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G.R. No.

L-36481-2 October 23, 1982


AMPARO
C.
SERVANDO,
CLARA
UY
BICO,
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.

plaintiffs-appellees,

Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo Servando.


Benedicto, Sumbingco & Associate for appellee Clara Uy Bico.
Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.

ESCOLIN, J.:
This appeal, originally brought to the Court of Appeals, seeks to set aside the decision of the
Court of First Instance of Negros Occidental in Civil Cases Nos. 7354 and 7428, declaring
appellant Philippine Steam Navigation liable for damages for the loss of the appellees' cargoes as
a result of a fire which gutted the Bureau of Customs' warehouse in Pulupandan, Negros
Occidental.
The Court of Appeals certified the case to Us because only pure questions of law are raised
therein.
The facts culled from the pleadings and the stipulations submitted by the parties are as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the
appellant's vessel, FS-176, for carriage from Manila to Pulupandan, Negros Occidental, the
following cargoes, to wit:
Clara Uy Bico
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando
44 cartons of colored paper,
toys and general merchandise valued at P1,070.50;
as evidenced by the corresponding bills of lading issued by the appellant.

Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes
were discharged, complete and in good order, unto the warehouse of the Bureau of Customs. At
about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of unknown
origin, destroying appellees' cargoes. Before the fire, however, appellee Uy Bico was able to take

delivery of 907 cavans of rice 2 Appellees' claims for the value of said goods were rejected by the
appellant.
On the bases of the foregoing facts, the lower court rendered a decision, the decretal portion of
which reads as follows:
WHEREFORE, judgment is rendered as follows:
1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C.
Servando the aggregate sum of P1,070.50 with legal interest thereon from the date
of the filing of the complaint until fully paid, and to pay the costs.
2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico
the aggregate sum of P16,625.00 with legal interest thereon from the date of the
filing of the complaint until fully paid, and to pay the costs.
Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary
diligence from the moment the goods are unconditionally placed in their possession "until the
same are delivered, actually or constructively, by the carrier to the consignee or to the person
who has a right to receive them, without prejudice to the provisions of Article 1738. "
The court a quo held that the delivery of the shipment in question to the warehouse of the
Bureau of Customs is not the delivery contemplated by Article 1736; and since the burning of the
warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss
is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for the cargoes in question,
the parties agreed to limit the responsibility of the carrier for the loss or damage that may be
caused to the shipment by inserting therein the following stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to shipments billed
'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall
carrier be responsible for loss or damage caused by force majeure, dangers or
accidents of the sea or other waters; war; public enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is nothing therein that is contrary to law,
morals or public policy.
Appellees would contend that the above stipulation does not bind them because it was printed in
fine letters on the back-of the bills of lading; and that they did not sign the same. This argument
overlooks the pronouncement of this Court in Ong Yiu vs. Court of Appeals, promulgated June 29,
1979, 3 where the same issue was resolved in this wise:
While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is
nevertheless bound by the provisions thereof. 'Such provisions have been held to be
a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation'. It is what is
known as a contract of 'adhesion', in regards which it has been said that contracts
of adhesion wherein one party imposes a ready made form of contract on the other,

as the plane ticket in the case at bar, are contracts not entirely prohibited. The one
who adheres to the contract is in reality free to reject it entirely; if he adheres, he
gives his consent." (Tolentino, Civil Code, Vol. IV, 1962 Ed., p. 462, citing Mr. Justice
J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic
principle of law written in Article 1 1 7 4 of the Civil Code:
Article 1174. Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss,
the obligor is exempt from liability for non-performance. The Partidas, 4 the antecedent of Article
1174 of the Civil Code, defines 'caso fortuito' as 'an event that takes place by accident and could
not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck,
violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a
legal sense and, consequently, also in relation to contracts, a 'caso fortuito' presents the
following essential characteristics: (1) the cause of the unforeseen and unexpected occurrence,
or of the failure of the debtor to comply with his obligation, must be independent of the human
will; (2) it must be impossible to foresee the event which constitutes the 'caso fortuito', or if it
can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be
free from any participation in the aggravation of the injury resulting to the creditor." In the case
at bar, the burning of the customs warehouse was an extraordinary event which happened
independently of the will of the appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred in delay in the performance
of its obligation. It appears that appellant had not only notified appellees of the arrival of their
shipment, but had demanded that the same be withdrawn. In fact, pursuant to such demand,
appellee Uy Bico had taken delivery of 907 cavans of rice before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence. The storage of the goods in
the Customs warehouse pending withdrawal thereof by the appellees was undoubtedly made
with their knowledge and consent. Since the warehouse belonged to and was maintained by the
government, it would be unfair to impute negligence to the appellant, the latter having no
control whatsoever over the same.
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6,
where this Court held the defendant liable for damages arising from a fire caused by the
negligence of the defendant's employees while loading cases of gasoline and petroleon products.
But unlike in the said case, there is not a shred of proof in the present case that the cause of the
fire that broke out in the Custom's warehouse was in any way attributable to the negligence of
the appellant or its employees. Under the circumstances, the appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No costs.

SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Guerrero, Abad Santos and De Castro, JJ., concur.

Separate Opinions

AQUINO, J., concurring:


I concur. Under article 1738 of the Civil Code "the extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored in the warehouse of the
carrier at the place of destination, until the consignee has been advised of the arrival of the
goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of
them".
From the time the goods in question were deposited in the Bureau of Customs' warehouse in the
morning of their arrival up to two o' clock in the afternoon of the same day, when the warehouse
was burned, Amparo C. Servando and Clara Uy Bico, the consignees, had reasonable opportunity
to remove the goods. Clara had removed more than one-half of the rice consigned to her.
Moreover, the shipping company had no more control and responsibility over the goods after
they were deposited in the customs warehouse by the arrastre and stevedoring operator.
No amount of extraordinary diligence on the part of the carrier could have prevented the loss of
the goods by fire which was of accidental origin.
Under those circumstances, it would not be legal and just to hold the carrier liable to the
consignees for the loss of the goods. The consignees should bear the loss which was due to a
fortuitous event.

Separate Opinions
AQUINO, J., concurring:
I concur. Under article 1738 of the Civil Code "the extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored in the warehouse of the
carrier at the place of destination, until the consignee has been advised of the arrival of the
goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of
them".

From the time the goods in question were deposited in the Bureau of Customs' warehouse in the
morning of their arrival up to two o' clock in the afternoon of the same day, when the warehouse
was burned, Amparo C. Servando and Clara Uy Bico, the consignees, had reasonable opportunity
to remove the goods. Clara had removed more than one-half of the rice consigned to her.
Moreover, the shipping company had no more control and responsibility over the goods after
they were deposited in the customs warehouse by the arrastre and stevedoring operator.
No amount of extraordinary diligence on the part of the carrier could have prevented the loss of
the goods by fire which was of accidental origin.
Under those circumstances, it would not be legal and just to hold the carrier liable to the
consignees for the loss of the goods. The consignees should bear the loss which was due to a
fortuitous event.

G.R. No. 94761 May 17, 1993


MAERSK
LINE,
petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under the name and style
of Ethegal Laboratories, respondents.
Bito, Lozada, Ortega & Castillo for petitioner.
Humberto A. Jambora for private respondent.

BIDIN, J.:
Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the
Philippines through its general agent Compania General de Tabacos de Filipinas.
Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a
firm engaged in the manutacture of pharmaceutical products.

