1. PEDRO DE GUZMAN v CA & ERNESTO CENDANA (G.R. No.

L-47822 December 22, 1988)

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.
I n 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 I diom 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'sprincipal 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:
(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act with grave
or irresistible threat, violence or force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account
of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of
carriage. (Emphasis supplied)
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

I n 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. I t 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.
2. NATIONAL STEEL CORPORATION V CA AND VLASONS SHIPPING,[G.R. No. 112350. December 12, 1997]
The Court finds occasion to apply the rules on the seaworthiness of a private carrier, its owners responsibility for damage to the cargo and its
liability for demurrage and attorneys fees. The Court also reiterates the well-known rule that findings of facts of trial courts, when affirmed by the
Court of Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which
assail the August 12, 1993 Decision of the Court of Appeals.
[1]
The Court of Appeals modified the decision of the Regional Trial Court of Pasig,
Metro Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the complaint with cost against plaintiff, and
ordering plaintiff to pay the defendant on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7,
1976 until the same shall have been fully paid;
2. Attorneys fees and expenses of litigation in the sum of P100,000.00; and
3. Cost of suit.
SO ORDERED.
[2]


On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for demurrage to P44,000.00 and deleting the
award for attorneys fees and expenses of litigation. Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.
SO ORDERED.
[3]


The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its
services are available only to specific persons who enter into a special contract of charter party with its owner. It is undisputed that the ship is a
private carrier. And it is in this capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter
hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a
Contract of Voyage Charter Hire (Exhibit B; also Exhibit 1) whereby NSC hired VSIs vessel, the MV VLASONS I to make one (1) voyage to
load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz:
1. x x x x x x.
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
3. x x x x x x
4. Freight/Payment: P30.00 /metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. x x x x x x
9. Cargo Insurance: Charterers and/or Shippers must insure the cargoes. Shipowners not responsible for losses/damages except on proven willful
negligence of the officers of the vessel.
10. Other terms:(a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall form part of
this Contract.
x x x x x x x x x
The terms F.I.O.S.T. which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for Freight In
and Out including Stevedoring and Trading, which means that the handling, loading and unloading of the cargoes are the responsibility of the
Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, Charterers to load, stow and discharge the cargo free of risk and expenses
to owners. x x x (Underscoring supplied).

Under paragraph 10 thereof, it is provided that (o)wners shall, before and at the beginning of the voyage, exercise due diligence to make the vessel
seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe
for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting from: unseaworthiness
unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned,
equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation; xxx; perils, dangers and accidents of the sea or other navigable waters; xxx; wastage in bulk or weight or any other loss or damage
arising from inherent defect, quality or vice of the cargo; insufficiency of packing; xxx; latent defects not discoverable by due diligence; any other
cause arising without the actual fault or privity of Owners or without the fault of the agents or servants of owners.

Paragraph 12 of said NANYOZAI Charter Party also provides that (o)wners shall not be responsible for split, chafing and/or any damage unless
caused by the negligence or default of the master and crew.

(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV VLASONS I loaded at plaintiffs pier at Iligan
City, the NSCs shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about
2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as
agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit D) on
August 8, 1974.

(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day, August 13, 1974, when the vessels
three (3) hatches containing the shipment were opened by plaintiffs agents, nearly all the skids of tinplates and hot rolled sheets were allegedly
found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on August
24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the unloading operations. (Exhibit E)

(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors
Company (MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit G), MASCO made a report of its ocular inspection conducted on the
cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and
stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch
covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO ventured the opinion that rusting
of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence of the heavy weather and rough
seas encountered while en route to destination (Exhibit F). It was also reported that MASCOs surveyors drew at random samples of bad order
packing materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing
Laboratories issued Report No. 1770 (Exhibit I) which in part, states, The analysis of bad order samples of packing materials xxx shows that
wetting was caused by contact with SEA WATER.

(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its claim for damages suffered due to the
downgrading of the damaged tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim
but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was docketed as Civil Case No.
23317, CFI, Rizal.

(6) In its complaint, plaintiff claimed that it sustained losses in thqaae aforesaid amount of P941,145.18 as a result of the act, neglect and default of
the master and crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make the vessel seaworthy
and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and preservation -- all in
violation of defendants undertaking under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV VLASONS I was seaworthy in all respects for the
carriage of plaintiffs cargo; that said vessel was not a common carrier inasmuch as she was under voyage charter contract with the plaintiff as
charterer under the charter party; that in the course of the voyage from Iligan City to Manila, the MV VLASONS I encountered very rough seas,
strong winds and adverse weather condition, causing strong winds and big waves to continuously pound against the vessel and seawater to overflow
on its deck and hatch covers; that under the Contract of Voyage Charter Hire, defendant shall not be responsible for losses/damages except on proven
willful negligence of the officers of the vessel, that the officers of said MV VLASONS I exercised due diligence and proper seamanship and were
not willfully negligent; that furthermore the Voyage Charter Party provides that loading and discharging of the cargo was on FIOST terms which
means that the vessel was free of risk and expense in connection with the loading and discharging of the cargo; that the damage, if any, was due to
the inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent defect of the cargo not discoverable by due diligence
or to any other cause arising without the actual fault or privity of defendant and without the fault of the agents or servants of defendant; consequently,
defendant is not liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent and did not exercise due care in the
discharge of the cargo; and that the cargo was exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiffs warehouse
after discharge from the vessel; and that plaintiffs claim was highly speculative and grossly exaggerated and that the small stain marks or sweat
marks on the edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant claimed that it had complied with all its
duties and obligations under the Voyage Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the following
counterclaim:
(a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter Hire Contract, plaintiff failed and refused
to pay the agreed charter hire of P75,000.00 despite demands made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum of P8,000.00 per day for demurrage. The vessel
was on demurrage for eleven (11) days in Manila waiting for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay
defendant demurrage in the total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay defendant attorneys fees and all expenses of
litigation in the amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came out with the following findings which were set forth in its decision:
(a) The MV VLASONS I is a vessel of Philippine registry engaged in the tramping service and is available for hire only under special contracts of
charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. 1), the MV VLASONS I was covered by the required
seaworthiness certificates including the Certification of Classification issued by an international classification society, the NIPPON KAIJI KYOKAI
(Exh. 4); Coastwise License from the Board of Transportation (Exh. 5); International Loadline Certificate from the Philippine Coast Guard (Exh.
6); Cargo Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh. 7); Ship Radio Station License (Exh. 8); Certificate of
Inspection by the Philippine Coast Guard (Exh. 12); and Certificate of Approval for Conversion issued by the Bureau of Customs (Exh. 9). That
being a vessel engaged in both overseas and coastwise trade, the MV VLASONS I has a higher degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter Hire, the MV VLASONS I underwent
drydocking in Cebu and was thoroughly inspected by the Philippine Coast Guard. In fact, subject voyage was the vessels first voyage after the
drydocking. The evidence shows that the MV VLASONS I was seaworthy and properly manned, equipped and supplied when it undertook the
voyage. It had all the required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were covered by hatchboards which were in turn
covered by two or double tarpaulins. The hatch covers were water tight. Furthermore, under the hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by evidence. The provisions of the Civil Code on
common carriers pursuant to which there exists a presumption of negligence in case of loss or damage to the cargo are not applicable. As to the
damage to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of witness Vicente Angliongto that
tinplates sweat by themselves when packed even without being in contract (sic) with water from outside especially when the weather is bad or
raining. The rust caused by sweat or moisture on the tinplates may be considered as a loss or damage but then, defendant cannot be held liable for it
pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for loss or damage arising from the character of the goods x
x x. All the 1,769 skids of the tinplates could not have been damaged by water as claimed by plaintiff. It was shown as claimed by plaintiff that the
tinplates themselves were wrapped in kraft paper lining and corrugated cardboards could not be affected by water from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the hatch openings of the MV VLASONS I
when rains occurred during the discharging of the cargo thus allowing rainwater to enter the hatches. It was proven that the stevedores merely set up
temporary tents to cover the hatch openings in case of rain so that it would be easy for them to resume work when the rains stopped by just removing
the tent or canvas. Because of this improper covering of the hatches by the stevedores during the discharging and unloading operations which were
interrupted by rains, rainwater drifted into the cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party
which was expressly made part of the Contract of Voyage Charter Hire, the loading, stowing and discharging of the cargo is the sole responsibility of
the plaintiff charterer and defendant carrier has no liability for whatever damage may occur or maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel encountered rough seas and bad weather while en route from Iligan City to Manila causing sea water to
splash on the ships deck on account of which the master of the vessel (Mr. Antonio C. Dumlao) filed a Marine Protest on August 13, 1974 (Exh.
15) which can be invoked by defendant as a force majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire contract that it was to insure the cargo
because it did not. Had plaintiff complied with the requirement, then it could have recovered its loss or damage from the insurer. Plaintiff also
violated the charter party contract when it loaded not only steel products, i.e. steel bars, angular bars and the like but also tinplates and hot rolled
sheets which are high grade cargo commanding a higher freight. Thus plaintiff was able to ship high grade cargo at a lower freight rate.
(I) As regards defendants counterclaim, the contract of voyage charter hire under paragraph 4 thereof, fixed the freight at P30.00 per metric ton
payable to defendant carrier upon presentation of the bill of lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00
despite demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the same Voyage Charter Hire contract to
pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The delay amounted to eleven (11) days thereby making plaintiff liable
to pay defendant for demurrage in the amount ofP88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV VLASONS I was seaworthy, properly manned, equipped and supplied, and that there is no proof of
willful negligence of the vessels officers.
II
The trial court erred in finding that the rusting of NSCs tinplates was due to the inherent nature or character of the goods and not due to contact with
seawater.
III
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSCs shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorneys fees, to VSI.
[4]

As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and
deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution
[5]
dated
October 20, 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before this Court. On
motion of VSI, the Court ordered on February 14, 1994 the consolidation of these petitions.
[6]

The Issues
In its petition
[7]
and memorandum,
[8]
NSC raises the following questions of law and fact
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused by weather interruption;
2. Whether or not the alleged seaworthiness certificates (Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and 12) were admissible in
evidence and constituted evidence of the vessels seaworthiness at the beginning of the voyages; and
3. Whether or not a charterers failure to insure its cargo exempts the shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessels officers and crew were negligent in handling and caring for NSCs cargo;
3. Whether or not NSCs cargo of tinplates did sweat during the voyage and, hence, rusted on their own; and
(4) Whether or not NSCs stevedores were negligent and caused the wetting[/]rusting of NSCs tinplates.
In its separate petition,
[9]
VSI submits for the consideration of this Court the following alleged errors of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for attorneys fees and expenses of litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum:
[10]

