negligence had intervened.