A.

Definition of common carrier

1. Carrying of persons or goods or both may be the principal or ancillary activity

Pedro De Guzman vs. Court of Appeals, G. R. No. L-47822, December 22,

1988

- A merchant and dealer of general milk company contracted with respondent

for the hauling of 750 cartons of liberty filled milk from a warehouse of
General Milk to the petitioner’s establishment on earth before December 4
1970 accordingly on December 1 respondent loaded on his trucks 150
cartoons were loaded on the truck Dr driven by the respondent while 600 were
placed on board on the other track which was driven by manuel Estrada.
- The 150 were delivered and the other 600 did not reach the petitioner since the
truck was hijacked. Petitioner argued that private respondent, being a common
carrier, and having failed to exercise the extraordinary diligence required of
him by the law, should be held liable for the value of the undelivered goods.
- Petitioner denied that he was a common carrier and such loss was force
majeure
- Armed men hijacked the delivery.
- Delivering is his casual occupation a sideline to scrap iron business
- There is no distinction between one whose principal business activity
- It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such back-hauling was done
on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent's principal occupation was not the carriage of goods
for others. There is no dispute that private respondent charged his customers a
fee for hauling their goods; that fee frequently fell below commercial freight
rates is not relevant here. The Court of Appeals referred to the fact that private
respondent held no certificate of public convenience, and concluded he was
not a common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the Civil
Code provisions governing common carriers.

2. The common carrier need not be the owner (of the vessel) used to consummate
contract of carriage

Cebu Salvage Corporation vs. Philippine Home Assurance Corporation,

G.R. No. 150403, January 25, 2007

- petitioner Cebu salvage corporation and Maria Cristina chemicals industries

entered into a voyage charter where the petitioner was to load 800 to 1100
metric tons of silica quartz on board the M/T espiritu Santo for transport and
to discharge at misamis oriental to consignee ferro Chrome Philippines.
- Pursuant to the contract petitioner received unloaded 1100 metric tons of
 silica quartz on board which left the next day the shipment never reached its
destination however because the M/T sank in the afternoon off the beach of
misamis oriental resulting in the loss of the cargo.
- Petitioner and the MCC file the claim for the loss of the shipment with its
insurer which is the respondent Philippine home assurance corporation
respondent then pay the claim in the amount of 200,000 and was subrogated to
the rights of MCC there after it filed in the RTC against petitioner for
reimbursement of the amount it paid.
- Petitioner and MCC in 30 to voyage charter or a contract of Where the ship
was leased for a single voyage for the conveyance of goods in consideration
of a payment under a voyage charter the ship owner retains the possession
command and navigation of the ship the charter merely having use of the
space in the vessel in return for his payment of freight an owner who retains
possession of the ship remains liable as carrier and must answer for loss or
non delivery of goods petitioner argues that the CA erred in affirming the
RTC finding the voyage charter they entered into was a contract of carriage it
insists that the agreement was merely a contract of hire where MCC hired the
vessel from its owner not being the owner of the M/T petitioner did not have
the control and supervision over the vessel thus it could not be held liable for
the loss of the shipment caused by sinking of a ship it did not own.
- The court disagreed based on the agreement signed by the parties and the
testimony of the petitioner's operation manager it was clear that it was a
contract of carriage petitioners signed with MCC it actively negotiated and
solicited MCC's account offered its services to ship the silica quartz and
proposed to utilize the ship there is no dispute that the petitioner was a
common carrier at the time of the loss of the cargo it was engaged in business
of carrying and transporting goods by water for compensation And offered
services to the public. From the nature of their business they are bound to
observe extraordinary diligence over the goods they transport according to the
circumstances of each case in all other cases Common carriers are presumed
to be at fault.
- Petitioner was the one which contracted MCC for the transport of the cargo it
had control over what vessel it would use all throughout its dealing with MCC
it represented himself as a common carrier. the fact that it did not own the
vessel it decided to use the contaminate the contract did not negate its
character and duties as a common carrier. On petitioners next contention that
if it was a contract of carriage there should be an evidence of belief leading
the court also disagreed bill of lading was merely I received issued by alesta
evidence that fact that the goods had been received for transportation it was
not signed by MCC as in fact it was simply signed by the supercargo this is
consistent with the fact that MCC did not contract directly with the LS well
it's through that a bill of lading may serve as the contract of carriage between
the parties it cannot prevail over the express provision of the voyage charter
that MCC and the petitioner executed.
- to summarize, a contract of carriage of goods was shown to exist; the cargo
was loaded on board the vessel; loss or non-delivery of the cargo was proven;
 and petitioner failed to prove that it exercised extraordinary diligence to
prevent such loss or that it was due to some casualty or force majeure. The
voyage charter here being a contract of affreightment, the carrier was
answerable for the loss of the goods received for transportation.

B. Examples of common carrier

1. Pipeline operator

First Philippine Industrial Corporation vs. Court of Appeals, G.R. No.

125948, December 29, 1989

- This case is for a business tax refund impose way to city petitioner is a
guarantee of a pipeline concession under Republic act number 387 as
amended the contract install and operate oil pipelines. the original pipeline
concession was granted in 1967 and renewed by the energy regulatory board
in 92. sometime in January 1995 Patricia replied 4 Mayor's permit 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 of 1993 pursuant to the LGC. The respondents city treasurer assessed a
business tax on the petitioner amounting 900,000 payable in four installments
based on the gross receipts for products pumped at GP S-1 for the fiscal year
1993. In order to not hamper its operations petitioner paid the tax on the
protest in the amount of 200,000 for its first quarter.
- on January 1994 petitioner then filed a letter protest addressed to the
respondent city treasurer. The letter states that FPC 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 fineries via
pipeline. Moreover transportation contractors are not included in the
enumeration of contractors under the local government code and it does not
include the power to levy on transportation contractors.
- On March 8 1994 the respondent secretary treasurer denied the protest
contending that the petitioner can not be considered engaged in transportation
business thus it cannot claim exemption.
- On June 1994 petitioner filed with RTC a complaint for tax refund with prayer
for preliminary injunction. In its complaint the petitioner alleged that first the
imposition and collection of the business tax on its gross receipts violates the
local government code second the authority of cities to impose and collect tax
on the gross receipts of contracts and independent contractors under the local
government code does not include the authority to collect such taxes on
transportation contractors. for the term contractors excludes transportation
contractors and third the city treasurer illegally and Erroneously imposed and
collected the set tags thus meriting the immediate refund of the tax.
- 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.
- 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.

2. Customs broker

A.F. Sanchez Brokerage Inc. vs. Court of Appeals, G.R. No. 147079,
December 21, 2004

- Before this Court on a petition for Certiorari is the appellate court’s Decision1
of August 10, 2000 reversing and setting aside the judgment 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
- On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of
Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for
which, Official Receipt No. 016992,10 was issued. On the receipt, another
representative of Sanchez Brokerage, M. Sison,11 acknowledged that he
received the cargoes consisting of three pieces in good condition.12
- Wyeth-Suaco being a regular importer, the customs examiner did not inspect
the cargoes13 which were thereupon stripped from the aluminum containers14
and loaded inside two transport vehicles hired by Sanchez Brokerage.15
- Among those who witnessed the release of the cargoes from the PSI
warehouse were Ruben Alonso and Tony Akas,16 employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor
and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of
FGU Insurance.
- Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. in Antipolo City for quality control check.17 The delivery
receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery
consisted of one container with 144 cartons of Femenal and Nordiol and 1
pallet containing Trinordiol.18
- On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco,
acknowledged the delivery of the cargoes by affixing his signature on the
delivery receipt.19 Upon inspection, however, he, together with Ruben
Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and
Nordiol tablets were in bad order.20 He thus placed a note above his signature
on the delivery receipt stating that 44 cartons of oral contraceptives were in
bad order. The remaining 160 cartons of oral contraceptives were accepted as
complete and in good order.
- Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey
report21 dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3
cartons of Nordiol tablets were "wetted" (sic).22
- The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 attached
to which was an "Annexed Schedule" whereon it was indicated that prior to
the loading of the cargoes to the broker’s trucks at the NAIA, they were
inspected and found to be in "apparent good condition."24 Also noted was
that at the time of delivery to the warehouse of Hizon Laboratories Inc., slight
to heavy rains fell, which could account for the wetting of the 44 cartons of
Femenal and Nordiol tablets.25
- On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report26
confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister
packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets were
heavily damaged with water and emitted foul smell.
- On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection27 of
38 cartons of Femenal and 3 cartons of Nordiol on the ground that they were
"delivered to Hizon Laboratories with heavy water damaged (sic) causing the
cartons to sagged (sic) emitting a foul order and easily attracted flies."28
- Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez
Brokerage the payment of P191,384.25 representing the value of its loss
 arising from the damaged tablets.
- As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an
insurance claim against FGU Insurance which paid Wyeth-Suaco the amount
of P181,431.49 in settlement of its claim under Marine Risk Note Number
4995.
- Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance.
- On demand by FGU Insurance for payment of the amount of P181,431.49 it
paid Wyeth-Suaco, Sanchez Brokerage, by letter31 of January 7, 1993,
disclaimed liability for the damaged goods, positing that the damage was due
to improper and insufficient export packaging; that when the sealed containers
were opened outside the PSI warehouse, it was discovered that some of the
loose cartons were wet,32 prompting its (Sanchez Brokerage’s) representative
Morales to inform the Import-Export Assistant of Wyeth-Suaco, Ramir
Calicdan, about the condition of the cargoes but that the latter advised to still
deliver them to Hizon Laboratories where an adjuster would assess the
damage.33
- Hence, the filing by FGU Insurance of a complaint for damages before the
Regional Trial Court of Makati City against the Sanchez Brokerage.
- The trial court, by Decision34 of July 29, 1996, dismissed the complaint,
holding that the Survey Report prepared by the Elite Surveyors is bereft of
any evidentiary support and a mere product of pure guesswork.
- 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.
- 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.
- The petition fails.
- Rule 45 is clear that decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action or proceedings
involved, may be appealed to this Court by filing a petition for review, which
would be but a continuation of the appellate process over the original case.40
- The Resolution of the Court of Appeals dated December 8, 2000 denying the
motion for reconsideration of its Decision of August 10, 2000 was received by
petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days
or on or before January 20, 2001, the appellate court’s decision had become
final and executory. The filing by petitioner of a petition for certiorari on
March 6, 2001 cannot serve as a substitute for the lost remedy of appeal.
- In another vein, the rule is well settled that in a petition for certiorari, the
petitioner must prove not merely reversible error but also grave abuse of
discretion amounting to lack or excess of jurisdiction.
- Petitioner alleges that the appellate court erred in reversing and setting aside
the decision of the trial court based on its finding that petitioner is liable for
the damage to the cargo as a common carrier. What petitioner is ascribing is
an error of judgment, not of jurisdiction, which is properly the subject of an
ordinary appeal.
- Where the issue or question involves or affects the wisdom or legal soundness
of the decision – not the jurisdiction of the court to render said decision – the
same is beyond the province of a petition for certiorari.41 The supervisory
jurisdiction of this Court to issue a cert writ cannot be exercised in order to
review the judgment of lower courts as to its intrinsic correctness, either upon
the law or the facts of the case.42
- Procedural technicalities aside, the petition still fails.
- The appellate court did not err in finding petitioner, a customs broker, to be
also a common carrier, as defined under Article 1732 of the Civil Code, to
wit:
- Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
 both, by land, water, or air, for compensation, offering their services to the
public.
- Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez
Brokerage, himself testified that the services the firm offers include the
delivery of goods to the warehouse of the consignee or importer.
-
- ATTY. FLORES:
-
- Q: What are the functions of these license brokers, license customs broker?

