G.R. No.
141910 August 6, 2002 evidence on the ground that petitioner had failed to prove that it was a
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M.
EROLES, respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18
June 1994 thirty (30) units of Condura S.D. white refrigerators aboard
one of its Isuzu truck, driven by Lambert Eroles, from the plant site of
Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While
the truck was traversing the north diversion road along McArthur
highway in Barangay Anupol, Bamban, Tarlac, it collided with an
unidentified truck, causing it to fall into a deep canal, resulting in
damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to
Concepcion Industries, Inc., the value of the covered cargoes in the sum
of P204,450.00. FGU, in turn, being the subrogee of the rights and
interests of Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the trucking company
failed to heed the claim, FGU filed a complaint for damages and breach
of contract of carriage against GPS and its driver Lambert Eroles with
the Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of
Concepcion Industries, Inc., since 1988, and it was not so engaged in
business as a common carrier. Respondents further claimed that the
cause of damage was purely accidental.1âwphi1.nêt
The issues having thus been joined, FGU presented its evidence,
establishing the extent of damage to the cargoes and the amount it had
paid to the assured. GPS, instead of submitting its evidence, filed with
leave of court a motion to dismiss the complaint by way of demurrer to
1
common carrier.
The trial court, in its order of 30 April 1996, 1 granted the motion to
dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is provided
that ‘Each party must prove his own affirmative allegation, xxx.’
"In the instant case, plaintiff did not present any single evidence
that would prove that defendant is a common carrier.
"x x x xxx xxx
"Accordingly, the application of the law on common carriers is
not warranted and the presumption of fault or negligence on the
part of a common carrier in case of loss, damage or
deterioration of goods during transport under 1735 of the Civil
Code is not availing.
"Thus, the laws governing the contract between the owner of the
cargo to whom the plaintiff was subrogated and the owner of
the vehicle which transports the cargo are the laws on
obligation and contract of the Civil Code as well as the law on
quasi delicts.
"Under the law on obligation and contract, negligence or fault is
not presumed. The law on quasi delict provides for some
presumption of negligence but only upon the attendance of
some circumstances. Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating
any traffic regulation.’
 "Evidence for the plaintiff shows no proof that defendant was
violating any traffic regulation. Hence, the presumption of
negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that
defendant is a common carrier and defendant’s driver was the
one negligent, defendant cannot be made liable for the damages
of the subject cargoes."2
The subsequent motion for reconsideration having been
denied,3 plaintiff interposed an appeal to the Court of Appeals,
contending that the trial court had erred (a) in holding that the appellee
corporation was not a common carrier defined under the law and
existing jurisprudence; and (b) in dismissing the complaint on a
demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor
of GPS. The appellate court, in its decision of 10 June 1999, 4 discoursed,
among other things, that -
"x x x in order for the presumption of negligence provided for
under the law governing common carrier (Article 1735, Civil
Code) to arise, the appellant must first prove that the appellee is
a common carrier. Should the appellant fail to prove that the
appellee is a common carrier, the presumption would not arise;
consequently, the appellant would have to prove that the carrier
was negligent.
"x x x xxx xxx
"Because it is the appellant who insists that the appellees can
still be considered as a common carrier, despite its `limited
clientele,’ (assuming it was really a common carrier), it follows
that it (appellant) has the burden of proving the same. It
(plaintiff-appellant) `must establish his case by a preponderance
2
of evidence, which means that the evidence as a whole adduced
by one side is superior to that of the other.’ (Summa Insurance
Corporation vs. Court of Appeals, 243 SCRA 175). This,
unfortunately, the appellant failed to do -- hence, the dismissal
of the plaintiff’s complaint by the trial court is justified.
"x x x xxx xxx
"Based on the foregoing disquisitions and considering the
circumstances that the appellee trucking corporation has been
`its exclusive contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its principal,’ the
inevitable conclusion is that the appellee is a private carrier.
"x x x xxx xxx
"x x x the lower court correctly ruled that 'the application of the
law on common carriers is not warranted and the presumption
of fault or negligence on the part of a common carrier in case of
loss, damage or deterioration of good[s] during transport under
[article] 1735 of the Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions
and findings of fact of a trial court are entitled to great weight on
appeal and should not be disturbed unless for strong and valid
reasons."5
Petitioner's motion for reconsideration was likewise denied; 6 hence, the
instant petition,7 raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A
COMMON CARRIER AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.
 II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER
OR A PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN
NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO
TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE
IN ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS
APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and
the Court of Appeals to be amply justified. GPS, being an exclusive
contractor and hauler of Concepcion Industries, Inc., rendering or
offering its services to no other individual or entity, cannot be
considered a common carrier. 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
hire or compensation, offering their services to the public,8 whether to
the public in general or to a limited clientele in particular, but never on
an exclusive basis.9 The true test of a common carrier is the carriage of
passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee. 10 Given accepted
standards, GPS scarcely falls within the term "common carrier."
The above conclusion nothwithstanding, GPS cannot escape from
liability.
In culpa contractual, upon which the action of petitioner rests as being
the subrogee of Concepcion Industries, Inc., the mere proof of the
existence of the contract and the failure of its compliance justify, prima
facie, a corresponding right of relief. 11 The law, recognizing the
obligatory force of contracts, 12 will not permit a party to be set free from
3
liability for any kind of misperformance of the contractual undertaking
or a contravention of the tenor thereof. 13 A breach upon the contract
confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the
interests of the promisee that may include his "expectation interest,"
which is his interest in having the benefit of his bargain by being put in
as good a position as he would have been in had the contract been
performed, or his "reliance interest," which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as
good a position as he would have been in had the contract not been
made; or his "restitution interest," which is his interest in having
restored to him any benefit that he has conferred on the other
party.14 Indeed, agreements can accomplish little, either for their
makers or for society, unless they are made the basis for action. 15 The
effect of every infraction is to create a new duty, that is, to make
recompense to the one who has been injured by the failure of another to
observe his contractual obligation 16 unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that
of the diligence of a good father of a family or, exceptionally by
stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to
excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract
of carriage between it and petitioner’s assured, and admits that the
cargoes it has assumed to deliver have been lost or damaged while in its
custody. In such a situation, a default on, or failure of compliance with,
the obligation – in this case, the delivery of the goods in its custody to
the place of destination - gives rise to a presumption of lack of care and
corresponding liability on the part of the contractual obligor the burden
being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his
negligence or fault, may not himself be ordered to pay petitioner. The
driver, not being a party to the contract of carriage between petitioner’s
principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their
successors who have assumed their personality or their juridical
position.17 Consonantly with the axiom res inter alios acta aliis neque
nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioner’s civil action against the driver can only be based
on culpa aquiliana, which, unlike culpa contractual, would require the
claimant for damages to prove negligence or fault on the part of the
defendant.18
A word in passing. Res ipsa loquitur, a doctrine being invoked by
petitioner, holds a defendant liable where the thing which caused the
injury complained of is shown to be under the latter’s management and
the accident is such that, in the ordinary course of things, cannot be
expected to happen if those who have its management or control use
proper care. It affords reasonable evidence, in the absence of
explanation by the defendant, that the accident arose from want of
care.19 It is not a rule of substantive law and, as such, it does not create
an independent ground of liability. Instead, it is regarded as a mode of
proof, or a mere procedural convenience since it furnishes a substitute
for, and relieves the plaintiff of, the burden of producing specific proof
of negligence. The maxim simply places on the defendant the burden of
going forward with the proof.20 Resort to the doctrine, however, may be
allowed only when (a) the event is of a kind which does not ordinarily
occur in the absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are sufficiently
eliminated by the evidence; and (c) the indicated negligence is within
the scope of the defendant's duty to the plaintiff. 21 Thus, it is not
applicable when an unexplained accident may be attributable to one of
several causes, for some of which the defendant could not be
responsible.22
Res ipsa loquitur generally finds relevance whether or not a contractual
relationship exists between the plaintiff and the defendant, for the
inference of negligence arises from the circumstances and nature of the
occurrence and not from the nature of the relation of the
parties.23 Nevertheless, the requirement that responsible causes other
4
than those due to defendant’s conduct must first be eliminated, for the
doctrine to apply, should be understood as being confined only to cases
of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out,
immediately attaches by a failure of the covenant or its tenor. In the
case of the truck driver, whose liability in a civil action is predicated
on culpa acquiliana, while he admittedly can be said to have been in
control and management of the vehicle which figured in the accident, it
is not equally shown, however, that the accident could have been
exclusively due to his negligence, a matter that can allow, forthwith, res
ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal
is reversed, the movant shall be deemed to have waived the right to
present evidence.24 Thus, respondent corporation may no longer offer
proof to establish that it has exercised due care in transporting the
cargoes of the assured so as to still warrant a remand of the case to the
trial court.1âwphi1.nêt
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial
Court, Branch 66, of Makati City, and the decision, dated 10 June 1999,
of the Court of Appeals, are AFFIRMED only insofar as respondent
Lambert M. Eroles is concerned, but said assailed order of the trial court
and decision of the appellate court are REVERSED as regards G.P.
Sarmiento Trucking Corporation which, instead, is hereby ordered to
pay FGU Insurance Corporation the value of the damaged and lost
cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY
and ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of
Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the
decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case
No. 4293, which dismissed petitioners' complaint for a business tax refund
imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as
amended, to contract, install and operate oil pipelines. The original pipeline
concession was granted in 19671 and renewed by the Energy Regulatory Board
in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the
Office of the Mayor of Batangas City. However, before the mayor's permit could
be issued, the respondent City Treasurer required petitioner to pay a local tax
based on its gross receipts for the fiscal year 1993 pursuant to the Local
Government Code3. The respondent City Treasurer assessed a business tax on
the petitioner amounting to P956,076.04 payable in four installments based on
the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which
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
5
paying tax on gross receipts under Section 133 of the Local Government Code
of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee authorized
under Section 147 of the Local Government Code. The said section limits the
imposition of fees and charges on business to such amounts as may be
commensurate to the cost of regulation, inspection, and licensing. Hence,
assuming arguendo that FPIC is liable for the license fee, the imposition thereof
based on gross receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of
regulation, inspection and licensing. The fee is already a revenue raising
measure, and not a mere regulatory imposition.4
On March 8, 1994, the respondent City Treasurer denied the protest
contending that petitioner cannot be considered engaged in transportation
business, thus it cannot claim exemption under Section 133 (j) of the Local
Government Code.5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City
a complaint6 for tax refund with prayer for writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her capacity as
City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax on its gross receipts violates
Section 133 of the Local Government Code; (2) the authority of cities to impose
and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to
collect such taxes on transportation contractors for, as defined under Sec. 131
(h), the term "contractors" excludes transportation contractors; and, (3) the
City Treasurer illegally and erroneously imposed and collected the said tax,
thus meriting the immediate refund of the tax paid.7
Traversing the complaint, the respondents argued that petitioner cannot be
exempt from taxes under Section 133 (j) of the Local Government Code as said
exemption applies only to "transportation contractors and persons engaged in
the transportation by hire and common carriers by air, land and water."
Respondents assert that pipelines are not included in the term "common
carrier" which refers solely to ordinary carriers such as trucks, trains, ships and
the like. Respondents further posit that the term "common carrier" under the
said code pertains to the mode or manner by which a product is delivered to its
destination.8
On October 3, 1994, the trial court rendered a decision dismissing the
complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes
being the lifeblood of the government. Exemption may therefore be granted
only by clear and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act
387. (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession
grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under Sec.
137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common
carriers so as not to overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a special carrier extending its
services and facilities to a single specific or "special customer" under a "special
contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective
local autonomy to local governments than the previous enactments, to make
them economically and financially viable to serve the people and discharge
their functions with a concomitant obligation to accept certain devolution of
powers, . . . So, consistent with this policy even franchise grantees are taxed
6
(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. 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
7
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
8
not impose taxes on the business of transportation, except as otherwise
provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one
can see there that provinces have the power to impose a tax on business
enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by
local government units on the carrier business. Local government units may
impose taxes on top of what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125
[now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of the
local government unit the imposition of business tax against common carriers
is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its
gross sales/earnings under the National Internal Revenue Code. 19 To tax
petitioner again on its gross receipts in its transportation of petroleum
business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
36801 is REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE COMPANY, LTD.,
and BLACK SEA SHIPPING AND DODWELL now INCHCAPE SHIPPING
SERVICES, Respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision 1 of the Court of Appeals, as
well as its Resolution2 dated September 28, 2001 denying the motion for
reconsideration, which affirmed that of Branch 21 of the Regional Trial Court
(RTC) of Manila in Civil Case No. 92-63132 3 holding petitioner Schmitz
Transport Brokerage Corporation (Schmitz Transport), together with Black Sea
Shipping Corporation (Black Sea), represented by its ship agent Inchcape
Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the
loss of 37 hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of
Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a vessel of Russian
registry and owned by Black Sea) 545 hot rolled steel sheets in coil weighing
6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the
consignee, Little Giant Steel Pipe Corporation (Little Giant), 4 were insured
against all risks with Industrial Insurance Company Ltd. (Industrial Insurance)
under Marine Policy No. M-91-3747-TIS.5
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine
Ports Authority (PPA) assigned it a place of berth at the outside breakwater at
the Manila South Harbor.6
Schmitz Transport, whose services the consignee engaged to secure the
requisite clearances, to receive the cargoes from the shipside, and to deliver
them to its (the consignee’s) warehouse at Cainta, Rizal, 7 in turn engaged the
services of TVI to send a barge and tugboat at shipside.
9
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the barge
"Erika V" to shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge
alongside the vessel, left and returned to the port terminal. 9 At 9:00 p.m.,
arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the
545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had
become inclement due to an approaching storm, the unloading unto the barge
of the 37 coils was accomplished.10 No tugboat pulled the barge back to the pier,
however.
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 37 coils into the sea. 12 At
7:00 a.m., a tugboat finally arrived to pull the already empty and damaged
barge back to the pier.13
Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.14
Little Giant thus filed a formal claim against Industrial Insurance which paid it
the amount of ₱5,246,113.11. Little Giant thereupon executed a subrogation
receipt15 in favor of Industrial Insurance.
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 Little Giant plus adjustment
fees, attorney’s fees, and litigation expenses.16
Industrial Insurance faulted the defendants for undertaking the unloading of
the cargoes while typhoon signal No. 1 was raised in Metro Manila.17
By Decision of November 24, 1997, Branch 21 of the RTC held all the
defendants negligent for unloading the cargoes outside of the breakwater
notwithstanding the storm signal.18 The dispositive portion of the decision
reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the
plaintiff, ordering the defendants to pay plaintiff jointly and severally the sum
of ₱5,246,113.11 with interest from the date the complaint was filed until fully
satisfied, as well as the sum of ₱5,000.00 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 counterclaims and cross claims of defendants are
hereby DISMISSED for lack of [m]erit.19
To the trial court’s decision, the defendants Schmitz Transport and TVI filed a
joint motion for reconsideration assailing the finding that they are common
carriers and the award of excessive attorney’s fees of more than ₱1,000,000.
And they argued that they were not motivated by gross or evident bad faith and
that the incident was caused by a fortuitous event. 20
By resolution of February 4, 1998, the trial court denied the motion for
reconsideration. 21
All the defendants appealed to the Court of Appeals which, by decision of June
27, 2001, affirmed in toto the decision of the trial court, 22 it finding that all the
defendants were common carriers — Black Sea and TVI for engaging in the
transport of goods and cargoes over the seas as a regular business and not as
an isolated transaction,23 and Schmitz Transport for entering into a contract
with Little Giant to transport the cargoes from ship to port for a fee.24
In holding all the defendants solidarily liable, the appellate court ruled that
"each one was essential such that without each other’s contributory negligence
the incident would not have happened and so much so that the person
principally liable cannot be distinguished with sufficient accuracy." 25
In discrediting the defense of fortuitous event, the appellate court held that
"although defendants obviously had nothing to do with the force of nature, they
however had control of where to anchor the vessel, where discharge will take
place and even when the discharging will commence."26
The defendants’ respective motions for reconsideration having been denied by
Resolution27 of September 28, 2001, Schmitz Transport (hereinafter referred to
as petitioner) filed the present petition against TVI, Industrial Insurance and
Black Sea.
10
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting
for its principal, consignee Little Giant, hence, the transportation contract was
by and between Little Giant and TVI.28
By Resolution of January 23, 2002, herein respondents Industrial Insurance,
Black Sea, and TVI were required to file their respective Comments.29
By its Comment, Black Sea argued that the cargoes were received by the
consignee through petitioner in good order, hence, it cannot be faulted, it
having had no control and supervision thereover.30
For its part, TVI maintained that it acted as a passive party as it merely received
the cargoes and transferred them unto the barge upon the instruction of
petitioner.31
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent
of any act of negligence on the part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black
Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any
party from any and all liability arising therefrom:
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 appreciate 40 — 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?
11
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:
12
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 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.
13
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 liable 56 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 WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz
goods were surrendered or unconditionally placed in its possession and Transport & Brokerage Corporation, and Transport Venture Incorporation
received for transportation until they were delivered actually or constructively jointly and severally liable for the amount of ₱5,246,113.11 with the
to consignee Little Giant.58 MODIFICATION that interest at SIX PERCENT per annum of the amount due
should be computed from the promulgation on November 24, 1997 of the
Parties to a contract of carriage may, however, agree upon a definition of decision of the trial court.
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 Costs against petitioner.
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" SO ORDERED.
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 ₱1,000,000.00 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

