1. De Guzman v.
Court of Appeals 168 SCRA On 6 January 1971, petitioner commenced
617
Through carrying of goods not the
principal occupation
Respondent Ernesto Cendana, a junk dealer, was
engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient
quantities of such scrap material, respondent
would bring such material to Manila for resale.
He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the
return trip to Pangasinan, respondent would load
his vehicles with cargo which various merchants
wanted delivered to differing establishments in
Pangasinan. For that service, respondent charged
freight rates which were commonly lower than
regular commercial rates.
Sometime in November 1970, petitioner Pedro
de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in
Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General
Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were
loaded on a truck driven by respondent himself,
while 600 cartons were placed on board the
other truck which was driven by Manuel
Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were
delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which
carried these boxes was hijacked somewhere
along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.
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 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 do
not act with grave or irresistible threat, violence
or force, is dispensed with or diminished; and
(7) that the common carrier shall not
responsible for the loss, destruction or
deterioration of goods on account of the
defective condition of the car vehicle, ship,
airplane or other equipment used in the contract
of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier
is held responsible — and will not be allowed to
divest or to diminish such responsibility — even
for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence
or force." We believe and so hold that the limits
of the duty of extraordinary diligence in the
vigilance over the goods carried are reached
where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat,
violence or force."
In the instant case, armed men held up the
second truck owned by private respondent which
carried petitioner's cargo. The record shows that
an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2,
in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon
Presno, Armando Mesina, Oscar Oria and one
John Doe." 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.
2. Loadmaster Customs Services, Inc. V.
Glodel Brokerage, GR 179446, January 10,
2011
Trucking Services
FACTS:
R&B Insurance issued a Marine Policy in favor
of Columbia to insure the shipment of 132
bundles of electric copper cathodes against All
Risks.
Columbia engaged the services of Glodel for the
release and withdrawal of the cargoes from the
pier and the subsequent delivery to its
warehouses/plants.
Glodel, in turn, engaged the services of
Loadmasters for the use of its delivery trucks to
transport the cargoes to Columbia’s
warehouses/plants in Bulacan and Valenzuela
City.
The goods were loaded on board twelve trucks
owned by Loadmasters, driven by its employed
drivers and accompanied by its employed truck
helpers.
The cargoes in six truckloads for Valenzuela
City were duly delivered. However, of the six
trucks en route to Bulacan, only five reached the
destination. One truck failed to deliver its cargo.
The said truck was later recovered but without
the copper cathodes. Columbia filed with R&B
Insurance a claim for insurance indemnity. R&B
Insurance paid Columbia the amount of
₱1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for
damages against both Loadmasters and Glodel,
seeking reimbursement of the amount it had paid
to Columbia for the loss of the subject cargo.
The RTC held Glodel liable for damages for the
loss of the subject cargo and was ordered to pay
R&B Insurance.
On appeal, the CA rendered the assailed
decision holding Loadmasters liable to appellant
Glodel for the insurance indemnity which
Glodel had to pay to R&B Insurance
Corporation.
Hence, Loadmasters filed the present petition.
ISSUES:
Whether or not Glodel and Loadmasters are
common carriers.
Define Extraordinary Diligence.
Who between Glodel and Loadmasters, is liable
to pay R&B Insurance for the amount of the
indemnity it paid Columbia.
RULING:
1. Loadmasters is a common carrier because it is
engaged in the business of transporting goods by
land, through its trucking service. It is a
common carrier as distinguished from a private
carrier wherein the carriage is generally
undertaken by special agreement and it does not
hold itself out to carry goods for the general
public.
The distinction is significant in the sense that
“the rights and obligations of the parties to a
contract of private carriage are governed
principally by their stipulations, not by the law
on common carriers.”
In the present case, there is no indication that the
undertaking in the contract between
Loadmasters and Glodel was private in
character. There is no showing that Loadmasters
solely and exclusively rendered services to
Glodel.
In fact, Loadmasters admitted that it is a
common carrier.
In the same vein, Glodel is also considered a
common carrier within the context of Article
1732. In its Memorandum, it states that it “is a
corporation duly organized and existing under
the laws of the Republic of the Philippines and is
engaged in th
e business of customs brokering.”
It cannot be considered otherwise because as
held by this Court in Schmitz Transport &
Brokerage Corporation v. Transport Venture,
Inc., a customs broker is also regarded as a
common carrier, the transportation of goods
being an integral part of its business.
2. Loadmasters and Glodel, being both common
carriers, are mandated from the nature of their
business and for reasons of public policy, to
observe the extraordinary diligence in the
vigilance over the goods transported by them
according to all the circumstances of such case.
When the Court speaks of extraordinary
diligence, it is that extreme measure of care and
caution which persons of unusual prudence and
circumspection observe for securing and
preserving their own property or rights. This
exacting standard imposed on common carriers
in a contract of carriage of goods is intended to
tilt the scales in favor of the shipper who is at
the mercy of the common carrier once the goods
have been lodged for shipment. Thus, in case of
loss of the goods, the common carrier is
presumed to have been at fault or to have acted
negligently.
The Civil Code provides that the exercise of
extraordinary diligence 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.
This presumption of fault or negligence,
however, may be rebutted by proof that the
common carrier has observed extraordinary
diligence over the goods.
3. Doubtless, R&B Insurance is subrogated to
the rights of the insured to the extent of the
amount it paid the consignee under the marine
insurance, as provided under Article 2207 of the
Civil Code.
As subrogee of the rights and interest of the
consignee, R&B Insurance has the right to seek
reimbursement from either Loadmasters or
Glodel or both for breach of contract and/or tort.
Premises considered, the Court is of the view
that both Loadmasters and Glodel are jointly and
severally liable to R & B Insurance for the loss
of the subject cargo. Under Article 2194 of the
New Civil Code, “the responsibility of two or
more persons who are liable for a quasi-delict is
solidary.”
3. Schmitz Transport and Brokerage Corporation
V. Transport Venture Inc., GR No. 150255,
April 22, 2005
Custom Broker
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001
Decision[1] of the Court of Appeals, as well as
its Resolution[2] dated September 28, 2001
denying the motion for reconsideration, which
affirmed that of Branch 21 of the Regional Trial
Court (RTC) of Manila in Civil Case No. 92-
63132[3] holding petitioner Schmitz Transport
Brokerage Corporation (Schmitz Transport),
together with Black Sea Shipping Corporation
(Black Sea), represented by its ship agent
Inchcape Shipping Inc. (Inchcape), and
Transport Venture (TVI), solidarily liable for
the loss of 37 hot rolled steel sheets in coil that
were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd.
Singapore shipped from the port of Ilyichevsk,
Russia on board M/V “Alexander Saveliev” (a
vessel of Russian registry and owned by Black
Sea) 545 hot rolled steel sheets in coil weighing
6,992,450 metric tons.
The cargoes, which were to be discharged at the
port of Manila in favor of the consignee, Little
Giant Steel Pipe Corporation (Little Giant),[4]
were insured against all risks with Industrial
Insurance Company Ltd. (Industrial Insurance)
under Marine Policy No. M-91-3747-TIS.[5]
The vessel arrived at the port of Manila on
October 24, 1991 and the Philippine Ports
Authority (PPA) assigned it a place of berth at
the outside breakwater at the Manila South
Harbor.[6]
Schmitz Transport, whose services the
consignee engaged to secure the requisite
clearances, to receive the cargoes from the
shipside, and to deliver them to its (the
consignee’s) warehouse at Cainta, Rizal,[7] in
turn engaged the services of TVI to send a barge
and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVI’s
tugboat “Lailani” towed the barge “Erika V” to
shipside.[8]
By 7:00 p.m. also of October 26, 1991, the
tugboat, after positioning the barge alongside the
vessel, left and returned to the port terminal.[9]
At 9:00 p.m., arrastre operator Ocean Terminal
Services Inc. commenced to unload 37 of the
545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which
the weather condition had become inclement due
to an approaching storm, the unloading unto the
barge of the 37 coils was accomplished.[10] No
tugboat pulled the barge back to the pier,
however.
At around 5:30 a.m. of October 27, 1991, due to
strong waves,[11] the crew of the barge
abandoned it and transferred to the vessel. The
barge pitched and rolled with the waves and
eventually capsized, washing the 37 coils into
the sea.[12] At 7:00 a.m., a tugboat finally
arrived to pull the already empty and damaged
barge back to the pier.[13]
Earnest efforts on the part of both the consignee
Little Giant and Industrial Insurance to recover
the lost cargoes proved futile.[14]
Little Giant thus filed a formal claim against
Industrial Insurance which paid it the amount of
P5,246,113.11. Little Giant thereupon executed
a subrogation receipt[15] in favor of Industrial
Insurance.
Industrial Insurance later filed a complaint
against Schmitz Transport, TVI, and Black Sea
through its representative Inchcape (the
defendants) before the RTC of Manila, for the
recovery of the amount it paid to Little Giant
plus adjustment fees, attorney’s fees, and
litigation expenses.[16]
Industrial Insurance faulted the defendants for
undertaking the unloading of the cargoes while
typhoon signal No. 1 was raised in Metro
Manila.[17]
By Decision of November 24, 1997, Branch 21
of the RTC held all the defendants negligent for
unloading the cargoes outside of the breakwater
notwithstanding the storm signal.[18] The
dispositive portion of the decision reads:
WHEREFORE, premises considered, the Court
renders judgment in favor of the plaintiff,
ordering the defendants to pay plaintiff jointly
and severally the sum of P5,246,113.11 with
interest from the date the complaint was filed
until fully satisfied, as well as the sum of
P5,000.00 representing the adjustment fee plus
the sum of 20% of the amount recoverable from
the defendants as attorney’s fees plus the costs
of suit. The counterclaims and cross claims of
defendants are hereby DISMISSED for lack of
[m]erit.[19]
To the trial court’s decision, the defendants
Schmitz Transport and TVI filed a joint motion
for reconsideration assailing the finding that
they are common carriers and the award of
excessive attorney’s fees of more than
P1,000,000. And they argued that they were not
motivated by gross or evident bad faith and that
the incident was caused by a fortuitous event.
[20]
By resolution of February 4, 1998, the trial court
denied the motion for reconsideration. [21]
All the defendants appealed to the Court of
Appeals which, by decision of June 27, 2001,
affirmed in toto the decision of the trial court,
[22] it finding that all the defendants were
common carriers — Black Sea and TVI for
engaging in the transport of goods and cargoes
over the seas as a regular business and not as an
isolated transaction,[23] and Schmitz Transport
for entering into a contract with Little Giant to
transport the cargoes from ship to port for a
fee.[24]
In holding all the defendants solidarily liable,
the appellate court ruled that “each one was
essential such that without each other’s
contributory negligence the incident would not
have happened and so much so that the person
principally liable cannot be distinguished with
sufficient accuracy.”[25]
In discrediting the defense of fortuitous event,
the appellate court held that “although
defendants obviously had nothing to do with the
force of nature, they however had control of
where to anchor the vessel, where discharge will
take place and even when the discharging will
commence.”[26]
The defendants’ respective motions for
reconsideration having been denied by
Resolution[27] of September 28, 2001, Schmitz
Transport (hereinafter referred to as petitioner)
filed the present petition against TVI, Industrial
Insurance and Black Sea.
Petitioner asserts that in chartering the barge and
tugboat of TVI, it was acting for its principal,
consignee Little Giant, hence, the transportation
contract was by and between Little Giant and
TVI.[28]
By Resolution of January 23, 2002, herein
respondents Industrial Insurance, Black Sea, and
TVI were required to file their respective
Comments.[29]
By its Comment, Black Sea argued that the
cargoes were received by the consignee through
petitioner in good order, hence, it cannot be
faulted, it having had no control and supervision
thereover.[30]
For its part, TVI maintained that it acted as a
passive party as it merely received the cargoes
and transferred them unto the barge upon the
instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a
fortuitous event, independent of any act of
negligence on the part of petitioner Black Sea
and TVI, and
(2) If there was negligence, whether liability for
the loss may attach to Black Sea, petitioner and
TVI.
When a fortuitous event occurs, Article 1174 of
the Civil Code absolves any party from any and
all liability arising therefrom:
ART. 1174. Except in cases expressly specified
by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall
be responsible for those events which could not
be foreseen, or which though foreseen, were
inevitable.
In order, to be considered a fortuitous event,
however, (1) the cause of the unforeseen and
unexpected occurrence, or the failure of the
debtor to comply with his obligation, must be
independent of human will; (2) it must be
impossible to foresee the event which constitute
the caso fortuito, or if it can be foreseen it must
be impossible to avoid; (3) the occurrence must
be such as to render it impossible for the debtor
to fulfill his obligation in any manner; and (4)
the obligor must be free from any participation
in the aggravation of the injury resulting to the
creditor.[32]
[T]he principle embodied in the act of God
doctrine strictly requires that the act must be
occasioned solely by the violence of nature.
Human intervention is to be excluded from
creating or entering into the cause of the
mischief. When the effect is found to be in part
the result of the participation of man, whether
due to his active intervention or neglect or
failure to act, the whole occurrence is then
humanized and removed from the rules
applicable to the acts of God.[33]
The appellate court, in affirming the finding of
the trial court that human intervention in the
form of contributory negligence by all the
defendants resulted to the loss of the
cargoes,[34] held that unloading outside the
breakwater, instead of inside the breakwater,
while a storm signal was up constitutes
negligence.[35] It thus concluded that the
proximate cause of the loss was Black Sea’s
negligence in deciding to unload the cargoes at
an unsafe place and while a typhoon was
approaching.[36]
From a review of the records of the case, there is
no indication that there was greater risk in
loading the cargoes outside the breakwater. As
the defendants proffered, the weather on October
26, 1991 remained normal with moderate sea
condition such that port operations continued
and proceeded normally.[37]
The weather data report,[38] furnished and
verified by the Chief of the Climate Data
Section of PAG-ASA and marked as a common
exhibit of the parties, states that while typhoon
signal No. 1 was hoisted over Metro Manila on
October 23-31, 1991, the sea condition at the
port of Manila at 5:00 p.m. - 11:00 p.m. of
October 26, 1991 was moderate. It cannot,
therefore, be said that the defendants were
negligent in not unloading the cargoes upon the
barge on October 26, 1991 inside the
breakwater.
That no tugboat towed back the barge to the pier
after the cargoes were completely loaded by
12:30 in the morning[39] is, however, a material
fact which the appellate court failed to properly
consider and appreciate[40] — the proximate
cause of the loss of the cargoes. Had the barge
been towed back promptly to the pier, the
deteriorating sea conditions notwithstanding, the
loss could have been avoided. But the barge
was left floating in open sea until big waves set
in at 5:30 a.m., causing it to sink along with the
cargoes.[41] The loss thus falls outside the “act
of God doctrine.”
The proximate cause of the loss having been
determined, who among the parties is/are
responsible therefor?
Contrary to petitioner’s insistence, this Court, as
did the appellate court, finds that petitioner is a
common carrier. For it undertook to transport
the cargoes from the shipside of “M/V
Alexander Saveliev” to the consignee’s
warehouse at Cainta, Rizal. As the appellate
court put it, “as long as a person or corporation
holds [itself] to the public for the purpose of
transporting goods as [a] business, [it] is already
considered a common carrier regardless if [it]
owns the vehicle to be used or has to hire
one.”[42] That petitioner is a common carrier,
the testimony of its own Vice-President and
General Manager Noel Aro that part of the
services it offers to its clients as a brokerage
firm includes the transportation of cargoes
reflects so.
Atty. Jubay: Will you please tell us what [are
you] functions x x x as Executive Vice-President
and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of
the brokerage and transport business of the
company. I also handle the various division
heads of the company for operation matters, and
all other related functions that the President may
assign to me from time to time, Sir.

Q: Now, in connection [with] your duties and
functions as you mentioned, will you please tell
the Honorable Court if you came to know the
company by the name Little Giant Steel Pipe
Corporation?
A: Yes, Sir. Actually, we are the brokerage firm
of that Company.
Q: And since when have you been the brokerage
firm of that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage
firm of this Company. What work or duty did
you perform in behalf of this company?
A: We handled the releases (sic) of their
cargo[es] from the Bureau of Customs. We [are]
also in-charged of the delivery of the goods to
their warehouses. We also handled the
clearances of their shipment at the Bureau of
Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement
with this Little Giant Steel Pipe Corporation
with regards to this shipment? What work did
you do with this shipment?
A: We handled the unloading of the cargo[es]
from vessel to lighter and then the delivery of
[the] cargo[es] from lighter to BASECO then to
the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you
are doing, Mr. Witness, you are supposed to
perform, what equipment do (sic) you require or
did you use in order to effect this unloading,
transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side
operations, this unloading [from] vessel to
lighter, and on this we hired or we sub-
contracted with [T]ransport Ventures, Inc. which
[was] in-charged (sic) of the barges. Also, in
BASECO compound we are leasing cranes to
have the cargo unloaded from the barge to
trucks, [and] then we used trucks to deliver [the
cargoes] to the consignee’s warehouse, Sir.
Q: And whose trucks do you use from BASECO
compound to the consignee’s warehouse?
A: We utilized of (sic) our own trucks and we
have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us,
to the Honorable Court why is it you have to
contract for the barges of Transport Ventures
Incorporated in this particular operation?
A: Firstly, we don’t own any barges. That is
why we hired the services of another firm whom
we know [al]ready for quite sometime, which is
Transport Ventures, Inc. (Emphasis
supplied)[43]
It is settled that under a given set of facts, a
customs broker may be regarded as a common
carrier. Thus, this Court, in A.F. Sanchez
Brokerage, Inc. v. The Honorable Court of
Appeals,[44] held:
The appellate court did not err in finding
petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732
of the Civil Code, to wit,
Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in
the business of carrying or transporting
passengers or goods or both, by land, water, or
air, for compensation, offering their services to
the public.
xxx
Article 1732 does not distinguish between one
whose principal business activity is the carrying
of goods and one who does such carrying only
as an ancillary activity. The contention,
therefore, of petitioner that it is not a common
carrier but a customs broker whose principal
function is to prepare the correct customs
declaration and proper shipping documents as
required by law is bereft of merit. It suffices
that petitioner undertakes to deliver the goods
for pecuniary consideration.[45]
And in Calvo v. UCPB General Insurance Co.
Inc.,[46] this Court held that as the
transportation of goods is an integral part of a
customs broker, the customs broker is also a
common carrier. For to declare otherwise
“would be to deprive those with whom [it]
contracts the protection which the law affords
them notwithstanding the fact that the obligation
to carry goods for [its] customers, is part and
parcel of petitioner’s business.”[47]
As for petitioner’s argument that being the agent
of Little Giant, any negligence it committed was
deemed the negligence of its principal, it does
not persuade.
True, petitioner was the broker-agent of Little
Giant in securing the release of the cargoes. In
effecting the transportation of the cargoes from
the shipside and into Little Giant’s warehouse,
however, petitioner was discharging its own
personal obligation under a contact of carriage.
Petitioner, which did not have any barge or
tugboat, engaged the services of TVI as
handler[48] to provide the barge and the tugboat.
In their Service Contract,[49] while Little Giant
was named as the consignee, petitioner did not
disclose that it was acting on commission and
was chartering the vessel for Little Giant.[50]
Little Giant did not thus automatically become a
party to the Service Contract and was not,
therefore, bound by the terms and conditions
therein.
Not being a party to the service contract, Little
Giant cannot directly sue TVI based thereon but
it can maintain a cause of action for
negligence.[51]
In the case of TVI, while it acted as a private
carrier for which it was under no duty to observe
extraordinary diligence, it was still required to
observe ordinary diligence to ensure the proper
and careful handling, care and discharge of the
carried goods.
Thus, Articles 1170 and 1173 of the Civil Code
provide:
ART. 1170. Those who in the performance of
their obligations are guilty of fraud, negligence,
or delay, and those who in any manner
contravene the tenor thereof, are liable for
damages.

