G.R. No. L-47822 December 22, 1988 basis.
basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e.,
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 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
the general community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle, either
for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services. ...
(Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even though he
merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was
done on a periodic or occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial
freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience,
and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and implementing regulations
and has been granted a certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to reward private respondent precisely
for failing to comply with applicable statutory requirements. The business of a common carrier impinges
directly and intimately upon the safety and well being and property of those members of the general
community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers
for the safety and protection of those who utilize their services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high
degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The
specific import of extraordinary diligence in the care of goods transported by a common carrier is, according
to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
Civil Code (Common Carriers) | Page 1 of 28
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they
appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant
case — the hijacking of the carrier's truck — does not fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt
with under the provisions of Article 1735, in other words, that the private respondent as common carrier is
presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown
by proof of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's
goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security
guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe,
however, that in the instant case, the standard of extraordinary diligence required private respondent to retain
a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the
lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article
1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts
or omissions of his or its employees;
(6) that the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment
used in the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are
lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First
Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with
willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and
loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took
away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and
later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the
police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery
in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond
the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that
even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and
are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not
liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals
dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
G.R. No. 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 1967 1 and renewed by the Energy
Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas
City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner
to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code 3.
The respondent City Treasurer assessed a business tax on the petitioner amounting 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
Civil Code (Common Carriers) | Page 2 of 28
 the license fee, the imposition thereof based on gross receipts is violative of the
aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and licensing. The fee is already a
revenue raising measure, and not a mere regulatory imposition. 4
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be
considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the
Local Government Code. 5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax refund
with prayer for 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. 10 On November 29,
1995, the respondent court rendered a decision 11 affirming the trial court's dismissal of petitioner's complaint.
Petitioner's motion for reconsideration was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of January
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 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.
Civil Code (Common Carriers) | Page 3 of 28
 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.
Civil Code (Common Carriers) | Page 4 of 28
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.
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost,
SO ORDERED. 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.
Bellosillo, Puno and Mendoza, JJ., concur.
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
G.R. No. 148496 March 19, 2002
delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES, order, makes out a prima facie case against the carrier, so that if no explanation is given as to how
INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove
Inc.) respondent. 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.)
MENDOZA, J.:
Defendant, being a customs brother, warehouseman and at the same time a common carrier is
This is a petition for review of the decision,1 dated May 31, 2001, of the Court of Appeals, affirming the
supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary
decision2of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as
responsibility lasts from the time the goods are unconditionally placed in the possession of and
subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by
received by the carrier for transportation until the same are delivered actually or constructively by
petitioner, 25% thereof as attorney's fees, and the cost of the suit.1âwphi1.nêt
the carrier to the consignee or to the person who has the right to receive the same.3
The facts are as follows:
Accordingly, the trial court ordered petitioner to pay the following amounts --
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole
1. The sum of P93,112.00 plus interest;
proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San
2. 25% thereof as lawyer's fee;
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft
3. Costs of suit.4
liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St.,
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari.
Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.
Petitioner contends that:
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, I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE
Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY
withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. On July MISTAKEN INFERENCE.
25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE
fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was
PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT
placed at P93,112.00.
HOLD ITS SERVICES TO THE PUBLIC.5
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount.
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common
In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch
carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable
148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for
beyond what ordinary diligence in the vigilance over the goods transported by her, would
the damage to the shipment.
require.6 Consequently, any damage to the cargo she agrees to transport cannot be presumed to have been
The trial court held: due to her fault or negligence.
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a
defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh. "F") common carrier but a private carrier because, as a customs broker and warehouseman, she does not
with entries appearing therein, classified as "TED" and "TSN", which the claims processor, Ms. indiscriminately hold her services out to the public but only offers the same to select parties with whom she
Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the subject may contract in the conduct of her business.
damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A")
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a similar contention and
confirms the fact of the damaged condition of the subject cargoes. The surveyor[s'] report (Exh. "H-
held the party to be a common carrier, thus -
4-A") in particular, which provides among others that:
The Civil Code defines "common carriers" in the following terms:
" . . . we opine that damages sustained by shipment is attributable to improper handling
in transit presumably whilst in the custody of the broker . . . ." "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
is a finding which cannot be traversed and overturned.
compensation, offering their services to the public."
The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not
The above article makes no distinction between one whose principal business activity is the carrying
liable. Defendant by reason of the nature of [her] business should have devised ways and means in
of persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article
order to prevent the damage to the cargoes which it is under obligation to take custody of and to
1732 also carefully avoids making any distinction between a person or enterprise offering
forthwith deliver to the consignee. Defendant did not present any evidence on what precaution
transportation service on a regular or scheduled basis and one offering such service on
[she] performed to prevent [the] said incident, hence the presumption is that the moment the
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
defendant accepts the cargo [she] shall perform such extraordinary diligence because of the nature
offering its services to the "general public," i.e., the general community or population, and one who
of the cargo.

Civil Code (Common Carriers) | Page 5 of 28

 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.
Civil Code (Common Carriers) | Page 6 of 28
G.R. No. 147079 December 21, 2004
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents.
CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate court’s Decision1 of August 10, 2000 reversing and
setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B which
dismissed the complaint of respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf,
Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and
42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories,
Inc.2The Femenal tablets were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which
were packed together in one (1) LD3 aluminum container, while the Trinordial tablets were packed in two
pallets, each of which contained 30 cartons.3
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No.
4995 pursuant to Marine Open Policy No. 138.4
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),5 it was
discharged "without exception"6 and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located
also at the NAIA for safekeeping.7
In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged
the services of Sanchez Brokerage which had been its licensed broker since 1984.8 As its customs broker,
Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for the cargo and thereafter
delivers it to Wyeth-Suaco.9
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI storage
fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,10 was issued. On the receipt,
another representative of Sanchez Brokerage, M. Sison,11 acknowledged that he received the cargoes
consisting of three pieces in good condition.12
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes13 which were
thereupon stripped from the aluminum containers14 and loaded inside two transport vehicles hired by Sanchez
Brokerage.15
Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and Tony
Akas,16 employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor and
insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for
quality control check.17 The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery
consisted of one container with 144 cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.18
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes by
affixing his signature on the delivery receipt.19 Upon inspection, however, he, together with Ruben Alonzo of
Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order.20 He
thus placed a note above his signature on the delivery receipt stating that 44 cartons of oral contraceptives
were in bad order. The remaining 160 cartons of oral contraceptives were accepted as complete and in good
order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report21
dated July 31, 1992 stating
that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were "wetted" (sic).22
The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 attached to which was an "Annexed
Schedule" whereon it was indicated that prior to the loading of the cargoes to the broker’s trucks at the NAIA,
they were inspected and found to be in "apparent good condition."24 Also noted was that at the time of delivery
to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account for the wetting of
the 44 cartons of Femenal and Nordiol tablets.25
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report26 confirming that 38 x 700 blister
packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets
were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection27 of 38 cartons of Femenal and 3
cartons of Nordiol on the ground that they were "delivered to Hizon Laboratories with heavy water damaged
(sic) causing the cartons to sagged (sic) emitting a foul order and easily attracted flies."28
Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez Brokerage the payment
of P191,384.25 representing the value of its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU
Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim under Marine Risk
Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez
Brokerage, by letter31 of January 7, 1993, disclaimed liability for the damaged goods, positing that the damage
was due to improper and insufficient export packaging; that when the sealed containers were opened outside
the PSI warehouse, it was discovered that some of the loose cartons were wet,32 prompting its (Sanchez
Brokerage’s) representative Morales to inform the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan,
about the condition of the cargoes but that the latter advised to still deliver them to Hizon Laboratories where
an adjuster would assess the damage.33
Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati City
against the Sanchez Brokerage.