On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its
(Eli Lilly, Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. The capsules were placed in six (6) drums of
100,000 capsules each valued at US $1,668.71.
Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder of Exhibits, pp. 5-6),
the shipper Eli Lilly, Inc. of Puerto Rico advised private respondent as consignee that the 600,000
empty gelatin capsules in six (6) drums of 100,000 capsules each, were already shipped on
board MV "Anders Maerskline" under Voyage No. 7703 for shipment to the Philippines via
Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be
April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia,
USA and then transported back Oakland, Califorilia. The goods finally arrived in the Philippines on
June 10, 1977 or after two (2) months from the date specified in the memorandum. As a
consequence, private respondent as consignee refused to take delivery of the goods on account
of its failure to arrive on time.
Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed
an action before the court a quo for rescission of contract with damages against petitioner and
Eli Lilly, Inc. as defendants.
Denying that it committed breach of contract, petitioner alleged in its that answer that the
subject shipment was transported in accordance with the provisions of the covering bill of lading
and that its liability under the law on transportation of good attaches only in case of loss,
destruction or deterioration of the goods as provided for in Article 1734 of Civil Code (Rollo, p.
16).
Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and cross-claim. In
its cross-claim, it alleged that the delay in the arrival of the the subject merchandise was due
solely to the gross negligence of petitioner Maersk Line.
The issues having been joined, private respondent moved for the dismissal of the complaint
against Eli Lilly, Inc.on the ground that the evidence on record shows that the delay in the
delivery of the shipment was attributable solely to petitioner.
Acting on private respondent's motion, the trial court dismissed the complaint against Eli Lilly,
Inc. Correspondingly, the latter withdraw its cross-claim against petitioner in a joint motion dated
December 3, 1979.
After trial held between respondent and petitioner, the court a quo rendered judgment dated
January 8, 1982 in favor of respondent Castillo, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, this Court believe (sic) and so hold (sic) that there was
a breach in the performance of their obligation by the defendant Maersk Line
consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which
under their own memorandum shipment would arrive in the Philippines on April 3,
1977 which under Art. 1170 of the New Civil Code, they stood liable for damages.

Considering that the only evidence presented by the defendant Maersk line thru its
agent the Compania de Tabacos de Filipinas is the testimony of Rolando Ramirez
who testified on Exhs. "1" to "5" which this Court believe (sic) did not change the
findings of this Court in its decision rendered on September 4, 1980, this Court
hereby renders judgment in favor of the plaintiff Efren Castillo as against the
defendant Maersk Line thru its agent, the COMPANIA GENERAL DE TABACOS DE
FILIPINAS and ordering:
(a) Defendant to pay the plaintiff Efren V. Castillo the amount of THREE HUNDRED
SIXTY NINE THOUSAND PESOS, (P369,000.00) as unrealized profit;.
(b) Defendant to pay plaintiff the sum of TWO HUNDRED THOUSAND PESOS
(P200,000.00), as moral damages;
(c) Defendant to pay plaintiff the sum of TEN THOUSAND PESOS (P10,000.00) as
exemplary damages;
(d) Defendant to pay plaintiff the sum of ELEVEN THOUSAND SIX HUNDRED EIGHTY
PESOS AND NINETY SEVEN CENTAVOS (P11,680.97) as cost of credit line; and
(e) Defendant to pay plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00), as
attorney's fees and to pay the costs of suit.
That the above sums due to the plaintiff will bear the legal rate of interest until they
are fully paid from the time the case was filed.
SO ORDERED. (AC-GR CV No. 10340, Rollo, p. 15).
On appeal, respondent court rendered its decision dated August 1, 1990 affirming with
modifications the lower court's decision as follows:
WHEREFORE, the decision appealed from is affirmed with a modification, and, as
modified, the judgment in this case should read as follows:
Judgment is hereby rendered ordering defendant-appellant Maersk Line to pay
plaintiff-appellee (1) compensatory damages of P11,680.97 at 6% annual interest
from filing of the complaint until fully paid, (2) moral damages of P50,000.00, (3)
exemplary damages of P20,000,00, (3) attorney's fees, per appearance fees, and
litigation expenses of P30,000.00, (4) 30% of the total damages awarded except
item (3) above, and the costs of suit.
SO ORDERED. (Rollo, p. 50)
In its Memorandum, petitioner submits the following "issues" for resolution of the court :
I

Whether or not the respondent Court of Appeals committed an error when it ruled
that a defendant's cross-claim against a co-defendant survives or subsists even
after the dismissal of the complaint against defendant-cross claimant.
II
Whether or not respondent Castillo is entitled to damages resulting from delay in
the delivery of the shipment in the absence in the bill of lading of a stipulation on
the period of delivery.
III
Whether or not the respondent appellate court erred in awarding actual, moral and
exemplary damages and attorney's fees despite the absence of factual findings
and/or legal bases in the text of the decision as support for such awards.
IV
Whether or not the respondent Court of Appeals committed an error when it
rendered an ambiguous and unexplained award in the dispositive portion of the
decision which is not supported by the body or the text of the decision. (Rollo,
pp.94-95).
With regard to the first issue raised by petitioner on whether or not a defendant's cross-claim
against co-defendant (petitioner herein) survives or subsists even after the dismissal of the
complaint against defendant-cross-claimant (petitioner herein), we rule in the negative.
Apparently this issue was raised by reason of the declaration made by respondent court in its
questioned decision, as follows:
Re the first assigned error: What should be rescinded in this case is not the
"Memorandum of Shipment" but the contract between appellee and defendant Eli
Lilly (embodied in three documents, namely: Exhs. A, A-1 and A-2) whereby the
former agreed to buy and the latter to sell those six drums of gelatin capsules. It is
by virtue of the cross-claim by appellant Eli Lilly against defendant Maersk Line for
the latter's gross negligence in diverting the shipment thus causing the delay and
damage to appellee that the trial court found appellant Maersk Line liable. . . .
xxx xxx xxx
Re the fourth assigned error: Appellant Maersk Line's insistence that appellee has
no cause of action against it and appellant Eli Lilly because the shipment was
delivered in good order and condition, and the bill of lading in question contains
"stipulations, exceptions and conditions" Maersk Line's liability only to the "loss,
destruction or deterioration," indeed, this issue of lack of cause of action has
already been considered in our foregoing discussion on the second assigned error,
and our resolution here is still that appellee has a cause of action against appellant
Eli Lilly. Since the latter had filed a cross-claim against appellant Maersk Line, the

trial court committed no error, therefore, in holding the latter appellant ultimately
liable to appellee. (Rollo, pp. 47-50; Emphasis supplied)
Reacting to the foregoing declaration, petitioner submits that its liability is predicated on the
cross-claim filed its co-defendant Eli Lilly, Inc. which cross-claim has been dismissed, the original
complaint against it should likewise be dismissed. We disagree. It should be recalled that the
complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and petitioner as carrier.
Petitioner being an original party defendant upon whom the delayed shipment is imputed cannot
claim that the dismissal of the complaint against Eli Lilly, Inc. inured to its benefit.
Respondent court, erred in declaring that the trial court based petitioner's liability on the crossclaim of Eli Lilly, Inc. As borne out by the record, the trial court anchored its decision on
petitioner's delay or negligence to deliver the six (6) drums of gelatin capsules within a
reasonable time on the basis of which petitioner was held liable for damages under Article 1170
of the New Civil Code which provides that those who in the performance of their obligations are
guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof,
are liable for damages.
Nonetheless, petitioner maintains that it cannot be held for damages for the alleged delay in the
delivery of the 600,000 empty gelatin capsules since it acted in good faith and there was no
special contract under which the carrier undertook to deliver the shipment on or before a specific
date (Rollo, p. 103).
On the other hand, private respondent claims that during the period before the specified date of
arrival of the goods, he had made several commitments and contract of adhesion. Therefore,
petitioner can be held liable for the damages suffered by private respondent for the cancellation
of the contracts he entered into.
We have carefully reviewed the decisions of respondent court and the trial court and both of
them show that, in finding petitioner liable for damages for the delay in the delivery of goods,
reliance was made on the rule that contracts of adhesion are void. Added to this, the lower court
stated that the exemption against liability for delay is against public policy and is thus, void.
Besides, private respondent's action is anchored on Article 1170 of the New Civil Code and not
under the law on Admiralty (AC-GR CV No. 10340, Rollo, p. 14).
The bill of lading covering the subject shipment among others, reads:
6. GENERAL
(1) The Carrier does not undertake that the goods shall arive at the port of
discharge or the place of delivery at any particular time or to meet any particular
market or use and save as is provided in clause 4 the Carrier shall in no
circumstances be liable for any direct, indirect or consequential loss or damage
caused by delay. If the Carrier should nevertheless be held legally liable for any
such direct or indirect or consequential loss or damage caused by delay, such
liability shall in no event exceed the freight paid for the transport covered by this
Bill of Lading. (Exh. "1-A"; AC-G.R. CV No. 10340, Folder of Exhibits, p. 41)