I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which there exist[s] a presumption of
negligence against the common carrier in case of loss or damage to the cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai Charter, are valid and binding on both
contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSCs Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorneys Fees.
The Courts Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a private carrier. The resolution of this
preliminary question determines the law, standard of diligence and burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. It has been held that the true
test of a common carrier is the carriage of passengers or goods, provided it has space, forall who opt to avail themselves of its transportation service
for a fee.
[11]
A carrier which does not qualify under the above test is deemed a private carrier. Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some
part of a ship for a period of time or a voyage or voyages.
[12]

In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried
passengers or goods only for those it chose under a special contract of charter party.
[13]
As correctly concluded by the Court of Appeals, the MV
Vlasons I was not a common but a private carrier.
[14]
Consequently, the rights and obligations of VSI and NSC, including their respective liability
for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party.
[15]
Recently, in Valenzuela
Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation,
[16]
the Court ruled:
x x x in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike
in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on
common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection
given by law in contracts involving common carriers.
[17]

Extent of VSIs Responsibility and Liability Over NSCs Cargo
It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974, that VSI shall not be responsible for losses except on proven
willful negligence of the officers of the vessel. The NANYOZAI Charter Party, which was incorporated in the parties contract of transportation,
further provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness, unless the same
was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was properly manned, equipped and supplied, and
to make the holds and all other parts of the vessel in which cargo [was] carried, fit and safe for its reception, carriage and preservation.
[18]
The
NANYOZAI Charter Party also provided that [o]wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence
or default of the master or crew.
[19]

Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was caused by VSIs willful
negligence or failure to exercise due diligence in makingMV Vlasons I seaworthy and fit for holding, carrying and safekeeping the
cargo. Ineluctably, the burden of proof was placed on NSC by the parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature and
inherent defect of the things, shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding article if proofs against him show that
they occurred on account of his negligence or his omission to take the precautions usually adopted by careful persons, unless the shipper committed
fraud in the bill of lading, making him to believe that the goods were of a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowners obligations are governed by the foregoing provisions of the Code of
Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier. It is a
hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or
unseaworthy, and the fact that the goods were lost or damaged while in the carriers custody does not put the burden of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the burden
of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carriers possession does not
cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of
lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the law aids the
bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the loss and that it was not one involving its
liability, the law requires that it come forward with the information available to it, and its failure to do so warrants an inference or presumption of its
liability. However, such inferences and presumptions, while they may affect the burden of coming forward with evidence, do not alter the burden of
proof which remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going forward
with the evidence is again on plaintiff.
Where the action is based on the shipowners warranty of seaworthiness, the burden of proving a breach thereof and that such breach was the
proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carriers possession does not cast on it
the burden of proving seaworthiness. x x x Where the contract of carriage exempts the carrier from liability for unseaworthiness not discoverable by
due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel seaworthy.
[20]

In the instant case, the Court of Appeals correctly found that NSC has not taken the correct position in relation to the question of who has the
burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-
appellants [NSCs] interpretation of Clause 12 is not even correct), it argues that a careful examination of the evidence will show that VSI
miserably failed to comply with any of these obligations as if defendant-appellee [VSI] had the burden of proof.
[21]

First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1) whether VSI exercised due diligence in
making MV Vlasons I seaworthy for the intended purpose under the charter party; (2) whether the damage to the cargo should be attributed to the
willful negligence of the officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the rusting of the tinplates was caused by
its own sweat or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties conflicting
claims and to carefully weigh their respective evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals. Where
the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court.
[22]
We stress that, subject to some
exceptional instances,
[23]
only questions of law -- not questions of fact -- may be raised before this Court in a petition for review under Rule 45 of the
Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the lower courts factual findings, as indeed NSC has not
successfully proven the application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSCs cargo of steel and
tinplates. This is shown by the fact that it was drydocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its
voyage to Manila under the contract of voyage charter hire.
[24]
The vessels voyage from Iligan to Manila was the vessels first voyage after
drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo
vessel.
[25]
The Court of Appeals itself sustained the conclusion of the trial court that MV Vlasons I was seaworthy. We find no reason to modify or
reverse this finding of both the trial and the appellate courts.
Who Were Negligent: Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the negligence of the officers and the crew
of MV Vlasons I in making their vessel seaworthy and fit for the carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to cover the hatches through which
the cargo was loaded into the cargo hold of the ship. It faults the Court of Appeals for failing to consider such claim as an uncontroverted
fact
[26]
and denies that MV Vlasons I was equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest
xxx.
[27]
We disagree.
The records sufficiently support VSIs contention that the ship used the old tarpaulin, only in addition to the new one used primarily to make
the ships hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the
deposition of the ships boatswain, Jose Pascua. The salient portions of said marine protest read:
x x x That the M/V VLASONS I departed Iligan City or or about 0730 hours of August 8, 1974, loaded with approximately 2,487.9 tons of steel
plates and tin plates consigned to National Steel Corporation; that before departure, the vessel was rigged, fully equipped and cleared by the
authorities; that on or about August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough seas and
strong winds and Manila office was advised by telegram of the adverse weather conditions encountered; that in the morning of August 10, 1974, the
weather condition changed to worse and strong winds and big waves continued pounding the vessel at her port side causing sea water to overflow on
deck andhatch (sic) covers and which caused the first layer of the canvass covering to give way while the new canvass covering still holding on;
That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re-secured the canvass covering back to position;
that in the afternoon of August 10, 1974, while entering Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while
approaching Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same canvass to give way and leaving
the new canvass holding on;
xxx xxx xxx
[28]

And the relevant portions of Jose Pascuas deposition are as follows:
Q: What is the purpose of the canvas cover?
A: So that the cargo would not be soaked with water.
A: And will you describe how the canvas cover was secured on the hatch opening?
WITNESS
A: It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we place[d] a flat bar over the canvas on
the side of the hatches and then we place[d] a stopper so that the canvas could not be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch opening? The length and the width of the hatch opening.
A: Forty-five feet by thirty-five feet, sir.
x x x x x x x x x
Q: How was the canvas supported in the middle of the hatch opening?
A: There is a hatch board.
ATTY DEL ROSARIO
Q: What is the hatch board made of?
A: It is made of wood, with a handle.
Q: And aside from the hatch board, is there any other material there to cover the hatch?
A: There is a beam supporting the hatch board.
Q: What is this beam made of?
A: It is made of steel, sir.
Q: Is the beam that was placed in the hatch opening covering the whole hatch opening?
A: No, sir.
Q: How many hatch beams were there placed across the opening?
A: There are five beams in one hatch opening.
ATTY DEL ROSARIO
Q: And on top of the beams you said there is a hatch board. How many pieces of wood are put on top?
A: Plenty, sir, because there are several pieces on top of the hatch beam.
Q: And is there a space between the hatch boards?
A: There is none, sir.
Q: They are tight together?
A: Yes, sir.
Q: How tight?
A: Very tight, sir.
Q: Now, on top of the hatch boards, according to you, is the canvas cover. How many canvas covers?
A: Two, sir.
[29]

That due diligence was exercised by the officers and the crew of the MV Vlasons I was further demonstrated by the fact that, despite
encountering rough weather twice, the new tarpaulin did not give way and the ships hatches and cargo holds remained waterproof. As aptly stated
by the Court of Appeals, xxx we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence, that the MV
VLASONS I was seaworthy when it undertook the voyage on August 8, 1974 carrying on board thereof plaintiff-appellants shipment of 1,677
skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages from NSCs pier in Iligan City arriving safely at North Harbor,
Port Area, Manila, on August 12, 1974; xxx.
[30]

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I. On the contrary, the
records reveal that it was the stevedores of NSC who were negligent in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the
unloading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the
ship. Vicente Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the vessel upon notice from the
National Steel Corporation in order to conduct the inspection of the cargo. During the course of the investigation, did you chance
to see the discharging operation?
WITNESS:
A: Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but majority of the tinplates were
inside the hall, all the hatches were opened.
Q: In connection with these cargoes which were unloaded, where is the place.
A: At the Pier.
Q: What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the transcript of stenographic notes shows the same
was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q: What was used in order to protect the cargo from the weather?
A: A base of canvas was used as cover on top of the tin plates, and tents were built at the opening of the hatches.
Q: You also stated that the hatches were already opened and that there were tents constructed at the opening of the hatches to protect the
cargo from the rain. Now, will you describe [to] the Court the tents constructed.
A: The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the middle with the whole side separated
down to the hatch, the size of the hatch and it is soaks [sic] at the middle because of those weather and this can be used only to
temporarily protect the cargo from getting wet by rains.
Q: Now, is this procedure adopted by the stevedores of covering tents proper?
A: No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the hatch tent was not good enough to hold
all of it to prevent the water soaking through the canvas and enter the cargo.
Q: In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak into the canvas and tinplates.
A: Yes, sir, the second time I went there, I saw it.
Q: As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure adopted by its stevedores in discharging
the cargo particularly in this tent covering of the hatches?
A: Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did not mind at all, so, I called the
attention of the representative of the National Steel but nothing was done, just the same. Finally, I wrote a letter to them.
[31]

NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately about the stevedores negligence on
the first day of unloading, pointing out that he wrote his letter to petitioner only seven days later.
[32]
The Court is not persuaded. Angliongtos
candid answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the attention of the
stevedores, then the NSCs representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions
constitutes a reasonable response in accord with common sense and ordinary human experience. Vicente Angliongto could not be blamed for calling
the stevedores attention first and then the NSCs representative on location before formally informing NSC of the negligence he had observed,
because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which was
ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts findings and conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of
NSCs shipment. We do not think so. Such negligence according to the trial court is evident in the stevedores hired by [NSC], not closing the hatch
of MV VLASONS I when rains occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the hatches and to
drift to and fall on the cargo. It was proven that the stevedores merely set up temporary tents or canvas to cover the hatch openings when it rained
during the unloading operations so that it would be easier for them to resume work after the rains stopped by just removing said tents or canvass. It
has also been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the manner the stevedores hired by
[NSC] were discharging the cargo on rainy days and the improper closing of the hatches which allowed continuous heavy rain water to leak through
and drip to the tinplates covers and [Vicente Angliongto] also suggesting that due to four (4) days continuos rains with strong winds that the hatches
be totally closed down and covered with canvas and the hatch tents lowered. (Exh 13). This letter was received by [NSC] on 22 August 1974 while
discharging operations were still going on (Exhibit 13-A).
[33]

