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CRISOSTOMO, petitioner, vs. THE
INC., respondents.
In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her
booking, ticketing and accommodation in a tour dubbed Jewels of Europe. The
package tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was
given a 5% discount on the amount, which included airfare, and the booking fee was
also waived because petitioners niece, Meriam Menor, was respondent companys
ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991
a Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in
turn, gave Menor the full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioners dismay, she discovered that the flight she was supposed to
take had already departed the previous day. She learned that her plane ticket was
for the flight scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she paid
for Jewels of Europe and the amount she owed respondent for the British Pageant

tour. Despite several demands, respondent company refused to reimburse the

amount, contending that the same was non-refundable.[1] Petitioner was thus
constrained to file a complaint against respondent for breach of contract of carriage
and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch
59 of the Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was
due to respondents fault since it did not clearly indicate the departure date on the
plane ticket.Respondent was also negligent in informing her of the wrong flight
schedule through its employee Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such that the cost of the former
should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was clearly
and legibly printed on the plane ticket. The travel documents were given to petitioner
two days ahead of the scheduled trip.Petitioner had only herself to blame for missing
the flight, as she did not bother to read or confirm her flight schedule as printed on
the ticket.
Respondent explained that it can no longer reimburse the amount paid for
Jewels of Europe, considering that the same had already been remitted to its
principal in Singapore, Lotus Travel Ltd., which had already billed the same even if
petitioner did not join the tour. Lotus European tour organizer, Insight International
Tours Ltd., determines the cost of a package tour based on a minimum number of
projected participants. For this reason, it is accepted industry practice to disallow
refund for individuals who failed to take a booked tour.[3]
Lastly, respondent maintained that the British Pageant was not a substitute for
the package tour that petitioner missed. This tour was independently procured by
petitioner after realizing that she made a mistake in missing her flight for Jewels of
Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the
second tour because her niece was then an employee of the travel
agency. Consequently, respondent prayed that petitioner be ordered to pay the
balance of P12,901.00 for the British Pageant package tour.

After due proceedings, the trial court rendered a decision,[4] the dispositive part
of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount
of Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty
Three Centavos (P53,989.43) with legal interest thereon at the rate of
twelve percent (12%) per annum starting January 16, 1992, the date
when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not presented
as witness to rebut petitioners testimony. However, petitioner should have verified
the exact date and time of departure by looking at her ticket and should have simply
not relied on Menors verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and accordingly, deducted 10% from
the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled to
any form of damages. Petitioner also forfeited her right to the Jewels of Europe tour
and must therefore pay respondent the balance of the price for the British Pageant
tour. The dispositive portion of the judgment appealed from reads as follows:

WHEREFORE, premises considered, the decision of the Regional Trial Court dated
October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the defendant-appellant the
amount of P12,901.00, representing the balance of the price of the British Pageant
Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per
annum, to be computed from the time the counterclaim was filed until the finality of
this decision. After this decision becomes final and executory, the rate of TWELVE
PERCENT (12%) interest per annum shall be additionally imposed on the total
obligation until payment thereof is satisfied. The award of attorneys fees is
DELETED. Costs against the plaintiff-appellee.
Upon denial of her motion for reconsideration, [7] petitioner filed the instant
petition under Rule 45 on the following grounds:
It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court by ruling
that the petitioner is not entitled to a refund of the cost of unavailed Jewels of Europe
tour she being equally, if not more, negligent than the private respondent, for in the
contract of carriage the common carrier is obliged to observe utmost care and extraordinary diligence which is higher in degree than the ordinary diligence required of
the passenger. Thus, even if the petitioner and private respondent were both
negligent, the petitioner cannot be considered to be equally, or worse, more guilty
than the private respondent. At best, petitioners negligence is only contributory while
the private respondent [is guilty] of gross negligence making the principle of pari
delicto inapplicable in the case;
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe
tour was not indivisible and the amount paid therefor refundable;

The Honorable Court erred in not granting to the petitioner the consequential
damages due her as a result of breach of contract of carriage.[8]
Petitioner contends that respondent did not observe the standard of care
required of a common carrier when it informed her wrongly of the flight schedule.
She could not be deemed more negligent than respondent since the latter is required
by law to exercise extraordinary diligence in the fulfillment of its obligation. If she
were negligent at all, the same is merely contributory and not the proximate cause of
the damage she suffered. Her loss could only be attributed to respondent as it was
the direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price.[9] Such person or association of
persons are regarded as carriers and are classified as private or special carriers and
common or public carriers.[10] A common carrier is defined under Article 1732 of the
Civil Code as persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged
in the business of transporting either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make
travel arrangements in their behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking customers
for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents obligation to
petitioner in this regard was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.