14
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.2 The 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
15
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-0731-1538/92 23 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 Rejection 27 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 letter 29 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 letter 31 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 Decision 34 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
16
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 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
17
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 Receipt 50 issued by petitioner,
and as indicated in the Survey Report of Elite Surveyors 51 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
18
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 PAGASA 61 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?

WITNESS:

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

Since petitioner received all the cargoes in good order and condition at the time
they were turned over by the 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 the goods. It did not, however. Hence, its presumed negligence
under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby
AFFIRMED.

Costs against petitioner.

SO ORDERED.

19
G.R. No. 138334 August 25, 2003
ESTELA L. CRISOSTOMO, Petitioner,
vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL,
INC., Respondents.
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed "Jewels of
Europe". The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included
airfare, and the booking fee was also waived because petitioner’s niece, Meriam
Menor, was respondent company’s ticketing manager.
Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991
– a Wednesday – to deliver petitioner’s travel documents and plane tickets.
Petitioner, in turn, gave Menor the full payment for the package tour. Menor
then told her to be at the Ninoy Aquino International Airport (NAIA) on
Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioner’s dismay, she discovered that the flight she was
supposed to take had already departed the previous day. She learned that her
plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour – the
"British Pageant" – which included England, Scotland and Wales in its itinerary.
For this tour package, petitioner was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and commenced the trip
in July 1991.
20
Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum
she paid for "Jewels of Europe" and the amount she owed respondent for the
"British Pageant" tour. Despite several demands, respondent company refused
to reimburse the amount, contending that the same was non-
refundable.1 Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages, which was
docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial
Court of Makati City.
In her complaint,2 petitioner alleged that her failure to join "Jewels of Europe"
was due to respondent’s fault since it did not clearly indicate the departure
date on the plane ticket. Respondent was also negligent in informing her of the
wrong flight schedule through its employee Menor. She insisted that the
"British Pageant" was merely a substitute for the "Jewels of Europe" tour, such
that the cost of the former should be properly set-off against the sum paid for
the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioner’s failure to join the first tour.
Chipeco insisted that petitioner was informed of the correct departure date,
which was clearly and legibly printed on the plane ticket. The travel documents
were given to petitioner two days ahead of the scheduled trip. Petitioner had
only herself to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for
"Jewels of Europe", considering that the same had already been remitted to its
principal in Singapore, Lotus Travel Ltd., which had already billed the same
even if petitioner did not join the tour. Lotus’ European tour organizer, Insight
International Tours Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this reason, it is accepted
industry practice to disallow refund for individuals who failed to take a booked
tour.3
Lastly, respondent maintained that the "British Pageant" was not a substitute
for the package tour that petitioner missed. This tour was independently
procured by petitioner after realizing that she made a mistake in missing her
flight for "Jewels of Europe". Petitioner was allowed to make a partial payment
of only US$300.00 for the second tour because her niece was then an employee
of the travel agency. Consequently, respondent prayed that petitioner be
ordered to pay the balance of P12,901.00 for the "British Pageant" package
tour.
After due proceedings, the trial court rendered a decision, 4 the dispositive part
of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of
Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three
Centavos (P53,989.43) with legal interest thereon at the rate of twelve percent
(12%) per annum starting January 16, 1992, the date when the complaint was
filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorney’s fees;
3. Dismissing the defendant’s counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.5
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioner’s testimony. However, petitioner
should have verified the exact date and time of departure by looking at her
ticket and should have simply not relied on Menor’s verbal representation. The
trial court thus declared that petitioner was guilty of contributory negligence
and accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both
parties to be at fault. However, the appellate court held that petitioner is more
negligent than respondent because as a lawyer and well-traveled person, she
should have known better than to simply rely on what was told to her. This
being so, she is not entitled to any form of damages. Petitioner also forfeited
her right to the "Jewels of Europe" tour and must therefore pay respondent the
21
balance of the price for the "British Pageant" tour. The dispositive portion of
the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court
dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment
is hereby ENTERED requiring the plaintiff-appellee to pay to the defendant-
appellant the amount of P12,901.00, representing the balance of the price of
the British Pageant Package Tour, the same to earn legal interest at the rate of
SIX PERCENT (6%) per annum, to be computed from the time the counterclaim
was filed until the finality of this decision. After this decision becomes final and
executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied.
The award of attorney’s fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.6
Upon denial of her motion for reconsideration, 7 petitioner filed the instant
petition under Rule 45 on the following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court by
ruling that the petitioner is not entitled to a refund of the cost of unavailed
"Jewels of Europe" tour she being equally, if not more, negligent than the
private respondent, for in the contract of carriage the common carrier is
obliged to observe utmost care and extra-ordinary diligence which is higher in
degree than the ordinary diligence required of the passenger. Thus, even if the
petitioner and private respondent were both negligent, the petitioner cannot
be considered to be equally, or worse, more guilty than the private respondent.
At best, petitioner’s negligence is only contributory while the private
respondent [is guilty] of gross negligence making the principle of pari delicto
inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the "Jewels of
Europe" tour was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential
damages due her as a result of breach of contract of carriage.8
Petitioner contends that respondent did not observe the standard of care
required of a common carrier when it informed her wrongly of the flight
schedule. She could not be deemed more negligent than respondent since the
latter is required by law to exercise extraordinary diligence in the fulfillment of
its obligation. If she were negligent at all, the same is merely contributory and
not the proximate cause of the damage she suffered. Her loss could only be
attributed to respondent as it was the direct consequence of its employee’s
gross negligence.
Petitioner’s contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons,
things, or news from one place to another for a fixed price. 9 Such person or
association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.10 A common carrier is defined
under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to
the public.
It is obvious from the above definition that respondent is not an entity engaged
in the business of transporting either passengers or goods and is therefore,
neither a private nor a common carrier. Respondent did not undertake to
transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondent’s
services as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondent’s
obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained directly to the airline.
22
The object of petitioner’s contractual relation with respondent is the latter’s
service of arranging and facilitating petitioner’s booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and
not one of carriage. Petitioner’s submission is premised on a wrong
assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latter’s
obligation under the contract. For reasons of public policy, a common carrier in
a contract of carriage is bound by law to carry passengers as far as human care
and foresight can provide using the utmost diligence of very cautious persons
and with due regard for all the circumstances.11 As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound
under the law to observe extraordinary diligence in the performance of its
obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family
under Article 1173 of the Civil Code. 12 This connotes reasonable care consistent
with that which an ordinarily prudent person would have observed when
confronted with a similar situation. The test to determine whether negligence
attended the performance of an obligation is: did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty
of negligence.13
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioner’s testimony was
accepted as indubitable evidence of Menor’s alleged negligent act since
respondent did not call Menor to the witness stand to refute the allegation. The
lower court applied the presumption under Rule 131, Section 3 (e) 14 of the
Rules of Court that evidence willfully suppressed would be adverse if produced
and thus considered petitioner’s uncontradicted testimony to be sufficient
proof of her claim.
On the other hand, respondent has consistently denied that Menor was
negligent and maintains that petitioner’s assertion is belied by the evidence on
record. The date and time of departure was legibly written on the plane ticket
and the travel papers were delivered two days in advance precisely so that
petitioner could prepare for the trip. It performed all its obligations to enable
petitioner to join the tour and exercised due diligence in its dealings with the
latter.
We agree with respondent.
Respondent’s failure to present Menor as witness to rebut petitioner’s
testimony could not give rise to an inference unfavorable to the former. Menor
was already working in France at the time of the filing of the
complaint,15 thereby making it physically impossible for respondent to present
her as a witness. Then too, even if it were possible for respondent to secure
Menor’s testimony, the presumption under Rule 131, Section 3(e) would still
not apply. The opportunity and possibility for obtaining Menor’s testimony
belonged to both parties, considering that Menor was not just respondent’s
employee, but also petitioner’s niece. It was thus error for the lower court to
invoke the presumption that respondent willfully suppressed evidence under
Rule 131, Section 3(e). Said presumption would logically be inoperative if the
evidence is not intentionally omitted but is simply unavailable, or when the
same could have been obtained by both parties.16
In sum, we do not agree with the finding of the lower court that Menor’s
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menor’s negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioner’s
uncorroborated narration of the events. It is well-settled that the party alleging
a fact has the burden of proving it and a mere allegation cannot take the place
of evidence.17 If the plaintiff, upon whom rests the burden of proving his cause
of action, fails to show in a satisfactory manner facts upon which he bases his
claim, the defendant is under no obligation to prove his exception or defense. 18
Contrary to petitioner’s claim, the evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As
correctly observed by the lower court, the plane ticket 19 issued to petitioner
23
clearly reflected the departure date and time, contrary to petitioner’s
contention. The travel documents, consisting of the tour itinerary, vouchers
and instructions, were likewise delivered to petitioner two days prior to the
trip. Respondent also properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets. It arranged petitioner’s
hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the
contract as well as everything else that was essential to book petitioner for the
tour. Had petitioner exercised due diligence in the conduct of her affairs, there
would have been no reason for her to miss the flight. Needless to say, after the
travel papers were delivered to petitioner, it became incumbent upon her to
take ordinary care of her concerns. This undoubtedly would require that she at
least read the documents in order to assure herself of the important details
regarding the trip.
The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation so
demands.20 There is no fixed standard of diligence applicable to each and every
contractual obligation and each case must be determined upon its particular
facts. The degree of diligence required depends on the circumstances of the
specific obligation and whether one has been negligent is a question of fact that
is to be determined after taking into account the particulars of each
case.21 1âwphi1
The lower court declared that respondent’s employee was negligent. This
factual finding, however, is not supported by the evidence on record. While
factual findings below are generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial court overlooked,
misunderstood, or misapplied some facts or circumstances of weight and
substance which will affect the result of the case.22
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach.
Hence, petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
petitioner is ordered to pay respondent the amount of P12,901.00 representing
the balance of the price of the British Pageant Package Tour, with legal interest
thereon at the rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision. After this Decision
becomes final and executory, the rate of 12% per annum shall be imposed until
the obligation is fully settled, this interim period being deemed to be by then an
equivalent to a forbearance of credit.23