The trial court, by Decision34 of July 29, 1996, dismissed the complaint, holding that the Survey Report prepared
by the Elite Surveyors is bereft of any evidentiary support and a mere product of pure guesswork.35
On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez Brokerage
engaged not only in the business of customs brokerage but also in the transportation and delivery of the cargo
of its clients, hence, a common carrier within the context of Article 1732 of the New Civil Code.36
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order and
condition but were in a damaged state when delivered to Wyeth-Suaco, the appellate court held that Sanchez
Brokerage is presumed negligent and upon it rested the burden of proving that it exercised extraordinary
negligence not only in instances when negligence is directly proven but also in those cases when the cause of
the damage is not known or unknown.37
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the
Court a quo is REVERSED. Another Decision is hereby rendered in favor of the Appellant and against
the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181,
431.49, with interest thereupon at the rate of 6% per annum, from the date of the
Decision of the Court, until the said amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as
and by way of attorney’s fees; and
3. The counterclaims of the Appellee are DISMISSED.38
Sanchez Brokerage’s Motion for Reconsideration having been denied by the appellate court’s Resolution of
December 8, 2000 which was received by petitioner on January 5, 2001, it comes to this Court on petition for
certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount to
abuse of discretion when it found petitioner a "common carrier" within the context of Article 1732 of the New
Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner should have
taken was to file a petition for review on certiorari since the sole office of a writ of certiorari is the correction
Civil Code (Common Carriers) | Page 7 of 28
of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of
jurisdiction and does not include correction of the appellate court’s evaluation of the evidence and factual
findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to overcome
the presumption of negligence, it being documented that petitioner withdrew from the warehouse of PSI the
subject shipment entirely in good order and condition.39
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of
the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for review,
which would be but a continuation of the appellate process over the original case.40
The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration of its
Decision of August 10, 2000 was received by petitioner on January 5, 2001. Since petitioner failed to appeal
within 15 days or on or before January 20, 2001, the appellate court’s decision had become final and executory.
The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a substitute for the lost
remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not merely
reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial court
based on its finding that petitioner is liable for the damage to the cargo as a common carrier. What petitioner
is ascribing is an error of judgment, not of jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of the decision – not the
jurisdiction of the court to render said decision – the same is beyond the province of a petition
for certiorari.41 The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in order to
review the judgment of lower courts as to its intrinsic correctness, either upon the law or the facts of the case.42
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the
services the firm offers include the delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of
the importer, we prepare the entry together for processing and claims from customs and
finally deliver the goods to the warehouse of the importer.43
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and
one who does such carrying only as an ancillary activity.44 The contention, therefore, of petitioner that it is not
a common carrier but a customs broker whose principal function is to prepare the correct customs declaration
and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to
deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 173345 of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each
case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary diligence.46
The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of Appeals:47
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers
to render service with the greatest skill and foresight and "to use all reasonable means to ascertain
the nature and characteristics of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires."48
In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in
good order and condition;49 and that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes
were found to be in bad order, as noted in the Delivery Receipt50 issued by petitioner, and as indicated in the
Survey Report of Elite Surveyors51 and the Destruction Report of Hizon Laboratories, Inc.52
In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were
damaged due to the fault or negligence of the shipper for failing to properly pack them and to the inherent
characteristics of the goods53; and that it should not be faulted for following the instructions of Calicdan of
Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter that some of the cartons,
on examination outside the PSI warehouse, were found to be wet.54
While paragraph No. 4 of Article 173455 of the Civil Code exempts a common carrier from liability if the loss or
damage is due to the character of the goods or defects in the packing or in the containers, the rule is that if the
improper packing is known to the carrier or his employees or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved
of liability for the resulting damage.56
If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it
should naturally have received the cargo under protest or with reservations duly noted on the receipt issued
by PSI. But it made no such protest or reservation.57
Moreover, as observed by the appellate court, if indeed petitioner’s employees only examined the cargoes
outside the PSI warehouse and found some to be wet, they would certainly have gone back to PSI, showed to
the warehouseman the damage, and demanded then and there for Bad Order documents or a certification
confirming the damage.58 Or, petitioner would have presented, as witness, the employees of the PSI from
whom Morales and Domingo took delivery of the cargo to prove that, indeed, part of the cargoes was already
damaged when the container was allegedly opened outside the warehouse.59
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it asserts
that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse but such
notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he failed to
specifically declare what time he received the call. As to whether the call was made at the PSI warehouse when
the shipment was stripped from the airport containers, or when the cargoes were already in transit to Antipolo,
it is not determinable. Aside from that phone call, petitioner admitted that it had no documentary evidence to
prove that at the time it received the cargoes, a part of it was wet, damaged or in bad condition.60
The 4-page weather data furnished by PAGASA61 on request of Sanchez Brokerage hardly impresses, no witness
having identified it and interpreted the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were
damaged by rainwater while in transit to Antipolo City is more likely then. Sanchez himself testified that in the
past, there was a similar instance when the shipment of Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the
NAIA were damaged and claimed by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not
claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
Civil Code (Common Carriers) | Page 8 of 28
 WITNESS: Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of P5,246,113.11.
Little Giant thereupon executed a subrogation receipt15 in favor of Industrial Insurance.
A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic)
up to the bottom are wet specially during rainy season.62 Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its
representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the amount it paid to
Since petitioner received all the cargoes in good order and condition at the time they were turned over by the
Little Giant plus adjustment fees, attorney’s fees, and litigation expenses.16
PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in
bad order, it was incumbent on petitioner to prove that it exercised extraordinary diligence in the carriage of Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while typhoon signal
the goods. It did not, however. Hence, its presumed negligence under Article 1735 of the Civil Code remains No. 1 was raised in Metro Manila.17
unrebutted.
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for unloading the
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED. cargoes outside of the breakwater notwithstanding the storm signal.18 The dispositive portion of the decision
reads:
Costs against petitioner.
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the
SO ORDERED.
defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 with interest from the date the
complaint was filed until fully satisfied, as well as the sum of P5,000.00 representing the adjustment fee plus
the sum of 20% of the amount recoverable from the defendants as attorney’s fees plus the costs of suit. The
G.R. No. 150255. April 22, 2005
counterclaims and cross claims of defendants are hereby DISMISSED for lack of [m]erit.19
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners, vs. TRANSPORT VENTURE, INC.,
To the trial court’s decision, the defendants Schmitz Transport and TVI filed a joint motion for reconsideration
INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now INCHCAPE
assailing the finding that they are common carriers and the award of excessive attorney’s fees of more
SHIPPING SERVICES, Respondents.
than P1,000,000. And they argued that they were not motivated by gross or evident bad faith and that the
CARPIO-MORALES, J.: incident was caused by a fortuitous event. 20
On petition for review is the June 27, 2001 Decision1 of the Court of Appeals, as well as its Resolution2 dated By resolution of February 4, 1998, the trial court denied the motion for reconsideration. 21
September 28, 2001 denying the motion for reconsideration, which affirmed that of Branch 21 of the Regional
All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in toto the
Trial Court (RTC) of Manila in Civil Case No. 92-631323 holding petitioner Schmitz Transport Brokerage
decision of the trial court, 22 it finding that all the defendants were common carriers — Black Sea and TVI for
Corporation (Schmitz Transport), together with Black Sea Shipping Corporation (Black Sea), represented by its
engaging in the transport of goods and cargoes over the seas as a regular business and not as an isolated
ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the loss of 37 hot
transaction,23 and Schmitz Transport for entering into a contract with Little Giant to transport the cargoes from
rolled steel sheets in coil that were washed overboard a barge.
ship to port for a fee.24
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V
In holding all the defendants solidarily liable, the appellate court ruled that "each one was essential such that
"Alexander Saveliev" (a vessel of Russian registry and owned by Black Sea) 545 hot rolled steel sheets in coil
without each other’s contributory negligence the incident would not have happened and so much so that the
weighing 6,992,450 metric tons.
person principally liable cannot be distinguished with sufficient accuracy."25
The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel Pipe
In discrediting the defense of fortuitous event, the appellate court held that "although defendants obviously
Corporation (Little Giant),4 were insured against all risks with Industrial Insurance Company Ltd. (Industrial
had nothing to do with the force of nature, they however had control of where to anchor the vessel, where
Insurance) under Marine Policy No. M-91-3747-TIS.5
discharge will take place and even when the discharging will commence."26
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA) assigned
The defendants’ respective motions for reconsideration having been denied by Resolution27 of September 28,
it a place of berth at the outside breakwater at the Manila South Harbor.6
2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present petition against TVI, Industrial
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive the Insurance and Black Sea.
cargoes from the shipside, and to deliver them to its (the consignee’s) warehouse at Cainta, Rizal,7 in turn
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal, consignee Little
engaged the services of TVI to send a barge and tugboat at shipside.