The object of petitioners contractual relation with respondent is the latters

service of arranging and facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of carriage
is the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of
carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with
due regard for all the circumstances.[11] As earlier stated, however, respondent is not
a common carrier but a travel agency. It is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family under
Article 1173 of the Civil Code.[12] This connotes reasonable care consistent with that
which an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the performance
of an obligation is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since respondent
did not call Menor to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e) [14] of the Rules of Court that
evidence willfully suppressed would be adverse if produced and thus considered
petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was
negligent and maintains that petitioners assertion is belied by the evidence on
record. The date and time of departure was legibly written on the plane ticket and the
travel papers were delivered two days in advance precisely so that petitioner could

prepare for the trip. It performed all its obligations to enable petitioner to join the tour
and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony
could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint, [15] thereby making it
physically impossible for respondent to present her as a witness. Then too, even if it
were possible for respondent to secure Menors testimony, the presumption under
Rule 131, Section 3(e) would still not apply. The opportunity and possibility for
obtaining Menors testimony belonged to both parties, considering that Menor was
not just respondents employee, but also petitioners niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed evidence
under Rule 131, Section 3(e). Said presumption would logically be inoperative if the
evidence is not intentionally omitted but is simply unavailable, or when the same
could have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menors negligence was not sufficiently proved, considering that
the only evidence presented on this score was petitioners uncorroborated narration
of the events. It is well-settled that the party alleging a fact has the burden of proving
it and a mere allegation cannot take the place of evidence. [17] If the plaintiff, upon
whom rests the burden of proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the defendant is under no obligation to
prove his exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and followed
standard procedure in rendering its services to petitioner. As correctly observed by
the lower court, the plane ticket[19] issued to petitioner clearly reflected the departure
date and time, contrary to petitioners contention. The travel documents, consisting of
the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two
days prior to the trip. Respondent also properly booked petitioner for the tour,
prepared the necessary documents and procured the plane tickets. It arranged
petitioners hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care of
her concerns. This undoubtedly would require that she at least read the documents
in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or negligence
of the obligor consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so demands. [20] There is
no fixed standard of diligence applicable to each and every contractual obligation
and each case must be determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific obligation and whether one
has been negligent is a question of fact that is to be determined after taking into
account the particulars of each case.[21]
The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain
exceptions, as when the trial court overlooked, misunderstood, or misapplied some
facts or circumstances of weight and substance which will affect the result of the
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner
is ordered to pay respondent the amount of P12,901.00 representing the balance of
the price of the British Pageant Package Tour, with legal interest thereon at the rate
of 6% per annum, to be computed from the time the counterclaim was filed until the
finality of this Decision. After this Decision becomes final and executory, the rate of
12% per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of credit.[23]

Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.

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 the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.




Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for
review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to
reverse and set aside the following: (a) the 30 January 1997 decision 1 of the Court
of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4 October
1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110,
ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC)
the amount of P6,067,178, with legal interest from the filing of the compliant until fully
paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19
November 1997, 3 denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed.1wphi1.nt

The goods, amounting to P6,067,178, were insured for the same amount with MIC
against various risks including "TOTAL LOSS BY TOTAL OF THE LOSS 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 the vessel directly to MIC, said amount to be deducted from MIC's
claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and
claimed that 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 LOADSTAR's appeal, the appellate court made the following

1) LOADSTAR cannot be considered a private carrier
on the sole ground that there was a single shipper on
that fateful voyage. The court noted that the charter of
the vessel was limited to the ship, but LOADSTAR
retained control over its crew. 4
2) As a common carrier, it is the Code of Commerce,
not the Civil Code, which should be applied in
determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was
undermanned on the day of the voyage. If it had been
seaworthy, it could have withstood the "natural and
inevitable action of the sea" on 20 November 1984,
when the condition of the sea was moderate. The
vessel sank, not because of force majeure, but
because it was not seaworthy. LOADSTAR'S allegation
that the sinking was probably due to the "convergence
of the winds," as stated by a PAGASA expert, was not
duly proven at the trial. The "limited liability" rule,
therefore, is not applicable considering that, in this
case, there was an actual finding of negligence on the
part of the carrier. 5
4) Between MIC and LOADSTAR, the provisions of the
Bill of Lading do not apply because said provisions
bind only the shipper/consignee and the carrier. When
MIC paid the shipper for the goods insured, it was
subrogated to the latter's rights as against the carrier,
5) There was a clear breach of the contract of carriage
when the shipper's goods never reached their

destination. LOADSTAR's defense of "diligence of a

good father of a family" in the training and selection of
its crew is unavailing because this is not a proper or
complete defense in culpa contractual.
6) "Art. 361 (of the Code of Commerce) has been
judicially construed to mean that when goods are
delivered on board a ship in good order and condition,
and the shipowner delivers them to the shipper in bad
order and condition, it then devolves upon the
shipowner to both allege and prove that the goods
were damaged by reason of some fact which legally
exempts him from liability." Transportation of the
merchandise at the risk and venture of the shipper
means that the latter bears the risk of loss or
deterioration of his goods arising from fortuitous
events, force majeure, or the inherent nature and
defects of the goods, but not those caused by the
presumed negligence or fault of the carrier, unless
otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following
(1) Is the M/V "Cherokee" a private or a common
(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 certificate of public convenience, it did not have a regular
trip or schedule nor a fixed route, and there was only "one shipper, one consignee for
a special cargo."