SO ORDERED.

24
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL
RAILWAYS, and the COURT OF APPEALS Respondents.
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law.
He is bound to observe extraordinary diligence in the conduct of his business.
He is presumed to be negligent when death occurs to a passenger. His liability
may include indemnity for loss of earning capacity even if the deceased
passenger may only be an unemployed high school student at the time of the
accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia
(Perefias) appeal the adverse decision promulgated on November 13, 2002, by
which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260,
in Parañ aque City that had decreed them jointly and severally liable with
Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L.
Zarate (Aaron), then a high school student of Don Bosco Technical Institute
(Don Bosco).
Antecedents
The Pereñ as were engaged in the business of transporting students from their
respective residences in Parañ aque City to Don Bosco in Pasong Tamo, Makati
City, and back. In their business, the Pereñ as used a KIA Ceres Van (van) with
Plate No. PYA 896, which had the capacity to transport 14 students at a time,
two of whom would be seated in the front beside the driver, and the others in
the rear, with six students on either side. They employed Clemente Alfaro
(Alfaro) as driver of the van.
25
In June 1996, the Zarates contracted the Pereñ as to transport Aaron to and
from Don Bosco. On August 22, 1996, as on previous school days, the van
picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his
place on the left side of the van near the rear door. The van, with its air-
conditioning unit turned on and the stereo playing loudly, ultimately carried all
the 14 student riders on their way to Don Bosco. Considering that the students
were due at Don Bosco by 7:15 a.m., and that they were already running late
because of the heavy vehicular traffic on the South Superhighway, Alfaro took
the van to an alternate route at about 6:45 a.m. by traversing the narrow path
underneath the Magallanes Interchange that was then commonly used by
Makati-bound vehicles as a short cut into Makati. At the time, the narrow path
was marked by piles of construction materials and parked passenger jeepneys,
and the railroad crossing in the narrow path had no railroad warning signs, or
watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter
No. 302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the
Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely
tailing a large passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train blew its horn
to warn motorists of its approach. When the train was about 50 meters away
from the passenger bus and the van, Alano applied the ordinary brakes of the
train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the
van driven by Alfaro did not. The train hit the rear end of the van, and the
impact threw nine of the 12 students in the rear, including Aaron, out of the
van. Aaron landed in the path of the train, which dragged his body and severed
his head, instantaneously killing him. Alano fled the scene on board the train,
and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates
commenced this action for damages against Alfaro, the Pereñ as, PNR and Alano.
The Pereñ as and PNR filed their respective answers, with cross-claims against
each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron
John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereñ a
for the adequate and safe transportation carriage of the
former spouses' son from their residence in Parañ aque to his
school at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the
implementation thereof, Aaron, the minor son of spouses
Zarate died in connection with a vehicular/train collision
which occurred while Aaron was riding the contracted carrier
Kia Ceres van of spouses Pereñ a, then driven and operated by
the latter's employee/authorized driver Clemente Alfaro,
which van collided with the train of PNR, at around 6:45 A.M.
of August 22, 1996, within the vicinity of the Magallanes
Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site
of the vehicular/train collision was a railroad crossing used by
motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there
were no appropriate and safety warning signs and railings at
the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound
public utility and private vehicles used on a daily basis the site
of the collision as an alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident
on board the commuter train involved without waiting for the
police investigator;
26
(8) The site commonly used for railroad crossing by
motorists was not in fact intended by the railroad operator for
railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the
vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by
PNR was an internal arrangement between the former and its
project contractor; and
(12) The site of the vehicular/train collision was within the
vicinity or less than 100 meters from the Magallanes station of
PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the
performance of his functions, liable for negligence constituting
the proximate cause of the vehicular collision, which resulted
in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereñ a being the
employer of defendant Alfaro are liable for any negligence
which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways
being the operator of the railroad system is liable for
negligence in failing to provide adequate safety warning signs
and railings in the area commonly used by motorists for
railroad crossings, constituting the proximate cause of the
vehicular collision which resulted in the death of the plaintiff
spouses' son;
(4) Whether or not defendant spouses Pereñ a are liable for
breach of the contract of carriage with plaintiff-spouses in
 failing to provide adequate and safe transportation for the
latter's son;
(5) Whether or not defendants spouses are liable for actual,
moral damages, exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette
Pereñ a observed the diligence of employers and school bus
operators;
(7) Whether or not defendant-spouses are civilly liable for the
accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in
operating the commuter train involved in the accident, in
allowing or tolerating the motoring public to cross, and its
failure to install safety devices or equipment at the site of the
accident for the protection of the public;
(9) Whether or not defendant PNR should be made to
reimburse defendant spouses for any and whatever amount
the latter may be held answerable or which they may be
ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs
directly and fully on the amounts claimed by the latter in their
Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants
spouses for actual, moral and exemplary damages and
attorney's fees.2
The Zarates’ claim against the Pereñ as was upon breach of the contract of
carriage for the safe transport of Aaron; but that against PNR was based on
quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñ as adduced evidence to show that they had exercised
the diligence of a good father of the family in the selection and supervision of
27
Alfaro, by making sure that Alfaro had been issued a driver’s license and had
not been involved in any vehicular accident prior to the collision; that their
own son had taken the van daily; and that Teodoro Pereñ a had sometimes
accompanied Alfaro in the van’s trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had
been the reckless crossing of the van whose driver had not first stopped, looked
and listened; and that the narrow path traversed by the van had not been
intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff and against the defendants ordering them to jointly and severally
pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñ as’ motion for
reconsideration,4 reiterating that the cooperative gross negligence of the
Pereñ as and PNR had caused the collision that led to the death of Aaron; and
that the damages awarded to the Zarates were not excessive, but based on the
established circumstances.
The CA’s Ruling
Both the Pereñ as and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National
Railways jointly and severally liable together with defendant-
appellants spouses Teodorico and Nanette Pereñ a and
defendant-appellant Clemente Alfaro to pay plaintiffs-
appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of
plaintiffs-appellees witnesses despite overwhelming
documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.
The Pereñ as ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally
liable for actual, moral and exemplary damages and attorney’s fees with the
other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñ as
against the Philippine National Railways and in not holding the latter and its
train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of
earning capacity in the absence of sufficient basis for such an award.
28
On November 13, 2002, the CA promulgated its decision, affirming the findings
of the RTC, but limited the moral damages to ₱ 2,500,000.00; and deleted the
attorney’s fees because the RTC did not state the factual and legal bases, to wit: 6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial
Court, Branch 260 of Parañ aque City is AFFIRMED with the modification that
the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages is
reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking
cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila
Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum
representing the loss of the deceased’s earning capacity despite Cariaga being
only a medical student at the time of the fatal incident. Applying the formula
adopted in the American Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon
reckoning his life expectancy from age of 21 (the age when he would have
graduated from college and started working for his own livelihood) instead of
15 years (his age when he died). Considering that the nature of his work and