Giant, hence, the transportation contract was by and between Little Giant and TVI.28
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the barge "Erika V" to shipside.8
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were required
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left and to file their respective Comments.29
returned to the port terminal.9 At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. commenced to
By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner in good
unload 37 of the 545 coils from the vessel unto the barge.
order, hence, it cannot be faulted, it having had no control and supervision thereover.30
By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an
For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and transferred
approaching storm, the unloading unto the barge of the 37 coils was accomplished.10 No tugboat pulled the
them unto the barge upon the instruction of petitioner.31
barge back to the pier, however.
In issue then are:
At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the crew of the barge abandoned it and
transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing the (1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence on the
37 coils into the sea.12 At 7:00 a.m., a tugboat finally arrived to pull the already empty and damaged barge back part of petitioner Black Sea and TVI, and
to the pier.13
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI.
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all liability
cargoes proved futile.14
arising therefrom:

Civil Code (Common Carriers) | Page 9 of 28

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2)
it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must
be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor.32
[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by
the violence of nature. Human intervention is to be excluded from creating or entering into the cause of the
mischief. When the effect is found to be in part the result of the participation of man, whether due to his active
intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules
applicable to the acts of God.33
The appellate court, in affirming the finding of the trial court that human intervention in the form of
contributory negligence by all the defendants resulted to the loss of the cargoes,34 held that unloading outside
the breakwater, instead of inside the breakwater, while a storm signal was up constitutes negligence.35 It thus
concluded that the proximate cause of the loss was Black Sea’s negligence in deciding to unload the cargoes at
an unsafe place and while a typhoon was approaching.36
From a review of the records of the case, there is no indication that there was greater risk in loading the cargoes
outside the breakwater. As the defendants proffered, the weather on October 26, 1991 remained normal with
moderate sea condition such that port operations continued and proceeded normally.37
The weather data report,38 furnished and verified by the Chief of the Climate Data Section of PAG-ASA and
marked as a common exhibit of the parties, states that while typhoon signal No. 1 was hoisted over Metro
Manila on October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October
26, 1991 was moderate. It cannot, therefore, be said that the defendants were negligent in not unloading the
cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in the
morning39 is, however, a material fact which the appellate court failed to properly consider and
appreciate40 — the proximate cause of the loss of the cargoes. Had the barge been towed back promptly to
the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the barge
was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes.41 The
loss thus falls outside the "act of God doctrine."
The proximate cause of the loss having been determined, who among the parties is/are responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the appellate court, finds that petitioner is a common
carrier. For it undertook to transport the cargoes from the shipside of "M/V Alexander Saveliev" to the
consignee’s warehouse at Cainta, Rizal. As the appellate court put it, "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 if [it] owns the vehicle to be used or has to hire one."42 That petitioner is a common carrier,
the testimony of its own Vice-President and General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and General
Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the company. I also
handle the various division heads of the company for operation matters, and all other related functions that
the President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the Honorable
Court if you came to know the company by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you perform in behalf
of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-charged of the
delivery of the goods to their warehouses. We also handled the clearances of their shipment at the Bureau of
Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with regards to this
shipment? What work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the] cargo[es]
from lighter to BASECO then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to perform, what
equipment do (sic) you require or did you use in order to effect this unloading, transfer and delivery to the
warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter, and on this
we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also,
in BASECO compound we are leasing cranes to have the cargo unloaded from the barge to trucks, [and] then
we used trucks to deliver [the cargoes] to the consignee’s warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignee’s warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract for the barges
of Transport Ventures Incorporated in this particular operation?
A: Firstly, we don’t own any barges. That is why we hired the services of another firm whom we know [al]ready
for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied)43
It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. Thus, this
Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,44 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.
xxx
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.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 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."47
As for petitioner’s argument that being the agent of Little Giant, any negligence it committed was deemed the
negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the
transportation of the cargoes from the shipside and into Little Giant’s warehouse, however, petitioner was
discharging its own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler48 to provide the
barge and the tugboat. In their Service Contract,49 while Little Giant was named as the consignee, petitioner
Civil Code (Common Carriers) | Page 10 of 28
did not disclose that it was acting on commission and was chartering the vessel for Little Giant.50 Little Giant
did not thus automatically become a party to the Service Contract and was not, therefore, bound by the terms
and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can maintain
a cause of action for negligence.51
In the case of TVI, while it acted as a private carrier for which it was under no duty to observe extraordinary
diligence, it was still required to observe ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by
the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
Was the reasonable care and caution which an ordinarily prudent person would have used in the same situation
exercised by TVI?52
This Court holds not.
TVI’s failure to promptly provide a tugboat did not only increase the risk that might have been reasonably
anticipated during the shipside operation, but was the proximate cause of the loss. A man of ordinary prudence
would not leave a heavily loaded barge floating for a considerable number of hours, at such a precarious time,
and in the open sea, knowing that the barge does not have any power of its own and is totally defenseless from
the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 173953 of the Civil Code, prove that
it exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of the storm
in order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers54 and a supervisor55 on board the vessel to counter-check the operations of TVI,
it failed to take all available and reasonable precautions to avoid the loss. After noting that TVI failed to arrange
for the prompt towage of the barge despite the deteriorating sea conditions, it should have summoned the
same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable56 for the loss of the cargoes. The following
pronouncement of the Supreme Court is instructive:
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 2176 and related provisions, in conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask
further, how then must the liability of the common carrier, on 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 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where
tort is that which breaches the contract. 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.57
As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or
unconditionally placed in its possession and received for transportation until they were delivered actually or
constructively to consignee Little Giant.58
Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services
rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be
made "to the port of discharge or so near thereto as she may safely get, always afloat."59 The delivery of the
goods to the consignee was not from "pier to pier" but from the shipside of "M/V Alexander Saveliev" and into
barges, for which reason the consignee contracted the services of petitioner. Since Black Sea had constructively
delivered the cargoes to Little Giant, through petitioner, it had discharged its duty.60
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorney’s fees in an amount over P1,000,000.00 to Industrial Insurance, for lack of
factual and legal basis, this Court sets it aside. While Industrial Insurance was compelled to litigate its rights,
such fact by itself does not justify the award of attorney’s fees under Article 2208 of the Civil Code. For 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.61 To award attorney’s fees to a party just because the judgment
is rendered in its favor would be tantamount to imposing a premium on one’s right to litigate or seek judicial
redress of legitimate grievances.62
On the award of adjustment fees: The adjustment fees and expense of divers were incurred by Industrial
Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo. They do not constitute
actual damages.63
As for the court a quo’s award of interest on the amount claimed, the same calls for modification following the
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals64 that when the demand cannot be reasonably
established at the time the demand is made, the interest shall begin to run not from the time the claim is made
judicially or extrajudicially but from the date the judgment of the court is made (at which the time the
quantification of damages may be deemed to have been reasonably ascertained).65
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage Corporation,
and Transport Venture Incorporation jointly and severally liable for the amount of P5,246,113.11 with the
MODIFICATION that interest at SIX PERCENT per annum of the amount due should be computed from the
promulgation on November 24, 1997 of the decision of the trial court.
Costs against petitioner.
SO ORDERED.
G.R. No. 161833. July 8, 2005
PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioners, vs. UNKNOWN OWNER OF THE VESSEL M/V
"NATIONAL HONOR," NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL
CONTAINER SERVICES, INC., Respondents.
CALLEJO, SR., J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the
Decision1dated January 19, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 57357 which affirmed the
Decision dated February 17, 1997 of the Regional Trial Court (RTC) of Manila, Branch 37, in Civil Case No. 95-
73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and
accessories in the port of Pusan, Korea, on board the vessel M/V "National Honor," represented in the
Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The shipment was for delivery
to Manila, Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of Lading No. SH94103062 in
the name of the shipper consigned to the order of Metropolitan Bank and Trust Company with arrival notice
in Manila to ultimate consignee Blue Mono International Company, Incorporated (BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No. NSGPBSML5125653 in the name of the freight forwarder, as shipper,
consigned to the order of Stamm International Inc., Makati, Philippines. It is provided therein that:
Civil Code (Common Carriers) | Page 11 of 28
12. This Bill of Lading shall be prima facie evidence of the receipt of the Carrier in apparent good order and
condition except as, otherwise, noted of the total number of Containers or other packages or units enumerated
overleaf. Proof to the contrary shall be admissible when this Bill of Lading has been transferred to a third party
acting in good faith. No representation is made by the Carrier as to the weight, contents, measure, quantity,
quality, description, condition, marks, numbers, or value of the Goods and the Carrier shall be under no
responsibility whatsoever in respect of such description or particulars.
