1
G.R. No. 80447 January 31, 1989
BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN,
JR. and ZENAIDA LOPEZ and GEORGE L.
CAILIPAN, respondents.
On 10 April 1985 a Complaint for damages arising from breach
of contract of carriage was filed by private respondents, the
Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son
George, of legal age, against petitioner Baliwag Transit
(Baliwag, for brevity). The Complaint alleged that George, who
was a paying passenger on a Baliwag bus on 17 December
1984, suffered multiple serious physical injuries when he was
thrown off said bus driven in a careless and negligent manner by
Leonardo Cruz, the authorized bus driver, along Barangay
Patubig, Marilao, Bulacan. As a result, he was confined in the
hospital for treatment, incurring medical expenses, which were
borne by his parents, the respondent Spouses, in the sum of
about P200,000.00 plus other incidental expenses of about
P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that
the cause of the injuries sustained by George was solely
attributable to his own voluntary act in that, without warning and
provocation, he suddenly stood up from his seat and headed for
the door of the bus as if in a daze, opened it and jumped off
while said bus was in motion, in spite of the protestations by the
driver and without the knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune
Insurance & Surety Company, Inc., on its third-party liability
insurance in the amount of P50,000.00. In its Answer, Fortune
Insurance claimed limited liability, the coverage being subject to
a Schedule of Indemnities forming part of the insurance policy.
On 14 November 1985 and 18 November 1985, respectively,
Fortune Insurance and Baliwag each filed Motions to Dismiss on
the ground that George, in consideration of the sum of
P8,020.50 had executed a "Release of Claims" dated 16 May
1985. These Motions were denied by the Trial Court in an Order
dated 13 January 1986 as they were filed beyond the time for
pleading and after the Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended
Answer, which was granted by the Trial Court. The Amended
Answer incorporated the affirmative defense in the Motion to
Dismiss to the effect that on 16 May 1985, George bad been
paid all his claims for damages arising from the incident subject
matter of the complaint when he executed the following
"Release of Claims":
For and in consideration of the payment to me/us of the sum of
EIGHT THOUSAND TWENTY and 50/100 PESOS ONLY
(P8,020.50), the receipt of which is hereby acknowledged, I/we,
being of lawful age, do hereby release, acquit and forever
discharge Fortune Insurance and/or Baliwag transit, Inc. his/her
heirs, executors and assigns, from any and all liability now
accrued or hereafter to accrue on account of any and all claims
or causes of action which I/we now or may here after have for
personal injuries, damage to property, loss of services, medical
expenses, losses or damages of any and every kind or nature
whatsoever, now known or what may hereafter develop by
me/us sustained or received on or about 17th day of December,
1984 through Reckless Imprudence Resulting to Physical
Injuries, and I/we hereby declare that I/we fully understand the
terms of this settlement and voluntarily accept said sum for the
purpose of making a full and final compromise adjustment and
settlement of the injuries and damages, expenses and
inconvenience above mentioned. (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative
defense, Baliwag waived the presentation of testimonial
evidence and instead offered as its Exhibit "1" the "Release of
Claims" signed by George and witnessed by his brother
Benjamin L. Cailipan, a licensed engineer.
By way of opposition to petitioner's affirmative defense,
respondent Sotero Cailipan, Jr. testified that be is the father of
George, who at the time of the incident was a student, living with
his parents and totally dependent on them for their support; that
the expenses for his hospitalization were shouldered by his
parents; and that they had not signed the "Release of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of
Bulacan, Branch 20, 1 dismissed the Complaint and Third-party
Complaint, ruling that since the contract of carriage is between
Baliwag and George L. Cailipan, the latter, who is of legal age,
had the exclusive right to execute the Release of Claims despite
the fact that he is still a student and dependent on his parents
for support. Consequently, the execution by George of the
Release of Claims discharges Baliwag and Fortune Insurance.
Aggrieved, the Spouses appealed to respondent Court of
Appeals.
On 22 October 1987, the Appellate Court rendered a
Decision 2 setting aside the appealed Order and holding that the
"Release of Claims" cannot operate as a valid ground for the
dismissal of the case because it does not have the conformity of
all the parties, particularly George's parents, who have a
substantial interest in the case as they stand to be prejudiced by
the judgment because they spent a sizeable amount for the
medical bills of their son; that the Release of Claims was
secured by Fortune Insurance for the consideration of P8,020.50
as the full and final settlement of its liability under the insurance
policy and not for the purpose of releasing Baliwag from its
liability as a carrier in this suit for breach of contract. The
Appellate Court also ordered the remand of the case to the
lower Court for trial on the merits and for George to return the
amount of P8,020.50 to Fortune Insurance.
Hence, this Petition for Review on certiorari by Baliwag assailing
the Appellate Court judgment.
The issue brought to the fore is the legal effect of the Release of
Claims executed by George during the pendency of this case.
We hold that since the suit is one for breach of contract of
carriage, the Release of Claims executed by him, as the injured
party, discharging Fortune Insurance and Baliwag from any and
all liability is valid. He was then of legal age, a graduating
student of Agricultural Engineering, and had the capacity to do
acts with legal effect (Article 37 in relation to Article 402, Civil
Code). Thus, he could sue and be sued even without the
assistance of his parents.
Significantly, the contract of carriage was actually between
George, as the paying passenger, and Baliwag, as the common
carrier. As such carrier, Baliwag was bound to carry its
passengers safely as far as human care and foresight could
provide, and is liable for injuries to them through the negligence
or wilful acts of its employees (Articles 1755 and 1759, Civil
Code). Thus, George had the right to be safely brought to his
destination and Baliwag had the correlative obligation to do so.
Since a contract may be violated only by the parties thereto, as
against each other, in an action upon that contract, the real
parties in interest, either as plaintiff or as defendant, must be
parties to said contract (Marimperio Compania Naviera, S.A. vs.
Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA
368). A real party-in-interest -plaintiff is one who has a legal right
while a real party-in-interest-defendant is one who has a
correlative legal obligation whose act or omission violates the
legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973,
May 28, 1988). In the absence of any contract of carriage
between Baliwag and George's parents, the latter are not real
parties-in-interest in an action for breach of that contract.
The general rule of the common law is that every action must be
brought in the name of the party whose legal right has been
invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the
immediate wrong and damage the person injured is the only one
who can maintain the action." Id. p. 578. The person who
sustains an injury is the person to bring an action for the injury
against the wrongdoer." Dicey parties to Actions, 347. (Cited in
Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).
There is no question regarding the genuineness and due
execution of the Release of Claims. It is a duly notarized public
document. It clearly stipulates that the consideration of
P8,020.50 received by George was "to release and forever
discharge Fortune Insurance and/or Baliwag from any and all
liabilities now accrued or to accrue on account of any and all
claims or causes of action ... for personal injuries, damage to
property, loss of services, medical expenses, losses or damages
of any and every kind or nature whatsoever, sustained by him on
17 December 1984 thru Reckless Imprudence Resulting to
Physical Injuries." Consequently, the ruling of respondent
Appellate Court that the "Release of Claims" was intended only
as the full and final settlement of a third-party liability for bodily
injury claim and not for the purpose of releasing Baliwag from its
liability, if any, in a breach of a contract of carriage, has to be
rejected for being contrary to the very terms thereof. If the terms
of a contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulations shall
control (Article 1370, Civil Code). The phraseology "any and all
claims or causes of action" is broad enough to include all

damages that may accrue to the injured party arising from the
unfortunate accident.
The Release of Claims had the effect of a compromise
agreement since it was entered into for the purpose of making a
full and final compromise adjustment and settlement of the
cause of action involved. A compromise is a contract whereby
the parties, by making reciprocal concessions, avoid a litigation
or put an end to one already commenced (Article 2028, Civil
Code). The Release of Claims executed by the injured party
himself wrote finish to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of
respondent Court of Appeals is SET ASIDE, the Decision of the
Regional Trial Court of Bulacan, Branch 20, is REINSTATED,
and the Complaint and Third-Party Complaint are hereby
ordered DISMISSED. No costs.
SO ORDERED.
G.R. No. 122494 October 8, 1998
EVERETT STEAMSHIP CORPORATION, petitioner,
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC.,
respondents.
Petitioner Everett Steamship Corporation, through this petition
for review, seeks the reversal of the decision1 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. C-15532, 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
petitioner's 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 attorney's fees; and (d) to pay the cost of the
suit. The trial court ruled:
Considering defendant's 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 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.
2
On appeal, the Court of Appeals deleted the award of attorney's
fees but affirmed the trial court's 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.
xxx xxx 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 carrier's
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 carrier's
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 carrier's 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.3Thus, 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 carrier's 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 shipper's 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 court's 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 Appeals5 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:
. . . 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 . . . are contracts not entirely
prohibited. The one who adheres to the contract is in reality free
to reject it entirely; if the 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 . . ., 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. . . ., 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
3
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 petitioner's 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
onsignee. . . . .
. . . 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 through 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. (Emphasis 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 carrier's 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 . . ., 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 petitioner's contention. To
defeat the carrier's 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 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.
G.R. No. 172822 Petitioner,
MOF COMPANY, INC., Petitioner,
vs.
SHIN YANG BROKERAGE CORPORATION Respondent.
The necessity of proving lies with the person who sues.
The refusal of the consignee named in the bill of lading to pay
the freightage on the claim that it is not privy to the contract of
affreightment propelled the shipper to sue for collection of
money, stressing that its sole evidence, the bill of lading, suffices
to prove that the consignee is bound to pay. Petitioner now
comes to us by way of Petition for Review on Certiorari1 under
Rule 45 praying for the reversal of the Court of Appeals' (CA)
judgment that dismissed its action for sum of money for
insufficiency of evidence.
Factual Antecedents
On October 25, 2001, Halla Trading Co., a company based in
Korea, shipped to Manila secondhand cars and other articles on
board the vessel Hanjin Busan 0238W. The bill of lading
covering the shipment, i.e., Bill of Lading No.
HJSCPUSI14168303,2 which was prepared by the carrier Hanjin
Shipping Co., Ltd. (Hanjin), named respondent Shin Yang
Brokerage Corp. (Shin Yang) as the consignee and indicated
that payment was on a "Freight Collect" basis, i.e., that the
consignee/receiver of the goods would be the one to pay for the
freight and other charges in the total amount of ₱57,646.00.3
The shipment arrived in Manila on October 29, 2001. Thereafter,
petitioner MOF Company, Inc. (MOF), Hanjin’s exclusive general
agent in the Philippines, repeatedly demanded the payment of
ocean freight, documentation fee and terminal handling charges
from Shin Yang. The latter, however, failed and refused to pay
contending that it did not cause the importation of the goods,
that it is only the Consolidator of the said shipment, that the
ultimate consignee did not endorse in its favor the original bill of
lading and that the bill of lading was prepared without its
consent.
Thus, on March 19, 2003, MOF filed a case for sum of money
before the Metropolitan Trial Court of Pasay City (MeTC Pasay)
which was docketed as Civil Case No. 206-03 and raffled to
Branch 48. MOF alleged that Shin Yang, a regular client, caused
the importation and shipment of the goods and assured it that
ocean freight and other charges would be paid upon arrival of
the goods in Manila. Yet, after Hanjin's compliance, Shin Yang
unjustly breached its obligation to pay. MOF argued that Shin
4
Yang, as the named consignee in the bill of lading, entered itself
as a party to the contract and bound itself to the "Freight Collect"
arrangement. MOF thus prayed for the payment of ₱57,646.00
representing ocean freight, documentation fee and terminal
handling charges as well as damages and attorney’s fees.
Claiming that it is merely a consolidator/forwarder and that Bill of
Lading No. HJSCPUSI14168303 was not endorsed to it by the
ultimate consignee, Shin Yang denied any involvement in
shipping the goods or in promising to shoulder the freightage. It
asserted that it never authorized Halla Trading Co. to ship the
articles or to have its name included in the bill of lading. Shin
Yang also alleged that MOF failed to present supporting
documents to prove that it was Shin Yang that caused the
importation or the one that assured payment of the shipping
charges upon arrival of the goods in Manila.
Ruling of the Metropolitan Trial Court
On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered
its Decision4 in favor of MOF. It ruled that Shin Yang cannot
disclaim being a party to the contract of affreightment because:
x x x it would appear that defendant has business transactions
with plaintiff. This is evident from defendant’s letters dated 09
May 2002 and 13 May 2002 (Exhibits "1" and "2", defendant’s
Position Paper) where it requested for the release of refund of
container deposits x x x. [In] the mind of the Court, by analogy, a
written contract need not be necessary; a mutual understanding
[would suffice]. Further, plaintiff would have not included the
name of the defendant in the bill of lading, had there been no
prior agreement to that effect.
In sum, plaintiff has sufficiently proved its cause of action
against the defendant and the latter is obliged to honor its
agreement with plaintiff despite the absence of a written
contract.5
The dispositive portion of the MeTC Decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff and against the defendant, ordering
the latter to pay plaintiff as follows:
1. ₱57,646.00 plus legal interest from the date of demand until
fully paid,
2. ₱10,000.00 as and for attorney’s fees and
3. the cost of suit.
SO ORDERED.6
Ruling of the Regional Trial Court

The Regional Trial Court (RTC) of Pasay City, Branch 108
affirmed in toto the Decision of the MeTC. It held that:
MOF and Shin Yang entered into a contract of affreightment
which Black’s Law Dictionary defined as a contract with the ship
owner to hire his ship or part of it, for the carriage of goods and
generally take the form either of a charter party or a bill of lading.
The bill of lading contain[s] the information embodied in the
contract.
Article 652 of the Code of Commerce provides that the charter
party must be in writing; however, Article 653 says: "If the cargo
should be received without charter party having been signed, the
contract shall be understood as executed in accordance with
what appears in the bill of lading, the sole evidence of title with
regard to the cargo for determining the rights and obligations of
the ship agent, of the captain and of the charterer". Thus, the
Supreme Court opined in the Market Developers, Inc. (MADE)
vs. Honorable Intermediate Appellate Court and Gaudioso Uy,
G.R. No. 74978, September 8, 1989, this kind of contract may
be oral. In another case, Compania Maritima vs. Insurance
Company of North America, 12 SCRA 213 the contract of
affreightment by telephone was recognized where the oral
agreement was later confirmed by a formal booking.
xxxx
Defendant is liable to pay the sum of ₱57,646.00, with interest
until fully paid, attorney’s fees of ₱10,000.00 [and] cost of suit.
Considering all the foregoing, this Court affirms in toto the
decision of the Court a quo.
SO ORDERED.7
Ruling of the Court of Appeals
Seeing the matter in a different light, the CA dismissed MOF’s
complaint and refused to award any form of damages or
attorney’s fees. It opined that MOF failed to substantiate its
claim that Shin Yang had a hand in the importation of the articles
to the Philippines or that it gave its consent to be a consignee of
the subject goods. In its March 22, 2006 Decision,8 the CA said:
This Court is persuaded [that except] for the Bill of Lading,
respondent has not presented any other evidence to bolster its
claim that petitioner has entered [into] an agreement of
affreightment with respondent, be it verbal or written. It is noted
that the Bill of Lading was prepared by Hanjin Shipping, not the
petitioner. Hanjin is the principal while respondent is the former’s
agent. (p. 43, rollo)
The conclusion of the court a quo, which was upheld by the RTC
Pasay City, Branch 108 xxx is purely speculative and
conjectural. A court cannot rely on speculations, conjectures or
guesswork, but must depend upon competent proof and on the
basis of the best evidence obtainable under the circumstances.
Litigation cannot be properly resolved by suppositions,
deductions or even presumptions, with no basis in evidence, for
the truth must have to be determined by the hard rules of
admissibility and proof (Lagon vs. Hooven Comalco Industries,
Inc. 349 SCRA 363).
While it is true that a bill of lading serves two (2) functions: first,
it is a receipt for the goods shipped; second, it is a contract by
which three parties, namely, the shipper, the carrier and the
consignee who undertake specific responsibilities and assume
stipulated obligations (Belgian Overseas Chartering and
Shipping N.V. vs. Phil. First Insurance Co., Inc., 383 SCRA 23),
x x x if the same is not accepted, it is as if one party does not
accept the contract. Said the Supreme Court:
"A bill of lading delivered and accepted constitutes the contract
of carriage[,] even though not signed, because the acceptance
of a paper containing the terms of a proposed contract generally
constitutes an acceptance of the contract and of all its terms and
conditions of which the acceptor has actual or constructive
notice" (Keng Hua Paper Products Co., Inc. vs. CA, 286 SCRA
257).
In the present case, petitioner did not only [refuse to] accept the
bill of lading, but it likewise disown[ed] the shipment x x x.
[Neither did it] authorize Halla Trading Company or anyone to
ship or export the same on its behalf.
It is settled that a contract is upheld as long as there is proof of
consent, subject matter and cause (Sta. Clara Homeowner’s
Association vs. Gaston, 374 SCRA 396). In the case at bar,
there is not even any iota of evidence to show that petitioner had
given its consent.
"He who alleges a fact has the burden of proving it and a mere
allegation is not evidence" (Luxuria Homes Inc. vs. CA, 302
SCRA 315).
The 40-footer van contains goods of substantial value. It is
highly improbable for petitioner not to pay the charges, which is
very minimal compared with the value of the goods, in order that
it could work on the release thereof.
For failure to substantiate its claim by preponderance of
evidence, respondent has not established its case against
petitioner.9
5
Petitioners filed a motion for reconsideration but it was denied in
a Resolution10 dated May 25, 2006. Hence, this petition for
review on certiorari.
Petitioner’s Arguments
In assailing the CA’s Decision, MOF argues that the factual
findings of both the MeTC and RTC are entitled to great weight
and respect and should have bound the CA. It stresses that the
appellate court has no justifiable reason to disturb the lower
courts’ judgments because their conclusions are well-supported
by the evidence on record.
MOF further argues that the CA erred in labeling the findings of
the lower courts as purely ‘speculative and conjectural’.
According to MOF, the bill of lading, which expressly stated Shin
Yang as the consignee, is the best evidence of the latter’s actual
participation in the transportation of the goods. Such document,
validly entered, stands as the law among the shipper, carrier and
the consignee, who are all bound by the terms stated therein.
Besides, a carrier’s valid claim after it fulfilled its obligation
cannot just be rejected by the named consignee upon a simple
denial that it ever consented to be a party in a contract of
affreightment, or that it ever participated in the preparation of the
bill of lading. As against Shin Yang’s bare denials, the bill of
lading is the sufficient preponderance of evidence required to
prove MOF’s claim. MOF maintains that Shin Yang was the one
that supplied all the details in the bill of lading and acquiesced to
be named consignee of the shipment on a ‘Freight Collect’
basis.
Lastly, MOF claims that even if Shin Yang never gave its
consent, it cannot avoid its obligation to pay, because it never
objected to being named as the consignee in the bill of lading
and that it only protested when the shipment arrived in the
Philippines, presumably due to a botched transaction between it
and Halla Trading Co. Furthermore, Shin Yang’s letters asking
for the refund of container deposits highlight the fact that it was
aware of the shipment and that it undertook preparations for the
intended release of the shipment.
Respondent’s Arguments
Echoing the CA decision, Shin Yang insists that MOF has no
evidence to prove that it consented to take part in the contract of
affreightment. Shin Yang argues that MOF miserably failed to
present any evidence to prove that it was the one that made
preparations for the subject shipment, or that it is an ‘actual
shipping practice’ that forwarders/consolidators as consignees
are the ones that provide carriers details and information on the
bills of lading.
Shin Yang contends that a bill of lading is essentially a contract
between the shipper and the carrier and ordinarily, the shipper is

the one liable for the freight charges. A consignee, on the other
hand, is initially a stranger to the bill of lading and can be liable
only when the bill of lading specifies that the charges are to be
paid by the consignee. This liability arises from either a) the
contract of agency between the shipper/consignor and the
consignee; or b) the consignee’s availment of the stipulation
pour autrui drawn up by and between the shipper/ consignor and
carrier upon the consignee’s demand that the goods be
delivered to it. Shin Yang contends that the fact that its name
was mentioned as the consignee of the cargoes did not make it
automatically liable for the freightage because it never benefited
from the shipment. It never claimed or accepted the goods, it
was not the shipper’s agent, it was not aware of its designation
as consignee and the original bill of lading was never endorsed
to it.
Issue
The issue for resolution is whether a consignee, who is not a
signatory to the bill of lading, is bound by the stipulations
thereof. Corollarily, whether respondent who was not an agent of
the shipper and who did not make any demand for the fulfillment
of the stipulations of the bill of lading drawn in its favor is liable
to pay the corresponding freight and handling charges.
Our Ruling
Since the CA and the trial courts arrived at different conclusions,
we are constrained to depart from the general rule that only
errors of law may be raised in a Petition for Review on Certiorari
under Rule 45 of the Rules of Court and will review the evidence
presented.11
The bill of lading is oftentimes drawn up by the
shipper/consignor and the carrier without the intervention of the
consignee. However, the latter can be bound by the stipulations
of the bill of lading when a) there is a relation of agency between
the shipper or consignor and the consignee or b) when the
consignee demands fulfillment of the stipulation of the bill of
lading which was drawn up in its favor.12
In Keng Hua Paper Products Co., Inc. v. Court of Appeals,13 we
held that once the bill of lading is received by the consignee who
does not object to any terms or stipulations contained therein, it
constitutes as an acceptance of the contract and of all of its
terms and conditions, of which the acceptor has actual or
constructive notice.1avvphi1
In Mendoza v. Philippine Air Lines, Inc.,14 the consignee sued
the carrier for damages but nevertheless claimed that he was
never a party to the contract of transportation and was a
complete stranger thereto. In debunking Mendoza’s contention,
we held that:
x x x First, he insists that the articles of the Code of Commerce
should be applied; that he invokes the provisions of said Code
governing the obligations of a common carrier to make prompt
delivery of goods given to it under a contract of transportation.
Later, as already said, he says that he was never a party to the
contract of transportation and was a complete stranger to it, and
that he is now suing on a tort or a violation of his rights as a
stranger (culpa aquiliana). If he does not invoke the contract of
carriage entered into with the defendant company, then he
would hardly have any leg to stand on. His right to prompt
delivery of the can of film at the Pili Air Port stems and is derived
from the contract of carriage under which contract, the PAL
undertook to carry the can of film safely and to deliver it to him
promptly. Take away or ignore that contract and the obligation to
carry and to deliver and right to prompt delivery disappear.
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. Said rights and obligations are created
by a specific contract entered into by the parties. In the present
case, the findings of the trial court which as already stated, are
accepted by the parties and which we must accept are to the
effect that the LVN Pictures Inc. and Jose Mendoza on one side,
and the defendant company on the other, entered into a contract
of transportation (p. 29, Rec. on Appeal). One interpretation of
said finding is that the LVN Pictures Inc. through previous
agreement with Mendoza acted as the latter's agent. When he
negotiated with the LVN Pictures Inc. to rent the film 'Himala ng
Birhen' and show it during the Naga town fiesta, he most
probably authorized and enjoined the Picture Company to ship
the film for him on the PAL on September 17th. Another
interpretation is that even if the LVN Pictures Inc. as consignor
of its own initiative, and acting independently of Mendoza for the
time being, made Mendoza a consignee. [Mendoza made
himself a party to the contract of transportaion when he
appeared at the Pili Air Port armed with the copy of the Air Way
Bill (Exh. 1) demanding the delivery of the shipment to him.] The
very citation made by appellant in his memorandum supports
this view. Speaking of the possibility of a conflict between the
order of the shipper on the one hand and the order of the
consignee on the other, as when the shipper orders the shipping
company to return or retain the goods shipped while the
consignee demands their delivery, Malagarriga in his book
Codigo de Comercio Comentado, Vol. 1, p. 400, citing a
decision of the Argentina Court of Appeals on commercial
matters, cited by Tolentino in Vol. II of his book entitled
'Commentaries and Jurisprudence on the Commercial Laws of
the Philippines' p. 209, says that the right of the shipper to
countermand the shipment terminates when the consignee or
legitimate holder of the bill of lading appears with such bill of
lading before the carrier and makes himself a party to the
contract. Prior to that time he is a stranger to the contract.
6
Still another view of this phase of the case is that contemplated
in Art. 1257, paragraph 2, of the old Civil Code (now Art. 1311,
second paragraph) which reads thus:
‘Should the contract contain any stipulation in favor of a third
person, he may demand its fulfillment provided he has given
notice of his acceptance to the person bound before the
stipulation has been revoked.'
Here, the contract of carriage between the LVN Pictures Inc. and
the defendant carrier contains the stipulations of delivery to
Mendoza as consignee. His demand for the delivery of the can
of film to him at the Pili Air Port may be regarded as a notice of
his acceptance of the stipulation of the delivery in his favor
contained in the contract of carriage and delivery. In this case he
also made himself a party to the contract, or at least has come
to court to enforce it. His cause of action must necessarily be
founded on its breach.15 (Emphasis Ours)
In sum, a consignee, although not a signatory to the contract of
carriage between the shipper and the carrier, becomes a party
to the contract by reason of either a) the relationship of agency
between the consignee and the shipper/ consignor; b) the
unequivocal acceptance of the bill of lading delivered to the
consignee, with full knowledge of its contents or c) availment of
the stipulation pour autrui, i.e., when the consignee, a third
person, demands before the carrier the fulfillment of the
stipulation made by the consignor/shipper in the consignee’s
favor, specifically the delivery of the goods/cargoes shipped.16
In the instant case, Shin Yang consistently denied in all of its
pleadings that it authorized Halla Trading, Co. to ship the goods
on its behalf; or that it got hold of the bill of lading covering the
shipment or that it demanded the release of the cargo. Basic is
the rule in evidence that the burden of proof lies upon him who
asserts it, not upon him who denies, since, by the nature of
things, he who denies a fact cannot produce any proof of it.17
Thus, MOF has the burden to controvert all these denials, it
being insistent that Shin Yang asserted itself as the consignee
and the one that caused the shipment of the goods to the
Philippines.
In civil cases, the party having the burden of proof must
establish his case by preponderance of evidence,18 which
means evidence which is of greater weight, or more convincing
than that which is offered in opposition to it.19Here, MOF failed
to meet the required quantum of proof. Other than presenting
the bill of lading, which, at most, proves that the carrier
acknowledged receipt of the subject cargo from the shipper and
that the consignee named is to shoulder the freightage, MOF
has not adduced any other credible evidence to strengthen its
cause of action. It did not even present any witness in support of
its allegation that it was Shin Yang which furnished all the details
indicated in the bill of lading and that Shin Yang consented to

shoulder the shipment costs. There is also nothing in the records
which would indicate that Shin Yang was an agent of Halla
Trading Co. or that it exercised any act that would bind it as a
named consignee. Thus, the CA correctly dismissed the suit for
failure of petitioner to establish its cause against respondent.
WHEREFORE, the petition is DENIED. The assailed Decision of
the Court of Appeals dated March 22, 2006 dismissing
petitioner’s complaint and the Resolution dated May 25, 2006
denying the motion for reconsideration are AFFIRMED.
SO ORDERED.
G.R. No. 114061 August 3, 1994
KOREAN AIRLINES CO., LTD., petitioner,
vs.
COURT OF APPEALS and JUANITO C. LAPUZ,
respondents.
G.R. No. 113842 August 3, 1994
JUANITO C. LAPUZ, petitioner,
vs.
COURT OF APPEALS and KOREAN AIRLINES CO., LTD.,
respondents.
Sometime in 1980, Juanito C. Lapuz, an automotive electrician,
was contracted for employment in Jeddah, Saudi Arabia, for a
period of one year through Pan Pacific Overseas Recruiting
Services, Inc. Lapuz was supposed to leave on November 8,
1980, via Korean Airlines. Initially, he was "wait-listed," which
meant that he could only be accommodated if any of the
confirmed passengers failed to show up at the airport before
departure. When two of such passengers did not appear, Lapuz
and another person by the name of Perico were given the two
unclaimed seats.
According to Lapuz, he was allowed to check in with one
suitcase and one shoulder bag at the check-in counter of KAL.
He passed through the customs and immigration sections for
routine check-up and was cleared for departure as Passenger
No. 157 of KAL Flight No. KE 903. Together with the other
passengers, he rode in the shuttle bus and proceeded to the
ramp of the KAL aircraft for boarding. However, when he was at
the third or fourth rung of the stairs, a KAL officer pointed to him
and shouted "Down! Down!" He was thus barred from taking the
flight. When he later asked for another booking, his ticket was
canceled by KAL. Consequently, he was unable to report for his
work in Saudi Arabia within the stipulated 2-week period and so
lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan
Pacific Recruiting Services Inc. coordinated with KAL for the
departure of 30 contract workers, of whom only 21 were
confirmed and 9 were wait-listed passengers. The agent of Pan
Pacific, Jimmie Joseph, after being informed that there was a
possibility of having one or two seats becoming available, gave
priority to Perico, who was one of the supervisors of the hiring
company in Saudi Arabia. The other seat was won through
lottery by Lapuz. However, only one seat became available and
so, pursuant to the earlier agreement that Perico was to be
given priority, he alone was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30, 1
adjudged KAL liable for damages, disposing as follows:
WHEREFORE, in view of the foregoing consideration, judgment
is hereby rendered sentencing the defendant Korean Air Lines to
pay plaintiff Juanito C. Lapuz the following:
1. The amount of TWO HUNDRED SEVENTY-TWO
THOUSAND ONE HUNDRED SIXTY (P272,160.00) PESOS as
actual/compensatory damages, with legal interest thereon from
the date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00)
PESOS as and for attorney's fees; and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan
Pacific Overseas Recruiting Services, Inc.
The counterclaims and cross-claim of defendant Korean Air
Lines Co., Ltd. are likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2
as follows:
WHEREFORE, in view of all the foregoing, the appealed
judgment is hereby AFFIRMED with the following modifications:
the amount of actual damages and compensatory damages is
reduced to P60,000.00 and defendant-appellant is hereby
ordered to pay plaintiff-appellant the sum of One Hundred
Thousand Pesos (P100,000.00) by way of moral and exemplary
damages, at 6% interest per annum from the date of the filing of
the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration,
which were both denied for lack of merit. Hence, the present
petitions for review which have been consolidated because of
the identity of the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate
court on the following grounds:
1. That the Court of Appeals erred in concluding that petitioner
committed a breach of contract of carriage notwithstanding lack
of proper, competent and sufficient evidence of the existence of
such contract.
7
2. That the Court of Appeals erred in not according the proper
evidentiary weight to some evidence presented and the fact that
private respondent did not have any boarding pass to prove that
he was allowed to board and to prove that his airline ticket was
confirmed.
3. That the Court of Appeals erred in concluding that the standby
passenger status of private respondent Lapuz was changed to a
confirmed status when his name was entered into the passenger
manifest.
4. That the Court of Appeals abused its discretion in awarding
moral and exemplary damages in the amount of P100,000.00 in
favor of private respondent notwithstanding its lack of basis and
private respondent did not state such amount in his complaint
nor had private respondent proven the said damages.
5. That the Court of Appeals erred in dismissing the
counterclaims.
6. That the Court of Appeals erred in dismissing the
counterclaim of petitioner against Pan Pacific.
7. That the Court of Appeals erred in ruling that the 6% per
annum legal interest on the judgment shall be computed from
the filing of the complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the
decision of the Court of Appeals insofar as it modifies the award
of damages; b) actual and compensatory damages in the sum
equivalent to 5 years' loss of earnings based on the petitioner's
monthly salary of 1,600 Saudi rials at the current conversion rate
plus the cost of baggage and personal belongings worth P2,000
and the service fee of P3,000 paid to the recruiting agency, all
with legal interest from the filing of the complaint until fully paid;
c) moral damages of not less than P1 million and exemplary
damages of not less than P500,000.00, both with interest at 6%
per annum from the filing of the complaint; and d) attorney's fees
in the sum equivalent to 30% of the award of damages.
It is evident that the issues raised in these petitions relate mainly
to the correctness of the factual findings of the Court of Appeals
and the award of damages. The Court has consistently affirmed
that the findings of fact of the Court of Appeals and the other
lower courts are as a rule binding upon it, subject to certain
exceptions. As nothing in the record indicates any of such
exceptions, the factual conclusions of the appellate court must
be affirmed.
The status of Lapuz as standby passenger was changed to that
of a confirmed passenger when his name was entered in the
passenger manifest of KAL for its Flight No. KE 903. His
clearance through immigration and customs clearly shows that
he had indeed been confirmed as a passenger of KAL in that

flight. KAL thus committed a breach of the contract of carriage
between them when it failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is
different in kind and degree from any other contractual relation.
3 The business of the carrier is mainly with the traveling public. It
invites people to avail themselves of the comforts and
advantages it offers. The contract of air carriage generates a
relation attended with a public duty. Passengers have the right
to be treated by the carrier's employees with kindness, respect,
courtesy and due consideration. They are entitled to be
protected against personal misconduct, injurious language,
indignities and abuses from such employees. 4 So it is that any
discourteous conduct on the part of these employees toward a
passenger gives the latter an action for damages against the
carrier.
The breach of contract was aggravated in this case when,
instead of courteously informing Lapuz of his being a "wait-
listed" passenger, a KAL officer rudely shouted "Down! Down!"
while pointing at him, thus causing him embarrassment and
public humiliation.
KAL argues that "the evidence of confirmation of a chance
passenger status is not through the entry of the name of a
chance passenger in the passenger manifest nor the clearance
from the Commission on Immigration and Deportation, because
they are merely means of facilitating the boarding of a chance
passenger in case his status is confirmed." We are not
persuaded.
The evidence presented by Lapuz shows that he had indeed
checked in at the departure counter, passed through customs
and immigration, boarded the shuttle bus and proceeded to the
ramp of KAL's aircraft. In fact, his baggage had already been
loaded in KAL's aircraft, to be flown with him to Jeddah. The
contract of carriage between him and KAL had already been
perfected when he was summarily and insolently prevented from
boarding the aircraft.
KAL's allegation that the respondent court abused its discretion
in awarding moral and exemplary damages is also not tenable.
The Court of Appeals granted moral and exemplary damages
because:
The findings of the court a quo that the defendant-appellant has
committed breach of contract of carriage in bad faith and in
wanton, disregard of plaintiff-appellant's rights as passenger laid
the basis and justification of an award for moral damages.
xxxx
In the instant case, we find that defendant-appellant Korean Air
Lines acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner when it "bumped off" plaintiff-appellant on
November 8, 1980, and in addition treated him rudely and
arrogantly as a "patay gutom na contract worker fighting Korean
Air Lines," which clearly shows malice and bad faith, thus
entitling plaintiff-appellant to moral damages.
xxxx
Considering that the plaintiff-appellant's entitlement to moral
damages has been fully established by oral and documentary
evidence, exemplary damages may be awarded. In fact,
exemplary damages may be awarded, even though not so
expressly pleaded in the complaint (Kapoe vs. Masa, 134 SCRA
231). By the same token, to provide an example for the public
good, an award of exemplary damages is also proper (Armovit
vs. Court of Appeals, supra).
On the other hand, Lapuz's claim that the award of P100,000.00
as moral and exemplary damages is inadequate is not
acceptable either. His prayer for moral damages of not less than
P1 million and exemplary damages of not less than P500,000.00
is overblown.
The well-entrenched principle is that moral damages depend
upon the discretion of the court based on the circumstances of
each case. 5 This discretion is limited by the principle that the
"amount awarded should not be palpably and scandalously
excessive" as to indicate that it was the result of prejudice or
corruption on the part of the trial court. 6 Damages are not
intended to enrich the complainant at the expense of the
defendant. They are awarded only to alleviate the moral
suffering that the injured party had undergone by reason of the
defendant's culpable action. 7 There is no hard-and-fast rule in
the determination of what would be a fair amount of moral
damages since each case must be governed by its own peculiar
facts.
A review of the record of this case shows that the injury suffered
by Lapuz is not so serious or extensive as to warrant an award
of P1.5 million. The assessment of P100,000 as moral and
exemplary damages in his favor is, in our view, reasonable and
realistic.
Lapuz likewise claims that the respondent court could not rule
upon the propriety of the award of actual damages because it
had not been assigned as an error by KAL. Not so. The rule is
that only errors specifically assigned and properly argued in the
brief will be considered except errors affecting jurisdiction over
the subject matter and plain as well as clerical errors. 8 But this
is not without qualification for, as the Court held in Vda. de
Javellana vs. Court of Appeals: 9
8
. . . [T]he Court is clothed with ample authority to review matters,
even if they are not assigned as errors in their appeal, if it finds
that their consideration is necessary in arriving at a just decision
of the case.
A similar pronouncement was made in Baquiran vs. Court of
Appeals 10 in this wise:
Issues, though not specifically raised in the pleading in the
appellate court, may, in the interest of justice, be properly
considered by said court in deciding a case, if they are questions
raised in the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to raise
or the lower court ignored.
The Court of Appeals was therefore justified in decreasing the
award of actual damages even if the issue was not assigned as
an error by KAL. Consideration of this question was necessary
for the just and complete resolution of the present case.
Furthermore, there was enough evidence to warrant the
reduction of the original award, as the challenged decision
correctly observed:
A perusal of the plaintiff-appellant's contract of employment
shows that the effectivity of the contract is for only one year,
renewable every year for five years. Although plaintiff-appellant
intends to renew his contract, such renewal will still be subject to
his foreign employer. Plaintiff-appellant had not yet started
working with his foreign employer, hence, there can be no basis
as to whether his contract will be renewed by his foreign
employer or not. Thus, the damages representing the loss of
earnings of plaintiff-appellant in the renewal of the contract of
employment is at most speculative. Damages may not be
awarded on the basis of speculation or conjecture (Gachalian
vs. Delim, 203 SCRA 126). Hence, defendant-appellant's liability
is limited to the one year contract only. Plaintiff-appellant is,
therefore, entitled only to his lost earnings for one year, i.e.,
P60,000.00, which is 1/5 of P300,000.00, the total amount of
actual damages, representing lost earnings for five years prayed
for in the Complaint.
Plaintiff-appellant's contention that in computing his lost
earnings, the current rate of the Saudi Rial to the Philippine
Peso at the time of payment should be used, is untenable,
considering that in his Complaint, plaintiff-appellant has
quantified in Philippine Peso his lost earnings for five years.
We disagree with the respondent court, however, on the date
when the legal interest should commence to run. The rule is that
the legal interest of six percent (6%) on the amounts adjudged in
favor of Lapuz should resume from the time of the rendition of
the trial court's decision instead of November 28, 1980, the date
of the filing of the complaint.