his salary at the time of Aaron’s death were unknown, it used the prevailing
minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be ₱
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual
salary by Aaron’s life expectancy of 39.3 years, his gross income would
aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱
2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income.
Due to Aaron’s computed net income turning out to be higher than the amount
claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed for
by them, was granted.
On April 4, 2003, the CA denied the Pereñ as’ motion for reconsideration.8
Issues
In this appeal, the Pereñ as list the following as the errors committed by the CA,
to wit:
I. The lower court erred when it upheld the trial court’s decision holding the
petitioners jointly and severally liable to pay damages with Philippine National
Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding
damages for loss of earning capacity of a minor who was only a high school
student at the time of his death in the absence of sufficient basis for such an
award.
III. The lower court erred in not reducing further the amount of damages
awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the
Pereñ as and the PNR, basing their claim against the Pereñ as on breach of
contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereñ as and the PNR negligent. The CA affirmed the
findings.
We concur with the CA.
To start with, the Pereñ as’ defense was that they exercised the diligence of a
good father of the family in the selection and supervision of Alfaro, the van
driver, by seeing to it that Alfaro had a driver’s license and that he had not been
involved in any vehicular accident prior to the fatal collision with the train; that
they even had their own son travel to and from school on a daily basis; and that
Teodoro Pereñ a himself sometimes accompanied Alfaro in transporting the
29
passengers to and from school. The RTC gave scant consideration to such
defense by regarding such defense as inappropriate in an action for breach of
contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts
that the Pereñ as operated as a common carrier; and that their standard of care
was extraordinary diligence, not the ordinary diligence of a good father of a
family.
Although in this jurisdiction the operator of a school bus service has been
usually regarded as a private carrier, 9 primarily because he only caters to some
specific or privileged individuals, and his operation is neither open to the
indefinite public nor for public use, the exact nature of the operation of a school
bus service has not been finally settled. This is the occasion to lay the matter to
rest.
A carrier is a person or corporation who undertakes to transport or convey
goods or persons from one place to another, gratuitously or for hire. The
carrier is classified either as a private/special carrier or as a common/public
carrier.10 A private carrier is one who, without making the activity a vocation, or
without holding himself or itself out to the public as ready to act for all who
may desire his or its services, undertakes, by special agreement in a particular
instance only, to transport goods or persons from one place to another either
gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code
govern the contract of private carriage.The diligence required of a private
carrier is only ordinary, that is, the diligence of a good father of the family. In
contrast, a common carrier is a 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 such services to the
public.12 Contracts of common carriage are governed by the provisions on
common carriers of the Civil Code, the Public Service Act, 13 and other special
laws relating to transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have acted
negligently in case of the loss of the effects of passengers, or the death or
injuries to passengers.14
In relation to common carriers, the Court defined public use in the following
terms in United States v. Tan Piaco,15 viz:
"Public use" is the same as "use by the public". The essential feature of the
public use is not confined to privileged individuals, but is open to the indefinite
public. It is this indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing it.
If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of
the public utility commission. There must be, in general, a right which the law
compels the owner to give to the general public. It is not enough that the
general prosperity of the public is promoted. Public use is not synonymous
with public interest. The true criterion by which to judge the character of the
use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil
Code avoided any distinction between a person or an enterprise offering
transportation on a regular or an isolated basis; and has not distinguished a
carrier offering his services to the general public, that is, the general
community or population, from one offering his services only to a narrow
segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the
Civil Code coincides neatly with the notion of public service under the Public
Service Act, which supplements the law on common carriers found in the Civil
Code. Public service, according to Section 13, paragraph (b) of the Public
Service Act, 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 clientèle,
whether permanent or occasional, and done for the 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, 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.17
30
Given the breadth of the aforequoted characterization of a common carrier, the
Court has considered as common carriers pipeline operators, 18 custom brokers
and warehousemen,19 and barge operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the
quantity or extent of the business actually transacted, or the number and
character of the conveyances used in the activity, but whether the undertaking
is a part of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity
rendering such service is a private, not a common, carrier. The question must
be determined by the character of the business actually carried on by the
carrier, not by any secret intention or mental reservation it may entertain or
assert when charged with the duties and obligations that the law imposes. 21
Applying these considerations to the case before us, there is no question that
the Pereñ as as the operators of a school bus service were: (a) engaged in
transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by the
method by which the business was conducted; and (c) transporting students
for a fee. Despite catering to a limited clientèle, the Pereñ as operated as a
common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near
where they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the
passengers is defined by law. Given the nature of the business and for reasons
of public policy, the common carrier is 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." 22 Article
1755 of the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the
circumstances." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of
that extraordinary diligence; otherwise, the legal presumption that he or it was
at fault or acted negligently would stand. 23 No device, whether by stipulation,
posting of notices, statements on tickets, or otherwise, may dispense with or
lessen the responsibility of the common carrier as defined under Article 1755
of the Civil Code. 24
And, secondly, the Pereñ as have not presented any compelling defense or
reason by which the Court might now reverse the CA’s findings on their
liability. On the contrary, an examination of the records shows that the
evidence fully supported the findings of the CA.
As earlier stated, the Pereñ as, acting as a common carrier, were already
presumed to be negligent at the time of the accident because death had
occurred to their passenger.25 The presumption of negligence, being a
presumption of law, laid the burden of evidence on their shoulders to establish
that they had not been negligent.26 It was the law no less that required them to
prove their observance of extraordinary diligence in seeing to the safe and
secure carriage of the passengers to their destination. Until they did so in a
credible manner, they stood to be held legally responsible for the death of
Aaron and thus to be held liable for all the natural consequences of such death.
There is no question that the Pereñ as did not overturn the presumption of their
negligence by credible evidence. Their defense of having observed the diligence
of a good father of a family in the selection and supervision of their driver was
not legally sufficient. According to Article 1759 of the Civil Code, their liability
as a common carrier did not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their
employee. This was the reason why the RTC treated this defense of the Pereñ as
as inappropriate in this action for breach of contract of carriage.
The Pereñ as were liable for the death of Aaron despite the fact that their driver
might have acted beyond the scope of his authority or even in violation of the
orders of the common carrier.27 In this connection, the records showed their
driver’s actual negligence. There was a showing, to begin with, that their driver
traversed the railroad tracks at a point at which the PNR did not permit
motorists going into the Makati area to cross the railroad tracks. Although that
point had been used by motorists as a shortcut into the Makati area, that fact
alone did not excuse their driver into taking that route. On the other hand, with
his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care was
that loud music was playing inside the air-conditioned van at the time of the
accident. The loudness most probably reduced his ability to hear the warning
31
horns of the oncoming train to allow him to correctly appreciate the lurking
dangers on the railroad tracks. Also, he sought to overtake a passenger bus on
the left side as both vehicles traversed the railroad tracks. In so doing, he lost
his view of the train that was then coming from the opposite side of the
passenger bus, leading him to miscalculate his chances of beating the bus in
