Calvo v. UCPB General Ins. Co., G.R. No. 148496, Mar.
19, 2002, is a finding which cannot be traversed and overturned.
This is a petition for review of the decision,1 dated May 31, 2001, of the Court of
Appeals, affirming the decision2 of the Regional Trial Court, Makati City, Branch 148,
which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00
with legal interest, representing the value of damaged cargo handled by petitioner,
25% thereof as 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 . . . ."
The evidence adduced by the defendants is not enough to sustain [her]
defense that [she is] are not liable. Defendant by reason of the nature of
[her] business should have devised ways and means in order to prevent the
damage to the cargoes which it is under obligation to take custody of and to
forthwith deliver to the consignee. Defendant did not present any evidence
on what precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo [she] shall
perform such extraordinary diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are
proved to have been lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they
prove that they have observed the extraordinary diligence required by law.
The burden of the plaintiff, therefore, is to prove merely that the goods he
transported have been lost, destroyed or deteriorated. Thereafter, the
burden is shifted to the carrier to prove that he has exercised the
extraordinary diligence required by law. Thus, it has been held that the mere
proof of delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove
that the loss was due to accident or some other circumstances inconsistent
with its liability." (cited in Commercial Laws of the Philippines by Agbayani,
p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a
common carrier is supposed [to] exercise [the] extraordinary diligence
required by law, hence the extraordinary responsibility lasts from the time the
goods are unconditionally placed in the possession of and received by the
carrier for transportation until the same are delivered actually or
constructively by the carrier to the consignee or to the person who has the
right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as 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
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.
Asia Lighterage and Shipping, Inc. v. C.A., G.R. No. 147246, Aug. 9, 2003
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 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 that this was caused by a typhoon, hence,
it should not be held liable for the loss of the cargo. However, petitioner failed to
prove that the typhoon is the proximate and only cause of the loss of the goods, and
that it has exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss.30 The evidence show that, even before the
towing bits of the barge broke, it had already previously sustained damage when it hit
a sunken object while docked at the Engineering Island. It even suffered a hole.
Clearly, this could not be solely attributed to the typhoon. The partly-submerged
vessel was refloated but its hole was patched with only clay and cement. The patch
work was merely a provisional remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo
to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-
surveyor of Tan-Gatue Adjustment Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:31
x x x           x x x           x x x
q     -     Can you tell us what else transpired after that incident?
a     -     After the first accident, through the initiative of the barge owners,
they tried to pull out the barge from the place of the accident, and bring it to
the anchor terminal for safety, then after deciding if the vessel is stabilized,
they tried to pull it to the consignee's warehouse, now while on route another
accident occurred, now this time the barge totally hitting something in the
course.
q     -     You said there was another accident, can you tell the court the
nature of the second accident?
a     -     The sinking, sir.
q     -     Can you tell the nature . . . can you tell the court, if you know what
caused the sinking?
a     -     Mostly it was related to the first accident because there was already
a whole (sic) on the bottom part of the barge.
x x x           x x x           x x x
This is not all. Petitioner still headed to the consignee's wharf despite knowledge of
an incoming typhoon. During the time that the barge was heading towards the
consignee's wharf on September 5, 1990, typhoon "Loleng" has already entered the
Philippine area of responsibility.32 A part of the testimony of Robert Boyd, Cargo
Operations Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:33
x x x           x x x           x x x
q     -     Now, Mr. Witness, did it not occur to you it might be safer to just
allow the Barge to lie where she was instead of towing it?
a     -     Since that time that the Barge was refloated, GMC (General Milling
Corporation, the consignee) as I have said was in a hurry for their goods to
be delivered at their Wharf since they needed badly the wheat that was
loaded in PSTSI-3. It was needed badly by the consignee.
q     -     And this is the reason why you towed the Barge as you did?
a     -     Yes, sir.
x x x           x x x           x x x
CROSS-EXAMINATION BY ATTY. IGNACIO:34
x x x           x x x           x x x
q     -     And then from ISLOFF Terminal you proceeded to the premises of
the GMC? Am I correct?
a     -     The next day, in the morning, we hired for additional two (2)
tugboats as I have stated.
q     -     Despite of the threats of an incoming typhoon as you testified a
while ago?
a     -     It is already in an inner portion of Pasig River. The typhoon would be
coming and it would be dangerous if we are in the vicinity of Manila Bay.
q     -     But the fact is, the typhoon was incoming? Yes or no?
a     -     Yes.
 q     -     And yet as a standard operating procedure of your Company, you
have to secure a sort of Certification to determine the weather condition, am
I correct?
a     -     Yes, sir.
q     -     So, more or less, you had the knowledge of the incoming typhoon,
right?
a     -     Yes, sir.
q     -     And yet you proceeded to the premises of the GMC?
a     -     ISLOFF Terminal is far from Manila Bay and anytime even with the
typhoon if you are already inside the vicinity or inside Pasig entrance, it is a
safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force
majeure to escape liability for the loss sustained by the private respondent. Surely,
meeting a typhoon head-on falls short of due diligence required from a common
carrier. More importantly, the officers/employees themselves of petitioner admitted
that when the towing bits of the vessel broke that caused its sinking and the total loss
of the cargo upon reaching the Pasig River, it was no longer affected by the typhoon.