ART. 1173. The fault or negligence of the
obligor consists in the omission of that diligence
which is required by the nature of the obligation
and corresponds with the circumstances of the
persons, of the time and of the place. When
negligence shows bad faith, the provisions of
articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of a family
shall be required.
Was the reasonable care and caution which an
ordinarily prudent person would have used in the
same situation exercised by TVI?[52]
This Court holds not.
TVI’s failure to promptly provide a tugboat did
not only increase the risk that might have been
reasonably anticipated during the shipside
operation, but was the proximate cause of the
loss. A man of ordinary prudence would not
leave a heavily loaded barge floating for a
considerable number of hours, at such a
precarious time, and in the open sea, knowing
that the barge does not have any power of its
own and is totally defenseless from the ravages
of the sea. That it was nighttime and, therefore,
the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from
calling for one such tugboat.
As for petitioner, for it to be relieved of liability,
it should, following Article 1739[53] of the Civil
Code, prove that it exercised due diligence to
prevent or minimize the loss, before, during and
after the occurrence of the storm in order that it
may be exempted from liability for the loss of
the goods.
While petitioner sent checkers[54] and a
supervisor[55] on board the vessel to counter-
check the operations of TVI, it failed to take all
available and reasonable precautions to avoid
the loss. After noting that TVI failed to arrange
for the prompt towage of the barge despite the
deteriorating sea conditions, it should have
summoned the same or another tugboat to
extend help, but it did not.
This Court holds then that petitioner and TVI are
solidarily liable[56] for the loss of the cargoes.
The following pronouncement of the Supreme
Court is instructive:
The foundation of LRTA’s liability is the
contract of carriage and its obligation to
indemnify the victim arises from the breach of
that contract by reason of its failure to exercise
the high diligence required of the common
carrier. In the discharge of its commitment to
ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself
of the services of an outsider or an independent
firm to undertake the task. In either case, the
common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at
all, that liability could only be for tort under the
provisions of Article 2176 and related
provisions, in conjunction with Article 2180 of
the Civil Code. x x x [O]ne might ask further,
how then must the liability of the common
carrier, on one hand, and an independent
contractor, on the other hand, be described? It
would be solidary. A contractual obligation can
be breached by tort and when the same act or
omission causes the injury, one resulting in
culpa contractual and the other in culpa
aquiliana, Article 2194 of the Civil Code can
well apply. In fine, a liability for tort may arise
even under a contract, where tort is that which
breaches the contract. Stated differently, when
an act which constitutes a breach of contract
would have itself constituted the source of a
quasi-delictual liability had no contract existed
between the parties, the contract can be said to
have been breached by tort, thereby allowing the
rules on tort to apply.[57]
As for Black Sea, its duty as a common carrier
extended only from the time the goods were
surrendered or unconditionally placed in its
possession and received for transportation until
they were delivered actually or constructively to
consignee Little Giant.[58]
Parties to a contract of carriage may, however,
agree upon a definition of delivery that extends
the services rendered by the carrier. In the case
at bar, Bill of Lading No. 2 covering the
shipment provides that delivery be made “to the
port of discharge or so near thereto as she may
safely get, always afloat.”[59] The delivery of
the goods to the consignee was not from “pier to
pier” but from the shipside of “M/V Alexander
Saveliev” and into barges, for which reason the
consignee contracted the services of petitioner.
Since Black Sea had constructively delivered the
cargoes to Little Giant, through petitioner, it had
discharged its duty.[60]
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorney’s fees in an
amount over P1,000,000.00 to Industrial
Insurance, for lack of factual and legal basis, this
Court sets it aside. While Industrial Insurance
was compelled to litigate its rights, such fact by
itself does not justify the award of attorney’s
fees under Article 2208 of the Civil Code. For
no sufficient showing of bad faith would be
reflected in a party’s persistence in a case other
than an erroneous conviction of the
righteousness of his cause.[61] To award
attorney’s fees to a party just because the
judgment is rendered in its favor would be
tantamount to imposing a premium on one’s
right to litigate or seek judicial redress of
legitimate grievances.[62]
On the award of adjustment fees: The
adjustment fees and expense of divers were
incurred by Industrial Insurance in its voluntary
but unsuccessful efforts to locate and retrieve the
lost cargo. They do not constitute actual
damages.[63]
As for the court a quo’s award of interest on the
amount claimed, the same calls for modification
following the ruling in Eastern Shipping Lines,
Inc. v. Court of Appeals[64] that when the
demand cannot be reasonably established at the
time the demand is made, the interest shall begin
to run not from the time the claim is made
judicially or extrajudicially but from the date the
judgment of the court is made (at which the time
the quantification of damages may be deemed to
have been reasonably ascertained).[65]
WHEREFORE, judgment is hereby rendered
ordering petitioner Schmitz Transport &
Brokerage Corporation, and Transport Venture
Incorporation jointly and severally liable for the
amount of P5,246,113.11 with the court dismissed the complaint, and such was
MODIFICATION that interest at SIX affirmed by the Court of Appeals.
PERCENT per annum of the amount due should
be computed from the promulgation on
November 24, 1997 of the decision of the trial Issue:
court.

Whether a pipeline business is included in the

Costs against petitioner. term “common carrier” so as to entitle the
petitioner to the exemption

SO ORDERED.
Held:

4. First Philippine Industrial Corporation v.

Court of Appeals, GR 125948, December 29 Article 1732 of the Civil Code defines a
1998 "common carrier" as "any person, corporation,
Pipeline 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."
Facts:

The test for determining whether a party is a

Petitioner is a grantee of a pipeline concession common carrier of goods is:
under Republic Act No. 387. Sometime in
January 1995, petitioner applied for mayor’s
permit in Batangas. However, the Treasurer
required petitioner to pay a local tax based on (1) He must be engaged in the business of
gross receipts amounting to P956,076.04. In carrying goods for others as a public
order not to hamper its operations, petitioner employment, and must hold himself out as ready
paid the taxes for the first quarter of 1993 to engage in the transportation of goods for
amounting to P239,019.01 under protest. On person generally as a business and not as a
January 20, 1994, petitioner filed a letter-protest casual occupation;
to the City Treasurer, claiming that it is exempt
from local tax since it is engaged in
transportation business. The respondent City (2) He must undertake to carry goods of the kind
Treasurer denied the protest, thus, petitioner to which his business is confined;
filed a complaint before the Regional Trial Court
of Batangas for tax refund. Respondents assert
that pipelines are not included in the term
“common carrier” which refers solely to
ordinary carriers or motor vehicles. The trial
(3) He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
(4) The transportation must be for hire.
Based on the above definitions and
requirements, there is no doubt that petitioner is
a common carrier. It is engaged in the business
of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It
undertakes to carry for all persons indifferently,
that is, to all persons who choose to employ its
services, and transports the goods by land and
for compensation. The fact that petitioner has a
limited clientele does not exclude it from the
definition of a common carrier.
FULL TEXT:
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]
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;
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 :
xxx xxx xxx
(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 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.
5. Philippine American General Insurance
Company v. PKS Shipping Company, GR
149038, April 9, 2003
Through with a limited clientele
FACTS:
Davao Union Marketing Corporation (DUMC)
contracted the services of PKS Shipping
Company (PKS Shipping) for the shipment to
Tacloban City of 75,000 bags of cement worth
P3,375,000.
DUMC insured the goods for its full value with
Philippine American General Insurance
Company (Philamgen).
The goods were loaded aboard the dumb barge
Limar I belonging to PKS Shipping.
December 22, 1988 9 pm: While Limar I was
being towed by PKS’ 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 so Philamgen to file suit against
PKS Shipping
RTC: dismissed the complaint - fortuitous event
CA:Affirmed - not a common carrier but a
casual occupation
ISSUE: W/N PKS Shipping is NOT liable since
it was NOT a common carrier
HELD: NO. Petition is DENIED
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 is Section 13, paragraph (b), of
the Public Service Act
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
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
distinction between:
common or public carrier
private or special carrier - 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
EX: 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 and gets the control of
the vessel and its crew.
The regularity of its activities in this area
indicates more than just a casual activity on its
part
The appellate court ruled, gathered from the
testimonies and sworn marine protests of the
respective vessel masters ofLimar I and MT Iron
Eagle, that there was no way by which the
barge’s or the tugboat’s crew could have
prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary
height of 6 to 8 feet and buffeted by strong
winds of 1.5 knots resulting in the entry of water
into the barge’s 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.
FULL TEXT:
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 o’clock, while Limar I was being towed by
respondent’s 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
company’s 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.
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 respondent’s 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, (1) Flood, storm, earthquake, lightning, or
although involving the carriage of goods for a other natural disaster or calamity;
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 (2) Act of the public enemy in war, whether
obtains the use and service of all or some part of international or civil;
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 (3) Act or omission of the shipper or owner
business of carrying goods for others, although of the goods;
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 (4) The character of the goods or defects in
individual contracts are executed or entered into the packing or in the containers; and
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. (5) Order or act of competent public
authority.[8]

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 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:
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
barge’s or the tugboat’s 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 barge’s 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.
6. Fabre v. Court of Appeals, GR No 111127,
July 26, 1996
School bus rented for transport for a fee
Alternative causes of action
Facts: Petitioners Engracio Fabre, Jr. and his
wife were owners of a Mazda minibus. They
used the bus principally in connection with a bus
service for school children which they operated
in Manila. It was driven by Porfirio Cabil.
On November 2, 1984 private respondent Word
for the World Christian Fellowship Inc.
(WWCF) arranged with the 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 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. 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. Because of the
mishap, several passengers were injured
particularly Amyline Antonio.
Criminal complaint was filed against the driver
and the spouses were also made jointly liable.
Spouses Fabre on the other hand contended that
they are not liable since they are not a common
carrier. The RTC of Makati ruled in favor of the
plaintiff and the defendants were ordered to pay
jointly and severally to the plaintiffs. The Court
of Appeals affirmed the decision of the trial
court.
Issue: Whether the spouses Fabre are common
carriers?
Held: Petition was denied. Spouses Fabre are
common carriers.
The Supreme Court held that 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 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.
FULL TEXT:
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. Scholastica’s
College in Malate, Manila.
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 o’clock 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
o’clock 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 latter’s fence.
On the basis of Escano’s 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. Niño 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.
2) P500,000.00 as the reasonable amount of loss
of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;

In its decision dated April 17, 1989, the trial

court found that: 4) P20,000.00 as exemplary damages; and
No convincing evidence was shown that the
minibus was properly checked for travel to a
long distance trip and that the driver was 5) 25% of the recoverable amount as attorney’s
properly screened and tested before being fees;
admitted for employment. Indeed, all the
evidence presented have shown the negligent act
of the defendants which ultimately resulted to
6) Costs of suit.
the accident subject of this case.

Accordingly, it gave judgment for private

respondents holding: SO ORDERED.

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.
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;

WHEREFORE, premises considered, the Court

hereby renders judgment against defendants Mr.
& Mrs. Engracio Fabre, Jr. and Porfirio Cabil y 2) P600,000.00 as compensatory damages;
Jamil pursuant to articles 2176 and 2180 of the
Civil Code of the Philippines and said
defendants are ordered to pay jointly and 3) P50,000.00 as moral damages;
severally to the plaintiffs the following amount:

4) P20,000.00 as exemplary damages;

1) P93,657.11 as compensatory and actual
damages;