13. The shipper, whether principal or agent, represents and warrants that the goods are properly described,
marked, secured, and packed and may be handled in ordinary course without damage to the goods, ship, or
property or persons and guarantees the correctness of the particulars, weight or each piece or package and
description of the goods and agrees to ascertain and to disclose in writing on shipment, any condition, nature,
quality, ingredient or characteristic that may cause damage, injury or detriment to the goods, other property,
the ship or to persons, and for the failure to do so the shipper agrees to be liable for and fully indemnify the
carrier and hold it harmless in respect of any injury or death of any person and loss or damage to cargo or
property. The carrier shall be responsible as to the correctness of any such mark, descriptions or
representations.4
The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate No. 2, complete and in good
order condition, covered by Commercial Invoice No. YJ-73564 DTD5 and a Packing List.6 There were no markings
on the outer portion of the crates except the name of the consignee.7 Crate No. 1 measured 24 cubic meters
and weighed 3,620 kgs. It contained the following articles: one (1) unit Lathe Machine complete with parts and
accessories; one (1) unit Surface Grinder complete with parts and accessories; and one (1) unit Milling Machine
complete with parts and accessories. On the flooring of the wooden crates were three wooden battens placed
side by side to support the weight of the cargo. Crate No. 2, on the other hand, measured 10 cubic meters and
weighed 2,060 kgs. The Lathe Machine was stuffed in the crate. The shipment had a total invoice value of
US$90,000.00 C&F Manila.8 It was insured for P2,547,270.00 with the Philippine Charter Insurance Corporation
(PCIC) thru its general agent, Family Insurance and Investment Corporation,9 under Marine Risk Note No. 68043
dated October 24, 1994.10
The M/V "National Honor" arrived at the Manila International Container Terminal (MICT) on November 14,
1995. The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the
crate cargo list and bill of lading, and it knew the contents of the crate.11 The following day, the vessel started
discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winchman from the
ICTSI,12 the exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI,
conducted an inspection of the cargo.13 They inspected the hatches, checked the cargo and found it in apparent
good condition.14 Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No.
1.15 No sling cable was fastened on the mid-portion of the crate. In Dauz’s experience, this was a normal
procedure.16 As the crate was being hoisted from the vessel’s hatch, the mid-portion of the wooden flooring
suddenly snapped in the air, about five feet high from the vessel’s twin deck, sending all its contents crashing
down hard,17 resulting in extensive damage to the shipment.
BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such damaged condition.18 Upon
receipt of the damaged shipment, BMICI found that the same could no longer be used for the intended
purpose. The Mariners’ Adjustment Corporation hired by PCIC conducted a survey and declared that the
packing of the shipment was considered insufficient. It ruled out the possibility of taxes due to insufficiency of
packing. It opined that three to four pieces of cable or wire rope slings, held in all equal setting, never by-
passing the center of the crate, should have been used, considering that the crate contained heavy
machinery.19
BMICI subsequently filed separate claims against the NSCP,20 the ICTSI,21 and its insurer, the PCIC,22 for
US$61,500.00. When the other companies denied liability, PCIC paid the claim and was issued a Subrogation
Receipt23 for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a Complaint for
Damages24against the "Unknown owner of the vessel M/V National Honor," NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the defendants. It prayed, among others –
WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered ordering defendants
to pay plaintiff, jointly or in the alternative, the following:
1. Actual damages in the amount of P1,740,634.50 plus legal interest at the time of the filing of this complaint
until fully paid;
2. Attorney’s fees in the amount of P100,000.00;
3. Cost of suit.25
ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-defendant NSCP, claiming
that the loss/damage of the shipment was caused exclusively by the defective material of the wooden battens
of the shipment, insufficient packing or acts of the shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified that the wooden battens placed on the
wooden flooring of the crate was of good material but was not strong enough to support the weight of the
machines inside the crate. He averred that most stevedores did not know how to read and write; hence, he
placed the sling cables only on those portions of the crate where the arrow signs were placed, as in the case of
fragile cargo. He said that unless otherwise indicated by arrow signs, the ICTSI used only two cable slings on
each side of the crate and would not place a sling cable in the mid-section.26 He declared that the crate fell
from the cranes because the wooden batten in the mid-portion was broken as it was being lifted.27 He
concluded that the loss/damage was caused by the failure of the shipper or its packer to place wooden battens
of strong materials under the flooring of the crate, and to place a sign in its mid-term section where the sling
cables would be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the damage to the cargo could be
attributed to insufficient packing and unbalanced weight distribution of the cargo inside the crate as evidenced
by the types and shapes of items found.28
The trial court rendered judgment for PCIC and ordered the complaint dismissed, thus:
WHEREFORE, the complaint of the plaintiff, and the respective counterclaims of the two defendants are
dismissed, with costs against the plaintiff.
SO ORDERED.29
According to the trial court, the loss of the shipment contained in Crate No. 1 was due to the internal defect
and weakness of the materials used in the fabrication of the crates. The middle wooden batten had a hole
(bukong-bukong). The trial court rejected the certification30 of the shipper, stating that the shipment was
properly packed and secured, as mere hearsay and devoid of any evidentiary weight, the affiant not having
testified.
Not satisfied, PCIC appealed31 to the CA which rendered judgment on January 19, 2004 affirming in toto the
appealed decision, with this fallo –
WHEREFORE, the decision of the Regional Trial Court of Manila, Branch 35, dated February 17, 1997, is
AFFIRMED.
SO ORDERED.32
The appellate court held, inter alia, that it was bound by the finding of facts of the RTC, especially so where the
evidence in support thereof is more than substantial. It ratiocinated that the loss of the shipment was due to
an excepted cause – "[t]he character of the goods or defects in the packing or in the containers" and the failure
of the shipper to indicate signs to notify the stevedores that extra care should be employed in handling the
shipment.33 It blamed the shipper for its failure to use materials of stronger quality to support the heavy
machines and to indicate an arrow in the middle portion of the cargo where additional slings should be
attached.34 The CA concluded that common carriers are not absolute insurers against all risks in the transport
of the goods.35
Hence, this petition by the PCIC, where it alleges that:
I. THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT HOLDING THAT
RESPONDENT COMMON CARRIER IS LIABLE FOR THE DAMAGE SUSTAINED BY THE SHIPMENT
IN THE POSSESSION OF THE ARRASTRE OPERATOR.
II. THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT APPLYING THE
STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE IN THE CASE AT BAR.
Civil Code (Common Carriers) | Page 12 of 28
 III. THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE FACTS IN FINDING THAT THE We have reviewed the records and find no justification to warrant the application of any exception to the
DAMAGE SUSTAINED BY THE [SHIPMENT] WAS DUE TO ITS DEFECTIVE PACKING AND NOT TO general rule.