- WITNESS:

- As customs broker, we calculate the taxes that has to be paid in cargos, and
those upon approval of the importer, we prepare the entry together for
processing and claims from customs and finally deliver the goods to the
warehouse of the importer.43

- Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity.44 The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by
law is bereft of merit. It suffices that petitioner undertakes to deliver the goods
for pecuniary consideration.

- In this light, petitioner as a common carrier is mandated to observe, under

Article 173345 of the Civil Code, extraordinary diligence in the vigilance over
the goods it transports according to all the circumstances of each case. In the
event that the goods are lost, destroyed or deteriorated, it is presumed to have
been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.46

- The concept of "extra-ordinary diligence" was explained in Compania

Maritima v. Court of Appeals:47

- The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for sale, carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristics of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as
their nature requires."48

- In the case at bar, it was established that petitioner received the cargoes from
the PSI warehouse in NAIA in good order and condition;49 and that upon
 delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were
found to be in bad order, as noted in the Delivery Receipt50 issued by
petitioner, and as indicated in the Survey Report of Elite Surveyors51 and the
Destruction Report of Hizon Laboratories, Inc.52

- In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of the
shipper for failing to properly pack them and to the inherent characteristics of
the goods53 ; and that it should not be faulted for following the instructions of
Calicdan of Wyeth-Suaco to proceed with the delivery despite information
conveyed to the latter that some of the cartons, on examination outside the PSI
warehouse, were found to be wet.54

- While paragraph No. 4 of Article 173455 of the Civil Code exempts a

common carrier from liability if the loss or damage is due to the character of
the goods or defects in the packing or in the containers, the rule is that if the
improper packing is known to the carrier or his employees or is apparent upon
ordinary observation, but he nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not relieved of liability for the
resulting damage.56

- If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo under
protest or with reservations duly noted on the receipt issued by PSI. But it
made no such protest or reservation.57

- Moreover, as observed by the appellate court, if indeed petitioner’s employees

only examined the cargoes outside the PSI warehouse and found some to be
wet, they would certainly have gone back to PSI, showed to the
warehouseman the damage, and demanded then and there for Bad Order
documents or a certification confirming the damage.58 Or, petitioner would
have presented, as witness, the employees of the PSI from whom Morales and
Domingo took delivery of the cargo to prove that, indeed, part of the cargoes
was already damaged when the container was allegedly opened outside the
warehouse.59

- Petitioner goes on to posit that contrary to the report of Elite Surveyors, no

rain fell that day. Instead, it asserts that some of the cargoes were already wet
on delivery by PSI outside the PSI warehouse but such notwithstanding
Calicdan directed Morales to proceed with the delivery to Hizon Laboratories,
Inc.

- While Calicdan testified that he received the purported telephone call of

Morales on July 29, 1992, he failed to specifically declare what time he
received the call. As to whether the call was made at the PSI warehouse when
the shipment was stripped from the airport containers, or when the cargoes
 were already in transit to Antipolo, it is not determinable. Aside from that
phone call, petitioner admitted that it had no documentary evidence to prove
that at the time it received the cargoes, a part of it was wet, damaged or in bad
condition.60

- The 4-page weather data furnished by PAGASA61 on request of Sanchez

Brokerage hardly impresses, no witness having identified it and interpreted
the technical terms thereof.

- The possibility on the other hand that, as found by Hizon Laboratories, Inc.,
the oral contraceptives were damaged by rainwater while in transit to Antipolo
City is more likely then. Sanchez himself testified that in the past, there was a
similar instance when the shipment of Wyeth-Suaco was also found to be wet
by rain.

- ATTY. FLORES:

- Q: Was there any instance that a shipment of this nature, oral contraceptives,
that arrived at the NAIA were damaged and claimed by the Wyeth-Suaco
without any question?

- WITNESS:

- A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but
Wyeth-Suaco did not claim anything against us.

- ATTY. FLORES:

- Q: HOW IS IT?

- 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.

Loadmasters Customs Services, Inc. vs. Glodel Brokerage Corporation, GR No.

179446, January 10, 2011
This is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court assailing the August 24, 2007 Decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 82822, entitled "R&B Insurance Corporation v. Glodel
Brokerage Corporation and Loadmasters Customs Services, Inc.," which held
petitioner Loadmasters Customs Services, Inc. (Loadmasters) liable to respondent
Glodel Brokerage Corporation (Glodel) in the amount of ₱1,896,789.62
representing the insurance indemnity which R&B Insurance Corporation (R&B
Insurance) paid to the insured-consignee, Columbia Wire and Cable Corporation
(Columbia).

THE FACTS:

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001
in favor of Columbia to insure the shipment of 132 bundles of electric copper
cathodes against All Risks. On August 28, 2001, the cargoes were shipped on
board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor,
Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of its delivery
trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and
Valenzuela City.

The goods were loaded on board twelve (12) trucks owned by Loadmasters,
driven by its employed drivers and accompanied by its employed truck helpers.
Six (6) truckloads of copper cathodes were to be delivered to Balagtas, Bulacan,
while the other six (6) truckloads were destined for Lawang Bato, Valenzuela
City. The cargoes in six truckloads for Lawang Bato were duly delivered in
Columbia’s warehouses there. Of the six (6) trucks en route to Balagtas, Bulacan,
however, only five (5) reached the destination. One (1) truck, loaded with 11
bundles or 232 pieces of copper cathodes, failed to deliver its cargo.

Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but
without the copper cathodes. Because of this incident, Columbia filed with R&B
Insurance a claim for insurance indemnity in the amount of ₱1,903,335.39. After
the requisite investigation and adjustment, R&B Insurance paid Columbia the
amount of ₱1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both

Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila
(RTC), docketed as Civil Case No. 02-103040. It sought reimbursement of the
amount it had paid to Columbia for the loss of the subject cargo. It claimed that it
had been subrogated "to the right of the consignee to recover from the
party/parties who may be held legally liable for the loss."2
On November 19, 2003, the RTC rendered a decision3 holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters’
counterclaim for damages and attorney’s fees against R&B Insurance. The
dispositive portion of the decision reads:

WHEREFORE, all premises considered, the plaintiff having established by

preponderance of evidence its claims against defendant Glodel Brokerage
Corporation, judgment is hereby rendered ordering the latter:

1. To pay plaintiff R&B Insurance Corporation the sum of ₱1,896,789.62 as

actual and compensatory damages, with interest from the date of complaint until
fully paid;

2. To pay plaintiff R&B Insurance Corporation the amount equivalent to 10% of

the principal amount recovered as and for attorney’s fees plus ₱1,500.00 per
appearance in Court;

3. To pay plaintiff R&B Insurance Corporation the sum of ₱22,427.18 as

litigation expenses.

WHEREAS, the defendant Loadmasters Customs Services, Inc.’s counterclaim

for damages and attorney’s fees against plaintiff are hereby dismissed.

With costs against defendant Glodel Brokerage Corporation.

SO ORDERED.4

Both R&B Insurance and Glodel appealed the RTC decision to the CA.

On August 24, 2007, the CA rendered the assailed decision which reads in part:

Considering that appellee is an agent of appellant Glodel, whatever liability the

latter owes to appellant R&B Insurance Corporation as insurance indemnity must
likewise be the amount it shall be paid by appellee Loadmasters.

WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED in

that the appellee Loadmasters is likewise held liable to appellant Glodel in the
amount of ₱1,896,789.62 representing the insurance indemnity appellant Glodel
has been held liable to appellant R&B Insurance Corporation.

Appellant Glodel’s appeal to absolve it from any liability is herein DISMISSED.

SO ORDERED.5

Hence, Loadmasters filed the present petition for review on certiorari before this
Court presenting the following
ISSUES

1. Can Petitioner Loadmasters be held liable to Respondent Glodel in spite of the

fact that the latter respondent Glodel did not file a cross-claim against it
(Loadmasters)?

2. Under the set of facts established and undisputed in the case, can petitioner
Loadmasters be legally considered as an Agent of respondent Glodel?6

To totally exculpate itself from responsibility for the lost goods, Loadmasters
argues that it cannot be considered an agent of Glodel because it never
represented the latter in its dealings with the consignee. At any rate, it further
contends that Glodel has no recourse against it for its (Glodel’s) failure to file a
cross-claim pursuant to Section 2, Rule 9 of the 1997 Rules of Civil Procedure.

Glodel, in its Comment,7 counters that Loadmasters is liable to it under its cross-
claim because the latter was grossly negligent in the transportation of the subject
cargo. With respect to Loadmasters’ claim that it is already estopped from filing a
cross-claim, Glodel insists that it can still do so even for the first time on appeal
because there is no rule that provides otherwise. Finally, Glodel argues that its
relationship with Loadmasters is that of Charter wherein the transporter
(Loadmasters) is only hired for the specific job of delivering the merchandise.
Thus, the diligence required in this case is merely ordinary diligence or that of a
good father of the family, not the extraordinary diligence required of common
carriers.

R&B Insurance, for its part, claims that Glodel is deemed to have interposed a
cross-claim against Loadmasters because it was not prevented from presenting
evidence to prove its position even without amending its Answer. As to the
relationship between Loadmasters and Glodel, it contends that a contract of
agency existed between the two corporations.8

Subrogation is the substitution of one person in the place of another with

reference to a lawful claim or right, so that he who is substituted succeeds to the
rights of the other in relation to a debt or claim, including its remedies or
securities.9 Doubtless, R&B Insurance is subrogated to the rights of the insured to
the extent of the amount it paid the consignee under the marine insurance, as
provided under Article 2207 of the Civil Code, which reads:

ART. 2207. If the plaintiff’s property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrong-doer or the person who
has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.

As subrogee of the rights and interest of the consignee, R&B Insurance has the
right to seek reimbursement from either Loadmasters or Glodel or both for breach
of contract and/or tort.

The issue now is who, between Glodel and Loadmasters, is liable to pay R&B
Insurance for the amount of the indemnity it paid Columbia.

At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are
common carriers to determine their liability for the loss of the subject cargo.
Under Article 1732 of the Civil Code, common carriers are persons, corporations,
firms, or associations engaged in the business of carrying or transporting
passenger or goods, or both by land, water or air for compensation, offering their
services to the public.

Based on the aforecited definition, Loadmasters is a common carrier because it is

engaged in the business of transporting goods by land, through its trucking
service. It is a common carrier as distinguished from a private carrier wherein the
carriage is generally undertaken by special agreement and it does not hold itself
out to carry goods for the general public.10 The distinction is significant in the
sense that "the rights and obligations of the parties to a contract of private carriage
are governed principally by their stipulations, not by the law on common
carriers."11

In the present case, there is no indication that the undertaking in the contract
between Loadmasters and Glodel was private in character. There is no showing
that Loadmasters solely and exclusively rendered services to Glodel.