It is not disputed that the aforequoted provision at the back of the bill of lading, in fine print, is a
contract of adhesion. Generally, contracts of adhesion are considered void since almost all the
provisions of these types of contracts are prepared and drafted only by one party, usually the
carrier (Sweet Lines v. Teves, 83 SCRA 361 [1978]). The only participation left of the other party
in such a contract is the affixing of his signature thereto, hence the term "Adhesion" (BPI Credit
Corporation v. Court of Appeals, 204 SCRA 601 [1991]; Angeles v. Calasanz, 135 SCRA 323
[1985]).
Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited (Ong Yiu v.
Court of Appeals, et al., 91 SCRA 223 [1979]; Servando, et al. v. Philippine Steam Navigation Co.,
117 SCRA 832 [1982]). One who adheres to the contract is in reality free to reject it in its
entirety; if he adheres, he gives his consent (Magellan Manufacturing Marketing Corporation v.
Court of Appeals, et al., 201 SCRA 102 [1991]).
In Magellan, (supra), we ruled:
It is a long standing jurisprudential rule that a bill of lading operates both as a
receipt and as contract to transport and deliver the same a therein stipulated. As a
contract, it names the parties, which includes the consignee, fixes the route,
destination, and freight rates or charges, and stipulates the rights and obligations
assumed by the parties. Being a contract, it is the law between the parties who are
bound by its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. A bill of lading usually
becomes effective upon its delivery to and acceptance by the shipper. It is
presumed that the stipulations of the bill were, in the absence of fraud,
concealment or improper conduct, known to the shipper, and he is generally bound
by his acceptance whether he reads the bill or not. (Emphasis supplied)
However, the aforequoted ruling applies only if such contracts will not create an absurd situation
as in the case at bar. The questioned provision in the subject bill of lading has the effect of
practically leaving the date of arrival of the subject shipment on the sole determination and will
of the carrier.
While it is true that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless such common
carriers previously assume the obligation to deliver at a given date or time (Mendoza v.
Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least be
made within a reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of
a special contract, a carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But where a carrier has made
an express contract to transport and deliver properly within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter from what cause it
may have arisen. This result logically follows from the well-settled rule that where

the law creates a duty or charge, and the default in himself, and has no remedy
over, then his own contract creates a duty or charge upon himself, he is bound to
make it good notwithstanding any accident or delay by inevitable necessity because
he might have provided against it by contract. Whether or not there has been such
an undertaking on the part of the carrier is to be determined from the
circumstances surrounding the case and by application of the ordinary rules for the
interpretation of contracts.
An examination of the subject bill of lading (Exh. "1"; AC GR CV No. 10340, Folder of Exhibits, p.
41) shows that the subject shipment was estimated to arrive in Manila on April 3, 1977. While
there was no special contract entered into by the parties indicating the date of arrival of the
subject shipment, petitioner nevertheless, was very well aware of the specific date when the
goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises
no need to execute another contract for the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning a period of two
(2) months and seven (7) days falls was beyond the realm of reasonableness. Described as
gelatin capsules for use in pharmaceutical products, subject shipment was delivered to, and left
in, the possession and custody of petitioner-carrier for transport to Manila via Oakland, California.
But through petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insitence
that it cannot be held liable for the delay finds no merit.
Petition maintains that the award of actual, moral and exemplary dames and attorney's fees are
not valid since there are no factual findings or legal bases stated in the text of the trial court's
decision to support the award thereof.
Indeed, it is settled that actual and compensataory damages requires substantial proof (Capco v.
Macasaet. 189 SCRA 561 [1990]). In the case at bar, private respondent was able to sufficiently
prove through an invoice (Exh. 'A-1'), certification from the issuer of the letter of credit (Exh.'A-2')
and the Memorandum of Shipment (Exh. "B"), the amount he paid as costs of the credit line for
the subject goods. Therefore, respondent court acted correctly in affirming the award of eleven
thousand six hundred eighty pesos and ninety seven centavos (P11,680.97) as costs of said
credit line.
As to the propriety of the award of moral damages, Article 2220 of the Civil Code provides that
moral damages may be awarded in "breaches of contract where the defendant acted
fraudulently or in bad faith" (Pan American World Airways v. Intermediate Appellate Court, 186
SCRA 687 [1990]).
In the case before us, we that the only evidence presented by petitioner was the testimony of Mr.
Rolando Ramirez, a claims manager of its agent Compania General de Tabacos de Filipinas, who
merely testified on Exhs. '1' to '5' (AC-GR CV No. 10340, p. 2) and nothing else. Petitioner never
even bothered to explain the course for the delay, i.e. more than two (2) months, in the delivery
of subject shipment. Under the circumstances of the case, we hold that petitioner is liable for
breach of contract of carriage through gross negligence amounting to bad faith. Thus, the award
of moral damages if therefore proper in this case.
In line with this pronouncement, we hold that exemplary damages may be awarded to the
private respondent. In contracts, exemplary damages may be awarded if the defendant acted in

a wanton, fraudulent, reckless, oppresive or malevolent manner. There was gross negligence on
the part of the petitioner in mishiping the subject goods destined for Manila but was inexplicably
shipped to Richmond, Virginia, U.S.A. Gross carelessness or negligence contitutes wanton
misconduct, hence, exemplary damages may be awarded to the aggrieved party (Radio
Communication of the Phils., Inc. v. Court of Appeals, 195 SCRA 147 [1991]).
Although attorney's fees are generally not recoverable, a party can be held lible for such if
exemplary damages are awarded (Artice 2208, New Civil Code). In the case at bar, we hold that
private respondent is entitled to reasonable attorney`s fees since petitioner acte with gross
negligence amounting to bad faith.
However, we find item 4 in the dispositive portion of respondent court`s decision which awarded
thirty (30) percent of the total damages awarded except item 3 regarding attorney`s fees and
litigation expenses in favor of private respondent, to be unconsionable, the same should be
deleted.
WHEREFORE, with the modification regarding the deletion of item 4 of respondent court`s
decision, the appealed decision is is hereby AFFIRMED in all respects.
SO ORDERED.

G.R. No. L-48757 May 30, 1988


MAURO
GANZON,
petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.

SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the
petitioner for damages based on culpa contractual. The antecedent facts, as found by the
respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul
305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT
"Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant to that
agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet
of water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered
the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually
begun on the same date by the crew of the lighter under the captain's supervision. When about
half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose
Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The
latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula
drew his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972,
pp. 6-7).<re||an1w> The gunshot was not fatal but Tumambing had to be taken to a hospital
in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting
Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and his crew
to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked (t.s.n.,
September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on
Appeal, pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the Municipality of
Mariveles had taken custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40;
t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the dispositive
portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a
new one entered ordering defendant-appellee Mauro Ganzon to pay plaintiffappellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum
of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's
fees. Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals
are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT
OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME
THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II

THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS
EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE
LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A
FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A
CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However, he completely
agrees with the respondent Court's finding that on December 1, 1956, the private respondent
delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the
petitioner, thru his employees, actually received the scraps is freely admitted. Significantly, there
is not the slightest allegation or showing of any condition, qualification, or restriction
accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of the
same by the petitioner. On the contrary, soon after the scraps were delivered to, and received by
the petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and control
of the common carrier, and upon their receipt by the carrier for transportation, the contract of
carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary
responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art.
1736, such extraordinary responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person who has a right to receive them. 5
The fact that part of the shipment had not been loaded on board the lighter did not impair the
said contract of transportation as the goods remained in the custody and control of the carrier,
albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the following
causes enumerated in Article 1734 of the Civil Code, namely:
(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.
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason
of this presumption, the court is not even required to make an express finding of fault or
negligence before it could hold the petitioner answerable for the breach of the contract of
carriage. Still, the petitioner could have been exempted from any liability had he been able to
prove that he observed extraordinary diligence in the vigilance over the goods in his custody,
according to all the circumstances of the case, or that the loss was due to an unforeseen event

or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove
that he exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he is
exempt from any liability because the loss of the scraps was due mainly to the intervention of
the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of
the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was
that the loss of the scraps was due to an "order or act of competent public authority," and this
contention was correctly passed upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority to
unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power
to issue the disputed order, or that it was lawful, or that it was issued under legal
process of authority. The appellee failed to establish this. Indeed, no authority or
power of the acting mayor to issue such an order was given in evidence. Neither has
it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles.
What we have in the record is the stipulation of the parties that the cargo of scrap
iron was accilmillated by the appellant through separate purchases here and there
from private individuals (Record on Appeal, pp. 38-39). The fact remains that the
order given by the acting mayor to dump the scrap iron into the sea was part of the
pressure applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00.
The order of the acting mayor did not constitute valid authority for appellee Mauro
Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we
cannot, however, allow. In any case, the intervention of the municipal officials was not In any
case, of a character that would render impossible the fulfillment by the carrier of its obligation.
The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same order was attended
with such force or intimidation as to completely overpower the will of the petitioner's employees.
The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree
with the private respondent that the scraps could have been properly unloaded at the shore or at
the NASSCO compound, so that after the dispute with the local officials concerned was settled,
the scraps could then be delivered in accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and Articles
361 8 and 362 9 of the Code of Commerce which were the basis for this Court's ruling in
Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes in
tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer
the losses and deterioration arising from the causes enumerated in Art. 1734; and in these
instances, the burden of proving that damages were caused by the fault or negligence of the
carrier rests upon him. However, the carrier must first establish that the loss or deterioration was
occasioned by one of the excepted causes or was due to an unforeseen event or to force
majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.

Finding the award of actual and exemplary damages to be proper, the same will not be disturbed
by us. Besides, these were not sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby
AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
Yap, C.J., Paras and Padilla, JJ., concur.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:


I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and destruction of the
scrap iron. The loss of said cargo was due to an excepted cause an 'order or act of competent
public authority" (Article 1734[5], Civil Code).
The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose
Advincula's intervention, who was a "competent public authority." Petitioner had no control over
the situation as, in fact, Tumambing himself, the owner of the cargo, was impotent to stop the
"act' of said official and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three
policemen, who ordered the dumping of the scrap iron into the sea right where the lighter was
docked in three feet of water. Again, could the captain of the lighter and his crew have defied
said order?
Through the "order" or "act" of "competent public authority," therefore, the performance of a
contractual obligation was rendered impossible. The scrap iron that was dumped into the sea
was "destroyed" while the rest of the cargo was "seized." The seizure is evidenced by the receipt
issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the
scrap iron. Apparently, therefore, the seizure and destruction of the goods was done under legal
process or authority so that petitioner should be freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or destroyed, the
common carrier is not responsible, provided said public authority had power to issue
the order.

Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and destruction of the
scrap iron. The loss of said cargo was due to an excepted cause an 'order or act of competent
public authority" (Article 1734[5], Civil Code).
The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose
Advincula's intervention, who was a "competent public authority." Petitioner had no control over
the situation as, in fact, Tumambing himself, the owner of the cargo, was impotent to stop the
"act' of said official and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three
policemen, who ordered the dumping of the scrap iron into the sea right where the lighter was
docked in three feet of water. Again, could the captain of the lighter and his crew have defied
said order?
Through the "order" or "act" of "competent public authority," therefore, the performance of a
contractual obligation was rendered impossible. The scrap iron that was dumped into the sea
was "destroyed" while the rest of the cargo was "seized." The seizure is evidenced by the receipt
issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the
scrap iron. Apparently, therefore, the seizure and destruction of the goods was done under legal
process or authority so that petitioner should be freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or destroyed, the
common carrier is not responsible, provided said public authority had power to issue
the order.

G.R. No. 131621. September 28, 1999]


LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE
CO., INC., respondents.
DECISION
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on
certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the
following: (a) the 30 January 1997 decision i[1] of the Court of Appeals in CA-G.R. CV No. 36401,
which affirmed the decision of 4 October 1991 ii[2] of the Regional Trial Court of Manila, Branch
16, in Civil Case No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance
Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing of the complaint
until fully paid, P8,000 as attorneys fees, and the costs of the suit; and (b) its resolution of 19
November 1997,iii[3] denying LOADSTARs motion for reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V Cherokee (hereafter, the vessel)
the following goods for shipment:
a)705 bales of lawanit hardwood;
b)

27 boxes and crates of tilewood assemblies and others; and

c)

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

The goods, amounting to P6,067,178, were insured for the same amount with MIC against
various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The vessel, in turn, was
insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20

November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel,
along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the
consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer, MIC
paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a
subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking
of the vessel was due to the fault and negligence of LOADSTAR and its employees. It also prayed
that PGAI be ordered to pay the insurance proceeds from the loss of the vessel directly to MIC,
said amount to be deducted from MICs claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods and claimed that
the sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had
no cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later
dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR
to elevate the matter to the Court of Appeals, which, however, agreed with the trial court and
affirmed its decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
1)
LOADSTAR cannot be considered a private carrier on the sole ground that there was a
single shipper on that fateful voyage. The court noted that the charter of the vessel was limited
to the ship, but LOADSTAR retained control over its crew. iv[4]
2)As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied
in determining the rights and liabilities of the parties.
3)
The vessel was not seaworthy because it was undermanned on the day of the voyage. If it
had been seaworthy, it could have withstood the natural and inevitable action of the sea on 20
November 1984, when the condition of the sea was moderate. The vessel sank, not because of
force majeure, but because it was not seaworthy. LOADSTARS allegation that the sinking was
probably due to the convergence of the winds, as stated by a PAGASA expert, was not duly
proven at the trial. The limited liability rule, therefore, is not applicable considering that, in
this case, there was an actual finding of negligence on the part of the carrier. v[5]
4)Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said
provisions bind only the shipper/consignee and the carrier. When MIC paid the shipper for the
goods insured, it was subrogated to the latters rights as against the carrier, LOADSTAR. vi[6]
5)There was a clear breach of the contract of carriage when the shippers goods never reached
their destination. LOADSTARs defense of diligence of a good father of a family in the training
and selection of its crew is unavailing because this is not a proper or complete defense in culpa
contractual.
6)
Art. 361 (of the Code of Commerce) has been judicially construed to mean that when
goods are delivered on board a ship in good order and condition, and the shipowner delivers
them to the shipper in bad order and condition, it then devolves upon the shipowner to both
allege and prove that the goods were damaged by reason of some fact which legally exempts
him from liability. Transportation of the merchandise at the risk and venture of the shipper
means that the latter bears the risk of loss or deterioration of his goods arising from fortuitous
events, force majeure, or the inherent nature and defects of the goods, but not those caused by
the presumed negligence or fault of the carrier, unless otherwise proved. vii[7]