On this matter, the Court has held:
If suit were for payment of a definite sum of money, the
contention might be tenable. However, if it is for damages,
unliquidated and not known until definitely ascertained,
assessed and determined by the courts after proof, interest
should be from the date of the decision. 11
xxxx
The obligation to pay interest on a sum filed in a judgment exists
from the date of the sentence, when so declared; for until the net
amount of the debtor's liability has been determined, he cannot
he considered delinquent in the fulfillment of his obligation to pay
the debt with interest thereon. 12
Finally, we find that the respondent court did not err in sustaining
the trial court's dismissal of KAL's counterclaim against Pan
Pacific Overseas Recruiting Services Inc., whose responsibility
ended with the confirmation by KAL of Lapuz as its passenger in
its Flight No. 903.
This is still another case of the maltreatment of our overseas
contract workers, this time by the airline supposed to bring the
passenger to his foreign assignment. Our OCW's sacrifice much
in seeking employment abroad, where they are deprived of the
company of their loved ones, the direct protection of our laws,
and the comfort of our own native culture and way of life. This
Court shall exert every effort to vindicate their rights when they
are abused and shall accord them the commensurate reparation
of their injuries consistent with their dignity and worth as
members of the working class.
WHEREFORE, the appealed judgment is AFFIRMED, but with
the modification that the legal interest on the damages awarded
to private respondent should commence from the date of the
decision of the trial court on November 14, 1990. The parties
shall bear their own costs.
SO ORDERED.
G.R. No. 92288 February 9, 1993
BRITISH AIRWAYS, INC., petitioner,
vs.
THE HON. COURT OF APPEALS, Twelfth Division, and
FIRST INTERNATIONAL TRADING AND GENERAL
SERVICES, respondents.
This is a petition for review on certiorari to annul and set aside
the decision dated November 15, 1989 of the Court of Appeals1
affirming the decision of the trial court2 in ordering petitioner
British Airways, Inc. to pay private respondent First International
Trading and General Services actual damages, moral damages,
corrective or exemplary damages, attorney's fees and the costs
as well as the Resolution dated February 15, 19903 denying
petitioner's Motion for Reconsideration in the appealed decision.
It appears on record that on February 15, 1981, private
respondent First International Trading and General Services
Co., a duly licensed domestic recruitment and placement
agency, received a telex message from its principal ROLACO
Engineering and Contracting Services in Jeddah, Saudi Arabia
to recruit Filipino contract workers in behalf of said principal.4
During the early part of March 1981, said principal paid to the
Jeddah branch of petitioner British Airways, Inc. airfare tickets
for 93 contract workers with specific instruction to transport said
workers to Jeddah on or before March 30, 1981.
As soon as petitioner received a prepaid ticket advice from its
Jeddah branch to transport the 93 workers, private respondent
was immediately informed by petitioner that its principal had
forwarded 93 prepaid tickets. Thereafter, private respondent
instructed its travel agent, ADB Travel and Tours. Inc., to book
the 93 workers with petitioner but the latter failed to fly said
workers, thereby compelling private respondent to borrow
money in the amount of P304,416.00 in order to purchase airline
tickets from the other airlines as evidenced by the cash
vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers
it had recruited who must leave immediately since the visas of
said workers are valid only for 45 days and the Bureau of
Employment Services mandates that contract workers must be
sent to the job site within a period of 30 days.
Sometime in the first week of June, 1981, private respondent
was again informed by the petitioner that it had received a
prepaid ticket advice from its Jeddah branch for the
transportation of 27 contract workers. Immediatety, private
respondent instructed its travel agent to book the 27 contract
workers with the petitioner but the latter was only able to book
and confirm 16 seats on its June 9, 1981 flight. However, on the
date of the scheduled flight only 9 workers were able to board
said flight while the remaining 7 workers were rebooked to June
30, 1981 which bookings were again cancelled by the petitioner
without any prior notice to either private respondent or the
workers. Thereafter, the 7 workers were rebooked to the July
4,1981 flight of petitioner with 6 more workers booked for said
flight. Unfortunately, the confirmed bookings of the 13 workers
were again cancelled and rebooked to July 7, 1981.
On July 6, 1981, private respondent paid the travel tax of the
said workers as required by the petitioner but when the receipt
of the tax payments was submitted, the latter informed private
respondent that it can only confirm the seats of the 12 workers
on its July 7, 1981 flight. However, the confirmed seats of said
workers were again cancelled without any prior notice either to
the private respondent or said workers. The 12 workers were
9
finally able to leave for Jeddah after private respondent had
bought tickets from the other airlines.
As a result of these incidents, private respondent sent a letter to
petitioner demanding compensation for the damages it had
incurred by the latter's repeated failure to transport its contract
workers despite confirmed bookings and payment of the
corresponding travel taxes.
On July 23, 1981, the counsel of private respondent sent
another letter to the petitioner demanding the latter to pay the
amount of P350,000.00 representing damages and unrealized
profit or income which was denied by the petitioner.
On August 8, 1981, private respondent received a telex
message from its principal cancelling the hiring of the remaining
recruited workers due to the delay in transporting the workers to
Jeddah.5
On January 27, 1982, private respondent filed a complaint for
damages against petitioner with the Regional Trial Court of
Manila, Branch 1 in Civil Case No. 82-4653.
On the other hand, petitioner, alleged in its Answer with
counterclaims that it received a telex message from Jeddah on
March 20, 1981 advising that the principal of private respondent
had prepaid the airfares of 100 persons to transport private
respondent's contract workers from Manila to Jeddah on or
before March 30, 1981. However, due to the unavailability of
space and limited time, petitioner had to return to its sponsor in
Jeddah the prepaid ticket advice consequently not even one of
the alleged 93 contract workers were booked in any of its flights.
On June 5, 1981, petitioner received another prepaid ticket
advice to transport 16 contract workers of private respondent to
Jeddah but the travel agent of the private respondent booked
only 10 contract workers for petitioner's June 9, 1981 flight.
However, only 9 contract workers boarded the scheduled flight
with 1 passenger not showing up as evidenced by the Philippine
Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A",
"7-B" and "7-C").6
Thereafter, private respondent's travel agent booked seats for 5
contract workers on petitioner's July 4, 1981 flight but said travel
agent cancelled the booking of 2 passengers while the other 3
passengers did not show up on said flight.
Sometime in July 1981, the travel agent of the private
respondent booked 7 more contract workers in addition to the
previous 5 contract workers who were not able to board the July
4, 1981 flight with the petitioner's July 7, 1981 flight which was
accepted by petitioner subject to reconfirmation.

However on July 6, 1981, petitioner's computer system broke
down which resulted to petitioner's failure to get a reconfirmation
from Saudi Arabia Airlines causing the automatic cancellation of
the bookings of private respondent's 12 contract workers. In the
morning of July 7, 1981, the computer system of the petitioner
was reinstalled and immediately petitioner tried to reinstate the
bookings of the 12 workers with either Gulf Air or Saudi Arabia
Airlines but both airlines replied that no seat was available on
that date and had to place the 12 workers on the wait list. Said
information was duly relayed to the private respondent and the
12 workers before the scheduled flight.
After due trial on or on August 27, 1985, the trial court rendered
its decision, the dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing, this Court renders
judgment:
1. Ordering the defendant to pay the plaintiff actual damages in
the sum of P308,016.00;
2. Ordering defendant to pay moral damages to the plaintiff in
the amount of P20,000.00;
3. Ordering the defendant to pay the plaintiff P10,000.00 by way
of corrective or exemplary damages;
4. Ordering the defendant to pay the plaintiff 30% of its total
claim for and as attorney's fees; and
5. To pay the costs.7
On March 13, 1986, petitioner appealed said decision to
respondent appellate court after the trial court denied its Motion
for Reconsideration on February 28, 1986.
On November 15, 1989, respondent appellate court affirmed the
decision of the trial court, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED with costs against the appellant.8
On December 9, 1989, petitioner filed a Motion for
Reconsideration which was also denied.
Hence, this petition.
It is the contention of petitioner that private respondent has no
cause of action against it there being no perfected contract of
carriage existing between them as no ticket was ever issued to
private respondent's contract workers and, therefore, the
obligation of the petitioner to transport said contract workers did
not arise. Furthermore, private respondent's failure to attach any
ticket in the complaint further proved that it was never a party to
the alleged transaction.
Petitioner's contention is untenable.
Private respondent had a valid cause of action for damages
against petitioner. A cause of action is an act or omission of one
party in violation of the legal right or rights of the other.9
Petitioner's repeated failures to transport private respondent's
workers in its flight despite confirmed booking of said workers
clearly constitutes breach of contract and bad faith on its part. In
resolving petitioner's theory that private respondent has no
cause of action in the instant case, the appellate court correctly
held that:
In dealing with the contract of common carriage of passengers
for purpose of accuracy, there are two (2) aspects of the same,
namely: (a) the contract "to carry (at some future time)," which
contract is consensual and is necessarily perfected by mere
consent (See Article 1356, Civil Code of the Philippines), and (b)
the contract "of carriage" or "of common carriage" itself which
should be considered as a real contract for not until the carrier is
actually used can the carrier be said to have already assumed
the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V,
p. 429, Eleventh Ed.)
In the instant case, the contract "to carry" is the one involved
which is consensual and is perfected by the mere consent of the
parties.
There is no dispute as to the appellee's consent to the said
contract "to carry" its contract workers from Manila to Jeddah.
The appellant's consent thereto, on the other hand, was
manifested by its acceptance of the PTA or prepaid ticket advice
that ROLACO Engineering has prepaid the airfares of the
appellee's contract workers advising the appellant that it must
transport the contract workers on or before the end of March,
1981 and the other batch in June, 1981.
Even if a PTA is merely an advice from the sponsors that an
airline is authorized to issue a ticket and thus no ticket was yet
issued, the fact remains that the passage had already been paid
for by the principal of the appellee, and the appellant had
accepted such payment. The existence of this payment was
never objected to nor questioned by the appellant in the lower
court. Thus, the cause or consideration which is the fare paid for
the passengers exists in this case.
The third essential requisite of a contract is an object certain. In
this contract "to carry", such an object is the transport of the
passengers from the place of departure to the place of
destination as stated in the telex.
10
Accordingly, there could be no more pretensions as to the
existence of an oral contract of carriage imposing reciprocal
obligations on both parties.
In the case of appellee, it has fully complied with the obligation,
namely, the payment of the fare and its willingness for its
contract workers to leave for their place of destination.
On the other hand, the facts clearly show that appellant was
remiss in its obligation to transport the contract workers on their
flight despite confirmation and bookings made by appellee's
travelling agent.
xxx xxx xxx
Besides, appellant knew very well that time was of the essence
as the prepaid ticket advice had specified the period of
compliance therewith, and with emphasis that it could only be
used if the passengers fly on BA. Under the circumstances, the
appellant should have refused acceptance of the PTA from
appellee's principal or to at least inform appellee that it could not
accommodate the contract workers.
xxx xxx xxx
While there is no dispute that ROLACO Engineering advanced
the payment for the airfares of the appellee's contract workers
who were recruited for ROLACO Engineering and the said
contract workers were the intended passengers in the aircraft of
the appellant, the said contract "to carry" also involved the
appellee for as recruiter he had to see to it that the contract
workers should be transported to ROLACO Engineering in
Jeddah thru the appellant's transportation. For that matter, the
involvement of the appellee in the said contract "to carry" was
well demonstrated when
the appellant upon receiving the PTA immediately advised the
appellee thereof. 10
Petitioner also contends that the appellate court erred in
awarding actual damages in the amount of P308,016.00 to
private respondent since all expenses had already been
subsequently reimbursed by the latter's principal.
In awarding actual damages to private respondent, the appellate
court held that the amount of P308,016.00 representing actual
damages refers to private respondent's second cause of action
involving the expenses incurred by the latter which were not
reimbursed by ROLACO Engineering. However, in the
Complaint 11 filed by private respondent, it was alleged that
private respondent suffered actual damages in the amount of
P308,016.00 representing the money it borrowed from friends
and financiers which is P304,416.00 for the 93 airline tickets and
P3,600.00 for the travel tax of the 12 workers. It is clear

therefore that the actual damages private respondent seeks to
recover are the airline tickets and travel taxes it spent for its
workers which were already reimbursed by its principal and not
for any other expenses it had incurred in the process of
recruiting said contract workers. Inasmuch as all expenses
including the processing fees incurred by private respondent had
already been paid for by the latter's principal on a staggered
basis as admitted in open court by its managing director, Mrs.
Bienvenida Brusellas. 12 We do not find anymore justification in
the appellate court's decision in granting actual damages to
private respondent.
Thus, while it may be true that private respondent was
compelled to borrow money for the airfare tickets of its contract
workers when petitioner failed to transport said workers, the
reimbursements made by its principal to private respondent
failed to support the latter's claim that it suffered actual damages
as a result of petitioner's failure to transport said workers. It is
undisputed that private respondent had consistently admitted
that its principal had reimbursed all its expenses.
Article 2199 of the Civil Code provides that:
Except as provided by law or by stipulations, one is entitled to an
adequate compensation only for such pecuniary loss suffered by
him as he has duly proved. Such compensation is referred to as
actual or compensatory damages.
Furthermore, actual or compensatory damages cannot be
presumed, but must be duly proved, and proved with reasonable
degree of certainty. A court cannot rely on speculation,
conjecture or guesswork as to the fact and amount of damages,
but must depend upon competent proof that they have suffered
and on evidence of the actual amount thereof. 13
However, private respondent is entitled to an award of moral and
exemplary damages for the injury suffered as a result of
petitioner's failure to transport the former's workers because of
the latter's patent bad faith in the performance of its obligation.
As correctly pointed out by the appellate court:
As evidence had proved, there was complete failure on the part
of the appellant to transport the 93 contract workers of the
appellee on or before March 30, 1981 despite receipt of the
payment for their airfares, and acceptance of the same by the
appellant, with specific instructions from the appellee's principal
to transport the contract workers on or before March 30, 1981.
No previous notice was ever registered by the appellant that it
could not comply with the same. And then followed the
detestable act of appellant in unilaterally cancelling, booking and
rebooking unreasonably the flight of appellee's contract workers
in June to July, 1981 without prior notice. And all of these
actuations of the appellant indeed constitute malice and evident
bad faith which had caused damage and besmirched the
reputation and business image of the appellee. 14
As to the alleged damages suffered by the petitioner as stated in
its counterclaims, the record shows that no claim for said
damages was ever made by the petitioner immediately after
their alleged occurrence therefore said counterclaims were mere
afterthoughts when private respondent filed the present case.
WHEREFORE, the assailed decision is hereby AFFIRMED with
the MODIFICATION that the award of actual damages be
deleted from said decision.
SO ORDERED.
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING,
respondents.
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).<äre||anº•1àw> 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,
11
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 plaintiff-appellant 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
12
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.
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE
LARDIZABAL y MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA
CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA
CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT,
SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of
the late Pedrito Cudiamat represented by Inocencia
Cudiamat, respondents.
On May 13, 1985, private respondents filed a complaint 1 for
damages against petitioners for the death of Pedrito Cudiamat
as a result of a vehicular accident which occurred on March 25,
1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it
was alleged that on said date, while petitioner Theodore M.
Lardizabal was driving a passenger bus belonging to petitioner
corporation in a reckless and imprudent manner and without due
regard to traffic rules and regulations and safety to persons and
property, it ran over its passenger, Pedrito Cudiamat. However,
instead of bringing Pedrito immediately to the nearest hospital,
the said driver, in utter bad faith and without regard to the
welfare of the victim, first brought his other passengers and
cargo to their respective destinations before banging said victim
to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed
and continued to observe the extraordinary diligence required in
the operation of the transportation company and the supervision
of the employees, even as they add that they are not absolute
insurers of the safety of the public at large. Further, it was
alleged that it was the victim's own carelessness and negligence
which gave rise to the subject incident, hence they prayed for
the dismissal of the complaint plus an award of damages in their
favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively
in favor of petitioners, with this decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby
pronounced that Pedrito Cudiamat was negligent, which
negligence was the proximate cause of his death. Nonetheless,

defendants in equity, are hereby ordered to pay the heirs of
Pedrito Cudiamat the sum of P10,000.00 which approximates
the amount defendants initially offered said heirs for the
amicable settlement of the case. No costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the
Court of Appeals which, in a decision 3 in CA-G.R. CV No.
19504 promulgated on August 14, 1990, set aside the decision
of the lower court, and ordered petitioners to pay private
respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of
indemnity for death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral
damages;
3. The sum of Two Hundred Eighty Eight Thousand
(P288,000.00) Pesos as actual and compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court
of Appeals in its resolution dated October 4, 1990, 5 hence this
petition with the central issue herein being whether respondent
court erred in reversing the decision of the trial court and in
finding petitioners negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court
of Appeals as a rule are final and may not be reviewed by this
Court on appeal. However, this is subject to settled exceptions,
one of which is when the findings of the appellate court are
contrary to those of the trial court, in which case a reexamination
of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have
discordant positions as to who between the petitioners an the
victim is guilty of negligence. Perforce, we have had to conduct
an evaluation of the evidence in this case for the prope
calibration of their conflicting factual findings and legal
conclusions.
The lower court, in declaring that the victim was negligent, made
the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in
trying to board a moving vehicle, especially with one of his
hands holding an umbrella. And, without having given the driver
or the conductor any indication that he wishes to board the bus.
But defendants can also be found wanting of the necessary
diligence. In this connection, it is safe to assume that when the
deceased Cudiamat attempted to board defendants' bus, the
vehicle's door was open instead of being closed. This should be
so, for it is hard to believe that one would even attempt to board
a vehicle (i)n motion if the door of said vehicle is closed. Here
lies the defendant's lack of diligence. Under such circumstances,
equity demands that there must be something given to the heirs
of the victim to assuage their feelings. This, also considering that
initially, defendant common carrier had made overtures to
amicably settle the case. It did offer a certain monetary
consideration to the victim's heirs. 7
However, respondent court, in arriving at a different opinion,
declares that:
From the testimony of appellees'own witness in the person of
Vitaliano Safarita, it is evident that the subject bus was at full
stop when the victim Pedrito Cudiamat boarded the same as it
was precisely on this instance where a certain Miss Abenoja
alighted from the bus. Moreover, contrary to the assertion of the
appellees, the victim did indicate his intention to board the bus
as can be seen from the testimony of the said witness when he
declared that Pedrito Cudiamat was no longer walking and made
a sign to board the bus when the latter was still at a distance
from him. It was at the instance when Pedrito Cudiamat was
closing his umbrella at the platform of the bus when the latter
made a sudden jerk movement (as) the driver commenced to
accelerate the bus.
Evidently, the incident took place due to the gross negligence of
the appellee-driver in prematurely stepping on the accelerator
and in not waiting for the passenger to first secure his seat
especially so when we take into account that the platform of the
bus was at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their duty and
obligation as common carrier to the end that they should
observe extra-ordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them
according to the circumstances of each case (Article 1733, New
Civil Code).8
After a careful review of the evidence on record, we find no
reason to disturb the above holding of the Court of Appeals. Its
aforesaid findings are supported by the testimony of petitioners'
own witnesses. One of them, Virginia Abalos, testified on cross-
examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is
before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the
bus.
Q And the incident happened before bunkhouse 56, is that not
correct?
13
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you
please inform this Honorable Court if there was anv unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person
alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this
particular place in Lepanto?
A When we reached the place, a passenger alighted and I
signalled my driver. When we stopped we went out because I
saw an umbrella about a split second and I signalled again the
driver, so the driver stopped and we went down and we saw
Pedrito Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat,
when you saw him lying down — from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters
from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident
and the place where one of the passengers alighted were both
between Bunkhouses 53 and 54, hence the finding of the Court
of Appeals that the bus was at full stop when the victim boarded
the same is correct. They further confirm the conclusion that the
victim fell from the platform of the bus when it suddenly
accelerated forward and was run over by the rear right tires of
the vehicle, as shown by the physical evidence on where he was
thereafter found in relation to the bus when it stopped. Under
such circumstances, it cannot be said that the deceased was
guilty of negligence.
The contention of petitioners that the driver and the conductor
had no knowledge that the victim would ride on the bus, since
the latter had supposedly not manifested his intention to board
the same, does not merit consideration. When the bus is not in
motion there is no necessity for a person who wants to ride the
same to signal his intention to board. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders.
Hence, it becomes the duty of the driver and the conductor,
every time the bus stops, to do no act that would have the effect
of increasing the peril to a passenger while he was attempting to
board the same. The premature acceleration of the bus in this
case was a breach of such duty. 11

It is the duty of common carriers of passengers, including
common carriers by railroad train, streetcar, or motorbus, to stop
their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are
liable for injuries suffered by boarding passengers resulting from
the sudden starting up or jerking of their conveyances while they
are doing so. 12
Further, even assuming that the bus was moving, the act of the
victim in boarding the same cannot be considered negligent
under the circumstances. As clearly explained in the testimony
of the aforestated witness for petitioners, Virginia Abalos, th bus
had "just started" and "was still in slow motion" at the point
where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt
to board a train or streetcar which is moving slowly. 14 An
ordinarily prudent person would have made the attempt board
the moving conveyance under the same or similar
circumstances. The fact that passengers board and alight from
slowly moving vehicle is a matter of common experience both
the driver and conductor in this case could not have been
unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of
the bus, is already considered a passenger and is entitled all the
rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier
passengers owes to its patrons extends to persons boarding
cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons
of public policy, are bound to observe extraordina diligence for
the safety of the passengers transported by the according to all
the circumstances of each case. 16 A common carrier is bound
to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence very cautious
persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a
contract of carriage, the court need not make an express finding
of fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By
contract of carriage, the carrier assumes the express obligation
to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the
passenger is right away attributable to the fault or negligence of
the carrier. This is an exception to the general rule that
negligence must be proved, and it is therefore incumbent upon
the carrier to prove that it has exercised extraordinary diligence
as prescribed in Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the
conductor failed to bring the gravely injured victim immediately
to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding
and can even be stigmatized as callous indifference. The
evidence shows that after the accident the bus could have
forthwith turned at Bunk 56 and thence to the hospital, but its
driver instead opted to first proceed to Bunk 70 to allow a
passenger to alight and to deliver a refrigerator, despite the
serious condition of the victim. The vacuous reason given by
petitioners that it was the wife of the deceased who caused the
delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the
fact that they had to wait for about twenty minutes for Inocencia
Cudiamat to get dressed deserves scant consideration. It is
rather scandalous and deplorable for a wife whose husband is at
the verge of dying to have the luxury of dressing herself up for
about twenty minutes before attending to help her distressed
and helpless husband. 19
Further, it cannot be said that the main intention of petitioner
Lardizabal in going to Bunk 70 was to inform the victim's family
of the mishap, since it was not said bus driver nor the conductor
but the companion of the victim who informed his family thereof.
20 In fact, it was only after the refrigerator was unloaded that
one of the passengers thought of sending somebody to the
house of the victim, as shown by the testimony of Virginia
Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular
time?
A I asked them to bring it down because that is the nearest
place to our house and when I went down and asked somebody
to bring down the refrigerator, I also asked somebody to call the
family of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr.
Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to
call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was,
however, committed by respondent Court of Appeals in
computing the actual damages based on the gross income of
the victim. The rule is that the amount recoverable by the heirs
14
of a victim of a tort is not the loss of the entire earnings, but
rather the loss of that portion of the earnings which the
beneficiary would have received. In other words, only net
earnings, not gross earnings, are to be considered, that is, the
total of the earnings less expenses necessary in the creation of
such earnings or income and minus living and other incidental
expenses. 22
We are of the opinion that the deductible living and other
expense of the deceased may fairly and reasonably be fixed at
P500.00 a month or P6,000.00 a year. In adjudicating the actual
or compensatory damages, respondent court found that the
deceased was 48 years old, in good health with a remaining
productive life expectancy of 12 years, and then earning
P24,000.00 a year. Using the gross annual income as the basis,
and multiplying the same by 12 years, it accordingly awarded
P288,000. Applying the aforestated rule on computation based
on the net earnings, said award must be, as it hereby is, rectified
and reduced to P216,000.00. However, in accordance with
prevailing jurisprudence, the death indemnity is hereby
increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the
challenged judgment and resolution of respondent Court of
Appeals are hereby AFFIRMED in all other respects.
SO ORDERED.
G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN,
petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD
& PRUDENT SECURITY AGENCY, respondents.
The case before the Court is an appeal from the decision and
resolution of the Court of Appeals, promulgated on 27 April 2000
and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled "Marjorie Navidad and Heirs of the Late Nicanor
Navidad vs. Rodolfo Roman, et. al.," which has modified the
decision of 11 August 1998 of the Regional Trial Court, Branch
266, Pasig City, exonerating Prudent Security Agency (Prudent)
from liability and finding Light Rail Transit Authority (LRTA) and
Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past seven o’clock in
the evening, Nicanor Navidad, then drunk, entered the EDSA
LRT station after purchasing a "token" (representing payment of
the fare). While Navidad was standing on the platform near the
LRT tracks, Junelito Escartin, the security guard assigned to the
area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight
started or who, between the two, delivered the first blow or how

Navidad later fell on the LRT tracks. At the exact moment that
Navidad fell, an LRT train, operated by petitioner Rodolfo
Roman, was coming in. Navidad was struck by the moving train,
and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent
Marjorie Navidad, along with her children, filed a complaint for
damages against Junelito Escartin, Rodolfo Roman, the LRTA,
the Metro Transit Organization, Inc. (Metro Transit), and Prudent
for the death of her husband. LRTA and Roman filed a
counterclaim against Navidad and a cross-claim against Escartin
and Prudent. Prudent, in its answer, denied liability and averred
that it had exercised due diligence in the selection and
supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent
and Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was
negligent in his assigned task. On 11 August 1998, the trial court
rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendants Prudent Security and
Junelito Escartin ordering the latter to pay jointly and severally
the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of
P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman
are dismissed for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise
dismissed."1
Prudent appealed to the Court of Appeals. On 27 August 2000,
the appellate court promulgated its now assailed decision
exonerating Prudent from any liability for the death of Nicanor
Navidad and, instead, holding the LRTA and Roman jointly and
severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by
exonerating the appellants from any liability for the death of
Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the
Light Rail Transit Authority (LRTA) are held liable for his death
and are hereby directed to pay jointly and severally to the
plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorney’s fees."2
The appellate court ratiocinated that while the deceased might
not have then as yet boarded the train, a contract of carriage
theretofore had already existed when the victim entered the
place where passengers were supposed to be after paying the
fare and getting the corresponding token therefor. In exempting
Prudent from liability, the court stressed that there was nothing
to link the security agency to the death of Navidad. It said that
Navidad failed to show that Escartin inflicted fist blows upon the
victim and the evidence merely established the fact of death of
Navidad by reason of his having been hit by the train owned and
managed by the LRTA and operated at the time by Roman. The
appellate court faulted petitioners for their failure to present
expert evidence to establish the fact that the application of
emergency brakes could not have stopped the train.
The appellate court denied petitioners’ motion for
reconsideration in its resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the
part of the appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
BY DISREGARDING THE FINDINGS OF FACTS BY THE
TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN FINDING THAT PETITIONERS ARE LIABLE FOR THE
DEATH OF NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF
LRTA."3
15
Petitioners would contend that the appellate court ignored the
evidence and the factual findings of the trial court by holding
them liable on the basis of a sweeping conclusion that the
presumption of negligence on the part of a common carrier was
not overcome. Petitioners would insist that Escartin’s assault
upon Navidad, which caused the latter to fall on the tracks, was
an act of a stranger that could not have been foreseen or
prevented. The LRTA would add that the appellate court’s
conclusion on the existence of an employer-employee
relationship between Roman and LRTA lacked basis because
Roman himself had testified being an employee of Metro Transit
and not of the LRTA.
Respondents, supporting the decision of the appellate court,
contended that a contract of carriage was deemed created from
the moment Navidad paid the fare at the LRT station and
entered the premises of the latter, entitling Navidad to all the
rights and protection under a contractual relation, and that the
appellate court had correctly held LRTA and Roman liable for
the death of Navidad in failing to exercise extraordinary diligence
imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from
the nature of its business and for reasons of public policy, is
burdened with the duty of exercising utmost diligence in
ensuring the safety of passengers.4 The Civil Code, governing
the liability of a common carrier for death of or injury to its
passengers, provides:
"Article 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts of
the former’s employees, although such employees may have
acted beyond the scope of their authority or in violation of the
orders of the common carriers.
"This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family
in the selection and supervision of their employees."
"Article 1763. A common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the common
carrier’s employees through the exercise of the diligence of a

good father of a family could have prevented or stopped the act
or omission."
The law requires common carriers to carry passengers safely
using the utmost diligence of very cautious persons with due
regard for all circumstances.5 Such duty of a common carrier to
provide safety to its passengers so obligates it not only during
the course of the trip but for so long as the passengers are
within its premises and where they ought to be in pursuance to
the contract of carriage.6 The statutory provisions render a
common carrier liable for death of or injury to passengers (a)
through the negligence or wilful acts of its employees or b) on
account of wilful acts or negligence of other passengers or of
strangers if the common carrier’s employees through the
exercise of due diligence could have prevented or stopped the
act or omission.7 In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and8 by
simple proof of injury, the passenger is relieved of the duty to
still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure.9 In
the absence of satisfactory explanation by the carrier on how the
accident occurred, which petitioners, according to the appellate
court, have failed to show, the presumption would be that it has
been at fault,10 an exception from the general rule that
negligence must be proved.11
The foundation of LRTA’s liability is the contract of carriage and
its obligation to indemnify the victim arises from the breach of
that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its
commitment to ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself of the services of
an outsider or an independent firm to undertake the task. In
either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability
could only be for tort under the provisions of Article 217612 and
related provisions, in conjunction with Article 2180,13 of the Civil
Code. The premise, however, for the employer’s liability is
negligence or fault on the part of the employee. Once such fault
is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection and
supervision of its employees. The liability is primary and can
only be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been
shown. Absent such a showing, one might ask further, how then
must the liability of the common carrier, on the one hand, and an
independent contractor, on the other hand, be described? It
would be solidary. A contractual obligation can be breached by
tort and when the same act or omission causes the injury, one
resulting in culpa contractual and the other in culpa aquiliana,
Article 219414 of the Civil Code can well apply.15 In fine, a
liability for tort may arise even under a contract, where tort is
that which breaches the contract.16 Stated differently, when an
act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be said to
have been breached by tort, thereby allowing the rules on tort to
apply.17
Regrettably for LRT, as well as perhaps the surviving spouse
and heirs of the late Nicanor Navidad, this Court is concluded by
the factual finding of the Court of Appeals that "there is nothing
to link (Prudent) to the death of Nicanor (Navidad), for the
reason that the negligence of its employee, Escartin, has not
been duly proven x x x." This finding of the appellate court is not
without substantial justification in our own review of the records
of the case.
There being, similarly, no showing that petitioner Rodolfo
Roman himself is guilty of any culpable act or omission, he must
also be absolved from liability. Needless to say, the contractual
tie between the LRT and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable
only for his own fault or negligence.
The award of nominal damages in addition to actual damages is
untenable. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by
him.18 It is an established rule that nominal damages cannot co-
exist with compensatory damages.19
WHEREFORE, the assailed decision of the appellate court is
AFFIRMED with MODIFICATION but only in that (a) the award
of nominal damages is DELETED and (b) petitioner Rodolfo
Roman is absolved from liability. No costs.
SO ORDERED.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA,
respondents.
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
16
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.
17
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 donot act with grave or irresistible
threat, violence or force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment
used in the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held
responsible — and will not be allowed to divest or to diminish
such responsibility — even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted
"with grave or irresistible threat, violence or force." We believe
and so hold that the limits of the duty of extraordinary diligence
in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by
"grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned
by private respondent which carried petitioner's cargo. The
record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case
No. 198 entitled "People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and
unlawfully taking and carrying away with them the second truck,
driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in
Urdaneta, Pangasinan. The decision of the trial court shows that
the accused acted with grave, if not irresistible, threat, violence
or force.3 Three (3) of the five (5) hold-uppers were armed with
firearms. The robbers not only took away the truck and its cargo
but also kidnapped the driver and his helper, detaining them for
several days and later releasing them in another province (in
Zambales). The hijacked truck was subsequently found by the
police in Quezon City. The Court of First Instance convicted all
the accused of robbery, though not of robbery in band. 4
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.
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her
official capacity as City Treasurer of Batangas,
respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the
Court of Appeals dated November 29, 1995, in CA-G.R. SP No.
36801, affirming the decision of the Regional Trial Court of
Batangas City, Branch 84, in Civil Case No. 4293, which
dismissed petitioners' complaint for a business tax refund
imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic
Act No. 387, as amended, to contract, install and operate oil
pipelines. The original pipeline concession was granted in 19671
and renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's
permit with the Office of the Mayor of Batangas City. However,
before the mayor's permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its
gross receipts for the fiscal year 1993 pursuant to the Local
Government Code3. The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04
payable in four installments based on the gross receipts for
products pumped at GPS-1 for the fiscal year 1993 which
18
amounted to P181,681,151.00. In order not to hamper its
operations, petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed
to the respondent City Treasurer, the pertinent portion of which
reads:
Please note that our Company (FPIC) is a pipeline operator with
a government concession granted under the Petroleum Act. It is
engaged in the business of transporting petroleum products from
the Batangas refineries, via pipeline, to Sucat and JTF
Pandacan Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the
enumeration of contractors under Section 131, Paragraph (h) of
the Local Government Code. Therefore, the authority to impose
tax "on contractors and other independent contractors" under
Section 143, Paragraph (e) of the Local Government Code does
not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a
mere fee authorized under Section 147 of the Local Government
Code. The said section limits the imposition of fees and charges
on business to such amounts as may be commensurate to the
cost of regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited
provision. The amount of P956,076.04 (P239,019.01 per
quarter) is not commensurate to the cost of regulation,
inspection and licensing. The fee is already a revenue raising
measure, and not a mere regulatory imposition.4
On March 8, 1994, the respondent City Treasurer denied the
protest contending that petitioner cannot be considered engaged
in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code.5
On June 15, 1994, petitioner filed with the Regional Trial Court
of Batangas City a complaint6 for tax refund with prayer for writ
of preliminary injunction against respondents City of Batangas
and Adoracion Arellano in her capacity as City Treasurer. In its
complaint, petitioner alleged, inter alia, that: (1) the imposition
and collection of the business tax on its gross receipts violates
Section 133 of the Local Government Code; (2) the authority of
cities to impose and collect a tax on the gross receipts of
"contractors and independent contractors" under Sec. 141 (e)
and 151 does not include the authority to collect such taxes on
transportation contractors for, as defined under Sec. 131 (h), the
term "contractors" excludes transportation contractors; and, (3)
the City Treasurer illegally and erroneously imposed and