In fact, Loadmasters admitted that it is a common carrier.12

In the same vein, Glodel is also considered a common carrier within the context
of Article 1732. In its Memorandum,13 it states that it "is a corporation duly
organized and existing under the laws of the Republic of the Philippines and is
engaged in the business of customs brokering." It cannot be considered otherwise
because as held by this Court in Schmitz Transport & Brokerage Corporation v.
Transport Venture, Inc.,14 a customs broker is also regarded as a common carrier,
the transportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the
nature of their business and for reasons of public policy, to observe the
extraordinary diligence in the vigilance over the goods transported by them
according to all the circumstances of such case, as required by Article 1733 of the
Civil Code. When the Court speaks of extraordinary diligence, it is that extreme
measure of care and caution which persons of unusual prudence and
circumspection observe for securing and preserving their own property or
rights.15 This exacting standard imposed on common carriers in a contract of
carriage of goods is intended to tilt the scales in favor of the shipper who is at the
mercy of the common carrier once the goods have been lodged for shipment.16
Thus, in case of loss of the goods, the common carrier is presumed to have been at
fault or to have acted negligently.17 This presumption of fault or negligence,
however, may be rebutted by proof that the common carrier has observed
extraordinary diligence over the goods.

With respect to the time frame of this extraordinary responsibility, the Civil Code
provides that the exercise of extraordinary diligence lasts from the time the goods
are unconditionally placed in the possession of, and received by, the carrier for
transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them.18

Premises considered, the Court is of the view that both Loadmasters and Glodel
are jointly and severally liable to R & B Insurance for the loss of the subject
cargo. Under Article 2194 of the New Civil Code, "the responsibility of two or
more persons who are liable for a quasi-delict is solidary."

Loadmasters’ claim that it was never privy to the contract entered into by Glodel
with the consignee Columbia or R&B Insurance as subrogee, is not a valid
defense. It may not have a direct contractual relation with Columbia, but it is
liable for tort under the provisions of Article 2176 of the Civil Code on quasi-
delicts which expressly provide:

ART. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.

Pertinent is the ruling enunciated in the case of Mindanao Terminal and

Brokerage Service, Inc. v. Phoenix Assurance Company of New York,/McGee &
Co., Inc.19 where this Court held that a tort may arise despite the absence of a
contractual relationship, to wit:

We agree with the Court of Appeals that the complaint filed by Phoenix and
McGee against Mindanao Terminal, from which the present case has arisen, states
a cause of action. The present action is based on quasi-delict, arising from the
negligent and careless loading and stowing of the cargoes belonging to Del Monte
Produce. Even assuming that both Phoenix and McGee have only been subrogated
in the rights of Del Monte Produce, who is not a party to the contract of service
between Mindanao Terminal and Del Monte, still the insurance carriers may have
a cause of action in light of the Court’s consistent ruling that the act that breaks
the contract may be also a tort. In fine, a liability for tort may arise even under a
contract, where tort is that which breaches the contract. In the present case,
Phoenix and McGee are not suing for damages for injuries arising from the breach
of the contract of service but from the alleged negligent manner by which
Mindanao Terminal handled the cargoes belonging to Del Monte Produce.
Despite the absence of contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the part of the defendant
should be sufficient to establish a cause of action arising from quasi-delict.
[Emphases supplied]

In connection therewith, Article 2180 provides:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for
one’s own acts or omissions, but also for those of persons for whom one is
responsible.

xxxx

Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.

It is not disputed that the subject cargo was lost while in the custody of
Loadmasters whose employees (truck driver and helper) were instrumental in the
hijacking or robbery of the shipment. As employer, Loadmasters should be made
answerable for the damages caused by its employees who acted within the scope
of their assigned task of delivering the goods safely to the warehouse.

Whenever an employee’s negligence causes damage or injury to another, there

instantly arises a presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection (culpa in eligiendo) or supervision
(culpa in vigilando) of its employees.20 To avoid liability for a quasi-delict
committed by its employee, an employer must overcome the presumption by
presenting convincing proof that he exercised the care and diligence of a good
father of a family in the selection and supervision of his employee.21 In this
regard, Loadmasters failed.

Glodel is also liable because of its failure to exercise extraordinary diligence. It

failed to ensure that Loadmasters would fully comply with the undertaking to
safely transport the subject cargo to the designated destination. It should have
been more prudent in entrusting the goods to Loadmasters by taking
precautionary measures, such as providing escorts to accompany the trucks in
delivering the cargoes. Glodel should, therefore, be held liable with Loadmasters.
Its defense of force majeure is unavailing.

At this juncture, the Court clarifies that there exists no principal-agent relationship
between Glodel and Loadmasters, as erroneously found by the CA. Article 1868
of the Civil Code provides: "By the contract of agency a person binds himself to
render some service or to do something in representation or on behalf of another,
with the consent or authority of the latter." The elements of a contract of agency
are: (1) consent, express or implied, of the parties to establish the relationship; (2)
the object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself; (4) the agent acts within the
scope of his authority.22

Accordingly, there can be no contract of agency between the parties. Loadmasters

never represented Glodel. Neither was it ever authorized to make such
representation. It is a settled rule that the basis for agency is representation, that
is, the agent acts for and on behalf of the principal on matters within the scope of
his authority and said acts have the same legal effect as if they were personally
executed by the principal. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his words or actions,
while on the part of the agent, there must be an intention to accept the
appointment and act on it.23 Such mutual intent is not obtaining in this case.

What then is the extent of the respective liabilities of Loadmasters and Glodel?
Each wrongdoer is liable for the total damage suffered by R&B Insurance. Where
there are several causes for the resulting damages, a party is not relieved from
liability, even partially. It is sufficient that the negligence of a party is an efficient
cause without which the damage would not have resulted. It is no defense to one
of the concurrent tortfeasors that the damage would not have resulted from his
negligence alone, without the negligence or wrongful acts of the other concurrent
tortfeasor. As stated in the case of Far Eastern Shipping v. Court of Appeals,24

X x x. Where several causes producing an injury are concurrent and each is an

efficient cause without which the injury would not have happened, the injury may
be attributed to all or any of the causes and recovery may be had against any or all
of the responsible persons although under the circumstances of the case, it may
appear that one of them was more culpable, and that the duty owed by them to the
injured person was not the same. No actor's negligence ceases to be a proximate
cause merely because it does not exceed the negligence of other actors. Each
wrongdoer is responsible for the entire result and is liable as though his acts were
the sole cause of the injury.

There is no contribution between joint tortfeasors whose liability is solidary since

both of them are liable for the total damage. Where the concurrent or successive
negligent acts or omissions of two or more persons, although acting
independently, are in combination the direct and proximate cause of a single
injury to a third person, it is impossible to determine in what proportion each
contributed to the injury and either of them is responsible for the whole injury.
Where their concurring negligence resulted in injury or damage to a third party,
they become joint tortfeasors and are solidarily liable for the resulting damage
under Article 2194 of the Civil Code. [Emphasis supplied]

The Court now resolves the issue of whether Glodel can collect from
 Loadmasters, it having failed to file a cross-claim against the latter.1avvphi1

Undoubtedly, Glodel has a definite cause of action against Loadmasters for

breach of contract of service as the latter is primarily liable for the loss of the
subject cargo. In this case, however, it cannot succeed in seeking judicial sanction
against Loadmasters because the records disclose that it did not properly interpose
a cross-claim against the latter. Glodel did not even pray that Loadmasters be
liable for any and all claims that it may be adjudged liable in favor of R&B
Insurance. Under the Rules, a compulsory counterclaim, or a cross-claim, not set
up shall be barred.25 Thus, a cross-claim cannot be set up for the first time on
appeal.

For the consequence, Glodel has no one to blame but itself. The Court cannot
come to its aid on equitable grounds. "Equity, which has been aptly described as
‘a justice outside legality,’ is applied only in the absence of, and never against,
statutory law or judicial rules of procedure."26 The Court cannot be a lawyer and
take the cudgels for a party who has been at fault or negligent.

3. Freight forwarder that contracts delivery of the goods

Unsworth Transport International (Phils.) vs. Court of Appeals, G.R. No.

166250, July 26, 2010

For review is the Court of Appeals (CA) Decision1 dated April 29, 2004 and
Resolution2 dated November 26, 2004. The assailed Decision affirmed the
Regional Trial Court (RTC) decision3 dated February 22, 2001; while the assailed
Resolution denied petitioner Unsworth Transport International (Philippines), Inc.,
American President Lines, Ltd. (APL), and Unsworth Transport International,
Inc.’s (UTI’s) motion for reconsideration.

The facts of the case are:

On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI
a shipment of 27 drums of various raw materials for pharmaceutical
manufacturing, consisting of: "1) 3 drums (of) extracts, flavoring liquid,
flammable liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x x
turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs:
Vitamin B Complex Extract."4 UTI issued Bill of Lading No. C320/C15991-2,5
covering the aforesaid shipment. The subject shipment was insured with private
respondent Pioneer Insurance and Surety Corporation in favor of Unilab against
all risks in the amount of ₱1,779,664.77 under and by virtue of Marine Risk Note
Number MC RM UL 0627 926 and Open Cargo Policy No. HO-022-RIU.7

On the same day that the bill of lading was issued, the shipment was loaded in a
sealed 1x40 container van, with no. APLU-982012, boarded on APL’s vessel
M/V "Pres. Jackson," Voyage 42, and transshipped to APL’s M/V "Pres. Taft"8
for delivery to petitioner in favor of the consignee United Laboratories, Inc.
(Unilab).

On September 30, 1992, the shipment arrived at the port of Manila. On October 6,
1992, petitioner received the said shipment in its warehouse after it stamped the
Permit to Deliver Imported Goods9 procured by the Champs Customs
Brokerage.10 Three days thereafter, or on October 9, 1992, Oceanica Cargo
Marine Surveyors Corporation (OCMSC) conducted a stripping survey of the
shipment located in petitioner’s warehouse. The survey results stated:

2-pallets STC 40 bags Dried Yeast, both in good order condition and properly
sealed

19- steel drums STC Vitamin B Complex Extract, all in good order condition and
properly sealed

1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side, with
approx. spilling of 1%11

On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc.
(Jardine) issued Gate Pass No. 761412 which stated that "22 drums13 Raw
Materials for Pharmaceutical Mfg." were loaded on a truck with Plate No. PCK-
434 facilitated by Champs for delivery to Unilab’s warehouse. The materials were
noted to be complete and in good order in the gate pass.14 On the same day, the
shipment arrived in Unilab’s warehouse and was immediately surveyed by an
independent surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G. Bernas). The
Report stated:

1-p/bag torn on side contents partly spilled

1-s/drum #7 punctured and retaped on bottom side content lacking

5-drums shortship/short delivery15

On October 23 and 28, 1992, the same independent surveyor conducted final
inspection surveys which yielded the same results. Consequently, Unilab’s quality
control representative rejected one paper bag containing dried yeast and one steel
drum containing Vitamin B Complex as unfit for the intended purpose.16

On November 7, 1992, Unilab filed a formal claim17 for the damage against
private respondent and UTI. On November 20, 1992, UTI denied liability on the
basis of the gate pass issued by Jardine that the goods were in complete and good
condition; while private respondent paid the claimed amount on March 23, 1993.
By virtue of the Loss and Subrogation Receipt18 issued by Unilab in favor of
private respondent, the latter filed a complaint for Damages against APL, UTI and
petitioner with the RTC of Makati.19 The case was docketed as Civil Case No.
93-3473 and was raffled to Branch 134.