their race, and of getting clear of the train. As a result, the bus avoided a
collision with the train but the van got slammed at its rear, causing the fatality.
Lastly, he did not slow down or go to a full stop before traversing the railroad
tracks despite knowing that his slackening of speed and going to a full stop
were in observance of the right of way at railroad tracks as defined by the
traffic laws and regulations.28 He thereby violated a specific traffic regulation on
right of way, by virtue of which he was immediately presumed to be negligent.29
The omissions of care on the part of the van driver constituted
negligence,30 which, according to Layugan v. Intermediate Appellate Court, 31 is
"the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would
do, or the doing of something which a prudent and reasonable man would not
do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of
the interests of another person, that degree of care, precaution, and vigilance
which the circumstances justly demand, whereby such other person suffers
injury.’"33
The test by which to determine the existence of negligence in a particular case
has been aptly stated in the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case
may be stated as follows: Did the defendant in doing the alleged negligent act
use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence.
The law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law considers
what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a
given situation must of course be always determined in the light of human
experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances which are before
them or known to them. They are not, and are not supposed to be, omniscient
of the future. Hence they can be expected to take care only when there is
something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against
that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the
existence of negligence in a given case is this: Conduct is said to be negligent
when a prudent man in the position of the tortfeasor would have foreseen that
an effect harmful to another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñ as’ driver was
entirely negligent when he traversed the railroad tracks at a point not allowed
for a motorist’s crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he disregarded the foresight of
harm to his passengers by overtaking the bus on the left side as to leave himself
blind to the approach of the oncoming train that he knew was on the opposite
side of the bus.
Unrelenting, the Pereñ as cite Phil. National Railways v. Intermediate Appellate
Court,35 where the Court held the PNR solely liable for the damages caused to a
passenger bus and its passengers when its train hit the rear end of the bus that
was then traversing the railroad crossing. But the circumstances of that case
and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory negligence was
adduced against the owner of the bus. Instead, it was the owner of the bus who
proved the exercise of extraordinary diligence by preponderant evidence. Also,
the records are replete with the showing of negligence on the part of both the
Pereñ as and the PNR. Another distinction is that the passenger bus in
Philippine National Railways v. Intermediate Appellate Court was traversing
the dedicated railroad crossing when it was hit by the train, but the Pereñ as’
school van traversed the railroad tracks at a point not intended for that
purpose.
32
At any rate, the lower courts correctly held both the Pereñ as and the PNR
"jointly and severally" liable for damages arising from the death of Aaron. They
had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative, in
respect to or arising out of the accident, and questions of fact and of law were
common as to the Zarates.36 Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the Pereñ as was distinct
from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict
under Article 2176, Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause the
death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
negligence despite the school van of the Pereñ as traversing the railroad tracks
at a point not dedicated by the PNR as a railroad crossing for pedestrians and
motorists, because the PNR did not ensure the safety of others through the
placing of crossbars, signal lights, warning signs, and other permanent safety
barriers to prevent vehicles or pedestrians from crossing there. The RTC
observed that the fact that a crossing guard had been assigned to man that
point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the
risks to others as well as the need to control the vehicular and other traffic
there. Verily, the Pereñ as and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although
agreeing with the RTC on the liability, the CA modified the amount. Both lower
courts took into consideration that Aaron, while only a high school student, had
been enrolled in one of the reputable schools in the Philippines and that he had
been a normal and able-bodied child prior to his death. The basis for the
computation of Aaron’s earning capacity was not what he would have become
or what he would have wanted to be if not for his untimely death, but the
minimum wage in effect at the time of his death. Moreover, the RTC’s
computation of Aaron’s life expectancy rate was not reckoned from his age of
15 years at the time of his death, but on 21 years, his age when he would have
graduated from college.
We find the considerations taken into account by the lower courts to be
reasonable and fully warranted.
Yet, the Pereñ as submit that the indemnity for loss of earning capacity was
speculative and unfounded.1âwphi1 They cited People v. Teehankee,
Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of
earning capacity as a pilot for being speculative due to his having graduated
from high school at the International School in Manila only two years before
the shooting, and was at the time of the shooting only enrolled in the first
semester at the Manila Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court, that he was for all
intents and purposes only a high school graduate.
We reject the Pereñ as’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation
there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC
were not speculating that Aaron would be some highly-paid professional, like a
pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the
computation of Aaron’s earning capacity was premised on him being a lowly
minimum wage earner despite his being then enrolled at a prestigious high
school like Don Bosco in Makati, a fact that would have likely ensured his
success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings
should not be taken against his parents and in favor of the defendants whose
negligence not only cost Aaron his life and his right to work and earn money,
but also deprived his parents of their right to his presence and his services as
well. Our law itself states that the loss of the earning capacity of the deceased
shall be the liability of the guilty party in favor of the heirs of the deceased, and
shall in every case be assessed and awarded by the court "unless the deceased
on account of permanent physical disability not caused by the defendant, had
no earning capacity at the time of his death." 38 Accordingly, we emphatically
hold in favor of the indemnification for Aaron’s loss of earning capacity despite
him having been unemployed, because compensation of this nature is awarded
not for loss of time or earnings but for loss of the deceased’s power or ability to
earn money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga
v. Laguna Tayabas Bus Company and Manila Railroad Company, 40 fourth-year
medical student Edgardo Carriaga’s earning capacity, although he survived the
accident but his injuries rendered him permanently incapacitated, was
33
computed to be that of the physician that he dreamed to become. The Court
considered his scholastic record sufficient to justify the assumption that he
could have finished the medical course and would have passed the medical
board examinations in due time, and that he could have possibly earned a
modest income as a medical practitioner. Also, in People v. Sanchez, 41 the Court
opined that murder and rape victim Eileen Sarmienta and murder victim Allan
Gomez could have easily landed good-paying jobs had they graduated in due
time, and that their jobs would probably pay them high monthly salaries from ₱
10,000.00 to ₱ 15,000.00 upon their graduation. Their earning capacities were
computed at rates higher than the minimum wage at the time of their deaths
due to their being already senior agriculture students of the University of the
Philippines in Los Bañ os, the country’s leading educational institution in
agriculture.
3.
Were the amounts of damages excessive?
The Pereñ as plead for the reduction of the moral and exemplary damages
awarded to the Zarates in the respective amounts of ₱ 2,500,000.00 and ₱
1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just and reasonable under
the established circumstances of this case because they were intended by the
law to assuage the Zarates’ deep mental anguish over their son’s unexpected
and violent death, and their moral shock over the senseless accident. That
amount would not be too much, considering that it would help the Zarates
obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as
excessive might prove to be an injustice, given the passage of a long time from
when their mental anguish was inflicted on them on August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce
the amount if only to render effective the desired example for the public good.
As a common carrier, the Pereñ as needed to be vigorously reminded to observe
their duty to exercise extraordinary diligence to prevent a similarly senseless
accident from happening again. Only by an award of exemplary damages in that
amount would suffice to instill in them and others similarly situated like them
the ever-present need for greater and constant vigilance in the conduct of a
business imbued with public interest.