collected the said tax, thus meriting the immediate refund of the
tax paid.7
Traversing the complaint, the respondents argued that petitioner
cannot be exempt from taxes under Section 133 (j) of the Local
Government Code as said exemption applies only to
"transportation contractors and persons engaged in the
transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the
term "common carrier" which refers solely to ordinary carriers
such as trucks, trains, ships and the like. Respondents further
posit that the term "common carrier" under the said code
pertains to the mode or manner by which a product is delivered
to its destination.8
On October 3, 1994, the trial court rendered a decision
dismissing the complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent
contractor.
. . . the exemption to tax claimed by the plaintiff has become
unclear. It is a rule that tax exemptions are to be strictly
construed against the taxpayer, taxes being the lifeblood of the
government. Exemption may therefore be granted only by clear
and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under
Republic Act 387. (Exhibit A) whose concession was lately
renewed by the Energy Regulatory Board (Exhibit B). Yet neither
said law nor the deed of concession grant any tax exemption
upon the plaintiff.
Even the Local Government Code imposes a tax on franchise
holders under Sec. 137 of the Local Tax Code. Such being the
situation obtained in this case (exemption being unclear and
equivocal) resort to distinctions or other considerations may be
of help:
1. That the exemption granted under Sec. 133 (j) encompasses
only common carriers so as not to overburden the riding public
or commuters with taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities to a single
specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give
more and effective local autonomy to local governments than the
previous enactments, to make them economically and financially
viable to serve the people and discharge their functions with a
concomitant obligation to accept certain devolution of powers, . .
. So, consistent with this policy even franchise grantees are
taxed (Sec. 137) and contractors are also taxed under Sec. 143
(e) and 151 of the Code.9
Petitioner assailed the aforesaid decision before this Court via a
petition for review. On February 27, 1995, we referred the case
to the respondent Court of Appeals for consideration and
adjudication. 10On November 29, 1995, the respondent court
rendered a decision 11 affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for reconsideration
was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course
in a Resolution dated November 11, 1996. 13 Petitioner moved
for a reconsideration which was granted by this Court in a
Resolution 14 of January 22, 1997. Thus, the petition was
reinstated.
Petitioner claims that the respondent Court of Appeals erred in
holding that (1) the petitioner is not a common carrier or a
transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds
himself out to the public as engaged in the business of
transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any
person, corporation, firm or association engaged in the business
of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the
public."
The test for determining whether a party is a common carrier of
goods is:
1. He must be engaged in the business of carrying goods for
others as a public employment, and must hold himself out as
ready to engage in the transportation of goods for person
generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his
business is confined;
3. He must undertake to carry by the method by which his
business is conducted and over his established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is no
doubt that petitioner is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry
for all persons indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land and for
19
compensation. The fact that petitioner has a limited clientele
does not exclude it from the definition of a common carrier. In
De Guzman vs. Court of Appeals 16 we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only
as an ancillary activity (in local idiom, as a "sideline"). Article
1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment
of the general population. We think that Article 1877 deliberately
refrained from making such distinctions.
So understood, the concept of "common carrier" under Article
1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service"
includes:
every person that now or hereafter may own, operate. manage,
or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system gas, electric light heat and power, water
supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations
and other similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as
used in Section 133 (j) of the Local Government Code refers
only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water,
is erroneous.
As correctly pointed out by petitioner, the definition of "common
carriers" in the Civil Code makes no distinction as to the means
of transporting, as long as it is by land, water or air. It does not
provide that the transportation of the passengers or goods
should be by motor vehicle. In fact, in the United States, oil pipe
line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387),
petitioner is considered a "common carrier." Thus, Article 86
thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe
line shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to
utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by
others for transport, and to charge without discrimination such
rates as may have been approved by the Secretary of
Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public
utility. Pertinent portion of Article 7 thereof provides:
that everything relating to the exploration for and exploitation of
petroleum . . . and everything relating to the manufacture,
refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)
The Bureau of Internal Revenue likewise considers the petitioner
a "common carrier." In BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged
only in transporting petroleum products, it is considered a
common carrier under Republic Act No. 387 . . . . Such being the
case, it is not subject to withholding tax prescribed by Revenue
Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner
is a "common carrier" and, therefore, exempt from the business
tax as provided for in Section 133 (j), of the Local Government
Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight
by hire and common carriers by air, land or water, except as
provided in this Code.
The deliberations conducted in the House of Representatives on
the Local Government Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on
the Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed to
be exempted from the taxing powers of the local government
units. May we know the reason why the transportation business
is being excluded from the taxing powers of the local
government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained
in Section 121 (now Sec. 131), line 16, paragraph 5. It states
that local government units may not impose taxes on the
business of transportation, except as otherwise provided in this
code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98
of Book II, one can see there that provinces have the power to
impose a tax on business enjoying a franchise at the rate of not
more than one-half of 1 percent of the gross annual receipts. So,
transportation contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the
imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of
what is already being imposed by the National Internal Revenue
Code which is the so-called "common carriers tax." We do not
want a duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a province may
impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker.
. . . 18
It is clear that the legislative intent in excluding from the taxing
power of the local government unit the imposition of business
tax against common carriers is to prevent a duplication of the so-
called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's
tax on its gross sales/earnings under the National Internal
Revenue Code. 19 To tax petitioner again on its gross receipts
in its transportation of petroleum business would defeat the
purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision
of the respondent Court of Appeals dated November 29, 1995 in
CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
20
G.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC.,
respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
The Court finds occasion to apply the rules on the
seaworthiness of private carrier, its owner's responsibility for
damage to the cargo and its liability for demurrage and
attorney's fees. The Court also reiterates the well-known rule
that findings of facts of trial courts, when affirmed by the Court of
Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National
Steel Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both
of which assail the August 12, 1993 Decision of the Court of
Appeals.1 The Court of Appeals modified the decision of the
Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil
Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of
defendant and against the plaintiff dismissing the complaint with
cost against plaintiff, and ordering plaintiff to pay the defendant
on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as
demurrage with interest at the legal rate on both amounts from
April 7, 1976 until the same shall have been fully paid;
2. Attorney's fees and expenses of litigation in the sum of
P100,000.00; and
3. Costs of suit.
SO ORDERED.2
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed
from is modified by reducing the award for demurrage to
P44,000.00 and deleting the award for attorney's fees and
expenses of litigation. Except as thus modified, the decision is
AFFIRMED. There is no pronouncement as to costs.
SO ORDERED.3
The Facts

The MV Vlasons I is a vessel which renders tramping service
and, as such, does not transport cargo or shipment for the
general public. Its services are available only to specific persons
who enter into a special contract of charter party with its owner.
It is undisputed that the ship is a private carrier. And it is in the
capacity that its owner, Vlasons Shipping, Inc., entered into a
contract of affreightment or contract of voyage charter hire with
National Steel Corporation.
The facts as found by Respondent Court of Appeals are as
follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC)
as Charterer and defendant Vlasons Shipping, Inc. (VSI) as
Owner, entered into a Contract of Voyage Charter Hire (Exhibit
"B"; also Exhibit "1") whereby NSC hired VSI's vessel, the MV
"VLASONS I" to make one (1) voyage to load steel products at
Iligan City and discharge them at North Harbor, Manila, under
the following terms and conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500 MT,
10% more or less at Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment
upon presentation of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
(Weather Working Day of 24 consecutive hours, Sundays and
Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must insure the
cargoes. Shipowners not responsible for losses/damages except
on proven willful negligence of the officers of the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic]
or other internationally recognized Charter Party Agreement
shall form part of this Contract.
xxx xxx xxx
The terms "F.I.O.S.T." which is used in the shipping business is
a standard provision in the NANYOZAI Charter Party which
stands for "Freight In and Out including Stevedoring and
Trading", which means that the handling, loading and unloading
of the cargoes are the responsibility of the Charterer. Under
Paragraph 5 of the NANYOZAI Charter Party, it states,
"Charterers to load, stow and discharge the cargo free of risk
and expenses to owners. . . . (Emphasis supplied).
Under paragraph 10 thereof, it is provided that "(o)wners shall,
before and at the beginning of the voyage, exercise due
diligence to make the vessel seaworthy and properly manned,
equipped and supplied and to make the holds and all other parts
of the vessel in which cargo is carried, fit and safe for its
reception, carriage and preservation. Owners shall not be liable
for loss of or damage of the cargo arising or resulting from:
unseaworthiness unless caused by want of due diligence on the
part of the owners to make the vessel seaworthy, and to secure
that the vessel is properly manned, equipped and supplied and
to make the holds and all other parts of the vessel in which
cargo is carried, fit and safe for its reception, carriage and
preservation; . . . ; perils, dangers and accidents of the sea or
other navigable waters; . . . ; wastage in bulk or weight or any
other loss or damage arising from inherent defect, quality or vice
of the cargo; insufficiency of packing; . . . ; latent defects not
discoverable by due diligence; any other cause arising without
the actual fault or privity of Owners or without the fault of the
agents or servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides
that "(o)wners shall not be responsible for split, chafing and/or
any damage unless caused by the negligence or default of the
master and crew."
(2) On August 6, 7 and 8, 1974, in accordance with the Contract
of Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs
pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates
and 92 packages of hot rolled sheets or a total of 1,769
packages with a total weight of about 2,481.19 metric tons for
carriage to Manila. The shipment was placed in the three (3)
hatches of the ship. Chief Mate Gonzalo Sabando, acting as
agent of the vessel[,] acknowledged receipt of the cargo on
board and signed the corresponding bill of lading, B.L.P.P. No.
0233 (Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor,
Manila, on August 12, 1974. The following day, August 13, 1974,
when the vessel's three (3) hatches containing the shipment
were opened by plaintiff's agents, nearly all the skids of tinplates
and hot rolled sheets were allegedly found to be wet and rusty.
The cargo was discharged and unloaded by stevedores hired by
the Charterer. Unloading was completed only on August 24,
1974 after incurring a delay of eleven (11) days due to the heavy
rain which interrupted the unloading operations. (Exhibit "E")
(4) To determine the nature and extent of the wetting and
rusting, NSC called for a survey of the shipment by the Manila
Adjusters and Surveyors Company (MASCO). In a letter to the
21
NSC dated March 17, 1975 (Exhibit "G"), MASCO made a report
of its ocular inspection conducted on the cargo, both while it was
still on board the vessel and later at the NDC warehouse in
Pureza St., Sta. Mesa, Manila where the cargo was taken and
stored. MASCO reported that it found wetting and rusting of the
packages of hot rolled sheets and metal covers of the tinplates;
that tarpaulin hatch covers were noted torn at various extents;
that container/metal casings of the skids were rusting all over.
MASCO ventured the opinion that "rusting of the tinplates was
caused by contact with SEA WATER sustained while still on
board the vessel as a consequence of the heavy weather and
rough seas encountered while en route to destination (Exhibit
"F"). It was also reported that MASCO's surveyors drew at
random samples of bad order packing materials of the tinplates
and delivered the same to the M.I.T. Testing Laboratories for
analysis. On August 31, 1974, the M.I.T. Testing Laboratories
issued Report No. 1770 (Exhibit "I") which in part, states, "The
analysis of bad order samples of packing materials . . . shows
that wetting was caused by contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid Report
No. 1770, plaintiff filed with the defendant its claim for damages
suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18. Then on October 3, 1974, plaintiff
formally demanded payment of said claim but defendant VSI
refused and failed to pay. Plaintiff filed its complaint against
defendant on April 21, 1976 which was docketed as Civil Case
No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in
the aforesaid amount of P941,145.18 as a result of the act,
neglect and default of the master and crew in the management
of the vessel as well as the want of due diligence on the part of
the defendant to make the vessel seaworthy and to make the
holds and all other parts of the vessel in which the cargo was
carried, fit and safe for its reception, carriage and preservation
— all in violation of defendant's undertaking under their Contract
of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged
damage claiming that the MV "VLASONS I" was seaworthy in all
respects for the carriage of plaintiff's cargo; that said vessel was
not a "common carrier" inasmuch as she was under voyage
charter contract with the plaintiff as charterer under the charter
party; that in the course of the voyage from Iligan City to Manila,
the MV "VLASONS I" encountered very rough seas, strong
winds and adverse weather condition, causing strong winds and
big waves to continuously pound against the vessel and
seawater to overflow on its deck and hatch covers, that under
the Contract of Voyage Charter Hire, defendant shall not be
responsible for losses/damages except on proven willful
negligence of the officers of the vessel, that the officers of said
MV "VLASONS I" exercised due diligence and proper
seamanship and were not willfully negligent; that furthermore the

Voyage Charter Party provides that loading and discharging of
the cargo was on FIOST terms which means that the vessel was
free of risk and expense in connection with the loading and
discharging of the cargo; that the damage, if any, was due to the
inherent defect, quality or vice of the cargo or to the insufficient
packing thereof or to latent defect of the cargo not discoverable
by due diligence or to any other cause arising without the actual
fault or privity of defendant and without the fault of the agents or
servants of defendant; consequently, defendant is not liable; that
the stevedores of plaintiff who discharged the cargo in Manila
were negligent and did not exercise due care in the discharge of
the cargo; land that the cargo was exposed to rain and seawater
spray while on the pier or in transit from the pier to plaintiff's
warehouse after discharge from the vessel; and that plaintiff's
claim was highly speculative and grossly exaggerated and that
the small stain marks or sweat marks on the edges of the
tinplates were magnified and considered total loss of the cargo.
Finally, defendant claimed that it had complied with all its duties
and obligations under the Voyage Charter Hire Contract and had
no responsibility whatsoever to plaintiff. In turn, it alleged the
following counterclaim:
(a) That despite the full and proper performance by defendant of
its obligations under the Voyage Charter Hire Contract, plaintiff
failed and refused to pay the agreed charter hire of P75,000.00
despite demands made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had
agreed to pay defendant the sum of P8,000.00 per day for
demurrage. The vessel was on demurrage for eleven (11) days
in Manila waiting for plaintiff to discharge its cargo from the
vessel. Thus, plaintiff was liable to pay defendant demurrage in
the total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant,
plaintiff should be ordered to pay defendant attorney's fees and
all expenses of litigation in the amount of not less than
P100,000.00.
(8) From the evidence presented by both parties, the trial court
came out with the following findings which were set forth in its
decision:
(a) The MV "VLASONS I" is a vessel of Philippine registry
engaged in the tramping service and is available for hire only
under special contracts of charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of
Voyage Charter Hire (Exh. "1"), the MV VLASONS I" was
covered by the required seaworthiness certificates including the
Certification of Classification issued by an international
classification society, the NIPPON KAIJI KYOKAI (Exh. "4");
Coastwise License from the Board of Transportation (Exh. "5");
International Loadline Certificate from the Philippine Coast
Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also
from the Philippine Coast Guard (Exh. "7"); Ship Radio Station
License (Exh. "8"); Certificate of Inspection by the Philippine
Coast Guard (Exh. "12"); and Certificate of Approval for
Conversion issued by the Bureau of Customs (Exh. "9"). That
being a vessel engaged in both overseas and coastwise trade,
the MV "VLASONS I" has a higher degree of seaworthiness and
safety.
(c) Before it proceeded to Iligan City to perform the voyage
called for by the Contract of Voyage Charter Hire, the MV
"VLASONS I" underwent drydocking in Cebu and was
thoroughly inspected by the Philippine Coast Guard. In fact,
subject voyage was the vessel's first voyage after the
drydocking. The evidence shows that the MV "VLASONS I" was
seaworthy and properly manned, equipped and supplied when it
undertook the voyage. It has all the required certificates of
seaworthiness.
(d) The cargo/shipment was securely stowed in three (3)
hatches of the ship. The hatch openings were covered by
hatchboards which were in turn covered by two or double
tarpaulins. The hatch covers were water tight. Furthermore,
under the hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant violated the contract
of carriage is not supported by evidence. The provisions of the
Civil Code on common carriers pursuant to which there exists a
presumption of negligence in case of loss or damage to the
cargo are not applicable. As to the damage to the tinplates
which was allegedly due to the wetting and rusting thereof, there
is unrebutted testimony of witness Vicente Angliongto that
tinplates "sweat" by themselves when packed even without
being in contract (sic) with water from outside especially when
the weather is bad or raining. The trust caused by sweat or
moisture on the tinplates may be considered as a loss or
damage but then, defendant cannot be held liable for it pursuant
to Article 1734 of the Civil Case which exempts the carrier from
responsibility for loss or damage arising from the "character of
the goods . . ." All the 1,769 skids of the tinplates could not have
been damaged by water as claimed by plaintiff. It was shown as
claimed by plaintiff that the tinplates themselves were wrapped
in kraft paper lining and corrugated cardboards could not be
affected by water from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of
tinplates were negligent in not closing the hatch openings of the
MV "VLASONS I" when rains occurred during the discharging of
the cargo thus allowing rainwater to enter the hatches. It was
proven that the stevedores merely set up temporary tents to
cover the hatch openings in case of rain so that it would be easy
for them to resume work when the rains stopped by just
removing the tent or canvas. Because of this improper covering
of the hatches by the stevedores during the discharging and
22
unloading operations which were interrupted by rains, rainwater
drifted into the cargo through the hatch openings. Pursuant to
paragraph 5 of the NANYOSAI [sic] Charter Party which was
expressly made part of the Contract of Voyage Charter Hire, the
loading, stowing and discharging of the cargo is the sole
responsibility of the plaintiff charterer and defendant carrier has
no liability for whatever damage may occur or maybe [sic]
caused to the cargo in the process.
(g) It was also established that the vessel encountered rough
seas and bad weather while en route from Iligan City to Manila
causing sea water to splash on the ship's deck on account of
which the master of the vessel (Mr. Antonio C. Dumlao) filed a
"Marine Protest" on August 13, 1974 (Exh. "15"); which can be
invoked by defendant as a force majeure that would exempt the
defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in
paragraph 9 of the Voyage Charter Hire contract that it was to
insure the cargo because it did not. Had plaintiff complied with
the requirement, then it could have recovered its loss or damage
from the insurer. Plaintiff also violated the charter party contract
when it loaded not only "steel products", i.e. steel bars, angular
bars and the like but also tinplates and hot rolled sheets which
are high grade cargo commanding a higher freight. Thus plaintiff
was able to ship grade cargo at a lower freight rate.
(i) As regards defendant's counterclaim, the contract of voyage
charter hire under Paragraph 4 thereof, fixed the freight at
P30.00 per metric ton payable to defendant carrier upon
presentation of the bill of lading within fifteen (15) days. Plaintiff
has not paid the total freight due of P75,000.00 despite
demands. The evidence also showed that the plaintiff was
required and bound under paragraph 7 of the same Voyage
Charter Hire contract to pay demurrage of P8,000.00 per day of
delay in the unloading of the cargoes. The delay amounted to
eleven (11) days thereby making plaintiff liable to pay defendant
for demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC
alleged six errors:
I
The trial court erred in finding that the MV "VLASONS I" was
seaworthy, properly manned, equipped and supplied, and that
there is no proof of willful negligence of the vessel's officers.
II
The trial court erred in finding that the rusting of NSC's tinplates
was due to the inherent nature or character of the goods and not
due to contact with seawater.

III
The trial court erred in finding that the stevedores hired by NSC
were negligent in the unloading of NSC's shipment.
IV
The trial court erred in exempting VSI from liability on the ground
of force majeure.
V reducing the award of demurrage from P88,000.00 to
The trial court erred in finding that NSC violated the contract of
voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage
and attorney's fees, to VSI.4
As earlier stated, the Court of Appeals modified the decision of
the trial court by reducing the demurrage from P88,000.00 to
P44,000.00 and deleting the award of attorneys fees and
expenses of litigation. NSC and VSI filed separate motions for
reconsideration. In a Resolution5 dated October 20, 1993, the
appellate court denied both motions. Undaunted, NSC and VSI
filed their respective petitions for review before this Court. On
motion of VSI, the Court ordered on February 14, 1994 the
consolidation of these petitions.6
The Issues
In its petition7 and memorandum,8 NSC raises the following
questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage
due to cargo unloading delays caused by weather interruption;
2. Whether or not the alleged "seaworthiness certificates"
(Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and "12") were
admissible in evidence and constituted evidence of the vessel's
seaworthiness at the beginning of the voyages; and
3. Whether or not a charterer's failure to insure its cargo
exempts the shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessel's officers and crew were negligent in
handling and caring for NSC's cargo;
3. Whether or not NSC's cargo of tinplates did sweat during the
voyage and, hence, rusted on their own; and
4. Whether or not NSC's stevedores were negligent and caused
the wetting[/]rusting of NSC's tinplates.
In its separate petition,9 VSI submits for the consideration of this
Court the following alleged errors of the CA:
A. The respondent Court of Appeals committed an error of law in
P44,000.00.
B. The respondent Court of Appeals committed an error of law in
deleting the award of P100,000 for attorney's fees and expenses
of litigation.
Amplifying the foregoing, VSI raises the following issues in its
memorandum:10
I. Whether or not the provisions of the Civil Code of the
Philippines on common carriers pursuant to which there exist[s]
a presumption of negligence against the common carrier in case
of loss or damage to the cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of
Voyage Charter Hire, including the Nanyozai Charter, are valid
and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed
under the following headings:
1. Questions of Fact
2. Effect of NSC's Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorney's Fees.
The Court's Ruling
The Court affirms the assailed Decision of the Court of Appeals,
except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted
with NSC as a common carrier or as a private carrier. The
resolution of this preliminary question determines the law,
standard of diligence and burden of proof applicable to the
present case.
Article 1732 of the Civil Code defines a common carrier as
"persons, corporations, firms or associations engaged in the
23
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public." It has been held that the true test of a
common carrier is the carriage of passengers or goods, provided
it has space, for all who opt to avail themselves of its
transportation service for a fee.11 A carrier which does not
qualify under the above test is deemed a private carrier.
"Generally, private carriage is undertaken by special agreement
and the carrier does not hold himself out to carry goods for the
general public. The most typical, although not the only form of
private carriage, is the charter party, a maritime contract by
which the charterer, a party other than the shipowner, obtains
the use and service of all or some part of a ship for a period of
time or a voyage or voyages."12
In the instant case, it is undisputed that VSI did not offer its
services to the general public. As found by the Regional Trial
Court, it carried passengers or goods only for those it chose
under a "special contract of charter party." 13 As correctly
concluded by the Court of Appeals, the MV Vlasons I "was not a
common but a private carrier."14 Consequently, the rights and
obligations of VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by stipulations in
their contract of private carriage or charter party.15Recently, in
Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of
Appeals and Seven Brothers Shipping Corporation,16 the Court
ruled:
. . . in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be
binding on them. Unlike in a contract involving a common
carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or
remove the protection given by law in contracts involving
common carriers.17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire,
dated July 17, 1974, that VSI "shall not be responsible for losses
except on proven willful negligence of the officers of the vessel."
The NANYOZAI Charter Party, which was incorporated in the
parties' contract of transportation further provided that the
shipowner shall not be liable for loss of or a damage to the cargo
arising or resulting from unseaworthiness, unless the same was
caused by its lack of due diligence to make the vessel seaworthy
or to ensure that the same was "properly manned, equipped and
supplied," and to "make the holds and all other parts of the

vessel in which cargo [was] carried, fit and safe for its reception,
carriage and preservation."18 The NANYOZAI Charter Party
also provided that "[o]wners shall not be responsible for split,
chafing and/or any damage unless caused by the negligence or
default of the master or crew."19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC
must prove that the damage to its shipment was caused by
VSI's willful negligence or failure to exercise due diligence in
making MV Vlasons I seaworthy and fit for holding, carrying and
safekeeping the cargo. Ineluctably, the burden of proof was
placed on NSC by the parties' agreement.
This view finds further support in the Code of Commerce which
pertinently provides:
Art. 361. Merchandise shall be transported at the risk and
venture of the shipper, if the contrary has not been expressly
stipulated.
Therefore, the damage and impairment suffered by the goods
during the transportation, due to fortuitous event, force majeure,
or the nature and inherent defect of the things, shall be for the
account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages
arising from the cause mentioned in the preceding article if
proofs against him show that they occurred on account of his
negligence or his omission to take the precautions usually
adopted by careful persons, unless the shipper committed fraud
in the bill of lading, making him to believe that the goods were of
a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowner's
obligations are governed by the foregoing provisions of the Code
of Commerce and not by the Civil Code which, as a general rule,
places the prima faciepresumption of negligence on a common
carrier. It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to,
cargo, the burden is on the plaintiff to prove that the carrier was
negligent or unseaworthy, and the fact that the goods were lost
or damaged while in the carrier's custody does not put the
burden of proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes only
to exercise due care in the protection of the goods committed to
its care, the burden of proving negligence or a breach of that
duty rests on plaintiff and proof of loss of, or damage to, cargo
while in the carrier's possession does not cast on it the burden
of proving proper care and diligence on its part or that the loss
occurred from an excepted cause in the contract or bill of lading.
However, in discharging the burden of proof, plaintiff is entitled
to the benefit of the presumptions and inferences by which the
law aids the bailor in an action against a bailee, and since the
carrier is in a better position to know the cause of the loss and
that it was not one involving its liability, the law requires that it
come forward with the information available to it, and its failure
to do so warrants an inference or presumption of its liability.
However, such inferences and presumptions, while they may
affect the burden of coming forward with evidence, do not alter
the burden of proof which remains on plaintiff, and, where the
carrier comes forward with evidence explaining the loss or
damage, the burden of going forward with the evidence is again
on plaintiff.
Where the action is based on the shipowner's warranty of
seaworthiness, the burden of proving a breach thereof and that
such breach was the proximate cause of the damage rests on
plaintiff, and proof that the goods were lost or damaged while in
the carrier's possession does not cast on it the burden of proving
seaworthiness. . . . Where the contract of carriage exempts the
carrier from liability for unseaworthiness not discoverable by due
diligence, the carrier has the preliminary burden of proving the
exercise of due diligence to make the vessel seaworthy.20
In the instant case, the Court of Appeals correctly found the
NSC "has not taken the correct position in relation to the
question of who has the burden of proof. Thus, in its brief (pp.
10-11), after citing Clause 10 and Clause 12 of the NANYOZAI
Charter Party (incidentally plaintiff-appellant's [NSC's]
interpretation of Clause 12 is not even correct), it argues that 'a
careful examination of the evidence will show that VSI miserably
failed to comply with any of these obligation's as if defendant-
appellee [VSI] had the burden of
proof."21
First Issue: Questions of Fact
Based on the foregoing, the determination of the following
factual questions is manifestly relevant: (1) whether VSI
exercised due diligence in making MV Vlasons I seaworthy for
the intended purpose under the charter party; (2) whether the
damage to the cargo should be attributed to the willful
negligence of the officers and crew of the vessel or of the
stevedores hired by NSC; and (3) whether the rusting of the
tinplates was caused by its own "sweat" or by contact with
seawater.
These questions of fact were threshed out and decided by the
trial court, which had the firsthand opportunity to hear the
parties' conflicting claims and to carefully weigh their respective
evidence. The findings of the trial court were subsequently
24
affirmed by the Court of Appeals. Where the factual findings of
both the trial court and the Court of Appeals coincide, the same
are binding on this Court.22 We stress that, subject to some
exceptional instances,23 only questions of law — not questions
of fact — may be raised before this Court in a petition for review
under Rule 45 of the Rules of Court. After a thorough review of
the case at bar, we find no reason to disturb the lower court's
factual findings, as indeed NSC has not successfully proven the
application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence
to make the ship seaworthy and fit for the carriage of NSC's
cargo of steel and tinplates. This is shown by the fact that it was
drylocked and inspected by the Philippine Coast Guard before it
proceeded to Iligan City for its voyage to Manila under the
contract of voyage charter hire.24 The vessel's voyage from
Iligan to Manila was the vessel's first voyage after drydocking.
The Philippine Coast Guard Station in Cebu cleared it as
seaworthy, fitted and equipped; it met all requirements for
trading as cargo vessel.25 The Court of Appeals itself sustained
the conclusion of the trial court that MV Vlasons Iwas seaworthy.
We find no reason to modify or reverse this finding of both the
trial and the appellate courts.
Who Were Negligent:
Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the
damage to the cargo was caused by the negligence of the
officers and the crew of MV Vlasons I in making their vessel
seaworthy and fit for the carriage of tinplates. NSC failed to
discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had
used an old and torn tarpaulin or canvas to cover the hatches
through which the cargo was loaded into the cargo hold of the
ship. It faults the Court of Appeals for failing to consider such
claim as an "uncontroverted fact"26 and denies that MV Vlasons
I "was equipped with new canvas covers in tandem with the old
ones as indicated in the Marine Protest . . ."27 We disagree.
The records sufficiently support VSI's contention that the ship
used the old tarpaulin, only in addition to the new one used
primarily to make the ship's hatches watertight. The foregoing
are clear from the marine protest of the master of the MV
Vlasons I, Antonio C. Dumlao, and the deposition of the ship's
boatswain, Jose Pascua. The salient portions of said marine
protest read:
. . . That the M/V "VLASONS I" departed Iligan City or about
0730 hours of August 8, 1974, loaded with approximately

2,487.9 tons of steel plates and tin plates consigned to National
Steel Corporation; that before departure, the vessel was rigged,
fully equipped and cleared by the authorities; that on or about
August 9, 1974, while in the vicinity of the western part of
Negros and Panay, we encountered very rough seas and strong
winds and Manila office was advised by telegram of the adverse
weather conditions encountered; that in the morning of August
10, 1974, the weather condition changed to worse and strong
winds and big waves continued pounding the vessel at her port
side causing sea water to overflow on deck andhatch (sic)
covers and which caused the first layer of the canvass covering
to give way while the new canvass covering still holding on;
That the weather condition improved when we reached Dumali
Point protected by Mindoro; that we re-secured the canvass
covering back to position; that in the afternoon of August 10,
1974, while entering Maricaban Passage, we were again
exposed to moderate seas and heavy rains; that while
approaching Fortune Island, we encountered again rough seas,
strong winds and big waves which caused the same canvass to
give way and leaving the new canvass holding on;
xxx xxx xxx 28
And the relevant portions of Jose Pascua's deposition are as
follows:
q What is the purpose of the canvas cover?
a So that the cargo would not be soaked with water.
q And will you describe how the canvas cover was secured on
the hatch opening?
WITNESS
a It was placed flat on top of the hatch cover, with a little canvas
flowing over the sides and we place[d] a flat bar over the canvas
on the side of the hatches and then we place[d] a stopper so
that the canvas could not be removed.
ATTY DEL ROSARIO
q And will you tell us the size of the hatch opening? The length
and the width of the hatch opening.
a Forty-five feet by thirty-five feet, sir.
xxx xxx xxx
q How was the canvas supported in the middle of the hatch
opening?
a There is a hatch board.
ATTY DEL ROSARIO
q What is the hatch board made of?
a It is made of wood, with a handle.
q And aside from the hatch board, is there any other material
there to cover the hatch?
a There is a beam supporting the hatch board.
q What is this beam made of?
a It is made of steel, sir.
q Is the beam that was placed in the hatch opening covering the
whole hatch opening?
a No, sir.
q How many hatch beams were there placed across the
opening?
a There are five beams in one hatch opening.
ATTY DEL ROSARIO
q And on top of the beams you said there is a hatch board. How
many pieces of wood are put on top?
a Plenty, sir, because there are several pieces on top of the
hatch beam.
q And is there a space between the hatch boards?
a There is none, sir.
q They are tight together?
a Yes, sir.
q How tight?
a Very tight, sir.
q Now, on top of the hatch boards, according to you, is the
canvass cover. How many canvas covers?
a Two, sir.29
That due diligence was exercised by the officers and the crew of
the MV Vlasons I was further demonstrated by the fact that,
despite encountering rough weather twice, the new tarpaulin did
not give way and the ship's hatches and cargo holds remained
waterproof. As aptly stated by the Court of Appeals, ". . . we find
25
no reason not to sustain the conclusion of the lower court based
on overwhelming evidence, that the MV 'VLASONS I' was
seaworthy when it undertook the voyage on August 8, 1974
carrying on board thereof plaintiff-appellant's shipment of 1,677
skids of tinplates and 92 packages of hot rolled sheets or a total
of 1,769 packages from NSC's pier in Iligan City arriving safely
at North Harbor, Port Area, Manila, on August 12, 1974; . . .30
Indeed, NSC failed to discharge its burden to show negligence
on the part of the officers and the crew of MV Vlasons I. On the
contrary, the records reveal that it was the stevedores of NSC
who were negligent in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the
hatches when strong rains occasioned by a passing typhoon
disrupted the unloading of the cargo. This tent-like covering,
however, was clearly inadequate for keeping rain and seawater
away from the hatches of the ship. Vicente Angliongto, an officer
of VSI, testified thus:
ATTY ZAMORA:
Q Now, during your testimony on November 5, 1979, you stated
on August 14 you went on board the vessel upon notice from the
National Steel Corporation in order to conduct the inspection of
the cargo. During the course of the investigation, did you chance
to see the discharging operation?
WITNESS:
A Yes, sir, upon my arrival at the vessel, I saw some of the
tinplates already discharged on the pier but majority of the
tinplates were inside the hall, all the hatches were opened.
Q In connection with these cargoes which were unloaded, where
is the place.
A At the Pier.
Q What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This
particular matter . . . the transcript of stenographic notes shows
the same was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the
serious part of the testimony.
COURT:

All right, witness may answer.
ATTY LOPEZ:
Q What was used in order to protect the cargo from the
weather?
A A base of canvas was used as cover on top of the tin plates,
and tents were built at the opening of the hatches.
Q You also stated that the hatches were already opened and
that there were tents constructed at the opening of the hatches
to protect the cargo from the rain. Now, will you describe [to] the
Court the tents constructed.
A The tents are just a base of canvas which look like a tent of an
Indian camp raise[d] high at the middle with the whole side
separated down to the hatch, the size of the hatch and it is
soaks [sic] at the middle because of those weather and this can
be used only to temporarily protect the cargo from getting wet by
rains.
Q Now, is this procedure adopted by the stevedores of covering
tents proper?
A No, sir, at the time they were discharging the cargo, there was
a typhoon passing by and the hatch tent was not good enough
to hold all of it to prevent the water soaking through the canvass
and enter the cargo.
Q In the course of your inspection, Mr. Anglingto [sic], did you
see in fact the water enter and soak into the canvass and
tinplates.
A Yes, sir, the second time I went there, I saw it.
Q As owner of the vessel, did you not advise the National Steel
Corporation [of] the procedure adopted by its stevedores in
discharging the cargo particularly in this tent covering of the
hatches?
A Yes, sir, I did the first time I saw it, I called the attention of the
stevedores but the stevedores did not mind at all, so, called the
attention of the representative of the National Steel but nothing
was done, just the same. Finally, I wrote a letter to them.31
NSC attempts to discredit the testimony of Angliongto by
questioning his failure to complain immediately about the
stevedores' negligence on the first day of unloading, pointing out
that he wrote his letter to petitioner only seven days later.32 The
Court is not persuaded. Angliongto's candid answer in his
aforequoted testimony satisfactorily explained the delay. Seven
days lapsed because he first called the attention of the
stevedores, then the NSC's representative, about the negligent
and defective procedure adopted in unloading the cargo. This
series of actions constitutes a reasonable response in accord
with common sense and ordinary human experience. Vicente
Angliongto could not be blamed for calling the stevedores'
attention first and then the NSC's representative on location
before formally informing NSC of the negligence he had
observed, because he was not responsible for the stevedores or
the unloading operations. In fact, he was merely expressing
concern for NSC which was ultimately responsible for the
stevedores it had hired and the performance of their task to
unload the cargo.
We see no reason to reverse the trial and the appellate courts'
findings and conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court
erred in finding that the stevedores hired by NSC were negligent
in the unloading of NSC's shipment. We do not think so. Such
negligence according to the trial court is evident in the
stevedores hired by [NSC], not closing the hatch of MV
'VLASONS I' when rains occurred during the discharging of the
cargo thus allowing rain water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It was proven that
the stevedores merely set up temporary tents or canvas to cover
the hatch openings when it rained during the unloading
operations so that it would be easier for them to resume work
after the rains stopped by just removing said tents or canvass. It
has also been shown that on August 20, 1974, VSI President
Vicente Angliongto wrote [NSC] calling attention to the manner
the stevedores hired by [NSC] were discharging the cargo on
rainy days and the improper closing of the hatches which
allowed continuous heavy rain water to leak through and drip to
the tinplates' covers and [Vicente Angliongto] also suggesting
that due to four (4) days continuos rains with strong winds that
the hatches be totally closed down and covered with canvas and
the hatch tents lowered. (Exh. "13"). This letter was received by
[NSC] on 22 August 1974 while discharging operations were still
going on (Exhibit "13-A").33
The fact that NSC actually accepted and proceeded to remove
the cargo from the ship during unfavorable weather will not
make VSI liable for any damage caused thereby. In passing, it
may be noted that the NSC may seek indemnification, subject to
the laws on prescription, from the stevedoring company at fault
in the discharge operations. "A stevedore company engaged in
discharging cargo . . . has the duty to load the cargo . . . in a
prudent manner, and it is liable for injury to, or loss of, cargo
caused by its negligence . . . and where the officers and
members and crew of the vessel do nothing and have no
responsibility in the discharge of cargo by stevedores . . . the
vessel is not liable for loss of, or damage to, the cargo caused
by the negligence of the
stevedores . . ."34 as in the instant case.
26
Do Tinplates "Sweat"?
The trial court relied on the testimony of Vicente Angliongto in
finding that ". . . tinplates 'sweat' by themselves when packed
even without being in contact with water from outside especially
when the weather is bad or
raining . . ."35 The Court of Appeals affirmed the trial court's
finding.
A discussion of this issue appears inconsequential and
unnecessary. As previously discussed, the damage to the
tinplates was occasioned not by airborne moisture but by
contact with rain and seawater which the stevedores negligently
allowed to seep in during the unloading.
Second Issue: Effect of NSC's Failure to
Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the
Contract of Voyage Charter Hire is totally separate and distinct
from the contractual or statutory responsibility that may be
incurred by VSI for damage to the cargo caused by the willful
negligence of the officers and the crew of MV Vlasons I. Clearly,
therefore, NSC's failure to insure the cargo will not affect its
right, as owner and real party in interest, to file an action against
VSI for damages caused by the latter's willful negligence. We do
not find anything in the charter party that would make the liability
of VSI for damage to the cargo contingent on or affected in any
manner by NSC's obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates
Proving Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is
anchored on the alleged inadmissibility of the certificates of
seaworthiness offered in evidence by VSI. The said certificates
include the following:
1. Certificate of Inspection of the Philippines Coast Guard at
Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast
Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of
Customs36

NSC argues that the certificates are hearsay for not having been
presented in accordance with the Rules of Court. It points out
that Exhibits 3, 4 and 11 allegedly are "not written records or
acts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are
not "evidenced by official publications or certified true copies" as
required by Sections 25 and 26, Rule 132, of the Rules of
Court.37
After a careful examination of these exhibits, the Court rules that
Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have
not been properly offered as evidence. Exhibits 3 and 4 are
certificates issued by private parties, but they have not been
proven by one who saw the writing executed, or by evidence of
the genuineness of the handwriting of the maker, or by a
subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule
have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-
settled exception to the hearsay rule per Section 44 of Rule 130
of the Rules of Court, which provides that "(e)ntries in official
records made in the performance of a duty by a public officer of
the Philippines, or by a person in the performance of a duty
specially enjoined by law, areprima facie evidence of the facts
therein stated."38 Exhibit 11 is an original certificate of the
Philippine Coast Guard in Cebu issued by Lieutenant Junior
Grade Noli C. Flores to the effect that "the vessel 'VLASONS I'
was drydocked . . . and PCG Inspectors were sent on board for
inspection . . . After completion of drydocking and duly inspected
by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is
in seaworthy condition, meets all requirements, fitted and
equipped for trading as a cargo vessel was cleared by the
Philippine Coast Guard and sailed for Cebu Port on July 10,
1974." (sic) NSC's claim, therefore, is obviously misleading and
erroneous.
At any rate, it should be stressed that NSC has the burden of
proving that MV Vlasons I was not seaworthy. As observed
earlier, the vessel was a private carrier and, as such, it did not
have the obligation of a common carrier to show that it was
seaworthy. Indeed, NSC glaringly failed to discharge its duty of
proving the willful negligence of VSI in making the ship
seaworthy resulting in damage to its cargo. Assailing the
genuineness of the certificate of seaworthiness is not sufficient
proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT,
10% more or less at Master's option.
xxx xxx xxx
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.39
The Court defined demurrage in its strict sense as the
compensation provided for in the contract of affreightment for
the detention of the vessel beyond the laytime or that period of
time agreed on for loading and unloading of cargo.40 It is given
to compensate the shipowner for the nonuse of the vessel. On
the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter
party. . . . If laytime is expressed in "running days," this means
days when the ship would be run continuously, and holidays are
not excepted. A qualification of "weather permitting" excepts
only those days when bad weather reasonably prevents the
work contemplated.41
In this case, the contract of voyage charter hire provided for a
four-day laytime; it also qualified laytime as WWDSHINC or
weather working days Sundays and holidays included.42 The
running of laytime was thus made subject to the weather, and
would cease to run in the event unfavorable weather interfered
with the unloading of cargo.43 Consequently, NSC may not be
held liable for demurrage as the four-day laytime allowed it did
not lapse, having been tolled by unfavorable weather condition
in view of the WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the Court of
Appeals to have found and affirmed respectively that NSC
incurred eleven days of delay in unloading the cargo. The trial
court arrived at this erroneous finding by subtracting from the
twelve days, specifically August 13, 1974 to August 24, 1974,
the only day of unloading unhampered by unfavorable weather
or rain, which was August 22, 1974. Based on our previous
discussion, such finding is a reversible error. As mentioned, the
respondent appellate court also erred in ruling that NSC was
liable to VSI for demurrage, even if it reduced the amount by
half.
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of the
award of attorney's fees. We disagree. While VSI was compelled
to litigate to protect its rights, such fact by itself will not justify an
award of attorney's fees under Article 2208 of the Civil Code
when ". . . no sufficient showing of bad faith would be reflected
in a party's persistence in a case other than an erroneous
conviction of the righteousness of his cause . . ."44 Moreover,
attorney's fees may not be awarded to a party for the reason
alone that the judgment rendered was favorable to the latter, as
this is tantamount to imposing a premium on one's right to
litigate or seek judicial redress of legitimate grievances.45
27
Epilogue
At bottom, this appeal really hinges on a factual issue: when,
how and who caused the damage to the cargo? Ranged against
NSC are two formidable truths. First, both lower courts found
that such damage was brought about during the unloading
process when rain and seawater seeped through the cargo due
to the fault or negligence of the stevedores employed by it. Basic
is the rule that factual findings of the trial court, when affirmed by
the Court of Appeals, are binding on the Supreme Court.
Although there are settled exceptions, NSC has not satisfactorily
shown that this case is one of them. Second, the agreement
between the parties — the Contract of Voyage Charter Hire —
placed the burden of proof for such loss or damage upon the
shipper, not upon the shipowner. Such stipulation, while
disadvantageous to NSC, is valid because the parties entered
into a contract of private charter, not one of common carriage.
Basic too is the doctrine that courts cannot relieve a parry from
the effects of a private contract freely entered into, on the
ground that it is allegedly one-sided or unfair to the plaintiff. The
charter party is a normal commercial contract and its stipulations
are agreed upon in consideration of many factors, not the least
of which is the transport price which is determined not only by
the actual costs but also by the risks and burdens assumed by
the shipper in regard to possible loss or damage to the cargo. In
recognition of such factors, the parties even stipulated that the
shipper should insure the cargo to protect itself from the risks it
undertook under the charter party. That NSC failed or neglected
to protect itself with such insurance should not adversely affect
VSI, which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated
petitions are hereby DENIED. The questioned Decision of the
Court of Appeals is AFFIRMED with the MODIFICATION that
the demurrage awarded to VSI is deleted. No pronouncement as
to costs.
SO ORDERED.
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO,
respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
This is a petition for review on certiorari of the decision ** of the
Court of Appeals in "RODOLFO A. CIPRIANO, doing business
under the name CIPRIANO TRADING ENTERPRISES plaintiff-
appellee, vs. ESTRELLITA M. BASCOS, doing business under
the name of BASCOS TRUCKING, defendant-appellant," C.A.-
G.R. CV No. 25216, the dispositive portion of which is quoted
hereunder:

"PREMISES considered, We find no reversible error in the
decision appealed from, which is hereby affirmed in toto. Costs
against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE for short) entered into a hauling contract 2 with
Jibfair Shipping Agency Corporation whereby the former bound
itself to haul the latter's 2,000 m/tons of soya bean meal from
Magallanes Drive, Del Pan, Manila to the warehouse of
Purefoods Corporation in Calamba, Laguna. To carry out its
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted
with Estrellita Bascos (petitioner) to transport and to deliver 400
sacks of soya bean meal worth P156,404.00 from the Manila
Port Area to Calamba, Laguna at the rate of P50.00 per metric
ton. Petitioner failed to deliver the said cargo. As a consequence
of that failure, Cipriano paid Jibfair Shipping Agency the amount
of the lost goods in accordance with the contract which stated
that:
"1. CIPTRADE shall be held liable and answerable for any loss
in bags due to theft, hijacking and non-delivery or damages to
the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter
refused to pay. Eventually, Cipriano filed a complaint for a sum
of money and damages with writ of preliminary attachment 4 for
breach of a contract of carriage. The prayer for a Writ of
Preliminary Attachment was supported by an affidavit 5 which
contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec.
1, Rule 57 the Rules of Court, whereby a writ of preliminary
attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of
his property, or is about to do so, with intent to defraud his
creditors;"
5. That there is no sufficient security for the claim sought to be
enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case
is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on
February 17, 1987.
In her answer, petitioner interposed the following defenses: that
there was no contract of carriage since CIPTRADE leased her
cargo truck to load the cargo from Manila Port Area to Laguna;
that CIPTRADE was liable to petitioner in the amount of
P11,000.00 for loading the cargo; that the truck carrying the
cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately
reported to CIPTRADE and that petitioner and the police exerted
all efforts to locate the hijacked properties; that after preliminary
investigation, an information for robbery and carnapping were
filed against Jose Opriano, et al.; and that hijacking, being a
force majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive
portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff
and against defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND
FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for
actual damages with legal interest of 12% per cent per annum to
be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and
for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment"
dated March 10, 1987 filed by defendant is DENIED for being
moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent
Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the
following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT
THE CONTRACTUAL RELATIONSHIP BETWEEN
PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE
OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING
OF THE RESPONDENT COURT THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT,
NEVERTHELESS, IT ERRED IN FINDING PETITIONER
LIABLE THEREUNDER BECAUSE THE LOSS OF THE
CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE
FINDING OF THE TRIAL COURT THAT PETITIONER'S
MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY
28
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.
29
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.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
Spouses Dante and Leonora Cruz (petitioners) lodged a
Complaint on January 25, 20011 against Sun Holidays, Inc.
(respondent) with the Regional Trial Court (RTC) of Pasig City
for damages arising from the death of their son Ruelito C. Cruz
(Ruelito) who perished with his wife on September 11, 2000 on
board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the
couple had stayed at Coco Beach Island Resort (Resort) owned
and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort
from September 9 to 11, 2000 was by virtue of a tour package-
contract with respondent that included transportation to and from
the Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of
the survivors, gave his account of the incident that led to the
filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He
was originally scheduled to leave the Resort in the afternoon of
September 10, 2000, but was advised to stay for another night
because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25
other Resort guests including petitioners’ son and his wife
trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach
III, which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther
away from Puerto Galera and into the open seas, the rain and
wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one
of the crew members.
The waves got more unwieldy. After getting hit by two big waves
which came one after the other, M/B Coco Beach III capsized
putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to
get out of the boat. Upon seeing the captain, Matute and the
other passengers who reached the surface asked him what they
could do to save the people who were still trapped under the
boat. The captain replied "Iligtas niyo na lang ang sarili niyo"
(Just save yourselves).
Help came after about 45 minutes when two boats owned by
Asia Divers in Sabang, Puerto Galera passed by the capsized
M/B Coco Beach III. Boarded on those two boats were 22
persons, consisting of 18 passengers and four crew members,
who were brought to Pisa Island. Eight passengers, including
petitioners’ son and his wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and
employed as a contractual worker for Mitsui Engineering &
Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly
salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded
indemnification from respondent for the death of their son in the
amount of at least ₱4,000,000.
Replying, respondent, by letter dated November 7, 2000,5
denied any responsibility for the incident which it considered to
be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of ₱10,000 to petitioners upon their
signing of a waiver.
As petitioners declined respondent’s offer, they filed the
Complaint, as earlier reflected, alleging that respondent, as a
common carrier, was guilty of negligence in allowing M/B Coco
Beach III to sail notwithstanding storm warning bulletins issued
by the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.6
In its Answer,7 respondent denied being a common carrier,
alleging that its boats are not available to the general public as
they only ferry Resort guests and crew members. Nonetheless,
it claimed that it exercised the utmost diligence in ensuring the
safety of its passengers; contrary to petitioners’ allegation, there
was no storm on September 11, 2000 as the Coast Guard in fact
cleared the voyage; and M/B Coco Beach III was not filled to
capacity and had sufficient life jackets for its passengers. By
way of Counterclaim, respondent alleged that it is entitled to an
award for attorney’s fees and litigation expenses amounting to
not less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the
Resort customarily requires four conditions to be met before a
boat is allowed to sail, to wit: (1) the sea is calm, (2) there is
clearance from the Coast Guard, (3) there is clearance from the
captain and (4) there is clearance from the Resort’s assistant
manager.8 He added that M/B Coco Beach III met all four
conditions on September 11, 2000,9 but a subasco or squall,
characterized by strong winds and big waves, suddenly
occurred, causing the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig
RTC dismissed petitioners’ Complaint and respondent’s
Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by
Order dated September 2, 2005,12 they appealed to the Court
of Appeals.
By Decision of August 19, 2008,13 the appellate court denied
petitioners’ appeal, holding, among other things, that the trial
court correctly ruled that respondent is a private carrier which is
only required to observe ordinary diligence; that respondent in
fact observed extraordinary diligence in transporting its guests
on board M/B Coco Beach III; and that the proximate cause of
the incident was a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by
Resolution dated January 16, 2009,14 they filed the present
Petition for Review.15
Petitioners maintain the position they took before the trial court,
adding that respondent is a common carrier since by its tour
package, the transporting of its guests is an integral part of its
resort business. They inform that another division of the
appellate court in fact held respondent liable for damages to the
other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed
to present evidence to prove that it is a common carrier; that the
Resort’s ferry services for guests cannot be considered as
ancillary to its business as no income is derived therefrom; that it
exercised extraordinary diligence as shown by the conditions it
had imposed before allowing M/B Coco Beach III to sail; that the
incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case
wherein the appellate court held it liable for damages involved
different plaintiffs, issues and evidence.16
The petition is impressed with merit.
30
Petitioners correctly rely on De Guzman v. Court of Appeals17 in
characterizing respondent as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully
avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberately
refrained from making such distinctions.
So understood, the concept of "common carrier" under Article
1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service"
includes:
. . . every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent, occasional
or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting
stations and other similar public services . . .18 (emphasis and
underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so
intertwined with its main business as to be properly considered
ancillary thereto. The constancy of respondent’s ferry services in
its resort operations is underscored by its having its own Coco
Beach boats. And the tour packages it offers, which include the

ferry services, may be availed of by anyone who can afford to
pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its
ferry services is of no moment. It would be imprudent to suppose
that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to
factor the transportation fee in arriving at the tour package price.
That guests who opt not to avail of respondent’s ferry services
pay the same amount is likewise inconsequential. These guests
may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining
"common carriers" has deliberately refrained from making
distinctions on whether the carrying of persons or goods is the
carrier’s principal business, whether it is offered on a regular
basis, or whether it is offered to the general public. The intent of
the law is thus to not consider such distinctions. Otherwise,
there is no telling how many other distinctions may be concocted
by unscrupulous businessmen engaged in the carrying of
persons or goods in order to avoid the legal obligations and
liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each
case.19 They are bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the
circumstances.20
When a passenger dies or is injured in the discharge of a
contract of carriage, it is presumed that the common carrier is at
fault or negligent. In fact, there is even no need for the court to
make an express finding of fault or negligence on the part of the
common carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary
diligence.21
Respondent nevertheless harps on its strict compliance with the
earlier mentioned conditions of voyage before it allowed M/B
Coco Beach III to sail on September 11, 2000. Respondent’s
position does not impress.
The evidence shows that PAGASA issued 24-hour public
weather forecasts and tropical cyclone warnings for shipping on
September 10 and 11, 2000 advising of tropical depressions in
Northern Luzon which would also affect the province of
Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to be expected under
such weather condition.23
A very cautious person exercising the utmost diligence would
thus not brave such stormy weather and put other people’s lives
at risk. The extraordinary diligence required of common carriers
demands that they take care of the goods or lives entrusted to
their hands as if they were their own. This respondent failed to
do.
Respondent’s insistence that the incident was caused by a
fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the
debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the
caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have
been such as to render it impossible for the debtors to fulfill their
obligation in a normal manner; and (d) the obligor must have
been free from any participation in the aggravation of the
resulting injury to the creditor.24
To fully free a common carrier from any liability, the fortuitous
event must have been the proximate and only causeof the loss.
And it should have exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
fortuitous event.25
Respondent cites the squall that occurred during the voyage as
the fortuitous event that overturned M/B Coco Beach III. As
reflected above, however, the occurrence of squalls was
expected under the weather condition of September 11, 2000.
Moreover, evidence shows that M/B Coco Beach III suffered
engine trouble before it capsized and sank.26 The incident was,
therefore, not completely free from human intervention.
The Court need not belabor how respondent’s evidence likewise
fails to demonstrate that it exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
squall.
Article 176427 vis-à-vis Article 220628 of the Civil Code holds
the common carrier in breach of its contract of carriage that
results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity
and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito
which is fixed at ₱50,000.29
As for damages representing unearned income, the formula for
its computation is:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
31
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the
formula (2/3 x [80 — age at death]) adopted in the American
Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy
by the net earnings of the deceased, i.e., the total earnings less
expenses necessary in the creation of such earnings or income
and less living and other incidental expenses.32 The loss is not
equivalent to the entire earnings of the deceased, but only such
portion as he would have used to support his dependents or
heirs. Hence, to be deducted from his gross earnings are the
necessary expenses supposed to be used by the deceased for
his own needs.33
In computing the third factor – necessary living expense, Smith
Bell Dodwell Shipping Agency Corp. v. Borja34teaches that
when, as in this case, there is no showing that the living
expenses constituted the smaller percentage of the gross
income, the living expenses are fixed at half of the gross
income.
Applying the above guidelines, the Court determines Ruelito's
life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of
death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic
monthly salary of $90035 which, when converted to Philippine
peso applying the annual average exchange rate of $1 = ₱44 in
2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is
thus computed as follows:
Net Earning Capacity = life expectancy x (gross annual
income - reasonable and necessary living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)
Net Earning Capacity = ₱8,316,000

Respecting the award of moral damages, since respondent
common carrier’s breach of contract of carriage resulted in the
death of petitioners’ son, following Article 1764 vis-à-vis Article
2206 of the Civil Code, petitioners are entitled to moral
damages.
Since respondent failed to prove that it exercised the
extraordinary diligence required of common carriers, it is
presumed to have acted recklessly, thus warranting the award
too of exemplary damages, which are granted in contractual
obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners
the amount of ₱100,000 as moral damages and ₱100,000 as
exemplary damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may
also be awarded where exemplary damages are awarded. The
Court finds that 10% of the total amount adjudged against
respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40
teaches that when an obligation, regardless of its source, i.e.,
law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for payment of
interest in the concept of actual and compensatory damages,
subject to the following rules, to wit —
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the
rate of 6% per annum. No interest, however, shall be adjudged
on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code) but when
such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the
date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a
forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been
determined with certainty only in the present petition, the interest
due shall be computed upon the finality of this decision at the
rate of 12% per annum until satisfaction, in accordance with
paragraph number 3 of the immediately cited guideline in Easter
Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19,
2008 is REVERSED and SET ASIDE. Judgment is rendered in
favor of petitioners ordering respondent to pay petitioners the
following: (1) ₱50,000 as indemnity for the death of Ruelito Cruz;
(2) ₱8,316,000 as indemnity for Ruelito’s loss of earning
capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as
exemplary damages; (5) 10% of the total amount adjudged
against respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn
interest at the rate of 12% per annum computed from the finality
of this decision until full payment.
SO ORDERED.
G.R. No. 200289 November 25, 2013
WESTWIND SHIPPING CORPORATION, Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN
TERMINALS INC., Respondents.
x-----------------------x
G.R. No. 200314
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN
TERMINALS INC., Respondents.
These two consolidated cases challenge, by way of petition for
certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
September 13, 2011 Decision1 and January 19, 2012
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No.
86752, which reversed and set aside the January 27, 2006
Decision3 of the Manila City Regional Trial Court Branch (RTC)
30. The facts, as established by the records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from
the port of Kobe, Japan, 197 metal containers/skids of tin-free
steel for delivery to the consignee, San Miguel Corporation
(SMC). The shipment, covered by Bill of Lading No. KBMA-
1074,4 was loaded and received clean on board M/V Golden
32
Harvest Voyage No. 66, a vessel owned and operated by
Westwind Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General
Insurance Co., Inc. (UCPB) for US Dollars: One Hundred Eighty-
Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven
Centavos (US$184,798.97), which, at the time, was equivalent
to Philippine Pesos: Six Million Two Hundred Nine Thousand
Two Hundred Forty-Five and Twenty-Eight Centavos
(₱6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993
and was discharged in the custody of the arrastre operator,
Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc.5
During the unloading operation, however, six containers/skids
worth Philippine Pesos: One Hundred Seventeen Thousand
Ninety-Three and Twelve Centavos (₱117,093.12) sustained
dents and punctures from the forklift used by the stevedores of
Ocean Terminal Services, Inc. (OTSI) in centering and shuttling
the containers/skids. As a consequence, the local ship agent of
the vessel, Baliwag Shipping Agency, Inc., issued two Bad
Order Cargo Receipt dated September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII),
the customs broker of SMC, withdrew from ATI the 197
containers/skids, including the six in damaged condition, and
delivered the same at SMC’s warehouse in Calamba, Laguna
through J.B. Limcaoco Trucking (JBL). It was discovered upon
discharge that additional nine containers/skids valued at
Philippine Pesos: One Hundred Seventy-Five Thousand Six
Hundred Thirty-Nine and Sixty-Eight Centavos (₱175,639.68)
were also damaged due to the forklift operations; thus, making
the total number of 15 containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim
against UCPB, Westwind, ATI, and OFII to recover the amount
corresponding to the damaged 15 containers/skids. When UCPB
paid the total sum of Philippine Pesos: Two Hundred Ninety-Two
Thousand Seven Hundred Thirty-Two and Eighty Centavos
(₱292,732.80), SMC signed the subrogation receipt. Thereafter,
in the exercise of its right of subrogation, UCPB instituted on
August 30, 1994 a complaint for damages against Westwind,
ATI, and OFII.6
After trial, the RTC dismissed UCPB’s complaint and the
counterclaims of Westwind, ATI, and OFII. It ruled that the right,
if any, against ATI already prescribed based on the stipulation in
the 16 Cargo Gate Passes issued, as well as the doctrine laid
down in International Container Terminal Services, Inc. v.
Prudential Guarantee & Assurance Co. Inc.7 that a claim for
reimbursement for damaged goods must be filed within 15 days
from the date of consignee’s knowledge. With respect to
Westwind, even if the action against it is not yet barred by
prescription, conformably with Section 3 (6) of the Carriage of

Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc.,
et al. v. Court of Appeals, et al.8 and Belgian Overseas
Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc.,9
the court a quo still opined that Westwind is not liable, since the
discharging of the cargoes were done by ATI personnel using
forklifts and that there was no allegation that it (Westwind) had a
hand in the conduct of the stevedoring operations. Finally, the
trial court likewise absolved OFII from any liability, reasoning
that it never undertook the operation of the forklifts which caused
the dents and punctures, and that it merely facilitated the
release and delivery of the shipment as the customs broker and
representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial
court. The fallo of its September 13, 2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is
hereby GRANTED. The Decision dated January 27, 2006
rendered by the court a quo is REVERSED AND SET ASIDE.
Appellee Westwind Shipping Corporation is hereby ordered to
pay to the appellant UCPB General Insurance Co., Inc., the
amount of One Hundred Seventeen Thousand and Ninety-Three
Pesos and Twelve Centavos (Php117,093.12), while Orient
Freight International, Inc. is hereby ordered to pay to UCPB the
sum of One Hundred Seventy-Five Thousand Six Hundred
Thirty-Nine Pesos and Sixty-Eight Centavos (Php175,639.68).
Both sums shall bear interest at the rate of six (6%) percent per
annum, from the filing of the complaint on August 30, 1994 until
the judgment becomes final and executory. Thereafter, an
interest rate of twelve (12%) percent per annum shall be
imposed from the time this decision becomes final and
executory until full payment of said amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against
ATI already prescribed, it rendered a contrary view as regards
the liability of Westwind and OFII. For the appellate court,
Westwind, not ATI, is responsible for the six damaged
containers/skids at the time of its unloading. In its rationale,
which substantially followed Philippines First Insurance Co., Inc.
v. Wallem Phils. Shipping, Inc.,11 it concluded that the common
carrier, not the arrastre operator, is responsible during the
unloading of the cargoes from the vessel and that it is not
relieved from liability and is still bound to exercise extraordinary
diligence at the time in order to see to it that the cargoes under
its possession remain in good order and condition. The CA also
considered that OFII is liable for the additional nine damaged
containers/skids, agreeing with UCPB’s contention that OFII is a
common carrier bound to observe extraordinary diligence and is
presumed to be at fault or have acted negligently for such
damage. Noting the testimony of OFII’s own witness that the
delivery of the shipment to the consignee is part of OFII’s job as
a cargo forwarder, the appellate court ruled that Article 1732 of
the New Civil Code (NCC) does not distinguish between one
whose principal business activity is the carrying of persons or
goods or both and one who does so as an ancillary activity. The
appellate court further ruled that OFII cannot excuse itself from
liability by insisting that JBL undertook the delivery of the
cargoes to SMC’s warehouse. It opined that the delivery receipts
signed by the inspector of SMC showed that the
containers/skids were received from OFII, not JBL. At the most,
the CA said, JBL was engaged by OFII to supply the trucks
necessary to deliver the shipment, under its supervision, to
SMC.
Only Westwind and OFII filed their respective motions for
reconsideration, which the CA denied; hence, they elevated the
case before Us via petitions docketed as G.R. Nos. 200289 and
200314, respectively.
Westwind argues that it no longer had actual or constructive
custody of the containers/skids at the time they were damaged
by ATI’s forklift operator during the unloading operations. In
accordance with the stipulation of the bill of lading, which
allegedly conforms to Article 1736 of the NCC, it contends that
its responsibility already ceased from the moment the cargoes
were delivered to ATI, which is reckoned from the moment the
goods were taken into the latter’s custody. Westwind adds that
ATI, which is a completely independent entity that had the right
to receive the goods as exclusive operator of stevedoring and
arrastre functions in South Harbor, Manila, had full control over
its employees and stevedores as well as the manner and
procedure of the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only
a customs broker whose participation is limited to facilitating
withdrawal of the shipment in the custody of ATI by overseeing
and documenting the turnover and counterchecking if the
quantity of the shipments were in tally with the shipping
documents at hand, but without participating in the physical
withdrawal and loading of the shipments into the delivery trucks
of JBL. Assuming that it is a common carrier, OFII insists that
there is no need to rely on the presumption of the law – that, as
a common carrier, it is presumed to have been at fault or have
acted negligently in case of damaged goods – considering the
undisputed fact that the damages to the containers/skids were
caused by the forklift blades, and that there is no evidence
presented to show that OFII and Westwind were the
owners/operators of the forklifts. It asserts that the loading to the
trucks were made by way of forklifts owned and operated by ATI
and the unloading from the trucks at the SMC warehouse was
done by way of forklifts owned and operated by SMC
employees. Lastly, OFII avers that neither the undertaking to
deliver nor the acknowledgment by the consignee of the fact of
delivery makes a person or entity a common carrier, since
delivery alone is not the controlling factor in order to be
considered as such.
33
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils.
Shipping, Inc.12 applies, as it settled the query on which
between a common carrier and an arrastre operator should be
responsible for damage or loss incurred by the shipment during
its unloading. We elucidated at length:
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 1734 of
the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce
provides that the ship captain is liable for the cargo from the time
it is turned over to him at the dock or afloat alongside the vessel
at the port of loading, until he delivers it on the shore or on the
discharging wharf at the port of unloading, unless agreed
otherwise. In Standard Oil Co. of New York v. Lopez Castelo,
the Court interpreted the ship captain’s liability as ultimately that
of the shipowner by regarding the captain as the representative
of the shipowner.
Lastly, Section 2 of the COGSA provides that under every
contract of carriage of goods by sea, the carrier in relation to the
loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities
and liabilities and entitled to the rights and immunities set forth in
the Act. Section 3 (2) thereof then states that among the
carriers’ responsibilities are to properly and carefully load,
handle, stow, carry, keep, care for, and discharge the goods
carried.
xxxx
On the other hand, the functions of an arrastre operator involve
the handling of cargo deposited on the wharf or between the
establishment of the consignee or shipper and the ship's tackle.
Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work
so its drivers/operators or employees should observe the
standards and measures necessary to prevent losses and
damage to shipments under its custody.