The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable for
any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription, from the
stevedoring company at fault in the discharge operations. A stevedore company engaged in discharging cargo xxx has the duty to load the cargo
xxx in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence xxx and where the officers and members and crew of
the vessel do nothing and have no responsibility in the discharge of cargo by stevedores xxx the vessel is not liable for loss of, or damage to, the
cargo caused by the negligence of the stevedores xxx
[34]
as in the instant case.
Do Tinplates Sweat?
The trial court relied on the testimony of Vicente Angliongto in finding that xxx tinplates sweat by themselves when packed even without
being in contact with water from outside especially when the weather is bad or raining xxx.
[35]
The Court of Appeals affirmed the trial courts
finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to the tinplates was occasioned not
by airborne moisture but by contact with rain and seawater which the stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSCs Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual
or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV
Vlasons I. Clearly, therefore, NSCs failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action against
VSI for damages caused by the latters willful negligence. We do not find anything in the charter party that would make the liability of VSI for
damage to the cargo contingent on or affected in any manner by NSCs obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates Proving Seaworthiness
NSCs contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the certificates of seaworthiness offered in
evidence by VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippine Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs.
[36]

NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of Court. It points out that Exhibits 3,
4 and 11 allegedly are not written records or acts of public officers; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced by official
publications or certified true copies as required by Sections 25 and 26, Rule 132, of the Rules of Court.
[37]

After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been
properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the writing
executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of
Court, which provides that (e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person in the
performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated.
[38]
Exhibit 11 is an original certificate of the
Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that the vessel VLASONS I was drydocked x x x
and PCG Inspectors were sent on board for inspection x x x. After completion of drydocking and duly inspected by PCG Inspectors, the vessel
VLASONS I, a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared by the
Philippine Coast Guard and sailed for Cebu Port on July 10, 1974. (sic) NSCs claim, therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that that NSC has the burden of proving that MV Vlasons I was not seaworthy. As observed earlier, the vessel
was a private carrier and, as such, it did not have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to
discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the genuineness
of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorneys Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
xxx xxx xxx
6. Loading/Discharging Rate : 750 tons per WWDSHINC.
7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day.
[39]

The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the vessel
beyond the laytime or that period of time agreed on for loading and unloading of cargo.
[40]
It is given to compensate the shipowner for the nonuse of
the vessel. On the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. x x x If laytime is expressed in running days, this means days when the ship
would be run continuously, and holidays are not excepted. A qualification of weather permitting excepts only those days when bad weather
reasonably prevents the work contemplated.
[41]

In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather working
days Sundays and holidays included.
[42]
The running of laytime was thus made subject to the weather, and would cease to run in the event
unfavorable weather interfered with the unloading of cargo.
[43]
Consequently, NSC may not be held liable for demurrage as the four-day laytime
allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred eleven days of
delay in unloading the cargo. The trial court arrived at this erroneous finding by subtracting from the twelve days, specifically August 13, 1974 to
August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain which was August 22, 1974. Based on our previous
discussion, such finding is a reversible error. As mentioned, the respondent appellate court also erred in ruling that NSC was liable to VSI for
demurrage, even if it reduced the amount by half.
Attorneys Fees
VSI assigns as error of law the Court of Appeals deletion of the award of attorneys fees. We disagree. While VSI was compelled to litigate
to protect its rights, such fact by itself will not justify an award of attorneys fees under Article 2208 of the Civil Code when x x x no sufficient
showing of bad faith would be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause x x
x.
[44]
Moreover, attorneys fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the latter, as this is
tantamount to imposing a premium on ones right to litigate or seek judicial redress of legitimate grievances.
[45]

Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the cargo? Ranged against NSC are two
formidable truths. First, both lower courts found that such damage was brought about during the unloading process when rain and seawater seeped
through the cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial court, when
affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are settled exceptions, NSC has not satisfactorily shown that
this case is one of them. Second, the agreement between the parties -- the Contract of Voyage Charter Hire -- placed the burden of proof for such
loss or damage upon the shipper, not upon the shipowner. Such stipulation, while disadvantageous to NSC, is valid because the parties entered into a
contract of private charter, not one of common carriage. Basic too is the doctrine that courts cannot relieve a party from the effects of a private
contract freely entered into, on the ground that it is allegedly one-sided or unfair to the plaintiff. The charter party is a normal commercial contract
and its stipulations are agreed upon in consideration of many factors, not the least of which is the transport price which is determined not only by the
actual costs but also by the risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such factors,
the parties even stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under the charter party. That NSC
failed or neglected to protect itself with such insurance should not adversely affect VSI, which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned Decision of the Court of Appeals
is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.

3. FIRST PHILIPPINE INDUSTRIAL CORPORATION, vs. CA, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.
This petition for review on certiorari assails the Decision of the 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 toP956,076.04 payable
in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order
not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum Act. It is engaged in the
business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company
is exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax 'on contractors and other independent contractors' under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local Government Code. The said section
limits the imposition of fees and charges on business to such amounts as may be commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of the
aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and
licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition."
[4]

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation
business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code.
[5]

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint
[6]
for tax refund with prayer for a writ of
preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code;
(2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151
does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate
refund of the tax paid.
[7]

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

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed against the taxpayer,
taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation obtained in
this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden the riding
public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and
facilities to a single specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than
the previous enactments, to make them economically and financially viable to serve the people and discharge their
functions with a concomitant obligation to accept certain devolution of powers, x x x So, consistent with this policy
even franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code."
[9]

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration and adjudication.
[10]
On November 29, 1995, the respondent court rendered a decision
[11]
affirming the
trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.
[12]

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996.
[13]
Petitioner moved for a
reconsideration which was granted by this Court in a Resolution
[14]
of January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation
contractor, and (2) the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or
property from place to place, for compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to
engage in the transportation of goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established roads; and
4. The transportation must be for hire.
[15]

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to
all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele
does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals
[16]
we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the 'general public,' i.e., the general
community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that
Article 1877 deliberately refrained from making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, 'public service' includes:
'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation
of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric
light heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common
carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.
[17]

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof provides
that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as
may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture
and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to the manufacture, refining, storage,
or transportation by special methods of petroleum, is hereby declared to be apublic utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 x x x. Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following :
x x x x x x x x x
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire
and common carriers by air, land or water, except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local
Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being deemed to be exempted from the
taxing powers of the local government units. May we know the reason why the transportation business is being excluded from the taxing powers of
the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that local government
units may not impose taxes on the business of transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to impose a tax on
business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross annual receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier business. Local government
units may impose taxes on top of what is already being imposed by the National Internal Revenue Code which is the so-called "common carriers
tax." We do not want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a province may impose
this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x
[18]

It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against
common carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue
Code.
[19]
To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government
Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP
No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
4. VIRGINES CALVO vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
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 segmentof 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.
SO ORDERED.
5. FGU INSURANCE CORPORATION, vs. G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, [G.R. No.
141910. August 6, 2002]

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators aboard
one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro
Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road along McArthur highway in
Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes in the sum
of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the amount it
had paid to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for damages and breach of contract of
carriage against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that
GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common
carrier. Respondents further claimed that the cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of damage to the cargoes and the amount it had paid to
the assured. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on
the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,
[1]
granted the motion to dismiss, explaining thusly:
Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove his own affirmative allegation, xxx.
In the instant case, plaintiff did not present any single evidence that would prove that defendant is a common carrier.
x x x x x x x x x
Accordingly, the application of the law on common carriers is not warranted and the presumption of fault or negligence on the part of a common
carrier in case of loss, damage or deterioration of goods during transport under 1735 of the Civil Code is not availing.
Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and the owner of the vehicle which
transports the cargo are the laws on obligation and contract of the Civil Code as well as the law on quasi delicts.
Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict provides for some presumption of negligence
but only upon the attendance of some circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap,
he was violating any traffic regulation.
Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence, the presumption of negligence is not obtaining.
Considering that plaintiff failed to adduce evidence that defendant is a common carrier and 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 obligation
[16]
unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that of the diligence of a
good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence) or of the
attendance of fortuitous event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and 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 inculpa
contractual, as previously so pointed out, immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose
liability in a civil action is predicated on culpa acquiliana, while he admittedly can be said to have been in control and management of the vehicle
which figured in the accident, it is not equally shown, however, that the accident could have been exclusively due to his negligence, a matter that can
allow, forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to
present evidence.
[24]
Thus, respondent corporation may no longer offer proof to establish that it has exercised due care in transporting the cargoes of
the assured so as to still warrant a remand of the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the decision, dated 10 June 1999,
of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and
decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is hereby ordered to pay FGU
Insurance Corporation the value of the damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
6. PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY vs. PKS SHIPPING COMPANY [G.R. No. 149038. April 9, 2003]

The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001,
which has affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for damages filed by
petitioner insurance corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company (PKS Shipping) for the shipment to
Tacloban City of seventy-five thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five Thousand Pesos
(P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American General Insurance Company (Philamgen). The
goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22 December 1988, about nine oclock,
whileLimar I was being towed by respondents tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa Point, in
Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.

DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment; it then sought
reimbursement from PKS Shipping of the sum paid to DUMC but the shipping company refused to pay, prompting Philamgen to file suit against
PKS Shipping with the Makati RTC.

The RTC dismissed the complaint after finding that the total loss of the cargo could have been caused either by a fortuitous event, in which
case the ship owner was not liable, or through the negligence of the captain and crew of the vessel and that, under Article 587 of the Code of
Commerce adopting the Limited Liability Rule, the ship owner could free itself of liability by abandoning, as it apparently so did, the vessel with
all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of the trial court. The appellate court ruled that
evidence to establish that PKS Shipping was a common carrier at the time it undertook to transport the bags of cement was wanting because the
peculiar method of the shipping companys carrying goods for others was not generally held out as a business but as a casual occupation. It then
concluded that PKS Shipping, not being a common carrier, was not expected to observe the stringent extraordinary diligence required of common
carriers in the care of goods. The appellate court, moreover, found that the loss of the goods was sufficiently established as having been due to
fortuitous event, negating any liability on the part of PKS Shipping to the shipper.

In the instant appeal, Philamgen contends that the appellate court has committed a patent error in ruling that PKS Shipping is not a common
carrier and that it is not liable for the loss of the subject cargo. The fact that respondent has a limited clientele, petitioner argues, does not militate
against respondents being a common carrier and that the only way by which such carrier can be held exempt for the loss of the cargo would be if the
loss were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the Philippine area of responsibility and
that, even if it did, respondent would not be exempt from liability because its employees, particularly the tugmaster, have failed to exercise due
diligence to prevent or minimize the loss.