WHEREFORE, we DENY the petition for review

on certiorari; AFFIRM the decision promulgated on November 13, 2002;
and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

34

G.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL CORPORATION, respondents.
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness
of private carrier, its owner's responsibility for damage to the cargo and its
liability for demurrage and attorney's fees. The Court also reiterates the well-
known rule that findings of facts of trial courts, when affirmed by the Court of
Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel
Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which assail the
August 12, 1993 Decision of the Court of Appeals. 1 The Court of Appeals
modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch
163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against
the plaintiff dismissing the complaint with cost against plaintiff, and ordering
plaintiff to pay the defendant on the counterclaim as follows:
35
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with
interest at the legal rate on both amounts from April 7, 1976 until the same
shall have been fully paid;
2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and
3. Costs of suit.
SO ORDERED.2
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by
reducing the award for demurrage to P44,000.00 and deleting the award for
attorney's fees and expenses of litigation. Except as thus modified, the decision
is AFFIRMED. There is no pronouncement as to costs.
SO ORDERED.3
The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does
not transport cargo or shipment for the general public. Its services are available
only to specific persons who enter into a special contract of charter party with
its owner. It is undisputed that the ship is a private carrier. And it is in the
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of
affreightment or contract of voyage charter hire with National Steel
Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer
and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of
Voyage Charter Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's
vessel, the MV "VLASONS I" to make one (1) voyage to load steel products at
Iligan City and discharge them at North Harbor, Manila, under the following
terms and conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or
less at Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon
presentation of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day
of 24 consecutive hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes.
Shipowners not responsible for losses/damages except on proven willful
negligence of the officers of the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other
internationally recognized Charter Party Agreement shall form part of this
Contract.
xxx xxx xxx
The terms "F.I.O.S.T." which is used in the shipping business is a standard
provision in the NANYOZAI Charter Party which stands for "Freight In and Out
including Stevedoring and Trading", which means that the handling, loading
and unloading of the cargoes are the responsibility of the Charterer. Under
Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow
and discharge the cargo free of risk and expenses to owners. . . . (Emphasis
supplied).
Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at
the beginning of the voyage, exercise due diligence to make the vessel
seaworthy and properly manned, equipped and supplied and to make the holds
and all other parts of the vessel in which cargo is carried, fit and safe for its
reception, carriage and preservation. Owners shall not be liable for loss of or
damage of the cargo arising or resulting from: unseaworthiness unless caused
36
by want of due diligence on the part of the owners to make the vessel
seaworthy, and to secure that the vessel is properly manned, equipped and
supplied and to make the holds and all other parts of the vessel in which cargo
is carried, fit and safe for its reception, carriage and preservation; . . . ; perils,
dangers and accidents of the sea or other navigable waters; . . . ; wastage in bulk
or weight or any other loss or damage arising from inherent defect, quality or
vice of the cargo; insufficiency of packing; . . . ; latent defects not discoverable
by due diligence; any other cause arising without the actual fault or privity of
Owners or without the fault of the agents or servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners
shall not be responsible for split, chafing and/or any damage unless caused by
the negligence or default of the master and crew."
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage
Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the
NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets
or a total of 1,769 packages with a total weight of about 2,481.19 metric tons
for carriage to Manila. The shipment was placed in the three (3) hatches of the
ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged
receipt of the cargo on board and signed the corresponding bill of lading,
B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on
August 12, 1974. The following day, August 13, 1974, when the vessel's three
(3) hatches containing the shipment were opened by plaintiff's agents, nearly
all the skids of tinplates and hot rolled sheets were allegedly found to be wet
and rusty. The cargo was discharged and unloaded by stevedores hired by the
Charterer. Unloading was completed only on August 24, 1974 after incurring a
delay of eleven (11) days due to the heavy rain which interrupted the
unloading operations. (Exhibit "E")
(4) To determine the nature and extent of the wetting and rusting, NSC called
for a survey of the shipment by the Manila Adjusters and Surveyors Company
(MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit "G"), MASCO
made a report of its ocular inspection conducted on the cargo, both while it was
still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa,
Manila where the cargo was taken and stored. MASCO reported that it found
wetting and rusting of the packages of hot rolled sheets and metal covers of the
tinplates; that tarpaulin hatch covers were noted torn at various extents; that
container/metal casings of the skids were rusting all over. MASCO ventured the
opinion that "rusting of the tinplates was caused by contact with SEA WATER
sustained while still on board the vessel as a consequence of the heavy weather
and rough seas encountered while en route to destination (Exhibit "F"). It was
also reported that MASCO's surveyors drew at random samples of bad order
packing materials of the tinplates and delivered the same to the M.I.T. Testing
Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories
issued Report No. 1770 (Exhibit "I") which in part, states, "The analysis of bad
order samples of packing materials . . . shows that wetting was caused by
contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770,
plaintiff filed with the defendant its claim for damages suffered due to the
downgrading of the damaged tinplates in the amount of P941,145.18. Then on
October 3, 1974, plaintiff formally demanded payment of said claim but
defendant VSI refused and failed to pay. Plaintiff filed its complaint against
defendant on April 21, 1976 which was docketed as Civil Case No. 23317, CFI,
Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid
amount of P941,145.18 as a result of the act, neglect and default of the master
and crew in the management of the vessel as well as the want of due diligence
on the part of the defendant to make the vessel seaworthy and to make the
holds and all other parts of the vessel in which the cargo was carried, fit and
safe for its reception, carriage and preservation — all in violation of
defendant's undertaking under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming
that the MV "VLASONS I" was seaworthy in all respects for the carriage of
plaintiff's cargo; that said vessel was not a "common carrier" inasmuch as she
was under voyage charter contract with the plaintiff as charterer under the
charter party; that in the course of the voyage from Iligan City to Manila, the
MV "VLASONS I" encountered very rough seas, strong winds and adverse
weather condition, causing strong winds and big waves to continuously pound
against the vessel and seawater to overflow on its deck and hatch covers, that
under the Contract of Voyage Charter Hire, defendant shall not be responsible
37
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
38
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
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 3. Whether or not NSC's cargo of tinplates did sweat during the voyage and,
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
39
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 petition7 and memorandum,8 NSC raises the following questions of law
and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo
unloading delays caused by weather interruption;
2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4",
"5", "6", "7", "8", "9", "11" and "12") were admissible in evidence and
constituted evidence of the vessel's seaworthiness at the beginning of the
voyages; and
3. Whether or not a charterer's failure to insure its cargo exempts the
shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessel's officers and crew were negligent in handling and
caring for NSC's cargo;
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
40
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public." It has been held that the
true test of a common carrier is the carriage of passengers or goods, provided it
has space, for all who opt to avail themselves of its transportation service for a
fee.11 A carrier which does not qualify under the above test is deemed a private
carrier. "Generally, private carriage is undertaken by special agreement and the
carrier does not hold himself out to carry goods for the general public. The
most typical, although not the only form of private carriage, is the charter party,
a maritime contract by which the charterer, a party other than the shipowner,
obtains the use and service of all or some part of a ship for a period of time or a
voyage or voyages."12
In the instant case, it is undisputed that VSI did not offer its services to the
general public. As found by the Regional Trial Court, it carried passengers or
goods only for those it chose under a "special contract of charter party." 13 As
correctly concluded by the Court of Appeals, the MV Vlasons I "was not a
common but a private carrier."14 Consequently, the rights and obligations of VSI
and NSC, including their respective liability for damage to the cargo, are
determined primarily by stipulations in their contract of private carriage or
charter party.15 Recently, in Valenzuela Hardwood and Industrial Supply,
Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation,16 the Court
ruled:
. . . in a contract of private carriage, the parties may freely stipulate their duties
and obligations which perforce would be binding on them. Unlike in a contract
involving a common carrier, private carriage does not involve the general
public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship
transporting commercial goods as a private carrier. Consequently, the public
policy embodied therein is not contravened by stipulations in a charter party
that lessen or remove the protection given by law in contracts involving
common carriers.17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17,
1974, that VSI "shall not be responsible for losses except on proven willful
negligence of the officers of the vessel." The NANYOZAI Charter Party, which
was incorporated in the parties' contract of transportation further provided
that the shipowner shall not be liable for loss of or a damage to the cargo
arising or resulting from unseaworthiness, unless the same was caused by its
lack of due diligence to make the vessel seaworthy or to ensure that the same
was "properly manned, equipped and supplied," and to "make the holds and all
other parts of the vessel in which cargo [was] carried, fit and safe for its
reception, carriage and preservation."18 The NANYOZAI Charter Party also
provided that "[o]wners shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of the master or crew." 19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that
the damage to its shipment was caused by VSI's willful negligence or failure to
exercise due diligence in making MV Vlasons I seaworthy and fit for holding,
carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed
on NSC by the parties' agreement.
This view finds further support in the Code of Commerce which pertinently
provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper,
if the contrary has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the
transportation, due to fortuitous event, force majeure, or the nature and
inherent defect of the things, shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the
cause mentioned in the preceding article if proofs against him show that they
occurred on account of his negligence or his omission to take the precautions
usually adopted by careful persons, unless the shipper committed fraud in the
bill of lading, making him to believe that the goods were of a class or quality
different from what they really were.
41
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
42
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:
. . . 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 q And aside from the hatch board, is there any other material there to cover the
again exposed to moderate seas and heavy rains; that while approaching hatch?
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 a There is a beam supporting the hatch board.
holding on; q What is this beam made of?
xxx xxx xxx 28
a It is made of steel, sir.
And the relevant portions of Jose Pascua's deposition are as follows: q Is the beam that was placed in the hatch opening covering the whole hatch
q What is the purpose of the canvas cover? opening?