5) P10,000.00 as attorney’s fees; and

6) Costs of suit.
The Court of Appeals sustained the trial court’s
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
Antonio’s 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 Cabil’s 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 driver’s 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.
Scholastica’s 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
congregation’s 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]
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 former’s 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 Cabil’s gross
negligence amounted to bad faith.[12] Amyline
Antonio’s 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 attorney’s
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 attorney’s 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. Buño,[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 latter’s 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:
The trial court was therefore right in finding that
Manalo [the driver] and spouses Mangune and
Carreon [the jeepney owners] were negligent.
However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with
Manalo is erroneous. The driver 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 is between the
carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively
responsible therefore to the passenger, even if
such breach be due to the negligence of his
driver (see Viluan v. The Court of Appeals, et
al., G.R. Nos. L-21477-81, April 29, 1966, 16
SCRA 742) . . .[22]
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 attorney’s
fees; and
6) costs of suit.
SO ORDERED.
7. FGU Insurance Corporation V. G.P.
Sarmiento Trucking Corporation, GR No.
141910, August 6, 2002
Rendering exclusively for a particular
person and no other
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS)
undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard
one of its Isuzu truck, driven by Lambert Eroles,
from the plant site of Concepcion Industries,
Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances
in Dagupan City. While the truck was traversing
the north diversion road along McArthur
highway in Barangay Anupol, Bamban, Tarlac,
it collided with an unidentified truck, causing it
to fall into a deep canal, resulting in damage to
the cargoes.
FGU Insurance Corporation (FGU), an insurer
of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum
of P204,450.00. FGU, in turn, being the
subrogee of the rights and interests of
Concepcion Industries, Inc., sought
reimbursement of the amount it had paid to the
latter from GPS. Since the trucking company
failed to heed the claim, FGU filed a complaint
for damages and breach of contract of carriage
against GPS and its driver Lambert Eroles with
the Regional Trial Court, Branch 66, of Makati
City. In its answer, respondents asserted that
GPS was the exclusive hauler only of
Concepcion Industries, Inc., since 1988, and it
was not so engaged in business as a common
carrier. Respondents further claimed that the
cause of damage was purely accidental.
The issues having thus been joined, FGU
presented its evidence, establishing the extent of
damage to the cargoes and the amount it had
paid to the assured. GPS, instead of submitting
its evidence, filed with leave of court a motion
to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed
to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,[1]
granted the motion to dismiss, explaining thusly:
“Under Section 1 of Rule 131 of the Rules of
Court, it is provided that ‘Each party must prove
his own affirmative allegation, xxx.’
“In the instant case, plaintiff did not present any
single evidence that would prove that defendant
is a common carrier.
“x x x x x x x x x
“Accordingly, the application of the law on
common carriers is not warranted and the
presumption of fault or negligence on the part of
a common carrier in case of loss, damage or
deterioration of goods during transport under
1735 of the Civil Code is not availing.
“Thus, the laws governing the contract between
the owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which
transports the cargo are the laws on obligation
and contract of the Civil Code as well as the law
on quasi delicts.
“Under the law on obligation and contract,
negligence or fault is not presumed. The law on
quasi delict provides for some presumption of
negligence but only upon the attendance of some
circumstances. Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary,
it is presumed that a person driving a motor
vehicle has been negligent if at the time of the
mishap, he was violating any traffic regulation.’
“Evidence for the plaintiff shows no proof that
defendant was violating any traffic regulation.
Hence, the presumption of negligence is not
obtaining.
“Considering that plaintiff failed to adduce
evidence that defendant is a common carrier and
defendant’s driver was the one negligent,
defendant cannot be made liable for the damages
of the subject cargoes.”[2]
The subsequent motion for reconsideration
having been denied,[3] plaintiff interposed an
appeal to the Court of Appeals, contending that
the trial court had erred (a) in holding that the
appellee corporation was not a common carrier
defined under the law and existing
jurisprudence; and (b) in dismissing the
complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of
petitioner and ruled in favor of GPS. The
appellate court, in its decision of 10 June 1999,
[4] discoursed, among other things, that -
"x x x in order for the presumption of negligence
provided for under the law governing common
carrier (Article 1735, Civil Code) to arise, the
appellant must first prove that the appellee is a
common carrier. Should the appellant fail to
prove that the appellee is a common carrier, the
presumption would not arise; consequently, the
appellant would have to prove that the carrier
was negligent.
"x x x x x x x x x
"Because it is the appellant who insists that the
appellees can still be considered as a common
carrier, despite its `limited clientele,’ (assuming
it was really a common carrier), it follows that it
(appellant) has the burden of proving the same.
It (plaintiff-appellant) `must establish his case
by a preponderance of evidence, which means
that the evidence as a whole adduced by one side
is superior to that of the other.’ (Summa
Insurance Corporation vs. Court of Appeals, 243
SCRA 175). This, unfortunately, the appellant
failed to do -- hence, the dismissal of the
plaintiff’s complaint by the trial court is
justified.
"x x x x x x x x x
"Based on the foregoing disquisitions and
considering the circumstances that the appellee
trucking corporation has been `its exclusive
contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its
principal,’ the inevitable conclusion is that the
appellee is a private carrier.
"x x x x x x x x x
"x x x the lower court correctly ruled that 'the
application of the law on common carriers is not
warranted and the presumption of fault or
negligence on the part of a common carrier in
case of loss, damage or deterioration of good[s]
during transport under [article] 1735 of the Civil
Code is not availing.' x x x.
"Finally, We advert to the long established rule
that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and
should not be disturbed unless for strong and
valid reasons."[5]
Petitioner's motion for reconsideration was
likewise denied;[6] hence, the instant petition,[7]
raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE
CONSIDERED AS A COMMON CARRIER
AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS
A COMMON CARRIER OR A PRIVATE
CARRIER, MAY BE PRESUMED TO HAVE
BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY
WERE SUBSEQUENTLY DAMAGED
WHILE IN ITS PROTECTIVE CUSTODY
AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA
LOQUITUR IS APPLICABLE IN THE
INSTANT CASE.
On the first issue, the Court finds the conclusion
of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive
contractor and hauler of Concepcion Industries,
Inc., rendering or offering its services to no
other individual or entity, cannot be considered a
common carrier. Common carriers are persons,
corporations, firms or associations engaged in
the business of carrying or transporting
passengers or goods or both, by land, water, or
air, for hire or compensation, offering their
services to the public,[8] whether to the public in
general or to a limited clientele in particular, but
never on an exclusive basis.[9] The true test of a
common carrier is the carriage of passengers or
goods, providing space for those who opt to
avail themselves of its transportation service for
a fee.[10] Given accepted standards, GPS
scarcely falls within the term “common carrier.”
The above conclusion nothwithstanding, GPS
cannot escape from liability.
In culpa contractual, upon which the action of
petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of
the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding
right of relief.[11] The law, recognizing the
obligatory force of contracts,[12] will not permit
a party to be set free from liability for any kind
of misperformance of the contractual
undertaking or a contravention of the tenor
thereof.[13] A breach upon the contract confers
upon the injured party a valid cause for
recovering that which may have been lost or
suffered. The remedy serves to preserve the
interests of the promisee that may include his
“expectation interest,” which is his interest in
having the benefit of his bargain by being put in
as good a position as he would have been in had
the contract been performed, or his “reliance
interest,” which is his interest in being
reimbursed for loss caused by reliance on the
contract by being put in as good a position as he
would have been in had the contract not been
made; or his “restitution interest,” which is his
interest in having restored to him any benefit
that he has conferred on the other party.[14]
Indeed, agreements can accomplish little, either
for their makers or for society, unless they are
made the basis for action.[15] The effect of
every infraction is to create a new duty, that is,
to make recompense to the one who has been
injured by the failure of another to observe his
contractual obligation[16] unless he can show
extenuating circumstances, like proof of his
exercise of due diligence (normally that of the
diligence of a good father of a family or,
exceptionally by stipulation or by law such as in
the case of common carriers, that of
extraordinary diligence) or of the attendance of
fortuitous event, to excuse him from his ensuing
liability.
Respondent trucking corporation recognizes the
existence of a contract of carriage between it and
petitioner’s assured, and admits that the cargoes
it has assumed to deliver have been lost or
damaged while in its custody. In such a
situation, a default on, or failure of compliance
with, the obligation – in this case, the delivery of
the goods in its custody to the place of
destination - gives rise to a presumption of lack
of care and corresponding liability on the part of
the contractual obligor the burden being on him
to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without
concrete proof of his negligence or fault, may
not himself be ordered to pay petitioner. The
driver, not being a party to the contract of
carriage between petitioner’s principal and
defendant, may not be held liable under the
agreement. A contract can only bind the parties
who have entered into it or their successors who
have assumed their personality or their juridical
position.[17] Consonantly with the axiom res
inter alios acta aliis neque nocet prodest, such
contract can neither favor nor prejudice a third
person. Petitioner’s civil action against the
driver can only be based on culpa aquiliana,
which, unlike culpa contractual, would require
the claimant for damages to prove negligence or
fault on the part of the defendant.[18]
A word in passing. Res ipsa loquitur, a doctrine
being invoked by petitioner, holds a defendant
liable where the thing which caused the injury
complained of is shown to be under the latter’s
management and the accident is such that, in the
ordinary course of things, cannot be expected to
happen if those who have its management or
control use proper care. It affords reasonable
evidence, in the absence of explanation by the
defendant, that the accident arose from want of
care.[19] It is not a rule of substantive law and,
as such, it does not create an independent ground
of liability. Instead, it is regarded as a mode of
proof, or a mere procedural convenience since it
furnishes a substitute for, and relieves the
plaintiff of, the burden of producing specific
proof of negligence. The maxim simply places
on the defendant the burden of going forward
with the proof.[20] Resort to the doctrine,
however, may be allowed only when (a) the
event is of a kind which does not ordinarily
occur in the absence of negligence; (b) other
responsible causes, including the conduct of the
plaintiff and third persons, are sufficiently
eliminated by the evidence; and (c) the indicated
negligence is within the scope of the defendant's
duty to the plaintiff.[21] Thus, it is not
applicable when an unexplained accident may be
attributable to one of several causes, for some of
which the defendant could not be
responsible.[22]
Res ipsa loquitur generally finds relevance
whether or not a contractual relationship exists
between the plaintiff and the defendant, for the
inference of negligence arises from the
circumstances and nature of the occurrence and
not from the nature of the relation of the
parties.[23] Nevertheless, the requirement that
responsible causes other than those due to
defendant’s conduct must first be eliminated, for
the doctrine to apply, should be understood as
being confined only to cases of pure (non-
contractual) tort since obviously the presumption
of negligence in culpa contractual, as previously
so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the
truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he
admittedly can be said to have been in control
and management of the vehicle which figured in
the accident, it is not equally shown, however,
that the accident could have been exclusively
due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on
appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right
to present evidence.[24] Thus, respondent
corporation may no longer offer proof to
establish that it has exercised due care in
transporting the cargoes of the assured so as to
still warrant a remand of the case to the trial
court.
WHEREFORE, the order, dated 30 April 1996,
of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June
1999, of the Court of Appeals, are AFFIRMED
only insofar as respondent Lambert M. Eroles is
concerned, but said assailed order of the trial
court and decision of the appellate court are
REVERSED as regards G.P. Sarmiento
Trucking Corporation which, instead, is hereby
ordered to pay FGU Insurance Corporation the
value of the damaged and lost cargoes in the
amount of P204,450.00. No costs.
SO ORDERED.
8. Planters Products, Inc. V. Court of Appeals,
GR No 101503, September 15, 1993
Single Transaction
Does a charter-party 1 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:jgc:chanrobles.com.ph
"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 steel-bodied dump trucks which were parked
alongside the berth, using metal scoops attached
to the ship, pursuant to the terms and conditions
of the charter-party (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 fertilizer. 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). 10 A 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 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 shifted 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" (Italics 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
charter-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 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 obligations . . ." 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 caused by want of due
diligence 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 be 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 the 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 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 shipowner 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 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 collussion occur; and
the same difficulty in discovering the truth as to
what has taken place arises . . ."cralaw
virtua1aw library
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 facie presumption 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 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)" (Italics 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 re-
examined 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 character of the goods or defects
in the packaging or in the containers. The Code
of Commerce also provides that all losses and
deteriorations 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 also contains
46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia
do not normally evaporate even on a long
voyage, provided that the 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, losses due to spillage during such
operation amounting to one percent (1%) against
the bill of lading is deemed "normal" or
"tolerable." The primary cause of these spillages
is the clamped shell which does not seal very
tightly. Also, the wind tends to blow away some
of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its
deterioration in value, is caused either by an
extremely high temperature in its place of
storage, or when it comes in contact with water.
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 "bad 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 hand, no
proof was adduced by the petitioner showing
that the carrier was remiss in the exercise of due
diligence in order to minimize the loss or
damage to the goods it carried.
WHEREFORE, the petition is DISMISSED.
The assailed decision of the Court of Appeals,
which reversed the trial court, is AFFIRMED.
Consequently, Civil Case No. 98623 of the then
Court of the First Instance, now Regional Trial
Court, of Manila should be, as it is hereby,
DISMISSED.
Costs against petitioner.
SO ORDERED.
9. Crisostomo V. Court of Appeals, GR 138334,
August 25, 2003
Travel agency

In May 1991, petitioner Estela L. Crisostomo
contracted the services of respondent Caravan
Travel and Tours International, Inc. to arrange
and facilitate her booking, ticketing and
accommodation in a tour dubbed "Jewels of
Europe". The package tour included the
countries of England, Holland, Germany,
Austria, Liechstenstein, Switzerland and France
at a total cost of P74,322.70. Petitioner was
given a 5% discount on the amount, which
included airfare, and the booking fee was also
waived because petitioner's niece, Meriam
Menor, was respondent company's ticketing
manager.
Pursuant to said contract, Menor went to her
aunt's residence on June 12, 1991 - a Wednesday
- to deliver petitioner's travel documents and
plane tickets. Petitioner, in turn, gave Menor the
full payment for the package tour. Menor then
told her to be at the Ninoy Aquino International
Airport (NAIA) on Saturday, two hours before
her flight on board British Airways.
Without checking her travel documents,
petitioner went to NAIA on Saturday, June 15,
1991, to take the flight for the first leg of her
journey from Manila to Hongkong. To
petitioner's dismay, she discovered that the flight
she was supposed to take had already departed
the previous day. She learned that her plane
ticket was for the flight scheduled on June 14,
1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner
to take another tour - the "British Pageant" -
which included England, Scotland and Wales in
its itinerary. For this tour package, petitioner
was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate
of P26.60). She gave respondent US$300 or
P7,980.00 as partial payment and commenced
the trip in July 1991.
Upon petitioner's return from Europe, she
demanded from respondent the reimbursement
of P61,421.70, representing the difference
between the sum she paid for "Jewels of
Europe" and the amount she owed respondent
for the "British Pageant" tour. Despite several
demands, respondent company refused to
reimburse the amount, contending that the same
was non-refundable.[1] Petitioner was thus
constrained to file a complaint against
respondent for breach of contract of carriage and
damages, which was docketed as Civil Case No.
92-133 and raffled to Branch 59 of the Regional
Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her
failure to join "Jewels of Europe" was due to
respondent's fault since it did not clearly indicate
the departure date on the plane ticket.
Respondent was also negligent in informing her
of the wrong flight schedule through its
employee Menor. She insisted that the "British
Pageant" was merely a substitute for the "Jewels
of Europe" tour, such that the cost of the former
should be properly set-off against the sum paid
for the latter.
For its part, respondent company, through its
Operations Manager, Concepcion Chipeco,
denied responsibility for petitioner's failure to
join the first tour. Chipeco insisted that
petitioner was informed of the correct departure
date, which was clearly and legibly printed on
the plane ticket. The travel documents were
given to petitioner two days ahead of the
scheduled trip. Petitioner had only herself to
blame for missing the flight, as she did not
bother to read or confirm her flight schedule as
printed on the ticket.
Three Centavos (P53,989.43) with legal interest
thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when
the complaint was filed;

Ordering the defendant to pay the plaintiff the

Respondent explained that it can no longer amount of Five Thousand (P5,000.00) Pesos as
reimburse the amount paid for "Jewels of and for reasonable attorney's fees;
Europe", considering that the same had already
been remitted to its principal in Singapore, Lotus
Travel Ltd., which had already billed the same Dismissing the defendant's counterclaim, for
even if petitioner did not join the tour. Lotus' lack of merit; and
European tour organizer, Insight International
Tours Ltd., determines the cost of a package tour
based on a minimum number of projected
participants. For this reason, it is accepted With costs against the defendant.
industry practice to disallow refund for
individuals who failed to take a booked tour.[3]
SO ORDERED.[5]

The trial court held that respondent was

Lastly, respondent maintained that the "British
negligent in erroneously advising petitioner of
Pageant" was not a substitute for the package
her departure date through its employee, Menor,
tour that petitioner missed. This tour was
who was not presented as witness to rebut
independently procured by petitioner after
petitioner's testimony. However, petitioner
realizing that she made a mistake in missing her
should have verified the exact date and time of
flight for "Jewels of Europe". Petitioner was
departure by looking at her ticket and should
allowed to make a partial payment of only
have simply not relied on Menor's verbal
US$300.00 for the second tour because her niece
representation. The trial court thus declared that
was then an employee of the travel agency.
petitioner was guilty of contributory negligence
Consequently, respondent prayed that petitioner
and accordingly, deducted 10% from the amount
be ordered to pay the balance of P12,901.00 for
being claimed as refund.
the "British Pageant" package tour.

