[G.R. No. 138334.

August 25, 2003]

ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and CARAVAN
TRAVEL & TOURS INTERNATIONAL, INC., respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:

In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included
airfare, and the booking fee was also waived because petitioners niece,
Meriam Menor, was respondent companys ticketing manager.

Pursuant to said contract, Menor went to her aunts residence on June 12, 1991
a Wednesday to deliver petitioners travel documents and plane tickets.
Petitioner, in turn, gave Menor the full payment for the package tour. Menor
then told her to be at the Ninoy Aquino International Airport (NAIA) on
Saturday, two hours before her flight on board British Airways.

Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioners dismay, she discovered that the flight she was
supposed to take had already departed the previous day. She learned that her
plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.

Subsequently, Menor prevailed upon petitioner to take another tour the
British Pageant which included England, Scotland and Wales in its itinerary.
For this tour package, petitioner was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and commenced the trip in
July 1991.

Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum
she paid for Jewels of Europe and the amount she owed respondent for the
British Pageant tour. Despite several demands, respondent company refused
to reimburse the amount, contending that the same was non-refundable.[1]
Petitioner was thus constrained to file a complaint against respondent for
breach of contract of carriage and damages, which was docketed as Civil Case
No. 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 respondents fault since it did not clearly indicate the departure
date on the plane ticket. Respondent was also negligent in informing her of the
wrong flight schedule through its employee Menor. She insisted that the
British Pageant was merely a substitute for the Jewels of Europe tour, such
that the cost of the former should be properly set-off against the sum paid for
the latter.

For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour.
Chipeco insisted that petitioner was informed of the correct departure date,
which was clearly and legibly printed on the plane ticket. The travel documents
were given to petitioner two days ahead of the scheduled trip. Petitioner had
only herself to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.

Respondent explained that it can no longer reimburse the amount paid for
Jewels of Europe, considering that the same had already been remitted to its
principal in Singapore, Lotus Travel Ltd., which had already billed the same even
if petitioner did not join the tour. Lotus European tour organizer, Insight
International Tours Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this reason, it is accepted
industry practice to disallow refund for individuals who failed to take a booked
tour.[3]

Lastly, respondent maintained that the British Pageant was not a substitute
for the package tour that petitioner missed. This tour was independently
procured by petitioner after realizing that she made a mistake in missing her
flight for Jewels of Europe. Petitioner was allowed to make a partial payment
of only US$300.00 for the second tour because her niece was then an employee
of the travel agency. Consequently, respondent prayed that petitioner be
ordered to pay the balance of P12,901.00 for the British Pageant package
tour.

After due proceedings, the trial court rendered a decision,[4] the dispositive
part of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to return and/or refund to the plaintiff the
amount of Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty
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;

2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;

3. Dismissing the defendants counterclaim, for lack of merit; and

4. With costs against the defendant.

SO ORDERED.[5]

The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioners testimony. However, petitioner
should have verified the exact date and time of departure by looking at her
ticket and should have simply not relied on Menors verbal representation. The
trial court thus declared that petitioner was guilty of contributory negligence
and accordingly, deducted 10% from the amount being claimed as refund.

Respondent appealed to the Court of Appeals, which likewise found both
parties to be at fault. However, the appellate court held that petitioner is more
negligent than respondent because as a lawyer and well-traveled person, she
should have 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 attorneys 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

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, petitioners 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 more negligent than respondent since the
latter is required by law to exercise extraordinary diligence in the fulfillment of
its obligation. If she were negligent at all, the same is merely contributory and
not the proximate cause of the damage she suffered. Her loss could only be
attributed to respondent as it was the direct consequence of its employees
gross negligence.

Petitioners contention has no merit.

By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons,
things, or news from one place to another for a fixed price.[9] Such person or
association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.[10] A common carrier is defined
under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to
the public.

It is obvious from the above definition that respondent is not an entity engaged
in the business of transporting either passengers or goods and is therefore,
neither a private nor a common carrier. Respondent did not undertake to
transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondents
services as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents
obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained directly to the airline.

The object of petitioners contractual relation with respondent is the latters
service of arranging and facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and
not one of carriage. Petitioners submission is premised on a wrong assumption.

The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in
a contract of carriage is bound by law to carry passengers as far as human care
and foresight can provide using the utmost diligence of very cautious persons
and with due regard for all the circumstances.[11] As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound
under the law to observe extraordinary diligence in the performance of its
obligation, as petitioner claims.

Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family
under Article 1173 of the Civil Code.[12] This connotes reasonable care
consistent with that which an ordinarily prudent person would have observed
when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in
doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then
he is guilty of negligence.[13]

In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since
respondent did not call Menor to the witness stand to refute the allegation. The
lower court applied the presumption under Rule 131, Section 3 (e)[14] of the
Rules of Court that evidence willfully suppressed would be adverse if produced
and thus considered petitioners uncontradicted testimony to be sufficient
proof of her claim.

On the other hand, respondent has consistently denied that Menor was
negligent and maintains that petitioners assertion is belied by the evidence on
record. The date and time of departure was legibly written on the plane ticket
and the travel papers were delivered two days in advance precisely so that
petitioner could prepare for the trip. It performed all its obligations to enable
petitioner to join the tour and exercised due diligence in its dealings with the
latter.

We agree with respondent.

Respondents failure to present Menor as witness to rebut petitioners
testimony could not give rise to an inference unfavorable to the former. Menor
was already working in France at the time of the filing of the complaint,[15]
thereby making it physically impossible for respondent to present her as a
witness. Then too, even if it were possible for respondent to secure Menors
testimony, the presumption under Rule 131, Section 3(e) would still not apply.
The opportunity and possibility for obtaining Menors testimony belonged to
both parties, considering that Menor was not just respondents employee, but
also petitioners niece. It was thus error for the lower court to invoke the
presumption that respondent willfully suppressed evidence under Rule 131,
Section 3(e). Said presumption would logically be inoperative if the evidence is
not intentionally omitted but is simply unavailable, or when the same could
have been obtained by both parties.[16]

In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party alleging
a fact has the burden of proving it and a mere allegation cannot take the place
of evidence.[17] If the plaintiff, upon whom rests the burden of proving his
cause of action, fails to show in a satisfactory manner facts upon which he bases
his claim, the defendant is under no obligation to prove his exception or
defense.[18]

Contrary to petitioners claim, the evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket[19] issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The
travel documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioners hotel accommodation as
well as food, land transfers and sightseeing excursions, in accordance with its
avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the
contract as well as everything else that was essential to book petitioner for the
tour. Had petitioner exercised due diligence in the conduct of her affairs, there
would have been no reason for her to miss the flight. Needless to say, after the
travel papers were delivered to petitioner, it became incumbent upon her to
take ordinary care of her concerns. This undoubtedly would require that she at
least read the documents in order to assure herself of the important details
regarding the trip.

The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation so
demands.[20] There is no fixed standard of diligence applicable to each and
every contractual obligation and each case must be determined upon its
particular facts. The degree of diligence required depends on the circumstances
of the specific obligation and whether one has been negligent is a question of
fact that is to be determined after taking into account the particulars of each
case.[21]

The lower court declared that respondents employee was negligent. This
factual finding, however, is not supported by the evidence on record. While
factual 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]

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.



FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used
bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of
such scrap material, respondent would bring such material to Manila for resale.
He utilized two (2) six-wheeler trucks which he owned for hauling the material
to Manila. On the return trip to Pangasinan, respondent would load his vehicles
with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight
rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by
respondent himself, while 600 cartons were placed on board the other truck
which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was
hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed
men who took with them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in
the Court of First Instance of Pangasinan, demanding payment of P 22,150.00,
the claimed value of the lost merchandise, plus damages and attorney's fees.
Petitioner argued that private respondent, being a common carrier, and having
failed to exercise the extraordinary diligence required of him by the law, should
be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and
argued that he could not be held responsible for the value of the lost goods,
such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private
respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court
had erred in considering him a common carrier; in finding that he had habitually
offered trucking services to the public; in not exempting him from liability on
the ground of force majeure; and in ordering him to pay damages and
attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight "as a
casual
occupation a sideline to his scrap iron business" and not as a common
carrier. Petitioner came to this Court by way of a Petition for Review assigning
as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

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

3. that respondent was not liable for the value of the undelivered
cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto
Cendana may, under the facts earlier set forth, be properly characterized as a
common carrier.

The Civil Code defines "common carriers" in the following terms:

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

The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We
think that Article 1733 deliberaom making such distinctions.