After the termination of the pre-trial conference, trial on the merits ensued. On
February 22, 2001, the RTC decided in favor of private respondent and against
APL, UTI and petitioner, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintif PIONEER

INSURANCE & SURETY CORPORATION and against the defendants
AMERICAN PRESIDENT LINES and UNSWORTH TRANSPORT
INTERNATIONAL (PHILS.), INC. (now known as JUGRO TRANSPORT
INT’L., PHILS.), ordering the latter to pay, jointly and severally, the former the
following amounts:

1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE

and 27/100 (Php76,231.27) with interest at the legal rate of 6% per annum to be
computed starting from September 30, 1993 until fully paid, for and as actual
damages;

2. The amount equivalent to 25% of the total sum as attorney’s fees;

3. Cost of this litigation.

SO ORDERED.20

On appeal, the CA affirmed the RTC decision on April 29, 2004. The CA rejected
UTI’s defense that it was merely a forwarder, declaring instead that it was a
common carrier. The appellate court added that by issuing the Bill of Lading, UTI
acknowledged receipt of the goods and agreed to transport and deliver them at a
specific place to a person named or his order. The court further concluded that
upon the delivery of the subject shipment to petitioner’s warehouse, its liability
became similar to that of a depositary. As such, it ought to have exercised
ordinary diligence in the care of the goods. And as found by the RTC, the CA
agreed that petitioner failed to exercise the required diligence. The CA also
rejected petitioner’s claim that its liability should be limited to $500 per package
pursuant to the Carriage of Goods by Sea Act (COGSA) considering that the
value of the shipment was declared pursuant to the letter of credit and the pro
forma invoice. As to APL, the court considered it as a common carrier
notwithstanding the non-issuance of a bill of lading inasmuch as a bill of lading is
not indispensable for the execution of a contract of carriage.21

Unsatisfied, petitioner comes to us in this petition for review on certiorari, raising

the following issues:

1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS

COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN UPHOLDING THE DECISION OF THE
REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001, AWARDING THE
SUM OF SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE AND
27/100 PESOS (PHP76,231.27) WITH LEGAL INTEREST AT 6% PER
ANNUM AS ACTUAL DAMAGES AND 25% AS ATTORNEY’S FEES.

2. WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.

3. WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED

ORDINARY DILIGENCE.

4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY

ESTABLISHED THE ALLEGED DAMAGE TO ITS CARGO.22

Petitioner admits that it is a forwarder but disagrees with the CA’s conclusion that
it is a common carrier. It also questions the appellate court’s findings that it failed
to establish that it exercised extraordinary or ordinary diligence in the vigilance
over the subject shipment. As to the damages allegedly suffered by private
respondent, petitioner counters that they were not sufficiently proven. Lastly, it
insists that its liability, in any event, should be limited to $500 pursuant to the
package limitation rule. Indeed, petitioner wants us to review the factual findings
of the RTC and the CA and to evaluate anew the evidence presented by the
parties.

The petition is partly meritorious.

Well established is the rule that factual questions may not be raised in a petition
for review on certiorari as clearly stated in Section 1, Rule 45 of the Rules of
Court, viz.:

Section 1. Filing of petition with Supreme Court. – A party desiring to appeal by

certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for review on certiorari.
The petition shall raise only questions of law which must be distinctly set forth.

Admittedly, petitioner is a freight forwarder. The term "freight forwarder" refers

to a firm holding itself out to the general public (other than as a pipeline, rail,
motor, or water carrier) to provide transportation of property for compensation
and, in the ordinary course of its business, (1) to assemble and consolidate, or to
provide for assembling and consolidating, shipments, and to perform or provide
for break-bulk and distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of receipt to the place
of destination; and (3) to use for any part of the transportation a carrier subject to
the federal law pertaining to common carriers.231avvphi1

A freight forwarder’s liability is limited to damages arising from its own

negligence, including negligence in choosing the carrier; however, where the
forwarder contracts to deliver goods to their destination instead of merely
arranging for their transportation, it becomes liable as a common carrier for loss
or damage to goods. A freight forwarder assumes the responsibility of a carrier,
which actually executes the transport, even though the forwarder does not carry
the merchandise itself.24

It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant

thereto, petitioner undertook to transport, ship, and deliver the 27 drums of raw
materials for pharmaceutical manufacturing to the consignee.

A bill of lading is a written acknowledgement of the receipt of goods and an

agreement to transport and to deliver them at a specified place to a person named
or on his or her order.25 It operates both as a receipt and as a contract. It is a
receipt for the goods shipped and a contract to transport and

deliver the same as therein stipulated. As a receipt, it recites the date and place of
shipment, describes the goods as to quantity, weight, dimensions, identification
marks, condition, quality, and value. As a contract, it names the contracting
parties, which include the consignee; fixes the route, destination, and freight rate
or charges; and stipulates the rights and obligations assumed by the parties.26

Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general

rule, are presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility
for any loss or damage, therefore, they have the burden of proving that they
observed such diligence.27 Mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their destination constitutes a
prima facie case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible.28

Though it is not our function to evaluate anew the evidence presented, we refer to
the records of the case to show that, as correctly found by the RTC and the CA,
petitioner failed to rebut the prima facie presumption of negligence in the carriage
of the subject shipment.

First, as stated in the bill of lading, the subject shipment was received by UTI in
apparent good order and condition in New York, United States of America.
Second, the OCMSC Survey Report stated that one steel drum STC Vitamin B
Complex Extract was discovered to be with a cut/hole on the side, with
approximate spilling of 1%. Third, though Gate Pass No. 7614, issued by Jardine,
noted that the subject shipment was in good order and condition, it was
specifically stated that there were 22 (should be 27 drums per Bill of Lading No.
C320/C15991-2) drums of raw materials for pharmaceutical manufacturing. Last,
 J.G. Bernas’ Survey Report stated that "1-s/drum was punctured and retaped on
the bottom side and the content was lacking, and there was a short delivery of 5-
drums."

All these conclusively prove the fact of shipment in good order and condition, and
the consequent damage to one steel drum of Vitamin B Complex Extract while in
the possession of petitioner which failed to explain the reason for the damage.
Further, petitioner failed to prove that it observed the extraordinary diligence and
precaution which the law requires a common carrier to exercise and to follow in
order to avoid damage to or destruction of the goods entrusted to it for safe
carriage and delivery.29

However, we affirm the applicability of the Package Limitation Rule under the
COGSA, contrary to the RTC and the CA’s findings.

It is to be noted that the Civil Code does not limit the liability of the common
carrier to a fixed amount per package. In all matters not regulated by the Civil
Code, the rights and obligations of common carriers are governed by the Code of
Commerce and special laws. Thus, the COGSA supplements the Civil Code by
establishing a provision limiting the carrier’s liability in the absence of a shipper’s
declaration of a higher value in the bill of lading.30 Section 4(5) of the COGSA
provides:

(5) Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package of lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or the equivalent of
that sum in other currency, unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading, shall be prima facie evidence, but
shall not be conclusive on the carrier.

In the present case, the shipper did not declare a higher valuation of the goods to
be shipped. Contrary to the CA’s conclusion, the insertion of the words "L/C No.
LC No. 1-187-008394/ NY 69867 covering shipment of raw materials for
pharmaceutical Mfg. x x x" cannot be the basis of petitioner’s liability.31
Furthermore, the insertion of an invoice number does not in itself sufficiently and
convincingly show that petitioner had knowledge of the value of the cargo.32

In light of the foregoing, petitioner’s liability should be limited to $500 per steel
drum. In this case, as there was only one drum lost, private respondent is entitled
to receive only $500 as damages for the loss. In addition to said amount, as aptly
held by the trial court, an interest rate of 6% per annum should also be imposed,
plus 25% of the total sum as attorney’s fees.

4. School bus operator despite limited clientele

Spouses Perena vs. Spouses Nicolas, GR No. 157917, August 29, 2012

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
Parañaque 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 Pereñas were engaged in the business of transporting students from their
respective residences in Parañaque City to Don Bosco in Pasong Tamo, Makati
City, and back. In their business, the Pereñas 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.

In June 1996, the Zarates contracted the Pereñas 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 Pereñas, PNR and Alano. The Pereñas
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 Pereña for the adequate and
safe transportation carriage of the former spouses' son from their residence in
Parañaque 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 Pereña, 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;

(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 Pereña 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 Pereña 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 Pereña 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 Pereñas 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 Pereñas adduced evidence to show that they had exercised the
diligence of a good father of the family in the selection and supervision of 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 Pereña 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 Pereñas’ motion for reconsideration,4
reiterating that the cooperative gross negligence of the Pereñas 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 Pereñas 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
Pereña 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 Pereñas 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 Pereñas
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.

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 Parañaque 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 Pereñas’ motion for reconsideration.8

Issues

In this appeal, the Pereñas 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 Pereñas
and the PNR, basing their claim against the Pereñas on breach of contract of
carriage and against the PNR on quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the
findings.

We concur with the CA.

To start with, the Pereñas’ 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 Pereña
himself sometimes accompanied Alfaro in transporting the 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 Pereñas 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

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
Pereñas 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 Pereñas 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 Pereñas 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 Pereñas, 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 Pereñas 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 Pereñas as inappropriate
in this action for breach of contract of carriage.

The Pereñas 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 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 Pereñas’ 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 Pereñas 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 Pereñas 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 Pereñas’ school van traversed the railroad tracks at
a point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereñas 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 Pereñas 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 Pereñas 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 Pereñas 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 Pereñas 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 Pereñas’ 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 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 Baños, the
country’s leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereñas 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 Pereñas 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.

C. Distinctions between common carrier and private carrier

Philippine American General Insurance Company vs. PKS Shipping Company, G.R. No.
149038, April 9, 2003

The petition before the Court seeks a review of the decision of the Court of Appeals in
C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has affirmed in toto the
judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the
complaint for damages filed by petitioner insurance corporation against respondent
shipping company.

Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS
Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-five
thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five
Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value with
petitioner Philippine American General Insurance Company (Philamgen). The goods
were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening
of 22 December 1988, about nine o’clock, while Limar I was being towed by
respondent’s tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of
Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of 75,000
bags of cement.

DUMC filed a formal claim with Philamgen for the full amount of the insurance.
Philamgen promptly made payment; it then sought reimbursement from PKS Shipping of
the sum paid to DUMC but the shipping company refused to pay, prompting Philamgen
to file suit against PKS Shipping with the Makati RTC.

The RTC dismissed the complaint after finding that the total loss of the cargo could have
been caused either by a fortuitous event, in which case the ship owner was not liable, or
through the negligence of the captain and crew of the vessel and that, under Article 587
of the Code of Commerce adopting the "Limited Liability Rule," the ship owner could
free itself of liability by abandoning, as it apparently so did, the vessel with all her
equipment and earned freightage.

Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the
decision of the trial court. The appellate court ruled that evidence to establish that PKS
Shipping was a common carrier at the time it undertook to transport the bags of cement
was wanting because the peculiar method of the shipping company’s carrying goods for
others was not generally held out as a business but as a casual occupation. It then
concluded that PKS Shipping, not being a common carrier, was not expected to observe
the stringent extraordinary diligence required of common carriers in the care of goods.
The appellate court, moreover, found that the loss of the goods was sufficiently
established as having been due to fortuitous event, negating any liability on the part of
PKS Shipping to the shipper.