The typhoon then is not the proximate cause of the loss of the cargo; a human
factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February 21,
2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
First Philippine Industrial Corporation v. Court of Appeals, G.R. No. 125948,
December 29, 1998
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 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 "special customer" under a
does not include the authority to collect such taxes on transportation contractors for, "special contract."
as defined under Sec. 131 (h), the term "contractors" excludes transportation
contractors; and, (3) the City Treasurer illegally and erroneously imposed and 2. The Local Tax Code of 1992
collected the said tax, thus meriting the immediate refund of the tax paid.7 was basically enacted to give
more and effective local
Traversing the complaint, the respondents argued that petitioner cannot be exempt autonomy to local governments
from taxes under Section 133 (j) of the Local Government Code as said exemption than the previous enactments,
applies only to "transportation contractors and persons engaged in the transportation to make them economically
by hire and common carriers by air, land and water." Respondents assert that and financially viable to serve
pipelines are not included in the term "common carrier" which refers solely to ordinary the people and discharge their
carriers such as trucks, trains, ships and the like. Respondents further posit that the functions with a concomitant
term "common carrier" under the said code pertains to the mode or manner by which obligation to accept certain
a product is delivered to its destination.8 devolution of powers, . . . So,
consistent with this policy even
On October 3, 1994, the trial court rendered a decision dismissing the complaint, franchise grantees are taxed
ruling in this wise: (Sec. 137) and contractors are
also taxed under Sec. 143 (e)
and 151 of the Code.9
. . . Plaintiff is either a contractor or other independent contractor.
Petitioner assailed the aforesaid decision before this Court  via a petition for review.
. . . the exemption to tax claimed by the plaintiff has become On February 27, 1995, we referred the case to the respondent Court of Appeals for
unclear. It is a rule that tax exemptions are to be strictly construed consideration and adjudication. 10 On November 29, 1995, the respondent court
against the taxpayer, taxes being the lifeblood of the government. rendered a decision 11 affirming the trial court's dismissal of petitioner's complaint.
Exemption may therefore be granted only by clear and unequivocal Petitioner's motion for reconsideration was denied on July 18, 1996. 12
provisions of law.
Hence, this petition. At first, the petition was denied due course in a Resolution dated
Plaintiff claims that it is a grantee of a pipeline concession under November 11, 1996. 13Petitioner moved for a reconsideration which was granted by
Republic Act 387. (Exhibit A) whose concession was lately renewed this Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
by the Energy Regulatory Board (Exhibit B). Yet neither said law
nor the deed of concession grant any tax exemption upon the
plaintiff. 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.
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 There is merit in the petition.
equivocal) resort to distinctions or other considerations may be of
help: 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
1. That the exemption granted place, for compensation, offering his services to the public generally.
under Sec. 133 (j)
encompasses only common Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation,
carriers  so as not to firm or association engaged in the business of carrying or transporting passengers or
overburden the riding public or goods or both, by land, water, or air, for compensation, offering their services to the
commuters with public."
taxes.  Plaintiff is not a common
carrier, but a special carrier The test for determining whether a party is a common carrier of goods is:
extending its services and
facilities to a single specific or
1. He must be engaged in the
business of carrying goods for
 others as a public employment,
and must hold himself out as
ready to engage in the
transportation of goods for
person generally as a business
and not as a casual
occupation;
2. He must undertake to carry
goods of the kind to which his
business is confined;
3. He must undertake to carry
by the method by which his
business is conducted and over
his established roads; and
4. The transportation must be
for hire. 15
Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods,  i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition of a common carrier. In De
Guzman vs. Court of Appeals  16we 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 andpower
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 (j) Taxes on
considered common carriers. 17 the gross
receipts of
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is transportatio
considered a "common carrier." Thus, Article 86 thereof provides that: n contractors
and persons
engaged in
Art. 86. Pipe line concessionaire as common the
carrier. — A pipe line shall have the preferential transportatio
right to utilize installations for the transportation of n of
petroleum owned by him, but is obligated to passengers
utilize the remaining transportation capacity pro or freight by
rata for the transportation of such other petroleum hire and
as may be offered by others for transport, and to common
charge without discrimination such rates as may carriers by
have been approved by the Secretary of air, land or
Agriculture and Natural Resources. water, except
as provided
Republic Act 387 also regards petroleum operation as a public utility. Pertinent in this Code.
portion of Article 7 thereof provides:
The deliberations conducted in the House of Representatives on the Local
that everything relating to the exploration for and Government Code of 1991 are illuminating:
exploitation of petroleum . . . and everything
relating to the manufacture, refining, storage, MR. AQUINO (A). Thank you, Mr. Speaker.
or transportation by special methods of
petroleum, is hereby declared to be a public
utility. (Emphasis Supplied) Mr. Speaker, we would like to proceed to page
95, line
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier."
In BIR Ruling No. 069-83, it declared: 1. It states: "SEC. 121 [now Sec. 131]. Common
Limitations on the Taxing Powers of Local
Government Units." . . .
. . . since [petitioner] is a pipeline concessionaire
that is engaged only in transporting petroleum
products, it is considered a common carrier under MR. AQUINO (A.). Thank you Mr. Speaker.
Republic Act No. 387 . . . . Such being the case, it
is not subject to withholding tax prescribed by Still on page 95, subparagraph 5, on taxes on the
Revenue Regulations No. 13-78, as amended. business of transportation. This appears to be
one of those being deemed to be exempted from
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" the taxing powers of the local government units.
and, therefore, exempt from the business tax as provided for in Section 133 (j), of the May we know the reason why the transportation
Local Government Code, to wit: business is being excluded from the taxing
powers of the local government units?
Sec. 133. Common Limitations on the Taxing
Powers of Local Government Units. — Unless MR. JAVIER (E.). Mr. Speaker, there is an
otherwise provided herein, the exercise of the exception contained in Section 121 (now Sec.
taxing powers of provinces, cities, municipalities, 131), line 16, paragraph 5. It states that local
and barangays shall not extend to the levy of the government units may not impose taxes on the
following: business of transportation, except as otherwise
provided in this code.
x x x           x x x          x x x
 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.