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

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

It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such back-hauling was done on
a periodic or occasional rather than regular or scheduled manner, and even
though private respondent's principal occupation was not the carriage of goods
for others. There is no dispute that private respondent 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.

VIRGINES CALVO doing business under the name and style TRANSORIENT
CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL
INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
D E C I S I O N
MENDOZA, J.:

This is a petition for review of the decision,[1] dated May 31, 2001, of the Court
of Appeals, affirming the decision[2] of the Regional Trial Court, Makati City,
Branch 148, which ordered petitioner to pay respondent, as subrogee, the
amount of P93,112.00 with legal interest, representing the value of damaged
cargo handled by petitioner, 25% thereof as attorneys fees, and the cost of the
suit.

The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal
Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time
material to this case, petitioner entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper
and 124 reels of kraft liner board from the Port Area in Manila to SMCs
warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The
cargo was insured by respondent UCPB General Insurance Co., Inc.

On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived
in Manila on board M/V Hayakawa Maru and, after 24 hours, were unloaded
from the vessel to the custody of the arrastre operator, Manila Port Services,
Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with
SMC, withdrew the cargo from the arrastre operator and delivered it to SMCs
warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by
Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting
paper were wet/stained/torn and 3 reels of kraft liner board were likewise
torn. The damage was placed at P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for
the aforementioned amount. In turn, respondent, as subrogee of SMC, brought
suit against petitioner in the Regional Trial Court, Branch 148, Makati City,
which, on December 20, 1995, rendered judgment finding petitioner liable to
respondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the
custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. E);
the Damage Report (Exh. F) with entries appearing therein, classified as TED
and TSN, which the claims processor, Ms. Agrifina De Luna, claimed to be
tearrage at the end and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh. H - H-4-A)
confirms the fact of the damaged condition of the subject cargoes. The
surveyor*s+ report (Exh. H-4-A) in particular, which provides among others
that:

. . . we opine that damages sustained by shipment is attributable to improper
handling in transit presumably whilst in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense
that [she is] are not liable. Defendant by reason of the nature of [her] business
should have devised ways and means in order to prevent the damage to the
cargoes which it is under obligation to take custody of and to forthwith deliver
to the consignee. Defendant did not present any evidence on what precaution
[she] performed to prevent [the] said incident, hence the presumption is that
the moment the defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the cargo.

. . . .

Generally speaking under Article 1735 of the Civil Code, if the goods are proved
to have been lost, destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they
have observed the extraordinary diligence required by law. The burden of the
plaintiff, therefore, is to prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is shifted to the carrier
to prove that he has exercised the extraordinary diligence required by law.
Thus, it has been held that the mere proof of delivery of goods in good order to
a carrier, and of their arrival at the place of destination in bad order, makes out
a prima facie case against the carrier, so that if no explanation is given as to
how the injury occurred, the carrier must be held responsible. It is incumbent
upon the carrier to prove that the loss was due to accident or some other
circumstances inconsistent with its liability. (cited in Commercial Laws of the
Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a
common carrier is supposed [to] exercise [the] extraordinary diligence required
by law, hence the extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of and received by the carrier for
transportation until the same are delivered actually or constructively by the
carrier to the consignee or to the person who has the right to receive the
same.[3]

Accordingly, the trial court ordered petitioner to pay the following amounts

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;

3. Costs of suit.[4]

The decision was affirmed by the Court of Appeals on appeal. Hence this
petition for review on certiorari.

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE
SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.

II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE
OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]

It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court
of Appeals held otherwise, then she is indeed not liable beyond what ordinary
diligence in the vigilance over the goods transported by her, would require.[6]
Consequently, any damage to the cargo she agrees to transport cannot be
presumed to have been due to her fault or negligence.

Petitioner contends that contrary to the findings of the trial court and the Court
of Appeals, she is not a common carrier but a private carrier because, as a
customs broker and warehouseman, she does not indiscriminately hold her
services out to the public but only offers the same to select parties with whom
she may contract in the conduct of her business.

The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court
dismissed a similar contention and held the party to be a common carrier, thus


The Civil Code defines common carriers in the following terms:

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

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


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

x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight
or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services.
x x x *8+

There is greater reason for holding petitioner to be a common carrier because
the transportation of goods is an integral part of her business. To uphold
petitioners contention would be to deprive those with whom she contracts the
protection which the law affords them notwithstanding the fact that the
obligation to carry goods for her customers, as already noted, is part and parcel
of petitioners business.

Now, as to petitioners liability, Art. 1733 of the Civil Code provides:

Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all
the circumstances of each case. . . .

In Compania Maritima v. Court of Appeals,*9+ the meaning of extraordinary
diligence in the vigilance over goods was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for sale, carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and to use all reasonable means to
ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their
nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She
claims that the spoilage or wettage took place while the goods were in the
custody of either the carrying vessel M/V Hayakawa Maru, which transported
the cargo to Manila, or the arrastre operator, to whom the goods were
unloaded and who allegedly kept them in open air for nine days from July 14 to
July 23, 1998 notwithstanding the fact that some of the containers were
deformed, cracked, or otherwise damaged, as noted in the Marine Survey
Report (Exh. H), to wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly
loose

PERU-204209-4 - with pinholes on roof panel right portion

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

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly
detached loosened.[10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino
testified that he has no personal knowledge on whether the container vans
were first stored in petitioners warehouse prior to their delivery to the
consignee. She likewise claims that after withdrawing the container vans from
the arrastre operator, her driver, Ricardo Nazarro, immediately delivered the
cargo to SMCs warehouse in Ermita, Manila, which is a mere thirty-minute
drive from the Port Area where the cargo came from. Thus, the damage to the
cargo could not have taken place while these were in her custody.[11]

Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine
Cargo Surveyors indicates that when the shipper transferred the cargo in
question to the arrastre operator, these were covered by clean Equipment
Interchange Report (EIR) and, when petitioners employees withdrew the cargo
from the arrastre operator, they did so without exception or protest either with
regard to the condition of container vans or their contents. The Survey Report
pertinently reads

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex
vessel to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized
onto 30 x 20 secure metal vans, covered by clean EIRs. Except for slight dents
and paint scratches on side and roof panels, these containers were deemed to
have [been] received in good condition.

. . . .

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was
[withdrawn] by Transorient Container Services, Inc. . . . without exception.

*The cargo+ was finally delivered to the consignees storage warehouse
located at Tabacalera Compound, Romualdez Street, Ermita, Manila from July
23/25, 1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from
the vessel to the arrastre, Marina Port Services Inc., in good order and condition
as evidenced by clean Equipment Interchange Reports (EIRs). Had there been
any damage to the shipment, there would have been a report to that effect
made by the arrastre operator. The cargoes were withdrawn by the defendant-
appellant from the arrastre still in good order and condition as the same were
received by the former without exception, that is, without any report of
damage or loss. Surely, if the container vans were deformed, cracked, distorted
or dented, the defendant-appellant would report it immediately to the
consignee or make an exception on the delivery receipt or note the same in the
Warehouse Entry Slip (WES). None of these took place. To put it simply, the
defendant-appellant received the shipment in good order and condition and
delivered the same to the consignee damaged. We can only conclude that the
damages to the cargo occurred while it was in the possession of the defendant-
appellant. Whenever the thing is lost (or damaged) in the possession of the
debtor (or obligor), it shall be presumed that the loss (or damage) was due to
his fault, unless there is proof to the contrary. No proof was proffered to rebut
this legal presumption and the presumption of negligence attached to a
common carrier in case of loss or damage to the goods.[13]

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

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

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

. . . .

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

. . . .

For this provision to apply, the rule is that if the improper packing or, in this
case, the defect/s in the container, is/are known to the carrier or his employees
or apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved
of liability for damage resulting therefrom.[14] In this case, petitioner accepted
the cargo without exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove that she exercised
extraordinary diligence in the carriage of goods in this case or that she is
exempt from liability, the presumption of negligence as provided under Art.
1735[15] holds.

WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE
MANILA INSURANCE CO., INC., respondents.
D E C I S I O N
DAVIDE, JR., C.J.:

Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for
review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to
reverse and set aside the following: (a) the 30 January 1997 decision[1] of the
Court of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4
October 1991[2] of the Regional Trial Court of Manila, Branch 16, in Civil Case
No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance
Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing
of the complaint until fully paid, P8,000 as attorneys fees, and the costs of the
suit; and (b) its resolution of 19 November 1997,*3+ denying LOADSTARs
motion for reconsideration of said decision.