PKS Shipping, in its comment, urges that the petition should be denied because what Philamgen seeks is not a review on points or errors of law
but a review of the undisputed factual findings of the RTC and the appellate court. In any event, PKS Shipping points out, the findings and
conclusions of both courts find support from the evidence and applicable jurisprudence.

The determination of possible liability on the part of PKS Shipping boils down to the question of whether it is a private carrier or a common
carrier and, in either case, to the other question of whether or not it has observed the proper diligence (ordinary, if a private carrier, or extraordinary,
if a common carrier) required of it given the circumstances.

The findings of fact made by the Court of Appeals, particularly when such findings are consistent with those of the trial court, may not at
liberty be reviewed by this Court in a petition for review under Rule 45 of the Rules of Court.
[1]
The conclusions derived from those factual findings,
however, are not necessarily just matters of fact as when they are so linked to, or inextricably intertwined with, a requisite appreciation of the
applicable law. In such instances, the conclusions made could well be raised as being appropriate issues in a petition for review before this
Court. Thus, an issue whether a carrier is private or common on the basis of the facts found by a trial court or the appellate court can be a valid and
reviewable question of law.

The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to the public.
Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it defines public service to be
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or wireless communication systems, wire or wireless broadcasting stations and
other similar public services. x x x. (Underscoring supplied).

The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs. Court of Appeals.
[2]
Applying Article 1732 of
the Code, in conjunction with Section 13(b) of the Public Service Act, this Court has held:
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity (in local idiom, as `a sideline). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the `general public, i.e., the general community
or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.
So understood, the concept of `common carrier under Article 1732 may be seen to coincide neatly with the notion of `public service, under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil
Code.

Much of the distinction between a common or public carrier and a private or special carrier lies in the character of the business, such that if
the undertaking is an isolated transaction, not a part of the business or occupation, and the carrier does not hold itself out to carry the goods for the
general public or to a limited clientele, although involving the carriage of goods for a fee,
[3]
the person or corporation providing such service could
very well be just a private carrier. A typical case is that of a charter party which includes both the vessel and its crew, such as in a bareboat or
demise, where the charterer obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages
[4]
and gets the control
of the vessel and its crew.
[5]
Contrary to the conclusion made by the appellate court, its factual findings indicate that PKS Shipping has engaged itself
in the business of carrying goods for others, although for a limited clientele, undertaking to carry such goods for a fee. The regularity of its activities
in this area indicates more than just a casual activity on its part.
[6]
Neither can the concept of a common carrier change merely because individual
contracts are executed or entered into with patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier to escape
liability by the simple expedient of entering into those distinct agreements with clients.

Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence demanded of common carriers, Article 1733 of
the Civil Code requires common carriers to observe extraordinary diligence in the vigilance over the goods they carry. In case of loss, destruction or
deterioration of goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on
them.
[7]
The provisions of Article 1733, notwithstanding, common carriers are exempt from liability for loss, destruction, or deterioration of the
goods due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.
[8]

The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel masters of Limar I and MT Iron
Eagle, that there was no way by which the barges or the tugboats crew could have prevented the sinking of Limar I. The vessel was suddenly
tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into the
barges hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise Load Line Certificate
would attest to the seaworthiness of Limar I and should strengthen the factual findings of the appellate court.

Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized exceptions from the rule - (1) when the factual
findings of the Court of Appeals and the trial court are contradictory; (2) when the conclusion is a finding grounded entirely on speculation,
surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or
impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5) when the appellate court, in making its findings, went
beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the Court of
Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts which, if properly
considered, would justify a different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of fact are
conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence but such findings are contradicted by the evidence on record would appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.

7. ASIA LIGHTERAGE AND SHIPPING, INC., vs. CA and PRUDENTIAL GUARANTEE AND ASSURANCE, [G.R. No.
147246. August 19, 2003]
8.
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.
SO ORDERED..
8. SPOUSES DANTE CRUZ and LEONORA CRUZ, vs. SUN HOLIDAYS, INC G.R. No. 186312 -June 29, 2010

D E C I S I O N
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001
1
against Sun Holidays, Inc. (respondent) with the Regional
Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September
11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had
stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a tour package-contract with respondent
that included transportation to and from the Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),
2
a scuba diving instructor and one of the survivors, gave his account of the incident that led to the filing of the complaint
as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in the afternoon of September 10, 2000,
but was advised to stay for another night because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners son and his wife trekked to the other side of
the Coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and wind got stronger,
causing the boat to tilt from side to side and the captain to step forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco Beach III capsized putting all
passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain, Matute and the other passengers who
reached the surface asked him what they could do to save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang
ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the capsized M/B Coco Beach III.
Boarded on those two boats were 22 persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers,
including petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in
Saudi Arabia, with a basic monthly salary of $900.
3

Petitioners, by letter of October 26, 2000,
4
demanded indemnification from respondent for the death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,
5
denied any responsibility for the incident which it considered to be a fortuitous event. It
nevertheless offered, as an act of commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging that respondent, as a common carrier, was guilty of
negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.
6

In its Answer,
7
respondent denied being a common carrier, alleging that its boats are not available to the general public as they only ferry Resort
guests and crew members. Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its passengers; contrary to
petitioners allegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not
filled to capacity and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged that it is entitled to an award for
attorneys fees and litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to be met before a boat is allowed to
sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the
Resorts assistant manager.
8
He added that M/B Coco Beach III met all four conditions on September 11, 2000,
9
but a subasco or squall,
characterized by strong winds and big waves, suddenly occurred, causing the boat to capsize.
10

By Decision of February 16, 2005,
11
Branch 267 of the Pasig RTC dismissed petitioners Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated September 2, 2005,
12
they appealed to the Court of Appeals.
By Decision of August 19, 2008,
13
the appellate court denied petitioners appeal, holding, among other things, that the trial court correctly ruled that
respondent is a private carrier which is only required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution dated January 16, 2009,
14
they filed the present Petition for Review.
15

Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier since by its tour package, the
transporting of its guests is an integral part of its resort business. They inform that another division of the appellate court in fact held respondent
liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a common carrier; that the Resorts ferry
services for guests cannot be considered as ancillary to its business as no income is derived therefrom; that it exercised extraordinary diligence as
shown by the conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case wherein the appellate court held it liable for damages involved different plaintiffs, issues
and evidence.
16

The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals
17
in characterizing respondent as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services . . .
18
(emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly considered ancillary thereto. The
constancy of respondents ferry services in its resort operations is underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to suppose that it provides said
services at a loss. The Court is aware of the practice of beach resort operators offering tour packages to factor the transportation fee in arriving at the
tour package price. That guests who opt not to avail of respondents ferry services pay the same amount is likewise inconsequential. These guests
may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained from making distinctions on whether
the carrying of persons or goods is the carriers principal business, whether it is offered on a regular basis, or whether it is offered to the general
public. The intent of the law is thus to not consider such distinctions. Otherwise, there is no telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligence for the safety of the passengers transported by them, according to all the circumstances of each case.
19
They are bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.
20

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common carrier is at fault or negligent. In fact,
there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence.
21

Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
on September 11, 2000. Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping on September 10 and 11,
2000 advising of tropical depressions in Northern Luzon which would also affect the province of Mindoro.
22
By the testimony of Dr. Frisco Nilo,
supervising weather specialist of PAGASA, squalls are to be expected under such weather condition.
23

A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other peoples lives at risk. The
extraordinary diligence required of common carriers demands that they take care of the goods or lives entrusted to their hands as if they were their
own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.
24

To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only causeof the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event.
25

Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach III. As reflected above, however,
the occurrence of squalls was expected under the weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III
suffered engine trouble before it capsized and sank.
26
The incident was, therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.
Article 1764
27
vis--vis Article 2206
28
of the Civil Code holds the common carrier in breach of its contract of carriage that results in the death of a
passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.
29

As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]
30

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death]) adopted in the American Expectancy Table of
Mortality or the Actuarial of Combined Experience Table of Mortality.
31

The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the total earnings less expenses necessary
in the creation of such earnings or income and less living and other incidental expenses.
32
The loss is not equivalent to the entire earnings of the
deceased, but only such portion as he would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are the
necessary expenses supposed to be used by the deceased for his own needs.
33

In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v. Borja
34
teaches that when, as in this case,
there is no showing that the living expenses constituted the smaller percentage of the gross income, the living expenses are fixed at half of the gross
income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900
35
which, when converted to Philippine peso applying the
annual average exchange rate of $1 = P44 in 2000,
36
amounts to P39,600. Ruelitos net earning capacity is thus computed as follows:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent common carriers breach of contract of carriage resulted in the death of petitioners son,
following Article 1764 vis--vis Article 2206 of the Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is presumed to have acted recklessly,
thus warranting the award too of exemplary damages, which are granted in contractual obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.
37

Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral damages andP100,000 as exemplary
damages.
38
1avvphi1
Pursuant to Article 2208
39
of the Civil Code, attorney's fees may also be awarded where exemplary damages are awarded. The Court finds that 10%
of the total amount adjudged against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals
40
teaches that when an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date
the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The
actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed
to be by then an equivalent to a forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the present petition, the interest due shall be computed upon
the finality of this decision at the rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline
in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE. Judgment is rendered in favor of petitioners
ordering respondent to pay petitioners the following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for
Ruelitos loss of earning capacity; (3) P100,000 as moral damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount adjudged
against respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed from the finality of this decision until full
payment.
SO ORDERED.
9. ESTRELLITA M. BASCOS V CA & CIPRIANO G.R. No. 101089. April 7, 1993.
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. Article 1732 of the Civil Code defines a
common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking
is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the
business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it
held thus: "The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are
enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence
in order to overcome the presumption . . . The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it.
Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. In De
Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising
from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with
Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy . . . (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held that: "Under Article 1745 (6)
above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold that
the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case, petitioner herself has made the admission that she
was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove
the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. While the affidavit of
Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. Granting that the said evidence were
not self-serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines
it to be and not what it is called by the contracting parties.
D E C I S I O N
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing business under the name
CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the
warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with
Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba,
Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping
Agency the amount of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages to the cargo during
transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and
damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was supported
by an affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of preliminary attachment may
lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE leased her cargo truck to load the
cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck
carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was immediately reported to
CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation, an information
for robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability
to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages with
legal interest of 12% per cent per annum to be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS,
IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE,
NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT PETITIONER'S MOTION TO
DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION
OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did business under the name
A.M. Bascos Trucking and that said admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was
a common carrier. The respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo
Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this petition that the contract between
her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the contract
as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his
testimony his statement that the contract was a lease contract. 10 She also stated that: she was not catering to the general public. Thus, in her answer
to the amended complaint, she said that she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who
have cargo to move, not to the general public but to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 12 In this case, petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same.
13
But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people and because the private
respondents, plaintiffs in the lower court, did not object to the presentation of affidavits by petitioner where the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil
Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed them as self-serving and petitioner
contests the conclusion. We are bound by the appellate court's factual conclusions. Yet, granting that the said evidence were not self-serving, the
same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what
it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the contract of lease. He who alleges a
fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. 17 Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances when the
presumption of negligence does not attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is applied,
the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the cargo. In De Guzman vs.
Court of Appeals, 20 the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of
Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article
1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force,
is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even
for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with grave or irresistible threat, violence or force. We
believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost
as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24
"Salaysay". However, both the trial court and the Court of Appeals have concluded that these affidavits were not enough to overcome the
presumption. Petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While
it had been admitted in court for lack of objection on the part of private respondent, the respondent Court had discretion in assigning weight to such
evidence. We are bound by the conclusion of the appellate court. In a petition for review on certiorari, We are not to determine the probative value of
evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the
affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned
from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of
the information for carnapping and robbery against the accused named in said affidavits did not necessarily mean that the contents of the affidavits
were true because they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the conclusion that the motion
to lift/dissolve the writ of preliminary attachment has been rendered moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The petition is DISMISSED and the decision of
the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
10.A.F. SANCHEZ BROKERAGE INC V CA and FGU INSURANCE CORPORATION, [G.R. No. 147079. December 21, 2004]
Before this Court on a petition for Certiorari is the appellate courts Decision
[1]
of August 10, 2000 reversing and setting aside the judgment of
Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of respondent FGU Insurance
Corporation (FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany oral
contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to
Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc.
[2]
The Femenal tablets were placed in 124 cartons and the Nordiol tablets were
placed in 20 cartons which were packed together in one (1) LD3 aluminum container, while the Trinordial tablets were packed in two pallets, each of
which contained 30 cartons.
[3]

Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No. 4995 pursuant to Marine Open
Policy No. 138.
[4]

Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),
[5]
it was discharged without
exception
[6]
and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.
[7]

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage
which had been its licensed broker since 1984.
[8]
As its customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage
fees for the cargo and thereafter delivers it to Wyeth-Suaco.
[9]

On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a
receipt for which, Official Receipt No. 016992,
[10]
was issued. On the receipt, another representative of Sanchez Brokerage, M.
Sison,
[11]
acknowledged that he received the cargoes consisting of three pieces in good condition.
[12]

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes
[13]
which were thereupon stripped from the aluminum
containers
[14]
and loaded inside two transport vehicles hired by Sanchez Brokerage.
[15]

Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and Tony Akas,
[16]
employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf
of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for quality control check.
[17]
The
delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery consisted of one container with 144 cartons of Femenal and
Nordiol and 1 pallet containing Trinordiol.
[18]

On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes by affixing his signature on the
delivery receipt.
[19]
Upon inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal
and Nordiol tablets were in bad order.
[20]
He thus placed a note above his signature on the delivery receipt stating that 44 cartons of oral
contraceptives were in bad order. The remaining 160 cartons of oral contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report
[21]
dated July 31, 1992 stating that 41 cartons of Femenal
tablets and 3 cartons of Nordiol tablets were wetted (sic).
[22]

The Elite Surveyors later issued Certificate No. CS-0731-1538/92
[23]
attached to which was an Annexed Schedule whereon it was indicated
that prior to the loading of the cargoes to the brokers trucks at the NAIA, they were inspected and found to be in apparent good condition.
[24]
Also
noted was that at the time of delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account for the wetting of
the 44 cartons of Femenal and Nordiol tablets.
[25]

On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report
[26]
confirming that 38 x 700 blister packs of Femenal tablets, 3 x
700 blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection
[27]
of 38 cartons of Femenal and 3 cartons of Nordiol on the ground
that they were delivered to Hizon Laboratories with heavy water damaged (sic) causing the cartons to sagged (sic) emitting a foul order and easily
attracted flies.
[28]

Wyeth-Suaco later demanded, by letter
[29]
of August 25, 1992, from Sanchez Brokerage the payment of P191,384.25 representing the value of
its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU Insurance which paid Wyeth-Suaco
the amount of P181,431.49 in settlement of its claim under Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt
[30]
in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by letter
[31]
of January 7,
1993, disclaimed liability for the damaged goods, positing that the damage was due to improper and insufficient export packaging; that when the
sealed containers were opened outside the PSI warehouse, it was discovered that some of the loose cartons were wet,
[32]
prompting its (Sanchez
Brokerages) representative Morales to inform the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but
that the latter advised to still deliver them to Hizon Laboratories where an adjuster would assess the damage.
[33]

Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati City against the Sanchez Brokerage.
The trial court, by Decision
[34]
of July 29, 1996, dismissed the complaint, holding that the Survey Report prepared by the Elite Surveyors is
bereft of any evidentiary support and a mere product of pure guesswork.
[35]

On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez Brokerage engaged not only in the business of
customs brokerage but also in the transportation and delivery of the cargo of its clients, hence, a common carrier within the context of Article 1732 of
the New Civil Code.
[36]

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order and condition but were in a damaged
state when delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed negligent and upon it rested the burden of proving
that it exercised extraordinary negligence not only in instances when negligence is directly proven but also in those cases when the cause of the
damage is not known or unknown.
[37]

The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the Court a quo is REVERSED. Another
Decision is hereby rendered in favor of the Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181, 431.49, with interest thereupon at the rate
of 6% per annum, from the date of the Decision of the Court, until the said amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as and by way of attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED.
[38]

Sanchez Brokerages Motion for Reconsideration having been denied by the appellate courts Resolution of December 8, 2000 which was
received by petitioner on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount to abuse of discretion when it found
petitioner a common carrier within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner should have taken was to file a petition for
review on certiorari since the sole office of a writ of certiorari is the correction of errors of jurisdiction including the commission of grave abuse of
discretion amounting to lack or excess of jurisdiction and does not include correction of the appellate courts evaluation of the evidence and factual
findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to overcome the presumption of negligence, it
being documented that petitioner withdrew from the warehouse of PSI the subject shipment entirely in good order and condition.
[39]

The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or
proceedings involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over
the original case.
[40]

The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration of its Decision of August 10, 2000 was
received by petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on or before January 20, 2001, the appellate courts
decision had become final and executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a substitute for the lost
remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not merely reversible error but also grave abuse
of discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial court based on its finding that petitioner is
liable for the damage to the cargo as a common carrier. What petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the
subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of the decision not the jurisdiction of the court to render said
decision the same is beyond the province of a petition for certiorari.
[41]
The supervisory jurisdiction of this Court to issue a cert writ cannot be
exercised in order to review the judgment of lower courts as to its intrinsic correctness, either upon the law or the facts of the case.
[42]

Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil
Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the services the firm offers include the
delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the importer, we prepare the entry
together for processing and claims from customs and finallydeliver the goods to the warehouse of the importer.
[43]

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only
as an ancillary activity.
[44]
The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to
deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733
[45]
of the Civil Code, extraordinary diligence in the
vigilance over the goods it transports according to all the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it
is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence.
[46]

The concept of extra-ordinary diligence was explained in Compania Maritima v. Court of Appeals:
[47]

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 characteristics of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.
[48]

In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and condition;
[49]
and
that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order, as noted in the Delivery
Receipt
[50]
issued by petitioner, and as indicated in the Survey Report of Elite Surveyors
[51]
and the Destruction Report of Hizon Laboratories, Inc.
[52]

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were damaged due to the fault or
negligence of the shipper for failing to properly pack them and to the inherent characteristics of the goods
[53]
; and that it should not be faulted for
following the instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter that some of the
cartons, on examination outside the PSI warehouse, were found to be wet.
[54]

While paragraph No. 4 of Article 1734
[55]
of the Civil Code exempts a common carrier from liability if the loss or damage is due to the
character of the goods or defects in the packing or in the containers, the rule is that if the improper packing is known to the carrier or his employees
or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not
relieved of liability for the resulting damage.
[56]

If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it should naturally have received the
cargo under protest or with reservations duly noted on the receipt issued by PSI. But it made no such protest or reservation.
[57]

Moreover, as observed by the appellate court, if indeed petitioners employees only examined the cargoes outside the PSI warehouse and found
some to be wet, they would certainly have gone back to PSI, showed to the warehouseman the damage, and demanded then and there for Bad Order
documents or a certification confirming the damage.
[58]
Or, petitioner would have presented, as witness, the employees of the PSI from whom
Morales and Domingo took delivery of the cargo to prove that, indeed, part of the cargoes was already damaged when the container was allegedly
opened outside the warehouse.
[59]

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it asserts that some of the cargoes were
already wet on delivery by PSI outside the PSI warehouse but such notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon
Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he failed to specifically declare what time
he received the call. As to whether the call was made at the PSI warehouse when the shipment was stripped from the airport containers, or when the
cargoes were already in transit to Antipolo, it is not determinable. Aside from that phone call, petitioner admitted that it had no documentary
evidence to prove that at the time it received the cargoes, a part of it was wet, damaged or in bad condition.
[60]

The 4-page weather data furnished by PAGASA
[61]
on request of Sanchez Brokerage hardly impresses, no witness having identified it and
interpreted the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were damaged by rainwater while in transit
to Antipolo City is more likely then. Sanchez himself testified that in the past, there was a similar instance when the shipment of Wyeth-Suaco was
also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA were damaged and claimed by the
Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic) up to the bottom are wet specially
during rainy season.
[62]

Since petitioner received all the cargoes in good order and condition at the time they were turned over by the PSI warehouseman, and upon
their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on petitioner to prove that it exercised
extraordinary diligence in the carriage of the goods. It did not, however. Hence, its presumed negligence under Article 1735 of the Civil Code
remains unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
ESTELA L. CRISOSTOMO V CA and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., respondents. [G.R. No. 138334. August
25, 2003]
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]

SO ORDERED.