Respondent appealed to the Court of Appeals,

After due proceedings, the trial court rendered a
decision,[4] the dispositive part of which reads:
WHEREFORE, premises considered, judgment
is hereby rendered as follows:
Ordering the defendant to return and/or refund to
the plaintiff the amount of Fifty Three Thousand
Nine Hundred Eighty Nine Pesos and Forty
which likewise found both parties to be at fault.
However, the appellate court held that petitioner
is more negligent than respondent because as a
lawyer and well-traveled person, she should
have known better than to simply rely on what
was told to her. This being so, she is not entitled
to any form of damages. Petitioner also forfeited
her right to the "Jewels of Europe" tour and must
therefore pay respondent the balance of the price
for the "British Pageant" tour. The dispositive
portion of the judgment appealed from reads as
follows:
WHEREFORE, premises considered, the
decision of the Regional Trial Court dated
October 26, 1995 is hereby REVERSED and
SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to
pay to the defendant-appellant the amount of
P12,901.00, representing the balance of the price
of the British Pageant Package Tour, the same to
earn legal interest at the rate of SIX PERCENT
(6%) per annum, to be computed from the time
the counterclaim was filed until the finality of
this decision. After this decision becomes final
and executory, the rate of TWELVE PERCENT
(12%) interest per annum shall be additionally
imposed on the total obligation until payment
thereof is satisfied. The award of attorney's fees
is DELETED. Costs against the plaintiff-
appellee.
SO ORDERED.[6]
Upon denial of her motion for
reconsideration,[7] petitioner filed the instant
petition under Rule 45 on the following grounds:
I more negligent than respondent since the latter is
It is respectfully submitted that the Honorable
Court of Appeals committed a reversible error in
reversing and setting aside the decision of the
trial court by ruling that the petitioner is not
entitled to a refund of the cost of unavailed
"Jewels of Europe" tour she being equally, if not
more, negligent than the private respondent, for
in the contract of carriage the common carrier is
obliged to observe utmost care and extra-
ordinary diligence which is higher in degree than
the ordinary diligence required of the passenger.
Thus, even if the petitioner and private
respondent were both negligent, the petitioner
cannot be considered to be equally, or worse,
more guilty than the private respondent. At best,
petitioner's negligence is only contributory while
the private respondent [is guilty] of gross
negligence making the principle of pari delicto
inapplicable in the case;
II
The Honorable Court of Appeals also erred in
not ruling that the "Jewels of Europe" tour was
not indivisible and the amount paid therefor
refundable;
III
The Honorable Court erred in not granting to the
petitioner the consequential damages due her as
a result of breach of contract of carriage.[8]
Petitioner contends that respondent did not
observe the standard of care required of a
common carrier when it informed her wrongly
of the flight schedule. She could not be deemed
required by law to exercise extraordinary
diligence in the fulfillment of its obligation. If
she were negligent at all, the same is merely
contributory and not the proximate cause of the
damage she suffered. Her loss could only be
attributed to respondent as it was the direct
consequence of its employee's gross negligence.
Petitioner's contention has no merit.
By definition, a contract of carriage or
transportation is one whereby a certain person or
association of persons obligate themselves to
transport persons, things, or news from one
place to another for a fixed price.[9] Such person
or association of persons are regarded as carriers
and are classified as private or special carriers
and common or public carriers.[10] A common
carrier is defined under Article 1732 of the Civil
Code as persons, corporations, firms or
associations engaged in the business of carrying
or transporting passengers or goods or both, by
land, water or air, for compensation, offering
their services to the public.
It is obvious from the above definition that
respondent is not an entity engaged in the
business of transporting either passengers or
goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake
to transport petitioner from one place to another
since its covenant with its customers is simply to
make travel arrangements in their behalf.
Respondent's services as a travel agency include
procuring tickets and facilitating travel permits
or visas as well as booking customers for tours.
While petitioner concededly bought her plane
ticket through the efforts of respondent
company, this does not mean that the latter ipso
facto is a common carrier. At most, respondent
acted merely as an agent of the airline, with
whom petitioner ultimately contracted for her
carriage to Europe. Respondent's obligation to
petitioner in this regard was simply to see to it
that petitioner was properly booked with the
airline for the appointed date and time. Her
transport to the place of destination, meanwhile,
pertained directly to the airline.
The object of petitioner's contractual relation
with respondent is the latter's service of
arranging and facilitating petitioner's booking,
ticketing and accommodation in the package
tour. In contrast, the object of a contract of
carriage is the transportation of passengers or
goods. It is in this sense that the contract
between the parties in this case was an ordinary
one for services and not one of carriage.
Petitioner's submission is premised on a wrong
assumption.
The nature of the contractual relation between
petitioner and respondent is determinative of the
degree of care required in the performance of the
latter's obligation under the contract. For reasons
of public policy, a common carrier in a contract
of carriage is bound by law to carry passengers
as far as human care and foresight can provide
using the utmost diligence of very cautious
persons and with due regard for all the
circumstances.[11] As earlier stated, however,
respondent is not a common carrier but a travel
agency. It is thus not bound under the law to
observe extraordinary diligence in the
performance of its obligation, as petitioner
claims.
Since the contract between the parties is an
ordinary one for services, the standard of care
required of respondent is that of a good father of
a family under Article 1173 of the Civil
Code.[12] This connotes reasonable care
consistent with that which an ordinarily prudent
person would have observed when confronted
with a similar situation. The test to determine
whether negligence attended the performance of
an obligation is: did the defendant in doing the
alleged negligent act use that reasonable care
and caution which an ordinarily prudent person
would have used in the same situation? If not,
then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor
negligent when she allegedly informed petitioner
of the wrong day of departure. Petitioner's
testimony was accepted as indubitable evidence
of Menor's alleged negligent act since
respondent did not call Menor to the witness
stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section
3 (e)[14] of the Rules of Court that evidence
willfully suppressed would be adverse if
produced and thus considered petitioner's
uncontradicted testimony to be sufficient proof
of her claim.
On the other hand, respondent has consistently
denied that Menor was negligent and maintains
that petitioner's assertion is belied by the
evidence on record. The date and time of
departure was legibly written on the plane ticket
and the travel papers were delivered two days in
advance precisely so that petitioner could
prepare for the trip. It performed all its
obligations to enable petitioner to join the tour
and exercised due diligence in its dealings with
the latter.
We agree with respondent.
Respondent's failure to present Menor as witness
to rebut petitioner's testimony could not give rise
to an inference unfavorable to the former. Menor
was already working in France at the time of the
filing of the complaint,[15] thereby making it
physically impossible for respondent to present
her as a witness. Then too, even if it were
possible for respondent to secure Menor's
testimony, the presumption under Rule 131,
Section 3(e) would still not apply. The
opportunity and possibility for obtaining
Menor's testimony belonged to both parties,
considering that Menor was not just respondent's
employee, but also petitioner's niece. It was thus
error for the lower court to invoke the
presumption that respondent willfully
suppressed evidence under Rule 131, Section
3(e). Said presumption would logically be
inoperative if the evidence is not intentionally
omitted but is simply unavailable, or when the
same could have been obtained by both
parties.[16]
In sum, we do not agree with the finding of the
lower court that Menor's negligence concurred
with the negligence of petitioner and resultantly
caused damage to the latter. Menor's negligence
was not sufficiently proved, considering that the
only evidence presented on this score was
petitioner's uncorroborated narration of the
events. It is well-settled that the party alleging a
fact has the burden of proving it and a mere
allegation cannot take the place of evidence.[17]
If the plaintiff, upon whom rests the burden of
proving his cause of action, fails to show in a
satisfactory manner facts upon which he bases
his claim, the defendant is under no obligation to
prove his exception or defense.[18]
Contrary to petitioner's claim, the evidence on
record shows that respondent exercised due
diligence in performing its obligations under the
contract and followed standard procedure in
rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket[19]
issued to petitioner clearly reflected the
departure date and time, contrary to petitioner's
contention. The travel documents, consisting of
the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days
prior to the trip. Respondent also properly
booked petitioner for the tour, prepared the
necessary documents and procured the plane
tickets. It arranged petitioner's hotel
accommodation as well as food, land transfers
and sightseeing excursions, in accordance with
its avowed undertaking.
Therefore, it is clear that respondent performed
its prestation under the contract as well as
everything else that was essential to book
petitioner for the tour. Had petitioner exercised
due diligence in the conduct of her affairs, there
would have been no reason for her to miss the
flight. Needless to say, after the travel papers
were delivered to petitioner, it became
incumbent upon her to take ordinary care of her
concerns. This undoubtedly would require that
she at least read the documents in order to assure
herself of the important details regarding the
trip.
The negligence of the obligor in the performance
of the obligation renders him liable for damages
for the resulting loss suffered by the obligee.
Fault or negligence of the obligor consists in his
failure to exercise due care and prudence in the
performance of the obligation as the nature of
the obligation so demands.[20] There is no fixed
standard of diligence applicable to each and
every contractual obligation and each case must
be determined upon its particular facts. The
degree of diligence required depends on the
circumstances of the specific obligation and
whether one has been negligent is a question of
fact that is to be determined after taking into
account the particulars of each case.[21]
The lower court declared that respondent's
employee was negligent. This factual finding,
however, is not supported by the evidence on
record. While factual findings below are
generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial
court overlooked, misunderstood, or misapplied
some facts or circumstances of weight and
substance which will affect the result of the
case.[22]
In the case at bar, the evidence on record shows
that respondent company performed its duty
diligently and did not commit any contractual
breach. Hence, petitioner cannot recover and
must bear her own damage.
WHEREFORE, the instant petition is DENIED
for lack of merit. The decision of the Court of
Appeals in CA-G.R. CV No. 51932 is
AFFIRMED. Accordingly, petitioner is ordered
to pay respondent the amount of P12,901.00
representing the balance of the price of the
British Pageant Package Tour, with legal interest
thereon at the rate of 6% per annum, to be
computed from the time the counterclaim was
filed until the finality of this Decision. After this
Decision becomes final and executory, the rate
of 12% per annum shall be imposed until the
obligation is fully settled, this interim period
being deemed to be by then an equivalent to a
forbearance of credit.[23]
SO ORDERED.
10. Mindanao Terminal and Brokerage Service,
Inc. V. Phoenix Assurance Company of New
York/Mcgee and Co., Inc., GR No. 162467, May
8 2009
 Arrastre and Stevedoring
Before us is a petition for review on certiorari[1]
under Rule 45 of the 1997 Rules of Civil
Procedure of the 29 October 2003[2] Decision of
the Court of Appeals and the 26 February 2004
Resolution[3] of the same court denying
petitioner's motion for reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte)
contracted petitioner Mindanao Terminal and
Brokerage Service, Inc. (Mindanao Terminal), a
stevedoring company, to load and stow a
shipment of 146,288 cartons of fresh green
Philippine bananas and 15,202 cartons of fresh
pineapples belonging to Del Monte Fresh
Produce International, Inc. (Del Monte Produce)
into the cargo hold of the vessel M/V Mistrau.
The vessel was docked at the port of Davao City
and the goods were to be transported by it to the
port of Inchon, Korea in favor of consignee
Taegu Industries, Inc. Del Monte Produce
insured the shipment under an "open cargo
policy" with private respondent Phoenix
Assurance Company of New York (Phoenix), a
non-life insurance company, and private
respondent McGee & Co. Inc. (McGee), the
underwriting manager/agent of Phoenix.[4]
Mindanao Terminal loaded and stowed the
cargoes aboard the M/V Mistrau. The vessel set
sail from the port of Davao City and arrived at
the port of Inchon, Korea. It was then discovered
upon discharge that some of the cargo was in
bad condition. The Marine Cargo Damage
Surveyor of Incok Loss and Average Adjuster of
Korea, through its representative Byeong Yong
Ahn (Byeong), surveyed the extent of the
damage of the shipment. In a survey report, it
was stated that 16,069 cartons of the banana
shipment and 2,185 cartons of the pineapple
shipment were so damaged that they no longer
had commercial value.[5]
Del Monte Produce filed a claim under the open
cargo policy for the damages to its shipment.
McGee's Marine Claims Insurance Adjuster
evaluated the claim and recommended that
payment in the amount of $210,266.43 be made.
A check for the recommended amount was sent
to Del Monte Produce; the latter then issued a
subrogation receipt[6] to Phoenix and McGee.
Phoenix and McGee instituted an action for
damages[7] against Mindanao Terminal in the
Regional Trial Court (RTC) of Davao City,
Branch 12. After trial, the RTC,[8] in a decision
dated 20 October 1999, held that the only
participation of Mindanao Terminal was to load
the cargoes on board the M/V Mistrau under the
direction and supervision of the ship's officers,
who would not have accepted the cargoes on
board the vessel and signed the foreman's report
unless they were properly arranged and tightly
secured to withstand voyage across the open
seas. Accordingly, Mindanao Terminal cannot
be held liable for whatever happened to the
cargoes after it had loaded and stowed them.
Moreover, citing the survey report, it was found
by the RTC that the cargoes were damaged on
account of a typhoon which M/V Mistrau had
encountered during the voyage. It was further
held that Phoenix and McGee had no cause of
action against Mindanao Terminal because the
latter, whose services were contracted by Del
Monte, a distinct corporation from Del Monte
Produce, had no contract with the assured Del
Monte Produce. The RTC dismissed the
complaint and awarded the counterclaim of
Mindanao Terminal in the amount of P83,945.80
as actual damages and P100,000.00 as attorney's
fees.[9] The actual damages were awarded as
reimbursement for the expenses incurred by
Mindanao Terminal's lawyer in attending the
hearings in the case wherein he had to travel all
the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of
Appeals. The appellate court reversed and set
aside[10] the decision of the RTC in its 29
October 2003 decision. The same court ordered
Mindanao Terminal to pay Phoenix and McGee
"the total amount of $210,265.45 plus legal
interest from the filing of the complaint until
fully paid and attorney's fees of 20% of the
claim."[11] It sustained Phoenix's and McGee's
argument that the damage in the cargoes was the
result of improper stowage by Mindanao
Terminal. It imposed on Mindanao Terminal, as
the stevedore of the cargo, the duty to exercise
extraordinary diligence in loading and stowing
the cargoes. It further held that even with the
absence of a contractual relationship between
Mindanao Terminal and Del Monte Produce, the
cause of action of Phoenix and McGee could be
based on quasi-delict under Article 2176 of the
Civil Code.[12]
Mindanao Terminal filed a motion for
reconsideration,[13] which the Court of Appeals
denied in its 26 February 2004[14] resolution.
Hence, the present petition for review.
Mindanao Terminal raises two issues in the case
at bar, namely: whether it was careless and
negligent in the loading and stowage of the
cargoes onboard M/V Mistrau making it liable
for damages; and, whether Phoenix and McGee
has a cause of action against Mindanao Terminal
under Article 2176 of the Civil Code on quasi-
delict. To resolve the petition, three questions
have to be answered: first, whether Phoenix and
McGee have a cause of action against Mindanao
Terminal; second, whether Mindanao Terminal,
as a stevedoring company, is under obligation to
observe the same extraordinary degree of
diligence in the conduct of its business as
required by law for common carriers[15] and
warehousemen;[16] and third, whether
Mindanao Terminal observed the degree of
diligence required by law of a stevedoring
company.
We agree with the Court of Appeals that the
complaint filed by Phoenix and McGee against
Mindanao Terminal, from which the present
case has arisen, states a cause of action. The
present action is based on quasi-delict, arising
from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte
Produce. Even assuming that both Phoenix and
McGee have only been subrogated in the rights
of Del Monte Produce, who is not a party to the
contract of service between Mindanao Terminal
and Del Monte, still the insurance carriers may
have a cause of action in light of the Court's
consistent ruling that the act that breaks the
contract may be also a tort.[17] In fine, a
liability for tort may arise even under a contract,
where tort is that which breaches the
contract[18]. In the present case, Phoenix and
McGee are not suing for damages for injuries
arising from the breach of the contract of service
but from the alleged negligent manner by which
Mindanao Terminal handled the cargoes
belonging to Del Monte Produce. Despite the
absence of contractual relationship between Del
Monte Produce and Mindanao Terminal, the
allegation of negligence on the part of the
defendant should be sufficient to establish a
cause of action arising from quasi-delict.[19]

The resolution of the two remaining issues is
determinative of the ultimate result of this case.
Article 1173 of the Civil Code is very clear that
if the law or contract does not state the degree of
diligence which is to be observed in the
performance of an obligation then that which is
expected of a good father of a family or ordinary
diligence shall be required. Mindanao Terminal,
a stevedoring company which was charged with
the loading and stowing the cargoes of Del
Monte Produce aboard M/V Mistrau, had acted
merely as a labor provider in the case at bar.
There is no specific provision of law that
imposes a higher degree of diligence than
ordinary diligence for a stevedoring company or
one who is charged only with the loading and
stowing of cargoes. It was neither alleged nor
proven by Phoenix and McGee that Mindanao
Terminal was bound by contractual stipulation
to observe a higher degree of diligence than that
required of a good father of a family. We
therefore conclude that following Article 1173,
Mindanao Terminal was required to observe
ordinary diligence only in loading and stowing
the cargoes of Del Monte Produce aboard M/V
Mistrau.
The Court of Appeals erred when it cited the
case of Summa Insurance Corporation v. CA
and Port Service Inc.[20] in imposing a higher
degree of diligence,[21] on Mindanao Terminal
in loading and stowing the cargoes. The case of
Summa Insurance Corporation v. CA, which
involved the issue of whether an arrastre
operator is legally liable for the loss of a
shipment in its custody and the extent of its
liability, is inapplicable to the factual
circumstances of the case at bar. Therein, a
vessel owned by the National Galleon Shipping
Corporation (NGSC) arrived at Pier 3, South
Harbor, Manila, carrying a shipment consigned
to the order of Caterpillar Far East Ltd. with
Semirara Coal Corporation (Semirara) as "notify
party." The shipment, including a bundle of PC
8 U blades, was discharged from the vessel to
the custody of the private respondent, the
exclusive arrastre operator at the South Harbor.
Accordingly, three good-order cargo receipts
were issued by NGSC, duly signed by the ship's
checker and a representative of private
respondent. When Semirara inspected the
shipment at house, it discovered that the bundle
of PC8U blades was missing. From those facts,
the Court observed:
x x x The relationship therefore between the
consignee and the arrastre operator must be
examined. This relationship is much akin to that
existing between the consignee or owner of
shipped goods and the common carrier, or that
between a depositor and a warehouseman[[22]].
In the performance of its obligations, an arrastre
operator should observe the same degree of
diligence as that required of a common carrier
and a warehouseman as enunciated under Article
1733 of the Civil Code and Section 3(b) of the
Warehouse Receipts Law, respectively. 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. (Emphasis
supplied)[23]
There is a distinction between an arrastre and a
stevedore.[24] Arrastre, a Spanish word which
refers to hauling of cargo, comprehends the
handling of cargo on the wharf or between the
establishment of the consignee or shipper and
the ship's tackle. The responsibility of the
arrastre operator lasts until the delivery of the
cargo to the consignee. The service is usually
performed by longshoremen. On the other hand,
stevedoring refers to the handling of the cargo in
the holds of the vessel or between the ship's
tackle and the holds of the vessel. The
responsibility of the stevedore ends upon the
loading and stowing of the cargo in the vessel.
It is not disputed that Mindanao Terminal was
performing purely stevedoring function while
the private respondent in the Summa case was
performing arrastre function. In the present case,
Mindanao Terminal, as a stevedore, was only
charged with the loading and stowing of the
cargoes from the pier to the ship's cargo hold; it
was never the custodian of the shipment of Del
Monte Produce. A stevedore is not a common
carrier for it does not transport goods or
passengers; it is not akin to a warehouseman for
it does not store goods for profit. The loading
and stowing of cargoes would not have a far
reaching public ramification as that of a
common carrier and a warehouseman; the public
is adequately protected by our laws on contract
and on quasi-delict. The public policy
considerations in legally imposing upon a
common carrier or a warehouseman a higher
degree of diligence is not present in a
stevedoring outfit which mainly provides labor
in loading and stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to
prove by preponderance of evidence[25] that
Mindanao Terminal had acted negligently.
Where the evidence on an issue of fact is in
equipoise or there is any doubt on which side the
evidence preponderates the party having the
burden of proof fails upon that issue. That is to
say, if the evidence touching a disputed fact is
equally balanced, or if it does not produce a just,
rational belief of its existence, or if it leaves the
mind in a state of perplexity, the party holding
the affirmative as to such fact must fail.[26]
We adopt the findings[27] of the RTC,[28]
which are not disputed by Phoenix and McGee.
The Court of Appeals did not make any new
findings of fact when it reversed the decision of
the trial court. The only participation of
Mindanao Terminal was to load the cargoes on
board M/V Mistrau.[29] It was not disputed by
Phoenix and McGee that the materials, such as
ropes, pallets, and cardboards, used in lashing
and rigging the cargoes were all provided by
M/V Mistrau and these materials meets industry
standard.[30]
It was further established that Mindanao
Terminal loaded and stowed the cargoes of Del
Monte Produce aboard the M/V Mistrau in
accordance with the stowage plan, a guide for
the area assignments of the goods in the vessel's
hold, prepared by Del Monte Produce and the
officers of M/V Mistrau.[31] The loading and
stowing was done under the direction and
supervision of the ship officers. The vessel's
officer would order the closing of the hatches
only if the loading was done correctly after a
final inspection.[32] The said ship officers
would not have accepted the cargoes on board
the vessel if they were not properly arranged and
tightly secured to withstand the voyage in open
seas. They would order the stevedore to rectify
any error in its loading and stowing. A foreman's
report, as proof of work done on board the
vessel, was prepared by the checkers of
Mindanao Terminal and concurred in by the
Chief Officer of M/V Mistrau after they were
satisfied that the cargoes were properly
loaded.[33]
Phoenix and McGee relied heavily on the
deposition of Byeong Yong Ahn[34] and on the
survey report[35] of the damage to the cargoes.
Byeong, whose testimony was refreshed by the
survey report,[36] found that the cause of the
damage was improper stowage[37] due to the
manner the cargoes were arranged such that
there were no spaces between cartons, the use of
cardboards as support system, and the use of
small rope to tie the cartons together but not by
the negligent conduct of Mindanao Terminal in
loading and stowing the cargoes. As admitted by
Phoenix and McGee in their Comment[38]
before us, the latter is merely a stevedoring
company which was tasked by Del Monte to
load and stow the shipments of fresh banana and
pineapple of Del Monte Produce aboard the M/V
Mistrau. How and where it should load and stow
a shipment in a vessel is wholly dependent on
the shipper and the officers of the vessel. In
other words, the work of the stevedore was
under the supervision of the shipper and officers
of the vessel. Even the materials used for
stowage, such as ropes, pallets, and cardboards,
are provided for by the vessel. Even the survey
report found that it was because of the
boisterous stormy weather due to the typhoon
Seth, as encountered by M/V Mistrau during its
voyage, which caused the shipments in the cargo
hold to collapse, shift and bruise in extensive
extent.[39] Even the deposition of Byeong was
not supported by the conclusion in the survey
report that:
CAUSE OF DAMAGE
x xx
From the above facts and our survey results, we
are of the opinion that damage occurred aboard
the carrying vessel during sea transit, being
caused by ship's heavy rolling and pitching
under boisterous weather while proceeding from
1600 hrs on 7th October to 0700 hrs on 12th
October, 1994 as described in the sea
protest.[40]
As it is clear that Mindanao Terminal had duly
exercised the required degree of diligence in
loading and stowing the cargoes, which is the
ordinary diligence of a good father of a family,
the grant of the petition is in order.
However, the Court finds no basis for the award
of attorney's fees in favor of petitioner. None of
the circumstances enumerated in Article 2208 of
the Civil Code exists. The present case is clearly
not an unfounded civil action against the
plaintiff as there is no showing that it was
instituted for the mere purpose of vexation or
injury. It is not sound public policy to set a
premium to the right to litigate where such right
is exercised in good faith, even if
erroneously.[41] Likewise, the RTC erred in
awarding P83,945.80 actual damages to
Mindanao Terminal. Although actual expenses
were incurred by Mindanao Terminal in relation
to the trial of this case in Davao City, the lawyer
of Mindanao Terminal incurred expenses for
plane fare, hotel accommodations and food, as
well as other miscellaneous expenses, as he
attended the trials coming all the way from
Manila. But there is no showing that Phoenix
and McGee made a false claim against
Mindanao Terminal resulting in the protracted
trial of the case necessitating the incurrence of
expenditures.[42]
WHEREFORE, the petition is GRANTED.The
decision of the Court of Appeals in CA-G.R. CV
No. 66121 is SET ASIDE and the decision of
the Regional Trial Court of Davao City, Branch
12 in Civil Case No. 25,311.97 is hereby
REINSTATED MINUS the awards of
P100,000.00 as attorney's fees and P83,945.80
as actual damages.
Carpio-Morales,* (Acting Chairperson),
Velasco, Jr., Leonardo De Castro,** and Brion,
JJ., concur.
11. Spouses Cruz v. Sun Holidays, Inc.,
GR186312, June 29, 2010
Definition of Extraordinary Diligence
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 Pasig City for
damages arising from the death of their son
Ruelito C. Cruz (Ruelito) who perished with his
wife on September 11, 2000 on board the boat
M/B Coco Beach III that 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 Ruelito's 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 respondent's 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, 2000 as 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 attorney's 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 Resort's 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 respondent's 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 Resort's
ferry services for guests cannot be considered as
ancillary to its business as no income is derived
therefrom; that it exercised 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 respondent's 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 respondent's 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 carrier's 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 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.
Respondent's 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 people's 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.
Respondent's 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 respondent's
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-ו-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.
Ruelito's net earning capacity is thus computed
as follows:
Net Earning Capacity = life expectancy x (gross
annual income - reasonable and necessary living
expenses).

= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since
respondent common carrier's breach of contract
of carriage resulted in the death of petitioners'
son, following Article 1764 vis-ו-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 --
1. When the obligation is breached, and it
consists in the 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 damages may be deemed to
have been reasonably ascertained). The actual
base for the computation of legal interest shall,
in any case, be on the amount finally adjudged.
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 Ruelito's 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.
SO ORDERED.
12. Regional Container Lines of Singapore and
EDSA Shipping Agency v. The Netherlands
Insurance Co., Inc., GR No. 168151, September
4, 2009
Presumption of Neglice: Goods
For our resolution is the petition for review on
certiorari filed by petitioners Regional Container
Lines of Singapore (RCL) and EDSA Shipping
Agency (EDSA Shipping) to annul and set aside
the decision[1] and resolution[2] of the Court of
Appeals (CA) dated May 26, 2004 and May 10,
2005, respectively, in CA-G.R. CV No. 76690.
RCL is a foreign corporation based in
Singapore. It does business in the Philippines
through its agent, EDSA Shipping, a domestic
corporation organized and existing under
Philippine laws. Respondent Netherlands
Insurance Company (Philippines), Inc.
(Netherlands Insurance) is likewise a domestic
corporation engaged in the marine underwriting
business.
FACTUAL ANTECEDENTS
The pertinent facts, based on the records are
summarized below.
On October 20, 1995, 405 cartons of Epoxy
Molding Compound were consigned to be
shipped from Singapore to Manila for Temic
Telefunken Microelectronics Philippines
(Temic). U-Freight Singapore PTE Ltd.[3] (U-
Freight Singapore), a forwarding agent based in
Singapore, contracted the services of Pacific
Eagle Lines PTE. Ltd. (Pacific Eagle) to
transport the subject cargo. The cargo was
packed, stored, and sealed by Pacific Eagle in its
Refrigerated Container No. 6105660 with Seal
No. 13223. As the cargo was highly perishable,
the inside of the container had to be kept at a
temperature of 0º Celsius. Pacific Eagle then
loaded the refrigerated container on board the
M/V Piya Bhum, a vessel owned by RCL, with
which Pacific Eagle had a slot charter
agreement. RCL duly issued its own Bill of
Lading in favor of Pacific Eagle.
To insure the cargo against loss and damage,
Netherlands Insurance issued a Marine Open
Policy in favor of Temic, as shown by MPO-21-
05081-94 and Marine Risk Note MRN-21
14022, to cover all losses/damages to the
shipment.
On October 25, 1995, the M/V Piya Bhum
docked in Manila. After unloading the
refrigerated container, it was plugged to the
power terminal of the pier to keep its
temperature constant. Fidel Rocha (Rocha),
Vice-President for Operations of Marines
Adjustment Corporation, accompanied by two
surveyors, conducted a protective survey of the
cargo. They found that based on the temperature
chart, the temperature reading was constant from
October 18, 1995 to October 25, 1995 at 0º
Celsius. However, at midnight of October 25,
1995 - when the cargo had already been
unloaded from the ship - the temperature
fluctuated with a reading of 33º Celsius. Rocha
believed the fluctuation was caused by the burnt
condenser fan motor of the refrigerated
container.
On November 9, 1995, Temic received the
shipment. It found the cargo completely
damaged. Temic filed a claim for cargo loss
against Netherlands Insurance, with supporting
claims documents. The Netherlands Insurance
paid Temic the sum of P1,036,497.00 under the
terms of the Marine Open Policy. Temic then
executed a loss and subrogation receipt in favor
of Netherlands Insurance.
Seven months from delivery of the cargo or on
June 4, 1996, Netherlands Insurance filed a
complaint for subrogation of insurance
settlement with the Regional Trial Court, Branch
5, Manila, against "the unknown owner of M/V
Piya Bhum" and TMS Ship Agencies (TMS), the
latter thought to be the local agent of M/V Piya
Bhum's unknown owner.[4] The complaint was
docketed as Civil Case No. 96-78612.
Netherlands Insurance amended the complaint
on January 17, 1997 to implead EDSA Shipping,
RCL, Eagle Liner Shipping Agencies, U-Freight
Singapore, and U-Ocean (Phils.), Inc. (U-
Ocean), as additional defendants. A third
amended complaint was later made, impleading
Pacific Eagle in substitution of Eagle Liner
Shipping Agencies.
TMS filed its answer to the original complaint.
RCL and EDSA Shipping filed their answers
with cross-claim and compulsory counterclaim
to the second amended complaint. U-Ocean
likewise filed an answer with compulsory
counterclaim and cross-claim. During the
pendency of the case, U-Ocean, jointly with U-
Freight Singapore, filed another answer with
compulsory counterclaim. Only Pacific Eagle
and TMS filed their answers to the third
amended complaint.
The defendants all disclaimed liability for the
damage caused to the cargo, citing several
reasons why Netherland Insurance's claims must
be rejected. Specifically, RCL and EDSA
Shipping denied negligence in the transport of
the cargo; they attributed any negligence that
may have caused the loss of the shipment to
their co-defendants. They likewise asserted that
no valid subrogation exists, as the payment
made by Netherlands Insurance to the consignee
was invalid. By way of affirmative defenses,
RCL and EDSA Shipping averred that the
Netherlands Insurance has no cause of action,
and is not the real party-in-interest, and that the
claim is barred by laches/prescription.
After Netherlands Insurance had made its formal
offer of evidence, the defendants including RCL
and EDSA Shipping sought leave of court to file
their respective motions to dismiss based on
demurrer to evidence.
RCL and EDSA Shipping, in their motion,
insisted that Netherlands Insurance had (1)
failed to prove any valid subrogation, and (2)
failed to establish that any negligence on their
part or that the loss was sustained while the
cargo was in their custody.
On May 22, 2002, the trial court handed down
an Order dismissing Civil Case No. 96-78612 on
demurrer to evidence. The trial court ruled that
while there was valid subrogation, the
defendants could not be held liable for the loss
or damage, as their respective liabilities ended at
the time of the discharge of the cargo from the
ship at the Port of Manila.
Netherlands Insurance seasonably appealed the
order of dismissal to the CA.
On May 26, 2004, the CA disposed of the appeal
as follows:
WHEREFORE, in view of the foregoing, the
dismissal of the complaint against defendants
Regional Container Lines and Its local agent,
EDSA Shipping Agency, is REVERSED and
SET ASIDE. The dismissal of the complaint
against the other defendants is AFFIRMED.
Pursuant to Section 1, Rule 33 of the 1997 Rules
of Civil Procedure, defendants Regional
Container Lines and EDSA Shipping Agency
are deemed to have waived the right to present
evidence.
As such, defendants Regional Container Lines
and EDSA Shipping Agency are ordered to
reimburse plaintiff in the sum of P1,036,497.00
with interest from date hereof until fully paid.
No costs.
SO ORDERED. [Emphasis supplied.]
The CA dismissed Netherland Insurance's
complaint against the other defendants after
finding that the claim had already been barred
by prescription.[5]
Having been found liable for the damage to the
cargo, RCL and EDSA Shipping filed a motion
for reconsideration, but the CA maintained its
original conclusions.
The sole issue for our resolution is whether the
CA correctly held RCL and EDSA Shipping
liable as common carriers under the theory of
presumption of negligence.
THE COURT'S RULING
The present case is governed by the following
provisions of the Civil Code:
ART. 1733. 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.
Such extraordinary diligence in the vigilance
over the goods is further expressed in articles
1734, 1735, and 1745, Nos. 5, 6, and 7, while
the extraordinary diligence for the safety of the
passengers is further set forth in articles1755 and
1756.
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 of 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.
ART. 1735. In all cases other that those
mentioned in Nos. 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 by article
1733.
ART. 1736. 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 sane are delivered,
actually or constructively, by the carrier to the
consignee, or to the person who has a right to
receive them, without prejudice to the provisions
of articles 1738.
ART. 1738. The extraordinary liability of the
common carrier continues to be operative even
during the time the goods are stored in a
warehouse of the carrier at the place of
destination, until the consignee has been advised
of the arrival of the goods and has had
reasonable opportunity thereafter to remove
them or otherwise dispose of them.
ART. 1742. Even if the loss, destruction, or
deterioration of the goods should be caused by
the character of the goods, or the faulty nature of
the packing or of the containers, the common
carrier must exercise due diligence to forestall or
lessen the loss.
In Central Shipping Company, Inc. v. Insurance
Company of North America,[6] we reiterated the
rules for the liability of a common carrier for
lost or damaged cargo as follows:
(1)
Common carriers are bound to observe
extraordinary diligence over the goods they
transport, according to all the circumstances of
each case;
(2)
In the event of loss, destruction, or deterioration
of the insured goods, common carriers are
responsible, unless they can prove that such loss,
destruction, or deterioration was brought about
by, among others, "flood, storm, earthquake,
lightning, or other natural disaster or calamity";
and
(3)
In all other cases not specified under Article
1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted
negligently, unless they observed extraordinary
diligence.[7]
In the present case, RCL and EDSA Shipping
disclaim any responsibility for the loss or
damage to the goods in question. They contend
that the cause of the damage to the cargo was the
"fluctuation of the temperature in the reefer
van," which fluctuation occurred after the cargo
had already been discharged from the vessel; no
fluctuation, they point out, arose when the cargo
was still on board M/V Piya Bhum. As the cause
of the damage to the cargo occurred after the
same was already discharged from the vessel
and was under the custody of the arrastre
operator (International Container Terminal
Services, Inc. or ICTSI), RCL and EDSA
Shipping posit that the presumption of
negligence provided in Article 1735 of the Civil
Code should not apply. What applies in this case
is Article 1734, particularly paragraphs 3 and 4
thereof, which exempts the carrier from liability
for loss or damage to the cargo when it is caused
either by an act or omission of the shipper or by
the character of the goods or defects in the
packing or in the containers. Thus, RCL and
EDSA Shipping seek to lay the blame at the feet
of other parties.
We do not find the arguments of RCL and
EDSA Shipping meritorious.
A common carrier is presumed to have been
negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it
transported.[8] When the goods shipped are
either lost or arrived in damaged condition, a
presumption arises against the carrier of its
failure to observe that diligence, and there need
not be an express finding of negligence to hold it
liable.[9]