THE FAULT AND NEGLIGENCE OF THE RESPONDENTS.36
We agree with the contention of the petitioner that common carriers, from the nature of their business and
The petitioner asserts that the mere proof of receipt of the shipment by the common carrier (to the carrier) in for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over the goods
good order, and their arrival at the place of destination in bad order makes out a prima facie case against it; in and for the safety of the passengers transported by them, according to all the circumstances of each case.41 The
such case, it is liable for the loss or damage to the cargo absent satisfactory explanation given by the carrier as Court has defined extraordinary diligence in the vigilance over the goods as follows:
to the exercise of extraordinary diligence. The petitioner avers that the shipment was sufficiently packed in
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier
wooden boxes, as shown by the fact that it was accepted on board the vessel and arrived in Manila safely. It
to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted
emphasizes that the respondents did not contest the contents of the bill of lading, and that the respondents
to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and
knew that the manner and condition of the packing of the cargo was normal and barren of defects. It maintains
foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for
that it behooved the respondent ICTSI to place three to four cables or wire slings in equal settings, including
shipment, and to exercise due care in the handling and stowage, including such methods as their nature
the center portion of the crate to prevent damage to the cargo:
requires."42
… [A] simple look at the manifesto of the cargo and the bill of lading would have alerted respondents of the
The common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time the
nature of the cargo consisting of thick and heavy machinery. Extra-care should have been made and extended
articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for
in the discharge of the subject shipment. Had the respondent only bothered to check the list of its contents,
transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person
they would have been nervous enough to place additional slings and cables to support those massive machines,
entitled to receive them.43 When the goods shipped are either lost or arrive in damaged condition, a
which were composed almost entirely of thick steel, clearly intended for heavy industries. As indicated in the
presumption arises against the carrier of its failure to observe that diligence, and there need not be an express
list, the boxes contained one lat[h]e machine, one milling machine and one grinding machine-all coming with
finding of negligence to hold it liable.44 To overcome the presumption of negligence in the case of loss,
complete parts and accessories. Yet, not one among the respondents were cautious enough. Here lies the utter
destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary
failure of the respondents to observed extraordinary diligence in the handling of the cargo in their custody and
diligence.45
possession, which the Court of Appeals should have readily observed in its appreciation of the pertinent facts.37
However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of
The petitioner posits that the loss/damage was caused by the mishandling of the shipment by therein
the following causes:
respondent ICTSI, the arrastre operator, and not by its negligence.
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
The petitioner insists that the respondents did not observe extraordinary diligence in the care of the goods. It
argues that in the performance of its obligations, the respondent ICTSI should observe the same degree of 2. Act of the public enemy in war, whether international or civil;
diligence as that required of a common carrier under the New Civil Code of the Philippines. Citing Eastern
3. Act or omission of the shipper or owner of the goods;
Shipping Lines, Inc. v. Court of Appeals,38 it posits that respondents are liable in solidum to it, inasmuch as both
are charged with the obligation to deliver the goods in good condition to its consignee, BMICI. 4. The character of the goods or defects in the packing or in the containers;
Respondent NSCP counters that if ever respondent ICTSI is adjudged liable, it is not solidarily liable with it. It 5. Order or act of competent public authority.
further avers that the "carrier cannot discharge directly to the consignee because cargo discharging is the
It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common
monopoly of the arrastre." Liability, therefore, falls solely upon the shoulder of respondent ICTSI, inasmuch as
carrier for the loss or damage to the cargo is a closed list.46 To exculpate itself from liability for the loss/damage
the discharging of cargoes from the vessel was its exclusive responsibility. Besides, the petitioner is raising
to the cargo under any of the causes, the common carrier is burdened to prove any of the aforecited causes
questions of facts, improper in a petition for review on certiorari.39
claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the
Respondent ICTSI avers that the issues raised are factual, hence, improper under Rule 45 of the Rules of Court. shipper to prove that the carrier is negligent.47
It claims that it is merely a depository and not a common carrier; hence, it is not obliged to exercise
"Defect" is the want or absence of something necessary for completeness or perfection; a lack or absence of
extraordinary diligence. It reiterates that the loss/damage was caused by the failure of the shipper or his packer
something essential to completeness; a deficiency in something essential to the proper use for the purpose for
to place a sign on the sides and middle portion of the crate that extra care should be employed in handling the
which a thing is to be used.48 On the other hand, inferior means of poor quality, mediocre, or second rate.49 A
shipment, and that the middle wooden batten on the flooring of the crate had a hole. The respondent asserts
thing may be of inferior quality but not necessarily defective. In other words, "defectiveness" is not
that the testimony of Anthony Abarquez, who conducted his investigation at the site of the incident, should
synonymous with "inferiority."
prevail over that of Rolando Balatbat. As an alternative, it argues that if ever adjudged liable, its liability is
limited only to P3,500.00 as expressed in the liability clause of Gate Pass CFS-BR-GP No. 319773. In the present case, the trial court declared that based on the record, the loss of the shipment was caused by
the negligence of the petitioner as the shipper:
The petition has no merit.
The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and the total
The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this Court in a
destruction of its contents were not imputable to any fault or negligence on the part of said defendant in
petition for review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when
handling the unloading of the cargoes from the carrying vessel, but was due solely to the inherent defect and
(1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly
weakness of the materials used in the fabrication of said crate.
mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence on The crate should have three solid and strong wooden batten placed side by side underneath or on the flooring
which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of of the crate to support the weight of its contents. However, in the case of the crate in dispute, although there
evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the were three wooden battens placed side by side on its flooring, the middle wooden batten, which carried
Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly considered, substantial volume of the weight of the crate’s contents, had a knot hole or "bukong-bukong," which
would justify a different conclusion; (10) the findings of the Court of Appeals are beyond the issues of the case; considerably affected, reduced and weakened its strength. Because of the enormous weight of the machineries
and (11) such findings are contrary to the admissions of both parties.40 inside this crate, the middle wooden batten gave way and collapsed. As the combined strength of the other
two wooden battens were not sufficient to hold and carry the load, they too simultaneously with the middle
wooden battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Civil Code (Common Carriers) | Page 13 of 28
Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea. There is nothing in the record
which would indicate that defendant ICTSI had any role in the choice of the materials used in fabricating this
crate. Said defendant, therefore, cannot be held as blame worthy for the loss of the machineries contained in
Crate No. 1.50
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil Code, particularly
number (4) thereof, i.e., the character of the goods or defects in the packing or in the containers. The trial court
found that the breakage of the crate was not due to the fault or negligence of ICTSI, but to the inherent defect
and weakness of the materials used in the fabrication of the said crate.
Upon examination of the records, We find no compelling reason to depart from the factual findings of the trial
court.
It appears that the wooden batten used as support for the flooring was not made of good materials, which
caused the middle portion thereof to give way when it was lifted. The shipper also failed to indicate signs to
notify the stevedores that extra care should be employed in handling the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court their duties and responsibilities:
"Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the sling is placed, Ma’am.
Q: When the crates have arrows drawn and where you placed the slings, what do you do with these crates?
A: A sling is placed on it, Ma’am.
Q: After you placed the slings, what do you do with the crates?
A: After I have placed a sling properly, I ask the crane (sic) to haul it, Ma’am.
… ommon carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted to
Q: Now, what, if any, were written or were marked on the crate?
A: The thing that was marked on the cargo is an arrow just like of a chain, Ma’am.
Q: And where did you see or what parts of the crate did you see those arrows?
A: At the corner of the crate, Ma’am.
Q: How many arrows did you see?
A: Four (4) on both sides, Ma’am.
… "WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court of Manila,
Q: What did you do with the arrows?
A: When I saw the arrows, that’s where I placed the slings, Ma’am.
… The assailed Resolution denied reconsideration.
Q: Now, did you find any other marks on the crate?
A: Nothing more, Ma’am.
Q: Now, Mr. Witness, if there are no arrows, would you place slings on the parts where there are no arrows?
A: You can not place slings if there are no arrows, Ma’am."
Appellant’s allegation that since the cargo arrived safely from the port of [P]usan, Korea without defect, the
fault should be attributed to the arrastre operator who mishandled the cargo, is without merit. The cargo fell
while it was being carried only at about five (5) feet high above the ground. It would not have so easily collapsed
had the cargo been properly packed. The shipper should have used materials of stronger quality to support the
heavy machines. Not only did the shipper fail to properly pack the cargo, it also failed to indicate an arrow in
the middle portion of the cargo where additional slings should be attached. At any rate, the issue of negligence
is factual in nature and in this regard, it is settled that factual findings of the lower courts are entitled to great
weight and respect on appeal, and, in fact, accorded finality when supported by substantial evidence.51
We agree with the trial and appellate courts.
The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The petitioner failed to rebut
the testimony of Dauz, that the crates were sealed and that the contents thereof could not be seen from the
outside.52 While it is true that the crate contained machineries and spare parts, it cannot thereby be concluded
that the respondents knew or should have known that the middle wooden batten had a hole, or that it was
not strong enough to bear the weight of the shipment.