In the instant appeal, Philamgen contends that the appellate court has committed a patent
error in ruling that PKS Shipping is not a common carrier and that it is not liable for the
loss of the subject cargo. The fact that respondent has a limited clientele, petitioner
argues, does not militate against respondent’s being a common carrier and that the only
way by which such carrier can be held exempt for the loss of the cargo would be if the
loss were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG"
has not entered the Philippine area of responsibility and that, even if it did, respondent
would not be exempt from liability because its employees, particularly the tugmaster,
have failed to exercise due diligence to prevent or minimize the loss.

PKS Shipping, in its comment, urges that the petition should be denied because what
Philamgen seeks is not a review on points or errors of law but a review of the undisputed
factual findings of the RTC and the appellate court. In any event, PKS Shipping points
out, the findings and conclusions of both courts find support from the evidence and
applicable jurisprudence.

The determination of possible liability on the part of PKS Shipping boils down to the
question of whether it is a private carrier or a common carrier and, in either case, to the
other question of whether or not it has observed the proper diligence (ordinary, if a
private carrier, or extraordinary, if a common carrier) required of it given the
circumstances.

The findings of fact made by the Court of Appeals, particularly when such findings are
consistent with those of the trial court, may not at liberty be reviewed by this Court in a
petition for review under Rule 45 of the Rules of Court.1 The conclusions derived from
those factual findings, however, are not necessarily just matters of fact as when they are
so linked to, or inextricably intertwined with, a requisite appreciation of the applicable
law. In such instances, the conclusions made could well be raised as being appropriate
issues in a petition for review before this Court. Thus, an issue whether a carrier is private
or common on the basis of the facts found by a trial court or the appellate court can be a
valid and reviewable question of law.

The Civil Code defines "common carriers" in the following terms:

"Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public."
Complementary to the codal definition is Section 13, paragraph (b), of the Public Service
Act; it defines "public service" to be –

"x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice
refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communication systems,
wire or wireless broadcasting stations and other similar public services. x x x.
(Underscoring supplied)."

The prevailing doctrine on the question is that enunciated in the leading case of De
Guzman vs. Court of Appeals.2 Applying Article 1732 of the Code, in conjunction with
Section 13(b) of the Public Service Act, this Court has held:

"The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as `a sideline’). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the `general public,’ i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making such distinctions.

"So understood, the concept of `common carrier’ under Article 1732 may be seen to
coincide neatly with the notion of `public service,’ under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code."

Much of the distinction between a "common or public carrier" and a "private or special
carrier" lies in the character of the business, such that if the undertaking is an isolated
transaction, not a part of the business or occupation, and the carrier does not hold itself
out to carry the goods for the general public or to a limited clientele, although involving
the carriage of goods for a fee,3 the person or corporation providing such service could
very well be just a private carrier. A typical case is that of a charter party which includes
both the vessel and its crew, such as in a bareboat or demise, where the charterer obtains
the use and service of all or some part of a ship for a period of time or a voyage or
voyages4 and gets the control of the vessel and its crew.5 Contrary to the conclusion
made by the appellate court, its factual findings indicate that PKS Shipping has engaged
itself in the business of carrying goods for others, although for a limited clientele,
undertaking to carry such goods for a fee. The regularity of its activities in this area
indicates more than just a casual activity on its part.6 Neither can the concept of a
common carrier change merely because individual contracts are executed or entered into
with patrons of the carrier. Such restrictive interpretation would make it easy for a
common carrier to escape liability by the simple expedient of entering into those distinct
agreements with clients.

Addressing now the issue of whether or not PKS Shipping has exercised the proper
diligence demanded of common carriers, Article 1733 of the Civil Code requires
common carriers to observe extraordinary diligence in the vigilance over the goods they
carry. In case of loss, destruction or deterioration of goods, common carriers are
presumed to have been at fault or to have acted negligently, and the burden of proving
otherwise rests on them.7 The provisions of Article 1733, notwithstanding, common
carriers are exempt from liability for loss, destruction, or deterioration of the goods due to
any of the following causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers; and

(5) Order or act of competent public authority.8

The appellate court ruled, gathered from the testimonies and sworn marine protests of the
respective vessel masters of Limar I and MT Iron Eagle, that there was no way by which
the barge’s or the tugboat’s crew could have prevented the sinking of Limar I. The vessel
was suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and
buffeted by strong winds of 1.5 knots resulting in the entry of water into the barge’s
hatches. The official Certificate of Inspection of the barge issued by the Philippine
Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness of
Limar I and should strengthen the factual findings of the appellate court.

Findings of fact of the Court of Appeals generally conclude this Court; none of the
recognized exceptions from the rule - (1) when the factual findings of the Court of
Appeals and the trial court are contradictory; (2) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjectures; (3) when the inference made
by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or
impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5)
when the appellate court, in making its findings, went beyond the issues of the case and
such findings are contrary to the admissions of both appellant and appellee; (6) when the
judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when
the Court of Appeals failed to notice certain relevant facts which, if properly considered,
would justify a different conclusion; (8) when the findings of fact are themselves
 conflicting; (9) when the findings of fact are conclusions without citation of the specific
evidence on which they are based; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence but such findings are contradicted by
the evidence on record – would appear to be clearly extant in this instance.

D. Diligence Required of Common Carriers

1. Extra-ordinary diligence required / Presumption of fault in case of loss or damage

to goods or death or injury to passengers

Heirs of Amparo de los Santos vs. Court of Appeals, 186 SCRA 649 (1990)

This petition for review on certiorari seeks to set aside the decision of the Court of
Appeals in CA-G.R. No. 58118-R affirming the decision in Civil Case No. 74593
of the then Court of First Instance (now Regional Trial Court), Branch XI, Manila
which dismissed the petitioners' claim for damages against Compania Maritima
for the injury to and death of the victims as a result of the sinking of M/V
Mindoro on November 4, 1967.

The trial court found the antecedent facts to be as follows:

This is a complaint originally filed on October 21, 1968 (p. 1, rec.) and amended
on October 24, 1968 (p. 16 rec.) by the heirs of Delos Santos and others as pauper
litigants against the Compania Maritima, for damages due to the death of several
passengers as a result of the sinking of the vessel of defendant, the M/V
'Mindoro', on November 4, 1967.

There is no dispute in the record that the M/V 'Mindoro' sailed from pier 8 North
Harbor, Manila, on November 2,1967 at about 2:00 (should have been 6:00 p.m.)
in the afternoon bound for New Washington, Aklan, with many passengers
aboard. It appears that said vessel met typhoon 'Welming' on the Sibuyan Sea,
Aklan, at about 5:00 in the morning of November 4, 1967 causing the death of
many of its passengers, although about 136 survived.

Mauricio delos Santos declared that on November 2, 1967 he accompanied his

common-law wife, Amparo delos Santos, and children, namely: Romeo, Josie,
Hernani, who was 10 years old, Abella, 7 years old, Maria Lemia, 5 years old and
Melany, 5 months old, to pier 8, North Harbor, Manila, to board the M/V
Mindoro 'bound for Aklan. It appears that Amparo delos Santos and the aforesaid
children brought all their belongings, including household utensils valued at P
1,000.00, with the intention of living in Aklan permanently.

As already stated, the boat met typhoon 'Welming' and due to the strong waves it
sank causing the drowning of many passengers among whom were Amparo delos
Santos and all the aforesaid children. It appears also that Teresa Pamatian and
Diego Salim, who were also passengers also drowned. Plaintiff Ruben Reyes was
one of the survivors. 'The plaintiffs presented the birth and death certificates of
Amparo delos Santos and the children (Exhs. 1, I-1, J, J-1, K, K-1, L, L-1, 0 to S,
pp. 180 to 194 rec.). They also presented copies of the manifest of passengers of
the M/V 'Mindoro' on November 2,1967 (Exhs. B & C, pp. 163 to 161 rec.).

Eliadora Crisostomo de Justo, one of the survivors, corroborated the testimony of

Mauricio delos Santos that he accompanied Amparo delos Santos and her children
to the port to board the M/V Mindoro. She is a cousin of Amparo delos Santos'
husband. According to her, when she boarded the second deck of the vessel, she
saw about 200 persons therein. She tried to see whether she could be
accommodated in the third deck or first deck because the second deck was very
crowded. She admitted that she was not included in the manifest because she
boarded the boat without a ticket, but she purchased one in the vessel. She
testified further that the boat was not able to reach its destination due to its
sinking. During the typhoon before the vessel sunk, she was able to board a
'balsa'.

Ruben Reyes, the other survivor, declared that he paid for his ticket before
boarding the M/V Mindoro. At that time he had with him personal belongings and
cash all in the amount of P2,900.00. It appears that Felix Reyes Jakusalem, Teresa
Pamatian and Amparo delos Santos drowned during the sinking of the vessel. He
was able to swim on (sic) an island and was with the others, rescued later on and
brought to the hospital. The survivors were then taken ashore (Exh. M, p. 188,
rec.).

Dominador Salim declared that Teresa Pamatian, his aunt and Diego Salim, his
father, drowned along with the sinking of the M/V Mindoro. Tins witness
declared that he accompanied both his father and his aunt to the pier to board the
boat and at the time Teresa Pamatian was bringing cash and personal belongings
of about P250.00 worth. His father brought with him P200.00 in cash plus some
belongings. He admitted that when his father boarded the vessel he did not have
yet a ticket.

The plaintiffs further submitted in evidence a copy of a Radiogram stating among

other things that the MN Mindoro was loaded also with 3,000 cases of beer, one
dump truck and 292 various goods (Exhs. D and D-1, p. 162 rec).

In alleging negligence on the part of the vessel, plaintiffs introduced in evidence a

letter sent to the Department of Social Welfare concerning the resurvey of the
M/V Mindoro victims (Exh. F, p. 169 rec.) and a telegram to the Social Welfare
Administration (Exh. G, p. 170 rec.), a resurvey of the M/V 'Mindoro' victims
(Exh. H, p. 171 rec.), a complete list of the M/V 'Mindoro' victims (Exhs. H-1 to
H-8, pp. 172179 rec.), a certified true copy of the Special Permit to the Compania
Maritima issued by the Bureau of Customs limiting the vessel to only 193
passengers (Exh. X, p. 318 rec.).
It appears that in a decision of the Board of Marine Inquiry, dated February 2,
1970, it was found that the captain and some officers of the crew were negligent
in operating the vessel and imposed upon them a suspension and/or revocation of
their license certificates. It appears, however, that this decision cannot be
executed against the captain who perished with the vessel (Exhs. E, E-1, E-1-A,
E-2 to E-9, pp. 163- 168 rec.).

Upon agreement of the parties, the plaintiffs also introduced in evidence the
transcript of stenographic notes of the testimony of Boanerjes Prado before
Branch I of this Court (Exh. U, pp. 203-220) and that of Felimon Rebano in the
same branch (Exh. V, pp. 225-260 rec.).