In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the
Court explained the relationship and responsibility of an arrastre
operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman. The
relationship between the consignee and the common carrier is
similar to that of the consignee and the arrastre operator. Since
it is the duty of the ARRASTRE to take good care of the goods
that are in its custody and to deliver them in good condition to
the consignee, such responsibility also devolves upon the
CARRIER. Both the ARRASTRE and the CARRIER are
therefore charged with and obligated to deliver the goods in
good condition to the consignee. (Emphasis supplied) (Citations
omitted)
The liability of the arrastre operator was reiterated in Eastern
Shipping Lines, Inc. v. Court of Appeals with the clarification that
the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the
rule.
Thus, in this case, the appellate court is correct insofar as it
ruled that an arrastre operator and a carrier may not be held
solidarily liable at all times. But the precise question is which
entity had custody of the shipment during its unloading from the
vessel?
The aforementioned Section 3 (2) of the COGSA states that
among the carriers’ responsibilities are to properly and carefully
load, care for and discharge the goods carried. The bill of lading
covering the subject shipment likewise stipulates that the
carrier’s liability for loss or damage to the goods ceases after its
discharge from the vessel. Article 619 of the Code of Commerce
holds a ship captain liable for the cargo from the time it is turned
over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v.
M/V Farland, it was ruled that like the duty of seaworthiness, the
duty of care of the cargo is non-delegable, and the carrier is
accordingly responsible for the acts of the master, the crew, the
stevedore, and his other agents. It has also been held that it is
ordinarily the duty of the master of a vessel to unload the cargo
and place it in readiness for delivery to the consignee, and there
is an implied obligation that this shall be accomplished with
sound machinery, competent hands, and in such manner that no
unnecessary injury shall be done thereto. And the fact that a
consignee is required to furnish persons to assist in unloading a
shipment may not relieve the carrier of its duty as to such
unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while
being unloaded generally remain under the custody of the carrier
x x x.13
In Regional Container Lines (RCL) of Singapore v. The
Netherlands Insurance Co. (Philippines), Inc.14 and Asian
Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court
echoed the doctrine that cargoes, while being unloaded,
generally remain under the custody of the carrier. We cannot
agree with Westwind’s disputation that "the carrier in Wallem
clearly exercised supervision during the discharge of the
shipment and that is why it was faulted and held liable for the
damage incurred by the shipment during such time." What
Westwind failed to realize is that the extraordinary responsibility
of the common carrier lasts until the time the goods are actually
or constructively delivered by the carrier to the consignee or to
the person who has a right to receive them. There is actual
delivery in contracts for the transport of goods when possession
has been turned over to the consignee or to his duly authorized
agent and a reasonable time is given him to remove the
goods.16 In this case, since the discharging of the
containers/skids, which were covered by only one bill of lading,
had not yet been completed at the time the damage occurred,
there is no reason to imply that there was already delivery,
actual or constructive, of the cargoes to ATI. Indeed, the earlier
case of Delsan Transport Lines, Inc. v. American Home
Assurance Corp.17serves as a useful guide, thus:
Delsan’s argument that it should not be held liable for the loss of
diesel oil due to backflow because the same had already been
actually and legally delivered to Caltex at the time it entered the
shore tank holds no water. It had been settled that the subject
cargo was still in the custody of Delsan because the discharging
thereof has not yet been finished when the backflow occurred.
Since the discharging of the cargo into the depot has not yet
been completed at the time of the spillage when the backflow
occurred, there is no reason to imply that there was actual
delivery of the cargo to the consignee. Delsan is straining the
issue by insisting that when the diesel oil entered into the tank of
Caltex on shore, there was legally, at that moment, a complete
delivery thereof to Caltex. To be sure, the extraordinary
responsibility of common carrier lasts from the time the goods
are unconditionally placed in the possession of, and received by,
the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to a
person who has the right to receive them. The discharging of oil
products to Caltex Bulk Depot has not yet been finished, Delsan
still has the duty to guard and to preserve the cargo. The carrier
still has in it the responsibility to guard and preserve the goods,
a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence in vigilance over the goods and for the
34
safety of the passengers transported by them, according to all
the circumstances of each case. The mere proof of delivery of
goods in good order to the carrier, and their arrival in the place
of destination in bad order, make out a prima facie case against
the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent
upon the carrier to prove that the loss was due to accident or
some other circumstances inconsistent with its liability.18
The contention of OFII is likewise untenable. A customs broker
has been regarded as a common carrier because transportation
of goods is an integral part of its business.19 In Schmitz
Transport & Brokerage Corporation v. Transport Venture, Inc.,20
the Court already reiterated: It is settled that under a given set of
facts, a customs broker may be regarded as a common
carrier.1âwphi1 Thus, this Court, in A.F. Sanchez Brokerage,
Inc. v. The Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs
broker, to be also a common carrier, as defined under Article
1732 of the Civil Code, to wit, Art. 1732. Common carriers are
persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public.
xxxx
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does
such carrying only as an ancillary activity. The contention,
therefore, of petitioner that it is not a common carrier but a
customs broker whose principal function is to prepare the correct
customs declaration and proper shipping documents as required
by law is bereft of merit. It suffices that petitioner undertakes to
deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court
held that as the transportation of goods is an integral part of a
customs broker, the customs broker is also a common carrier.
For to declare otherwise "would be to deprive those with whom
[it] contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for [its]
customers, is part and parcel of petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of
its own witness, Mr. Loveric Panganiban Cueto, that part of the
services it offers to clients is cargo forwarding, which includes
the delivery of the shipment to the consignee.22 Thus, for
undertaking the transport of cargoes from ATI to SMC’s
warehouse in Calamba, Laguna, OFII is considered a common
carrier. As long as a person or corporation holds itself to the
public for the purpose of transporting goods as a business, it is

already considered a common carrier regardless of whether it
owns the vehicle to be used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article
1733 of the Civil Code,23 extraordinary diligence in the vigilance
over the goods24 it transports according to the peculiar
circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or
to have acted negligently unless it proves that it observed
extraordinary diligence.25 In the case at bar it was established
that except for the six containers/skids already damaged OFII
received the cargoes from ATI in good order and condition; and
that upon its delivery to SMC additional nine containers/skids
were found to be in bad order as noted in the Delivery Receipts
issued by OFII and as indicated in the Report of Cares Marine
Cargo Surveyors. Instead of merely excusing itself from liability
by putting the blame to ATI and SMC it is incumbent upon OFII
to prove that it actively took care of the goods by exercising
extraordinary diligence in the carriage thereof. It failed to do so.
Hence its presumed negligence under Article 1735 of the Civil
Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind
and OFII in G.R. Nos. 200289 and 200314 respectively are
DENIED. The September 13 2011 Decision and January 19
2012 Resolution of the Court of Appeals in CA-G.R. CV No.
86752 which reversed and set aside the January 27 2006
Decision of the Manila City Regional Trial Court Branch 30 are
AFFIRMED.
SO ORDERED.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style
TRANSORIENT CONTAINER TERMINAL SERVICES, INC.,
petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied
Guarantee Ins. Co., Inc.) respondent.
This is a petition for review of the decision,1 dated May 31,
2001, of the Court of Appeals, affirming the decision2of the
Regional Trial Court, Makati City, Branch 148, which ordered
petitioner to pay respondent, as subrogee, the amount of
P93,112.00 with legal interest, representing the value of
damaged cargo handled by petitioner, 25% thereof as attorney's
fees, and the cost of the suit.1âwphi1.nêt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container
Terminal Services, Inc. (TCTSI), a sole proprietorship customs
broker. At the time material to this case, petitioner entered into a
contract with San Miguel Corporation (SMC) for the transfer of
114 reels of semi-chemical fluting paper and 124 reels of kraft
liner board from the Port Area in Manila to SMC's warehouse at
the Tabacalera Compound, Romualdez St., Ermita, Manila. The
cargo was insured by respondent UCPB General Insurance Co.,
Inc.
On July 14, 1990, the shipment in question, contained in 30
metal vans, arrived in Manila on board "M/V Hayakawa Maru"
and, after 24 hours, were unloaded from the vessel to the
custody of the arrastre operator, Manila Port Services, Inc. From
July 23 to July 25, 1990, petitioner, pursuant to her contract with
SMC, withdrew the cargo from the arrastre operator and
delivered it to SMC's warehouse in Ermita, Manila. On July 25,
1990, the goods were inspected by Marine Cargo Surveyors,
who found that 15 reels of the semi-chemical fluting paper were
"wet/stained/torn" and 3 reels of kraft liner board were likewise
torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its
insurance contract for the aforementioned amount. In turn,
respondent, as subrogee of SMC, brought suit against petitioner
in the Regional Trial Court, Branch 148, Makati City, which, on
December 20, 1995, rendered judgment finding petitioner liable
to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained
damage while in the custody of defendants. Evidence such as
the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh.
"F") with entries appearing therein, classified as "TED" and
"TSN", which the claims processor, Ms. Agrifina De Luna,
claimed to be tearrage at the end and tearrage at the middle of
the subject damaged cargoes respectively, coupled with the
Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the
fact of the damaged condition of the subject cargoes. The
surveyor[s'] report (Exh. "H-4-A") in particular, which provides
among others that:
" . . . we opine that damages sustained by shipment is
attributable to improper handling in transit presumably whilst in
the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to
sustain [her] defense that [she is] are not liable. Defendant by
reason of the nature of [her] business should have devised ways
and means in order to prevent the damage to the cargoes which
it is under obligation to take custody of and to forthwith deliver to
the consignee. Defendant did not present any evidence on what
precaution [she] performed to prevent [the] said incident, hence
the presumption is that the moment the defendant accepts the
cargo [she] shall perform such extraordinary diligence because
of the nature of the cargo.
35
....
Generally speaking under Article 1735 of the Civil Code, if the
goods are proved to have been lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the
plaintiff, therefore, is to prove merely that the goods he
transported have been lost, destroyed or deteriorated.
Thereafter, the burden is shifted to the carrier to prove that he
has exercised the extraordinary diligence required by law. Thus,
it has been held that the mere proof of delivery of goods in good
order to a carrier, and of their arrival at the place of destination
in bad order, makes out a prima facie case against the carrier,
so that if no explanation is given as to how the injury occurred,
the carrier must be held responsible. It is incumbent upon the
carrier to prove that the loss was due to accident or some other
circumstances inconsistent with its liability." (cited in Commercial
Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the
same time a common carrier is supposed [to] exercise [the]
extraordinary diligence required by law, hence the extraordinary
responsibility lasts from the time the goods are unconditionally
placed in the possession of and received by the carrier for
transportation until the same are delivered actually or
constructively by the carrier to the consignee or to the person
who has the right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following
amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal.
Hence this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON
THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS
A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.5

It will be convenient to deal with these contentions in the inverse
order, for if petitioner is not a common carrier, although both the
trial court and the Court of Appeals held otherwise, then she is
indeed not liable beyond what ordinary diligence in the vigilance
over the goods transported by her, would require.6
Consequently, any damage to the cargo she agrees to transport
cannot be presumed to have been due to her fault or
negligence.
Petitioner contends that contrary to the findings of the trial court
and the Court of Appeals, she is not a common carrier but a
private carrier because, as a customs broker and
warehouseman, she does not indiscriminately hold her services
out to the public but only offers the same to select parties with
whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of
Appeals,7 the Court dismissed a similar contention and held the
party to be a common carrier, thus -
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public."
The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary
activity . . . Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering
its services to the "general public," i.e., the general community
or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think
that Article 1732 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under Article
1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service"
includes:
" x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent, occasional
or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting
stations and other similar public services. x x x" 8
There is greater reason for holding petitioner to be a common
carrier because the transportation of goods is an integral part of
her business. To uphold petitioner's contention would be to
deprive those with whom she contracts the protection which the
law affords them notwithstanding the fact that the obligation to
carry goods for her customers, as already noted, is part and
parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code
provides:
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the
circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of
"extraordinary diligence in the vigilance over goods" was
explained thus:
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the
greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."
In the case at bar, petitioner denies liability for the damage to
the cargo. She claims that the "spoilage or wettage" took place
while the goods were in the custody of either the carrying vessel
"M/V Hayakawa Maru," which transported the cargo to Manila,
or the arrastre operator, to whom the goods were unloaded and
who allegedly kept them in open air for nine days from July 14 to
July 23, 1998 notwithstanding the fact that some of the
containers were deformed, cracked, or otherwise damaged, as
noted in the Marine Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
36
ICSU-363461-3 - left side rubber gasket on door
distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of
water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel
partly detached loosened.10
In addition, petitioner claims that Marine Cargo Surveyor
Ernesto Tolentino testified that he has no personal knowledge
on whether the container vans were first stored in petitioner's
warehouse prior to their delivery to the consignee. She likewise
claims that after withdrawing the container vans from the
arrastre operator, her driver, Ricardo Nazarro, immediately
delivered the cargo to SMC's warehouse in Ermita, Manila,
which is a mere thirty-minute drive from the Port Area where the
cargo came from. Thus, the damage to the cargo could not have
taken place while these were in her custody.11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of
the Marine Cargo Surveyors indicates that when the shipper
transferred the cargo in question to the arrastre operator, these
were covered by clean Equipment Interchange Report (EIR)
and, when petitioner's employees withdrew the cargo from the
arrastre operator, they did so without exception or protest either
with regard to the condition of container vans or their contents.
The Survey Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted
discharged ex vessel to dock of Pier #13 South Harbor, Manila
on 14 July 1990, containerized onto 30' x 20' secure metal vans,
covered by clean EIRs. Except for slight dents and paint
scratches on side and roof panels, these containers were
deemed to have [been] received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo
containers was [withdrawn] by Transorient Container Services,
Inc. . . . without exception.
[The cargo] was finally delivered to the consignee's storage
warehouse located at Tabacalera Compound, Romualdez
Street, Ermita, Manila from July 23/25, 1990.12

As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port Services
Inc., in good order and condition as evidenced by clean
Equipment Interchange Reports (EIRs). Had there been any
damage to the shipment, there would have been a report to that
effect made by the arrastre operator. The cargoes were
withdrawn by the defendant-appellant from the arrastre still in
good order and condition as the same were received by the
former without exception, that is, without any report of damage
or loss. Surely, if the container vans were deformed, cracked,
distorted or dented, the defendant-appellant would report it
immediately to the consignee or make an exception on the
delivery receipt or note the same in the Warehouse Entry Slip
(WES). None of these took place. To put it simply, the
defendant-appellant received the shipment in good order and
condition and delivered the same to the consignee damaged.
We can only conclude that the damages to the cargo occurred
while it was in the possession of the defendant-appellant.
Whenever the thing is lost (or damaged) in the possession of the
debtor (or obligor), it shall be presumed that the loss (or
damage) was due to his fault, unless there is proof to the
contrary. No proof was proffered to rebut this legal presumption
and the presumption of negligence attached to a common carrier
in case of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not have been
damaged while in her custody as she immediately delivered the
containers to SMC's compound, suffice it to say that to prove the
exercise of extraordinary diligence, petitioner must do more than
merely show the possibility that some other party could be
responsible for the damage. It must prove that it used "all
reasonable means to ascertain the nature and characteristic of
goods tendered for [transport] and that [it] exercise[d] due care
in the handling [thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art.
1734(4), which provides --
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
....
(4) The character of the goods or defects in the packing or in the
containers.
....
For this provision to apply, the rule is that if the improper packing
or, in this case, the defect/s in the container, is/are known to the
carrier or his employees or apparent upon ordinary observation,
but he nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not relieved of
liability for damage resulting therefrom.14 In this case, petitioner
accepted the cargo without exception despite the apparent
defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in
the carriage of goods in this case or that she is exempt from
liability, the presumption of negligence as provided under Art.
173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May
31, 2001, is AFFIRMED.1âwphi1.nêt
SO ORDERED.
G.R. No. 149038 April 9, 2003
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY,
petitioner,
vs.
PKS SHIPPING COMPANY, respondent.
VITUG, J.:
The petition before the Court seeks a review of the decision of
the Court of Appeals in C.A. G.R. CV No. 56470, promulgated
on 25 June 2001, which has affirmed in toto the judgment of the
Regional Trial Court (RTC), Branch 65, of Makati, dismissing the
complaint for damages filed by petitioner insurance corporation
against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the
services of respondent PKS Shipping Company (PKS Shipping)
for the shipment to Tacloban City of seventy-five thousand
(75,000) bags of cement worth Three Million Three Hundred
Seventy-Five Thousand Pesos (P3,375,000.00). DUMC insured
the goods for its full value with petitioner Philippine American
General Insurance Company (Philamgen). The goods were
loaded aboard the dumb barge Limar I belonging to PKS
Shipping. On the evening of 22 December 1988, about nine
o’clock, while Limar I was being towed by respondent’s tugboat,
MT Iron Eagle, the barge sank a couple of miles off the coast of
Dumagasa Point, in Zamboanga del Sur, bringing down with it
the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of
the insurance. Philamgen promptly made payment; it then
sought reimbursement from PKS Shipping of the sum paid to
DUMC but the shipping company refused to pay, prompting
Philamgen to file suit against PKS Shipping with the Makati
RTC.
The RTC dismissed the complaint after finding that the total loss
of the cargo could have been caused either by a fortuitous
event, in which case the ship owner was not liable, or through
the negligence of the captain and crew of the vessel and that,
under Article 587 of the Code of Commerce adopting the
37
"Limited Liability Rule," the ship owner could free itself of liability
by abandoning, as it apparently so did, the vessel with all her
equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which
affirmed in toto the decision of the trial court. The appellate court
ruled that evidence to establish that PKS Shipping was a
common carrier at the time it undertook to transport the bags of
cement was wanting because the peculiar method of the
shipping company’s carrying goods for others was not generally
held out as a business but as a casual occupation. It then
concluded that PKS Shipping, not being a common carrier, was
not expected to observe the stringent extraordinary diligence
required of common carriers in the care of goods. The appellate
court, moreover, found that the loss of the goods was sufficiently
established as having been due to fortuitous event, negating any
liability on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate
court has committed a patent error in ruling that PKS Shipping is
not a common carrier and that it is not liable for the loss of the
subject cargo. The fact that respondent has a limited clientele,
petitioner argues, does not militate against respondent’s being a
common carrier and that the only way by which such carrier can
be held exempt for the loss of the cargo would be if the loss
were caused by natural disaster or calamity. Petitioner avers
that typhoon "APIANG" has not entered the Philippine area of
responsibility and that, even if it did, respondent would not be
exempt from liability because its employees, particularly the
tugmaster, have failed to exercise due diligence to prevent or
minimize the loss.
PKS Shipping, in its comment, urges that the petition should be
denied because what Philamgen seeks is not a review on points
or errors of law but a review of the undisputed factual findings of
the RTC and the appellate court. In any event, PKS Shipping
points out, the findings and conclusions of both courts find
support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS
Shipping boils down to the question of whether it is a private
carrier or a common carrier and, in either case, to the other
question of whether or not it has observed the proper diligence
(ordinary, if a private carrier, or extraordinary, if a common
carrier) required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly
when such findings are consistent with those of the trial court,
may not at liberty be reviewed by this Court in a petition for
review under Rule 45 of the Rules of Court.1 The conclusions
derived from those factual findings, however, are not necessarily
just matters of fact as when they are so linked to, or inextricably
intertwined with, a requisite appreciation of the applicable law. In
such instances, the conclusions made could well be raised as

being appropriate issues in a petition for review before this
Court. Thus, an issue whether a carrier is private or common on
the basis of the facts found by a trial court or the appellate court
can be a valid and reviewable question of law.
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public."
Complementary to the codal definition is Section 13, paragraph
(b), of the Public Service Act; it defines "public service" to be –
"x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent, occasional
or accidental, and done for general business purposes, any
common carrier, railroad, street railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed
route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship,
or steamship line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice refrigeration
plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system,
wire or wireless communication systems, wire or wireless
broadcasting stations and other similar public services. x x x.
(Underscoring supplied)."
The prevailing doctrine on the question is that enunciated in the
leading case of De Guzman vs. Court of Appeals.2 Applying
Article 1732 of the Code, in conjunction with Section 13(b) of the
Public Service Act, this Court has held:
"The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary
activity (in local idiom, as `a sideline’). Article 1732 also carefully
avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the `general public,’ i.e.,
the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately
refrained from making such distinctions.
"So understood, the concept of `common carrier’ under Article
1732 may be seen to coincide neatly with the notion of `public
service,’ under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code."
Much of the distinction between a "common or public carrier"
and a "private or special carrier" lies in the character of the
business, such that if the undertaking is an isolated transaction,
not a part of the business or occupation, and the carrier does not
hold itself out to carry the goods for the general public or to a
limited clientele, although involving the carriage of goods for a
fee,3 the person or corporation providing such service could
very well be just a private carrier. A typical case is that of a
charter party which includes both the vessel and its crew, such
as in a bareboat or demise, where the charterer obtains the use
and service of all or some part of a ship for a period of time or a
voyage or voyages4 and gets the control of the vessel and its
crew.5 Contrary to the conclusion made by the appellate court,
its factual findings indicate that PKS Shipping has engaged itself
in the business of carrying goods for others, although for a
limited clientele, undertaking to carry such goods for a fee. The
regularity of its activities in this area indicates more than just a
casual activity on its part.6 Neither can the concept of a common
carrier change merely because individual contracts are executed
or entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to
escape liability by the simple expedient of entering into those
distinct agreements with clients.
Addressing now the issue of whether or not PKS Shipping has
exercised the proper diligence demanded of common carriers,
Article 1733 of the Civil Code requires common carriers to
observe extraordinary diligence in the vigilance over the goods
they carry. In case of loss, destruction or deterioration of goods,
common carriers are presumed to have been at fault or to have
acted negligently, and the burden of proving otherwise rests on
them.7The provisions of Article 1733, notwithstanding, common
carriers are exempt from liability for loss, destruction, or
deterioration of the goods due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers; and
(5) Order or act of competent public authority.8
The appellate court ruled, gathered from the testimonies and
sworn marine protests of the respective vessel masters of Limar
I and MT Iron Eagle, that there was no way by which the barge’s
or the tugboat’s crew could have prevented the sinking of Limar
38
I. The vessel was suddenly tossed by waves of extraordinary
height of six (6) to eight (8) feet and buffeted by strong winds of
1.5 knots resulting in the entry of water into the barge’s hatches.
The official Certificate of Inspection of the barge issued by the
Philippine Coastguard and the Coastwise Load Line Certificate
would attest to the seaworthiness of Limar I and should
strengthen the factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this
Court; none of the recognized exceptions from the rule - (1)
when the factual findings of the Court of Appeals and the trial
court are contradictory; (2) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjectures; (3)
when the inference made by the Court of Appeals from its
findings of fact is manifestly mistaken, absurd, or impossible; (4)
when there is a grave abuse of discretion in the appreciation of
facts; (5) when the appellate court, in making its findings, went
beyond the issues of the case and such findings are contrary to
the admissions of both appellant and appellee; (6) when the
judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed
to notice certain relevant facts which, if properly considered,
would justify a different conclusion; (8) when the findings of fact
are themselves conflicting; (9) when the findings of fact are
conclusions without citation of the specific evidence on which
they are based; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence but such
findings are contradicted by the evidence on record – would
appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment
absolving PKS Shipping from liability for the loss of the DUMC
cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
G.R. No. 147246 August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents.
On appeal is the Court of Appeals' May 11, 2000 Decision1 in
CA-G.R. CV No. 49195 and February 21, 2001 Resolution2
affirming with modification the April 6, 1994 Decision3 of the
Regional Trial Court of Manila which found petitioner liable to
pay private respondent the amount of indemnity and attorney's
fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White
Wheat in bulk, valued at US$423,192.354 was shipped by

Marubeni American Corporation of Portland, Oregon on board
the vessel M/V NEO CYMBIDIUM V-26 for delivery to the
consignee, General Milling Corporation in Manila, evidenced by
Bill of Lading No. PTD/Man-4.5The shipment was insured by the
private respondent Prudential Guarantee and Assurance, Inc.
against loss or damage for P14,621,771.75 under Marine Cargo
Risk Note RN 11859/90.6
On July 25, 1990, the carrying vessel arrived in Manila and the
cargo was transferred to the custody of the petitioner Asia
Lighterage and Shipping, Inc. The petitioner was contracted by
the consignee as carrier to deliver the cargo to consignee's
warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was
loaded on barge PSTSI III, evidenced by Lighterage Receipt No.
03647 for delivery to consignee. The cargo did not reach its
destination.
It appears that on August 17, 1990, the transport of said cargo
was suspended due to a warning of an incoming typhoon. On
August 22, 1990, the petitioner proceeded to pull the barge to
Engineering Island off Baseco to seek shelter from the
approaching typhoon. PSTSI III was tied down to other barges
which arrived ahead of it while weathering out the storm that
night. A few days after, the barge developed a list because of a
hole it sustained after hitting an unseen protuberance
underneath the water. The petitioner filed a Marine Protest on
August 28, 1990.8 It likewise secured the services of Gaspar
Salvaging Corporation which refloated the barge.9 The hole was
then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally
headed towards the consignee's wharf on September 5, 1990.
Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current. To avoid the complete sinking of
the barge, a portion of the goods was transferred to three other
barges.10
The next day, September 6, 1990, the towing bits of the barge
broke. It sank completely, resulting in the total loss of the
remaining cargo.11 A second Marine Protest was filed on
September 7, 1990.12
On September 14, 1990, a bidding was conducted to dispose of
the damaged wheat retrieved and loaded on the three other
barges.13 The total proceeds from the sale of the salvaged
cargo was P201,379.75.14
On the same date, September 14, 1990, consignee sent a claim
letter to the petitioner, and another letter dated September 18,
1990 to the private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the
consignee in the amount of P4,104,654.22.15Thereafter, as
subrogee, it sought recovery of said amount from the petitioner,
but to no avail.
On July 3, 1991, the private respondent filed a complaint against
the petitioner for recovery of the amount of indemnity, attorney's
fees and cost of suit.16 Petitioner filed its answer with
counterclaim.17
The Regional Trial Court ruled in favor of the private respondent.
The dispositive portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby
rendered ordering defendant Asia Lighterage & Shipping, Inc.
liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc.
the sum of P4,104,654.22 with interest from the date complaint
was filed on July 3, 1991 until fully satisfied plus 10% of the
amount awarded as and for attorney's fees. Defendant's
counterclaim is hereby DISMISSED. With costs against
defendant.18
Petitioner appealed to the Court of Appeals insisting that it is not
a common carrier. The appellate court affirmed the decision of
the trial court with modification. The dispositive portion of its
decision reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED with modification in the sense that the salvage value
of P201,379.75 shall be deducted from the amount of
P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was
likewise denied by the appellate court in a Resolution
promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors
allegedly committed by the appellate court, viz:19
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO
IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO
IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO
THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL
CODE APPLICABLE TO COMMON CARRIERS, "THE LOSS
OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER
39
IN ALL CASES EXCEPT IN THE FIVE (5) CASES
ENUMERATED."
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO
IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED
TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT
IN ITS CARE AND CUSTODY OF THE CONSIGNEE'S
CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it
exercised extraordinary diligence in its care and custody of the
consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as
persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public.
Petitioner contends that it is not a common carrier but a private
carrier. Allegedly, it has no fixed and publicly known route,
maintains no terminals, and issues no tickets. It points out that it
is not obliged to carry indiscriminately for any person. It is not
bound to carry goods unless it consents. In short, it does not
hold out its services to the general public.20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the
definition of common carriers in Article 1732 of the Civil Code
makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity. We also did not
distinguish between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Further, we ruled that Article 1732 does not distinguish
between a carrier offering its services to the general public, and
one who offers services or solicits business only from a narrow
segment of the general population.
In the case at bar, the principal business of the petitioner is that
of lighterage and drayage22 and it offers its barges to the public
for carrying or transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De Guzman, supra,23
we considered private respondent Ernesto Cendaña to be a

common carrier even if his principal occupation was not the
carriage of goods for others, but that of buying used bottles and
scrap metal in Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its
carrying of goods is done on an irregular rather than scheduled
manner, and with an only limited clientele. A common carrier
need not have fixed and publicly known routes. Neither does it
have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid
down in Bascos vs. Court of Appeals.24 The test to determine a
common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or
extent of the business transacted."25 In the case at bar, the
petitioner admitted that it is engaged in the business of shipping
and lighterage,26 offering its barges to the public, despite its
limited clientele for carrying or transporting goods by water for
compensation.27
On the second issue, we uphold the findings of the lower courts
that petitioner failed to exercise extraordinary diligence in its
care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence
in the vigilance over the goods transported by them.28 They are
presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated.29 To overcome
the presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however,
exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence
does not attach:
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits
broke, resulting in the total loss of its cargo. Petitioner claims
40
that this was caused by a typhoon, hence, it should not be held xxx xxx xxx
liable for the loss of the cargo. However, petitioner failed to
prove that the typhoon is the proximate and only cause of the q - Now, Mr. Witness, did it not occur to you it might be
loss of the goods, and that it has exercised due diligence before, safer to just allow the Barge to lie where she was instead of
during and after the occurrence of the typhoon to prevent or towing it?
minimize the loss.30 The evidence show that, even before the
towing bits of the barge broke, it had already previously a - Since that time that the Barge was refloated, GMC
sustained damage when it hit a sunken object while docked at (General Milling Corporation, the consignee) as I have said was
the Engineering Island. It even suffered a hole. Clearly, this in a hurry for their goods to be delivered at their Wharf since
could not be solely attributed to the typhoon. The partly- they needed badly the wheat that was loaded in PSTSI-3. It was
submerged vessel was refloated but its hole was patched with needed badly by the consignee.
only clay and cement. The patch work was merely a provisional
remedy, not enough for the barge to sail safely. Thus, when q - And this is the reason why you towed the Barge as you
petitioner persisted to proceed with the voyage, it recklessly did?
exposed the cargo to further damage. A portion of the cross-
examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue a - Yes, sir.
Adjustment Co., Inc., states:
xxx xxx xxx
CROSS-EXAMINATION BY ATTY. DONN LEE:31
CROSS-EXAMINATION BY ATTY. IGNACIO:34
xxx xxx xxx
xxx xxx xxx
q - Can you tell us what else transpired after that incident?
q - And then from ISLOFF Terminal you proceeded to the
a - After the first accident, through the initiative of the barge premises of the GMC? Am I correct?
owners, they tried to pull out the barge from the place of the
accident, and bring it to the anchor terminal for safety, then after a - The next day, in the morning, we hired for additional two
deciding if the vessel is stabilized, they tried to pull it to the (2) tugboats as I have stated.
consignee's warehouse, now while on route another accident
occurred, now this time the barge totally hitting something in the q - Despite of the threats of an incoming typhoon as you
course. testified a while ago?
q - You said there was another accident, can you tell the a - It is already in an inner portion of Pasig River. The
court the nature of the second accident? typhoon would be coming and it would be dangerous if we are in
the vicinity of Manila Bay.
a - The sinking, sir.
q - But the fact is, the typhoon was incoming? Yes or no?
q - Can you tell the nature . . . can you tell the court, if you
know what caused the sinking? a - Yes.
a - Mostly it was related to the first accident because there q - And yet as a standard operating procedure of your
was already a whole (sic) on the bottom part of the barge. Company, you have to secure a sort of Certification to determine
the weather condition, am I correct?
xxx xxx xxx
a - Yes, sir.
This is not all. Petitioner still headed to the consignee's wharf
despite knowledge of an incoming typhoon. During the time that q - So, more or less, you had the knowledge of the
the barge was heading towards the consignee's wharf on incoming typhoon, right?
September 5, 1990, typhoon "Loleng" has already entered the
a - Yes, sir.
Philippine area of responsibility.32 A part of the testimony of
Robert Boyd, Cargo Operations Supervisor of the petitioner,
q - And yet you proceeded to the premises of the GMC?
reveals:
DIRECT-EXAMINATION BY ATTY. LEE:33

a - ISLOFF Terminal is far from Manila Bay and anytime
even with the typhoon if you are already inside the vicinity or
inside Pasig entrance, it is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the
typhoon as force majeure to escape liability for the loss
sustained by the private respondent. Surely, meeting a typhoon
head-on falls short of due diligence required from a common
carrier. More importantly, the officers/employees themselves of
petitioner admitted that when the towing bits of the vessel broke
that caused its sinking and the total loss of the cargo upon
reaching the Pasig River, it was no longer affected by the
typhoon. The typhoon then is not the proximate cause of the
loss of the cargo; a human factor, i.e., negligence had
intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000
and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 131166 September 30, 1999
CALTEX (PHILIPPINES), INC., petitioner,
vs.
SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO,
EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO,
DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO,
ARTURO S. GO, EDGAR S. GO, EDMUND S. GO,
FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAÑEZAL, AND SOTERA E.
CAÑEZAL, respondents.
Is the charterer of a sea vessel liable for damages resulting from
a collision between the chartered vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December
19, 1987 carrying petroleum products of Caltex (Philippines),
Inc. (hereinafter Caltex) no one could have guessed that it would
collide with MV Doña Paz, killing almost all the passengers and
crew members of both ships, and thus resulting in one of the
country's worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals
decision 1 holding petitioner jointly liable with the operator of MT
Vector for damages when the latter collided with Sulpicio Lines,
Inc.'s passenger ship MV Doña Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay,
Bataan, at about 8:00 p.m., enroute to Masbate, loaded with
8,800 barrels of petroleum products shipped by petitioner
Caltex. 2 MT Vector is a tramping motor tanker owned and
operated by Vector Shipping Corporation, engaged in the
business of transporting fuel products such as gasoline,
kerosene, diesel and crude oil. During that particular voyage, the
MT Vector carried on board gasoline and other oil products
owned by Caltex by virtue of a charter contract between
them. 3
On December 20, 1987, at about 6:30 a.m., the passenger ship
MV Doña Paz left the port of Tacloban headed for Manila with a
complement of 59 crew members including the master and his
officers, and passengers totaling 1,493 as indicated in the Coast
Guard Clearance. 4 The MV Doña Paz is a passenger and
cargo vessel owned and operated by Sulpicio Lines, Inc. plying
the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/
Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels
collided in the open sea within the vicinity of Dumali Point
between Marinduque and Oriental Mindoro. All the
crewmembers of MV Doña Paz died, while the two survivors
from MT Vector claimed that they were sleeping at the time of
the incident.1âwphi1.nêt
The MV Doña Paz carried an estimated 4,000 passengers;
many indeed, were not in the passenger manifest. Only 24
survived the tragedy after having been rescued from the burning
waters by vessels that responded to distress calls. 5 Among
those who perished were public school teacher Sebastian
Cañezal (47 years old) and his daughter Corazon Cañezal (11
years old), both unmanifested passengers but proved to be on
board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No.
659-87 after investigation found that the MT Vector, its
registered operator Francisco Soriano, and its owner and actual
operator Vector Shipping Corporation, were at fault and
responsible for its collision with MV Doña Paz. 6
On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal,
Sebastian Cañezal's wife and mother respectively, filed with the
Regional Trial Court, Branch 8, Manila, a complaint for
"Damages Arising from Breach of Contract of Carriage" against
Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a
third party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex (Philippines), Inc. Sulpicio alleged that
Caltex chartered MT Vector with gross and evident bad faith
knowing fully well that MT Vector was improperly manned, ill-
equipped, unseaworthy and a hazard to safe navigation; as a
result, it rammed against MV Doña Paz in the open sea setting
MT Vector's highly flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision
dismissing, the third party complaint against petitioner. The
dispositive portion reads:
41
WHEREFORE, judgment is hereby rendered in favor of plaintiffs
and against defendant-3rd party plaintiff Sulpicio Lines, Inc., to
wit:
1. For the death of Sebastian E. Cañezal and his 11-year old
daughter Corazon G. Cañezal, including loss of future earnings
of said Sebastian, moral and exemplary damages, attorney's
fees, in the total amount of P 1,241,287.44 and finally;
2. The statutory costs of the proceedings.
Likewise, the 3rd party complaint is hereby DISMISSED for want
of substantiation and with costs against the 3rd party plaintiff.
IT IS SO ORDERED.
DONE IN MANILA, this 15th day of September 1992.
ARSENIO M. GONONG
Judge 7
On appeal to the Court of Appeals interposed by Sulpicio Lines,
Inc., on April 15, 1997, the Court of Appeal modified the trial
court's ruling and included petitioner Caltex as one of the those
liable for damages. Thus:
WHEREFORE, in view of all the foregoing, the judgment
rendered by the Regional Trial Court is hereby MODIFIED as
follows:
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay
the heirs of Sebastian E. Cañezal and Corazon Cañezal:
1. Compensatory damages for the death of Sebastian E.
Cañezal and Corazon Cañezal the total amount of ONE
HUNDRED THOUSAND PESOS (P100,000);
2. Compensatory damages representing the unearned income of
Sebastian E. Cañezal, in the total amount of THREE HUNDRED
SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00)
PESOS;
3. Moral damages in the amount of THREE HUNDRED
THOUSAND PESOS (P300,000.00);
4. Attorney's fees in the concept of actual damages in the
amount of FIFTY THOUSAND PESOS (P50,000.00);
5. Costs of the suit.
Third party defendants Vector Shipping Co. and Caltex (Phils.),
Inc. are held equally liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-
mentioned damages, attorney's fees and costs which the latter

is adjudged to pay plaintiffs, the same to be shared half by
Vector Shipping Co. (being the vessel at fault for the collision)
and the other half by Caltex (Phils.), Inc. (being the charterer
that negligently caused the shipping of combustible cargo
aboard an unseaworthy vessel).
SO ORDERED.
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
vs.
COURT OF APPEALS and the PHILIPPINE GENERAL
INSURANCE COMPANY, respondents.
This is a petition for review of a Decision rendered by the Court
of Appeals, dated December 17, 1993, affirming Branch 35 of
the Regional Trial Court, Manila in holding that herein petitioner
is liable to pay herein private respondent the amount of
P700,000.00, plus legal interest thereon, another sum of
P100,000.00 as attorney's fees and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport
molasses from the province of Negros to Manila with Coastwise
Lighterage Corporation (Coastwise for brevity), using the latter's
dumb barges. The barges were towed in tandem by the tugboat
MT Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of
the barges, "Coastwise 9", struck an unknown sunken object.
The forward buoyancy compartment was damaged, and water
gushed in through a hole "two inches wide and twenty-two
inches long"1 As a consequence, the molasses at the cargo
tanks were contaminated and rendered unfit for the use it was
intended. This prompted the consignee, Pag-asa Sales, Inc. to
reject the shipment of molasses as a total loss. Thereafter, Pag-
asa Sales, Inc. filed a formal claim with the insurer of its lost
cargo, herein private respondent, Philippine General Insurance
Company (PhilGen, for short) and against the carrier, herein
petitioner, Coastwise Lighterage. Coastwise Lighterage denied
the claim and it was PhilGen which paid the consignee, Pag-asa
Sales, Inc., the amount of P700,000.00, representing the value
of the damaged cargo of molasses.
In turn, PhilGen then filed an action against Coastwise
Lighterage before the Regional Trial Court of Manila, seeking to
recover the amount of P700,000.00 which it paid to Pag-asa
Sales, Inc. for the latter's lost cargo. PhilGen now claims to be
subrogated to all the contractual rights and claims which the
consignee may have against the carrier, which is presumed to
have violated the contract of carriage.
The RTC awarded the amount prayed for by PhilGen. On
Coastwise Lighterage's appeal to the Court of Appeals, the
award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether
or not petitioner Coastwise Lighterage was transformed into a
private carrier, by virtue of the contract of affreightment which it
entered into with the consignee, Pag-asa Sales, Inc. Corollarily,
if it were in fact transformed into a private carrier, did it exercise
the ordinary diligence to which a private carrier is in turn bound?
Second, whether or not the insurer was subrogated into the
rights of the consignee against the carrier, upon payment by the
insurer of the value of the consignee's goods lost while on board
one of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the
Court of Appeals erred in finding that it was a common carrier. It
stresses the fact that it contracted with Pag-asa Sales, Inc. to
transport the shipment of molasses from Negros Oriental to
Manila and refers to this contract as a "charter agreement". It
then proceeds to cite the case of Home Insurance Company vs.
American Steamship Agencies, Inc.2 wherein this Court held: ". .
. a common carrier undertaking to carry a special cargo or
chartered to a special person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In
its entirety, the conclusions of the court are as follows:
Accordingly, the charter party contract is one of affreightment
over the whole vessel, rather than a demise. As such, the
liability of the shipowner for acts or negligence of its captain and
crew, would remain in the absence of stipulation.3
The distinction between the two kinds of charter parties (i.e.
bareboat or demise and contract of affreightment) is more
clearly set out in the case of Puromines, Inc. vs. Court of
Appeals,4 wherein we ruled:
Under the demise or bareboat charter of the vessel, the
charterer will generally be regarded as the owner for the voyage
or service stipulated. The charterer mans the vessel with his
own people and becomes the owner pro hac vice, subject to
liability to others for damages caused by negligence. To create a
demise, the owner of a vessel must completely and exclusively
relinquish possession, command and navigation thereof to the
charterer, anything short of such a complete transfer is a
contract of affreightment (time or voyage charter party) or not a
charter party at all.
On the other hand a contract of affreightment is one in which the
owner of the vessel leases part or all of its space to haul goods
for others. It is a contract for special service to be rendered by
42
the owner of the vessel and under such contract the general
owner retains the possession, command and navigation of the
ship, the charterer or freighter merely having use of the space in
the vessel in return for his payment of the charter hire. . . . .
. . . . An owner who retains possession of the ship though the
hold is the property of the charterer, remains liable as carrier
and must answer for any breach of duty as to the care, loading
and unloading of the cargo. . . .
Although a charter party may transform a common carrier into a
private one, the same however is not true in a contract of
affreightment on account of the aforementioned distinctions
between the two.
Petitioner admits that the contract it entered into with the
consignee was one of affreightment.5 We agree. Pag-asa Sales,
Inc. only leased three of petitioner's vessels, in order to carry
cargo from one point to another, but the possession, command
and navigation of the vessels remained with petitioner
Coastwise Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines
case, Coastwise Lighterage, by the contract of affreightment,
was not converted into a private carrier, but remained a common
carrier and was still liable as such.
The law and jurisprudence on common carriers both hold that
the mere proof of delivery of goods in good order to a carrier and
the subsequent arrival of the same goods at the place of
destination in bad order makes for a prima facie case against
the carrier.
It follows then that the presumption of negligence that attaches
to common carriers, once the goods it transports are lost,
destroyed or deteriorated, applies to the petitioner. This
presumption, which is overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted in this case.
The records show that the damage to the barge which carried
the cargo of molasses was caused by its hitting an unknown
sunken object as it was heading for Pier 18. The object turned
out to be a submerged derelict vessel. Petitioner contends that
this navigational hazard was the efficient cause of the accident.
Further it asserts that the fact that the Philippine Coastguard
"has not exerted any effort to prepare a chart to indicate the
location of sunken derelicts within Manila North Harbor to avoid
navigational accidents"6 effectively contributed to the happening
of this mishap. Thus, being unaware of the hidden danger that
lies in its path, it became impossible for the petitioner to avoid
the same. Nothing could have prevented the event, making it
beyond the pale of even the exercise of extraordinary diligence.