12. ASIAN TERMINALS, INC. V DAEHAN FIRE AND MARINE INSURANCE CO., LTD G.R. No. 171194

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA) September 14, 2005
Decision
[1]
and December 20, 2005 Resolution
[2]
in CA-G.R. CV No. 83647. The assailed Decision reversed and set aside the Regional Trial Court
(RTC)
[3]
August 4, 2004 Decision
[4]
in Civil Case No. 01-101309, while the assailed resolution denied petitioner Asian Terminals, Inc.s motion for
reconsideration.

The case stemmed from the following facts:

On July 8, 2000, Doosan Corporation (Doosan) shipped twenty-six (26) boxes of printed aluminum sheets on board the vessel Heung-A
Dragon owned by Dongnama Shipping Co., Ltd. (Dongnama).
[5]
The shipment was covered by Bill of Lading No. DNALHMBUMN010010
[6]
and
consigned to Access International, with address at No. 9 Parada St., San Juan, Metro Manila. Doosan insured the subject shipment with respondent
Daehan Fire and Marine Insurance Co., Ltd. under an all-risk marine cargo insurance policy,
[7]
payable to its settling agent in the Philippines, the
Smith Bell & Co., Inc. (Smith Bell).

On July 12, 2000, the vessel arrived in Manila and the containerized van was discharged and unloaded in apparent good condition, as no survey
and exceptions were noted in the Equipment Interchange Receipt (EIR) issued by petitioner.
[8]
The container van was stored in the Container Yard of
the Port. On July 18, 2000, Access International requested
[9]
from petitioner and the licensed Customs Broker, Victoria Reyes Lazo (V. Reyes Lazo),
a joint survey of the shipment at the place of storage in the Container Yard, but no such inspection was conducted.

On July 19, 2000, V. Reyes Lazo withdrew, and petitioner released, the shipment and delivered it to Access Internationals warehouse in
Binondo, Manila.
[10]
While the shipment was at Access Internationals warehouse, the latter, together with its surveyor, Lloyds Agency, conducted
an inspection and noted that only twelve (12) boxes were accounted for, while fourteen (14) boxes were missing.
[11]
Access International thus filed a
claim against petitioner and V. Reyes Lazo for the missing shipment amounting to $34,993.28.
[12]
For failure to collect its claim, Access
International sought indemnification from respondent in the amount of $45,742.81.
[13]
On November 8, 2000, respondent paid the amount of the
claim and Access International accordingly executed a Subrogation Receipt in favor of the former.
[14]


On July 10, 2001, respondent, represented by Smith Bell, instituted the present case against Dongnama, Uni-ship, Inc. (Uni-ship), petitioner,
and V. Reyes Lazo before the RTC.
[15]
Respondent alleged that the losses, shortages and short deliveries sustained by the shipment were caused by
the joint fault and negligence of Dongnama, petitioner and V. Reyes Lazo.

Dongnama and Uni-ship filed a Motion to Dismiss
[16]
on the grounds that Daehan lacked legal capacity to sue and that the complaint stated
no cause of action. The trial court, however, denied the motion in an Order dated August 31, 2001.
[17]


Thereafter, Dongnama and Uni-ship filed their Answer with Counterclaim and Cross-Claim Ad Cautelam denying any liability for the
damages/losses sustained by the shipment, pointing out that it was on a Full Container Load, Said to Contain, and Shippers Load and Count
bases, under which they had no means of verifying the contents of the containers. They also alleged that the container van was properly discharged
from the vessel with seals intact and no exceptions noted. Moreover, they claimed that the losses occurred while the subject shipment was in the
custody, possession or control of the shipper, its trucker, the arrastre operator, or their representatives, or due to the consignees own negligence.
They further questioned the absence of notice of loss within the three (3)-day period provided under the Carriage of Goods by Sea Act. Finally, they
averred that their liability, if there be any, should only be limited to US$500.00 per package or customary freight unit.
[18]


For its part, petitioner denied liability, claiming that it exercised due diligence in handling and storing the subject container van. It,
likewise, assailed the timeliness of the complaint, having been filed beyond the fifteen (15)-day period under its Contract for Cargo Handling
Services with the Philippine Ports Authority (PPA). If at all, petitioner added, its liability should only be limited to P5,000.00.
[19]


In her Answer, V. Reyes Lazo questioned respondents capacity to sue in Philippine courts. She accused respondent of engaging in a
fishing expedition since the latter could not determine with clarity the party at fault.
[20]


On December 2, 2002, in their Joint Motion to Dismiss,
[21]
respondent, on one hand, and Dongnama and Uni-ship, on the other, prayed that
the complaint be dismissed against the latter, alleging that they could not be held liable based on the EIR. The motion was granted on December 9,
2002.
[22]
Consequently, the case proceeded as against petitioner and V. Reyes Lazo.

As no amicable settlement was reached during the pretrial, trial on the merits ensued.

On August 4, 2004, the RTC dismissed the complaint for insufficiency of evidence.
[23]
It found the complaint fatally flawed, having been
signed by a person who had no authority from complainant (respondent herein) corporation to act for and on behalf of the latter.
[24]
The RTC,
likewise, held that respondent failed to prove that the loss/damage of the subject cargoes was due to the fault or negligence of petitioner or V. Reyes
Lazo. It added that the cargoes were damaged when they were already in Access Internationals possession, considering that an inspection was
conducted in the latters warehouse.
[25]


On appeal, the CA reversed and set aside the RTC decision. The dispositive portion of the CA decision reads:

WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision dated August 4,
2004 of the Regional Trial Court of Manila, Branch 21 in Civil Case No. 01-101309 is hereby REVERSED and SET ASIDE. A
new judgment is hereby entered ordering the defendants-appellees Asian Terminals, Inc. and V. Reyes Lazo to pay, jointly and
severally, the plaintiff-appellant Daehan Fire & Marine Insurance Co., Ltd. the sums of P2,295,374.20 with interest at the legal
rate (6% per annum) from the date of the filing of the complaint and P229,537.42 by way of attorneys fees.

No pronouncement as to costs.

SO ORDERED.
[26]



A
pplying the principle of substantial compliance, the CA recognized the validity of respondents complaint after the submission, albeit late, of the
board resolution, indicating the authority of the signatory to represent the corporation.
[27]
Pursuant to the Management Contract between petitioner
and the PPA, the former may not disclaim responsibility for the shortage of the subject cargoes while the container van remained in its custody for
seven (7) days, despite the withdrawal of the subject shipment by the brokers representative without any complaint. Applying E. Razon, Inc. v. Court
of Appeals,
[28]
the CA refused to impose the P5,000.00 limitation, considering that petitioner was aware of the value of the subject goods shown in
the pertinent shipping documents.
[29]
The CA added that petitioner could not disclaim any liability, having refused or ignored Access Internationals
request for a joint survey at the time when the goods were still in the possession and custody of the former.
[30]
Lastly, V. Reyes Lazo was also made
liable jointly and severally with petitioner in negligently withdrawing the container van from the premises of the pier, notwithstanding Access
Internationals request for a joint survey.
[31]


Aggrieved, petitioner comes before us in this petition for review on certiorari, raising the following issues:

1. WHETHER OR NOT PETITIONER ATI IS LIABLE FOR THE LOSS TO THE SUBJECT SHIPMENT
NOTWITHSTANDING THE ACKNOWLEDGMENT BY THE CONSIGNEES BROKER/REPRESENTATIVE IN THE
EQUIPMENT INTERCHANGE RECEIPT THAT THE SHIPMENT WAS RECEIVED IN GOOD ORDER AND WITHOUT
EXCEPTION.

2. WHAT IS THE EXTENT OF PETITIONER ATIS LIABILITY, IF ANY?
[32]

Simply put, we are tasked to determine the propriety of making petitioner, as arrastre operator, liable for the loss of the subject shipment,
and if so, the extent of its liability.

Petitioner denies liability for the loss of the subject shipment, considering that the consignees representative signified receipt of the goods
in good order without exception. This being the case, respondent, as subrogee, is bound by such acknowledgment. As to the extent of its liability, if
there be any, petitioner insists that it be limited to P5,000.00 per package, as provided for in its Management Contract with the PPA.
[33]


We do not agree with petitioner.

Respondent, as insurer, was subrogated to the rights of the consignee, pursuant to the subrogation receipt executed by the latter in favor of
the former. The relationship, therefore, between the consignee and the arrastre operator must be examined. This relationship is akin to that existing
between the consignee and/or the owner of the shipped goods and the common carrier, or that between a depositor and a warehouseman.
[34]
In the
performance of its obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a
warehouseman. Being the custodian of the goods discharged from a vessel, an arrastre operators duty is to take good care of the goods and to turn
them over to the party entitled to their possession.
[35]


The loss of 14 out of 26 boxes of printed aluminum sheets is undisputed. It is, likewise, settled that Dongnama (the shipping company) and
Uni-ship were absolved from liability because respondent realized that they had no liability based on the EIR issued by Dongnama. This resulted in
the withdrawal of the complaint against them. What remained was the complaint against petitioner as the arrastre operator and V. Reyes Lazo as the
customs broker. Records show that the subject shipment was discharged from the vessel and placed under the custody of petitioner for a period of
seven (7) days. Thereafter, the same was withdrawn from the container yard by the customs broker, then delivered to the consignee. It was after
such delivery that the loss of 14 boxes was discovered. Hence, the complaint against both the arrastre operator and the customs broker.