a So that the cargo would not be soaked with water. a No, sir.

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.
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.

a Forty-five feet by thirty-five feet, sir. q They are tight together?

xxx xxx xxx a Yes, sir.

q How was the canvas supported in the middle of the hatch opening? q How tight?

a There is a hatch board. a Very tight, sir.

ATTY DEL ROSARIO q Now, on top of the hatch boards, according to you, is the canvass cover. How
many canvas covers?
q What is the hatch board made of?
a Two, sir.29
a It is made of wood, with a handle.
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

43
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:
44
We object, your Honor, this question was already asked. This particular matter .
. . the transcript of stenographic notes shows the same was covered in the
direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of
the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q What was used in order to protect the cargo from the weather?
A A base of canvas was used as cover on top of the tin plates, and tents were
built at the opening of the hatches.
Q You also stated that the hatches were already opened and that there were
tents constructed at the opening of the hatches to protect the cargo from the
rain. Now, will you describe [to] the Court the tents constructed.
A The tents are just a base of canvas which look like a tent of an Indian camp
raise[d] high at the middle with the whole side separated down to the hatch,
the size of the hatch and it is soaks [sic] at the middle because of those weather
and this can be used only to temporarily protect the cargo from getting wet by
rains.
Q Now, is this procedure adopted by the stevedores of covering tents proper?
A No, sir, at the time they were discharging the cargo, there was a typhoon
passing by and the hatch tent was not good enough to hold all of it to prevent the
water soaking through the canvass and enter the cargo.
Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the
water enter and soak into the canvass and tinplates.
A Yes, sir, the second time I went there, I saw it.
Q As owner of the vessel, did you not advise the National Steel Corporation [of]
the procedure adopted by its stevedores in discharging the cargo particularly in
this tent covering of the hatches?
A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but
the stevedores did not mind at all, so, called the attention of the representative
of the National Steel but nothing was done, just the same. Finally, I wrote a
letter to them.31
NSC attempts to discredit the testimony of Angliongto by questioning his
failure to complain immediately about the stevedores' negligence on the first
day of unloading, pointing out that he wrote his letter to petitioner only seven
days later.32 The Court is not persuaded. Angliongto's candid answer in his
aforequoted testimony satisfactorily explained the delay. Seven days lapsed
because he first called the attention of the stevedores, then the NSC's
representative, about the negligent and defective procedure adopted in
unloading the cargo. This series of actions constitutes a reasonable response in
accord with common sense and ordinary human experience. Vicente
Angliongto could not be blamed for calling the stevedores' attention first and
then the NSC's representative on location before formally informing NSC of the
negligence he had observed, because he was not responsible for the stevedores
or the unloading operations. In fact, he was merely expressing concern for NSC
which was ultimately responsible for the stevedores it had hired and the
performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts' findings and
conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding
that the stevedores hired by NSC were negligent in the unloading of NSC's
shipment. We do not think so. Such negligence according to the trial court is
evident in the stevedores hired by [NSC], not closing the hatch of MV 'VLASONS
I' when rains occurred during the discharging of the cargo thus allowing rain
water and seawater spray to enter the hatches and to drift to and fall on the
cargo. It was proven that the stevedores merely set up temporary tents or
canvas to cover the hatch openings when it rained during the unloading
operations so that it would be easier for them to resume work after the rains
stopped by just removing said tents or canvass. It has also been shown that on
45
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.
46
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 Philippine Coast Guard in
Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the
vessel 'VLASONS I' was drydocked . . . and PCG Inspectors were sent on board
for inspection . . . After completion of drydocking and duly inspected by PCG
Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition,
meets all requirements, fitted and equipped for trading as a cargo vessel was
cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10,
1974." (sic) NSC's claim, therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that NSC has the burden of proving that MV
Vlasons I was not seaworthy. As observed earlier, the vessel was a private
carrier and, as such, it did not have the obligation of a common carrier to show
that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of
proving the willful negligence of VSI in making the ship seaworthy resulting in
damage to its cargo. Assailing the genuineness of the certificate of
seaworthiness is not sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or
less at Master's option.
xxx xxx xxx
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.39
The Court defined demurrage in its strict sense as the compensation provided
for in the contract of affreightment for the detention of the vessel beyond the
laytime or that period of time agreed on for loading and unloading of cargo. 40 It
is given to compensate the shipowner for the nonuse of the vessel. On the other
hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. . . . If
laytime is expressed in "running days," this means days when the ship would
be run continuously, and holidays are not excepted. A qualification of "weather
permitting" excepts only those days when bad weather reasonably prevents
the work contemplated.41
In this case, the contract of voyage charter hire provided for a four-day laytime;
it also qualified laytime as WWDSHINC or weather working days Sundays and
holidays included.42 The running of laytime was thus made subject to the
weather, and would cease to run in the event unfavorable weather interfered
with the unloading of cargo.43 Consequently, NSC may not be held liable for
demurrage as the four-day laytime allowed it did not lapse, having been tolled
by unfavorable weather condition in view of the WWDSHINC qualification
agreed upon by the parties. Clearly, it was error for the trial court and the Court
of Appeals to have found and affirmed respectively that NSC incurred eleven
days of delay in unloading the cargo. The trial court arrived at this erroneous
finding by subtracting from the twelve days, specifically August 13, 1974 to
August 24, 1974, the only day of unloading unhampered by unfavorable
weather or rain, which was August 22, 1974. Based on our previous discussion,
such finding is a reversible error. As mentioned, the respondent appellate court
also erred in ruling that NSC was liable to VSI for demurrage, even if it reduced
the amount by half.
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of the award of
attorney's fees. We disagree. While VSI was compelled to litigate to protect its
rights, such fact by itself will not justify an award of attorney's fees under
Article 2208 of the Civil Code when ". . . no sufficient showing of bad faith
would be reflected in a party's persistence in a case other than an erroneous
conviction of the righteousness of his cause . . ." 44 Moreover, attorney's fees may
not be awarded to a party for the reason alone that the judgment rendered was
favorable to the latter, as this is tantamount to imposing a premium on one's
right to litigate or seek judicial redress of legitimate grievances. 45
Epilogue
47
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.