However, petitioner's assertion is belied by the evidence on
record where it appeared that far from having rendered service
with the greatest skill and utmost foresight, and being free from
fault, the carrier was culpably remiss in the observance of its
duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9"
admitted that he was not licensed. The Code of Commerce,
which subsidiarily governs common carriers (which are primarily
governed by the provisions of the Civil Code) provides:
Art. 609. — Captains, masters, or patrons of vessels must be
Filipinos, have legal capacity to contract in accordance with this
code, and prove the skill capacity and qualifications necessary
to command and direct the vessel, as established by marine and
navigation laws, ordinances or regulations, and must not be
disqualified according to the same for the discharge of the duties
of the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a
voyage with an unlicensed patron violates this rule. It cannot
safely claim to have exercised extraordinary diligence, by
placing a person whose navigational skills are questionable, at
the helm of the vessel which eventually met the fateful accident.
It may also logically, follow that a person without license to
navigate, lacks not just the skill to do so, but also the utmost
familiarity with the usual and safe routes taken by seasoned and
legally authorized ones. Had the patron been licensed, he could
be presumed to have both the skill and the knowledge that
would have prevented the vessel's hitting the sunken derelict
ship that lay on their way to Pier 18.
As a common carrier, petitioner is liable for breach of the
contract of carriage, having failed to overcome the presumption
of negligence with the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence.
On the issue of subrogation, which petitioner contends as
inapplicable in this case, we once more rule against the
petitioner. We have already found petitioner liable for breach of
the contract of carriage it entered into with Pag-asa Sales, Inc.
However, for the damage sustained by the loss of the cargo
which petitioner-carrier was transporting, it was not the carrier
which paid the value thereof to Pag-asa Sales, Inc. but the
latter's insurer, herein private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who violated
the contract. . . .
This legal provision containing the equitable principle of
subrogation has been applied in a long line of cases including
Compania Maritima v. Insurance Company of North America;7
Fireman's Fund Insurance Company v. Jamilla & Company,
Inc.,8 and Pan Malayan Insurance Corporation v. Court of
Appeals,9 wherein this Court explained:
Article 2207 of the Civil Code is founded on the well-settled
principle of subrogation. If the insured property is destroyed or
damaged through the fault or negligence of a party other than
the assured, then the insurer, upon payment to the assured will
be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to
pay. Payment by the insurer to the assured operated as an
equitable assignment to the former of all remedies which the
latter may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract
or upon written assignment of claim. It accrues simply upon
payment of the insurance claim by the insurer.
Undoubtedly, upon payment by respondent insurer PhilGen of
the amount of P700,000.00 to Pag-asa Sales, Inc., the
consignee of the cargo of molasses totally damaged while being
transported by petitioner Coastwise Lighterage, the former was
subrogated into all the rights which Pag-asa Sales, Inc. may
have had against the carrier, herein petitioner Coastwise
Lighterage.
WHEREFORE, premises considered, this petition is DENIED
and the appealed decision affirming the order of Branch 35 of
the Regional Trial Court of Manila for petitioner Coastwise
Lighterage to pay respondent Philippine General Insurance
Company the "principal amount of P700,000.00 plus interest
thereon at the legal rate computed from March 29, 1989, the
date the complaint was filed until fully paid and another sum of
P100,000.00 as attorney's fees and costs"10 is likewise hereby
AFFIRMED
SO ORDERED.
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES
AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for
private respondents.
Does a charter-party1 between a shipowner and a charterer
transform a common carrier into a private one as to negate the
civil law presumption of negligence in case of loss or damage to
its cargo?
43
Planters Products, Inc. (PPI), purchased from Mitsubishi
International Corporation (MITSUBISHI) of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the
latter shipped in bulk on 16 June 1974 aboard the cargo vessel
M/V "Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union, Philippines, as evidenced by Bill
of Lading No. KP-1 signed by the master of the vessel and
issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on
the vessel M/V "Sun Plum" pursuant to the Uniform General
Charter2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan.3
Riders to the aforesaid charter-party starting from par. 16 to 40
were attached to the pre-printed agreement. Addenda Nos. 1, 2,
3 and 4 to the charter-party were also subsequently entered into
on the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her
holds4 were all presumably inspected by the charterer's
representative and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished
by certificate from National Cargo Bureau inspector or substitute
appointed by charterers for his account certifying the vessel's
readiness to receive cargo spaces. The vessel's hold to be
properly swept, cleaned and dried at the vessel's expense and
the vessel to be presented clean for use in bulk to the
satisfaction of the inspector before daytime commences.
(emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired
by and under the supervision of the shipper, the steel hatches
were closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained
closed and tightly sealed throughout the entire voyage.5
Upon arrival of the vessel at her port of call on 3 July 1974, the
steel pontoon hatches were opened with the use of the vessel's
boom. Petitioner unloaded the cargo from the holds into its
steelbodied dump trucks which were parked alongside the berth,
using metal scoops attached to the ship, pursuant to the terms
and conditions of the charter-partly (which provided for an
F.I.O.S. clause).6 The hatches remained open throughout the
duration of the discharge.7
Each time a dump truck was filled up, its load of Urea was
covered with tarpaulin before it was transported to the
consignee's warehouse located some fifty (50) meters from the
wharf. Midway to the warehouse, the trucks were made to pass
through a weighing scale where they were individually weighed
for the purpose of ascertaining the net weight of the cargo. The

port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining
occasionally while the discharge was in progress.8 The
petitioner's warehouse was made of corrugated galvanized iron
(GI) sheets, with an opening at the front where the dump trucks
entered and unloaded the fertilizer on the warehouse floor.
Tarpaulins and GI sheets were placed in-between and alongside
the trucks to contain spillages of the ferilizer.9
It took eleven (11) days for PPI to unload the cargo, from 5 July
to 18 July 1974 (except July 12th, 14th and 18th).10 A private
marine and cargo surveyor, Cargo Superintendents Company
Inc. (CSCI), was hired by PPI to determine the "outturn" of the
cargo shipped, by taking draft readings of the vessel prior to and
after discharge. 11The survey report submitted by CSCI to the
consignee (PPI) dated 19 July 1974 revealed a shortage in the
cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The same
results were contained in a Certificate of Shortage/Damaged
Cargo dated 18 July 1974 prepared by PPI which showed that
the cargo delivered was indeed short of 94.839 M/T and about
23 M/T were rendered unfit for commerce, having been polluted
with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974
to Soriamont Steamship Agencies (SSA), the resident agent of
the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in
value of that portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond
to the consignee's claim for payment because, according to
them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was
denied by them because they "had nothing to do with the
discharge of the shipment." 14Hence, on 18 July 1975, PPI filed
an action for damages with the Court of First Instance of Manila.
The defendant carrier argued that the strict public policy
governing common carriers does not apply to them because
they have become private carriers by reason of the provisions of
the charter-party. The court a quo however sustained the claim
of the plaintiff against the defendant carrier for the value of the
goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common
carrier is presumed negligent in case of loss or damage of the
goods it contracts to transport, all that a shipper has to do in a
suit to recover for loss or damage is to show receipt by the
carrier of the goods and to delivery by it of less than what it
received. After that, the burden of proving that the loss or
damage was due to any of the causes which exempt him from
liability is shipted to the carrier, common or private he may be.
Even if the provisions of the charter-party aforequoted are
deemed valid, and the defendants considered private carriers, it
was still incumbent upon them to prove that the shortage or
contamination sustained by the cargo is attributable to the fault
or negligence on the part of the shipper or consignee in the
loading, stowing, trimming and discharge of the cargo. This they
failed to do. By this omission, coupled with their failure to
destroy the presumption of negligence against them, the
defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower
court and absolved the carrier from liability for the value of the
cargo that was lost or damaged. 16 Relying on the 1968 case of
Home Insurance Co. v. American Steamship Agencies, Inc.,17
the appellate court ruled that the cargo vessel M/V "Sun Plum"
owned by private respondent KKKK was a private carrier and
not a common carrier by reason of the time charterer-party.
Accordingly, the Civil Code provisions on common carriers
which set forth a presumption of negligence do not find
application in the case at bar. Thus —
. . . In the absence of such presumption, it was incumbent upon
the plaintiff-appellee to adduce sufficient evidence to prove the
negligence of the defendant carrier as alleged in its complaint. It
is an old and well settled rule that if the plaintiff, upon whom
rests the burden of proving his cause of action, fails to show in a
satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or
defense (Moran, Commentaries on the Rules of Court, Volume
6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to
prove the basis of its cause of action, i.e. the alleged negligence
of defendant carrier. It appears that the plaintiff was under the
impression that it did not have to establish defendant's
negligence. Be that as it may, contrary to the trial court's finding,
the record of the instant case discloses ample evidence showing
that defendant carrier was not negligent in performing its
obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review
assailing the decision of the Court of Appeals. Petitioner
theorizes that the Home Insurance case has no bearing on the
present controversy because the issue raised therein is the
validity of a stipulation in the charter-party delimiting the liability
of the shipowner for loss or damage to goods cause by want of
due deligence on its part or that of its manager to make the
vessel seaworthy in all respects, and not whether the
presumption of negligence provided under the Civil Code applies
only to common carriers and not to private carriers. 19 Petitioner
further argues that since the possession and control of the
vessel remain with the shipowner, absent any stipulation to the
contrary, such shipowner should made liable for the negligence
of the captain and crew. In fine, PPI faults the appellate court in
44
not applying the presumption of negligence against respondent
carrier, and instead shifting the onus probandi on the shipper to
show want of due deligence on the part of the carrier, when he
was not even at hand to witness what transpired during the
entire voyage.
As earlier stated, the primordial issue here is whether a common
carrier becomes a private carrier by reason of a charter-party; in
the negative, whether the shipowner in the instant case was able
to prove that he had exercised that degree of diligence required
of him under the law.
It is said that etymology is the basis of reliable judicial decisions
in commercial cases. This being so, we find it fitting to first
define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship,
or some principal part thereof, is let by the owner to another
person for a specified time or use; 20 a contract of affreightment
by which the owner of a ship or other vessel lets the whole or a
part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment
of freight; 21 Charter parties are of two types: (a) contract of
affreightment which involves the use of shipping space on
vessels leased by the owner in part or as a whole, to carry
goods for others; and, (b) charter by demise or bareboat charter,
by the terms of which the whole vessel is let to the charterer with
a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and
the crew, who are his servants. Contract of affreightment may
either be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein
the ship is leased for a single voyage. 22 In both cases, the
charter-party provides for the hire of vessel only, either for a
determinate period of time or for a single or consecutive voyage,
the shipowner to supply the ship's stores, pay for the wages of
the master and the crew, and defray the expenses for the
maintenance of the ship.
Upon the other hand, the term "common or public carrier" is
defined in Art. 1732 of the Civil Code. 23 The definition extends
to carriers either by land, air or water which hold themselves out
as ready to engage in carrying goods or transporting passengers
or both for compensation as a public employment and not as a
casual occupation. The distinction between a "common or public
carrier" and a "private or special carrier" lies in the character of
the business, such that if the undertaking is a single transaction,
not a part of the general business or occupation, although
involving the carriage of goods for a fee, the person or
corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common
carriers, by reason of the nature of their business, should
observe extraordinary diligence in the vigilance over the goods

they carry.25 In the case of private carriers, however, the
exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to
have been at fault or to have acted negligently, and the burden
of proving otherwise rests on them.26 On the contrary, no such
presumption applies to private carriers, for whosoever alleges
damage to or deterioration of the goods carried has the onus of
proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course
of business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the
vessel M/V "Sun Plum", the ship captain, its officers and
compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and
control. Hardly then can we charge the charterer, a stranger to
the crew and to the ship, with the duty of caring for his cargo
when the charterer did not have any control of the means in
doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination
of the course of the voyage and other technical incidents of
maritime navigation were all consigned to the officers and crew
who were screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited to
the ship only, as in the case of a time-charter or voyage-charter.
It is only when the charter includes both the vessel and its crew,
as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or
voyage charter retains possession and control of the ship,
although her holds may, for the moment, be the property of the
charterer. 28
Respondent carrier's heavy reliance on the case of Home
Insurance Co. v. American Steamship Agencies, supra, is
misplaced for the reason that the meat of the controversy therein
was the validity of a stipulation in the charter-party exempting
the shipowners from liability for loss due to the negligence of its
agent, and not the effects of a special charter on common
carriers. At any rate, the rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a
common carrier, 29 does not find application in our jurisdiction,
for we have observed that the growing concern for safety in the
transportation of passengers and /or carriage of goods by sea
requires a more exacting interpretation of admiralty laws, more
particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux,
the learned barrister-at-law 30 —
As a matter of principle, it is difficult to find a valid distinction
between cases in which a ship is used to convey the goods of
one and of several persons. Where the ship herself is let to a
charterer, so that he takes over the charge and control of her,
the case is different; the shipowner is not then a carrier. But
where her services only are let, the same grounds for imposing
a strict responsibility exist, whether he is employed by one or
many. The master and the crew are in each case his servants,
the freighter in each case is usually without any representative
on board the ship; the same opportunities for fraud or collusion
occur; and the same difficulty in discovering the truth as to what
has taken place arises . . .
In an action for recovery of damages against a common carrier
on the goods shipped, the shipper or consignee should first
prove the fact of shipment and its consequent loss or damage
while the same was in the possession, actual or constructive, of
the carrier. Thereafter, the burden of proof shifts to respondent
to prove that he has exercised extraordinary diligence required
by law or that the loss, damage or deterioration of the cargo was
due to fortuitous event, or some other circumstances
inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by
clear and convincing proof, the prima faciepresumption of
negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his
deposition taken on 19 April 1977 before the Philippine Consul
and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4) hatches
of the vessel were cleaned, dried and fumigated. After
completing the loading of the cargo in bulk in the ship's holds,
the steel pontoon hatches were closed and sealed with iron lids,
then covered with three (3) layers of serviceable tarpaulins
which were tied with steel bonds. The hatches remained close
and tightly sealed while the ship was in transit as the weight of
the steel covers made it impossible for a person to open without
the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was
in good condition, foreclosing the possibility of spillage of the
cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place,
representatives of the consignee boarded, and in the presence
of a representative of the shipowner, the foreman, the
stevedores, and a cargo surveyor representing CSCI, opened
the hatches and inspected the condition of the hull of the vessel.
The stevedores unloaded the cargo under the watchful eyes of
the shipmates who were overseeing the whole operation on
rotation basis. 34
Verily, the presumption of negligence on the part of the
respondent carrier has been efficaciously overcome by the
45
showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by
respondent appellate court thus —
. . . Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing
that defendant carrier was not negligent in performing its
obligations. Particularly, the following testimonies of plaintiff-
appellee's own witnesses clearly show absence of negligence
by the defendant carrier; that the hull of the vessel at the time of
the discharge of the cargo was sealed and nobody could open
the same except in the presence of the owner of the cargo and
the representatives of the vessel (TSN, 20 July 1977, p. 14); that
the cover of the hatches was made of steel and it was overlaid
with tarpaulins, three layers of tarpaulins and therefore their
contents were protected from the weather (TSN, 5 April 1978, p.
24); and, that to open these hatches, the seals would have to be
broken, all the seals were found to be intact (TSN, 20 July 1977,
pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the
degree of diligence required of it as a public carrier began from
the time the cargo was unconditionally placed in its charge after
the vessel's holds were duly inspected and passed scrutiny by
the shipper, up to and until the vessel reached its destination
and its hull was reexamined by the consignee, but prior to
unloading. This is clear from the limitation clause agreed upon
by the parties in the Addendum to the standard "GENCON" time
charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be
done by the charterer, free from all risk and expense to the
carrier. 35 Moreover, a shipowner is liable for damage to the
cargo resulting from improper stowage only when the stowing is
done by stevedores employed by him, and therefore under his
control and supervision, not when the same is done by the
consignee or stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common
carriers are not responsible for the loss, destruction or
deterioration of the goods if caused by the charterer of the
goods or defects in the packaging or in the containers. The
Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the
transportation by reason of fortuitous event, force majeure, or
the inherent defect of the goods, shall be for the account and
risk of the shipper, and that proof of these accidents is
incumbent upon the carrier. 37 The carrier, nonetheless, shall be
liable for the loss and damage resulting from the preceding
causes if it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the
precautions which usage has established among careful
persons. 38

Respondent carrier presented a witness who testified on the
characteristics of the fertilizer shipped and the expected risks of
bulk shipping. Mr. Estanislao Chupungco, a chemical engineer
working with Atlas Fertilizer, described Urea as a chemical
compound consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea also contains 46%
nitrogen and is highly soluble in water. However, during storage,
nitrogen and ammonia do not normally evaporate even on a long
voyage, provided that the temperature inside the hull does not
exceed eighty (80) degrees centigrade. Mr. Chupungco further
added that in unloading fertilizer in bulk with the use of a
clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is
deemed "normal" or "tolerable." The primary cause of these
spillages is the clamped shell which does not seal very tightly.
Also, the wind tends to blow away some of the materials during
the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in
value, is caused either by an extremely high temperature in its
place of storage, or when it comes in contact with water. When
Urea is drenched in water, either fresh or saline, some of its
particles dissolve. But the salvaged portion which is in liquid
form still remains potent and usable although no longer saleable
in its original market value.
The probability of the cargo being damaged or getting mixed or
contaminated with foreign particles was made greater by the fact
that the fertilizer was transported in "bulk," thereby exposing it to
the inimical effects of the elements and the grimy condition of
the various pieces of equipment used in transporting and hauling
it.
The evidence of respondent carrier also showed that it was
highly improbable for sea water to seep into the vessel's holds
during the voyage since the hull of the vessel was in good
condition and her hatches were tightly closed and firmly sealed,
making the M/V "Sun Plum" in all respects seaworthy to carry
the cargo she was chartered for. If there was loss or
contamination of the cargo, it was more likely to have occurred
while the same was being transported from the ship to the dump
trucks and finally to the consignee's warehouse. This may be
gleaned from the testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He explained that the 18
M/T of alleged "bar order cargo" as contained in their report to
PPI was just an approximation or estimate made by them after
the fertilizer was discharged from the vessel and segregated
from the rest of the cargo.
The Court notes that it was in the month of July when the vessel
arrived port and unloaded her cargo. It rained from time to time
at the harbor area while the cargo was being discharged
according to the supply officer of PPI, who also testified that it
was windy at the waterfront and along the shoreline where the
dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of
highly soluble goods like fertilizer carries with it the risk of loss or
damage. More so, with a variable weather condition prevalent
during its unloading, as was the case at bar. This is a risk the
shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent character
of the goods which makes it highly vulnerable to deterioration;
as well as the inadequacy of its packaging which further
contributed to the loss. On the other hand, no proof was
adduced by the petitioner showing that the carrier was remise in
the exercise of due diligence in order to minimize the loss or
damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed
decision of the Court of Appeals, which reversed the trial court,
is AFFIRMED. Consequently, Civil Case No. 98623 of the then
Court of the First Instance, now Regional Trial Court, of Manila
should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
G.R. No. 111127 July 26, 1996
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL,
petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD
CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN
RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR.,
ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS
CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA,
YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN,
ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS
NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO
MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL,
ROSARIO MARA-MARA, TERESITA REGALA, MELINDA
TORRES, MARELLA MIJARES, JOSEFA CABATINGAN,
MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE
JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS
RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.
This is a petition for review on certiorari of the decision of the
Court of Appeals1 in CA-GR No. 28245, dated September 30,
1992, which affirmed with modification the decision of the
Regional Trial Court of Makati, Branch 58, ordering petitioners
jointly and severally to pay damages to private respondent
Amyline Antonio, and its resolution which denied petitioners'
motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a
1982 model Mazda minibus. They used the bus principally in
connection with a bus service for school children which they
46
operated in Manila. The couple had a driver, Porfirio J. Cabil,
whom they hired in 1981, after trying him out for two weeks, His
job was to take school children to and from the St. Scholastica's
College in Malate, Manila.
On November 2, 1984 private respondent Word for the World
Christian Fellowship Inc. (WWCF) arranged with petitioners for
the transportation of 33 members of its Young Adults Ministry
from Manila to La Union and back in consideration of which
private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at
5:00 o'clock in the afternoon. However, as several members of
the party were late, the bus did not leave the Tropical Hut at the
corner of Ortigas Avenue and EDSA until 8:00 o'clock in the
evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under repair,
sot hat petitioner Cabil, who was unfamiliar with the area (it
being his first trip to La Union), was forced to take a detour
through the town of Baay in Lingayen, Pangasinan. At 11:30 that
night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as
"siete." The road was slippery because it was raining, causing
the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the left traffic
steel brace and sign along the road and rammed the fence of
one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus
came to rest off the road. A coconut tree which it had hit fell on it
and smashed its front portion.
Several passengers were injured. Private respondent Amyline
Antonio was thrown on the floor of the bus and pinned down by
a wooden seat which came down by a wooden seat which came
off after being unscrewed. It took three persons to safely remove
her from this portion. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve
until it was too late. He said he was not familiar with the area
and he could not have seen the curve despite the care he took
in driving the bus, because it was dark and there was no sign on
the road. He said that he saw the curve when he was already
within 15 to 30 meters of it. He allegedly slowed down to 30
kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day,
November 3, 1984. On the basis of their finding they filed a
criminal complaint against the driver, Porfirio Cabil. The case
was later filed with the Lingayen Regional Trial Court. Petitioners
Fabre paid Jesus Escano P1,500.00 for the damage to the
latter's fence. On the basis of Escano's affidavit of desistance
the case against petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in
the RTC of Makati, Metro Manila. As a result of the accident, she
is now suffering from paraplegia and is permanently paralyzed
from the waist down. During the trial she described the
operations she underwent and adduced evidence regarding the
cost of her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Baay,
Lingayen. As this hospital was not adequately equipped, she
was transferred to the Sto. Niño Hospital, also in the town of Ba-
ay, where she was given sedatives. An x-ray was taken and the
damage to her spine was determined to be too severe to be
treated there. She was therefore brought to Manila, first to the
Philippine General Hospital and later to the Makati Medical
Center where she underwent an operation to correct the
dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was
properly checked for travel to a long distance trip and that the
driver was properly screened and tested before being admitted
for employment. Indeed, all the evidence presented have shown
the negligent act of the defendants which ultimately resulted to
the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian
Fellowship, Inc. and Ms. Amyline Antonio were the only ones
who adduced evidence in support of their claim for damages, the
Court is therefore not in a position to award damages to the
other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders
judgment against defendants Mr. & Mrs. Engracio Fabre, Jr. and
Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the
Civil Code of the Philippines and said defendants are ordered to
pay jointly and severally to the plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of earning
capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorney's fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with
respect to Amyline Antonio but dismissed it with respect to the
other plaintiffs on the ground that they failed to prove their
respective claims. The Court of Appeals modified the award of
damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney's fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court's finding that
petitioner Cabil failed to exercise due care and precaution in the
operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were
themselves presumptively negligent. Hence, this petition.
Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR
THE INJURIES SUFFERED BY PRIVATE RESPONDENTS.
III WHETHER OR NOT DAMAGES CAN BE AWARDED AND
IN THE POSITIVE, UP TO WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory
damages in the amount of P600,000.00. It is insisted that, on the
assumption that petitioners are liable an award of P600,000.00
is unconscionable and highly speculative. Amyline Antonio
testified that she was a casual employee of a company called
"Suaco," earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners
contend that as casual employees do not have security of
tenure, the award of P600,000.00, considering Amyline
Antonio's earnings, is without factual basis as there is no
assurance that she would be regularly earning these amounts.
With the exception of the award of damages, the petition is
devoid of merit.
First, it is unnecessary for our purpose to determine whether to
decide this case on the theory that petitioners are liable for
breach of contract of carriage or culpa contractual or on the
theory of quasi delict or culpa aquiliana as both the Regional
Trial Court and the Court of Appeals held, for although the
relation of passenger and carrier is "contractual both in origin
47
and nature," nevertheless "the act that breaks the contract may
be also a tort." 2 In either case, the question is whether the bus
driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his
employer, the Fabres, who owned the bus, failed to exercise the
diligence of a good father of the family in the selection and
supervision of their employee is fully supported by the evidence
on record. These factual findings of the two courts we regard as
final and conclusive, supported as they are by the evidence.
Indeed, it was admitted by Cabil that on the night in question, it
was raining, and as a consequence, the road was slippery, and
it was dark. He averred these facts to justify his failure to see
that there lay a sharp curve ahead. However, it is undisputed
that Cabil drove his bus at the speed of 50 kilometers per hour
and only slowed down when he noticed the curve some 15 to 30
meters ahead. 3 By then it was too late for him to avoid falling
off the road. Given the conditions of the road and considering
that the trip was Cabil's first one outside of Manila, Cabil should
have driven his vehicle at a moderate speed. There is testimony
4that the vehicles passing on that portion of the road should only
be running 20 kilometers per hour, so that at 50 kilometers per
hour, Cabil was running at a very high speed.
Considering the foregoing — the fact that it was raining and the
road was slippery, that it was dark, that he drove his bus at 50
kilometers an hour when even on a good day the normal speed
was only 20 kilometers an hour, and that he was unfamiliar with
the terrain, Cabil was grossly negligent and should be held liable
for the injuries suffered by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his
negligence gave rise to the presumption that his employers, the
Fabres, were themselves negligent in the selection and
supervisions of their employee.
Due diligence in selection of employees is not satisfied by
finding that the applicant possessed a professional driver's
license. The employer should also examine the applicant for his
qualifications, experience and record of service. 5 Due diligence
in supervision, on the other hand, requires the formulation of
rules and regulations for the guidance of employees and
issuance of proper instructions as well as actual implementation
and monitoring of consistent compliance with the rules.6
In the case at bar, the Fabres, in allowing Cabil to drive the bus
to La Union, apparently did not consider the fact that Cabil had
been driving for school children only, from their homes to the St.
Scholastica's College in Metro Manila. 7 They had hired him
only after a two-week apprenticeship. They had hired him only
after a two-week apprenticeship. They had tested him for certain
matters, such as whether he could remember the names of the
children he would be taking to school, which were irrelevant to
his qualification to drive on a long distance travel, especially

considering that the trip to La Union was his first. The existence
of hiring procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on the part of
an employer. 8
Petitioners argue that they are not liable because (1) an earlier
departure (made impossible by the congregation's delayed
meeting) could have a averted the mishap and (2) under the
contract, the WWCF was directly responsible for the conduct of
the trip. Neither of these contentions hold water. The hour of
departure had not been fixed. Even if it had been, the delay did
not bear directly on the cause of the accident. With respect to
the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver
directions as to the place to which he wishes to be conveyed,
but exercises no other control over the conduct of the driver, is
not responsible for acts of negligence of the latter or prevented
from recovering for injuries suffered from a collision between the
automobile and a train, caused by the negligence or the
automobile driver. 9
As already stated, this case actually involves a contract of
carriage. Petitioners, the Fabres, did not have to be engaged in
the business of public transportation for the provisions of the
Civil Code on common carriers to apply to them. As this Court
has held: 10
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully
avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately
refrained from making such distinctions.
As common carriers, the Fabres were found to exercise
"extraordinary diligence" for the safe transportation of the
passengers to their destination. This duty of care is not excused
by proof that they exercise the diligence of a good father of the
family in the selection and supervision of their employee. As Art.
1759 of the Code provides:
Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former's
employees although such employees may have acted beyond
the scope of their authority or in violation of the orders of the
common carriers.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family
in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding
of the trial court and of the appellate court that petitioners are
liable under Arts. 2176 and 2180 for quasi delict, fully justify
findings them guilty of breach of contract of carriage under Arts.
1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline
Antonio. However, we think the Court of Appeals erred in
increasing the amount of compensatory damages because
private respondents did not question this award as inadequate.
11 To the contrary, the award of P500,000.00 for compensatory
damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual
employee of a company and as distributor of beauty products
and the fact that the possibility that she might be able to work
again has not been foreclosed. In fact she testified that one of
her previous employers had expressed willingness to employ
her again.
With respect to the other awards, while the decisions of the trial
court and the Court of Appeals do not sufficiently indicate the
factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case.
Viewed as an action for quasi delict, this case falls squarely
within the purview of Art. 2219(2) providing for the payment of
moral damages in cases of quasi delict. On the theory that
petitioners are liable for breach of contract of carriage, the award
of moral damages is authorized by Art. 1764, in relation to Art.
2220, since Cabil's gross negligence amounted to bad faith.12
Amyline Antonio's testimony, as well as the testimonies of her
father and copassengers, fully establish the physical suffering
and mental anguish she endured as a result of the injuries
caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also
properly made. However, for the same reason that it was error
for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the
award of moral damages and reduce the award of attorney's
fees, inasmuch as private respondents, in whose favor the
awards were made, have not appealed. 13
As above stated, the decision of the Court of Appeals can be
sustained either on the theory of quasi delict or on that of breach
48
of contract. The question is whether, as the two courts below
held, petitioners, who are the owners and driver of the bus, may
be made to respond jointly and severally to private respondent.
We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals, 14 on facts similar to those in this case, this Court held
the bus company and the driver jointly and severally liable for
damages for injuries suffered by a passenger. Again, in
Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in
order to let off passengers when a fellow passenger ran amuck,
as a result of which the passengers jumped out of the speeding
bus and suffered injuries, was held also jointly and severally
liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the
negligence of the driver of the bus on which plaintiff was riding
concurred with the negligence of a third party who was the driver
of another vehicle, thus causing an accident. In Anuran v. Buño,
16 Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court, 17 and Metro Manila Transit Corporation v. Court of
Appeals, 18 the bus company, its driver, the operator of the
other vehicle and the driver of the vehicle were jointly and
severally held liable to the injured passenger or the latters' heirs.
The basis of this allocation of liability was explained in Viluan v.
Court of Appeals, 19 thus:
Nor should it make any difference that the liability of petitioner
[bus owner] springs from contract while that of respondents
[owner and driver of other vehicle] arises from quasi-delict. As
early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56
Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of
the driver of another vehicle, the drivers as well as the owners of
the two vehicles are jointly and severally liable for damages.
Some members of the Court, though, are of the view that under
the circumstances they are liable on quasi-delict. 20
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of
Appeals 21 this Court exonerated the jeepney driver from liability
to the injured passengers and their families while holding the
owners of the jeepney jointly and severally liable, but that is
because that case was expressly tried and decided exclusively
on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo (the
driver) and spouses Mangune and Carreon (the jeepney
owners) were negligent. However, its ruling that spouses
Mangune and Carreon are jointly and severally liable with
Manalo is erroneous. The driver cannot be held jointly and
severally liable with carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly,
the contract of carriage is between the carrier is exclusively
responsible therefore to the passenger, even if such breach be

due to the negligence of his driver (see Viluan v. The Court of
Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA
742). 22
As in the case of BLTB, private respondents in this case and her
coplaintiffs did not stake out their claim against the carrier and
the driver exclusively on one theory, much less on that of breach
of contract alone. After all, it was permitted for them to allege
alternative causes of action and join as many parties as may be
liable on such causes of action 23 so long as private respondent
and her coplaintiffs do not recover twice for the same injury.
What is clear from the cases is the intent of the plaintiff there to
recover from both the carrier and the driver, thus, justifying the
holding that the carrier and the driver were jointly and severally
liable because their separate and distinct acts concurred to
produce the same injury.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with MODIFICATION as to award of damages.
Petitioners are ORDERED to PAY jointly and severally the
private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning
capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorney's fees; and
6) costs of suit.
SO ORDERED.
G.R. No. 138334 August 25, 2003
ESTELA L. CRISOSTOMO, Petitioner,
vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS
INTERNATIONAL, 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 petitioner’s niece, Meriam Menor, was
respondent company’s ticketing manager.
Pursuant to said contract, Menor went to her aunt’s residence on
June 12, 1991 – a Wednesday – to deliver petitioner’s travel
documents and plane tickets. Petitioner, in turn, gave Menor the
full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two
hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA
on Saturday, June 15, 1991, to take the flight for the first leg of
her journey from Manila to Hongkong. To petitioner’s dismay,
she discovered that the flight she was supposed to take had
already departed the previous day. She learned that her plane
ticket was for the flight scheduled on June 14, 1991. She thus
called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another
tour – the "British Pageant" – which included England, Scotland
and Wales in its itinerary. For this tour package, petitioner was
asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent
US$300 or P7,980.00 as partial payment and commenced the
trip in July 1991.
Upon petitioner’s return from Europe, she demanded from
respondent the reimbursement of P61,421.70, representing the
difference between the sum she paid for "Jewels of Europe" and
the amount she owed respondent for the "British Pageant" tour.
Despite several demands, respondent company refused to
reimburse the amount, contending that the same was non-
refundable.1 Petitioner was thus constrained to file a complaint
against respondent for breach of contract of carriage and
damages, which was docketed as Civil Case No. 92-133 and
raffled to Branch 59 of the Regional Trial Court of Makati City.
In her complaint,2 petitioner alleged that her failure to join
"Jewels of Europe" was due to respondent’s fault since it did not
clearly indicate the departure date on the plane ticket.
Respondent was also negligent in informing her of the wrong
flight schedule through its employee Menor. She insisted that
the "British Pageant" was merely a substitute for the "Jewels of
Europe" tour, such that the cost of the former should be properly
set-off against the sum paid for the latter.
For its part, respondent company, through its Operations
Manager, Concepcion Chipeco, denied responsibility for
petitioner’s failure to join the first tour. Chipeco insisted that
petitioner was informed of the correct departure date, which was
clearly and legibly printed on the plane ticket. The travel
documents were given to petitioner two days ahead of the
scheduled trip. Petitioner had only herself to blame for missing
the flight, as she did not bother to read or confirm her flight
schedule as printed on the ticket.
49
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 attorney’s
fees;
3. Dismissing the defendant’s counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.5
The trial court held that respondent was negligent in erroneously
advising petitioner of her departure date through its employee,
Menor, who was not presented as witness to rebut petitioner’s
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 Menor’s 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
attorney’s fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.6
Upon denial of her motion for reconsideration,7 petitioner filed
the instant petition under Rule 45 on the following grounds:
I or goods and is therefore, neither a private nor a common
It is respectfully submitted that the Honorable Court of Appeals
committed a reversible error in reversing and setting aside the
decision of the trial court by ruling that the petitioner is not
entitled to a refund of the cost of unavailed "Jewels of Europe"
tour she being equally, if not more, negligent than the private
respondent, for in the contract of carriage the common carrier is
obliged to observe utmost care and extra-ordinary diligence
which is higher in degree than the ordinary diligence required of
the passenger. Thus, even if the petitioner and private
respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the private
respondent. At best, petitioner’s negligence is only contributory
while the private respondent [is guilty] of gross negligence
making the principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the
"Jewels of Europe" tour was not indivisible and the amount paid
therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the
consequential damages due her as a result of breach of contract
of carriage.8
Petitioner contends that respondent did not observe the
standard of care required of a common carrier when it informed
her wrongly of the flight schedule. She could not be deemed
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 employee’s gross negligence.
Petitioner’s contention has no merit.
By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place
to another for a fixed price.9 Such person or association of
persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.10 A common
carrier is defined under Article 1732 of the Civil Code as
persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their
services to the public.
It is obvious from the above definition that respondent is not an
entity engaged in the business of transporting either passengers
carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers
is simply to make travel arrangements in their behalf.
Respondent’s services as a travel agency include procuring
tickets and facilitating travel permits or visas as well as booking
customers for tours.
While petitioner concededly bought her plane ticket through the
efforts of respondent company, this does not mean that the latter
ipso facto is a common carrier. At most, respondent acted
merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondent’s obligation
to petitioner in this regard was simply to see to it that petitioner
was properly booked with the airline for the appointed date and
time. Her transport to the place of destination, meanwhile,
pertained directly to the airline.
The object of petitioner’s contractual relation with respondent is
the latter’s service of arranging and facilitating petitioner’s
booking, ticketing and accommodation in the package tour. In
contrast, the object of a contract of carriage is the transportation
of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for
50
services and not one of carriage. Petitioner’s submission is
premised on a wrong assumption.
The nature of the contractual relation between petitioner and
respondent is determinative of the degree of care required in the
performance of the latter’s obligation under the contract. For
reasons of public policy, a common carrier in a contract of
carriage is bound by law to carry passengers as far as human
care and foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the
circumstances.11 As earlier stated, however, respondent is not
a common carrier but a travel agency. It is thus not bound under
the law to observe extraordinary diligence in the performance of
its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for
services, the standard of care required of respondent is that of a
good father of a family under Article 1173 of the Civil Code.12
This connotes reasonable care consistent with that which an
ordinarily prudent person would have observed when confronted
with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the
defendant in doing the alleged negligent act use that reasonable
care and caution which an ordinarily prudent person would have
used in the same situation? If not, then he is guilty of
negligence.13
In the case at bar, the lower court found Menor negligent when
she allegedly informed petitioner of the wrong day of departure.
Petitioner’s testimony was accepted as indubitable evidence of
Menor’s alleged negligent act since respondent did not call
Menor to the witness stand to refute the allegation. The lower
court applied the presumption under Rule 131, Section 3 (e)14
of the Rules of Court that evidence willfully suppressed would be
adverse if produced and thus considered petitioner’s
uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that
Menor was negligent and maintains that petitioner’s assertion is
belied by the evidence on record. The date and time of
departure was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so that
petitioner could prepare for the trip. It performed all its
obligations to enable petitioner to join the tour and exercised due
diligence in its dealings with the latter.
We agree with respondent.
Respondent’s failure to present Menor as witness to rebut
petitioner’s testimony could not give rise to an inference
unfavorable to the former. Menor was already working in France
at the time of the filing of the complaint,15 thereby making it
physically impossible for respondent to present her as a witness.
Then too, even if it were possible for respondent to secure