There is no showing in the Bill of Lading that the shipment was in good order or condition when the carrier
received the cargo, or that the three wooden battens under the flooring of the cargo were not defective or
insufficient or inadequate. On the other hand, under Bill of Lading No. NSGPBSML512565 issued by the
respondent NSCP and accepted by the petitioner, the latter represented and warranted that the goods were
properly packed, and disclosed in writing the "condition, nature, quality or characteristic that may cause
damage, injury or detriment to the goods." Absent any signs on the shipment requiring the placement of a sling
cable in the mid-portion of the crate, the respondent ICTSI was not obliged to do so.
The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a
finding of absence of defects in the merchandise. Case law has it that such statement will create a prima
facie presumption only as to the external condition and not to that not open to inspection.53
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
SO ORDERED.
G.R. No. 161745 September 30, 2005
LEA MER INDUSTRIES, INC., Petitioners, vs. MALAYAN INSURANCE CO., INC.,* Respondent.
PANGANIBAN, J.:
them, as required by the nature of their business and for reasons of public policy. Consequently, the law
presumes that common carriers are at fault or negligent for any loss or damage to the goods that they
transport. In the present case, the evidence submitted by petitioner to overcome this presumption was sorely
insufficient.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the October 9, 2002
Decision2and the December 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 66028. The
challenged Decision disposed as follows:
Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner] is ordered to pay the
[herein respondent] the value of the lost cargo in the amount of P565,000.00. Costs against the [herein
petitioner]."4
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900
metric tons of silica sand valued at P565,000.5 Consigned to Vulcan Industrial and Mining Corporation, the
cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on
board Judy VII, a barge leased by Lea Mer.6 During the voyage, the vessel sank, resulting in the loss of the
cargo.7
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.8 To recover the amount paid
and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which refused
to comply. Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC) of Manila on
September 4, 1992, for the collection of P565,000 representing the amount that respondent had paid Vulcan.9
On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the loss was a
fortuitous event.10 The RTC noted that the vessel had sunk because of the bad weather condition brought about
Civil Code (Common Carriers) | Page 14 of 28
by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming typhoon, and
that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.11
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the
loss of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.12
Hence, this recourse. 13
The Issues
Petitioner states the issues in this wise:
"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a
witness of the said report during the trial of this case before the lower court can be admitted in evidence to
prove the alleged facts cited in the said report.
"B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of the
Regional Trial Court which clearly and unequivocally held that the loss of the cargo subject of this case was
caused by fortuitous event for which herein petitioner could not be held liable.
"C. Whether or not the respondent, Court of Appeals, had committed serious error and grave abuse of
discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the
effect that the vessel ‘Judy VII’ was seaworthy at the time of incident and further in disregarding the testimony
of the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon ‘Trining’ did not hit
Metro Manila or Palawan."14
In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and (2) whether
the survey report of Jesus Cortez is admissible in evidence.
The Court’s Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event. This
issue involves primarily a question of fact, notwithstanding petitioner’s claim that it pertains only to a question
of law. As a general rule, questions of fact may not be raised in a petition for review.15 The present case serves
as an exception to this rule, because the factual findings of the appellate and the trial courts vary.16 This Court
meticulously reviewed the records, but found no reason to reverse the CA.
Rule on Common Carriers
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 -- when this service is offered to the public
for compensation.17 Petitioner is clearly a common carrier, because it offers to the public its business of
transporting goods through its vessels.18
Thus, the Court corrects the trial court’s finding that petitioner became a private carrier when Vulcan chartered
it.19 Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are
distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for
the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect,
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."20
The distinction is significant, because a demise or bareboat charter indicates a business undertaking that
is private in character. 21 Consequently, the rights and obligations of the parties to a contract of private carriage
are governed principally by their stipulations, not by the law on common carriers.22
The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner’s crew
that manned the tugboat M/V Ayalit and controlled the barge Judy VII.23 Necessarily, petitioner was a common
carrier, and the pertinent law governs the present factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety
of the passengers they transport, as required by the nature of their business and for reasons of public
policy.24Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid damage
and destruction to the goods entrusted for carriage and delivery.25
Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the
goods that they have transported.26 This presumption can be rebutted only by proof that they observed
extraordinary diligence, or that the loss or damage was occasioned by any of the following causes:27
"(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."28
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that "no person shall be responsible for a fortuitous event which could
not be foreseen, or which, though foreseen, was inevitable." Thus, if the loss or damage was due to such an
event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a "fortuitous event" as follows: (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.29
To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and
only cause of the loss.30 Moreover, it should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.31
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present case. As the common carrier, petitioner
bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had
been occasioned by a fortuitous event -- an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of the
cargo was due to the bad weather condition brought about by Typhoon Trining.32 Evidence was presented to
show that petitioner had not been informed of the incoming typhoon, and that the Philippine Coast Guard had
given it clearance to begin the voyage.33 On October 25, 1991, the date on which the voyage commenced and
the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only "Signal
No. 1."34
The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. As
required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen
or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or
after the alleged fortuitous event.35 Its witness, Joey A. Draper, testified that he could no longer remember
whether anything had been done to minimize loss when water started entering the barge.36 This fact was
confirmed during his cross-examination, as shown by the following brief exchange:
"Atty. Baldovino, Jr.:
Civil Code (Common Carriers) | Page 15 of 28
Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised by you and the
crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat Ayalit and barge
Judy VII x x x to prevent the sinking of barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time ago."37
Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a preponderance
of evidence that the barge was not seaworthy when it sailed for Manila.38 Respondent was able to prove that,
in the hull of the barge, there were holes that might have caused or aggravated the sinking.39 Because the
presumption of negligence or fault applied to petitioner, it was incumbent upon it to show that there were no
holes; or, if there were, that they did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna, testified that
the barge was in "tip-top" or excellent condition,40 but that he had not personally inspected it when it left
Palawan.41
The submission of the Philippine Coast Guard’s Certificate of Inspection of Judy VII, dated July 31, 1991, did not
conclusively prove that the barge was seaworthy.42 The regularity of the issuance of the Certificate is disputably
presumed.43 It could be contradicted by competent evidence, which respondent offered. Moreover, this
evidence did not necessarily take into account the actual condition of the vessel at the time of the
commencement of the voyage.44
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report45 prepared by Jesus Cortez, the cargo surveyor, should not have been
admitted in evidence. The Court partly agrees. Because he did not testify during the trial, 46 then the Report
that he had prepared was hearsay and therefore inadmissible for the purpose of proving the truth of its
contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortez’s Survey Report was used in the testimonies of respondent’s witnesses -- Charlie
M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and Harding
Company.47 Soriano testified that the Survey Report had been used in preparing the final Adjustment Report
conducted by their company.48 The final Report showed that the barge was not seaworthy because of the
existence of the holes. Manlapig testified that he had prepared that Report after taking into account the
findings of the surveyor, as well as the pictures and the sketches of the place where the sinking
occurred.49 Evidently, the existence of the holes was proved by the testimonies of the witnesses, not merely
by Cortez’ Survey Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial,50 and that their testimonies must be confined
to personal knowledge is required by the rules on evidence, from which we quote:
"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness can testify only
to those facts which he knows of his personal knowledge; that is, which are derived from his own perception,
except as otherwise provided in these rules."51
On this basis, the trial court correctly refused to admit Jesus Cortez’s Affidavit, which respondent had offered
as evidence.52 Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is considered
hearsay.53
An exception to the foregoing rule is that on "independently relevant statements." A report made by a person
is admissible if it is intended to prove the tenor, not the truth, of the statements.54 Independent of the truth
or the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the hearsay
rule does not apply.55
In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of the
testimonies of respondent’s witnesses. The referral to Cortez’s Report was in relation to Manlapig’s final
Adjustment Report. Evidently, it was the existence of the Survey Report that was testified to. The admissibility
of that Report as part of the testimonies of the witnesses was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed to overcome the presumption of
fault that applies to common carriers.
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against
petitioner.
SO ORDERED.
G.R. No. 150403 January 25, 2007
CEBU SALVAGE CORPORATION, Petitioner, vs. PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.
CORONA, J.:
May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?