The facts are undisputed.

On 19 November 1984, LOADSTAR received on board its M/V Cherokee
(hereafter, the vessel) the following goods for shipment:

a) 705 bales of lawanit hardwood;

b) 27 boxes and crates of tilewood assemblies and others; and

c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.

The goods, amounting to P6,067,178, were insured for the same amount with
MIC against various risks including TOTAL LOSS BY TOTAL LOSS OF THE
VESSEL. The vessel, in turn, was insured by Prudential Guarantee & Assurance,
Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its way to Manila
from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank
off Limasawa Island. As a result of the total loss of its shipment, the consignee
made a claim with LOADSTAR which, however, ignored the same. As the
insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and
the latter executed a subrogation receipt therefor.

On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging
that the sinking of the vessel was due to the fault and negligence of LOADSTAR
and its employees. It also prayed that PGAI be ordered to pay the insurance
proceeds from the loss of the vessel directly to MIC, said amount to be
deducted from MICs claim from LOADSTAR.

In its answer, LOADSTAR denied any liability for the loss of the shippers goods
and claimed that the sinking of its vessel was due to force majeure. PGAI, on
the other hand, averred that MIC had no cause of action against it, LOADSTAR
being the party insured. In any event, PGAI was later dropped as a party
defendant after it paid the insurance proceeds to LOADSTAR.

As stated at the outset, the court a quo rendered judgment in favor of MIC,
prompting LOADSTAR to elevate the matter to the Court of Appeals, which,
however, agreed with the trial court and affirmed its decision in toto.

In dismissing LOADSTARs appeal, the appellate court made the following
observations:

1) LOADSTAR cannot be considered a private carrier on the sole ground that
there was a single shipper on that fateful voyage. The court noted that the
charter of the vessel was limited to the ship, but LOADSTAR retained control
over its crew.[4]

2) As a common carrier, it is the Code of Commerce, not the Civil Code, which
should be applied in determining the rights and liabilities of the parties.

3) The vessel was not seaworthy because it was undermanned on the day of
the voyage. If it had been seaworthy, it could have withstood the natural and
inevitable action of the sea on 20 November 1984, when the condition of the
sea was moderate. The vessel sank, not because of force majeure, but because
it was not seaworthy. LOADSTARS allegation that the sinking was probably due
to the convergence of the winds, as stated by a PAGASA expert, was not duly
proven at the trial. The limited liability rule, therefore, is not applicable
considering that, in this case, there was an actual finding of negligence on the
part of the carrier.[5]

4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not
apply because said provisions bind only the shipper/consignee and the carrier.
When MIC paid the shipper for the goods insured, it was subrogated to the
latters rights as against the carrier, LOADSTAR.*6+

5) There was a clear breach of the contract of carriage when the shippers
goods never reached their destination. LOADSTARs defense of diligence of a
good father of a family in the training and selection of its crew is unavailing
because this is not a proper or complete defense in culpa contractual.

6) Art. 361 (of the Code of Commerce) has been judicially construed to mean
that when goods are delivered on board a ship in good order and condition, and
the shipowner delivers them to the shipper in bad order and condition, it then
devolves upon the shipowner to both allege and prove that the goods were
damaged by reason of some fact which legally exempts him from liability.
Transportation of the merchandise at the risk and venture of the shipper means
that the latter bears the risk of loss or deterioration of his goods arising from
fortuitous events, force majeure, or the inherent nature and defects of the
goods, but not those caused by the presumed negligence or fault of the carrier,
unless otherwise proved.[7]

The errors assigned by LOADSTAR boil down to a determination of the following
issues:

(1) Is the M/V Cherokee a private or a common carrier?

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?

Regarding the first issue, LOADSTAR submits that the vessel was a private
carrier because it was not issued a certificate of public convenience, it did not
have a regular trip or schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo.

In refutation, MIC argues that the issue as to the classification of the M/V
Cherokee was not timely raised below; hence, it is barred by estoppel. While
it is true that the vessel had on board only the cargo of wood products for
delivery to one consignee, it was also carrying passengers as part of its regular
business. Moreover, the bills of lading in this case made no mention of any
charter party but only a statement that the vessel was a general cargo carrier.
Neither was there any special arrangement between LOADSTAR and the
shipper regarding the shipment of the cargo. The singular fact that the vessel
was carrying a particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.

As regards the second error, LOADSTAR argues that as a private carrier, it
cannot be presumed to have been negligent, and the burden of proving
otherwise devolved upon MIC.[8]

LOADSTAR also maintains that the vessel was seaworthy. Before the fateful
voyage on 19 November 1984, the vessel was allegedly dry docked at Keppel
Philippines Shipyard and was duly inspected by the maritime safety engineers of
the Philippine Coast Guard, who certified that the ship was fit to undertake a
voyage. Its crew at the time was experienced, licensed and unquestionably
competent. With all these precautions, there could be no other conclusion
except that LOADSTAR exercised the diligence of a good father of a family in
ensuring the vessels seaworthiness.

LOADSTAR further claims that it was not responsible for the loss of the cargo,
such loss being due to force majeure. It points out that when the vessel left
Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until the
next day when the vessel sank due to strong waves. MICs witness, Gracelia
Tapel, fully established the existence of two typhoons, WELFRING and
YOLING, inside the Philippine area of responsibility. In fact, on 20 November
1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa
Island. Tapel also testified that the convergence of winds brought about by
these two typhoons strengthened wind velocity in the area, naturally producing
strong waves and winds, in turn, causing the vessel to list and eventually sink.

LOADSTAR goes on to argue that, being a private carrier, any agreement limiting
its liability, such as what transpired in this case, is valid. Since the cargo was
being shipped at owners risk, LOADSTAR was not liable for any loss or
damage to the same. Therefore, the Court of Appeals erred in holding that the
provisions of the bills of lading apply only to the shipper and the carrier, and not
to the insurer of the goods, which conclusion runs counter to the Supreme
Courts ruling in the case of St. Paul Fire & Marine Insurance Co. v. Macondray &
Co., Inc.,[9] and National Union Fire Insurance Company of Pittsburg v. Stolt-
Nielsen Phils., Inc.[10]

Finally, LOADSTAR avers that MICs claim had already prescribed, the case
having been instituted beyond the period stated in the bills of lading for
instituting the same suits based upon claims arising from shortage, damage,
or non-delivery of shipment shall be instituted within sixty days from the
accrual of the right of action. The vessel sank on 20 November 1984; yet, the
case for recovery was filed only on 4 February 1985.

MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that
the loss of the cargo was due to force majeure, because the same concurred
with LOADSTARs fault or negligence.

Secondly, LOADSTAR did not raise the issue of prescription in the court below;
hence, the same must be deemed waived.

Thirdly, the limited liability theory is not applicable in the case at bar because
LOADSTAR was at fault or negligent, and because it failed to maintain a
seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a
typhoon is tantamount to negligence.

We find no merit in this petition.

Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is
not necessary that the carrier be issued a certificate of public convenience, and
this public character is not altered by the fact that the carriage of the goods in
question was periodic, occasional, episodic or unscheduled.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance
Co. v. American Steamship Agencies, Inc.,[11] where this Court held that a
common carrier transporting special cargo or chartering the vessel to a special
person becomes a private carrier that is not subject to the provisions of the Civil
Code. Any stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent is void only if the strict policy governing
common carriers is upheld. Such policy has no force where the public at large is
not involved, as in the case of a ship totally chartered for the use of a single
party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v.
Court of Appeals[12] and National Steel Corp. v. Court of Appeals,[13] both of
which upheld the Home Insurance doctrine.

These cases invoked by LOADSTAR are not applicable in the case at bar for
simple reason that the factual settings are different. The records do not
disclose that the M/V Cherokee, on the date in question, undertook to carry a
special cargo or was chartered to a special person only. There was no charter
party. The bills of lading failed to show any special arrangement, but only a
general provision to the effect that the M/V Cherokee was a general cargo
carrier.*14+ Further, the bare fact that the vessel was carrying a particular type
of cargo for one shipper, which appears to be purely coincidental, is not reason
enough to convert the vessel from a common to a private carrier, especially
where, as in this case, it was shown that the vessel was also carrying
passengers.