Menor’s testimony, the presumption under Rule 131, Section
3(e) would still not apply. The opportunity and possibility for
obtaining Menor’s testimony belonged to both parties,
considering that Menor was not just respondent’s employee, but
also petitioner’s niece. It was thus error for the lower court to
invoke the presumption that respondent willfully suppressed
evidence under Rule 131, Section 3(e). Said presumption would
logically be inoperative if the evidence is not intentionally omitted
but is simply unavailable, or when the same could have been
obtained by both parties.16
In sum, we do not agree with the finding of the lower court that
Menor’s negligence concurred with the negligence of petitioner
and resultantly caused damage to the latter. Menor’s negligence
was not sufficiently proved, considering that the only evidence
presented on this score was petitioner’s uncorroborated
narration of the events. It is well-settled that the party alleging a
fact has the burden of proving it and a mere allegation cannot
take the place of evidence.17 If the plaintiff, upon whom rests
the burden of proving his cause of action, fails to show in a
satisfactory manner facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or
defense.18
Contrary to petitioner’s claim, the evidence on record shows that
respondent exercised due diligence in performing its obligations
under the contract and followed standard procedure in rendering
its services to petitioner. As correctly observed by the lower
court, the plane ticket19 issued to petitioner clearly reflected the
departure date and time, contrary to petitioner’s contention. The
travel documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to petitioner two days prior
to the trip. Respondent also properly booked petitioner for the
tour, prepared the necessary documents and procured the plane
tickets. It arranged petitioner’s hotel accommodation as well as
food, land transfers and sightseeing excursions, in accordance
with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation
under the contract as well as everything else that was essential
to book petitioner for the tour. Had petitioner exercised due
diligence in the conduct of her affairs, there would have been no
reason for her to miss the flight. Needless to say, after the travel
papers were delivered to petitioner, it became incumbent upon
her to take ordinary care of her concerns. This undoubtedly
would require that she at least read the documents in order to
assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the
obligation renders him liable for damages for the resulting loss
suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so
demands.20 There is no fixed standard of diligence applicable to
each and every contractual obligation and each case must be
determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific obligation
and whether one has been negligent is a question of fact that is
to be determined after taking into account the particulars of each
case.21 1âwphi1
The lower court declared that respondent’s employee was
negligent. This factual finding, however, is not supported by the
evidence on record. While factual findings below are generally
conclusive upon this court, the rule is subject to certain
exceptions, as when the trial court overlooked, misunderstood,
or misapplied some facts or circumstances of weight and
substance which will affect the result of the case.22
In the case at bar, the evidence on record shows that
respondent company performed its duty diligently and did not
commit any contractual breach. Hence, petitioner cannot recover
and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit.
The decision of the Court of Appeals in CA-G.R. CV No. 51932
is AFFIRMED. Accordingly, petitioner is ordered to pay
respondent the amount of P12,901.00 representing the balance
of the price of the British Pageant Package Tour, with legal
interest thereon at the rate of 6% per annum, to be computed
from the time the counterclaim was filed until the finality of this
Decision. After this Decision becomes final and executory, the
rate of 12% per annum shall be imposed until the obligation is
fully settled, this interim period being deemed to be by then an
equivalent to a forbearance of credit.23
SO ORDERED.
G.R. No. L-16567 March 27, 1961
DELGADO BROTHERS, INC., petitioner,
vs.
HOME INSURANCE COMPANY and THE COURT OF
APPEALS, respondents.
This is an appeal by certiorari to review the decision of the Court
of Appeals (in CA-G.R. No. 20441-R), reversing the judgment of
dismissal of the Court of First Instance of Manila (in Civil Case
No. 29144) and, instead, ordering petitioner-defendant Delgado
Brothers, Inc. to pay to respondent-plaintiff Home Insurance
Company, the sum of P1,436.86, plus 6% per annum interest
from the commencement of the action until fully paid.
On March 7, 1956, respondent Home Insurance Company filed
with the Court of First Instance of Manila a complaint against
petitioner Delgado Brothers, Inc. alleging that on February 17,
1955, Victor Bijou & Co. of 14 East 37th Street, New York 16,
New York, U.S.A., shipped at New York for Manila aboard the
vessel S.S. Leoville and consigned to the Judy Philippines, Inc.
51
of Manila, a shipment of 1 case Linen Handkerchiefs and 2
cases cotton piece goods, for which, the New York agent of said
vessel, the Barber Steamship Lines, Inc., issued Bill of Lading
No. 119; that said shipment as insured with herein respondent
by the shipper and/or consignee; that said vessel arrived at the
Port of Manila on March 30, 1955 and, thereafter, said shipment
was unloaded complete and in good order from said vessel by
petitioner, but the latter delivered the same to the consignee with
1 case of Linen Handkerchiefs in bad order, with a shortage of
503 yards of Linen Print Handkerchiefs, to the prejudice, loss
and damage of shipper and or consignee in the sum of
P1,287.20; that the shipper and/or consignee filed its claim with
petitioner for said loss in the sum of $713.08 (P1,436.86); and
since respondent dent paid the amount to the shipper and\or
consignee, the former was subrogated to the shipper's and/or
consignee's rights and interests; that notwithstanding
respondent's claim against petitioner, the latter failed and
refused to pay the shipper and/or consignee and/or respondent
the total claim of P1,287.20; and that as it result of petitioner's
gross and evident bad faith to pay the claim of the shipper
and/or consignee and/or respondent, it was compelled to file the
Case and will incur attorney's fees in the sum of P478.95.
Respondent prayed that petitioner pay to it the sum of
P1,287.20, with legal interest thereon from the filing of the
complaint until fully, paid; P149.66, the difference between
P1,436.86 paid by respondent to the shipper and/or consignee
and the said sum of P1,287.20; and P478.95 as attorney's fees,
plus costs.
To this complaint, petitioner filed its answer on March 27, 1956,
alleging as special defense that since no claim whatsoever was
filed by respondent or the consignee, or their representatives
against petitioner within the 15-day period from the date of the
arrival of the goods before they could file a suit in the court of
proper jurisdiction within 1 year from the date of said arrival at
the Port of Manila, petitioner is completely relieved and released
of any and all liability for loss or damage under the law and in
accordance with the pertinent provisions of the management
Contract with the Bureau of Customs, covering the operation of
the Arrastre Service for the Port of Manila; and that petitioner in
no way acts as an agent of the carrying vessel or of the importer
or consignee. Petitioner, therefore, prayed for the dismissal of
respondent's complaint.
On October 16, 1956, petitioner filed a motion to dismiss the
complaint, on the ground that "the court has no jurisdiction over
the subject matter of the complaint", to which, respondent filed
an opposition on October 19, 1956, alleging that since the case
is an action in admiralty, it is within the original jurisdiction of the
court. On October 20, 1956, the court issued an order denying
petitioner's motion to dismiss.
The case was, thereafter, tried and, after trial, the court, on
March 6, 1957, rendered a decision dismissing the case and

absolving petitioner from liability to respondent, not on the
ground of lack of jurisdiction raised by petitioner-defendant, but
on the merits of the latter's special defenses invoked in its
answer.
Not satisfied with said decision, respondent appealed to the
Court of Appeals which court, on December 29, 1959, rendered
as already adverted to, a decision reversing the judgment of the
Court of First Instance of Manila and ordering petitioner to pay to
respondent the sum of P1,436.86, plus 6% per annum interest
thereon from the commencement of the action until fully paid.
Hence, this appeal.
Petitioner, in this instance, claims that the Court of Appeals (as
did the Court of First Instance of Manila) erred in not dismissing
respondent's complaint on the specific ground that it (Court of
First Instance) had no jurisdiction over the subject matter of the
action, the same not being an admiralty case, and the amount
sought to be recovered falling within the exclusive original
jurisdiction of the Municipal Court of Manila.
Appellant's contention is meritorious. In the case of Macondray
& Company, Inc. v. Delgado Brothers, Inc. (G.R. No. L-13116,
prom. April 28, 1960), the facts and issues of which are identical,
mutatis mutandis, to the case at bar, we held:
The case at bar does not deal with any maritime or with the
administration and application of any maritime law. As custodian
of the sixty-eight (68) cartons of paints it had received from the
MS Pleasantville, it was defendant's duty, like that of any
ordinary depositary, to take good care of said goods and to turn
the same over to the party entitled to its possession, subject to
such qualifications as may have validly been imposed in the
contract between the parties concerned. Such duty on the part
of the defendant would be the same if the final destination of the
goods were Manila, not Iloilo, and the goods had not been
imported from another state. The only issues raised in the
pleadings are (1) whether or not defendant had fully discharged
its obligation to deliver the aforementioned sixty-eight (68)
cartons of paint; and (2) in the negative case, the amount of
indemnity due the plaintiff therefor. The determination of those
questions does not require the application of any maritime law
and cannot affect either navigation or maritime commerce. The
foreign origin of the goods is — under the attending
circumstances — immaterial to the law applicable to this case or
the rights of the parties herein, or the procedure for the
settlement of their disputes. Indeed, it is well settled that —
In case of controversy involving both maritime and nonmaritime
subject matter, where the principal matter involved belongs to
the jurisdiction of a court of common law or of equity, admiralty
will not take cognizance of incidental maritime matters
connected therewith but will relegate the whole controversy to
the appropriate tribunal. (2 C.J.S. 66.). (Emphasis supplied.)
Respondent, however, submits that the above-quoted ruling is
wrong and urges a re-examination of the issue, arguing that
petitioner's arrastre service is maritime in nature and, therefore,
actions against petitioner arrastre operator properly come under
the jurisdiction of the Court of First Instance of Manila.
We have carefully considered respondent's argument but found
nothing to justify a departure from our conclusion in the
Macondray case, supra. Section 2 of the Management Contract
entered into between petitioner an the Bureau of Customs on
October 21, 1950 (effective January 1, 1951), reads as follows:
2. During the period while this agreement remains in force and
effect, the CONTRACTOR (herein petitioner Delgado Brothers,
Inc.) shall be, and the shall manager of the Arrastre Service at
the Port of Manila, subject always, how ever, to the terms
conditions, restrictions, subjections, supervisions and provisions
in this agreement contained, with the exclusive right or privilege
of receiving, handling, caring for, and delivering all merchandise,
imported and exported, upon or passing over, the Philippine
Government-owned wharves and piers in the Port of Manila; as
also, the recording or checking of all merchandise which may be
delivered to the Port of Manila at shipside, except coal, lumber
and firebricks in quantity case crude oil and kerosene and
gasoline in lots of over ten thousand cases or its equivalent, and
whole cargoes of on commodity when consigned to one
consignee only as hereafter provided, and in general to furnish
lighting and water services and other incidental services, in
order to undertake such work and with full power to fix the
number and salaries of, and to appoint and dismiss, all officers,
employees and laborers temporary and permanent, which may
be necessary, and to do all acts and things which said
CONTRACTOR may consider conclusive to the interests of the
Arrastre Service. (Emphasis supplied.)
Under this provision, petitioner's functions as arrastre operator
are (1) to receive, handle, care for, and deliver all merchandise
imported and exported, upon or passing over Government-
owned wharves and piers in the Port of Manila, (2) as well as to
record or cheek all merchandise which may be delivered to said
port at shipside, and in general, (3) to furnish light and water
services and other incidental services in order to undertake its
arrastre service. Note that there is nothing in those functions
which relate to the trade and business of navigation (1 Am. Jur.
564), nor to the use or operation of vessels (Id. at 568). Both as
to the nature of the functions and the place of their performance
(upon wharves and piers shipside), petitioner's services are
clearly not maritime. As we held in the Macondray case, they are
no different from those of a depositary or warehouseman.
Granting, arguendo, that petitioner's arrastre service depends
on, assists, or furthers maritime transportation (Id. at 565), it
may be deemed merely incidental to its aforementioned
functions as arrastre operator and does not, thereby, make
petitioner's arrastre service maritime in character.
52
To give admiralty jurisdiction over a contract as maritime, such
contract must relate to the trade and business of the sea; it must
be essentially and fully maritime in its character; it must provide
for maritime services, maritime transactions, or maritime
casualties. (The James T. Furber, 129 Fed. 808, cited in 66
L.R.A. 212; emphasis supplied.) See also 2 C.J.S. 66, supra.
The case of Cebu Arrastre Service v. Collector of Internal
Revenue (G.R. No. L-7444, prom. May 30, 1956) cited by
respondent is irrelevant to the present case, considering that the
functions of the Cebu Arrastre Service involve the loading, and
unloading of coastwise vessels calling at the port of Cebu and,
are, therefore, of a "stevedore", subject to the percentage tax
under Section 191 of the Tax Code. Similarly, the case of
American Stevedores v. Porello (330 U.S. 446, 91 L. Ed. 1011)
is inapplicable, involving as it does, stevedores or
longshoremen, not an arrastre operator. In the instant case,
Delgado Brothers, Inc. has nothing to do with the loading or
unloading of cargoes to and from the ships. Its operation on and
its responsibility for the merchandise and goods begins from the
time they are placed upon the wharves or piers or delivered
along sides of ships. Evans v. New York & Pacific Steamship
Co., Ltd., et al. (145 F. 841) cited by respondent is, likewise, not
in point. It should be noted that in said case, the New York &
Pacific Steamship Co. Ltd. (owner of the steamship "Capac" and
with whom appellant Evans has a contract evidenced by a bill of
lading) and not the warehouseman or depositary Beards Erie
Basin Stores, was the one sued by said appellant Evans for
recovery of the value of 20 bales of rubber which said steamship
failed to deliver. Hence, the District Court of New York properly
held that the contract with the steamship company was maritime
in nature, over which it had jurisdiction to entertain and decide.
Undoubtedly, the Court of First Instance of Manila has
jurisdiction in cases where suit is brought directly against the
carrier or shipowner.
Respondent cannot invoke the rule against multiplicity of suits,
for the simple reason that said rule has to be subservient to the
superior requirement that the court must have jurisdiction. (See
International Harvester Company of the Philippines v. Judge
Aragon, et al., G.R. No. L-2372, prom. August 26, 1949, 84 Phil.
363.)
With these conclusions, it is needless to discuss the other points
raised in the briefs.
WHEREFORE, the decision of the Court of Appeals appealed
from is hereby reversed and set aside, and case dismissed, with
costs against the respondent. So ordered.
This is an appeal from [G.R. No. L-7444. May 30, 1956.]
CEBU ARRASTRE SERVICE, Petitioner-Appellant, vs.
COLLECTOR OF INTERNAL REVENUE, Respondent-
Appellee.

the decision of the Board of Tax Appeals affirming the decision
of the Collector of Internal Revenue (later referred to as
COLLECTOR), denying exemption to the Petitioner-Appellant
Cebu Arrastre Service (later referred to as CEBU ARRASTRE)
from the percentage tax under section 191 of the National
Internal Revenue Code, and for refund of the amount of
P2,867.02 already paid.
In 1952 the Cebu Arrastre, an association of persons engaged in
the handling of cargoes carried by coastwise vessels stopping at
the port of Cebu, thru its counsel Atty. Jose Muaña petitioned
the Collector of Internal Revenue for the exemption and the
refund based on the following
grounds:chanroblesvirtuallawlibrary
“(1) That they were a group of laborers who had recently
organized themselves into an arrastre service association
merely for the purpose of centralizing the collection of handling
charges and making direct payment to the men in order to insure
the compliance of the Minimum Wage Law requirement.
“(2) That the work of the men of the said arrastre group is under
the direct supervision and control of the officers of the ships.
“(3) That the Cebu Arrastre Service is engaged solely in the
loading and unloading of cargoes to and from the boats and is
not engaged in the transportation business.”
Acting upon the petition, the Collector referred the matter to his
agent in Cebu for investigation. Mr. Ignacio Quijano, the
Assistant Agent, conducted the investigation and filed his report,
the pertinent portions of which are as
follows:chanroblesvirtuallawlibrary
“1. The loading and unloading of cargoes to and from the ship’s
holds is done by the laborers under the ‘Cebu Arrastre Service
Co., Inc.’
“2. The supervision of the ship’s officers in the work is confined
only to the proper handling of the cargoes according to their
nature and to the proper placing of the cargoes inside the ship’s
holds.
“3. As to the laborers’ actuations outside of the handling and
placing of cargoes inside the ship’s holds the officers of the ship
have no supervision.
xxx xxx xxx
“6. The ‘Cebu Arrastre Service Co., Inc.’ is not engaged in the
transportation of the cargoes from the wharf to the bodegas of
the shippers. The shippers have their own trucks or provide for
the transportation of their cargoes from the wharf to their
bodegas.
“7. The laborers of the ‘Cebu Arrastre Service Co., Inc.’ help
only in the loading of the cargoes from the wharf to the shippers’
trucks, for the shippers’ trucks are provided with their own
‘journales’.”
On the basis of said report the Collector denied the petition,
holding that inasmuch as the Cebu Arrastre was engaged in the
loading and unloading of vessels in port, it may be considered a
stevedore within the meaning of section 191 of the Tax Code. In
this connection, it may be stated that section 191 of the Tax
Code imposes a tax equivalent to 3 per cent of the gross
receipts on certain businesses and business entities, among
them stevedores.
In his brief counsel for Petitioner-Appellant bitterly assails the
proceedings had in this case, saying that it “has been most
inquisitorial, reminiscent of the ancient and antiquated method of
administering justice by which the Defendant was condemned
without benefit of confrontation. The guarantee and protection
jealousy safeguarded by our Constitution has been completely
disregarded. The report of the BIR Agent was a mere unilateral
affair and its findings were arrived at without the Petitioner-
Appellants’ having had the slightest opportunity to be confronted
and his side heard.” We have examined the record of the
proceedings and find this attack unfounded. Although the Board
of Tax Appeals as an appellate board usually considers only the
evidence that comes with the appeal, nevertheless, in this case
a hearing was had before it, and the very same counsel Atty.
Jose Muaña testified on behalf of the Cebu Arrastre, his client
and of which he was the president, but he failed to present any
evidence or give any testimony in support of his present
contention that the Cebu Arrastre is not engaged in the work of
loading cargoes into the holds of the boat or unloading the same
from it. But in his memorandum filed with the Tax Board, he
made statements which the Tax Board liberally considered as
evidence but which the Board regarded as insufficient and not
entirely credible. We reproduce a portion of the decision of the
Tax Board on this point:chanroblesvirtuallawlibrary
“In its memorandum filed with us in support of its petition for
review of the case, Petitioner’s counsel makes some additional
statements of facts wherein he avers that, ‘Their work (that of
the company’s laborers) was simply the handling of cargoes at
the wharf almost mechanically under the control and supervision
of the shipping companies. In cases where boats had booms
their work was simply to load on the wharf at the ships tackle by
placing the cargoes in the sling and hooking unto the tackle, and
unloading by unhooking the sling from the tackle and
discharging the cargoes on the wharf. In rare cases where the
boats have no booms, these men carry the cargoes up to the
deck for the stevedores on board to store in the hold, in the case
of loading, and carry cargoes from the deck which have been
unloaded from the hold by the stevedores to the wharf.’
53
“We have here three descriptions of the kind of work performed
by the laborers of Petitionercorporation, of which one is widely
different from the other two:chanroblesvirtuallawlibrary one is
from the investigator of the Bureau of Internal Revenue who
says that the laborers in question carry cargoes to and from the
pier to the hold of ships, which agrees with the description
appearing on the original request to the Collector by the
President and Counselor of the Corporation, the other being the
contention of the same official of the Arrastre Service who, in his
memorandum on appeal, would have us believe that its
workingmen merely place the cargoes in the slings and then
leave the ships tackle to lift and drop them into the holds or
dump them on decks, there to be stowed by another set of
workingmen, presumably not connected at all with the Arrastre
Service Corporation. When ships are not provided with booms,
cargoes are carried by the Arrastre Service laborers over planks
or ladders to be dumped into the deck or into the hold, there to
be stowed by another set of stevedores not related to the
Corporation.
xxx xxx xxx
“The question, then revolves around the facts and around the
credibility of the description depicting the exact nature of the
work of the laborers working under the contracts entered into by
the Cebu Arrastre Co. Inc. with Cebu shipowners. We just
determine therefore, which of the two conflicting versions comes
nearer the reality of the situation.
“We may say at the outset that the preponderance of evidence is
in favor of the version of the Assistant Agent of the Bureau of
Internal Revenue of Cebu. According to him the loading and
unloading of cargoes to and from the ships holds is done by the
laborers under the Cebu Arrastre Service Co., Inc. and the ships
officers supervision is limited to the proper placing of the same
inside the ships hold, the inference being that said ‘proper
placing’ (stowing) is being done by the corporation laborers. This
is not contradicted by the version of the Petitioner as given in its
original petition wherein it says:chanroblesvirtuallawlibrary The
men working under the Cebu Arrastre Service are same men of
‘Katubusanan sa Mamumuo’ who have been handling the
loading of the boats of the Aboitiz & Co. and of the Philippine
Navigation Co. since 1947 up to the present.’ It says also,
further on:chanroblesvirtuallawlibrary ‘The Cebu Arrastre
Service is dedicated itself solely to the loading and unloading of
cargoes on the boats ..’ It is true that the President and Counsel
corrected this description in the memorandum on appeal to the
effect that laborers of the corporation do not, except on rare
occasions, engage in loading or unloading the boat but limit their
work on loading or unloading pele-mele the slings of the boats
under contract with the Arrastre Service, but in the opinion of the
Board this amendment is not nearer to the truth than the original
version which was corroborated by the official who investigated
the case by order of the Collector of Internal Revenue.

“It is noteworthy that in the agreement entered into by the
shipowners and the corporation mention is twice made of the
‘arrastre service on the vessels’ (but never on the piers) to be
done by the laborers of the Cebu Arrastre Service Inc. Another
circumstance which may help in obtaining a clear picture of the
situation is that nowhere in these papers is it contended that the
stevedores actually performing the stowing work belong to an
organization not related to the Petitioner.”
We quote the following definitions of stevedores,
viz:chanroblesvirtuallawlibrary
Stevedores is “one who works at, or one who is responsible for,
the unloading and loading of a vessel in port. (Webster’s New
International Dictionary, Second Edition (unabridged), p. 2473).
A stevedore is a person employed in loading and unloading a
vessel. (The Owego, D. C. Wash., 292 F. 505, 507).
Stevedores are class of laborers at the ports whose business it
is to load and unload vessels. (The Senator, 21 F. 191).
“Stevedore” is defined as “one whose occupation is to load and
unload vessels in port”; chan roblesvirtualawlibraryin other
words, a contractor or a jobber for special business ready to be
employed by anybody at his line of work (Rankin vs. Merchants
and Miners Transp. Co., 73 Ga. 239, 54 Am. Rep. 874).
“Stevedore” and “longshoreman”, are synonymous terms when
interpreted in the light of the work they perform, namely loading
and unloading of vessels (Zampiere vs. Willian Spencer and Son
Corporation, 18b N.Y.S. 639, 640, 194 App. Div. 576).
Under the above definitions the Cebu Arrastre admittedly
engaged in the work of loading and unloading coastwise vessels
calling at the port of Cebu, should be regarded as a stevedore
and therefore subject to the percentage tax under section 191 of
the Tax Code. But even if we applied the narrower and more
specific concept of stevedore used by the Tax Board, namely,
that a stevedore is one who places cargoes in the holds of ships
in such a way that the boat would maintain an even keel, and
that even with the movement of the boat, especially in rough
weather, the cargoes would not be displaced from their original
position, still, under the finding of fact made by the Tax Board
that the Cebu Arrastre is engaged in this work of towing cargo
either in the hold or even on the deck, Appellant would be
subject to the tax. We also agree with the Tax Board that the
purpose for which the Petitioner-Appellant was organized, and
the supervision exercised by the ships’ officers over its work in
loading and unloading vessels including the towing of cargo, has
nothing to do with the tax liability of the Petitioner-Appellant.
In view of the foregoing, the decision appealed from is hereby
affirmed, with costs in both instances.
54
G.R. No. L-69044 May 29, 1987 Petitioner-Carrier denied liability mainly on the ground that the
EASTERN SHIPPING LINES, INC., petitioner, loss was due to an extraordinary fortuitous event, hence, it is not
vs. liable under the law.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents.
On August 31, 1979, the Trial Court rendered judgment in favor
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, of Development Insurance in the amounts of P256,039.00 and
vs. P92,361.75, respectively, with legal interest, plus P35,000.00 as
THE NISSHIN FIRE AND MARINE INSURANCE CO., and attorney's fees and costs. Petitioner Carrier took an appeal to
DOWA FIRE & MARINE INSURANCE CO., LTD., the then Court of Appeals which, on August 14, 1984, affirmed.
respondents.
Petitioner Carrier is now before us on a Petition for Review on
These two cases, both for the recovery of the value of cargo
Certiorari.
insurance, arose from the same incident, the sinking of the M/S
ASIATICA when it caught fire, resulting in the total loss of ship
G.R. NO. 71478 On June 16, 1978, respondents Nisshin Fire &
and cargo.
Marine Insurance Co. NISSHIN for short), and Dowa Fire &
Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of
The basic facts are not in controversy:
the insured, filed suit against Petitioner Carrier for the recovery
of the insured value of the cargo lost with the then Court of First
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S
Instance of Manila, Branch 11 (Civil Case No. 116151), imputing
ASIATICA, a vessel operated by petitioner Eastern Shipping
unseaworthiness of the ship and non-observance of
Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded
extraordinary diligence by petitioner Carrier.
at Kobe, Japan for transportation to Manila, 5,000 pieces of
calorized lance pipes in 28 packages valued at P256,039.00
Petitioner Carrier denied liability on the principal grounds that
consigned to Philippine Blooming Mills Co., Inc., and 7 cases of
the fire which caused the sinking of the ship is an exempting
spare parts valued at P92,361.75, consigned to Central Textile
circumstance under Section 4(2) (b) of the Carriage of Goods by
Mills, Inc. Both sets of goods were insured against marine risk
Sea Act (COGSA); and that when the loss of fire is established,
for their stated value with respondent Development Insurance
the burden of proving negligence of the vessel is shifted to the
and Surety Corporation.
cargo shipper.
In G.R. No. 71478, during the same period, the same vessel
On September 15, 1980, the Trial Court rendered judgment in
took on board 128 cartons of garment fabrics and accessories,
favor of NISSHIN and DOWA in the amounts of US $46,583.00
in two (2) containers, consigned to Mariveles Apparel
and US $11,385.00, respectively, with legal interest, plus
Corporation, and two cases of surveying instruments consigned
attorney's fees of P5,000.00 and costs. On appeal by petitioner,
to Aman Enterprises and General Merchandise. The 128 cartons
the then Court of Appeals on September 10, 1984, affirmed with
were insured for their stated value by respondent Nisshin Fire &
modification the Trial Court's judgment by decreasing the
Marine Insurance Co., for US $46,583.00, and the 2 cases by
amount recoverable by DOWA to US $1,000.00 because of
respondent Dowa Fire & Marine Insurance Co., Ltd., for US
$500 per package limitation of liability under the COGSA.
$11,385.00.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and
sank, resulting in the total loss of ship and cargo. The respective
Both Petitions were initially denied for lack of merit. G.R. No.
respondent Insurers paid the corresponding marine insurance
69044 on January 16, 1985 by the First Division, and G. R. No.
values to the consignees concerned and were thus subrogated
71478 on September 25, 1985 by the Second Division. Upon
unto the rights of the latter as the insured.
Petitioner Carrier's Motion for Reconsideration, however, G.R.
No. 69044 was given due course on March 25, 1985, and the
G.R. NO. 69044
parties were required to submit their respective Memoranda,
which they have done.
On May 11, 1978, respondent Development Insurance & Surety
Corporation (Development Insurance, for short), having been
On the other hand, in G.R. No. 71478, Petitioner Carrier sought
subrogated unto the rights of the two insured companies, filed
reconsideration of the Resolution denying the Petition for
suit against petitioner Carrier for the recovery of the amounts it
Review and moved for its consolidation with G.R. No. 69044, the
had paid to the insured before the then Court of First instance of
lower-numbered case, which was then pending resolution with
Manila, Branch XXX (Civil Case No. 6087).
the First Division. The same was granted; the Resolution of the