The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1)Is the M/V Cherokee a private or a common carrier?
(2)

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

Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was
not issued a certificate of public convenience, it did not have a regular trip or schedule nor a
fixed route, and there was only one shipper, one consignee for a special cargo.
In refutation, MIC argues that the issue as to the classification of the M/V Cherokee was not
timely raised below; hence, it is barred by estoppel. While it is true that the vessel had on board
only the cargo of wood products for delivery to one consignee, it was also carrying passengers as
part of its regular business. Moreover, the bills of lading in this case made no mention of any
charter party but only a statement that the vessel was a general cargo carrier. Neither was
there any special arrangement between LOADSTAR and the shipper regarding the shipment of
the cargo. The singular fact that the vessel was carrying a particular type of cargo for one
shipper is not sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to
have been negligent, and the burden of proving otherwise devolved upon MIC. viii[8]
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19
November 1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was
duly inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that
the ship was fit to undertake a voyage. Its crew at the time was experienced, licensed and
unquestionably competent. With all these precautions, there could be no other conclusion
except that LOADSTAR exercised the diligence of a good father of a family in ensuring the
vessels seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due
to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19
November 1984, the weather was fine until the next day when the vessel sank due to strong
waves.
MICs witness, Gracelia Tapel, fully established the existence of two typhoons,
WELFRING and YOLING, inside the Philippine area of responsibility. In fact, on 20 November
1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa Island. Tapel
also testified that the convergence of winds brought about by these two typhoons strengthened
wind velocity in the area, naturally producing strong waves and winds, in turn, causing the vessel
to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such
as what transpired in this case, is valid. Since the cargo was being shipped at owners risk,
LOADSTAR was not liable for any loss or damage to the same. Therefore, the Court of Appeals
erred in holding that the provisions of the bills of lading apply only to the shipper and the carrier,
and not to the insurer of the goods, which conclusion runs counter to the Supreme Courts ruling
in the case of St. Paul Fire & Marine Insurance Co. v. Macondray & Co., Inc., ix[9] and National
Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen Phils., Inc. x[10]
Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been instituted
beyond the period stated in the bills of lading for instituting the same suits based upon claims
arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days
from the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for
recovery was filed only on 4 February 1985.

MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the
cargo was due to force majeure, because the same concurred with LOADSTARs fault or
negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same
must be deemed waived.
Thirdly, the limited liability theory is not applicable in the case at bar because LOADSTAR was
at fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the
voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary
that the carrier be issued a certificate of public convenience, and this public character is not
altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc.,xi[11] where this Court held that a common carrier transporting special
cargo or chartering the vessel to a special person becomes a private carrier that is not subject to
the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from
liability for loss due to the negligence of its agent is void only if the strict policy governing
common carriers is upheld. Such policy has no force where the public at large is not involved, as
in the case of a ship totally chartered for the use of a single party. LOADSTAR also cited
Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals xii[12] and National Steel
Corp. v. Court of Appeals,xiii[13] both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that
the factual settings are different. The records do not disclose that the M/V Cherokee, on the
date in question, undertook to carry a special cargo or was chartered to a special person only.
There was no charter party. The bills of lading failed to show any special arrangement, but only a
general provision to the effect that the M/V Cherokee was a general cargo carrier.xiv[14]
Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper,
which appears to be purely coincidental, is not reason enough to convert the vessel from a
common to a private carrier, especially where, as in this case, it was shown that the vessel was
also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a
common carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of
Appeals,xv[15] the Court juxtaposed the statutory definition of common carriers with the
peculiar circumstances of that case, viz.:
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a sideline. Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the general public, i.e., the

general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733 deliberately refrained from
making such distinctions.
xxx
It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely back-hauled goods for other merchants from Manila to Pangasinan,
although such backhauling was done on a periodic or occasional rather than regular or scheduled
manner, and even though private respondents principal occupation was not the carriage of
goods for others. There is no dispute that private respondent charged his customers a fee for
hauling their goods; that that fee frequently fell below commercial freight rates is not relevant
here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of
public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of
the applicable regulatory statute and implementing regulations and has been granted a
certificate of public convenience or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business
of a common carrier impinges directly and intimately upon the safety and well being and
property of those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of those
who utilize their services and the law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
Moving on to the second assigned error, we find that the M/V Cherokee was not seaworthy
when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently
manned at the time. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is
a clear breach of its duty prescribed in Article 1755 of the Civil Code. xvi[16]
Neither do we agree with LOADSTARs argument that the limited liability theory should be
applied in this case. The doctrine of limited liability does not apply where there was negligence
on the part of the vessel owner or agent. xvii[17] LOADSTAR was at fault or negligent in not
maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an
approaching typhoon. In any event, it did not sink because of any storm that may be deemed as
force majeure, inasmuch as the wind condition in the area where it sank was determined to be
moderate. Since it was remiss in the performance of its duties, LOADSTAR cannot hide behind
the limited liability doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the
goods, in utter disregard of this Courts pronouncements in St. Paul Fire & Marine Ins. Co. v.
Macondray & Co., Inc.,xviii[18] and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. xix[19] It
was ruled in these two cases that after paying the claim of the insured for damages under the
insurance policy, the insurer is subrogated merely to the rights of the assured, that is, it can
recover only the amount that may, in turn, be recovered by the latter. Since the right of the
assured in case of loss or damage to the goods is limited or restricted by the provisions in the
bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and
restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR involved a

limitation on the carriers liability to an amount fixed in the bill of lading which the parties may
enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On
the other hand, the stipulation in the case at bar effectively reduces the common carriers
liability for the loss or destruction of the goods to a degree less than extraordinary (Articles 1744
and 1745), that is, the carrier is not liable for any loss or damage to shipments made at owners
risk. Such stipulation is obviously null and void for being contrary to public policy. xx[20] It has
been said:
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting
the carrier from any and all liability for loss or damage occasioned by its own negligence. The
second is one providing for an unqualified limitation of such liability to an agreed valuation. And
the third is one limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight. According to an almost uniform weight
of authority, the first and second kinds of stipulations are invalid as being contrary to public
policy, but the third is valid and enforceable. xxi[21]
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription.
MICs cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither
the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the
Carriage of Goods by Sea Act (COGSA) which provides for a one-year period of limitation on
claims for loss of, or damage to, cargoes sustained during transit may be applied suppletorily to
the case at bar. This one-year prescriptive period also applies to the insurer of the good. xxii[22] In
this case, the period for filing the action for recovery has not yet elapsed. Moreover, a
stipulation reducing the one-year period is null and void; xxiii[23] it must, accordingly, be struck
down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of
the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. L-47822 December 22, 1988
PEDRO
DE
GUZMAN,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

petitioner,

Vicente D. Millora for petitioner.


Jacinto Callanta for private respondent.

FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would
load his vehicles with cargo which various merchants wanted delivered to differing

establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for
the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal,
to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons
were loaded on a truck driven by respondent himself, while 600 cartons were placed on board
the other truck which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere along the
MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his
helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being
a common carrier, and having failed to exercise the extraordinary diligence required of him by
the law, should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could
not be held responsible for the value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services to
the public; in not exempting him from liability on the ground of force majeure; and in ordering
him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged
in
transporting
return
loads
of
freight
"as
a
casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came
to this Court by way of a Petition for Review assigning as errors the following conclusions of the
Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the
facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733 deliberaom making such
distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or
dock,
ice
plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent's principal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged his customers a
fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant
here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of

public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of
the applicable regulatory statute and implementing regulations and has been granted a
certificate of public convenience or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business of
a common carrier impinges directly and intimately upon the safety and well being and property
of those members of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and protection of those who
utilize their services and the law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a
very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well
as of passengers. The specific import of extraordinary diligence in the care of goods transported
by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and
1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers;
and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in Article 1733. (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged
in the instant case the hijacking of the carrier's truck does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would follow, therefore, that the
hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other

words, that the private respondent as common carrier is presumed to have been at fault or to
have acted negligently. This presumption, however, may be overthrown by proof of extraordinary
diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to ride with the
truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver
and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking
or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or
of robbers who do not act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment used in
the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to
divest or to diminish such responsibility even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or
force." We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled " People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe."
There, the accused were charged with willfully and unlawfully taking and carrying away with

them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty
filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the
trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3
Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away
the truck and its cargo but also kidnapped the driver and his helper, detaining them for several
days and later releasing them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First Instance convicted all the
accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of an
event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

G.R. No. 101089. April 7, 1993.


ESTRELLITA
M.
BASCOS,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

petitioners,

Modesto S. Bascos for petitioner.


Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
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.
DECISION
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, defendantappellant," 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.
Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

[G.R. No. 122494. October 8, 1998]


EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and HERNANDEZ
TRADING CO. INC., respondents.
DECISION
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of
the decision[1] of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which
affirmed the decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of
the lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12,
MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were
shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by
petitioners principal, Everett Orient Lines. The said crates were covered by Bill of Lading No.
NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was
missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992
addressed to private respondent, which thereafter made a formal claim upon petitioner for the
value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred
(Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991.

However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum
amount stipulated under Clause 18 of the covering bill of lading which limits the liability of
petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as
Civil Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City,
Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to
offer and agreed instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment[2] in favor of private respondent, ordering
petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the
actual value of the lost cargo and the material and packaging cost; (c) 10% of the total amount
as an award for and as contingent attorneys fees; and (d) to pay the cost of the suit. The trial
court ruled:
Considering defendants categorical admission of loss and its failure to overcome the
presumption of negligence and fault, the Court conclusively finds defendant liable to the
plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability
of the defendant. As stated earlier, plaintiff contends that defendant should be held
liable for the whole value for the loss of the goods in the amount of Y1,552,500.00
because the terms appearing at the back of the bill of lading was so written in fine prints
and that the same was not signed by plaintiff or shipper thus, they are not bound by the
clause stated in paragraph 18 of the bill of lading. On the other hand, defendant merely
admitted that it lost the shipment but shall be liable only up to the amount of
Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code Art. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely agreed
upon.
It is required, however, that the contract must be reasonable and just under the
circumstances and has been fairly and freely agreed upon. The requirements provided in
Art. 1750 of the New Civil Code must be complied with before a common carrier can claim
a limitation of its pecuniary liability in case of loss, destruction or deterioration of the
goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not
been met. The fact that those conditions are printed at the back of the bill of lading in
letters so small that they are hard to read would not warrant the presumption that the
plaintiff or its supplier was aware of these conditions such that he had fairly and freely
agreed to these conditions. It can not be said that the plaintiff had actually entered into
a contract with the defendant, embodying the conditions as printed at the back of the bill
of lading that was issued by the defendant to plaintiff.

On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial
courts findings with the additional observation that private respondent can not be bound by the
terms and conditions of the bill of lading because it was not privy to the contract of carriage. It
said:
As to the amount of liability, no evidence appears on record to show that the appellee
(Hernandez Trading Co.) consented to the terms of the Bill of Lading. The shipper named
in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship
Corp.) contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms
of the bill of lading when it delivered the cargo to the appellant, still it does not
necessarily follow that appellee Hernandez Trading Company as consignee is bound
thereby considering that the latter was never privy to the shipping contract.
x x xx x x

xxx

Never having entered into a contract with the appellant, appellee should therefore not
be bound by any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the
basis of which is not the breach of contract as appellee was never a privy to the any
contract with the appellant, but is based on Article 1735 of the New Civil Code, there
being no evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent
of the consignee to the terms and conditions of the bill of lading is necessary to make such
stipulations binding upon it; (2) in holding that the carriers limited package liability as stipulated
in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to
fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a
cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by
law, particularly Articles 1749 and 1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of
cases.[3] Thus, in Sea Land Service, Inc. vs Intermediate Appellate Court[4], we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist,
the validity and binding effect of the liability limitation clause in the bill of lading here are
nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justness and fairness of the law itself,
and this the private respondent does not pretend to do. But over and above that consideration,
the just and reasonable character of such stipulation is implicit in it giving the shipper or owner
the option of avoiding accrual of liability limitation by the simple and surely far from onerous
expedient of declaring the nature and value of the shipment in the bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the
common carriers liability for loss must be reasonable and just under the circumstances, and has
been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the
basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and in
no event shall the carrier be liable for any loss of possible profits or any consequential
loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with,
goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency
(Y100,000.00) or its equivalent in any other currency per package or customary freight
unit (whichever is least) unless the value of the goods higher than this amount is
declared in writing by the shipper before receipt of the goods by the carrier and inserted
in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier
made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen.
However, the shipper, Maruman Trading, had the option to declare a higher valuation if the
value of its cargo was higher than the limited liability of the carrier. Considering that
the shipper did not declare a higher valuation, it had itself to blame for not complying
with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely agreed to
the limited liability clause in the bill of lading because the said conditions were printed in small
letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals[5] that the jurisprudence on the matter reveals
the consistent holding of the court that contracts of adhesion are not invalid per se and that it
has on numerous occasions upheld the binding effect thereof. Also, in Philippine American
General Insurance Co., Inc. vs. Sweet Lines , Inc.[6] this Court , speaking through the
learned Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein
one party imposes a ready-made form of contract on the other x x x are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it

entirely; if he adheres he gives his consent. In the present case, not even an allegation
of ignorance of a party excuses non-compliance with the contractual stipulations since
the responsibility for ensuring full comprehension of the provisions of a contract of
carriage devolves not on the carrier but on the owner, shipper, or consignee as the case
may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals[7] that stipulations in contracts of
adhesion are valid and binding.
While it may be true that petitioner had not signed the plane ticket x x, he is
nevertheless bound by the provisions thereof. Such provisions have been held to be a
part of the contract of carriage, and valid and binding upon the passenger regardless of
the latters lack of knowledge or assent to the regulation. It is what is known as a
contract of adhesion, in regards which it has been said that contracts of adhesion
wherein one party imposes a ready-made form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his consent. x x x , a
contract limiting liability upon an agreed valuation does not offend against the policy of
the law forbidding one from contracting against his own negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in
that the said contracts must be carefully scrutinized in order to shield the unwary (or weaker
party) from deceptive schemes contained in ready-made covenants,[8] such as the bill of lading
in question. The stringent requirement which the courts are enjoined to observe is in recognition
of Article 24 of the Civil Code which mandates that (i)n all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other handicap,
the courts must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading
business. It can not be said to be ignorant of the business transactions it entered into involving
the shipment of its goods to its customers. The shipper could not have known, or should know
the stipulations in the bill of lading and there it should have declared a higher valuation of the
goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been
deceived or rushed into agreeing to ship the cargo in petitioners vessel. In fact, it was not even
impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a
signatory to the bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that
even if the consignee was not a signatory to the contract of carriage between the shipper and
the carrier, the consignee can still be bound by the contract. Speaking through Mr. Chief Justice
Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of
lading to recover from the carrier or shipper for loss of, or damage to goods being
transported under said bill, although that document may have been- as in practice