The defendant alleges that no negligence was ever established and, in fact, the
shipowners and their officers took all the necessary precautions in operating the
vessel. Furthermore, the loss of lives as a result of the drowning of some
passengers, including the relatives of the herein plaintiff, was due to force
majeure because of the strong typhoon 'Welming.' It appears also that there was a
note of marine protest in connection with the sinking of the vessel as substantiated
by affidavits (Exhs. 3, 3-A, 3-B, 3-C, 3-D, 3-E, 3-F and 3-G rec.). On this score
Emer Saul, member of the PC Judge Advocate General's Office, brought to Court
records of this case which were referred to their office by the Board of Marine
Inquiry. According to him the decision referred to by the plaintiffs was appealed
to the Department of National Defense, although he did not know the result of the
appeal. At any rate, he knew that the Department of National Defense remanded
the case to the Board of Marine Inquiry for further investigation. In the second
indorsement signed by Efren I. Plana, Undersecretary of National Defense, it is
stated, among other things, that the hearings of the Board of Marine Inquiry
wherein the Philippine Coast Guard made the decision lacked the necessary
quorum as required by Section 827 of the Tariff and Customs Code. Moreover,
the decision of the Commandant of the Philippine Coast Guard relied principally
on the findings reached by the Board of Officers after an ex-parte investigation
especially in those aspects unfavorable to the captain (Exh. 1, folder of exhibits).

It appears also that there were findings and recommendations made by the Board
of Marine Inquiry, dated March 5, 1968, recommending among other things that
the captain of the M/V 'Mindoro,' Felicito Irineo, should be exonerated.
Moreover, Captain Irineo went down with the vessel and his lips are forever
sealed and could no longer defend himself. This body also found that the ship's
compliment (sic) and crew were all complete and the vessel was in seaworthy
condition. If the M/V Mindoro' sank, it was through force majeure (Exhs. 2 & 2-
A, folder of exhibits).

Defendant also introduced in evidence the transcripts of stenographic notes of the

testimony of Francisco Punzalan, marine officer, as well as of Abelardo F. Garcia,
Harbor Pilot in Zamboanga City, in Civil Case No. Q-12473 of Branch XXVIII,
Court of First Instance of Rizal, Quezon City Branch (Exhs. 3-H & 10-H, folder
of exhibits), and of Arturo Ilagan, boat captain, in Civil Case No. Q-1 5962 of
Branch V, of the same Court (Exh. 9 folder of exhibits).

It appears that five other vessels left the pier at Manila on November 2, 1967,
aside from the M/V Mindoro' (Exhs 4 & 4-A). A certification of the Weather
Bureau indicated the place of typhoon 'Welming' on November 2, 1967 (Exh. 6).
A certification of the shipyard named El Varadero de Manila stated among other
things that the M/V 'Mindoro' was dry-docked from August 25 to September 6,
1967 and was found to be in a seaworthy condition (Exh. 5), and that the said
M/V 'Mindoro' was duly inspected by the Bureau of Customs (Exhs. 7, 7-A & 7-
B). Another certification was introduced stating among other things that the
Bureau of Customs gave a clearance to the M/V 'Mindoro' after inspection (Exh. 8
folder of exhibits). (CFI Decision, Records, pp. 468-471)

On the basis of these facts, the trial court sustained the position of private
respondent Compania Maritima (Maritima, for short) and issued a decision on
March 27, 1974, to wit:

WHEREFORE, the Court finds that in view of lack of sufficient evidence, the
case be, as it is hereby DISMISSED.

For lack of evidence, the counterclaim is also hereby DISMISSED.

IT IS SO ORDERED. (Records, p. 474)

Forthwith, the petitioners' heirs and Reyes brought an appeal to the Court of
Appeals. As earlier mentioned, the appellate court affirmed the decision on
appeal. While it found that there was concurring negligence on the part of the
captain which must be imputable to Maritima, the Court of Appeals ruled that
Maritima cannot be held liable in damages based on the principle of limited
liability of the shipowner or ship agent under Article 587 of the Code of
Commerce.

The heirs and Reyes now come to Us with the following assignment of errors:

ERROR I

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED IN NOT

CONCENTRATING TO (sic) THE PROVISION OF LAW IN THE NEW CIVIL
CODE AS EXPRESSED) IN, —

Art. 1766. In all matters not regulated by this Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by special
laws.

ERROR II
RESPONDENT COURT OF APPEALS ERRED IN NOT REVERSING THE
DECISION OF THE LOWER COURT OF ORIGIN AFTER FINDING A
SERIES OF FAULTS AND NEGLIGENCE AND IN NOT ORDERING ITS
CO-RESPONDENT COMPANIA MARITIMA TO PAY THE DAMAGES IN
ACCORDANCE WITH THE LAW.

ERROR III

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED TO

NOTE, OBSERVE AND COMPREHEND THAT ART. 587 OF THE CODE OF
COMMERCE IS ONLY FOR THE GOODS WHICH THE VESSEL CARRIED
AND DO NOT INCLUDE PERSONS. (Rollo, p. 8)

The petition has merit. At the outset, We note that there is no dispute as to the
finding of the captain's negligence in the mishap. The present controversy centers
on the questions of Maritima's negligence and of the application of Article 587 of
the Code of Commerce. The said article provides:

Art. 587. The ship agent shall also be civilly liable for indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel, but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight it may have earned
during the voyage.

Under this provision, a shipowner or agent has the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of
right to abandon-"the vessel with all her equipments and the freight it may have
earned during the voyage" (Yangco v. Laserna, et al., 73 Phil. 330, 332).
Notwithstanding the passage of the New Civil Code, Article 587 of the Code of
Commerce is still good law. The reason lies in the peculiar nature of maritime law
which is 94 exclusively real and hypothecary that operates to limit such liability
to the value of the vessel, or to the insurance thereon, if any (Yangco v. Laserna,
Ibid). As correctly stated by the appellate court, "(t)his rule is found necessary to
offset against the innumerable hazards and perils of a sea voyage and to
encourage shipbuilding and marine commerce. (Decision, Rollo, p. 29). Contrary
to the petitioners' supposition, the limited liability doctrine applies not only to the
goods but also in all cases like death or injury to passengers wherein the
shipowner or agent may properly be held liable for the negligent or illicit acts of
the captain (Yangco v. Laserna, Ibid). It must be stressed at this point that Article
587 speaks only of situations where the fault or negligence is committed solely by
the captain. In cases where the shipowner is likewise to be blamed, Article 587
does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil.
32, 38). Such a situation will be covered by the provisions of the New Civil Code
on Common Carriers. Owing to the nature of their business and for reasons of
public policy, common carriers are tasked to observe extraordinary diligence in
the vigilance over the goods and for the safety of its passengers (Article 1733,
New Civil Code). Further, they are bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances (Article 1755, New Civil
Code). Whenever death or injury to a passenger occurs, common carriers are
presumed to have been at fault or to have acted negligently unless they prove that
they observed extraordinary diligence as prescribed by Articles 1733 and 1755
(Article 1756, New Civil Code).

Guided by the above legal provisions, We painstakingly reviewed the records of

the case and found imprints of Maritima's negligence which compel Us to reverse
the conclusion of the appellate court.

Maritima claims that it did not have any information about typhoon 'Welming'
until after the boat was already at sea. Modem technology belie such contention.
The Weather Bureau is now equipped with modern apparatus which enables it to
detect any incoming atmospheric disturbances. In his summary report on tropical
cyclone 'Welming' which occurred within the Philippine Area of Responsibility,
Dr. Roman L. Kintanar, Weather Bureau Director, stated that during the periods
of November 15, 1967, the Bureau issued a total of seventeen (17) warnings or
advisories of typhoon 'Welming' to shipping companies. Additionally, he reported
that:

By 11:15 a.m. of November lst, or in less than twenty four hours, the storm
intensified into a typhoon. It was by then located at 8.7 N 137.3 E with sea level
pressure of 978 millibars, an eye diameter of about 18.53 kilometers and a
maximum surface wind of 139 kilometers per hour. "As it moved along in the
open sea, it intensified further and by 11.07 a.m. of November 2, when its center
was at 103 N 131.4 E, it had attained surface winds of about 240 kilometers per
hour. ... (Exh. Z, p. 131, Index of Exhibits, p. 11 5, Emphasis supplied).

Considering the above report and the evidence on record showing the late
departure of the ship at 6:00 p.m. (instead of the scheduled 2:00 p.m. departure)
on November 2, 1967, We find it highly improbable that the Weather Bureau had
not yet issued any typhoon bulletin at any time during the day to the shipping
companies. Maritima submitted no convincing evidence to show this omission.
It's evidence showing the Weather Bureau's forecast of November 3, 1967 is not
persuasive. It merely indicated the weather bulletin of that day. Nowhere could
We find any statement therein from the Weather Bureau that it had not issued any
forecast on November I and 2, 1967 (Exh. 6, Records, p. 257). Significantly, the
appellate court found that the ship's captain through his action showed prior
knowledge of the typhoon. The court said:

... It cannot be true that he was apprised of the typhoon only at about 11:00
o'clock the following morning on November 3, 1967 when the Weather report
was transmitted to him from the Weather Bureau at which time he plotted its
position. For in his radiogram sent to defendant-appellee's office in Manila as
early as 8:07 in the morning of November 3, 1967 (Exh. D) he states in the
concluding portion 'still observing weather condition.' thereby implicitly
suggesting that he had known even before departure of the unusual weather
condition. ... (Decision, Rollo, p. 26)

If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to

be totally in the dark of 'Welming.' In allowing the ship to depart late from Manila
despite the typhoon advisories, Maritima displayed lack of foresight and
minimum concern for the safety of its passengers taking into account the
surrounding circumstances of the case.

While We agree with the appellate court that the captain was negligent for
overloading the ship, We, however, rule that Maritima shares equally in his
negligence. We find that while M/V Mindoro was already cleared by the Bureau
of Customs and the Coast Guard for departure at 2:00 p.m. the ship's departure
was, however, delayed for four hours. Maritima could not account for the delay
because it neither checked from the captain the reasons behind the delay nor sent
its representative to inquire into the cause of such delay. It was due to this interim
that the appellate court noted that "(i)ndeed there is a great probability that
unmanifested cargo (such as dump truck, 3 toyota cars, steel bars, and 6,000 beer
cases) and passengers (about 241 more than the authorized 193 passengers) were
loaded during the four (4) hour interval" (Decision, p. 13, Rollo, p. 26).
Perchance, a closer supervision could have prevented the overloading of the ship.
Maritima could have directed the ship's captain to immediately depart in view of
the fact that as of 11:07 in the morning of November 2, 1967, the typhoon had
already attained surface winds of about 240 kilometers per hour. As the appellate
court stated, '(v)erily, if it were not for have reached (its) destination and this
delay, the vessel could thereby have avoided the effects of the storm" (Decision,
Rollo p. 26). This conclusion was buttressed by evidence that another ship, M/V
Mangaren, an interisland vessel, sailed for New Washington, Aklan on November
2, 1967, ahead of M/V Mindoro and took the same route as the latter but it arrived
safely (Exh. BB-2, Index of Exhibits, pp. 143-144 and Exh. 4-A, Ibid, p. 254).

Maritima presents evidence of the seaworthy condition of the ship prior to its
departure to prove that it exercised extraordinary diligence in this case. M/V
Mindoro was drydocked for about a month. Necessary repairs were made on the
ship. Life saving equipment and navigational instruments were installed.