This is the issue presented for the Court’s resolution in this petition for review on certiorari1 assailing the March
16, 2001 decision2 and September 17, 2001 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 40473
which in turn affirmed the December 27, 1989 decision4 of the Regional Trial Court (RTC), Branch 145, Makati,
Metro Manila.5
The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals
Industries, Inc. [MCCII] (as charterer) entered into a voyage charter6 wherein petitioner was to load 800 to
1,100 metric tons of silica quartz on board the M/T Espiritu Santo7 at Ayungon, Negros Occidental for transport
to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc.8
Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric tons of silica
quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day.9 The shipment never
reached its destination, however, because the M/T Espiritu Santo sank in the afternoon of December 24, 1984
off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.10
MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance
Corporation.11 Respondent paid the claim in the amount of P211,500 and was subrogated to the rights of
MCCII.12 Thereafter, it filed a case in the RTC13 against petitioner for reimbursement of the amount it paid
MCCII.
After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay
respondent P211,500 plus legal interest, attorney’s fees equivalent to 25% of the award and costs of suit.
On appeal, the CA affirmed the decision of the RTC. Hence, this petition.
Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the
ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of
freight.14 Under a voyage charter, the shipowner 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 freight.15 An
owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery of
the goods received for transportation.16
Civil Code (Common Carriers) | Page 16 of 28
Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter it entered into
with MCCII was a contract of carriage.17 It insists that the agreement was merely a contract of hire wherein
MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS).18 Not being the owner of the M/T Espiritu
Santo, petitioner did not have control and supervision over the vessel, its master and crew.19 Thus, it could not
be held liable for the loss of the shipment caused by the sinking of a ship it did not own.
We disagree.
Based on the agreement signed by the parties and the testimony of petitioner’s operations manager, it is clear
that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited MCCII’s
account, offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in lieu of
the M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since these vessels had
broken down.20
There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was engaged
in the business of carrying and transporting goods by water, for compensation, and offered its services to the
public.21
From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to the circumstances of each case.22 In the
event of loss of the goods, common carriers are responsible, unless they can prove that this was brought about
by the causes specified in Article 1734 of the Civil Code.23 In all other cases, common carriers are presumed to
be at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.24
Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what
vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact
that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its
character and duties as a common carrier. The MCCII (respondent’s subrogor) could not be reasonably
expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize. As a practical
matter, it is very difficult and often impossible for the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the actual owner of the vessel is.25 In fact, in this case,
the voyage charter itself denominated petitioner as the "owner/operator" of the vessel.26
Petitioner next contends that if there was a contract of carriage, then it was between MCCII and ALS as
evidenced by the bill of lading ALS issued.27
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received for
transportation. It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS.28 This is
consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may
serve as the contract of carriage between the parties,29 it cannot prevail over the express provision of the
voyage charter that MCCII and petitioner executed:
[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under a
charter party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the receipt
for the goods, and as document of title passing the property of the goods, but not as varying the contract
between the charterer and the shipowner." The Bill of Lading becomes, therefore, only a receipt and not the
contract of carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law between
the parties who are bound by its terms and condition provided that these are not contrary to law, morals, good
customs, public order and public policy. 30
Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage charter stipulated
that cargo insurance was for the charterer’s account.31 This deserves scant consideration. This simply meant
that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability
for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary
to public policy.32
To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on board the vessel;
loss or non-delivery of the cargo was proven; and petitioner failed to prove that it exercised extraordinary
diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage charter here
being a contract of affreightment, the carrier was answerable for the loss of the goods received for
transportation.33
The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier that enters
into a contract of carriage is not liable to the charterer or shipper if it does not own the vessel it chooses to
use. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for its
loss. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport (by
the expedient of alleging non-ownership of the vessel it employed) would radically derogate from the carrier's
duty of extraordinary diligence. It would also open the door to collusion between the carrier and the supposed
owner and to the possible shifting of liability from the carrier to one without any financial capability to answer
for the resulting damages.34
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS, INC., Respondent.
CARPIO MORALES, J.:
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 P4,000,000.
Civil Code (Common Carriers) | Page 17 of 28
Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident which it
considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of P10,000
to petitioners upon their signing of a waiver.
As petitioners declined 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 P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to
be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard,
(3) there is clearance from the captain and (4) there is clearance from the 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.
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
Civil Code (Common Carriers) | Page 18 of 28
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
cause of 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 P50,000.29
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at death]) adopted
in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the
total earnings less expenses necessary in the creation of such earnings or income and less living and other
incidental expenses.32 The loss is not equivalent to the entire earnings of the deceased, but only such portion
as he would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are
the necessary expenses supposed to be used by the deceased for his own needs.33
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v.
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 = P44 in 2000,36 amounts to P39,600.
Ruelito’s net earning capacity is thus computed as follows:
Net Earning = life expectancy x (gross annual income - reasonable and necessary living
Capacity expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning
= P8,316,000
Capacity
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 P100,000 as moral damages
and P100,000 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) P50,000 as indemnity
for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelito’s loss of earning capacity; (3) P100,000
as moral damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount adjudged against
respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed
from the finality of this decision until full payment.
SO ORDERED.
Civil Code (Common Carriers) | Page 19 of 28
G.R. No. 112287 December 12, 1997 5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS SHIPPING, 6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive
INC., respondents. hours, Sundays and Holidays Included).
G.R. No. 112350 December 12, 1997 7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL 8. . . .
CORPORATION, respondents.
9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not
PANGANIBAN, J.: responsible for losses/damages except on proven willful negligence of the officers of the vessel.
The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's responsibility 10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized
for damage to the cargo and its liability for demurrage and attorney's fees. The Court also reiterates the well- Charter Party Agreement shall form part of this Contract.
known rule that findings of facts of trial courts, when affirmed by the Court of Appeals, are binding on this
xxx xxx xxx
Court.
The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the NANYOZAI
The Case
Charter Party which stands for "Freight In and Out including Stevedoring and Trading", which means
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping, that the handling, loading and unloading of the cargoes are the responsibility of the Charterer.
Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. 1 The Court of Appeals Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge
modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No. 23317. the cargo free of risk and expenses to owners. . . . (Emphasis supplied).
The RTC disposed as follows:
Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and
the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and
counterclaim as follows: 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
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal
part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned,
rate on both amounts from April 7, 1976 until the same shall have been fully paid;
equipped and supplied and to make the holds and all other parts of the vessel in which cargo is
2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and 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
3. Costs of suit.
arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . . ; latent defects
SO ORDERED. 2 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."
On the other hand, the Court of Appeals ruled:
Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible
WHEREFORE, premises considered, the decision appealed from is modified by reducing the award
for split, chafing and/or any damage unless caused by the negligence or default of the master and
for demurrage to P44,000.00 and deleting the award for attorney's fees and expenses of litigation.
crew."
Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
SO ORDERED. 3
"VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates
The Facts 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
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment
ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the
for the general public. Its services are available only to specific persons who enter into a special contract of
cargo on board and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on August
charter party with its owner. It is undisputed that the ship is a private carrier. And it is in the capacity that its
8, 1974.
owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter hire with
National Steel Corporation. (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
The facts as found by Respondent Court of Appeals are as follows:
opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit "B"; also Charterer. Unloading was completed only on August 24, 1974 after incurring a delay of eleven (11)
Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load days due to the heavy rain which interrupted the unloading operations. (Exhibit "E")
steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the
and conditions, viz:
shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated
1. . . . 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,
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.
Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting
3. . . . of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading were noted torn at various extents; that container/metal casings of the skids were rusting all over.
within fifteen (15) days. 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
Civil Code (Common Carriers) | Page 20 of 28
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 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
Civil Code (Common Carriers) | Page 21 of 28
 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. 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 Resolution 5 dated October 20, 1993, the appellate court denied
both motions. Undaunted, NSC and VSI filed their respective petitions for review before this Court. On motion
of VSI, the Court ordered on February 14, 1994 the consolidation of these petitions. 6
The Issues
In its petition 7 and memorandum, 8 NSC raises the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays
caused by weather interruption;
2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9",
"11" and "12") were admissible in evidence and constituted evidence of the 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 reducing the award of demurrage
from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000
for 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 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." 14Consequently, the rights and obligations of VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter
party. 15 Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers
Shipping Corporation, 16 the Court ruled:
Civil Code (Common Carriers) | Page 22 of 28
 . . . 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
facie presumption of negligence on a common carrier. It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to
prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or
damaged while in the 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 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 I was seaworthy. We find no reason to modify or reverse this finding of both the trial and the appellate
courts.