Under the facts and circumstances obtaining in this case, LOADSTAR fits the
definition of a common carrier under Article 1732 of the Civil Code. In the case
of De Guzman v. Court of Appeals,[15] the Court juxtaposed the statutory
definition of common carriers with the peculiar circumstances of that case,
viz.:

The Civil Code defines common carriers in the following terms:

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

The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a sideline. Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the general
public, i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We
think that Article 1733 deliberately refrained from making such distinctions.

x x x

It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely back-hauled goods for other
merchants from Manila to Pangasinan, although such backhauling was done on
a periodic or occasional rather than regular or scheduled manner, and even
though private respondents principal occupation was not the carriage of goods
for others. There is no dispute that private respondent charged his customers a
fee for hauling their goods; that that fee frequently fell below commercial
freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for
the incurring of liability under the Civil Code provisions governing common
carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with
the requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience or other
franchise. To exempt private respondent from the liabilities of a common
carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to
reward private respondent precisely for failing to comply with applicable
statutory requirements. The business of a common carrier impinges directly
and intimately upon the safety and well being and property of those members
of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a
common carrier to render such duties and liabilities merely facultative by simply
failing to obtain the necessary permits and authorizations.

Moving on to the second assigned error, we find that the M/V Cherokee was
not seaworthy when it embarked on its voyage on 19 November 1984. The
vessel was not even sufficiently manned at the time. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. The failure of a common
carrier to maintain in seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code.*16+

Neither do we agree with LOADSTARs argument that the limited liability
theory should be applied in this case. The doctrine of limited liability does not
apply where there was negligence on the part of the vessel owner or agent.[17]
LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and
in having allowed its vessel to sail despite knowledge of an approaching
typhoon. In any event, it did not sink because of any storm that may be
deemed as force majeure, inasmuch as the wind condition in the area where it
sank was determined to be moderate. Since it was remiss in the performance
of its duties, LOADSTAR cannot hide behind the limited liability doctrine to
escape responsibility for the loss of the vessel and its cargo.

LOADSTAR also claims that the Court of Appeals erred in holding it liable for the
loss of the goods, in utter disregard of this Courts pronouncements in St. Paul
Fire & Marine Ins. Co. v. Macondray & Co., Inc.,[18] and National Union Fire
Insurance v. Stolt-Nielsen Phils., Inc.[19] It was ruled in these two cases that
after paying the claim of the insured for damages under the insurance policy,
the insurer is subrogated merely to the rights of the assured, that is, it can
recover only the amount that may, in turn, be recovered by the latter. Since the
right of the assured in case of loss or damage to the goods is limited or
restricted by the provisions in the bills of lading, a suit by the insurer as
subrogee is necessarily subject to the same limitations and restrictions. We do
not agree. In the first place, the cases relied on by LOADSTAR involved a
limitation on the carriers liability to an amount fixed in the bill of lading which
the parties may enter into, provided that the same was freely and fairly agreed
upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar
effectively reduces the common carriers liability for the loss or destruction of
the goods to a degree less than extraordinary (Articles 1744 and 1745), that is,
the carrier is not liable for any loss or damage to shipments made at owners
risk. Such stipulation is obviously null and void for being contrary to public
policy.[20] It has been said:

Three kinds of stipulations have often been made in a bill of lading. The first is
one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence. The second is one providing for an
unqualified limitation of such liability to an agreed valuation. And the third is
one limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight. According to an
almost uniform weight of authority, the first and second kinds of stipulations
are invalid as being contrary to public policy, but the third is valid and
enforceable.[21]

Since the stipulation in question is null and void, it follows that when MIC paid
the shipper, it was subrogated to all the rights which the latter has against the
common carrier, LOADSTAR.

Neither is there merit to the contention that the claim in this case was barred
by prescription. MICs cause of action had not yet prescribed at the time it was
concerned. Inasmuch as neither the Civil Code nor the Code of Commerce
states a specific prescriptive period on the matter, the Carriage of Goods by Sea
Act (COGSA) which provides for a one-year period of limitation on claims for
loss of, or damage to, cargoes sustained during transit may be applied
suppletorily to the case at bar. This one-year prescriptive period also applies to
the insurer of the good.[22] In this case, the period for filing the action for
recovery has not yet elapsed. Moreover, a stipulation reducing the one-year
period is null and void;[23] it must, accordingly, be struck down.

WHEREFORE, the instant petition is DENIED and the challenged decision of 30
January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED.
Costs against petitioner.

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas,
respondents.



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 .
. . .

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 writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her capacity as
City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax on its gross receipts violates
Section 133 of the Local Government Code; (2) the authority of cities to impose
and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to
collect such taxes on transportation contractors for, as defined under Sec. 131
(h), the term "contractors" excludes transportation contractors; and, (3) the City
Treasurer illegally and erroneously imposed and collected the said tax, thus
meriting the immediate refund of the tax paid. 7

Traversing the complaint, the respondents argued that petitioner cannot be
exempt from taxes under Section 133 (j) of the Local Government Code as said
exemption applies only to "transportation contractors and persons engaged in
the transportation by hire and common carriers by air, land and water."
Respondents assert that pipelines are not included in the term "common
carrier" which refers solely to ordinary carriers such as trucks, trains, ships and
the like. Respondents further posit that the term "common carrier" under the
said code pertains to the mode or manner by which a product is delivered to its
destination. 8

On October 3, 1994, the trial court rendered a decision dismissing the
complaint, ruling in this wise:

. . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes
being the lifeblood of the government. Exemption may therefore be granted
only by clear and unequivocal provisions of law.

Plaintiff claims that it is a grantee of a pipeline concession under Republic Act
387. (Exhibit A) whose concession was lately renewed by the Energy Regulatory
Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax
exemption upon the plaintiff.

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, . . . 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 22, 1997. Thus, the petition
was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1)
the petitioner is not a common carrier or a transportation contractor, and (2)
the exemption sought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to
the public as engaged in the business of transporting persons or property from
place to place, for compensation, offering his services to the public generally.

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

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a casual
occupation;

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

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

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that
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 . . . avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained from making such
distinctions.

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

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

Also, respondent's argument that the term "common carrier" as used in Section
133 (j) of the 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 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 . . .
and everything relating to the manufacture, refining, storage, or transportation
by special methods of petroleum, is hereby declared to be a public utility.
(Emphasis Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 . . . . Such being the case, it is not subject to withholding
tax prescribed by Revenue Regulations No. 13-78, as amended.

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

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

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." . . .

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. . . . 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.
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and
PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
D E C I S I O N
PUNO, J.:

On appeal is the Court of Appeals May 11, 2000 Decision*1+ in CA-G.R. CV No.
49195 and February 21, 2001 Resolution[2] affirming with modification the April
6, 1994 Decision[3] of the Regional Trial Court of Manila which found petitioner
liable to pay private respondent the amount of indemnity and attorney's fees.

First, the facts.

On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk,
valued at US$423,192.35[4] was shipped by Marubeni American Corporation of
Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to
the consignee, General Milling Corporation in Manila, evidenced by Bill of
Lading No. PTD/Man-4.[5] The shipment was insured by the private
respondent Prudential Guarantee and Assurance, Inc. against loss or damage
for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6]

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

On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI
III, evidenced by Lighterage Receipt No. 0364[7] for delivery to consignee. The
cargo did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended
due to a warning of an incoming typhoon. On August 22, 1990, the petitioner
proceeded to pull the barge to Engineering Island off Baseco to seek shelter
from the approaching typhoon. PSTSI III was tied down to other barges which
arrived ahead of it while weathering out the storm that night. A few days after,
the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. The petitioner filed a Marine Protest on
August 28, 1990.[8] It likewise secured the services of Gaspar Salvaging
Corporation which refloated the barge.[9] The hole was then patched with clay
and cement.

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

The next day, September 6, 1990, the towing bits of the barge broke. It sank
completely, resulting in the total loss of the remaining cargo.[11] A second
Marine Protest was filed on September 7, 1990.[12]

On September 14, 1990, a bidding was conducted to dispose of the damaged
wheat retrieved and loaded on the three other barges.[13] The total proceeds
from the sale of the salvaged cargo was P201,379.75.[14]

On the same date, September 14, 1990, consignee sent a claim letter to the
petitioner, and another letter dated September 18, 1990 to the private
respondent for the value of the lost cargo.

On January 30, 1991, the private respondent indemnified the consignee in the
amount of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of
said amount from the petitioner, but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner
for recovery of the amount of indemnity, attorney's fees and cost of suit.[16]
Petitioner filed its answer with counterclaim.[17]

The Regional Trial Court ruled in favor of the private respondent. The
dispositive portion of its Decision states:

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

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

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

SO ORDERED.

Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied
by the appellate court in a Resolution promulgated on February 21, 2001.

Hence, this petition. Petitioner submits the following errors allegedly
committed by the appellate court, viz:[19]

(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.

(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A
QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE
TO COMMON CARRIERS, THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY
THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED.

(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED
TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND
CUSTODY OF THE CONSIGNEES CARGO.

The issues to be resolved are:

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

(2) Assuming the petitioner is a common carrier, whether it exercised
extraordinary diligence in its care and custody of the consignees cargo.

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

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

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

We disagree.

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

In the case at bar, the principal business of the petitioner is that of lighterage
and drayage[22] and it offers its barges to the public for carrying or transporting
goods by water for compensation. Petitioner is clearly a common carrier. In De
Guzman, supra,[23] we considered private respondent Ernesto Cendaa to be a
common carrier even if his principal occupation was not the carriage of goods
for others, but that of buying used bottles and scrap metal in Pangasinan and
selling these items in Manila.

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

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

On the second issue, we uphold the findings of the lower courts that petitioner
failed to exercise extraordinary diligence in its care and custody of the
consignees goods.

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

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

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

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

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

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

(5) Order or act of competent public authority.

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

CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

x x x x x x
x x x

q - Can you tell us what else transpired after that incident?

a - After the first accident, through the initiative of the barge owners, they
tried to pull out the barge from the place of the accident, and bring it to the
anchor terminal for safety, then after deciding if the vessel is stabilized, they
tried to pull it to the consignees warehouse, now while on route another
accident occurred, now this time the barge totally hitting something in the
course.

q - You said there was another accident, can you tell the court the nature of
the second accident?

a - The sinking, sir.

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

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

x x x x x x
x x x

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

DIRECT-EXAMINATION BY ATTY. LEE:[33]

x x x x x x
x x x

q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the
Barge to lie where she was instead of towing it?

a - Since that time that the Barge was refloated, GMC (General Milling
Corporation, the consignee) as I have said was in a hurry for their goods to be
delivered at their Wharf since they needed badly the wheat that was loaded in
PSTSI-3. It was needed badly by the consignee.

q - And this is the reason why you towed the Barge as you did?

a - Yes, sir.

x x x x x x
x x x

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

x x x x x x
x x x

q - And then from ISLOFF Terminal you proceeded to the premises of the
GMC? Am I correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I
have stated.

q - Despite of the threats of an incoming typhoon as you testified a while
ago?

a - It is already in an inner portion of Pasig River. The typhoon would be
coming and it would be dangerous if we are in the vicinity of Manila Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

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

a - Yes, sir.

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

a - Yes, sir.

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

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

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

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February
21, 2001 are hereby AFFIRMED. Costs against petitioner.

FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES,
respondents.

VITUG, J.:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June
1994 thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu
truck, driven by Lambert Eroles, from the plant site of Concepcion Industries,
Inc., along South Superhighway in Alabang, Metro Manila, to the Central Luzon
Appliances in Dagupan City. While the truck was traversing the north diversion
road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided
with an unidentified truck, causing it to fall into a deep canal, resulting in
damage to the cargoes.

FGU Insurance Corporation (FGU), an insurer of the shipment, paid to
Concepcion Industries, Inc., the value of the covered cargoes in the sum of
P204,450.00. FGU, in turn, being the subrogee of the rights and interests of
Concepcion Industries, Inc., sought reimbursement of the amount it had paid to
the latter from GPS. Since the trucking company failed to heed the claim, FGU
filed a complaint for damages and breach of contract of carriage against GPS
and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati
City. In its answer, respondents asserted that GPS was the exclusive hauler only
of Concepcion Industries, Inc., since 1988, and it was not so engaged in business
as a common carrier. Respondents further claimed that the cause of damage
was purely accidental.1wphi1.nt

The issues having thus been joined, FGU presented its evidence, establishing
the extent of damage to the cargoes and the amount it had paid to the assured.
GPS, instead of submitting its evidence, filed with leave of court a motion to
dismiss the complaint by way of demurrer to evidence on the ground that
petitioner had failed to prove that it was a common carrier.

The trial court, in its order of 30 April 1996,1 granted the motion to dismiss,
explaining thusly:

"Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each
party must prove his own affirmative allegation, xxx.

"In the instant case, plaintiff did not present any single evidence that would
prove that defendant is a common carrier.

"x x x 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 defendants 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 plaintiffs 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
obligation16 unless he can show extenuating circumstances, like proof of his
exercise of due diligence (normally that of the diligence of a good father of a
family or, exceptionally by stipulation or by law such as in the case of common
carriers, that of extraordinary diligence) or of the attendance of fortuitous
event, to excuse him from his ensuing liability.

Respondent trucking corporation recognizes the existence of a contract of
carriage between it and petitioners assured, and admits that the cargoes it has
assumed to deliver have been lost or damaged while in its custody. In such a
situation, a default on, or failure of compliance with, the obligation in this
case, the delivery of the goods in its custody to the place of destination - gives
rise to a presumption of lack of care and corresponding liability on the part of
the contractual obligor the burden being on him to establish otherwise. GPS has
failed to do so.

Respondent driver, on the other hand, without concrete proof of his negligence
or fault, may not himself be ordered to pay petitioner. The driver, not being a
party to the contract of carriage between petitioners principal and defendant,
may not be held liable under the agreement. A contract can only bind the
parties who have entered into it or their successors who have assumed their
personality or their juridical position.17 Consonantly with the axiom res inter
alios acta aliis neque nocet prodest, such contract can neither favor nor
prejudice a third person. Petitioners civil action against the driver can only be
based on culpa aquiliana, which, unlike culpa contractual, would require the
claimant for damages to prove negligence or fault on the part of the
defendant.18

A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner,
holds a defendant liable where the thing which caused the injury complained of
is shown to be under the latters management and the accident is such that, in
the ordinary course of things, cannot be expected to happen if those who have
its management or control use proper care. It affords reasonable evidence, in
the absence of explanation by the defendant, that the accident arose from want
of care.19 It is not a rule of substantive law and, as such, it does not create an
independent ground of liability. Instead, it is regarded as a mode of proof, or a
mere procedural convenience since it furnishes a substitute for, and relieves the
plaintiff of, the burden of producing specific proof of negligence. The maxim
simply places on the defendant the burden of going forward with the proof.20
Resort to the doctrine, however, may be allowed only when (a) the event is of a
kind which does not ordinarily occur in the absence of negligence; (b) other
responsible causes, including the conduct of the plaintiff and third persons, are
sufficiently eliminated by the evidence; and (c) the indicated negligence is
within the scope of the defendant's duty to the plaintiff.21 Thus, it is not
applicable when an unexplained accident may be attributable to one of several
causes, for some of which the defendant could not be responsible.22

Res ipsa loquitur generally finds relevance whether or not a contractual
relationship exists between the plaintiff and the defendant, for the inference of
negligence arises from the circumstances and nature of the occurrence and not
from the nature of the relation of the parties.23 Nevertheless, the requirement
that responsible causes other than those due to defendants conduct must first
be eliminated, for the doctrine to apply, should be understood as being
confined only to cases of pure (non-contractual) tort since obviously the
presumption of negligence in culpa contractual, as previously so pointed out,
immediately attaches by a failure of the covenant or its tenor. In the case of the
truck driver, whose liability in a civil action is predicated on culpa acquiliana,
while he admittedly can be said to have been in control and management of the
vehicle which figured in the accident, it is not equally shown, however, that the
accident could have been exclusively due to his negligence, a matter that can
allow, forthwith, res ipsa loquitur to work against him.

If a demurrer to evidence is granted but on appeal the order of dismissal is
reversed, the movant shall be deemed to have waived the right to present
evidence.24 Thus, respondent corporation may no longer offer proof to
establish that it has exercised due care in transporting the cargoes of the
assured so as to still warrant a remand of the case to the trial court.1wphi1.nt

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

Fabre v. Court of Appeals
This is a petition for review on certiorari of the decision of the Court of
Appeals[1] in CA-GR No. 28245, dated September 30, 1992, which affirmed with
modification the decision of the Regional Trial Court of Makati, Branch 58,
ordering petitioners jointly and severally to pay damages to private respondent
Amyline Antonio, and its resolution which denied petitioners motion for
reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for
school children which they operated in Manila. The couple had a driver, Porfirio
J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job
was to take school children to and from the St. Scholasticas College in Malate,
Manila.