While indeed it is true that all these things were done on the vessel, Maritima,
however, could not present evidence that it specifically installed a radar which
could have allowed the vessel to navigate safely for shelter during a storm.
Consequently, the vessel was left at the mercy of ''Welming' in the open sea
because although it was already in the vicinity of the Aklan river, it was unable to
enter the mouth of Aklan River to get into New Washington, Aklan due to
darkness and the Floripon Lighthouse at the entrance of the Aklan River was not
functioning or could not be seen at all (Exh. 3-H, Index of Exhibits, p. 192-195;
see also Exh. 2-A, Ibid, p. 160). Storms and typhoons are not strange occurrences.
In 1967 alone before 'Welming,' there were about 17 typhoons that hit the country
(Exh. M, Index of Exhibits, p. 115), the latest of which was typhoon Uring which
occurred on October 20-25, which cost so much damage to lives and properties.
With the impending threat of 'Welming,' an important device such as the radar
could have enabled the ship to pass through the river and to safety.

The foregoing clearly demonstrates that Maritima's lack of extraordinary

diligence coupled with the negligence of the captain as found by the appellate
court were the proximate causes of the sinking of M/V Mindoro.

Hence, Maritima is liable for the deaths and injury of the victims. amount of With
the above finding, We now come to the damages due to the petitioners.
Ordinarily, We would remand the case to the trial court for the reception of
evidence. Considering however, that this case has been pending for almost
twenty-three (23) years now and that since all the evidence had already been
presented by both parties and received by the trial court, We resolve to decide the
corresponding damages due to petitioners (see Samal v. Court of Appeals, 99
Phil. 230; Del Castillo v. Jaymalin, L-28256, March 17, 1982, 112 SCRA 629).

In their complaint filed with the Court of First Instance, petitioners prayed for
moral, actual and exemplary damages, as well as for attorney's fees plus costs.

Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount
of damages for the death of a passenger caused by the breach of contract by a
common carrier is at least three thousand pesos (P3,000.00). The prevailing
jurisprudence has increased the amount of P3,000.00 to P30,000.00 (De Lima v.
Laguna Tayabas Co., L-35697-99, April 15, 1988, 160 SCRA 70). Consequently,
Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the
victims. For mental anguish suffered due to the deaths of their relatives, Maritima
should also pay to the heirs the sum of P10,000.00 each as moral damages.

In addition, it was proven at the trial that at the time of death, (1) Amparo delos
Santos had with her cash in the sum of P1,000.00 and personal belongings valued
at P500.00; (2) Teresa Pamatian, cash in the sum of P250.00 and personal
belongings worth P200.00; and (3) Diego Salem, cash in the sum of P200.00 and
personal belongings valued at P100.00. Likewise, it was established that the heirs
of Amparo delos Santos and her deceased children incurred transportation and
incidental expenses in connection with the trial of this case in the amount of
P500.00 while Dominador Salem, son of victim Diego Salem and nephew of
victim Teresa Pamatian spent about P100.00 for expenses at the trial. With respect
to petitioner Reyes, the evidence shows that at the time of the disaster, he had in
his possession cash in the sum of P2,900.00 and personal belongings worth
P100.00. Further, due to the disaster, Reyes was unable to work for three months
due to shock and he was earning P9.50 a day or in a total sum of P855.00. Also,
he spent about P100.00 for court expenses. For such losses and incidental
expenses at the trial of this case, Maritima should pay the aforestated amounts to
the petitioners as actual damages.

Reyes' claim for moral damages cannot be granted inasmuch as the same is not
recoverable in damage action based on the breach of contract of transportation
under Articles 2219 and 2220 of the New Civil Code except (1) where the mishap
resulted in the death of a passenger and (2) where it is proved that the carrier was
guilty of fraud or bad faith, even if death does not result (Rex Taxicab Co., Inc. v.
Bautista, 109 Phil. 712). The exceptions do not apply in this case since Reyes
survived the incident and no evidence was presented to show that Maritima was
guilty of bad faith. Mere carelessness of the carrier does not per se constitute or
justify an inference of malice or bad faith on its part (Rex Taxicab Co., Inc. v.
Bautista, supra).

Anent the claim for exemplary damages, We are not inclined to grant the same in
the absence of gross or reckless negligence in this case.

As regards the claim for attorney's fees, the records reveal that the petitioners
engaged the services of a lawyer and agreed to pay the sum of P 3,000.00 each on
a contingent basis (see TSN'S, July 21, 1971, p. 24; November 3, 1971, pp. 18
and 29). In view hereof, We find the sum of P 10,000.00 as a reasonable
compensation for the legal services rendered.

ACCORDINGLY, the appealed decision is hereby REVERSED and judgment is

hereby rendered sentencing the private respondent to pay the following: (1)
P30,000.00 as indemnity for death to the heirs of each of the victims; (2)
P10,000.00 as moral damages to the heirs of each of the victims; (3) P6,805.00 as
actual damages divided among the petitioners as follows: heirs of Amparo Delos
Santos and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00;
heirs of Diego Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as
attorney's fees; and (5) the costs.

American Home Assurance Company vs. The Court of Appeals, G.R. No. 94149,
May 5, 1992

This is a petition for review on certiorari which seeks to annul and set aside the
(a) decision 1 dated May 30, 1990 of the Court of Appeals in C.A. G.R. SP. No.
20043 entitled "American Home Assurance Company v. Hon. Domingo D. Panis,
Judge of the Regional Trial Court of Manila, Branch 41 and National Marine
Corporation and/or National Marine Corporation (Manila)", dismissing
petitioner's petition for certiorari, and (b) resolution 2 dated June 29, 1990 of the
Court of Appeals denying petitioner's motion for reconsideration.

The undisputed facts of the case are follows:

Both petitioner American Home Assurance Co. and the respondent National
Marine Corporation are foreign corporations licensed to do business in the
Philippines, the former through its branch. The American Home Assurance
Company (Philippines), Inc. and the latter through its branch. The National
Marine Corporation (Manila) (Rollo, p. 20, Annex L, p.1).

That on or about June 19, 1988, Cheng Hwa Pulp Corporation shipped 5,000
bales (1,000 ADMT) of bleached kraft pulp from Haulien, Taiwan on board "SS
Kaunlaran", which is owned and operated by herein respondent National Marine
Corporation with Registration No. PID-224. The said shipment was consigned to
Mayleen Paper, Inc. of Manila, which insured the shipment with herein petitioner
American Home Assurance Co. as evidenced by Bill of Lading No. HLMN-01.

On June 22, 1988, the shipment arrived in Manila and was discharged into the
custody of the Marina Port Services, Inc., for eventual delivery to the consignee-
assured. However, upon delivery of the shipment to Mayleen Paper, Inc., it was
found that 122 bales had either been damaged or lost. The loss was calculated to
be 4,360 kilograms with an estimated value of P61,263.41.

Mayleen Paper, Inc. then duly demanded indemnification from respondent

National Marine Corporation for the aforesaid damages/losses in the shipment
but, for apparently no justifiable reason, said demand was not heeded (Petition, p.
4).

As the shipment was insured with petitioner in the amount of US$837,500.00,

Mayleen Paper, Inc. sought recovery from the former. Upon demand and
submission of proper documentation, American Home Assurance paid Mayleen
Paper, Inc. the adjusted amount of P31,506.75 for the damages/losses suffered by
the shipment, hence, the former was subrogated to the rights and interests on
Mayleen Paper, Inc.

On June 6, 1989, the petitioner, as subrogee, then brought suit against respondent
for the recovery of the amount of P31.506.75 and 25% of the total amount due as
attorney's fees, by filing a complaint for recovery of sum of money (Petition, p.
4).

Respondent, National Marine Corporation, filed a motion to dismiss dated August

7, 1989 stating that American Home Assurance Company had no cause of action
based on Article 848 of the Code of Commerce which provides "that claims for
averages shall not be admitted if they do not exceed 5% of the interest which the
claimant may have in the vessel or in the cargo if it be gross average and 1% of
the goods damaged if particular average, deducting in both cases the expenses of
appraisal, unless there is an agreement to the contrary." It contended that based on
the allegations of the complaint, the loss sustained in the case was P35,506.75
which is only .18% of P17,420,000.00, the total value of the cargo.
On the other hand, petitioner countered that Article 848 does not apply as it refers
to averages and that a particular average presupposes that the loss or damages is
due to an inherent defect of the goods, an accident of the sea, or a force majeure
or the negligence of the crew of the carrier, while claims for damages due to the
negligence of the common carrier are governed by the Civil Code provisions on
Common Carriers.

In its order dated November 23, 1989, the Regional Trial Court sustained private
respondent's contention. In part it stated:

Before the Court for resolution is a motion for reconsideration filed by defendant
through counsel dated October 6, 1989.

The record shows that last August 8, 1989, defendant through counsel filed a
motion to dismiss plaintiff's complaint.

Resolving the said motion last September 18, 1989, the court ruled to defer
resolution thereof until after trial on the merits. In the motion now under
consideration, defendant prays for the reconsideration of the order of September
18, 1989 and in lieu thereof, another order be entered dismissing plaintiff's
complaint.

There appears to be good reasons for the court to take a second look at the issues
raised by the defendant.

xxx xxx xxx

It is not disputed defendants that the loss suffered by the shipment is only .18% or
less that 1% of the interest of the consignee on the cargo Invoking the provision
of the Article 848 of the Code of Commerce which reads:

Claims for average shall not be admitted if they do not exceed five percent of the
interest which the claimant may have in the vessels or cargo if it is gross average,
and one percent of the goods damaged if particular average, deducting in both
cases the expenses of appraisal, unless there is an agreement to the contrary.
(Emphasis supplied)

defendant claims that plaintiff is barred from suing for recovery.

Decisive in this case in whether the loss suffered by the cargo in question is a
"particular average."

Particular average, is a loss happening to the ship, freight, or cargo which is not
be (sic) shared by contributing among all those interested, but must be borne by
the owner of the subject to which it occurs. (Black's Law Dictionary, Revised
Fourth Edition, p. 172, citing Bargett v. Insurance Co. 3 Bosw. [N.Y.] 395).
as distinguished from general average which

is a contribution by the several interests engaged in the maritime venture to make

good the loss of one of them for the voluntary sacrifice of a part of the ship or
cargo to save the residue of the property and the lives of those on board, or for
extraordinary expenses necessarily incurred for the common benefit and safety of
all (Ibid., citing California Canneries Co. v. Canton Ins. Office 25 Cal. App. 303,
143 p. 549-553).

From the foregoing definition, it is clear that the damage on the cargo in question,
is in the nature of the "particular average." Since the loss is less than 1% to the
value of the cargo and there appears to be no allegations as to any agreement
defendants and the consignee of the goods to the contrary, by express provision of
the law, plaintiff is barred from suing for recovery.

WHEREOF, plaintiff's complaint is hereby dismissed for lack of cause of action.

(Rollo, p. 27; Annex A, pp. 3-4).

The petitioner then filed a motion for reconsideration of the order of dismissal but
same was denied by the court in its order dated January 26, 1990 (supra).

Instead of filing an appeal from the order of the court a quo dismissing the
complaint for recovery of a sum of money, American Home Assurance Company
filed a petition for certiorari with the Court of Appeals to set aside the two orders
or respondent judge in said court (Rollo, p. 25).