In a claim for loss filed by the consignee (or the insurer), the burden of proof to show compliance with the obligation to deliver the goods
to the appropriate party devolves upon the arrastre operator. Since the safekeeping of the goods is its responsibility, it must prove that the losses were
not due to its negligence or to that of its employees.
[36]
To prove the exercise of diligence in handling the subject cargoes, petitioner must do more
than merely show the possibility that some other party could be responsible for the loss or the damage. It must prove that it exercised due care in the
handling thereof.
[37]
Petitioner failed to do this. Instead, it insists that it be exonerated from liability, because the customs brokers representative
received the subject shipment in good order and condition without exception. The appellate courts conclusion on this matter is instructive:

ATI may not disclaim responsibility for the shortage/pilferage of fourteen (14) boxes of printed aluminum sheet while the
container van remained in its custody for seven (7) days (at the Container Yard) simply because the alleged representative of the
customs broker had withdrawn the shipment from its premises and signed the EIR without any complaint. The signature of the
person/broker representative merely signifies that said person thereby frees the ATI from any liability for loss or damage to the
cargo so withdrawn while the same was in the custody of such representative to whom the cargo was released. It does not
foreclose any remedy or right of the consignee to prove that any loss or damage to the subject shipment occurred while the same
was under the custody, control and possession of the arrastre operator.
[38]



Clearly, petitioner cannot be excused from culpability simply because another person could be responsible for the loss. This is especially true
in the instant case because, while the subject shipment was in petitioners custody, Access International requested
[39]
that a joint survey be conducted
at the place of storage. And as correctly observed by the CA:

There is no dispute that it was the customs broker who in behalf of the consignee took delivery of the subject shipment
from the arrastre operator. However, the trial court apparently disregarded documentary evidence showing that the consignee
made a written request on both the appellees ATI and V. Reyes Lazo for a joint survey of the container van on July 18,
2000 while the same was still in the possession, control and custody of the arrastre operator at the Container Yard of the
pier. Both ATI and Lazo merely denied being aware of the letters (Exhibits M and N). The fact remains that the consignee
complained of short-delivery and while inspection of the cargo was made only at its warehouse after delivery by the customs
broker, the arrastre ATI together with said broker both refused or ignored the written request for a joint survey at the premises of
the arrastre. Instead of complying with the consignees demand, the broker withdrew and the arrastre released the shipment the
very next day,July 19, 2000 without even acting upon the consignees request for a joint survey.
[40]



Moreover, it was shown in the Survey Report prepared by Access Internationals surveyor that petitioner was remiss in its obligations to
handle the goods with due care and to ensure that they reach the proper party in good order as to quality and quantity. Specifically, the Survey Report
states:




DELIVERY

On July 19, 2000, V. Reyes-Lazo (Licensed Customs Broker) effected delivery of the 1 x 20 Van Container from the Container
Yard of said port to the Consignees designated warehouse at No. 622 Asuncion Street, Binondo, Manila.

Prior to withdrawal from the said port, the Brokers representative noticed that the padlock secured to the doors of the Van
Container was forcibly pulled-out resulting to its breakage. He then immediately informed the Arrastre Contractors (ATI) and
requested that Van Container be opened and inventory of its contents be made as he suspected the contents might have been
pilfered.

However, his request was denied averring that stripping of FCL Van Containers are not allowed inside the Customs Zone. As
all efforts exerted proved futile, he instead bought new padlock and secured same to the Van. He then informed the Consignee
about the incident upon delivery of the Container at the Consignees designated warehouse, who immediately requested for
survey.
[41]


Considering that both petitioner and V. Reyes Lazo were negligent in the performance of their duties in the handling, storage and delivery
of the subject shipment to the consignee, resulting in the loss of 14 boxes of printed aluminum sheets, both shall be solidarily liable for such loss.

As to the extent of petitioners liability, we cannot sustain its contention that it be limited to P5,000.00 per package. Petitioners
responsibility and liability for losses and damages are set forth in Section 7.01 of the Management Contract drawn between the PPA and the Marina
Port Services, Inc., petitioners predecessor-in-interest, to wit:

CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES

Section 7.01. Responsibility and Liability for Losses and Damages; Exceptions. The CONTRACTOR shall, at its own
expense, handle all merchandise in all work undertaken by it, hereunder, diligently and in a skillful, workman-like and efficient
manner. The CONTRACTOR shall be solely responsible as an independent contractor, and hereby agrees to accept liability and
to pay to the shipping company, consignees, consignors or other interested party or parties for the loss, damage or non-delivery
of cargoes in its custody and control to the extent of the actual invoice value of each package which in no case shall be more than
FIVE THOUSAND PESOS (P5,000.00) each, unless the value of the cargo shipment is otherwise specified or manifested or
communicated in writing together with the declared Bill of Lading value and supported by a certified packing list to the
CONTRACTOR by the interested party or parties before the discharge or loading unto vessel of the goods. This amount of Five
Thousand Pesos (P5,000.00) per package may be reviewed and adjusted by the AUTHORITY from time to time. The
CONTRACTOR shall not be responsible for the condition or the contents of any package received, nor for the weight nor for any
loss, injury or damage to the said cargo before or while the goods are being received or remains in the piers, sheds, warehouses or
facility, if the loss, injury or damage is caused by force majeure or other causes beyond the CONTRACTORS control or
capacity to prevent or remedy; PROVIDED that a formal claim together with the necessary copies of Bill of Lading, Invoice,
Certified Packing List and Computation arrived at covering the loss, injury or damage or non-delivery of such goods shall have
been filed with the CONTRACTOR within fifteen (15) days from day of issuance by the CONTRACTOR of a certificate of non-
delivery; PROVIDED, however, that if said CONTRACTOR fails to issue such certification within fifteen (15) days from receipt
of a written request by the shipper/consignee or his duly authorized representative or any interested party, said certification shall
be deemed to have been issued, and thereafter, the fifteen (15) day period within which to file the claim commences;
PROVIDED, finally, that the request for certification of loss shall be made within thirty (30) days from the date of delivery of the
package to the consignee.

x x x x

The CONTRACTOR shall be solely responsible for any and all injury or damage that may arise on account of the
negligence or carelessness of the CONTRACTOR, its agent or employees in the performance of the undertaking under the
Contract. Further, the CONTRACTOR hereby agrees to hold free the AUTHORITY, at all times, from any claim that may be
instituted by its employee by reason of the provisions of the Labor Code, as amended.
[42]



As clearly stated above, such limitation does not apply if the value of the cargo shipment is communicated to the arrastre operator before the
discharge of the cargoes.
It is undisputed that Access International, upon arrival of the shipment, declared the same for taxation purposes, as well as for the
assessment of arrastre charges and other fees. For the purpose, the invoice, packing list and other shipping documents were presented to the Bureau
of Customs as well as to petitioner for the proper assessment of the arrastre charges and other fees. Such manifestation satisfies the condition of
declaration of the actual invoices of the value of the goods before their arrival, to overcome the limitation on the liability of the arrastre
operator.
[43]
Then, the arrastre operator, by reason of the payment to it of a commensurate charge based on the higher declared value of the
merchandise, could and should take extraordinary care of the special or valuable cargo.
[44]
What would, indeed, be unfair and arbitrary is to hold the
arrastre operator liable for the full value of the merchandise after the consignee has paid the arrastre charges only on a basis much lower than the true
value of the goods.
[45]


What is essential is knowledge beforehand of the extent of the risk to be undertaken by the arrastre operator, as determined by the value of the
property committed to its care. This defines its responsibility for loss of or damage to such cargo and ascertains the compensation commensurate to
such risk assumed. Having been duly informed of the actual invoice value of the merchandise under its custody and having received payment of
arrastre charges based thereon, petitioner cannot therefore insist on a limitation of its liability under the contract to less than the value of each lost
cargo.
[46]


The stipulation requiring the consignee to inform the arrastre operator and to give advance notice of the actual invoice value of the goods to be
put in its custody is adopted for the purpose of determining its liability, that it may obtain compensation commensurate to the risk it assumes, not for
the purpose of determining the degree of care or diligence it must exercise as a depositary or warehouseman.
[47]


WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit. The Court of Appeals September 14, 2005 Decision
and December 20, 2005Resolution in CA-G.R. CV No. 83647 are AFFIRMED.


13. SPS TEODORO & NANETTE PERENA V SPS TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, &
CA - G.R. No. 157917. August 29, 2012
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the conduct of his
business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if
the deceased passenger may only be an unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision promulgated on November 13,
2002, by which the Court of Appeals (CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court
(RTC), Branch 260, in Paraaque City that had decreed them jointly and severally liable with Philippine National Railways (PNR), their co-
defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting students from their respective residences in Paraaque City to Don Bosco in Pasong Tamo,
Makati City, and back. In their business, the Pereas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14
students at a time, two of whom would be seated in the front beside the driver, and the others in the rear, with six students on either side. They
employed Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On August 22, 1996, as on previous school days, the van
picked Aaron up around 6:00 a.m. from the Zarates residence. Aaron took his place on the left side of the van near the rear door. The van, with its
air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that
the students were due at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the Magallanes Interchange that
was then commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of construction
materials and parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other
responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the
vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its left
side. The train blew its horn to warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was imminent. The passenger bus
successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact threw nine of the 12
students in the rear, including Aaron, out of the van. Aaron landed in the path of the train, which dragged his body and severed his head,
instantaneously killing him. Alano fled the scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against Alfaro, the Pereas, PNR and Alano.
The Pereas and PNR filed their respective answers, with cross-claims against each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Perea for the adequate and safe transportation carriage of the former spouses' son
from their residence in Paraaque to his school at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son of spouses Zarate died in
connection with a vehicular/train collision which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Perea,
then driven and operated by the latter's employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around
6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad crossing used by motorists for
crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs and railings at the site
commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private vehicles used on a daily basis the site of the collision
as an alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on board the commuter train involved without waiting for the police
investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator for railroad crossing at the
time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the former and its project
contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence constituting the proximate
cause of the vehicular collision, which resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Perea being the employer of defendant Alfaro are liable for any negligence which may be
attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable for negligence in failing to
provide adequate safety warning signs and railings in the area commonly used by motorists for railroad crossings, constituting the
proximate cause of the vehicular collision which resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Perea are liable for breach of the contract of carriage with plaintiff-spouses in failing to provide
adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the accident, in allowing or tolerating
the motoring public to cross, and its failure to install safety devices or equipment at the site of the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever amount the latter may be held
answerable or which they may be ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the latter in their Complaint by
reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages and attorney's fees.
2

The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on
quasi-delict under Article 2176, Civil Code.
In their defense, the Pereas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and
supervision of Alfaro, by making sure that Alfaro had been issued a drivers license and had not been involved in any vehicular accident prior to the
collision; that their own son had taken the van daily; and that Teodoro Perea had sometimes accompanied Alfaro in the vans trips transporting the
students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first
stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,
3
disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and
severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorneys fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for reconsideration,
4
reiterating that the cooperative gross negligence of the Pereas and PNR
had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established
circumstances.
The CAs Ruling
Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:
5

The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with defendant-appellants spouses
Teodorico and Nanette Perea and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and
damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming documentary evidence on
record, supporting the case of defendants-appellants Philippine National Railways.
The Pereas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary damages and attorneys fees with
the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereas against the Philippine National Railways and in not holding the latter and
its train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorneys fees.
The trial court erred in awarding damages in the form of deceaseds loss of earning capacity in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral damages to P 2,500,000.00; and
deleted the attorneys fees because the RTC did not state the factual and legal bases, to wit:
6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Paraaque City is AFFIRMED with the
modification that the award of Actual Damages is reduced to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for Attorneys
Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company,
7
wherein the Court gave the heirs of Cariaga a sum representing the loss of the deceaseds earning capacity despite
Cariaga being only a medical student at the time of the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 (the age when he would have
graduated from college and started working for his own livelihood) instead of 15 years (his age when he died). Considering that the nature of his
work and his salary at the time of Aarons death were unknown, it used the prevailing minimum wage of P 280.00/day to compute Aarons gross
annual salary to beP 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aarons life expectancy of 39.3 years, his
gross income would aggregate to P 4,351,164.30, from which his estimated expenses in the sum ofP 2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aarons computed net income turning out to be higher than the amount claimed by the Zarates,
only P 2,109,071.00, the amount expressly prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereas motion for reconsideration.
8