On November 2, 1984 private respondent Word for the World Christian
Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33
members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of
P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did
not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00
oclock in the evening. Petitioner Porfirio Cabil drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However,
the bridge at Carmen was under repair, so that petitioner Cabil, who was
unfamiliar with the area (it being his first trip to La Union), was forced to take a
detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night,
petitioner Cabil came upon a sharp curve on the highway, running on a south to
east direction, which he described as siete. The road was slippery because it
was raining, causing the bus, which was running at the speed of 50 kilometers
per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace
and sign along the road and rammed the fence of one Jesus Escano, then turned
over and landed on its left side, coming to a full stop only after a series of
impacts. The bus came to rest off the road. A coconut tree which it had hit fell
on it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was
thrown on the floor of the bus and pinned down by a wooden seat which came
off after being unscrewed. It took three persons to safely remove her from this
position. She was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too
late. He said he was not familiar with the area and he could not have seen the
curve despite the care he took in driving the bus, because it was dark and there
was no sign on the road. He said that he saw the curve when he was already
within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per
hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984.
On the basis of their finding they filed a criminal complaint against the driver,
Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court.
Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latters
fence. On the basis of Escanos affidavit of desistance the case against
petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of
Makati, Metro Manila. As a result of the accident, she is now suffering from
paraplegia and is permanently paralyzed from the waist down. During the trial
she described the operations she underwent and adduced evidence regarding
the cost of her treatment and therapy. Immediately after the accident, she was
taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Nio Hospital, also in the
town of Ba-ay, where she was given sedatives. An x-ray was taken and the
damage to her spine was determined to be too severe to be treated there. She
was therefore brought to Manila, first to the Philippine General Hospital and
later to the Makati Medical Center where she underwent an operation to
correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for
travel to a long distance trip and that the driver was properly screened and
tested before being admitted for employment. Indeed, all the evidence
presented have shown the negligent act of the defendants which ultimately
resulted to the accident subject of this case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms.
Amyline Antonio were the only ones who adduced evidence in support of their
claim for damages, the Court is therefore not in a position to award damages to
the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against
defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to
articles 2176 and 2180 of the Civil Code of the Philippines and said defendants
are ordered to pay jointly and severally to the plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff
Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorneys fees;

6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to
Amyline Antonio but dismissed it with respect to the other plaintiffs on the
ground that they failed to prove their respective claims. The Court of Appeals
modified the award of damages as follows:

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorneys fees; and

6) Costs of suit.

The Court of Appeals sustained the trial courts finding that petitioner Cabil
failed to exercise due care and precaution in the operation of his vehicle
considering the time and the place of the accident. The Court of Appeals held
that the Fabres were themselves presumptively negligent. Hence, this petition.
Petitioners raise the following issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED
BY PRIVATE RESPONDENTS.

III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP
TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in
the amount of P600,000.00. It is insisted that, on the assumption that
petitioners are liable, an award of P600,000.00 is unconscionable and highly
speculative. Amyline Antonio testified that she was a casual employee of a
company called Suaco, earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as
casual employees do not have security of tenure, the award of P600,000.00,
considering Amyline Antonios earnings, is without factual basis as there is no
assurance that she would be regularly earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case
on the theory that petitioners are liable for breach of contract of carriage or
culpa contractual or on the theory of quasi delict or culpa aquiliana as both the
Regional Trial Court and the Court of Appeals held, for although the relation of
passenger and carrier is contractual both in origin and nature, nevertheless
the act that breaks the contract may be also a tort.*2+ In either case, the
question is whether the bus driver, petitioner Porfirio Cabil, was negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres,
who owned the bus, failed to exercise the diligence of a good father of the
family in the selection and supervision of their employee is fully supported by
the evidence on record. These factual findings of the two courts we regard as
final and conclusive, supported as they are by the evidence. Indeed, it was
admitted by Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark. He averred these facts to
justify his failure to see that there lay a sharp curve ahead. However, it is
undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and
only slowed down when he noticed the curve some 15 to 30 meters ahead.[3]
By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabils first one outside
of Manila, Cabil should have driven his vehicle at a moderate speed. There is
testimony[4] that the vehicles passing on that portion of the road should only
be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was
running at a very high speed.

Considering the foregoing the fact that it was raining and the road was
slippery, that it was dark, that he drove his bus at 50 kilometers an hour when
even on a good day the normal speed was only 20 kilometers an hour, and that
he was unfamiliar with the terrain, Cabil was grossly negligent and should be
held liable for the injuries suffered by private respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the
selection and supervision of their employee.

Due diligence in selection of employees is not satisfied by finding that the
applicant possessed a professional drivers license. The employer should also
examine the applicant for his qualifications, experience and record of service.[5]
Due diligence in supervision, on the other hand, requires the formulation of
rules and regulations for the guidance of employees and the issuance of proper
instructions as well as actual implementation and monitoring of consistent
compliance with the rules.[6]

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union,
apparently did not consider the fact that Cabil had been driving for school
children only, from their homes to the St. Scholasticas College in Metro
Manila.[7] They had hired him only after a two-week apprenticeship. They had
tested him for certain matters, such as whether he could remember the names
of the children he would be taking to school, which were irrelevant to his
qualification to drive on a long distance travel, especially considering that the
trip to La Union was his first. The existence of hiring procedures and
supervisory policies cannot be casually invoked to overturn the presumption of
negligence on the part of an employer.[8]

Petitioners argue that they are not liable because (1) an earlier departure
(made impossible by the congregations delayed meeting) could have averted
the mishap and (2) under the contract, the WWCF was directly responsible for
the conduct of the trip. Neither of these contentions hold water. The hour of
departure had not been fixed. Even if it had been, the delay did not bear
directly on the cause of the accident. With respect to the second contention, it
was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to
the place to which he wishes to be conveyed, but exercises no other control
over the conduct of the driver, is not responsible for acts of negligence of the
latter or prevented from recovering for injuries suffered from a collision
between the automobile and a train, caused by the negligence either of the
locomotive engineer or the automobile driver.[9]

As already stated, this case actually involves a contract of carriage. Petitioners,
the Fabres, did not have to be engaged in the business of public transportation
for the provisions of the Civil Code on common carriers to apply to them. As
this Court has held:[10]

Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their services to the
public.

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

As common carriers, the Fabres were bound to exercise extraordinary
diligence for the safe transportation of the passengers to their destination.
This duty of care is not excused by proof that they exercised the diligence of a
good father of the family in the selection and supervision of their employee. As
Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through
the negligence or wilful acts of the formers employees, although such
employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.

The same circumstances detailed above, supporting the finding of the trial court
and of the appellate court that petitioners are liable under Arts. 2176 and 2180
for quasi delict, fully justify finding them guilty of breach of contract of carriage
under Arts. 1733, 1755 and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio.
However, we think the Court of Appeals erred in increasing the amount of
compensatory damages because private respondents did not question this
award as inadequate.[11] To the contrary, the award of P500,000.00 for
compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a
company and as distributor of beauty products and the fact that the possibility
that she might be able to work again has not been foreclosed. In fact she
testified that one of her previous employers had expressed willingness to
employ her again.

With respect to the other awards, while the decisions of the trial court and the
Court of Appeals do not sufficiently indicate the factual and legal basis for them,
we find that they are nevertheless supported by evidence in the records of this
case. Viewed as an action for quasi delict, this case falls squarely within the
purview of Art. 2219(2) providing for the payment of moral damages in cases of
quasi delict. On the theory that petitioners are liable for breach of contract of
carriage, the award of moral damages is authorized by Art. 1764, in relation to
Art. 2220, since Cabils gross negligence amounted to bad faith.*12+ Amyline
Antonios testimony, as well as the testimonies of her father and co-passengers,
fully establish the physical suffering and mental anguish she endured as a result
of the injuries caused by petitioners negligence.

The award of exemplary damages and attorneys fees was also properly made.
However, for the same reason that it was error for the appellate court to
increase the award of compensatory damages, we hold that it was also error for
it to increase the award of moral damages and reduce the award of attorneys
fees, inasmuch as private respondents, in whose favor the awards were made,
have not appealed.[13]

As above stated, the decision of the Court of Appeals can be sustained either on
the theory of quasi delict or on that of breach of contract. The question is
whether, as the two courts below held, petitioners, who are the owners and
driver of the bus, may be made to respond jointly and severally to private
respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals,[14] on facts similar to those in this case, this Court held the bus
company and the driver jointly and severally liable for damages for injuries
suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of Appeals[15]
a driver found negligent in failing to stop the bus in order to let off passengers
when a fellow passenger ran amuck, as a result of which the passengers jumped
out of the speeding bus and suffered injuries, was held also jointly and severally
liable with the bus company to the injured passengers.