it oftentimes is-drawn up only by the consignor and the carrier without the
intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover
for loss of a shipment consigned to him under a bill of lading drawn up only by
and between the shipper and the carrier, springs from either a relation of
agency that may exist between him and the shipper or consignor, or his status
as stranger in whose favor some stipulation is made in said contract, and who
becomes a party thereto when he demands fulfillment of that stipulation, in
this case the delivery of the goods or cargo shipped. In neither capacity can he
assert personally, in bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision was vitiated by its
being in such fine print as to be hardly readable. Parenthetically, it may be
observed that in one comparatively recent case (Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package
limitation clause was printed in the smallest type on the back of the bill of
lading, it nonetheless ruled that the consignee was bound thereby on the
strength of authority holding that such provisions on liability limitation are as
much a part of a bill of lading as though physically in it and as though placed
therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of
freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the
liability of the carrier to an agreed valuation unless the shipper declares a higher
value and inserts it into said contract or bill. This proposition, moreover, rests upon
an almost uniform weight of authority. (Underscoring supplied)
When private respondent formally claimed reimbursement for the missing goods from petitioner
and subsequently filed a case against the latter based on the very same bill of lading, it (private
respondent) accepted the provisions of the contract and thereby made itself a party thereto, or
at least has come to court to enforce it.[9] Thus, private respondent cannot now reject or
disregard the carriers limited liability stipulation in the bill of lading. In other words, private
respondent is bound by the whole stipulations in the bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost
cargo in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully
declared the shipment x x x, the contents of each crate, the dimensions, weight and value of the
contents,"[10] as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and
value of "the shipment which consisted of three pre-packed crates described in Bill of Lading No.
NGO-53MN merely as 3 CASES SPARE PARTS.[11]
The bill of lading in question confirms petitioners contention. To defeat the carriers limited
liability, the aforecited Clause 18 of the bill of lading requires that the shipper should have
declared in writing a higher valuation of its goods before receipt thereof by the carrier and
insert the said declaration in the bill of lading, with the extra freight paid. These
requirements in the bill of lading were never complied with by the shipper, hence, the liability of
the carrier under the limited liability clause stands. The commercial Invoice No. MTM-941 does

not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the
cargo as contended by private respondent. No other evidence was proffered by private
respondent to support is contention. Thus, we are convinced that petitioner should be liable for
the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand
(Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No.
42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.
Regalado, (Acting Chief Justice), Melo, Puno, and Mendoza, JJ., concur.

[G.R. No. 84680. February 5, 1996]


SUMMA INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and METRO PORT SERVICE,
INC., respondents.
DECISION
PANGANIBAN, J.:
Is an arrastre operator legally liable for the loss of a shipment in its custody? If so, what is the
extent of its liability? These are the two questions that this Court faced in this petition for review
on certiorari of the Decision[1] of the Court of Appeals[2] in CA-G.R. No. CV 04964 promulgated
on April 27, 1988, which affirmed with modification the decision of the Court of First Instance of
Manila in Civil Case No. 82-13988, ordering petitioner to pay private respondent a sum of money,
with legal interest, attorneys fees and the costs of the suit.
The Facts

On November 22, 1981, the S/S Galleon Sapphire, a vessel owned by the National Galleon Shipping
Corporation (NGSC), arrived at Pier 3, South Harbor, Manila, carrying a shipment consigned to the order of
Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara) as notify party. The shipment,
including a bundle of PC 8 U blades, was covered by marine insurance under Certificate No.
82/012-FEZ issued by petitioner and Bill of Lading No. SF/MLA 1014. The shipment was
discharged from the vessel to the custody of private respondent, formerly known as E. Razon,
Inc., the exclusive arrastre operator at the South Harbor. Accordingly, three good-order cargo

receipts were issued by NGSC, duly signed by the ships checker and a representative of private
respondent.
On February 24, 1982, the forwarder, Sterling International Brokerage Corporation, withdrew the
shipment from the pier and loaded it on the barge Semirara 8104. The barge arrived at its port
of destination, Semirara Island, on March 9, 1982. When Semirara inspected the shipment at its
warehouse, it discovered that the bundle of PC8U blades was missing.
On March 15, 1982, private respondent issued a shortlanded certificate stating that the bundle of
PC8U blades was already missing when it received the shipment from the NGSC vessel. Semirara
then filed with petitioner, private respondent and NGSC its claim for P280,969.68, the alleged
value of the lost bundle.
On September 29, 1982, petitioner paid Semirara the invoice value of the lost shipment.
Semirara thereafter executed a release of claim and subrogation receipt. Consequently,
petitioner filed its claims with NGSC and private respondent but it was unsuccessful.
Petitioner then filed a complaint (Civil Case No. 82-13988) with the Regional Trial Court, Branch
XXIV, Manila, against NGSC and private respondent for collection of a sum of money, damages
and attorneys fees.
On August 2, 1984, the trial court rendered a decision absolving NGSC from any liability but
finding private respondent liable to petitioner.
The dispositive portion of the decision reads as follows:
PREMISES CONSIDERED, judgment is hereby rendered ordering defendant Metro Port Service,
Inc. to pay plaintiff Summa Insurance Corporation the sum of P280,969.68 with legal interest
from November 22, 1982, the date of the filing of the complaint, until full payment, and
attorneys fees in the sum of P20,000.00, with costs of suit.
The complaint as against defendant National Galleon Shipping Corporation and the counterclaim
interposed by said defendant are hereby dismissed. (Rollo, p. 32).
In resolving the issue as to who had custody of the shipment when it was lost, the trial court
relied more on the good-order cargo receipts issued by NGSC than on the short-landed certificate
issued by private respondent. The trial court held:
As between the aforementioned two documentary exhibits, the Court is more inclined to give
credence to the cargo receipts. Said cargo receipts were signed by a checker of defendant NGSC
and a representative of Metro Port. It is safe to presume that the cargo receipts accurately
describe the quantity and condition of the shipment when it was discharged from the vessel.
Metro Ports representative would not have signed the cargo receipts if only four (4) packages
were discharged from the vessel and given to the possession and custody of the arrastre
operator. Having been signed by its representative, the Metro Port is bound by the contents of
the cargo receipts.
On the other hand, the Metro Ports shortlanded certificate could not be given much weight
considering that, as correctly argued by counsel for defendant NGSC, it was issued by Metro Port

alone and was not countersigned by the representatives of the shipping company and the
consignee. Besides, the certificate was prepared by Atty. Servillano V. Dolina, Second Deputy
General Manager of Metro Port, and there is no proof on record that he was present at the time
the subject shipment was unloaded from the vessel and received by the arrastre operator.
Moreover, the shortlanded certificate bears the date of March 15, 1982, more than three months
after the discharge of the cargo from the carrying vessel.
Neither could the Court give probative value to the marine report (Exhibit J, also Exhibit 1Razon). The attending surveyor who attended the unloading of the shipment did not take the
witness stand to testify on said report. Although Transnational Adjustment Co.s general
manager, Mariano C. Remorin, was presented as a witness, his testimony is not competent
because he was not present at the time of the discharge of the cargo.
Under the foregoing considerations, the Court finds that the one (1) bundle of PC8U blade in
question was not lost while the cargo was in the custody of the carrying vessel. Considering that
the missing bundle was discharged from the vessel unto the custody of defendant arrastre
operator and considering further that the consignee did not receive this cargo from the arrastre
operator, it is safe to conclude from these facts that said missing cargo was lost while same was
in the possession and control of defendant Metro Port. Defendant Metro Port has not introduced
competent evidence to prove that the loss was not due to its fault or negligence. Consequently,
only the Metro Port must answer for the value of the missing cargo. Defendant NGSC is absolved
of any liability for such loss.
On appeal, the Court of Appeals modified the decision of the trial court and reduced private
respondents liability to P3,500.00 as follows[3]:
WHEREFORE, the judgment appealed from is MODIFIED in that defendant Metro Port Service,
Inc., is ordered to pay plaintiff Summa Insurance Corporation:
(1) the sum of P3,500.00, with legal interest from November 22, 1982, until fully paid; and
(2) the sum of P7,000.00, as and for attorneys fees.
Costs against defendant Metro Port Service, Inc.
Petitioner moved for reconsideration of the said decision but the Court of Appeals denied the
same. Hence, the instant petition.
The Issues
The issues brought by the parties could be stated as follows:
(1)

Is the private respondent legally liable for the loss of the shipment in question?