Who Were Negligent:
Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the negligence
of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the carriage of tinplates.
NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to
cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court of
Appeals for failing to consider such claim as an "uncontroverted fact" 26 and denies that MV Vlasons I "was
equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest . . ." 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:
Civil Code (Common Carriers) | Page 23 of 28
 . . . 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 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:
Civil Code (Common Carriers) | Page 24 of 28
 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.
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 Customs 36
NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of
Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records or acts of public officers"; while
Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or certified true copies" as required
by Sections 25 and 26, Rule 132, of the Rules of Court. 37
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by
private parties, but they have not been proven by one who saw the writing executed, or by evidence of the
genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section
44 of Rule 130 of the Rules of Court, which provides that "(e)ntries in official records made in the performance
of a duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined
by law, are prima facie evidence of the facts therein stated." 38 Exhibit 11 is an original certificate of the
Civil Code (Common Carriers) | Page 25 of 28
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. 43Consequently, 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
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.
Narvasa, C.J., Romero, Melo and Francisco, JJ., concur.
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the following: (a) the 30 January 1997
decision 1 of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4 October 1991 2 of
the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR to pay private
respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing
of the compliant until fully paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19
November 1997, 3 denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the following
goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks
including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential
Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its way to Manila from
the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of
the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same.
As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a
subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel
was due to the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to
pay the insurance proceeds from the loss the vessel directly to MIC, said amount to be deducted from MIC's
claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its
vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it,
Civil Code (Common Carriers) | Page 26 of 28
LOADSTAR being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the
insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate
the matter to the court of Appeals, which, however, agreed with the trial court and affirmed its decision in
toto.
In dismissing LOADSTAR's appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole
ground that there was a single shipper on that fateful voyage. The
court noted that the charter of the vessel was limited to the ship,
but LOADSTAR retained control over its crew. 4
2) As a common carrier, it is the Code of Commerce, not the Civil
Code, which should be applied in determining the rights and
liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on
the day of the voyage. If it had been seaworthy, it could have
withstood the "natural and inevitable action of the sea" on 20
November 1984, when the condition of the sea was moderate.
The vessel sank, not because of force majeure, but because it was
not seaworthy. LOADSTAR'S allegation that the sinking was
probably due to the "convergence of the winds," as stated by a
PAGASA expert, was not duly proven at the trial. The "limited
liability" rule, therefore, is not applicable considering that, in this
case, there was an actual finding of negligence on the part of the
carrier. 5
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading
do not apply because said provisions bind only the
shipper/consignee and the carrier. When MIC paid the shipper for
the goods insured, it was subrogated to the latter's rights as
against the carrier, LOADSTAR. 6
5) There was a clear breach of the contract of carriage when the
shipper's goods never reached their destination. LOADSTAR's
defense of "diligence of a good father of a family" in the training
and selection of its crew is unavailing because this is not a proper
or complete defense in culpa contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially
construed to mean that when goods are delivered on board a ship
in good order and condition, and the shipowner delivers them to
the shipper in bad order and condition, it then devolves upon the
shipowner to both allege and prove that the goods were damaged
by reason of some fact which legally exempts him from liability."
Transportation of the merchandise at the risk and venture of the
shipper means that the latter bears the risk of loss or deterioration
of his goods arising from fortuitous events, force majeure, or the
inherent nature and defects of the goods, but not those caused by
the presumed negligence or fault of the carrier, unless otherwise
proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V "Cherokee" a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these
premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued
certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only
"one shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised
below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood
products for delivery to one consignee, it was also carrying passengers as part of its regular business. Moreover,
the bills of lading in this case made no mention of any charter party but only a statement that the vessel was a
"general cargo carrier." Neither was there any "special arrangement" between LOADSTAR and the shipper
regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular type of cargo
for one shipper is not sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been
negligent, and the burden of proving otherwise devolved upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the
vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety
engineers of the Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at
the time was experienced, licensed and unquestionably competent. With all these precautions, there could be
no other conclusion except that LOADSTAR exercised the diligence of a good father of a family in ensuring the
vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force
majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather
was fine until the next day when the vessel sank due to strong waves. MCI's witness, Gracelia Tapel, fully
established the existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area of
responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which includes
Limasawa Island. Tapel also testified that the convergence of winds brought about by these two typhoons
strengthened wind velocity in the area, naturally producing strong waves and winds, in turn, causing the vessel
to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was being shipped at "owner's risk," LOADSTAR was not liable
for any loss or damage to the same. Therefore, the Court of Appeals erred in holding that the provisions of the
bills of lading apply only to the shipper and the carrier, and not to the insurer of the goods, which conclusion
runs counter to the Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v. Macondray & Co.,
Inc., 9 and National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted beyond the
period stated in the bills of lading for instituting the same — suits based upon claims arising from shortage,
damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action.
The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due
to force majeure, because the same concurred with LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be
deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at fault or
negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its
knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier
be issued a certificate of public convenience, and this public character is not altered by the fact that the carriage
of the goods in question was periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship
Agencies, Inc., 11 where this Court held that a common carrier transporting special cargo or chartering the
vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any
stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is
void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at
Civil Code (Common Carriers) | Page 27 of 28
is not involved, as in the case of a ship totally chartered for the use of a single party. LOADSTAR also
cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court
of Appeals, 13 both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual
settings are different. The records do not disclose that the M/V "Cherokee," on the date in question, undertook
to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading
failed to show any special arrangement, but only a general provision to the effect that the M/V"Cherokee" was
a "general cargo carrier." 14 Further, the bare fact that the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common
to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier
under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, 15 the Court juxtaposed the
statutory definition of "common carriers" with the peculiar circumstances of that case, viz.:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only
as ancillary activity (in local idiom, as "a sideline". Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population.
We think that Article 1733 deliberately refrained from making such distinctions.
xxx xxx xxx
It appears to the Court that private respondent is properly characterized as a common
carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such backhauling was done on a periodic or occasional rather than
regular or scheduled manner, and eventhough private respondent's principal occupation
was not the carriage of goods for others. There is no dispute that private respondent
charged his customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of
public convenience, and concluded he was not a common carrier. This is palpable error.
A certificate of public convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers. That liability arises the moment a
person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or
other franchise. To exempt private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent precisely
for failing to comply with applicable statutory requirements The business of a common
carrier impinges directly and intimately upon the safety and well being and property of
those members of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a common carrier to render
such duties and liabilities merely facultative by simply failing to obtain the necessary
permits and authorizations.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it
embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. "For
a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number
of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this
case. The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner
or agent. 17 LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its
vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm
that may be deemed as force majeure, inasmuch as the wind condition in the performance of its duties,
LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the vessel
and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter
disregard of this Court's pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co.,
Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these two cases that after
paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to
the rights of the assured, that is, it can recover only the amount that may, in turn, be recovered by the latter.
Since the right of the assured in case of loss or damage to the goods is limited or restricted by the provisions
in the bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and
restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR involved a limitation on the
carrier's liability to an amount fixed in the bill of lading which the parties may enter into, provided that the
same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation in the case at
bar effectively reduces the common carrier's liability for the loss or destruction of the goods to a degree less
than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to shipments
made at "owner's risk." Such stipulation is obviously null and void for being contrary to public policy." 20 It has
been said:
Three kinds of stipulations have often been made in a bill of lading. The first one
exempting the carrier from any and all liability for loss or damage occasioned by its own
negligence. The second is one providing for an unqualified limitation of such liability to
an agreed valuation. And the third is one limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and pays a higher rate of. freight.
According to an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable. 21
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's cause of
action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) —
which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during
transit — may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the
insurer of the goods. 22 In this case, the period for filing the action for recovery has not yet elapsed. Moreover,
a stipulation reducing the one-year period is null and void; 23 it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of
Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.1âwphi1.nêt
SO ORDERED.
Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.
Civil Code (Common Carriers) | Page 28 of 28