The same rule of liability was applied in situations where the negligence of the
driver of the bus on which plaintiff was riding concurred with the negligence of
a third party who was the driver of another vehicle, thus causing an accident. In
Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,[18] the
bus company, its driver, the operator of the other vehicle and the driver of the
vehicle were jointly and severally held liable to the injured passenger or the
latters heirs. The basis of this allocation of liability was explained in Viluan v.
Court of Appeals,[19] thus:

Nor should it make any difference that the liability of petitioner [bus owner]
springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez
vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of
another vehicle, the drivers as well as the owners of the two vehicles are jointly
and severally liable for damages. Some members of the Court, though, are of
the view that under the circumstances they are liable on quasi-delict.[20]

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this
Court exonerated the jeepney driver from liability to the injured passengers and
their families while holding the owners of the jeepney jointly and severally
liable, but that is because that case was expressly tried and decided exclusively
on the theory of culpa contractual. As this Court there explained:

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 attorneys fees; and

6) costs of suit.

SO ORDERED

Home Insurance Co. v. American Steamship
"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at
Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS
Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated
January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San
Miguel Corporation, and insured by Home Insurance Company for $202,505,
arrived in Manila on March 7, 1963 and was discharged into the lighters of
Luzon Stevedoring Company. When the cargo was delivered to consignee San
Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing
the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance
Company and the American Steamship Agencies, owner and operator of SS
Crowborough.

Because the others denied liability, Home Insurance Company paid the
consignee P14,870.71 the insurance value of the loss, as full settlement of
the claim. Having been refused reimbursement by both the Luzon Stevedoring
Corporation and American Steamship Agencies, Home Insurance Company, as
subrogee to the consignee, filed against them on March 6, 1964 before the
Court of First Instance of Manila a complaint for recovery of P14,870.71 with
legal interest, plus attorney's fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due
diligence the goods in the same quantity and quality that it had received the
same from the carrier. It also claimed that plaintiff's claim had prescribed under
Article 366 of the Code of Commerce stating that the claim must be made
within 24 hours from receipt of the cargo.

American Steamship Agencies denied liability by alleging that under the
provisions of the Charter party referred to in the bills of lading, the charterer,
not the shipowner, was responsible for any loss or damage of the cargo.
Furthermore, it claimed to have exercised due diligence in stowing the goods
and that as a mere forwarding agent, it was not responsible for losses or
damages to the cargo.

On November 17, 1965, the Court of First Instance, after trial, absolved Luzon
Stevedoring Corporation, having found the latter to have merely delivered what
it received from the carrier in the same condition and quality, and ordered
American Steamship Agencies to pay plaintiff P14,870.71 with legal interest plus
P1,000 attorney's fees. Said court cited the following grounds:

(a) The non-liability claim of American Steamship Agencies under the charter
party contract is not tenable because Article 587 of the Code of Commerce
makes the ship agent also civilly liable for damages in favor of third persons due
to the conduct of the captain of the carrier;

(b) The stipulation in the charter party contract exempting the owner from
liability is against public policy under Article 1744 of the Civil Code;

(c) In case of loss, destruction or deterioration of goods, common carriers are
presumed at fault or negligent under Article 1735 of the Civil Code unless they
prove extraordinary diligence, and they cannot by contract exempt themselves
from liability resulting from their negligence or that of their servants; and

(d) When goods are delivered to the carrier in good order and the same are in
bad order at the place of destination, the carrier is prima facie liable.

Disagreeing with such judgment, American Steamship Agencies appealed
directly to Us. The appeal brings forth for determination this legal issue: Is the
stipulation in the charter party of the owner's non-liability valid so as to absolve
the American Steamship Agencies from liability for loss?

The bills of lading,1 covering the shipment of Peruvian fish meal provide at the
back thereof that the bills of lading shall be governed by and subject to the
terms and conditions of the charter party, if any, otherwise, the bills of lading
prevail over all the agreements.2 On the of the bills are stamped "Freight
prepaid as per charter party. Subject to all terms, conditions and exceptions of
charter party dated London, Dec. 13, 1962."

A perusal of the charter party3 referred to shows that while the possession and
control of the ship were not entirely transferred to the charterer,4 the vessel
was chartered to its full and complete capacity (Exh. 3). Furthermore, the,
charter had the option to go north or south or vice-versa,5 loading, stowing and
discharging at its risk and expense.6 Accordingly, the charter party contract is
one of affreightment over the whole vessel rather than a demise. As such, the
liability of the shipowner for acts or negligence of its captain and crew, would
remain in the absence of stipulation.

Section 2, paragraph 2 of the charter party, provides that the owner is liable for
loss or damage to the goods caused by personal want of due diligence on its
part or its manager to make the vessel in all respects seaworthy and to secure
that she be properly manned, equipped and supplied or by the personal act or
default of the owner or its manager. Said paragraph, however, exempts the
owner of the vessel from any loss or damage or delay arising from any other
source, even from the neglect or fault of the captain or crew or some other
person employed by the owner on board, for whose acts the owner would
ordinarily be liable except for said paragraph..

Regarding the stipulation, the Court of First Instance declared the contract as
contrary to Article 587 of the Code of Commerce making the ship agent civilly
liable for indemnities suffered by third persons arising from acts or omissions of
the captain in the care of the goods and Article 1744 of the Civil Code under
which a stipulation between the common carrier and the shipper or owner
limiting the liability of the former for loss or destruction of the goods to a
degree less than extraordinary diligence is valid provided it be reasonable, just
and not contrary to public policy. The release from liability in this case was held
unreasonable and contrary to the public policy on common carriers.

The provisions of our Civil Code on common carriers were taken from Anglo-
American law.7 Under American jurisprudence, a common carrier undertaking
to carry a special cargo or chartered to a special person only, becomes a private
carrier.8 As a private carrier, a stipulation exempting the owner from liability for
the negligence of its agent is not against public policy,9 and is deemed valid.

Such doctrine We find reasonable. The Civil Code provisions on common
carriers should not be applied where the carrier is not acting as such but as a
private carrier. The stipulation in the charter party absolving the owner from
liability for loss due to the negligence of its agent would be void only if the strict
public policy governing common carriers is applied. Such policy has no force
where the public at large is not involved, as in the case of a ship totally
chartered for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the
master to the charterer, as shipper, is in fact and legal contemplation merely a
receipt and a document of title not a contract, for the contract is the charter
party.10 The consignee may not claim ignorance of said charter party because
the bills of lading expressly referred to the same. Accordingly, the consignees
under the bills of lading must likewise abide by the terms of the charter party.
And as stated, recovery cannot be had thereunder, for loss or damage to the
cargo, against the shipowners, unless the same is due to personal acts or
negligence of said owner or its manager, as distinguished from its other agents
or employees. In this case, no such personal act or negligence has been proved.

WHEREFORE, the judgment appealed from is hereby reversed and appellant is
absolved from liability to plaintiff. No costs. So ordered.

PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.



BELLOSILLO, J.:

Does a charter-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:

16. . . . At loading port, notice of readiness to be accomplished by
certificate from National Cargo Bureau inspector or substitute appointed by
charterers for his account certifying the vessel's readiness to receive cargo
spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's
expense and the vessel to be presented clean for use in bulk to the satisfaction
of the inspector before daytime commences. (emphasis supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under
the supervision of the shipper, the steel hatches were closed with heavy iron
lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The
hatches remained closed and tightly sealed throughout the entire voyage. 5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon
hatches were opened with the use of the vessel's boom. Petitioner unloaded
the cargo from the holds into its steelbodied dump trucks which were parked
alongside the berth, using metal scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly (which provided for an F.I.O.S.
clause). 6 The hatches remained open throughout the duration of the discharge.
7