(2)

If so, what is the extent of its liability?

The First Issue: Liability for Loss of Shipment

Petitioner was subrogated to the rights of the consignee. The relationship therefore between the
consignee and the arrastre operator must be examined. This relationship is much akin to that
existing between the consignee or owner of shipped goods and the common carrier, or that
between a depositor and a warehouseman.[4] In the performance of its obligations, an arrastre
operator should observe the same degree of diligence as that required of a common carrier and
a warehouseman as enunciated under Article 1733 of the Civil Code and Section 3(b) of the
Warehouse Receipts Law, respectively. Being the custodian of the goods discharged from a
vessel, an arrastre operators duty is to take good care of the goods and to turn them over to the
party entitled to their possession.
In this case, it has been established that the shipment was lost while in the custody of private
respondent. We find private respondent liable for the loss. This is an issue of fact determined by
the trial court and respondent Court, which is not reviewable in a petition under Rule 45 of the
Rules of Court.
The Second Issue: Extent of Liability
In the performance of its job, an arrastre operator is bound by the management contract it had
executed with the Bureau of Customs. However, a management contract, which is a sort of a
stipulation pour autrui within the meaning of Article 1311 of the Civil Code, is also binding on a
consignee because it is incorporated in the gate pass and delivery receipt which must be
presented by the consignee before delivery can be effected to it.[5] The insurer, as successor-ininterest of the consignee, is likewise bound by the management contract. [6] Indeed, upon taking
delivery of the cargo, a consignee (and necessarily its successor-in- interest) tacitly accepts the
provisions of the management contract, including those which are intended to limit the liability of
one of the contracting parties, the arrastre operator.[7]
However, a consignee who does not avail of the services of the arrastre operator is not bound by
the management contract.[8] Such an exception to the rule does not obtain here as the
consignee did in fact accept delivery of the cargo from the arrastre operator.
Section 1, Article VI of the Management Contract between private respondent and the Bureau of
Customs[9] provides:
1. Responsibility and Liability for Losses and Damages - The CONTRACTOR shall, at its own
expense handle all merchandise in the piers and other designated places and at its own expense
perform all work undertaken by it hereunder diligently and in a skillful workmanlike and efficient
manner; that the CONTRACTOR shall be solely responsible as an independent CONTRACTOR, and
hereby agrees to accept liability and to promptly pay to the steamship company, consignee,
consignor or other interested party or parties for the loss, damage, or non-delivery of cargoes to
the extent of the actual invoice value of each package which in no case shall be more than Three
Thousand Five Hundred Pesos (P3,500.00) for each package unless the value of the importation
is otherwise specified or manifested or communicated in writing together with the invoice value
and supported by a certified packing list to the CONTRACTOR by the interested party or parties
before the discharge of the goods, as well as all damage that may be suffered on account of loss,
damage, or destruction of any merchandise while in custody or under the control of the
CONTRACTOR in any pier, shed, warehouse, facility or other designated place under the
supervision of the BUREAU, x x x (Italics supplied).

Interpreting a similar provision in the management contract between private respondents


predecessor, E. Razon, Inc. and the Bureau of Customs, the Court said in E. Razon Inc. vs. Court
of Appeals:[10]
Indeed, the provision in the management contract regarding the declaration of the actual
invoice value before the arrival of the goods must be understood to mean a declaration before
the arrival of the goods in the custody of the arrastre operator, whether it be done long before
the landing of the shipment at port, or immediately before turn-over thereof to the arrastre
operators custody. 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 that it may define its responsibility for loss or damage to such cargo and to ascertain
compensation commensurate to such risk assumed x x x.
In the same case, the Court added that the advance notice of the actual invoice of the goods
entrusted to the arrastre operator is for the purpose of determining its liability, that it may
obtain compensation commensurable to the risk it assumes, (and) not for the purpose of
determining the degree of care or diligence it must exercise as a depository or
warehouseman[11] since the arrastre operator should not discriminate between cargoes of
substantial and small values, nor exercise care and caution only for the handling of goods
announced to it beforehand to be of sizeable value, for that would be spurning the public service
nature of its business.
On the same provision limiting the arrastre operators liability, the Court held in Northern Motors,
Inc. v. Prince Line[12]:
Appellant claims that the above quoted provision is null and void, as it limits the liability of
appellee for the loss, destruction or damage of any merchandise, to P500.00 per package,
contending that to sustain the validity of the limitation would be to encourage acts of conversion
and unjust enrichment on the part of the arrastre operator. Appellant, however, overlooks the
fact that the limitation of appellees liability under said provision, is not absolute or unqualified,
for if the value of the merchandise is specified or manifested by the consignee, and the
corresponding arrastre charges are paid on the basis of the declared value, the limitation does
not apply. Consequently, the questioned provision is neither unfair nor abitrary, as contended,
because the consignee has it in his hands to hold, if he so wishes, the arrastre operator
responsible for the full value of his merchandise by merely specifying it in any of the various
documents required of him, in clearing the merchandise from the customs. For then, the
appellee arrastre operator, by reasons 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. In this manner, there would be mutuality. 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.
In this case, no evidence was offered by petitioner proving the amount of arrastre fees paid to
private respondent so as to put the latter on notice of the value of the cargo. While petitioner
alleged that prior to the loss of the package, its value had been relayed to private respondent
through the documents the latter had processed, petitioner does not categorically state that
among the submitted documents were the pro forma invoice value and the certified packing list.
Neither does petitioner pretend that these two documents were prerequisites to the issuance of a

permit to deliver or were attachments thereto. Even the permit to deliver, upon which petitioner
anchors its arguments, may not be considered by the Court because it was not identified and
formally offered in evidence.[13]
In civil cases, the burden of proof is on the party who would be defeated if no evidence is given
on either side. Said party 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.[14] Petitioner
having asserted the affirmative of the issue in this case, it should have presented evidence
required to obtain a favorable judgment.
On the other hand, on top of its denial that it had received the invoice value and the packing list
before the discharge of the shipment, private respondent was able to prove that it was apprised
of the value of the cargo only after its discharge from the vessel, ironically through petitioners
claim for the lost package to which were attached the invoice and packing list. All told, petitioner
failed to convince the Court that the requirement of the management contract had been
complied with to entitle it to recover the actual invoice value of the lost shipment.
Anent the attorneys fees, we find the award to be proper considering that the acts and
omissions of private respondent have compelled petitioner to litigate or incur expenses to
protect its rights.[15] However, as to the amount of the award, we find no reason to re-examine
the appellate courts determination thereon in view of the amount of the principal obligation.
Otherwise, we would be disregarding the doctrine that discretion, when well exercised, should
not be disturbed.
WHEREFORE, the petition for review on certiorari is DENIED and the decision of the Court of
Appeals is AFFIRMED. Costs against petitioner.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

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