Second Division of September 25, 1985 was set aside and the
Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the
operator of the M/S Asiatica but merely a charterer thereof. We
note that in G.R. No. 69044, Petitioner Carrier stated in its
Petition:
There are about 22 cases of the "ASIATICA" pending in various
courts where various plaintiffs are represented by various
counsel representing various consignees or insurance
companies. The common defendant in these cases is petitioner
herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a
general rule, the facts alleged in a party's pleading are deemed
admissions of that party and binding upon it. 2 And an admission
in one pleading in one action may be received in evidence
against the pleader or his successor-in-interest on the trial of
another action to which he is a party, in favor of a party to the
latter action. 3
The threshold issues in both cases are: (1) which law should
govern — the Civil Code provisions on Common carriers or the
Carriage of Goods by Sea Act? and (2) who has the burden of
proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss,
destruction or deterioration. 4 As the cargoes in question were
transported from Japan to the Philippines, the liability of
Petitioner Carrier is governed primarily by the Civil Code. 5
However, in all matters not regulated by said Code, the rights
and obligations of common carrier shall be governed by the
Code of Commerce and by special laws. 6 Thus, the Carriage of
Goods by Sea Act, a special law, is suppletory to the provisions
of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over goods, according to
all the circumstances of each case. 8 Common carriers are
responsible for the loss, destruction, or deterioration of the
goods unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, lightning or other natural disaster
or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire
exempts it from liability under the phrase "natural disaster or
calamity. " However, we are of the opinion that fire may not be
considered a natural disaster or calamity. This must be so as it
arises almost invariably from some act of man or by human
means. 10 It does not fall within the category of an act of God
unless caused by lightning 11 or by other natural disaster or
calamity. 12 It may even be caused by the actual fault or privity
of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an
extraordinary fortuitous event refers to leases of rural lands
where a reduction of the rent is allowed when more than one-
half of the fruits have been lost due to such event, considering
that the law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception
in Article 1734, supra, Article 1735 of the Civil Code provides
that all cases than those mention in Article 1734, the common
carrier shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the
extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo
shippers, have proven that the transported goods have been
lost. Petitioner Carrier has also proved that the loss was caused
by fire. The burden then is upon Petitioner Carrier to proved that
it has exercised the extraordinary diligence required by law. In
this regard, the Trial Court, concurred in by the Appellate Court,
made the following Finding of fact:
The cargoes in question were, according to the witnesses
defendant placed in hatches No, 2 and 3 cf the vessel,
Boatswain Ernesto Pastrana noticed that smoke was coming out
from hatch No. 2 and hatch No. 3; that where the smoke was
noticed, the fire was already big; that the fire must have started
twenty-four 24) our the same was noticed; that carbon dioxide
was ordered released and the crew was ordered to open the
hatch covers of No, 2 tor commencement of fire fighting by sea
water: that all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to
extraordinary diligence in the vigilance over the goods. The
evidence of the defendant did not show that extraordinary
vigilance was observed by the vessel to prevent the occurrence
of fire at hatches numbers 2 and 3. Defendant's evidence did not
likewise show he amount of diligence made by the crew, on
orders, in the care of the cargoes. What appears is that after the
cargoes were stored in the hatches, no regular inspection was
made as to their condition during the voyage. Consequently, the
crew could not have even explain what could have caused the
fire. The defendant, in the Court's mind, failed to satisfactorily
show that extraordinary vigilance and care had been made by
the crew to prevent the occurrence of the fire. The defendant, as
55
a common carrier, is liable to the consignees for said lack of
deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had
exercised the extraordinary diligence required by law, Petitioner
Carrier cannot escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within
the meaning of Article 1734 of the Civil Code, it is required under
Article 1739 of the same Code that the "natural disaster" must
have been the "proximate and only cause of the loss," and that
the carrier has "exercised due diligence to prevent or minimize
the loss before, during or after the occurrence of the disaster. "
This Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the
Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible
for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in
effect, found, as a fact, that there was "actual fault" of the carrier
shown by "lack of diligence" in that "when the smoke was
noticed, the fire was already big; that the fire must have started
twenty-four (24) hours before the same was noticed; " and that
"after the cargoes were stored in the hatches, no regular
inspection was made as to their condition during the voyage."
The foregoing suffices to show that the circumstances under
which the fire originated and spread are such as to show that
Petitioner Carrier or its servants were negligent in connection
therewith. Consequently, the complete defense afforded by the
COGSA when loss results from fire is unavailing to Petitioner
Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed
US $500 per package as provided in section 4(5) of the COGSA,
which reads:
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per
package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper before
shipment and inserted in bill of lading. This declaration if

embodied in the bill of lading shall be prima facie evidence, but
all be conclusive on the carrier.
By agreement between the carrier, master or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such
maximum shall not be less than the figure above named. In no
event shall the carrier be Liable for more than the amount of
damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of
liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the
liability of the common carrier to a fixed amount per package
although the Code expressly permits a stipulation limiting such
liability. Thus, the COGSA which is suppletory to the provisions
of the Civil Code, steps in and supplements the Code by
establishing a statutory provision limiting the carrier's liability in
the absence of a declaration of a higher value of the goods by
the shipper in the bill of lading. The provisions of the Carriage of
Goods by.Sea Act on limited liability are as much a part of a bill
of lading as though physically in it and as much a part thereof as
though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills
of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's
liability for the loss or destruction of the goods. Nor is there a
declaration of a higher value of the goods. Hence, Petitioner
Carrier's liability should not exceed US $500 per package, or its
peso equivalent, at the time of payment of the value of the
goods lost, but in no case "more than the amount of damage
actually sustained."
The actual total loss for the 5,000 pieces of calorized lance
pipes was P256,039 (Exhibit "C"), which was exactly the amount
of the insurance coverage by Development Insurance (Exhibit
"A"), and the amount affirmed to be paid by respondent Court.
The goods were shipped in 28 packages (Exhibit "C-2")
Multiplying 28 packages by $500 would result in a product of
$14,000 which, at the current exchange rate of P20.44 to US $1,
would be P286,160, or "more than the amount of damage
actually sustained." Consequently, the aforestated amount of
P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"),
their actual value was P92,361.75 (Exhibit "I"), which is likewise
the insured value of the cargo (Exhibit "H") and amount was
affirmed to be paid by respondent Court. however, multiplying
seven (7) cases by $500 per package at the present prevailing
rate of P20.44 to US $1 (US $3,500 x P20.44) would yield
P71,540 only, which is the amount that should be paid by
Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying
instruments are concerned, the amount awarded to DOWA
which was already reduced to $1,000 by the Appellate Court
following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in
two (2) containers and insured with NISSHIN, the Appellate
Court also limited Petitioner Carrier's liability to $500 per
package and affirmed the award of $46,583 to NISSHIN. it
multiplied 128 cartons (considered as COGSA packages) by
$500 to arrive at the figure of $64,000, and explained that "since
this amount is more than the insured value of the goods, that is
$46,583, the Trial Court was correct in awarding said amount
only for the 128 cartons, which amount is less than the
maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2)
containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d
807 (1981), the consignees of tin ingots and the shipper of floor
covering brought action against the vessel owner and operator
to recover for loss of ingots and floor covering, which had been
shipped in vessel — supplied containers. The U.S. District Court
for the Southern District of New York rendered judgment for the
plaintiffs, and the defendant appealed. The United States Court
of Appeals, Second Division, modified and affirmed holding that:
When what would ordinarily be considered packages are
shipped in a container supplied by the carrier and the number of
such units is disclosed in the shipping documents, each of those
units and not the container constitutes the "package" referred to
in liability limitation provision of Carriage of Goods by Sea Act.
Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act
left doubt as to whether carrier-furnished containers whose
contents are disclosed should be treated as packages, the
interest in securing international uniformity would suggest that
they should not be so treated. Carriage of Goods by Sea Act,
4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d
at 815, that treating a container as a package is inconsistent
with the congressional purpose of establishing a reasonable
minimum level of liability, Judge Beeks wrote, 414 F. Supp. at
907 (footnotes omitted):
56
Although this approach has not completely escaped criticism,
there is, nonetheless, much to commend it. It gives needed
recognition to the responsibility of the courts to construe and
apply the statute as enacted, however great might be the
temptation to "modernize" or reconstitute it by artful judicial
gloss. If COGSA's package limitation scheme suffers from
internal illness, Congress alone must undertake the surgery.
There is, in this regard, obvious wisdom in the Ninth Circuit's
conclusion in Hartford that technological advancements, whether
or not forseeable by the COGSA promulgators, do not warrant a
distortion or artificial construction of the statutory term
"package." A ruling that these large reusable metal pieces of
transport equipment qualify as COGSA packages — at least
where, as here, they were carrier owned and supplied — would
amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the
shipper and containing his goods can rightly be considered
"packages" standing by themselves, they do not suddenly lose
that character upon being stowed in a carrier's container. I would
liken these containers to detachable stowage compartments of
the ship. They simply serve to divide the ship's overall cargo
stowage space into smaller, more serviceable loci. Shippers'
packages are quite literally "stowed" in the containers utilizing
stevedoring practices and materials analogous to those
employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807
(E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979),
another district with many maritime cases followed Judge Beeks'
reasoning in Matsushita and similarly rejected the functional
economics test. Judge Kellam held that when rolls of polyester
goods are packed into cardboard cartons which are then placed
in containers, the cartons and not the containers are the
packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the
Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged
by the shipper into cartons which were then placed by the
shipper into a carrier- furnished container. The number of
cartons was disclosed to the carrier in the bill of lading.
Eurygenes followed the Mitsui test and treated the cartons, not
the container, as the COGSA packages. However, Eurygenes
indicated that a carrier could limit its liability to $500 per
container if the bill of lading failed to disclose the number of
cartons or units within the container, or if the parties indicated, in
clear and unambiguous language, an agreement to treat the
container as the package.

(Admiralty Litigation in Perpetuum: The Continuing Saga of
Package Limitations and Third World Delivery Problems by
Chester D. Hooper & Keith L. Flicker, published in Fordham
International Law Journal, Vol. 6, 1982-83, Number 1)
(Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the
following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed
the contents of the containers, the number of cartons or units, as
well as the nature of the goods, and applying the ruling in the
Mitsui and Eurygenes cases it is clear that the 128 cartons, not
the two (2) containers should be considered as the shipping unit
subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers
involved herein were carrier-furnished or not. Usually, however,
containers are provided by the carrier. 19 In this case, the
probability is that they were so furnished for Petitioner Carrier
was at liberty to pack and carry the goods in containers if they
were not so packed. Thus, at the dorsal side of the Bill of Lading
(Exhibit "A") appears the following stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is
acknowledged on the face of this Bill of Lading are not already
packed into container(s) at the time of receipt, the Carrier shall
be at liberty to pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two
(2) Containers Only" in the Bill of Lading, meaning that the
goods could probably fit in two (2) containers only. It cannot
mean that the shipper had furnished the containers for if so,
"Two (2) Containers" appearing as the first entry would have
sufficed. and if there is any ambiguity in the Bill of Lading, it is a
cardinal principle in the construction of contracts that the
interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity. 20 This applies
with even greater force in a contract of adhesion where a
contract is already prepared and the other party merely adheres
to it, like the Bill of Lading in this case, which is draw. up by the
carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its
Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it
sufficient time to take the depositions of its witnesses in Japan
by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to
present its evidence but it failed to do so. On this point, the Trial
Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not
to mention the time from June 27, 1978, when its answer was
prepared and filed in Court, until September 26, 1978, when the
pre-trial conference was conducted for the last time, the
defendant had more than nine months to prepare its evidence.
Its belated notice to take deposition on written interrogatories of
its witnesses in Japan, served upon the plaintiff on August 25th,
just two days before the hearing set for August 27th, knowing
fully well that it was its undertaking on July 11 the that the
deposition of the witnesses would be dispensed with if by next
time it had not yet been obtained, only proves the lack of merit of
the defendant's motion for postponement, for which reason it
deserves no sympathy from the Court in that regard. The
defendant has told the Court since February 16, 1979, that it
was going to take the deposition of its witnesses in Japan. Why
did it take until August 25, 1979, or more than six months, to
prepare its written interrogatories. Only the defendant itself is to
blame for its failure to adduce evidence in support of its
defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of
the case. 23 It cannot complain now that it was denied due
process when the Trial Court rendered its Decision on the basis
of the evidence adduced. What due process abhors is absolute
lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both
cases, respondent Court affirmed the award by the Trial Court of
attorney's fees of P35,000.00 in favor of Development Insurance
in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and
DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of
attorney's fees, it is believed that the amount of P5,000.00 would
be more reasonable in G.R. No. 69044. The award of P5,000.00
in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified
in that petitioner Eastern Shipping Lines shall pay the
Development Insurance and Surety Corporation the amount of
57
P256,039 for the twenty-eight (28) packages of calorized lance
pipes, and P71,540 for the seven (7) cases of spare parts, with
interest at the legal rate from the date of the filing of the
complaint on June 13, 1978, plus P5,000 as attorney's fees, and
the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents-
appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-
appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents-
appellees.
Balgos & Perez Law Office for private respondent in both
cases.
These are appeals by certiorari from the decision * of the Court
of Appeals in CA G.R. No: L- 46513-R entitled "Development
Insurance and Surety Corporation plaintiff-appellee vs. Maritime
Company of the Philippines and National Development
Company defendant-appellants," affirming in toto the decision **
in Civil Case No. 60641 of the then Court of First Instance of
Manila, Sixth Judicial District, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered ordering the
defendants National Development Company and Maritime
Company of the Philippines, to pay jointly and severally, to the
plaintiff Development Insurance and Surety Corp., the sum of
THREE HUNDRED SIXTY FOUR THOUSAND AND NINE
HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS
(364,915.86) with the legal interest thereon from the filing of
plaintiffs complaint on April 22, 1965 until fully paid, plus TEN
THOUSAND PESOS (Pl0,000.00) by way of damages as and
for attorney's fee.
On defendant Maritime Company of the Philippines' cross-claim
against the defendant National Development Company,
judgment is hereby rendered, ordering the National
Development Company to pay the cross-claimant Maritime
Company of the Philippines the total amount that the Maritime
Company of the Philippines may voluntarily or by compliance to
a writ of execution pay to the plaintiff pursuant to the judgment
rendered in this case.
With costs against the defendant Maritime Company of the
Philippines.

(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are
as follows:
The evidence before us shows that in accordance with a
memorandum agreement entered into between defendants NDC
and MCP on September 13, 1962, defendant NDC as the first
preferred mortgagee of three ocean going vessels including one
with the name 'Dona Nati' appointed defendant MCP as its agent
to manage and operate said vessel for and in its behalf and
account (Exh. A). Thus, on February 28, 1964 the E. Philipp
Corporation of New York loaded on board the vessel "Dona
Nati" at San Francisco, California, a total of 1,200 bales of
American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the People's Bank and Trust Company
acting for and in behalf of the Pan Asiatic Commercial Company,
Inc., who represents Riverside Mills Corporation (Exhs. K-2 to
K7-A & L-2 to L-7-A). Also loaded on the same vessel at Tokyo,
Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned
to the order of Manila Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10 cases of aluminum foil
(Exhs. M & M-1). En route to Manila the vessel Dofia Nati
figured in a collision at 6:04 a.m. on April 15, 1964 at Ise Bay,
Japan with a Japanese vessel 'SS Yasushima Maru' as a result
of which 550 bales of aforesaid cargo of American raw cotton
were lost and/or destroyed, of which 535 bales as damaged
were landed and sold on the authority of the General Average
Surveyor for Yen 6,045,-500 and 15 bales were not landed and
deemed lost (Exh. G). The damaged and lost cargoes was worth
P344,977.86 which amount, the plaintiff as insurer, paid to the
Riverside Mills Corporation as holder of the negotiable bills of
lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A,
K-5-A, A- 2, N-3 and R-3}. Also considered totally lost were the
aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to
the order of Manila Banking Corporation, Manila, acting for
Guilcon, Manila, The total loss was P19,938.00 which the
plaintiff as insurer paid to Guilcon as holder of the duly endorsed
bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid
as insurer the total amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or damaged
cargoes. Hence, plaintiff filed this complaint to recover said
amount from the defendants-NDC and MCP as owner and ship
agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-
49469, p.38)
On April 22, 1965, the Development Insurance and Surety
Corporation filed before the then Court of First Instance of
Manila an action for the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC and MCP (Record on
Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of
action and even if it does, the action has prescribed, MCP filed
on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-
14). DISC filed an Opposition on May 21, 1965 to which MCP
filed a reply on May 27, 1965 (Record on Appeal, pp. 14-24). On
June 29, 1965, the trial court deferred the resolution of the
motion to dismiss till after the trial on the merits (Record on
Appeal, p. 32). On June 8, 1965, MCP filed its answer with
counterclaim and cross-claim against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27,
1965 (Record on Appeal, pp. 22-24). It also filed an answer to
MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-
40). However, on October 16, 1965, NDC's answer to DISC's
complaint was stricken off from the record for its failure to
answer DISC's written interrogatories and to comply with the trial
court's order dated August 14, 1965 allowing the inspection or
photographing of the memorandum of agreement it executed
with MCP. Said order of October 16, 1965 likewise declared
NDC in default (Record on Appeal, p. 44). On August 31, 1966,
NDC filed a motion to set aside the order of October 16, 1965,
but the trial court denied it in its order dated September 21,
1966.
On November 12, 1969, after DISC and MCP presented their
respective evidence, the trial court rendered a decision ordering
the defendants MCP and NDC to pay jointly and solidarity to
DISC the sum of P364,915.86 plus the legal rate of interest to be
computed from the filing of the complaint on April 22, 1965, until
fully paid and attorney's fees of P10,000.00. Likewise, in said
decision, the trial court granted MCP's crossclaim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC
filed its appeal on February 17, 1970 after its motion to set aside
the decision was denied by the trial court in its order dated
February 13,1970.
On November 17,1978, the Court of Appeals promulgated its
decision affirming in toto the decision of the trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of
MCP was docketed as G.R. No. 49469. On July 25,1979, this
Court ordered the consolidation of the above cases (Rollo, p.
103). On August 27,1979, these consolidated cases were given
due course (Rollo, p. 108) and submitted for decision on
February 29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE
827 OF THE CODE OF COMMERCE AND NOT SECTION
4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE
58
KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN
DETERMINING THE LIABILITY FOR LOSS OF CARGOES
RESULTING FROM THE COLLISION OF ITS VESSEL "DONA
NATI" WITH THE YASUSHIMA MARU"OCCURRED AT ISE
BAY, JAPAN OR OUTSIDE THE TERRITORIAL
JURISDICTION OF THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE
C0MPLAINT FOR REIMBURSEMENT FILED BY THE
INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE,
AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT.
(pp. 1-2, Brief for Petitioner-Appellant National Development
Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN NOT
HOLDING THAT RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION HAS NO CAUSE
OF ACTION AS AGAINST PETITIONER MARITIME COMPANY
OF THE PHILIPPINES AND IN NOT DISMISSING THE
COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT
HOLDING THAT THE CAUSE OF ACTION OF RESPONDENT
DEVELOPMENT INSURANCE AND SURETY CORPORATION
IF ANY EXISTS AS AGAINST HEREIN PETITIONER
MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY
THE STATUTE OF LIMITATION AND HAS ALREADY
PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN
ADMITTING IN EVIDENCE PRIVATE RESPONDENTS
EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF
THAT THE COLLISION OF THE SS DONA NATI AND THE
YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH
VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS
CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL
OF THE COMPLEMENTS OF THE YASUSHIMA MARU
WITHOUT THE FAULT OR NEGLIGENCE OF THE
COMPLEMENT OF THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THAT UNDER THE CODE OF COMMERCE

PETITIONER APPELLANT MARITIME COMPANY OF THE
PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA
NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL
DEVELOPMENT COMPANY AND THAT SAID PETITIONER-
APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-
PETITIONER FOR LOSS OF OR DAMAGES TO CARGO
RESULTING IN THE COLLISION OF SAID VESSEL, WITH
THE JAPANESE YASUSHIMA MARU.
V deterioration" (Article 1753, Civil Code). Thus, the rule was
THE RESPONDENT COURT OF APPEALS ERRED IN
FINDING THAT THE LOSS OF OR DAMAGES TO THE
CARGO OF 550 BALES OF AMERICAN RAW COTTON,
DAMAGES WERE CAUSED IN THE AMOUNT OF P344,977.86
INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS
ESTABLISHED IN THE BILLS OF LADING AND ALSO IN
HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING
HAS NO APPLICATION IN THE INSTANT CASE THERE
BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THE PETITIONERS NATIONAL DEVELOPMENT
COMPANY AND COMPANY OF THE PHILIPPINES TO PAY
JOINTLY AND SEVERALLY TO HEREIN RESPONDENT
DEVELOPMENT INSURANCE AND SURETY CORPORATION
THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM
THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS
P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF
SENTENCING SAID PRIVATE RESPONDENT TO PAY
HEREIN PETITIONERS ITS COUNTERCLAIM IN THE
AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES
AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of
the Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the
determination of which laws govern loss or destruction of goods
due to collision of vessels outside Philippine waters, and the
extent of liability as well as the rules of prescription provided
thereunder.
The main thrust of NDC's argument is to the effect that the
Carriage of Goods by Sea Act should apply to the case at bar
and not the Civil Code or the Code of Commerce. Under Section
4 (2) of said Act, the carrier is not responsible for the loss or
damage resulting from the "act, neglect or default of the master,
mariner, pilot or the servants of the carrier in the navigation or in
the management of the ship." Thus, NDC insists that based on
the findings of the trial court which were adopted by the Court of
Appeals, both pilots of the colliding vessels were at fault and
negligent, NDC would have been relieved of liability under the
Carriage of Goods by Sea Act. Instead, Article 287 of the Code
of Commerce was applied and both NDC and MCP were
ordered to reimburse the insurance company for the amount the
latter paid to the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern
Shipping Lines Inc. v. IAC (1 50 SCRA 469-470 [1987]) where it
was held under similar circumstance "that the law of the country
to which the goods are to be transported governs the liability of
the common carrier in case of their loss, destruction or
specifically laid down that for cargoes transported from Japan to
the Philippines, the liability of the carrier is governed primarily by
the Civil Code and in all matters not regulated by said Code, the
rights and obligations of common carrier shall be governed by
the Code of commerce and by laws (Article 1766, Civil Code).
Hence, the Carriage of Goods by Sea Act, a special law, is
merely suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in
question are transported from San Francisco, California and
Tokyo, Japan to the Philippines and that they were lost or due to
a collision which was found to have been caused by the
negligence or fault of both captains of the colliding vessels.
Under the above ruling, it is evident that the laws of the
Philippines will apply, and it is immaterial that the collision
actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the
nature of their business and for reasons of public policy are
bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by
them according to all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all other than those
mentioned is Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negigently,
unless it proves that it has observed the extraordinary diligence
required by law.
It appears, however, that collision falls among matters not
specifically regulated by the Civil Code, so that no reversible
error can be found in respondent courses application to the case
at bar of Articles 826 to 839, Book Three of the Code of
Commerce, which deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides
that where collision is imputable to the personnel of a vessel, the
owner of the vessel at fault, shall indemnify the losses and
damages incurred after an expert appraisal. But more in point to
the instant case is Article 827 of the same Code, which provides
that if the collision is imputable to both vessels, each one shall
suffer its own damages and both shall be solidarily responsible
for the losses and damages suffered by their cargoes.
59
Significantly, under the provisions of the Code of Commerce,
particularly Articles 826 to 839, the shipowner or carrier, is not
exempt from liability for damages arising from collision due to
the fault or negligence of the captain. Primary liability is imposed
on the shipowner or carrier in recognition of the universally
accepted doctrine that the shipmaster or captain is merely the
representative of the owner who has the actual or constructive
control over the conduct of the voyage (Y'eung Sheng Exchange
and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the
Code of Commerce should apply only to domestic trade and not
to foreign trade. Aside from the fact that the Carriage of Goods
by Sea Act (Com. Act No. 65) does not specifically provide for
the subject of collision, said Act in no uncertain terms, restricts
its application "to all contracts for the carriage of goods by sea to
and from Philippine ports in foreign trade." Under Section I
thereof, it is explicitly provided that "nothing in this Act shall be
construed as repealing any existing provision of the Code of
Commerce which is now in force, or as limiting its application."
By such incorporation, it is obvious that said law not only
recognizes the existence of the Code of Commerce, but more
importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims
that Development Insurance and Surety Corporation, has no
cause of action against it because the latter did not prove that its
alleged subrogers have either the ownership or special property
right or beneficial interest in the cargo in question; neither was it
proved that the bills of lading were transferred or assigned to the
alleged subrogers; thus, they could not possibly have transferred
any right of action to said plaintiff- appellee in this case. (Brief for
the Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and
Guilcon, Manila are the holders of the duly endorsed bills of
lading covering the shipments in question and an examination of
the invoices in particular, shows that the actual consignees of
the said goods are the aforementioned companies. Moreover,
no less than MCP itself issued a certification attesting to this
fact. Accordingly, as it is undisputed that the insurer, plaintiff
appellee paid the total amount of P364,915.86 to said
consignees for the loss or damage of the insured cargo, it is
evident that said plaintiff-appellee has a cause of action to
recover (what it has paid) from defendant-appellant MCP
(Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC
because it is merely the manager and operator of the vessel
Dona Nati not a ship agent. As the general managing agent,
according to MCP, it can only be liable if it acted in excess of its
authority.

As found by the trial court and by the Court of Appeals, the
Memorandum Agreement of September 13, 1962 (Exhibit 6,
Maritime) shows that NDC appointed MCP as Agent, a term
broad enough to include the concept of Ship-agent in Maritime
Law. In fact, MCP was even conferred all the powers of the
owner of the vessel, including the power to contract in the name
of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40).
Consequently, under the circumstances, MCP cannot escape
liability.
It is well settled that both the owner and agent of the offending
vessel are liable for the damage done where both are impleaded
(Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]);
that in case of collision, both the owner and the agent are civilly
responsible for the acts of the captain (Yueng Sheng Exchange
and Trading Co. v. Urrutia & Co., supra citing Article 586 of the
Code of Commerce; Standard Oil Co. of New York v. Lopez
Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the
liability of the naviero in the sense of charterer or agent, is not
expressly provided in Article 826 of the Code of Commerce, it is
clearly deducible from the general doctrine of jurisprudence
under the Civil Code but more specially as regards contractual
obligations in Article 586 of the Code of Commerce. Moreover,
the Court held that both the owner and agent (Naviero) should
be declared jointly and severally liable, since the obligation
which is the subject of the action had its origin in a tortious act
and did not arise from contract (Verzosa and Ruiz, Rementeria y
Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even
though he may not be the owner of the vessel, is liable to the
shippers and owners of the cargo transported by it, for losses
and damages occasioned to such cargo, without prejudice,
however, to his rights against the owner of the ship, to the extent
of the value of the vessel, its equipment, and the freight (Behn
Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability
should be limited to P200.00 per package or per bale of raw
cotton as stated in paragraph 17 of the bills of lading. Also the
MCP argues that the law on averages should be applied in
determining their liability.
MCP's contention is devoid of merit. The declared value of the
goods was stated in the bills of lading and corroborated no less
by invoices offered as evidence ' during the trial. Besides,
common carriers, in the language of the court in Juan Ysmael &
Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its
liability for injury to a loss of goods where such injury or loss was
caused by its own negligence." Negligence of the captains of the
colliding vessel being the cause of the collision, and the cargoes
not being jettisoned to save some of the cargoes and the vessel,
the trial court and the Court of Appeals acted correctly in not
applying the law on averages (Articles 806 to 818, Code of
Commerce).
MCP's claim that the fault or negligence can only be attributed to
the pilot of the vessel SS Yasushima Maru and not to the
Japanese Coast pilot navigating the vessel Dona Nati need not
be discussed lengthily as said claim is not only at variance with
NDC's posture, but also contrary to the factual findings of the
trial court affirmed no less by the Court of Appeals, that both
pilots were at fault for not changing their excessive speed
despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found
that the bills of lading issued allow trans-shipment of the cargo,
which simply means that the date of arrival of the ship Dona Nati
on April 18,1964 was merely tentative to give allowances for
such contingencies that said vessel might not arrive on schedule
at Manila and therefore, would necessitate the trans-shipment of
cargo, resulting in consequent delay of their arrival. In fact,
because of the collision, the cargo which was supposed to arrive
in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20
and July 10, 13 and 15, 1964. Hence, had the cargoes in
question been saved, they could have arrived in Manila on the
above-mentioned dates. Accordingly, the complaint in the instant
case was filed on April 22, 1965, that is, long before the lapse of
one (1) year from the date the lost or damaged cargo "should
have been delivered" in the light of Section 3, sub-paragraph (6)
of the Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are DENIED
for lack of merit and the assailed decision of the respondent
Appellate Court is AFFIRMED.
SO ORDERED.
G.R. No. 71929 : December 4, 1990.
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE
COURT and FELIPA E. PABLO, Respondents.
Dr. Felipa Pablo — an associate professor in the University of
the Philippines, 1 and a research grantee of the Philippine
Atomic Energy Agency — was invited to take part at a meeting
of the Department of Research and Isotopes of the Joint FAO-
IAEA Division of Atomic Energy in Food and Agriculture of the
United Nations in Ispra, Italy. 2 She was invited in view of her
specialized knowledge in "foreign substances in food and the
agriculture environment." She accepted the invitation, and was
then scheduled by the organizers, to read a paper on "The Fate
of Radioactive Fusion Products Contaminating Vegetable
Crops." 3 The program announced that she would be the
second speaker on the first day of the meeting. 4 To fulfill this
engagement, Dr. Pablo booked passage on petitioner airline,
ALITALIA.
She arrived in Milan on the day before the meeting in
accordance with the itinerary and time table set for her by
ALITALIA. She was however told by the ALITALIA personnel
60
there at Milan that her luggage was "delayed inasmuch as the
same . . . (was) in one of the succeeding flights from Rome to
Milan." 5 Her luggage consisted of two (2) suitcases: one
contained her clothing and other personal items; the other, her
scientific papers, slides and other research material. But the
other flights arriving from Rome did not have her baggage on
board.
By then feeling desperate, she went to Rome to try to locate her
bags herself. There, she inquired about her suitcases in the
domestic and international airports, and filled out the forms
prescribed by ALITALIA for people in her predicament. However,
her baggage could not be found. Completely distraught and
discouraged, she returned to Manila without attending the
meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make
reparation for the damages thus suffered by her. ALITALIA
offered her "free airline tickets to compensate her for any
alleged damages. . . ." She rejected the offer, and forthwith
commenced the action 6 which has given rise to the present
appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and
forwarded to Ispra, 7 Italy, but only on the day after her
scheduled appearance and participation at the U.N. meeting
there. 8 Of course Dr. Pablo was no longer there to accept
delivery; she was already on her way home to Manila. And for
some reason or other, the suitcases were not actually restored
to Prof. Pablo by ALITALIA until eleven (11) months later, and
four (4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First
Instance rendered judgment in Dr. Pablo's favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum
of TWENTY THOUSAND PESOS (P20,000.00), Philippine
Currency, by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE
THOUSAND PESOS (P5,000.00), Philippine Currency, as and
for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but
failed to obtain a reversal of the judgment. 11 Indeed, the
Appellate Court not only affirmed the Trial Court's decision but
also increased the award of nominal damages payable by
ALITALIA to P40,000.00. 12 That increase it justified as follows:
13
"Considering the circumstances, as found by the Trial Court and
the negligence committed by defendant, the amount of

P20,000.00 under present inflationary conditions as awarded . . .
to the plaintiff as nominal damages, is too little to make up for
the plaintiff's frustration and disappointment in not being able to
appear at said conference; and for the embarrassment and
humiliation she suffered from the academic community for failure
to carry out an official mission for which she was singled out by
the faculty to represent her institution and the country. After
weighing carefully all the considerations, the amount awarded to
the plaintiff for nominal damages and attorney's fees should be
increased to the cost of her round trip air fare or at the present
rate of peso to the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it
seeks to make basically the same points it tried to make before
the Trial Court and the Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit
ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award to Dr.
Pablo of nominal damages and attorney's fees. 14
In addition, ALITALIA postulates that it was error for the
Intermediate Appellate Court to have refused to pass on all the
assigned errors and in not stating the facts and the law on which
its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable
for damages for:
1) the death, wounding or other bodily injury of a passenger if
the accident causing it took place on board the aircraft or in the
course of its operations of embarking or disembarking; 17
2) the destruction or loss of, or damage to, any registered
luggage or goods, if the occurrence causing it took place during
the carriage by air;" 18 and
3) delay in the transportation by air of passengers, luggage or
goods. 19
In these cases, it is provided in the Convention that the "action
for damages, however, founded, can only be brought subject to
conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers
in the following manner: 21
1. In the carriage of passengers the liability of the carrier for
each passenger is limited to the sum of 250,000 francs . . .
Nevertheless, by special contract, the carrier and the passenger
may agree to a higher limit of liability.: nad
2. a) In the carriage of registered baggage and of cargo, the
liability of the carrier is limited to a sum of 250 francs per
kilogramme, unless the passenger or consignor has made, at
the time when the package was handed over to the carrier, a
special declaration of interest in delivery at destination and has
paid a supplementary sum if the case so requires. In that case
the carrier will be liable to pay a sum not exceeding the declared
sum, unless he proves that sum is greater than the actual value
to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered
baggage or cargo, or of any object contained therein, the weight
to be taken into consideration in determining the amount to
which the carrier's liability is limited shall be only the total weight
of the package or packages concerned. Nevertheless, when the
loss, damage or delay of a part of the registered baggage or
cargo, or of an object contained therein, affects the value of
other packages covered by the same baggage check or the
same air way bill, the total weight of such package or packages
shall also be taken into consideration in determining the limit of
liability.
3. As regards objects of which the passenger takes charge
himself the liability of the carrier is limited to 5000 francs per
passenger.
4. The limits prescribed . . shall not prevent the court from
awarding, in accordance with its own law, in addition, the whole
or part of the court costs and of the other expenses of litigation
incurred by the plaintiff. The foregoing provision shall not apply if
the amount of the damages awarded, excluding court costs and
other expenses of the litigation, does not exceed the sum which
the carrier has offered in writing to the plaintiff within a period of
six months from the date of the occurrence causing the damage,
or before the commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier
availment "of the provisions which exclude or limit his liability, if
the damage is caused by his wilful misconduct or by such
default on his part as, in accordance with the law of the court
seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any
agent of the carrier acting within the scope of his employment."
22 The Hague Protocol amended the Warsaw Convention by
removing the provision that if the airline took all necessary steps
to avoid the damage, it could exculpate itself completely, 23 and
declaring the stated limits of liability not applicable "if it is proved
that the damage resulted from an act or omission of the carrier,
its servants or agents, done with intent to cause damage or
recklessly and with knowledge that damage would probably
result." The same deletion was effected by the Montreal
Agreement of 1966, with the result that a passenger could
recover unlimited damages upon proof of wilful misconduct. 24
61
The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an
absolute limit of the extent of that liability. Such a proposition is
not borne out by the language of the Convention, as this Court
has now, and at an earlier time, pointed out. 25 Moreover, slight
reflection readily leads to the conclusion that it should be
deemed a limit of liability only in those cases where the cause of
the death or injury to person, or destruction, loss or damage to
property or delay in its transport is not attributable to or attended
by any wilful misconduct, bad faith, recklessness, or otherwise
improper conduct on the part of any official or employee for
which the carrier is responsible, and there is otherwise no
special or extraordinary form of resulting injury. The
Convention's provisions, in short, do not "regulate or exclude
liability for other breaches of contract by the carrier" 26 or
misconduct of its officers and employees, or for some particular
or exceptional type of damage. Otherwise, "an air carrier would
be exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd." 27 Nor may it for a moment be
supposed that if a member of the aircraft complement should
inflict some physical injury on a passenger, or maliciously
destroy or damage the latter's property, the Convention might
successfully be pleaded as the sole gauge to determine the
carrier's liability to the passenger. Neither may the Convention
be invoked to justify the disregard of some extraordinary sort of
damage resulting to a passenger and preclude recovery therefor
beyond the limits set by said Convention. It is in this sense that
the Convention has been applied, or ignored, depending on the
peculiar facts presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example,
the Warsaw Convention was applied as regards the limitation on
the carrier's liability, there being a simple loss of baggage
without any otherwise improper conduct on the part of the
officials or employees of the airline or other special injury
sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been
held inapplicable, or as not restrictive of the carrier's liability,
where there was satisfactory evidence of malice or bad faith
attributable to its officers and employees. 29 Thus, an air carrier
was sentenced to pay not only compensatory but also moral and
exemplary damages, and attorney's fees, for instance, where its
employees rudely put a passenger holding a first-class ticket in
the tourist or economy section, 30 or ousted a brown Asiatic
from the plane to give his seat to a white man, 31 or gave the
seat of a passenger with a confirmed reservation to another, 32
or subjected a passenger to extremely rude, even barbaric
treatment, as by calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper conduct
may be ascribed to the employees of petitioner airline; and Dr.
Pablo's luggage was eventually returned to her, belatedly, it is
 62

true, but without appreciable damage. The fact is, nevertheless,
that some special species of injury was caused to Dr. Pablo
because petitioner ALITALIA misplaced her baggage and failed
to deliver it to her at the time appointed — a breach of its
contract of carriage, to be sure — with the result that she was
unable to read the paper and make the scientific presentation
(consisting of slides, autoradiograms or films, tables and
tabulations) that she had painstakingly labored over, at the
prestigious international conference, to attend which she had
traveled hundreds of miles, to her chagrin and embarrassment
and the disappointment and annoyance of the organizers. She
felt, not unreasonably, that the invitation for her to participate at
the conference, extended by the Joint FAO/IAEA Division of
Atomic Energy in Food and Agriculture of the United Nations,
was a singular honor not only to herself, but to the University of
the Philippines and the country as well, an opportunity to make
some sort of impression among her colleagues in that field of
scientific activity. The opportunity to claim this honor or
distinction was irretrievably lost to her because of Alitalia's
breach of its contract.
baggage — necessarily raised the issue of nominal damages.:
rd
This Court also agrees that respondent Court of Appeals
correctly awarded attorney's fees to Dr. Pablo, and the amount
of P5,000.00 set by it is reasonable in the premises. The law
authorizes recovery of attorney's fees inter alia where, as here,
"the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his
interest," 34 or "where the court deems it just and equitable."
35
WHEREFORE, no error being perceived in the challenged
decision of the Court of Appeals, it appearing on the contrary to
be entirely in accord with the facts and the law, said decision is
hereby AFFIRMED, with costs against the petitioner.
SO ORDERED.

Apart from this, there can be no doubt that Dr. Pablo underwent
profound distress and anxiety, which gradually turned to panic
and finally despair, from the time she learned that her suitcases
were missing up to the time when, having gone to Rome, she
finally realized that she would no longer be able to take part in
the conference. As she herself put it, she "was really shocked
and distraught and confused."

Certainly, the compensation for the injury suffered by Dr. Pablo

cannot under the circumstances be restricted to that prescribed
by the Warsaw Convention for delay in the transport of baggage.

She is not, of course, entitled to be compensated for loss or

damage to her luggage. As already mentioned, her baggage
was ultimately delivered to her in Manila, tardily but safely. She
is however entitled to nominal damages — which, as the law
says, is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated
and recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered — and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at
P40,000.00. As to the purely technical argument that the award
to her of such nominal damages is precluded by her omission to
include a specific claim therefor in her complaint, it suffices to
draw attention to her general prayer, following her plea for moral
and exemplary damages and attorney's fees, "for such other and
further just and equitable relief in the premises," which certainly
is broad enough to comprehend an application as well for
nominal damages. Besides, petitioner should have realized that
the explicit assertion, and proof, that Dr. Pablo's right had been
violated or invaded by it — absent any claim for actual or
compensatory damages, the prayer thereof having been
voluntarily deleted by Dr. Pablo upon the return to her of her