In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee"
was not timely raised below; hence, it is barred by estoppel. While it is true that the
vessel had on board only the cargo of wood products for delivery to one consignee, it
was also carrying passengers as part of its regular business. Moreover, the bills of
lading in this case made no mention of any charter party but only a statement that
the vessel was a "general cargo carrier." Neither was there any "special
arrangement" between LOADSTAR and the shipper regarding the shipment of the
cargo. The singular fact that the vessel was carrying a particular type of cargo for
one shipper is not sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot
be presumed to have been negligent, and the burden of proving otherwise devolved
upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage
on 19 November 1984, the vessel was allegedly dry docked at Keppel Philippines
Shipyard and was duly inspected by the maritime safety engineers of the Philippine
Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the
time was experienced, licensed and unquestionably competent. With all these
precautions, there could be no other conclusion except that LOADSTAR exercised
the diligence of a good father of a family in ensuring the vessel's 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. MCI's 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 "owner's 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 Court's ruling in the case
of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union Fire
Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's 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 toforce majeure, because the same concurred with
LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below;
hence, the same must be deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because
LOADSTAR was at fault or negligent, and because it failed to maintain a seaworthy
vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is
tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not
necessary that the carrier be issued a certificate of public convenience, and this
public character is not altered by the fact that the carriage of the goods in question
was periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance
Co. v. American Steamship Agencies, Inc., 11 where this Court held that a common
carrier transporting special cargo or chartering the vessel to a special person
becomes a private carrier that is not subject to the provisions of the Civil Code. Any

stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent is void only if the strict policy governing common carriers is
upheld. Such policy has no force where the public at is not involved, as in the case of
a ship totally chartered for the use of a single party. LOADSTAR also
cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of
Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of which upheld the
Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the
simple reason that the factual settings are different. The records do not disclose that
the M/V "Cherokee," on the date in question, undertook to carry a special cargo or
was chartered to a special person only. There was no charter party. The bills of
lading failed to show any special arrangement, but only a general provision to the
effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact
that the vessel was carrying a particular type of cargo for one shipper, which appears
to be purely coincidental, is not reason enough to convert the vessel from a common
to a private carrier, especially where, as in this case, it was shown that the vessel
was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the
definition of a common carrier under Article 1732 of the Civil Code. In the case of De
Guzman v. Court of Appeals, 15 the Court juxtaposed the statutory definition of
"common carriers" with the peculiar circumstances of that case, viz.:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of
carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their
services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as 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 xxx xxx
It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely "backhauled" 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 eventhough 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.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not
seaworthy when it embarked on its voyage on 19 November 1984. The vessel was
not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage is a clear breach of
its duty prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory
should be applied in this case. The doctrine of limited liability does not apply where
there was negligence on the part of the vessel owner or agent. 17 LOADSTAR was at
fault or negligent in not maintaining a seaworthy vessel and in having allowed its
vessel to sail despite knowledge of an approaching typhoon. In any event, it did not
sink because of any storm that may be deemed as force majeure, inasmuch as the
wind condition in the performance of its duties, LOADSTAR cannot hide behind the
"limited liability" doctrine to escape responsibility for the loss of the vessel and its
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss
of the goods, in utter disregard of this Court's pronouncements in St. Paul Fire &
Marine Ins. Co. v. Macondray & Co., Inc., 18 andNational Union Fire Insurance v.
Stolt-Nielsen Phils., Inc. 19 It was ruled in these two cases that after paying the claim
of the insured for damages under the insurance policy, the insurer is subrogated
merely to the rights of the assured, that is, it can recover only the amount that may,
in turn, be recovered by the latter. Since the right of the assured in case of loss or
damage to the goods is limited or restricted by the provisions in the bills of lading, a
suit by the insurer as subrogee is necessarily subject to the same limitations and
restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR
involved a limitation on the carrier's 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 carrier's 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 "owner's risk." Such
stipulation is obviously null and void for being contrary to public policy." 20 It has been
Three kinds of stipulations have often been made in a bill of lading.
The first one exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence. The second is one
providing for an unqualified limitation of such liability to an agreed
valuation. And the third is one limiting the liability of the carrier to an
agreed valuation unless the shipper declares a higher value and pays
a higher rate of. freight. According to an almost uniform weight of
authority, the first and second kinds of stipulations are invalid as being
contrary to public policy, but the third is valid and enforceable. 21
Since the stipulation in question is null and void, it follows that when MIC paid
the shipper, it was subrogated to all the rights which the latter has against the
common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by
prescription. MIC's 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
goods. 22 In this case, the period for filing the action for recovery has not yet elapsed.
Moreover, a stipulation reducing the one-year period is null and void; 23 it must,
accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30
January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs
against petitioner.1wphi1.nt