Issues
In this appeal, the Pereas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly and severally liable to pay damages with Philippine
National Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial courts decision awarding damages for loss of earning capacity of a minor who was only a high school
student at the time of his death in the absence of sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereas and the PNR, basing their claim against the Pereas on breach of
contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereas defense was that they exercised the diligence of a good father of the family in the selection and supervision of Alfaro, the
van driver, by seeing to it that Alfaro had a drivers license and that he had not been involved in any vehicular accident prior to the fatal collision
with the train; that they even had their own son travel to and from school on a daily basis; and that Teodoro Perea himself sometimes accompanied
Alfaro in transporting the passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereas operated as a common carrier; and that their standard of
care was extraordinary diligence, not the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually regarded as a private carrier,
9
primarily because he only caters to
some specific or privileged individuals, and his operation is neither open to the indefinite public nor for public use, the exact nature of the operation
of a school bus service has not been finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another, gratuitously or for hire. The
carrier is classified either as a private/special carrier or as a common/public carrier.
10
A private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes, by special
agreement in a particular instance only, to transport goods or persons from one place to another either gratuitously or for hire.
11
The provisions on
ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a private carrier is only ordinary, that is, the
diligence of a good father of the family. In contrast, a common carrier is a 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 such services to the public.
12
Contracts of
common carriage are governed by the provisions on common carriers of the Civil Code, the Public Service Act,
13
and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of
the loss of the effects of passengers, or the death or injuries to passengers.
14

In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco,
15
viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged individuals, but is open to the
indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not
only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public
benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in
general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The true criterion by which to judge the character of the use is whether the public may enjoy it by
right or only by permission.
In De Guzman v. Court of Appeals,
16
the Court noted that Article 1732 of the Civil Code avoided any distinction between a person or an enterprise
offering transportation on a regular or an isolated basis; and has not distinguished a carrier offering his services to the general public, that is, the
general community or population, from one offering his services only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the notion of public service under the
Public Service Act, which supplements the law on common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of
the Public Service Act, 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
clientle, whether permanent or occasional, and done for the 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, 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.
17

Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common carriers pipeline operators,
18
custom
brokers and warehousemen,
19
and barge operators
20
even if they had limited clientle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually transacted, or the number and
character of the conveyances used in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to
the general public as his business or occupation. If the undertaking is a single transaction, not a part of the general business or occupation engaged in,
as advertised and held out to the general public, the individual or the entity rendering such service is a private, not a common, carrier. The question
must be determined by the character of the business actually carried on by the carrier, not by any secret intention or mental reservation it may
entertain or assert when charged with the duties and obligations that the law imposes.
21

Applying these considerations to the case before us, there is no question that the Pereas as the operators of a school bus service were: (a) engaged in
transporting passengers generally as a business, not just as a casual occupation; (b) undertaking to carry passengers over established roads by the
method by which the business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientle, the Pereas operated as a
common carrier because they held themselves out as a ready transportation indiscriminately to the students of a particular school living within or near
where they operated the service and for a fee.
The common carriers standard of care and vigilance as to the safety of the passengers is defined by law. Given the nature of the business and for
reasons of public policy, the common carrier is 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."
22
Article 1755 of the Civil Code specifies that the common carrier
should "carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances." To successfully fend off liability in an action upon the death or injury to a passenger, the common carrier must
prove his or its observance of that extraordinary diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would
stand.
23
No device, whether by stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of
the common carrier as defined under Article 1755 of the Civil Code.
24

And, secondly, the Pereas have not presented any compelling defense or reason by which the Court might now reverse the CAs findings on their
liability. On the contrary, an examination of the records shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereas, acting as a common carrier, were already presumed to be negligent at the time of the accident because death had
occurred to their passenger.
25
The presumption of negligence, being a presumption of law, laid the burden of evidence on their shoulders to establish
that they had not been negligent.
26
It was the law no less that required them to prove their observance of extraordinary diligence in seeing to the safe
and secure carriage of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible for the
death of Aaron and thus to be held liable for all the natural consequences of such death.
There is no question that the Pereas did not overturn the presumption of their negligence by credible evidence. Their defense of having observed the
diligence of a good father of a family in the selection and supervision of their driver was not legally sufficient. According to Article 1759 of the Civil
Code, their liability as a common carrier did not cease upon proof that they exercised all the diligence of a good father of a family in the selection and
supervision of their employee. This was the reason why the RTC treated this defense of the Pereas as inappropriate in this action for breach of
contract of carriage.
The Pereas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope of his authority or even in
violation of the orders of the common carrier.
27
In this connection, the records showed their drivers actual negligence. There was a showing, to begin
with, that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists going into the Makati area to cross the
railroad tracks. Although that point had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into
taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his passengers but he still
disregarded the risks. Compounding his lack of care was that loud music was playing inside the air-conditioned van at the time of the accident. The
loudness most probably reduced his ability to hear the warning horns of the oncoming train to allow him to correctly appreciate the lurking dangers
on the railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost
his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate his chances of beating the bus in
their race, and of getting clear of the train. As a result, the bus avoided a collision with the train but the van got slammed at its rear, causing the
fatality. Lastly, he did not slow down or go to a full stop before traversing the railroad tracks despite knowing that his slackening of speed and going
to a full stop were in observance of the right of way at railroad tracks as defined by the traffic laws and regulations.
28
He thereby violated a specific
traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent.
29

The omissions of care on the part of the van driver constituted negligence,
30
which, according to Layugan v. Intermediate Appellate Court,
31
is "the
omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do,
or the doing of something which a prudent and reasonable man would not do,
32
or as Judge Cooley defines it, (t)he failure to observe for the
protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such
other person suffers injury."
33

The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading case of Picart v. Smith,
34
thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as follows: 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. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before
him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability
by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of course be always determined in the light of human
experience and in view of the facts involved in the particular case. Abstract speculation cannot here be of much value but this much can be profitably
said: Reasonable men govern their conduct by the circumstances which are before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only when there is something before them to suggest or warn of danger. Could a
prudent man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always
necessary before negligence can be held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another
was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent when he traversed the railroad tracks at a point not
allowed for a motorists crossing despite being fully aware of the grave harm to be thereby caused to his passengers; and when he disregarded the
foresight of harm to his passengers by overtaking the bus on the left side as to leave himself blind to the approach of the oncoming train that he knew
was on the opposite side of the bus.
Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court,
35
where the Court held the PNR solely liable for the damages
caused to a passenger bus and its passengers when its train hit the rear end of the bus that was then traversing the railroad crossing. But the
circumstances of that case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court, no evidence of
contributory negligence was adduced against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the Pereas and the PNR.
Another distinction is that the passenger bus in Philippine National Railways v. Intermediate Appellate Court was traversing the dedicated railroad
crossing when it was hit by the train, but the Pereas school van traversed the railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally" liable for damages arising from the death of Aaron.
They had been impleaded in the same complaint as defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the
alternative, in respect to or arising out of the accident, and questions of fact and of law were common as to the Zarates.
36
Although the basis of the
right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereas was distinct from the basis of the Zarates right to relief against
the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally liable by virtue of their respective
negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence despite the school van of
the Pereas traversing the railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR
did not ensure the safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to prevent
vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been assigned to man that point from 7 a.m. to
5 p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to control the vehicular and other traffic there. Verily,
the Pereas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the RTC on the liability, the CA modified the amount.
Both lower courts took into consideration that Aaron, while only a high school student, had been enrolled in one of the reputable schools in the
Philippines and that he had been a normal and able-bodied child prior to his death. The basis for the computation of Aarons earning capacity was not
what he would have become or what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his
death. Moreover, the RTCs computation of Aarons life expectancy rate was not reckoned from his age of 15 years at the time of his death, but on 21
years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully warranted.
Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and unfounded.1wphi1 They cited People v. Teehankee,
Jr.,
37
where the Court deleted the indemnity for victim Jussi Leinos loss of earning capacity as a pilot for being speculative due to his having
graduated from high school at the International School in Manila only two years before the shooting, and was at the time of the shooting only
enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that
he was for all intents and purposes only a high school graduate.
We reject the Pereas submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to that of Aaron here. The CA and
the RTC were not speculating that Aaron would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a
lawyer). Instead, the computation of Aarons earning capacity was premised on him being a lowly minimum wage earner despite his being then
enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and in favor of the defendants whose
negligence not only cost Aaron his life and his right to work and earn money, but also deprived his parents of their right to his presence and his
services as well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs
of the deceased, and shall in every case be assessed and awarded by the court "unless the deceased on account of permanent physical disability not
caused by the defendant, had no earning capacity at the time of his death."
38
Accordingly, we emphatically hold in favor of the indemnification for
Aarons loss of earning capacity despite him having been unemployed, because compensation of this nature is awarded not for loss of time or
earnings but for loss of the deceaseds power or ability to earn money.
39

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
Company,
40
fourth-year medical student Edgardo Carriagas earning capacity, although he survived the accident but his injuries rendered him
permanently incapacitated, was computed to be that of the physician that he dreamed to become. The Court considered his scholastic record
sufficient to justify the assumption that he could have finished the medical course and would have passed the medical board examinations in due
time, and that he could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez,
41
the Court opined that murder
and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time, and
that their jobs would probably pay them high monthly salaries from P 10,000.00 to P 15,000.00 upon their graduation. Their earning capacities were
computed at rates higher than the minimum wage at the time of their deaths due to their being already senior agriculture students of the University of
the Philippines in Los Baos, the countrys leading educational institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective amounts of P 2,500,000.00
and P 1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and reasonable under the established circumstances of this case because they were intended by
the law to assuage the Zarates deep mental anguish over their sons unexpected and violent death, and their moral shock over the senseless accident.
That amount would not be too much, considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given the passage of a long time
from when their mental anguish was inflicted on them on August 22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective the desired example for the
public good. As a common carrier, the Pereas needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent
a similarly senseless accident from happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and
others similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13, 2002; and ORDER the
petitioners to pay the costs of suit.
SO ORDERED.