Each time a dump truck was filled up, its load of Urea was covered with
tarpaulin before it was transported to the consignee's warehouse located some
fifty (50) meters from the wharf. Midway to the warehouse, the trucks were
made to pass through a weighing scale where they were individually weighed
for the purpose of ascertaining the net weight of the cargo. The port area was
windy, certain portions of the route to the warehouse were sandy and the
weather was variable, raining occasionally while the discharge was in progress.
8 The petitioner's warehouse was made of corrugated galvanized iron (GI)
sheets, with an opening at the front where the dump trucks entered and
unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were
placed in-between and alongside the trucks to contain spillages of the ferilizer.
9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974
(except July 12th, 14th and 18th). 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 to delivery by it of less than what it
received. After that, the burden of proving that the loss or damage was due to
any of the causes which exempt him from liability is shipted to the carrier,
common or private he may be. Even if the provisions of the charter-party
aforequoted are deemed valid, and the defendants considered private carriers,
it was still incumbent upon them to prove that the shortage or contamination
sustained by the cargo is attributable to the fault or negligence on the part of
the shipper or consignee in the loading, stowing, trimming and discharge of the
cargo. This they failed to do. By this omission, coupled with their failure to
destroy the presumption of negligence against them, the defendants are liable
(emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved
the carrier from liability for the value of the cargo that was lost or damaged. 16
Relying on the 1968 case of Home Insurance Co. v. American Steamship
Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun
Plum" owned by private respondent KKKK was a private carrier and not a
common carrier by reason of the time charterer-party. Accordingly, the Civil
Code provisions on common carriers which set forth a presumption of
negligence do not find application in the case at bar. Thus

. . . In the absence of such presumption, it was incumbent upon the plaintiff-
appellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or defense (Moran,
Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13
Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the
basis of its cause of action, i.e. the alleged negligence of defendant carrier. It
appears that the plaintiff was under the impression that it did not have to
establish defendant's negligence. Be that as it may, contrary to the trial court's
finding, the record of the instant case discloses ample evidence showing that
defendant carrier was not negligent in performing its obligation . . . 18
(emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision
of the Court of Appeals. Petitioner theorizes that the Home Insurance case has
no bearing on the present controversy because the issue raised therein is the
validity of a stipulation in the charter-party delimiting the liability of the
shipowner for loss or damage to goods cause by want of due deligence on its
part or that of its manager to make the vessel seaworthy in all respects, and not
whether the presumption of negligence provided under the Civil Code applies
only to common carriers and not to private carriers. 19 Petitioner further argues
that since the possession and control of the vessel remain with the shipowner,
absent any stipulation to the contrary, such shipowner should made liable for
the negligence of the captain and crew. In fine, PPI faults the appellate court in
not applying the presumption of negligence against respondent carrier, and
instead shifting the onus probandi on the shipper to show want of due
deligence on the part of the carrier, when he was not even at hand to witness
what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier
becomes a private carrier by reason of a charter-party; in the negative, whether
the shipowner in the instant case was able to prove that he had exercised that
degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial
cases. This being so, we find it fitting to first define important terms which are
relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some
principal part thereof, is let by the owner to another person for a specified time
or use; 20 a contract of affreightment by which the owner of a ship or other
vessel lets the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of
freight; 21 Charter parties are of two types: (a) contract of affreightment which
involves the use of shipping space on vessels leased by the owner in part or as a
whole, to carry goods for others; and, (b) charter by demise or bareboat
charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control
over its navigation, including the master and the crew, who are his servants.
Contract of affreightment may either be time charter, wherein the vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein
the ship is leased for a single voyage. 22 In both cases, the charter-party
provides for the hire of vessel only, either for a determinate period of time or
for a single or consecutive voyage, the shipowner to supply the ship's stores,
pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art.
1732 of the Civil Code. 23 The definition extends to carriers either by land, air or
water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment and
not as a casual occupation. The distinction between a "common or public
carrier" and a "private or special carrier" lies in the character of the business,
such that if the undertaking is a single transaction, not a part of the general
business or occupation, although involving the carriage of goods for a fee, the
person or corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of
the nature of their business, should observe extraordinary diligence in the
vigilance over the goods they carry. 25 In the case of private carriers, however,
the exercise of ordinary diligence in the carriage of goods will suffice. Moreover,
in the case of loss, destruction or deterioration of the goods, common carriers
are presumed to have been at fault or to have acted negligently, and the
burden of proving otherwise rests on them. 26 On the contrary, no such
presumption applies to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of proving that the cause was
the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business,
operates as a common carrier, transporting goods indiscriminately for all
persons. When petitioner chartered the vessel M/V "Sun Plum", the ship
captain, its officers and compliment were under the employ of the shipowner
and therefore continued to be under its direct supervision and control. Hardly
then can we charge the charterer, a stranger to the crew and to the ship, with
the duty of caring for his cargo when the charterer did not have any control of
the means in doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination of the course
of the voyage and other technical incidents of maritime navigation were all
consigned to the officers and crew who were screened, chosen and hired by the
shipowner. 27

It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a time-
charter or voyage-charter. It is only when the charter includes both the vessel
and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be
the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v.
American Steamship Agencies, supra, is misplaced for the reason that the meat
of the controversy therein was the validity of a stipulation in the charter-party
exempting the shipowners from liability for loss due to the negligence of its
agent, and not the effects of a special charter on common carriers. At any rate,
the rule in the United States that a ship chartered by a single shipper to carry
special cargo is not a common carrier, 29 does not find application in our
jurisdiction, for we have observed that the growing concern for safety in the
transportation of passengers and /or carriage of goods by sea requires a more
exacting interpretation of admiralty laws, more particularly, the rules governing
common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned
barrister-at-law 30

As a matter of principle, it is difficult to find a valid distinction between cases in
which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and
control of her, the case is different; the shipowner is not then a carrier. But
where her services only are let, the same grounds for imposing a strict
responsibility exist, whether he is employed by one or many. The master and
the crew are in each case his servants, the freighter in each case is usually
without any representative on board the ship; the same opportunities for fraud
or collusion occur; and the same difficulty in discovering the truth as to what
has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods
shipped, the shipper or consignee should first prove the fact of shipment and its
consequent loss or damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof shifts to respondent
to prove that he has exercised extraordinary diligence required by law or that
the loss, damage or deterioration of the cargo was due to fortuitous event, or
some other circumstances inconsistent with its liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and
convincing proof, the prima 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 the respondent carrier has
been efficaciously overcome by the showing of extraordinary zeal and assiduity
exercised by the carrier in the care of the cargo. This was confirmed by
respondent appellate court thus

. . . Be that as it may, contrary to the trial court's finding, the record of the
instant case discloses ample evidence showing that defendant carrier was not
negligent in performing its obligations. Particularly, the following testimonies of
plaintiff-appellee's own witnesses clearly show absence of negligence by the
defendant carrier; that the hull of the vessel at the time of the discharge of the
cargo was sealed and nobody could open the same except in the presence of
the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977,
p. 14); that the cover of the hatches was made of steel and it was overlaid with
tarpaulins, three layers of tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these
hatches, the seals would have to be broken, all the seals were found to be intact
(TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of
diligence required of it as a public carrier began from the time the cargo was
unconditionally placed in its charge after the vessel's holds were duly inspected
and passed scrutiny by the shipper, up to and until the vessel reached its
destination and its hull was reexamined by the consignee, but prior to
unloading. This is clear from the limitation clause agreed upon by the parties in
the Addendum to the standard "GENCON" time charter-party which provided
for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of
the cargo was to be done by the charterer, free from all risk and expense to the
carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting
from improper stowage only when the stowing is done by stevedores employed
by him, and therefore under his control and supervision, not when the same is
done by the consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not
responsible for the loss, destruction or deterioration of the goods if caused by
the charterer of the goods or defects in the packaging or in the containers. The
Code of Commerce also provides that all losses and deterioration which the
goods may suffer during the transportation by reason of fortuitous event, force
majeure, or the inherent defect of the goods, shall be for the account and risk
of the shipper, and that proof of these accidents is incumbent upon the carrier.
37 The carrier, nonetheless, shall be liable for the loss and damage resulting
from the preceding causes if it is proved, as against him, that they arose
through his negligence or by reason of his having failed to take the precautions
which usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of
the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao
Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as
a chemical compound consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea 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 daterioration 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 "bar order
cargo" as contained in their report to PPI was just an approximation or estimate
made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port
and unloaded her cargo. It rained from time to time at the harbor area while
the cargo was being discharged according to the supply officer of PPI, who also
testified that it was windy at the waterfront and along the shoreline where the
dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble
goods like fertilizer carries with it the risk of loss or damage. More so, with a
variable weather condition prevalent during its unloading, as was the case at
bar. This is a risk the shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent character of the goods
which makes it highly vulnerable to deterioration; as well as the inadequacy of
its packaging which further contributed to the loss. On the other hand, no proof
was adduced by the petitioner showing that the carrier was remise 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