To overcome the presumption of negligence, the
common carrier must establish by adequate
proof that it exercised extraordinary diligence
over the goods. It must do more than merely
show that some other party could be responsible
for the damage.[10]
In the present case, RCL and EDSA Shipping
failed to prove that they did exercise that degree
of diligence required by law over the goods they
transported. Indeed, there is sufficient evidence
showing that the fluctuation of the temperature
in the refrigerated container van, as recorded in
the temperature chart, occurred after the cargo
had been discharged from the vessel and was
already under the custody of the arrastre
operator, ICTSI. This evidence, however, does
not disprove that the condenser fan - which
caused the fluctuation of the temperature in the
refrigerated container - was not damaged while
the cargo was being unloaded from the ship. It is
settled in maritime law jurisprudence that
cargoes while being unloaded generally remain
under the custody of the carrier;[11] RCL and
EDSA Shipping failed to dispute this.
RCL and EDSA Shipping could have offered
evidence before the trial court to show that the
damage to the condenser fan did not occur: (1)
while the cargo was in transit; (2) while they
were in the act of discharging it from the vessel;
or (3) while they were delivering it actually or
constructively to the consignee. They could have
presented proof to show that they exercised
extraordinary care and diligence in the handling
of the goods, but they opted to file a demurrer to
evidence. As the order granting their demurrer
was reversed on appeal, the CA correctly ruled
that they are deemed to have waived their right
to present evidence,[12] and the presumption of
negligence must stand.
It is for this reason as well that we find RCL and
EDSA Shipping's claim that the loss or damage
to the cargo was caused by a defect in the
packing or in the containers. To exculpate itself
from liability for the loss/damage to the cargo
under any of the causes, the common carrier is
burdened to prove any of the causes in Article
1734 of the Civil Code claimed by it by a
preponderance of evidence. If the carrier
succeeds, the burden of evidence is shifted to the
shipper to prove that the carrier is negligent.[13]
RCL and EDSA Shipping, however, failed to
satisfy this standard of evidence and in fact
offered no evidence at all on this point; a
reversal of a dismissal based on a demurrer to
evidence bars the defendant from presenting
evidence supporting its allegations.
WHEREFORE, we DENY the petition for
review on certiorari filed by the Regional
Container Lines of Singapore and EDSA
Shipping Agency. The decision of the Court of
Appeals dated May 26, 2004 in CA-G.R. CV
No. 76690 is AFFIRMED IN TOTO. Costs
against the petitioners.
13. Calalas v. Court of Appeals, GR No.
122039, May 21, 2000
Presumption of Neglice: Passengers
This is a petition for review on certiorari of the
decision[1] of the Court of Appeals, dated
March 31, 1991, reversing the contrary decision
of the Regional Trial Court, Branch 36,
Dumaguete City, and awarding damages instead
to private respondent Eliza Jujeurche Sunga as
plaintiff in an action for breach of contract of
carriage.
The facts, as found by the Court of Appeals, are
as follows:
At 10 o’clock in the morning of August 23,
1989, private respondent Eliza Jujeurche G.
Sunga, then a college freshman majoring in
Physical Education at the Siliman University,
took a passenger jeepney owned and operated by
petitioner Vicente Calalas. As the jeepney was
filled to capacity of about 24 passengers, Sunga
was given by the conductor an "extension seat,"
a wooden stool at the back of the door at the rear
end of the vehicle.
On the way to Poblacion Sibulan, Negros
Occidental, the jeepney stopped to let a
passenger off. As she was seated at the rear of
the vehicle, Sunga gave way to the outgoing
passenger. Just as she was doing so, an Isuzu
truck driven by Iglecerio Verena and owned by
Francisco Salva bumped the left rear portion of
the jeepney. As a result, Sunga was injured. She
sustained a fracture of the "distal third of the left
tibia-fibula with severe necrosis of the
underlying skin." Closed reduction of the
fracture, long leg circular casting, and case
wedging were done under sedation. Her
confinement in the hospital lasted from August
23 to September 7, 1989. Her attending
physician, Dr. Danilo V. Oligario, an orthopedic
surgeon, certified she would remain on a cast for
a period of three months and would have to
ambulate in crutches during said period.
On October 9, 1989, Sunga filed a complaint for
damages against Calalas, alleging violation of
the contract of carriage by the former in failing
to exercise the diligence required of him as a
common carrier. Calalas, on the other hand, filed
a third-party complaint against Francisco Salva,
the owner of the Isuzu truck.
The lower court rendered judgment against
Salva as third-party defendant and absolved
Calalas of liability, holding that it was the driver
of the Isuzu truck who was responsible for the
accident. It took cognizance of another case
(Civil Case No. 3490), filed by Calalas against
Salva and Verena, for quasi-delict, in which
Branch 37 of the same court held Salva and his
driver Verena jointly liable to Calalas for the
damage to his jeepney.
On appeal to the Court of Appeals, the ruling of
the lower court was reversed on the ground that
Sunga’s cause of action was based on a contract
of carriage, not quasi-delict, and that the
common carrier failed to exercise the diligence
required under the Civil Code. The appellate
court dismissed the third-party complaint against
Salva and adjudged Calalas liable for damages
to Sunga. The dispositive portion of its decision
reads:
WHEREFORE, the decision appealed from is
hereby REVERSED and SET ASIDE, and
another one is entered ordering defendant-
appellee Vicente Calalas to pay plaintiff-
appellant:
(1) P50,000.00 as actual and compensatory
damages;
(2) P50,000.00 as moral damages;
(3) P10,000.00 as attorney’s fees; and
(4) P1,000.00 as expenses of litigation; and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the
ruling in Civil Case No. 3490 that the negligence
of Verena was the proximate cause of the
accident negates his liability and that to rule
otherwise would be to make the common carrier
an insurer of the safety of its passengers. He
contends that the bumping of the jeepney by the
truck owned by Salva was a caso fortuito.
Petitioner further assails the award of moral
damages to Sunga on the ground that it is not
supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling
in Civil Case No. 3490 finding the driver and the
owner of the truck liable for quasi-delict ignores
the fact that she was never a party to that case
and, therefore, the principle of res judicata does
not apply.
Nor are the issues in Civil Case No. 3490 and in
the present case the same. The issue in Civil
Case No. 3490 was whether Salva and his driver
Verena were liable for quasi-delict for the
damage caused to petitioner’s jeepney. On the
other hand, the issue in this case is whether
petitioner is liable on his contract of carriage.
The first, quasi-delict, also known as culpa
aquiliana or culpa extra contractual, has as its
source the negligence of the tortfeasor. The
second, breach of contract or culpa contractual,
is premised upon the negligence in the
performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or
fault should be clearly established because it is
the basis of the action, whereas in breach of
contract, the action can be prosecuted merely by
proving the existence of the contract and the fact
that the obligor, in this case the common carrier,
failed to transport his passenger safely to his
destination.[2] In case of death or injuries to
passengers, Art. 1756 of the Civil Code provides
that common carriers are presumed to have been
at fault or to have acted negligently unless they
prove that they observed extraordinary diligence
as defined in Arts. 1733 and 1755 of the Code.
This provision necessarily shifts to the common
carrier the burden of proof.
There is, thus, no basis for the contention that
the ruling in Civil Case No. 3490, finding Salva
and his driver Verena liable for the damage to
petitioner’s jeepney, should be binding on
Sunga. It is immaterial that the proximate cause
of the collision between the jeepney and the
truck was the negligence of the truck driver. The
doctrine of proximate cause is applicable only in
actions for quasi-delict, not in actions involving
breach of contract. The doctrine is a device for
imputing liability to a person where there is no
relation between him and another party. In such
a case, the obligation is created by law itself.
But, where there is a pre-existing contractual
relation between the parties, it is the parties
themselves who create the obligation, and the
function of the law is merely to regulate the
relation thus created. Insofar as contracts of
carriage are concerned, some aspects regulated
by the Civil Code are those respecting the
diligence required of common carriers with
regard to the safety of passengers as well as the
presumption of negligence in cases of death or
injury to passengers. It provides:
Art. 1733. 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.
Such extraordinary diligence in the vigilance
over the goods is further expressed in articles
1734, 1735, and 1746, Nos. 5,6, and 7, while the
extraordinary diligence for the safety of the
passengers is further set forth in articles 1755
and 1756.
Art. 1755. A common carrier is 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.
Art. 1756. In case of death of or injuries to
passengers, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as prescribed by articles
1733 and 1755.
In the case at bar, upon the happening of the
accident, the presumption of negligence at once
arose, and it became the duty of petitioner to
prove that he had to observe extraordinary
diligence in the care of his passengers.
Now, did the driver of jeepney carry Sunga
"safely as far as human care and foresight could
provide, using the utmost diligence of very
cautious persons, with due regard for all the
circumstances" as required by Art. 1755? We do
not think so. Several factors militate against
petitioner’s contention.
First, as found by the Court of Appeals, the
jeepney was not properly parked, its rear portion
being exposed about two meters from the broad
shoulders of the highway, and facing the middle
of the highway in a diagonal angle. This is a
violation of the R.A. No. 4136, as amended, or
the Land Transportation and Traffic Code,
which provides:
Sec. 54. Obstruction of Traffic. - No person shall
drive his motor vehicle in such a manner as to
obstruct or impede the passage of any vehicle,
nor, while discharging or taking on passengers
or loading or unloading freight, obstruct the free
passage of other vehicles on the highway.
Second, it is undisputed that petitioner’s driver
took in more passengers than the allowed seating
capacity of the jeepney, a violation of §32(a) of
the same law. It provides:
Exceeding registered capacity. - No person
operating any motor vehicle shall allow more
passengers or more freight or cargo in his
vehicle than its registered capacity.
The fact that Sunga was seated in an "extension
seat" placed her in a peril greater than that to
which the other passengers were exposed.
Therefore, not only was petitioner unable to
overcome the presumption of negligence
imposed on him for the injury sustained by
Sunga, but also, the evidence shows he was
actually negligent in transporting passengers.
We find it hard to give serious thought to
petitioner’s contention that Sunga’s taking an
"extension seat" amounted to an implied
assumption of risk. It is akin to arguing that the
injuries to the many victims of the tragedies in
our seas should not be compensated merely
because those passengers assumed a greater risk
of drowning by boarding an overloaded ferry.
This is also true of petitioner’s contention that
the jeepney being bumped while it was
improperly parked constitutes caso fortuito. A
caso fortuito is an event which could not be
foreseen, or which, though foreseen, was
inevitable.[3] This requires that the following
requirements be present: (a) the cause of the
breach is independent of the debtor’s will; (b)
the event is unforeseeable or unavoidable; (c)
the event is such as to render it impossible for
the debtor to fulfill his obligation in a normal
manner, and (d) the debtor did not take part in
causing the injury to the creditor.[4] Petitioner
should have foreseen the danger of parking his
jeepney with its body protruding two meters into
the highway.
Finally, petitioner challenges the award of moral
damages alleging that it is excessive and without
basis in law. We find this contention well taken.
In awarding moral damages, the Court of
Appeals stated:
Plaintiff-appellant at the time of the accident
was a first-year college student in that school
year 1989-1990 at the Silliman University,
majoring in Physical Education. Because of the
injury, she was not able to enroll in the second
semester of that school year. She testified that
she had no more intention of continuing with her
schooling, because she could not walk and
decided not to pursue her degree, major in
Physical Education "because of my leg which
has a defect already."
Plaintiff-appellant likewise testified that even
while she was under confinement, she cried in
pain because of her injured left foot. As a result
of her injury, the Orthopedic Surgeon also
certified that she has "residual bowing of the
fracture side." She likewise decided not to
further pursue Physical Education as her major
subject, because "my left leg x x x has a defect
already."
Those are her physical pains and moral
sufferings, the inevitable bedfellows of the
injuries that she suffered. Under Article 2219 of
the Civil Code, she is entitled to recover moral
damages in the sum of P50,000.00, which is fair,
just and reasonable.
As a general rule, moral damages are not
recoverable in actions for damages predicated on
a breach of contract for it is not one of the items
enumerated under Art. 2219 of the Civil
Code.[5] As an exception, such damages are
recoverable: (1) in cases in which the mishap
results in the death of a passenger, as provided
in Art. 1764, in relation to Art. 2206(3) of the
Civil Code; and (2) in the cases in which the
carrier is guilty of fraud or bad faith, as provided
in Art. 2220.[6]
In this case, there is no legal basis for awarding
moral damages since there was no factual
finding by the appellate court that petitioner
acted in bad faith in the performance of the
contract of carriage. Sunga’s contention that
petitioner’s admission in open court that the
driver of the jeepney failed to assist her in going
to a nearby hospital cannot be construed as an
admission of bad faith. The fact that it was the
driver of the Isuzu truck who took her to the
hospital does not imply that petitioner was
utterly indifferent to the plight of his injured
passenger. If at all, it is merely implied
recognition by Verena that he was the one at
fault for the accident.
WHEREFORE, the decision of the Court of
Appeals, dated March 31, 1995, and its
resolution, dated September 11, 1995, are
AFFIRMED, with the MODIFICATION that the
award of moral damages is DELETED.
SO ORDERED.
14. Philippine Charter Insurance Corporation v.
Unknown Owner of the Vessel M/V “National
Honor”, National Shipping Corporation of the
Philippines and International Container Services,
Inc., GR No. 161833, July 8, 2005
Presumption how overturned
This is a petition for review under Rule 45 of the
1997 Revised Rules of Civil Procedure assailing
the Decision[1] dated January 19, 2004 of the
Court of Appeals (CA) in CA-G.R. CV No.
57357 which affirmed the Decision dated
February 17, 1997 of the Regional Trial Court
(RTC) of Manila, Branch 37, in Civil Case No.
95-73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of
Seoul, Korea, loaded a shipment of four units of
parts and accessories in the port of Pusan,
Korea, on board the vessel M/V "National
Honor," represented in the Philippines by its
agent, National Shipping Corporation of the
Philippines (NSCP). The shipment was for
delivery to Manila, Philippines. Freight
forwarder, Samhwa Inter-Trans Co., Ltd., issued
Bill of Lading No. SH9410306[2] in the name of
the shipper consigned to the order of
Metropolitan Bank and Trust Company with
arrival notice in Manila to ultimate consignee
Blue Mono International Company, Incorporated
(BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No.
NSGPBSML512565[3] in the name of the
freight forwarder, as shipper, consigned to the
order of Stamm International Inc., Makati,
Philippines. It is provided therein that:
This Bill of Lading shall be prima facie evidence
of the receipt of the Carrier in apparent good
order and condition except as, otherwise, noted
of the total number of Containers or other
packages or units enumerated overleaf. Proof to
the contrary shall be admissible when this Bill of
Lading has been transferred to a third party
acting in good faith. No representation is made
by the Carrier as to the weight, contents,
measure, quantity, quality, description,
condition, marks, numbers, or value of the
Goods and the Carrier shall be under no
responsibility whatsoever in respect of such
description or particulars.
The shipper, whether principal or agent,
represents and warrants that the goods are
properly described, marked, secured, and packed
and may be handled in ordinary course without
damage to the goods, ship, or property or
persons and guarantees the correctness of the
particulars, weight or each piece or package and
description of the goods and agrees to ascertain
and to disclose in writing on shipment, any
condition, nature, quality, ingredient or
characteristic that may cause damage, injury or
detriment to the goods, other property, the ship
or to persons, and for the failure to do so the
shipper agrees to be liable for and fully
indemnify the carrier and hold it harmless in
respect of any injury or death of any person and
loss or damage to cargo or property. The carrier
shall be responsible as to the correctness of any
such mark, descriptions or representations.[4]
The shipment was contained in two wooden
crates, namely, Crate No. 1 and Crate No. 2,
complete and in good order condition, covered
by Commercial Invoice No. YJ-73564 DTD[5]
and a Packing List.[6] There were no markings
on the outer portion of the crates except the
name of the consignee.[7] Crate No. 1 measured
24 cubic meters and weighed 3,620 kgs. It
contained the following articles: one (1) unit
Lathe Machine complete with parts and
accessories; one (1) unit Surface Grinder
complete with parts and accessories; and one (1)
unit Milling Machine complete with parts and
accessories. On the flooring of the wooden
crates were three wooden battens placed side by
side to support the weight of the cargo. Crate
No. 2, on the other hand, measured 10 cubic
meters and weighed 2,060 kgs. The Lathe
Machine was stuffed in the crate. The shipment
had a total invoice value of US$90,000.00 C&F
Manila.[8] It was insured for P2,547,270.00
with the Philippine Charter Insurance
Corporation (PCIC) thru its general agent,
Family Insurance and Investment
Corporation,[9] under Marine Risk Note No.
68043 dated October 24, 1994.[10]
The M/V "National Honor" arrived at the Manila
International Container Terminal (MICT) on
November 14, 1995. The International
Container Terminal Services, Incorporated
(ICTSI) was furnished with a copy of the crate
cargo list and bill of lading, and it knew the
contents of the crate.[11] The following day, the
vessel started discharging its cargoes using its
winch crane. The crane was operated by
Olegario Balsa, a winchman from the
ICTSI,[12] the exclusive arrastre operator of
MICT.
Denasto Dauz, Jr., the checker-inspector of the
NSCP, along with the crew and the surveyor of
the ICTSI, conducted an inspection of the
cargo.[13] They inspected the hatches, checked
the cargo and found it in apparent good
condition.[14] Claudio Cansino, the stevedore
of the ICTSI, placed two sling cables on each
end of Crate No. 1.[15] No sling cable was
fastened on the mid-portion of the crate. In
Dauz's experience, this was a normal
procedure.[16] As the crate was being hoisted
from the vessel's hatch, the mid-portion of the
wooden flooring suddenly snapped in the air,
about five feet high from the vessel's twin deck,
sending all its contents crashing down hard,[17]
resulting in extensive damage to the shipment.
BMICI's customs broker, JRM Incorporated,
took delivery of the cargo in such damaged
condition.[18] Upon receipt of the damaged
shipment, BMICI found that the same could no
longer be used for the intended purpose. The
Mariners' Adjustment Corporation hired by
PCIC conducted a survey and declared that the
packing of the shipment was considered
insufficient. It ruled out the possibility of taxes
due to insufficiency of packing. It opined that
three to four pieces of cable or wire rope slings,
held in all equal setting, never by-passing the
center of the crate, should have been used,
considering that the crate contained heavy
machinery.[19]
BMICI subsequently filed separate claims
against the NSCP,[20] the ICTSI,[21] and its
insurer, the PCIC,[22] for US$61,500.00. When
the other companies denied liability, PCIC paid
the claim and was issued a Subrogation
Receipt[23] for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed
with the RTC of Manila, Branch 35, a
Complaint for Damages[24] against the
"Unknown owner of the vessel M/V National
Honor," NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault
and negligence of the defendants. It prayed,
among others —
WHEREFORE, it is respectfully prayed of this
Honorable Court that judgment be rendered
ordering defendants to pay plaintiff, jointly or in
the alternative, the following:
Actual damages in the amount of P1,740,634.50
plus legal interest at the time of the filing of this
complaint until fully paid;
Attorney's fees in the amount of P100,000.00;
Cost of suit.[25]
ICTSI, for its part, filed its Answer with
Counterclaim and Cross-claim against its co-
defendant NSCP, claiming that the loss/damage
of the shipment was caused exclusively by the
defective material of the wooden battens of the
shipment, insufficient packing or acts of the
shipper.
At the trial, Anthony Abarquez, the safety
inspector of ICTSI, testified that the wooden
battens placed on the wooden flooring of the
crate was of good material but was not strong
enough to support the weight of the machines
inside the crate. He averred that most stevedores
did not know how to read and write; hence, he
placed the sling cables only on those portions of
the crate where the arrow signs were placed, as
in the case of fragile cargo. He said that unless
otherwise indicated by arrow signs, the ICTSI
used only two cable slings on each side of the
crate and would not place a sling cable in the
mid-section.[26] He declared that the crate fell
from the cranes because the wooden batten in
the mid-portion was broken as it was being
lifted.[27] He concluded that the loss/damage
was caused by the failure of the shipper or its
packer to place wooden battens of strong
materials under the flooring of the crate, and to
place a sign in its mid-term section where the
sling cables would be placed.
The ICTSI adduced in evidence the report of the
R.J. Del Pan & Co., Inc. that the damage to the
cargo could be attributed to insufficient packing
and unbalanced weight distribution of the cargo
inside the crate as evidenced by the types and
shapes of items found.[28]
The trial court rendered judgment for PCIC and
ordered the complaint dismissed, thus:
WHEREFORE, the complaint of the plaintiff,
and the respective counterclaims of the two
defendants are dismissed, with costs against the
plaintiff.
SO ORDERED.[29]
According to the trial court, the loss of the
shipment contained in Crate No. 1 was due to
the internal defect and weakness of the materials
used in the fabrication of the crates. The middle
wooden batten had a hole (bukong-bukong).
The trial court rejected the certification[30] of
the shipper, stating that the shipment was
properly packed and secured, as mere hearsay
and devoid of any evidentiary weight, the affiant
not having testified.
Not satisfied, PCIC appealed[31] to the CA
which rendered judgment on January 19, 2004
affirming in toto the appealed decision, with this
fallo —
WHEREFORE, the decision of the Regional
Trial Court of Manila, Branch 35, dated
February 17, 1997, is AFFIRMED.
SO ORDERED.[32]
The appellate court held, inter alia, that it was
bound by the finding of facts of the RTC,
especially so where the evidence in support
thereof is more than substantial. It ratiocinated
that the loss of the shipment was due to an
excepted cause — "[t]he character of the goods
or defects in the packing or in the containers"
and the failure of the shipper to indicate signs to
notify the stevedores that extra care should be
employed in handling the shipment.[33] It
blamed the shipper for its failure to use materials
of stronger quality to support the heavy
machines and to indicate an arrow in the middle
portion of the cargo where additional slings
should be attached.[34] The CA concluded that
common carriers are not absolute insurers
against all risks in the transport of the goods.[35]
Hence, this petition by the PCIC, where it
alleges that:
I.
THE COURT OF APPEALS COMMITTED
SERIOUS ERROR OF LAW IN NOT
HOLDING THAT RESPONDENT COMMON
CARRIER IS LIABLE FOR THE DAMAGE
SUSTAINED BY THE SHIPMENT IN THE
POSSESSION OF THE ARRASTRE
OPERATOR.
II.
THE COURT OF APPEALS COMMITTED
SERIOUS ERROR OF LAW IN NOT
APPLYING THE STATUTORY
PRESUMPTION OF FAULT AND
NEGLIGENCE IN THE CASE AT BAR.
III.
THE COURT OF APPEALS GROSSLY
MISCOMPREHENDED THE FACTS IN
FINDING THAT THE DAMAGE
SUSTAINED BY THE [SHIPMENT] WAS
DUE TO ITS DEFECTIVE PACKING AND
NOT TO THE FAULT AND NEGLIGENCE
OF THE RESPONDENTS.[36]
The petitioner asserts that the mere proof of
receipt of the shipment by the common carrier
(to the carrier) in good order, and their arrival at
the place of destination in bad order makes out a
prima facie case against it; in such case, it is
liable for the loss or damage to the cargo absent
satisfactory explanation given by the carrier as
to the exercise of extraordinary diligence. The
petitioner avers that the shipment was
sufficiently packed in wooden boxes, as shown
by the fact that it was accepted on board the
vessel and arrived in Manila safely. It
emphasizes that the respondents did not contest
the contents of the bill of lading, and that the
respondents knew that the manner and condition
of the packing of the cargo was normal and
barren of defects. It maintains that it behooved
the respondent ICTSI to place three to four
cables or wire slings in equal settings, including
the center portion of the crate to prevent damage
to the cargo:
. . . [A] simple look at the manifesto of the cargo
and the bill of lading would have alerted
respondents of the nature of the cargo consisting
of thick and heavy machinery. Extra-care
should have been made and extended in the
discharge of the subject shipment. Had the
respondent only bothered to check the list of its
contents, they would have been nervous enough
to place additional slings and cables to support
those massive machines, which were composed
almost entirely of thick steel, clearly intended
for heavy industries. As indicated in the list, the
boxes contained one lat[h]e machine, one
milling machine and one grinding machine-all
coming with complete parts and accessories.
Yet, not one among the respondents were
cautious enough. Here lies the utter failure of
the respondents to observed extraordinary
diligence in the handling of the cargo in their
custody and possession, which the Court of
Appeals should have readily observed in its
appreciation of the pertinent facts.[37]
The petitioner posits that the loss/damage was
caused by the mishandling of the shipment by
therein respondent ICTSI, the arrastre operator,
and not by its negligence.
The petitioner insists that the respondents did
not observe extraordinary diligence in the care
of the goods. It argues that in the performance
of its obligations, the respondent ICTSI should
observe the same degree of diligence as that
required of a common carrier under the New
Civil Code of the Philippines. Citing Eastern
Shipping Lines, Inc. v. Court of Appeals,[38] it
posits that respondents are liable in solidum to it,
inasmuch as both are charged with the obligation
to deliver the goods in good condition to its
consignee, BMICI.
Respondent NSCP counters that if ever
respondent ICTSI is adjudged liable, it is not
solidarily liable with it. It further avers that the
"carrier cannot discharge directly to the
consignee because cargo discharging is the
monopoly of the arrastre." Liability, therefore,
falls solely upon the shoulder of respondent
ICTSI, inasmuch as the discharging of cargoes
from the vessel was its exclusive responsibility.
Besides, the petitioner is raising questions of
facts, improper in a petition for review on
certiorari.[39]
Respondent ICTSI avers that the issues raised
are factual, hence, improper under Rule 45 of
the Rules of Court. It claims that it is merely a
depository and not a common carrier; hence, it is
not obliged to exercise extraordinary diligence.
It reiterates that the loss/damage was caused by
the failure of the shipper or his packer to place a
sign on the sides and middle portion of the crate
that extra care should be employed in handling
the shipment, and that the middle wooden batten
on the flooring of the crate had a hole. The
respondent asserts that the testimony of Anthony
Abarquez, who conducted his investigation at
the site of the incident, should prevail over that
of Rolando Balatbat. As an alternative, it argues
that if ever adjudged liable, its liability is limited
only to P3,500.00 as expressed in the liability
clause of Gate Pass CFS-BR-GP No. 319773.
The petition has no merit.

The well-entrenched rule in our jurisdiction is
that only questions of law may be entertained by
this Court in a petition for review on certiorari.
This rule, however, is not ironclad and admits
certain exceptions, such as when (1) the
conclusion is grounded on speculations,
surmises or conjectures; (2) the inference is
manifestly mistaken, absurd or impossible; (3)
there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6)
there is no citation of specific evidence on which
the factual findings are based; (7) the findings of
absence of facts are contradicted by the presence
of evidence on record; (8) the findings of the
Court of Appeals are contrary to those of the
trial court; (9) the Court of Appeals manifestly
overlooked certain relevant and undisputed facts
that, if properly considered, would justify a
different conclusion; (10) the findings of the
Court of Appeals are beyond the issues of the
case; and (11) such findings are contrary to the
admissions of both parties.[40]
We have reviewed the records and find no
justification to warrant the application of any
exception to the general rule.
We agree with the contention of the petitioner
that common carriers, from the nature of their
business and for reasons of public policy, are
mandated 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.[41] The
Court has defined extraordinary diligence in the
vigilance over the goods as follows:
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."[42]
The common carrier's duty to observe the
requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or
unconditionally placed in the possession of, and
received by, the carrier for transportation until
delivered to, or until the lapse of a reasonable
time for their acceptance, by the person entitled
to receive them.[43] When the goods shipped
are either lost or arrive in damaged condition, a
presumption arises against the carrier of its
failure to observe that diligence, and there need
not be an express finding of negligence to hold it
liable.[44] 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.[45]
However, under Article 1734 of the New Civil
Code, the presumption of negligence does not
apply to any of the following causes:
Flood, storm, earthquake, lightning or other
natural disaster or calamity;
Act of the public enemy in war, whether
international or civil;
Act or omission of the shipper or owner of the
goods;
The character of the goods or defects in the
packing or in the containers;
Order or act of competent public authority.
It bears stressing that the enumeration in Article
1734 of the New Civil Code which exempts the
common carrier for the loss or damage to the
cargo is a closed list.[46] To exculpate itself
from liability for the loss/damage to the cargo
under any of the causes, the common carrier is
burdened to prove any of the aforecited causes
claimed by it by a preponderance of evidence. If
the carrier succeeds, the burden of evidence is
shifted to the shipper to prove that the carrier is
negligent.[47]
"Defect" is the want or absence of something
necessary for completeness or perfection; a lack
or absence of something essential to
completeness; a deficiency in something
essential to the proper use for the purpose for
which a thing is to be used.[48] On the other
hand, inferior means of poor quality, mediocre,
or second rate.[49] A thing may be of inferior
quality but not necessarily defective. In other
words, "defectiveness" is not synonymous with
"inferiority."
In the present case, the trial court declared that
based on the record, the loss of the shipment was
caused by the negligence of the petitioner as the
shipper:
The same may be said with respect to defendant
ICTSI. The breakage and collapse of Crate No.
1 and the total destruction of its contents were
not imputable to any fault or negligence on the
part of said defendant in handling the unloading
of the cargoes from the carrying vessel, but was
due solely to the inherent defect and weakness
of the materials used in the fabrication of said
crate.
The crate should have three solid and strong
wooden batten placed side by side underneath or
on the flooring of the crate to support the weight
of its contents. However, in the case of the crate
in dispute, although there were three wooden
battens placed side by side on its flooring, the
middle wooden batten, which carried substantial
volume of the weight of the crate's contents, had
a knot hole or "bukong-bukong," which
considerably affected, reduced and weakened its
strength. Because of the enormous weight of the
machineries inside this crate, the middle wooden
batten gave way and collapsed. As the
combined strength of the other two wooden
battens were not sufficient to hold and carry the
load, they too simultaneously with the middle
wooden battens gave way and collapsed (TSN,
Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the
machineries in Seoul, Korea. There is nothing
in the record which would indicate that
defendant ICTSI had any role in the choice of
the materials used in fabricating this crate. Said
defendant, therefore, cannot be held as blame
worthy for the loss of the machineries contained
in Crate No. 1.[50]
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions
mentioned in Article 1734 of the Civil Code,
particularly number (4) thereof, i.e., the
character of the goods or defects in the packing
or in the containers. The trial court found that
the breakage of the crate was not due to the fault
or negligence of ICTSI, but to the inherent
defect and weakness of the materials used in the
fabrication of the said crate.
Upon examination of the records, We find no After you placed the slings, what do you do with
compelling reason to depart from the factual the crates?
findings of the trial court.
A:

After I have placed a sling properly, I ask the

It appears that the wooden batten used as crane (sic) to haul it, Ma'am.
support for the flooring was not made of good
materials, which caused the middle portion
thereof to give way when it was lifted. The
shipper also failed to indicate signs to notify the
stevedores that extra care should be employed in
handling the shipment.
...

Claudio Cansino, a stevedore of ICTSI, testified

before the court their duties and responsibilities:

"Q: Q:

With regard to crates, what do you do with the Now, what, if any, were written or were marked
crates? on the crate?

A: A:

Everyday with the crates, there is an arrow The thing that was marked on the cargo is an
drawn where the sling is placed, Ma'am. arrow just like of a chain, Ma'am.

Q: Q:

When the crates have arrows drawn and where And where did you see or what parts of the crate
you placed the slings, what do you do with these did you see those arrows?
crates?
A:
A
At the corner of the crate, Ma'am.
sling is placed on it, Ma'am.

Q:
Q:
How many arrows did you see?
A: Now, Mr. Witness, if there are no arrows, would
you place slings on the parts where there are no
Four (4) on both sides, Ma'am. arrows?

A:

You can not place slings if there are no arrows,

Ma'am."

Appellant's allegation that since the cargo

...
arrived safely from the port of [P]usan, Korea
without defect, the fault should be attributed to
the arrastre operator who mishandled the cargo,
is without merit. The cargo fell while it was
being carried only at about five (5) feet high
Q:
above the ground. It would not have so easily
What did you do with the arrows? collapsed had the cargo been properly packed.
The shipper should have used materials of
A: stronger quality to support the heavy machines.
Not only did the shipper fail to properly pack the
When I saw the arrows, that's where I placed the
cargo, it also failed to indicate an arrow in the
slings, Ma'am.
middle portion of the cargo where additional
slings should be attached. At any rate, the issue
of negligence is factual in nature and in this
regard, it is settled that factual findings of the
lower courts are entitled to great weight and
respect on appeal, and, in fact, accorded finality
... when supported by substantial evidence.[51]

We agree with the trial and appellate courts.

Q: The petitioner failed to adduce any evidence to

counter that of respondent ICTSI. The petitioner
Now, did you find any other marks on the crate? failed to rebut the testimony of Dauz, that the
crates were sealed and that the contents thereof
A: could not be seen from the outside.[52] While it
Nothing more, Ma'am. is true that the crate contained machineries and
spare parts, it cannot thereby be concluded that
the respondents knew or should have known that
the middle wooden batten had a hole, or that it
was not strong enough to bear the weight of the
Q: shipment.
There is no showing in the Bill of Lading that
the shipment was in good order or condition
when the carrier received the cargo, or that the
three wooden battens under the flooring of the
cargo were not defective or insufficient or
inadequate. On the other hand, under Bill of
Lading No. NSGPBSML512565 issued by the
respondent NSCP and accepted by the petitioner,
the latter represented and warranted that the
goods were properly packed, and disclosed in
writing the "condition, nature, quality or
characteristic that may cause damage, injury or
detriment to the goods." Absent any signs on
the shipment requiring the placement of a sling
cable in the mid-portion of the crate, the
respondent ICTSI was not obliged to do so.
The statement in the Bill of Lading, that the
shipment was in apparent good condition, is
sufficient to sustain a finding of absence of
defects in the merchandise. Case law has it that
such statement will create a prima facie
presumption only as to the external condition
and not to that not open to inspection.[53]
IN LIGHT OF ALL THE FOREGOING, the
petition is DENIED for lack of merit.
SO ORDERED.
15. Asian terminals, Inc., v. Simon Enterprises,
Inc., GR No. 177116, February 27. 2013
Burden of proof
Before us is a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the
Decision[1] dated November 27, 2006 and
Resolution[2] dated March 23, 2007 of the Court
of Appeals (CA) in CA-G.R. CV No. 71210.
The facts are as follows:
On October 25, 1995, Contiquincybunge Export
Company loaded 6,843.700 metric tons of U.S.
Soybean Meal in Bulk on board the vessel M/V
“Sea Dream” at the Port of Darrow, Louisiana,
U.S.A., for delivery to the Port of Manila to
respondent Simon Enterprises, Inc., as
consignee. When the vessel arrived at the South
Harbor in Manila, the shipment was discharged
to the receiving barges of petitioner Asian
Terminals, Inc. (ATI), the arrastre operator.
Respondent later received the shipment but
claimed having received only 6,825.144 metric
tons of U.S. Soybean Meal, or short by 18.556
metric tons, which is estimated to be worth
US$7,100.16 or P186,743.20.[3]
On November 25, 1995, Contiquincybunge
Export Company made another shipment to
respondent and allegedly loaded on board the
vessel M/V “Tern” at the Port of Darrow,
Louisiana, U.S.A. 3,300.000 metric tons of U.S.
Soybean Meal in Bulk for delivery to respondent
at the Port of Manila. The carrier issued its clean
Berth Term Grain Bill of Lading.[4]

On January 25, 1996, the carrier docked at the
inner Anchorage, South Harbor, Manila. The
subject shipment was discharged to the receiving
barges of petitioner ATI and received by
respondent which, however, reported receiving
only 3,100.137 metric tons instead of the
manifested 3,300.000 metric tons of shipment.
Respondent filed against petitioner ATI and the
carrier a claim for the shortage of 199.863
metric tons, estimated to be worth US$79,848.86
or P2,100,025.00, but its claim was denied.
Thus, on December 3, 1996, respondent filed
with the Regional Trial Court (RTC) of Manila
an action for damages[5] against the unknown
owner of the vessels M/V “Sea Dream” and
M/V “Tern,” its local agent Inter-Asia Marine
Transport, Inc., and petitioner ATI alleging that
it suffered the losses through the fault or
negligence of the said defendants. Respondent
sought to claim damages plus attorney’s fees and
costs of suit. Its claim against the unknown
owner of the vessel M/V “Sea Dream,” however,
was later settled in a Release and Quitclaim[6]
dated June 9, 1998, and only the claims against
the unknown owner of the M/V “Tern,” Inter-
Asia Marine Transport, Inc., and petitioner ATI
remained.
In their Answer,[7] the unknown owner of the
vessel M/V “Tern” and its local agent Inter-Asia
Marine Transport, Inc., prayed for the dismissal
of the complaint essentially alleging lack of
cause of action and prescription. They alleged as
affirmative defenses the following: that the
complaint does not state a cause of action; that
plaintiff and/or defendants are not the real
parties-in-interest; that the cause of action had
already prescribed or laches had set in; that the
claim should have been filed within three days
from receipt of the cargo pursuant to the
provisions of the Code of Commerce; that the
defendant could no longer check the veracity of
plaintiff’s claim considering that the claim was
filed eight months after the cargo was
discharged from the vessel; that plaintiff hired
its own barges to receive the cargo and hence,
any damages or losses during the discharging
operations were for plaintiff’s account and
responsibility; that the statement of facts bears
no remarks on any short-landed cargo; that the
draft survey report indicates that the cargo
discharged was more than the figures appearing
in the bill of lading; that because the bill of
lading states that the goods are carried on a
“shipper’s weight, quantity and quality
unknown” terms and on “all terms, conditions
and exceptions as per charter party dated
October 15, 1995,” the vessel had no way of
knowing the actual weight, quantity, and quality
of the bulk cargo when loaded at the port of
origin and the vessel had to rely on the shipper
for such information; that the subject shipment
was discharged in Manila in the same condition
and quantity as when loaded at the port of
loading; that defendants’ responsibility ceased
upon discharge from the ship’s tackle; that the
damage or loss was due to the inherent vice or
defect of the goods or to the insufficiency of
packing thereof or perils or dangers or accidents
of the sea, pre-shipment damage or to improper
handling of the goods by plaintiff or its
representatives after discharge from the vessel,
for which defendants cannot be made liable; that
damage/loss occurred while the cargo was in the
possession, custody or control of plaintiff or its
representative, or due to plaintiff’s own
negligence and careless actuations in the
handling of the cargo; that the loss is less than
0.75% of the entire cargo and assuming
arguendo that the shortage exists, the figure is
well within the accepted parameters when
loading this type of bulk cargo; that defendants
exercised the required diligence under the law in
the performance of their duties; that the vessel
was seaworthy in all respects; that the vessel
went straight from the port of loading to Manila,
without passing through any intermediate ports
so there was no chance for any loss of the cargo;
the plaintiff’s claim is excessive, grossly
overstated, unreasonable and a mere paper loss
and is certainly unsubstantiated and without any
basis; the terms and conditions of the relevant
bill of lading and the charter party, as well as the
provisions of the Carriage of Goods by Sea Act
and existing laws, absolve the defendants from
any liability; that the subject shipment was
received in bulk and thus defendant carrier has
no knowledge of the condition, quality and
quantity of the cargo at the time of loading; that
the complaint was not referred to the arbitrators
pursuant to the bill of lading; that liability, if
any, should not exceed the CIF value of the lost
cargo, or the limits of liability set forth in the bill
of lading and the charter party. As counterclaim,
defendants prayed for the payment of attorney’s
fees in the amount of P220,000. By way of
cross-claim, they ask for reimbursement from
their co-defendant, petitioner ATI, in the event
that they are held liable to plaintiff.
engage the services of counsel to protect its
interest.
On May 10, 2001, the RTC of Manila rendered a
Decision[9] holding petitioner ATI and its co-
defendants solidarily liable to respondent for
damages arising from the shortage. The RTC
held:
WHEREFORE, premises considered, judgment
is hereby rendered ordering defendants M/V
“Tern” Inter-Asia Marine Transport, Inc. and
Asian Terminal Inc. jointly and severally liable
to pay plaintiff Simon Enterprises the sum of
P2,286,259.20 with legal interest from the date
the complaint was filed until fully satisfied, 10%
of the amount due plaintiff as and for attorney’s
fees plus the costs of suit.
Defendants’ counterclaim and cross claim are
hereby DISMISSED for lack of merit.

SO ORDERED.[10]
Petitioner ATI meanwhile alleged in its
Answer[8] that it exercised the required
diligence in handling the subject shipment. It
The trial court found that respondent has
moved for the dismissal of the complaint, and
established that the losses/shortages were
alleged by way of special and affirmative
incurred prior to its receipt of the goods. As
defense that plaintiff has no valid cause of action
such, the burden shifted to the carrier to prove
against petitioner ATI; that the cargo was
that it exercised extraordinary diligence as
completely discharged from the vessel M/V
required by law to prevent the loss, destruction
“Tern” to the receiving barges owned or hired
or deterioration. However, the trial court held
by the plaintiff; and that petitioner ATI
that the defendants failed to prove that they did
exercised the required diligence in handling the
so. The trial court gave credence to the
shipment. By way of counterclaim, petitioner
testimony of Eduardo Ragudo, a super cargo of
ATI argued that plaintiff should shoulder its
defendant Inter-Asia Marine Transport, Inc.,
expenses for attorney’s fees in the amount of
who admitted that there were spillages or
P20,000 as petitioner ATI was constrained to
overflow down to the spillage saver. The trial
court also noted that said witness also declared
that respondent’s representative was not allowed
to sign the Master’s Certificate. Such
declaration, said the trial court, placed petitioner
ATI in a bad light and weakened its stand.
Not satisfied, the unknown owner of the vessel
M/V “Tern,” Inter-Asia Marine Transport, Inc.
and petitioner ATI respectively filed appeals to
the CA. In their petition, the unknown owner of
the vessel M/V “Tern” and Inter-Asia Marine
Transport, Inc. raised the question of whether
the trial court erred in finding that they did not
exercise extraordinary diligence in the handling
of the goods.[11]
On the other hand, petitioner ATI alleged that:
THE COURT-A-QUO COMMITTED
SERIOUS AND REVERSIBLE ERROR IN
HOLDING DEFENDANT[-]APPELLANT ATI
SOLIDARILY LIABLE WITH CO-
DEFENDANT APPELLANT INTER-ASIA
MARINE TRANSPORT, INC. CONTRARY
TO THE EVIDENCE PRESENTED.[12]
On November 27, 2006, the CA promulgated the
assailed Decision, the decretal portion of which
reads:
WHEREFORE, the appealed Decision dated
May 10, 2001 is affirmed, except the award of
attorney’s fees which is hereby deleted.
SO ORDERED.[13]
In affirming the RTC Decision, the CA held that
there is no justification to disturb the factual
findings of the trial court which are entitled to
respect on appeal as they were supported by
substantial evidence. It agreed with the findings
of the trial court that the unknown owner of the
vessel M/V “Tern” and Inter-Asia Marine
Transport, Inc. failed to establish that they
exercised extraordinary diligence in transporting
the goods or exercised due diligence to forestall
or lessen the loss as provided in Article
1742[14] of the Civil Code. The CA also ruled
that petitioner ATI, as the arrastre operator,
should be held jointly and severally liable with
the carrier considering that petitioner ATI’s
stevedores were under the direct supervision of
the unknown owner of M/V “Tern” and that the
spillages occurred when the cargoes were being
unloaded by petitioner ATI’s stevedores.
Petitioner ATI filed a motion for
reconsideration,[15] but the CA denied its
motion in a Resolution[16] dated March 23,
2007. The unknown owner of the vessel M/V
“Tern” and Inter-Asia Marine Transport, Inc. for
their part, appealed to this Court via a petition
for review on certiorari, which was docketed as
G.R. No. 177170. Its appeal, however, was
denied by this Court on July 16, 2007 for failure
to sufficiently show any reversible error
committed by the CA in the challenged Decision
and Resolution as to warrant the exercise of this
Court’s discretionary appellate jurisdiction. The
unknown owner of M/V “Tern” and Inter-Asia
Marine Transport, Inc. sought reconsideration of
the denial but their motion was denied by the
Court in a Resolution dated October 17,
2007.[17]
Meanwhile, on April 20, 2007, petitioner ATI
filed the present petition raising the sole issue of
whether the appellate court erred in affirming
the decision of the trial court holding petitioner
ATI solidarily liable with its co-defendants for
the shortage incurred in the shipment of the
goods to respondent.
Petitioner ATI argues that:
1. Respondent failed to prove that the subject
shipment suffered actual loss/shortage as there
was no competent evidence to prove that it
actually weighed 3,300 metric tons at the port of
origin.
2. Stipulations in the bill of lading that the cargo
was carried on a “shipper’s weight, quantity and
quality unknown” is not contrary to public
policy. Thus, herein petitioner cannot be bound
by the quantity or weight of the cargo stated in
the bill of lading.
3. Shortage/loss, if any, may have been due to
the inherent nature of the shipment and its
insufficient packing considering that the subject
cargo was shipped in bulk and had a moisture
content of 12.5%.
4. Respondent failed to substantiate its claim for
damages as no competent evidence was
presented to prove the same.
5. Respondent has not presented any scintilla of
evidence showing any fault/negligence on the
part of herein petitioner.
6. Petitioner ATI should be entitled to its
counterclaim.[18]
Respondent, on the other hand, quotes
extensively the CA decision and maintains its
correctness.
We grant the petition.
The CA erred in affirming the decision of the
trial court holding petitioner ATI solidarily
liable with its co-defendants for the shortage
incurred in the shipment of the goods to
respondent.
We note that the matters raised by petitioner
ATI involve questions of fact which are
generally not reviewable in a petition for review
on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, as the Court is not
a trier of facts. Section 1 thereof provides that
“[t]he petition x x x shall raise only questions of
law, which must be distinctly set forth.”
A question of law exists when the doubt or
controversy concerns the correct application of
law or jurisprudence to a certain set of facts; or
when the issue does not call for an examination
of the probative value of the evidence presented,
the truth or falsehood of facts being admitted. A
question of fact exists when the doubt or
difference arises as to the truth or falsehood of
facts or when the query invites calibration of the
whole evidence considering mainly the
credibility of the witnesses, the existence and
relevancy of specific surrounding circumstances
as well as their relation to each other and to the
whole, and the probability of the situation.[19]
The well-entrenched rule in our jurisdiction is
that only questions of law may be entertained by
this Court in a petition for review on certiorari.
This rule, however, is not ironclad and admits
certain exceptions, such as when (1) the
conclusion is grounded on speculations,
surmises or conjectures; (2) the inference is
manifestly mistaken, absurd or impossible; (3)
there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6)
there is no citation of specific evidence on which
the factual findings are based; (7) the findings of
absence of facts are contradicted by the presence
of evidence on record; (8) the findings of the
Court of Appeals are contrary to those of the
trial court; (9) the Court of Appeals manifestly
overlooked certain relevant and undisputed facts
that, if properly considered, would justify a
different conclusion; (10) the findings of the
Court of Appeals are beyond the issues of the
case; and (11) such findings are contrary to the
admissions of both parties.[20]
After a careful review of the records, we find
justification to warrant the application of the
fourth exception. The CA misapprehended the
following facts.
First, petitioner ATI is correct in arguing that the
respondent failed to prove that the subject
shipment suffered actual shortage, as there was
no competent evidence to prove that it actually
weighed 3,300 metric tons at the port of origin.
Though it is true that common carriers are
presumed to have been at fault or to have acted
negligently if the goods transported by them are
lost, destroyed, or deteriorated, and that the
common carrier must prove that it exercised
extraordinary diligence in order to overcome the
presumption,[21] the plaintiff must still, before
the burden is shifted to the defendant, prove that
the subject shipment suffered actual shortage.
This can only be done if the weight of the
shipment at the port of origin and its subsequent
weight at the port of arrival have been proven by
a preponderance of evidence, and it can be seen
that the former weight is considerably greater
than the latter weight, taking into consideration
the exceptions provided in Article 1734[22] of
the Civil Code.
In this case, respondent failed to prove that the
subject shipment suffered shortage, for it was
not able to establish that the subject shipment
was weighed at the port of origin at Darrow,
Louisiana, U.S.A. and that the actual weight of
the said shipment was 3,300 metric tons.
The Berth Term Grain Bill of Lading[23]
(Exhibit “A”), the Proforma Invoice[24]
(Exhibit “B”), and the Packing List[25] (Exhibit
“C”), being used by respondent to prove that the
subject shipment weighed 3,300 metric tons, do
not, in fact, help its cause.
The Berth Term Grain Bill of Lading states that
the subject shipment was carried with the
qualification “Shipper’s weight, quantity and
quality unknown,” meaning that it was
transported with the carrier having been
oblivious of the weight, quantity, and quality of
the cargo. This interpretation of the quoted
qualification is supported by Wallem Philippines
Shipping, Inc. v. Prudential Guarantee &
Assurance, Inc.,[26] a case involving an
analogous stipulation in a bill of lading, wherein
the Supreme Court held that:
Indeed, as the bill of lading indicated that the
contract of carriage was under a “said to weigh”
clause, the shipper is solely responsible for the
loading while the carrier is oblivious of the
contents of the shipment. (Emphasis supplied)
Similarly, International Container Terminal
Services, Inc. v. Prudential Guarantee &
Assurance Co., Inc.,[27] explains the meaning of
clauses analogous to “Shipper’s weight, quantity
and quality unknown” in this manner:
This means that the shipper was solely
responsible for the loading of the container,
while the carrier was oblivious to the contents of
the shipment x x x. The arrastre operator was,
like any ordinary depositary, duty-bound to take
good care of the goods received from the vessel
and to turn the same over to the party entitled to
their possession, subject to such qualifications as
may have validly been imposed in the contract
between the parties. The arrastre operator was
not required to verify the contents of the
container received and to compare them with
those declared by the shipper because, as earlier
stated, the cargo was at the shipper’s load and
count x x x. (Italics in the original; emphasis
supplied)
Also, Bankers & Manufacturers Assurance
Corporation v. Court of Appeals[28] elucidates
thus:
[T]he recital of the bill of lading for goods thus
transported [i.e., transported in sealed containers
or “containerized”] ordinarily would declare
“Said to Contain”, “Shipper’s Load and Count”,
“Full Container Load”, and the amount or
quantity of goods in the container in a particular
package is only prima facie evidence of the
amount or quantity x x x.
A shipment under this arrangement is not
inspected or inventoried by the carrier whose
duty is only to transport and deliver the
containers in the same condition as when the
carrier received and accepted the containers for
transport x x x. (Emphasis supplied)
Hence, as can be culled from the above-
mentioned cases, the weight of the shipment as
indicated in the bill of lading is not conclusive as
to the actual weight of the goods. Consequently,
the respondent must still prove the actual weight
of the subject shipment at the time it was loaded
at the port of origin so that a conclusion may be
made as to whether there was indeed a shortage
for which petitioner must be liable. This, the
respondent failed to do.
The Proforma Invoice militates against
respondent’s claim that the subject shipment
weighed 3,300 metric tons. The pertinent portion
of the testimony of Mr. Jose Sarmiento,
respondent’s Claims Manager, is narrated
below:
Atty. Rebano: You also identified a while ago,
Mr. Witness Exhibit B, the invoice. Why does it
state as description of the cargo three thousand
metric tons and not three thousand three
hundred?
A: Usually there is a contract between the
supplier and our company that embodied [sic] in
the letter credit [sic] that they have the option to
ship the cargo plus or minus ten percent of the
quantity.
xxxx
Q: So, it is possible for the shipper to ship less
than ten percent in [sic] the quantity stated in the
invoice and it will still be a valid shipment. Is it
[sic] correct?
A: It [sic] is correct but we must be properly
advised and the commercial invoice should
indicate how much they sent to us.[29]
(Emphasis supplied)
The quoted part of Mr. Sarmiento’s testimony
not only shows uncertainty as to the actual
weight of the shipment, it also shows that
assuming respondent did order 3,300 metric tons
of U.S. Soybean Meal from Contiquincybunge
Export Company, and also assuming that it only
received 3,100.137 metric tons, such volume
would still be a valid shipment because it is well
within the 10% allowable shortage. Note that
Mr. Sarmiento himself mentioned that the
supplier has the option to “ship the cargo plus or
minus ten percent of the quantity.”[30]
Notably also, the genuineness and the due
execution of the Packing List, the Berth Term
Grain Bill of Lading, and the Proforma Invoice,
were not established.
Wallem Philippines Shipping, Inc.,[31] is
instructive on this matter:
We find that the Court of Appeals erred in
finding that a shortage had taken place.
Josephine Suarez, Prudential’s claims processor,
merely identified the papers submitted to her in
connection with GMC’s claim (Bill of Lading
BEDI/1 (Exh. “B”), Commercial Invoice No.
1401 issued by Toepfer International Asia Pte,
Ltd. (Exh. “C”), SGS Certificate of Quality
(Exh. “F-1”), and SGS Certificate of Weight
(Exh. “F-3”)). Ms. Suarez had no personal
knowledge of the contents of the said documents
and could only surmise as to the actual weight of
the cargo loaded on M/V Gao Yang x x x.
xxxx
Ms. Suarez’s testimony regarding the contents of
the documents is thus hearsay, based as it is on
the knowledge of another person not presented
on the witness stand.
Nor has the genuineness and due execution of
these documents been established. In the
absence of clear, convincing, and competent
evidence to prove that the shipment indeed
weighed 4,415.35 metric tons at the port of
origin when it was loaded on the M/V Gao
Yang, it cannot be determined whether there was
a shortage of the shipment upon its arrival in
Batangas. (Emphasis supplied)
As in the present case, Mr. Sarmiento merely
identified the three above-mentioned exhibits,
but he had no personal knowledge of the weight
of the subject shipment when it was loaded onto
the M/V “Tern” at the port of origin. His
testimony as regards the weight of the subject
shipment as described in Exhibits “A,” “B,” and
“C” must then be considered as hearsay,[32] for
it was based on the knowledge of a person who
was not presented during the trial in the RTC.
The presumption that the Berth Term Grain Bill
of Lading serves as prima facie evidence of the
weight of the cargo has been rebutted, there
being doubt as to the weight of the cargo at the
time it was loaded at the port of origin. Further,
the fact that the cargo was shipped with the
arrangement “Shipper’s weight, quantity and
quality unknown,” indeed means that the weight
of the cargo could not be determined using as
basis the figures written on the Berth Term
Grain Bill of Lading. This is in line with
Malayan Insurance Co., Inc. v. Jardine Davies
Transport Services, Inc.,[33] where we said:
The presumption that the bill of lading, which
petitioner relies upon to support its claim for
restitution, constitutes prima facie evidence of
the goods therein described was correctly
deemed by the appellate court to have been
rebutted in light of abundant evidence casting
doubts on its veracity.
That MV Hoegh undertook, under the bill of
lading, to transport 6,599.23 MT of yellow crude
sulphur on a “said to weigh” basis is not
disputed. Under such clause, the shipper is
solely responsible for the loading of the cargo
while the carrier is oblivious of the contents of
the shipment. Nobody really knows the actual
weight of the cargo inasmuch as what is written
on the bill of lading, as well as on the manifest,
is based solely on the shipper’s declaration.
The bill of lading carried an added clause – the
shipment’s weight, measure, quantity, quality,
condition, contents and value unknown.
Evidently, the weight of the cargo could not be
gauged from the bill of lading. (Italics in the
original; emphasis supplied)
The respondent having failed to present
evidence to prove the actual weight of the
subject shipment when it was loaded onto the
M/V “Tern,” its cause of action must then fail
because it cannot prove the shortage that it was
alleging. Indeed, if the claimant cannot
definitively establish the weight of the subject
shipment at the point of origin, the fact of
shortage or loss cannot be ascertained. The
claimant then has no basis for claiming damages
resulting from an alleged shortage. Again,
Malayan Insurance Co., Inc.,[34] provides
jurisprudential basis:
In the absence of clear, convincing and
competent evidence to prove that the cargo
indeed weighed, albeit the Bill of Lading
qualified it by the phrase “said to weigh,”
6,599.23 MT at the port of origin when it was
loaded onto the MV Hoegh, the fact of loss or
shortage in the cargo upon its arrival in Manila
cannot be definitively established. The legal
basis for attributing liability to either of the
respondents is thus sorely wanting. (Emphasis
supplied)
Second, as correctly asserted by petitioner ATI,
the shortage, if any, may have been due to the
inherent nature of the subject shipment or its
packaging since the subject cargo was shipped in
bulk and had a moisture content of 12.5%.
It should be noted that the shortage being
claimed by the respondent is minimal, and is an
indication that it could be due to consolidation
or settlement of the subject shipment, as
accurately observed by the petitioner. A Kansas
State University study on the handling and
storage of soybeans and soybean meal[35] is
instructive on this matter. Pertinent portions of
the study reads:
Soybean meal is difficult to handle because of
poor flow ability and bridging characteristics.
Soybean meal tends to settle or consolidate over
time. This phenomenon occurs in most granular
materials and becomes more severe with
increased moisture, time and small particle size
x x x.
xxxx
Moisture is perhaps the most important single
factor affecting storage of soybeans and soybean
meal. Soybeans contain moisture ranging from
12% to 15% (wet basis) at harvest time x x x.
xxxx
Soybeans and soybean meal are hygroscopic
materials and will either lose (desorb) or gain
(adsorb) moisture from the surrounding air. The
moisture level reached by a product at a given
constant temperature and equilibrium relative
humidity (ERH) is its equilibrium moisture
content (EMC) x x x. (Emphasis supplied)
As indicated in the Proforma Invoice mentioned
above, the moisture content of the subject
shipment was 12.5%. Taking into consideration
the phenomena of desorption, the change in
temperature surrounding the Soybean Meal from
the time it left wintertime Darrow, Louisiana,
U.S.A. and the time it arrived in Manila, and the
fact that the voyage of the subject cargo from the
point of loading to the point of unloading was 36
days, the shipment could have definitely lost
weight, corresponding to the amount of moisture
it lost during transit.
The conclusion that the subject shipment lost
weight in transit is bolstered by the testimony of
Mr. Fernando Perez, a Cargo Surveyor of L.J.
Del Pan. The services of Mr. Perez were
requested by respondent.[36] Mr. Perez testified
that it was possible for the subject shipment to
have lost weight during the 36-day voyage, as it
was wintertime when M/V “Tern” left the
United States and the climate was warmer when
it reached the Philippines; hence the moisture
level of the Soybean Meal could have
changed.[37] Moreover, Mr. Perez himself
confirmed, by answering a question propounded
by the RTC, that loss of weight of the subject
cargo cannot be avoided because of the shift in
temperature from the colder United States
weather to the warmer Philippine climate.[38]
More importantly, the 199.863 metric-ton
shortage that respondent alleges is a minimal
6.05% of the weight of the entire Soy Bean Meal
shipment. Taking into consideration the
previously mentioned option of the shipper to
ship 10% more or less than the contracted
shipment, and the fact that the alleged shortage
is only 6.05% of the total quantity of 3,300
metric tons, the alleged percentage loss clearly
does not exceed the allowable 10% allowance
for loss, as correctly argued by petitioner. The
alleged loss, if any, not having exceeded the
allowable percentage of shortage, the respondent
then has no cause of action to claim for
shortages.
Third, we agree with the petitioner ATI that
respondent has not proven any negligence on the
part of the former.
As petitioner ATI pointed out, a reading of the
Survey Report of Del Pan Surveyors[39]
(Exhibits “D” to “D-4” of respondent) would not
show any untoward incident or negligence on
the part of petitioner ATI during the discharging
operations.
Also, a reading of Exhibits “D”, “D-1”, and “D-
2” would show that the methods used in
determining whether there was a shortage are
not accurate.
Respondent relied on the Survey Reports of Del
Pan Surveyors to prove that the subject shipment
suffered loss. The conclusion that there was a
shortage arose from an evaluation of the weight
of the cargo using the barge displacement
method. This is a type of draught survey, which
is a method of cargo weight determination by
ship’s displacement calculations.[40] The basic
principle upon which the draught survey
methodology is based is the Principle of
Archimedes, i.e., a vessel when floating in
water, will displace a weight of water equal to
its own weight.[41] It then follows that if a
weight of cargo is loaded on (or unloaded from)
a vessel freely floating in water, then the vessel
will sink (or float) into the water until the total
weight of water displaced is equal to the original
weight of the vessel, plus (or minus) the cargo
which has been loaded (or unloaded) and plus
(or minus) density variation of the water
between the starting survey (first measurement)
and the finishing survey (second
measurement).[42] It can be seen that this
method does not entail the weighing of the cargo
itself, but as correctly stated by the petitioner,
the weight of the shipment is being measured by
mere estimation of the water displaced by the
barges before and after the cargo is unloaded
from the said barges.
In addition, the fact that the measurements were
done by Del Pan Surveyors in prevailing slight
to slightly rough sea condition[43] supports the
conclusion that the resulting measurement may
not be accurate. A United Nations study on
draught surveys[44] in fact states that the
accuracy of draught surveys will be dependent
upon several factors, one of which is the weather
and seas condition in the harbor.
Also, it can be seen in respondent’s own Exhibit
“D-1” that the actual weight of the cargo was
established by weighing 20% of the cargo.
Though we recognize the practicality of
establishing cargo weight through random
sampling, we note the discrepancy in the
weights used in the determination of the alleged
shortage.
Exhibit “D-1” of respondent states that the
average weight of each bag is 52 kilos. A total of
63,391 bags[45] were discharged from the
barges, and the tare weight[46] was established
at 0.0950 kilos.[47] Therefore, if one were to
multiply 52 kilos per bag by 63,391 bags and
deduct the tare weight of 0.0950 kilos multiplied
by 63,391 bags, the result would be
3,290,309.65 kilos, or 3,290.310 metric tons.
This would mean that the shortage was only 9.69
metric tons, if we suppose that respondent was
able to establish that the shipment actually
weighed 3,300 metric tons at the port of loading.
However, the computation in Exhibit “D-2”
would show that Del Pan Surveyors inexplicably
used 49 kilos as the weight per bag, instead of
52 kilos, therefore resulting in the total net
weight of 3,100,137 kilos or 3,100.137 metric
tons. This was the figure used as basis for
respondent’s conclusion that there is a shortage
of 199.863 metric tons.[48]
relied upon to establish the shortage it alleges is
inaccurate, respondent cannot fairly claim
damages against petitioner for the subject
shipment’s alleged shortage.
WHEREFORE, the petition for review on
certiorari is GRANTED. The Decision dated
November 27, 2006 and Resolution dated March
23, 2007 of the Court of Appeals in CA-G.R.
CV No. 71210 are REVERSED AND SET
ASIDE insofar as petitioner Asian Terminals,
Inc. is concerned. Needless to add, the complaint
against petitioner docketed as RTC Manila Civil
Case No. 96-81101 is ordered DISMISSED.
No pronouncement as to costs.

SO ORDERED.
These discrepancies only lend credence to
petitioner ATI’s assertion that the weighing
methods respondent used as bases are unreliable
and should not be completely relied upon.

Considering that respondent was not able to

establish conclusively that the subject shipment
weighed 3,300 metric tons at the port of loading,
and that it cannot therefore be concluded that
there was a shortage for which petitioner should
be responsible; bearing in mind that the subject
shipment most likely lost weight in transit due to
the inherent nature of Soya Bean Meal;
assuming that the shipment lost weight in transit
due to desorption, the shortage of 199.863
metric tons that respondent alleges is a minimal
6.05% of the weight of the entire shipment,
which is within the allowable 10% allowance for
loss; and noting that the respondent was not able
to show negligence on the part of the petitioner
and that the weighing methods which respondent