But the Court of Appeals in its decision dated May 30, 1990, dismissed the
petition as constituting plain errors of law and not grave abuse of discretion
correctible by certiorari (a Special Civil Action). If at all, respondent court ruled
that there are errors of judgment subject to correction by certiorari as a mode of
appeal but the appeal is to the Supreme Court under Section 17 of the Judiciary
Act of 1948 as amended by Republic Act No. 5440. Otherwise stated, respondent
Court opined that the proper remedy is a petition for review on certiorari with the
Supreme Court on pure questions of law (Rollo, p. 30).

Hence, this petition.

In a resolution dated December 10, 1990, this Court gave due course to the
petition and required both parties to file their respective memoranda (Rollo, p.
58).

The procedural issue in this case is whether or not certiorari was the proper
remedy in the case before the Court of Appeals.

The Court of Appeals ruled that appeal is the proper remedy, for aside from the
fact that the two orders dismissing the complaint for lack of cause of action are
final orders within the meaning of Rule 41, Section 2 of the Rules of Court,
subject petition raised questions which if at all, constituting grave abuse of
discretion correctible by certiorari.

Evidently, the Court of Appeals did not err in dismissing the petition for certiorari
for as ruled by this Court, an order of dismissal whether right or wrong is a final
order, hence, a proper subject of appeal, not certiorari (Marahay v. Melicor, 181
SCRA 811 (1990]). However, where the fact remains that respondent Court of
Appeals obviously in the broader interests of justice, nevertheless proceeded to
decide the petition for certiorari and ruled on specific points raised therein in a
manner akin to what would have been done on assignments of error in a regular
appeal, the petition therein was therefore disposed of on the merits and not on a
dismissal due to erroneous choice of remedies or technicalities (Cruz v. I.A.C.,
169 SCRA 14 (1989]). Hence, a review of the decision of the Court of Appeals on
the merits against the petitioner in this case is in order.

On the main controversy, the pivotal issue to be resolved is the application of the
law on averages (Articles 806, 809 and 848 of the Code of Commerce).

Petitioner avers that respondent court failed to consider that respondent National
Marine Corporation being a common carrier, in conducting its business is
regulated by the Civil Code primarily and suppletorily by the Code of Commerce;
and that respondent court refused to consider the Bill of Lading as the law
governing the parties.

Private respondent countered that in all matters not covered by the Civil Code, the
rights and obligations of the parties shall be governed by the Code of Commerce
and by special laws as provided for in Article 1766 of the Civil Code; that Article
806, 809 and 848 of the Code of Commerce should be applied suppletorily as they
provide for the extent of the common carriers' liability.

This issue has been resolved by this Court in National Development Co. v. C.A.
(164 SCRA 593 [1988]; citing Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA
469, 470 [1987] where it was held that "the law of the country to which the goods
are to be transported persons the liability of the common carrier in case of their
loss, destruction or deterioration." (Article 1753, Civil Code). Thus, for cargoes
transported to the Philippines as in the case at bar, the liability of the carrier is
governed primarily by the Civil Code and in all matters not regulated by said
Code, the rights and obligations of common carrier shall be governed by the Code
of Commerce and by special laws (Article 1766, Civil Code).

Corollary thereto, the Court held further that under Article 1733 of the Civil
Code, common carriers from the nature of their business and for reasons of public
policy are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of passengers transported by them according to all
circumstances of each case. Thus, under Article 1735 of the same Code, in all
cases other than those mentioned in Article 1734 thereof, the common carrier
shall be presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by law (Ibid., p.
595).

But more importantly, the Court ruled that common carriers cannot limit their
liability for injury or loss of goods where such injury or loss was caused by its
own negligence. Otherwise stated, the law on averages under the Code of
Commerce cannot be applied in determining liability where there is negligence
(Ibid., p. 606).

Under the foregoing principle and in line with the Civil Code's mandatory
requirement of extraordinary diligence on common carriers in the car care of
goods placed in their stead, it is but reasonable to conclude that the issue of
negligence must first be addressed before the proper provisions of the Code of
Commerce on the extent of liability may be applied.

The records show that upon delivery of the shipment in question of Mayleen's
warehouse in Manila, 122 bales were found to be damaged/lost with straps cut or
loose, calculated by the so-called "percentage method" at 4,360 kilograms and
amounting to P61,263.41 (Rollo, p. 68). Instead of presenting proof of the
exercise of extraordinary diligence as required by law, National Marine
Corporation (NMC) filed its Motion to Dismiss dated August 7, 1989,
hypothetically admitting the truth of the facts alleged in the complaint to the
effect that the loss or damage to the 122 bales was due to the negligence or fault
of NMC (Rollo, p. 179). As ruled by this Court, the filing of a motion to dismiss
on the ground of lack of cause of action carries with it the admission of the
material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v.
C.A., 181 SCRA 443 [1990]). Such being the case, it is evident that the Code of
Commerce provisions on averages cannot apply.

On the other hand, Article 1734 of the Civil Code provides that common carriers
are responsible for loss, destruction or deterioration of the goods, unless due to
any of the causes enumerated therein. It is obvious that the case at bar does not
fall under any of the exceptions. Thus, American Home Assurance Company is
entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer.

Accordingly, it is evident that the findings of respondent Court of Appeals,

affirming the findings and conclusions of the court a quo are not supported by law
and jurisprudence.

Philippines Airlines, Inc. vs. Court of Appeals, 226 SCRA 423 (1993)

This petition for review in certiorari seeks to annul and set aside the decision of
the then Intermediate Appellant Court,1 now Court of Appeals, dated 28 February
1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.")
affirming the decision of the then Court of first Instance, now Regional Trial
Court, declaring Philippine Airlines, Inc., liable in damages for breach of contract.

On 25 November 1976, private respondent filed a complaint for damages for

breach of contract of carriage2 against Philippine Airlines, Inc. (PAL), before the
then Court of First Instance, now Regional Trial Court, of Misamis Occidental, at
Ozamiz City. According to him, on 2 August 1976, he was among the twenty-one
(21) passengers of PAL Flight 477 that took off from Cebu bound for Ozamiz
City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and
just about fifteen (15) minutes before landing at Ozamiz City, the pilot received a
radio message that the airport was closed due to heavy rains and inclement
weather and that he should proceed to Cotabato City instead.

Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of
their options to return to Cebu on flight 560 of the same day and thence to Ozamiz
City on 4 August 1975, or take the next flight to Cebu the following day, or
remain at Cotabato and take the next available flight to Ozamiz City on 5 August
1975.3 The Station Agent likewise informed them that Flight 560 bound for
Manila would make a stop-over at Cebu to bring some of the diverted passengers;
that there were only six (6) seats available as there were already confirmed
passengers for Manila; and, that the basis for priority would be the check-in
sequence at Cebu.

Private respondent chose to return to Cebu but was not accommodated because he
checked-in as passenger No. 9 on Flight 477. He insisted on being given priority
over the confirmed passengers in the accommodation, but the Station Agent
refused private respondent's demand explaining that the latter's predicament was
not due to PAL's own doing but to be a force majeure.4

Private respondent tried to stop the departure of Flight 560 as his personal
belongings, including a package containing a camera which a certain Miwa from
Japan asked him to deliver to Mrs. Fe Obid of Gingoog City, were still on board.
His plea fell on deaf ears. PAL then issued to private respondent a free ticket to
Iligan city, which the latter received under protest.5 Private respondent was left at
the airport and could not even hitch a ride in the Ford Fiera loaded with PAL
personnel.6 PAL neither provided private respondent with transportation from the
airport to the city proper nor food and accommodation for his stay in Cotabato
City.

The following day, private respondent purchased a PAL ticket to Iligan City. He
informed PAL personnel that he would not use the free ticket because he was
filing a case against PAL.7 In Iligan City, private respondent hired a car from the
airport to Kolambugan, Lanao del Norte, reaching Ozamiz City by crossing the
bay in a launch.8 His personal effects including the camera, which were valued at
P2,000.00 were no longer recovered.
On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to
accommodate private respondent.9 It alleged that there was simply no more seat
for private respondent on Flight 560 since there were only six (6) seats available
and the priority of accommodation on Flight 560 was based on the check-in
sequence in Cebu; that the first six (6) priority passengers on Flight 477 chose to
take Flight 560; that its Station Agent explained in a courteous and polite manner
to all passengers the reason for PAL's inability to transport all of them back to
Cebu; that the stranded passengers agreed to avail of the options and had their
respective tickets exchanged for their onward trips; that it was
only the private respondent who insisted on being given priority in the
accommodation; that pieces of checked-in baggage and had carried items of the
Ozamiz City passengers were removed from the aircraft; that the reason for their
pilot's inability to land at Ozamis City airport was because the runway was wet
due to rains thus posing a threat to the safety of both passengers and aircraft; and,
that such reason of force majeure was a valid justification for the pilot to bypass
Ozamiz City and proceed directly to Cotabato City.

On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of
which states:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against

the defendant Philippine AirLines, Inc. ordering the latter to pay:

(1) As actual damages, the sum of Two Hundred Pesos (P200.00) representing
plaintiff's expenses for transportation, food and accommodation during his
stranded stay at Cotabato City; the sum of Forty-Eight Pesos (P48.00)
representing his flight fare from Cotabato City to Iligan city; the sum of Five
Hundred Pesos (P500.00) representing plaintiff's transportation expenses from
Iligan City to Ozamiz City; and the sum of Five Thousand Pesos (P5,000.00) as
loss of business opportunities during his stranded stay in Cotabato City;

(2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) for
plaintiff's hurt feelings, serious anxiety, mental anguish and unkind and
discourteous treatment perpetrated by defendant's employees during his stay as
stranded passenger in Cotabato City;

(3) As exemplary damages, the sum of Ten Thousand Pesos (P10,000.00) to set a
precedent to the defendant airline that it shall provide means to give comfort and
convenience to stranded passengers;

(4) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees;

(5) To pay the costs of this suit.

PAL appealed to the Court of Appeals which on 28 February 1985, finding no

reversible error, affirmed the judgment of the court a quo. 11

PAL then sought recourse to this Court by way of a petition for review on
certiorari 12 upon the following issues: (1) Can the Court of Appeals render a
decision finding petitioner (then defendant-appellant in the court below) negligent
and, consequently, liable for damages on a question of substance which was
neither raised on a question nor proved at the trial? (2) Can the Court of Appeals
award actual and moral damages contrary to the evidence and established
jurisprudence? 13

An assiduous examination of the records yields no valid reason for reversal of the
judgment on appeal; only a modification of its disposition.

In its petition, PAL vigorously maintains that private respondent's principal cause
of action was its alleged denial of private respondent's demand for priority over
the confirmed passengers on Flight 560. Likewise, PAL points out that the
complaint did not impute to PAL neglect in failing to attend to the needs of the
diverted passengers; and, that the question of negligence was not and never put in
issue by the pleadings or proved at the trial.

Contrary to the above arguments, private respondent's amended complaint

touched on PAL's indifference and inattention to his predicament. The pertinent
portion of the amended complaint 14 reads:

10. That by virtue of the refusal of the defendant through its agent in Cotabato to
accommodate (sic) and allow the plaintiff to take and board the plane back to
Cebu, and by accomodating (sic) and allowing passengers from Cotabato for
Cebu in his stead and place, thus forcing the plaintiff against his will, to be left
and stranded in Cotabato, exposed to the peril and danger of muslim rebels
plundering at the time, the plaintiff, as a consequence, (have) suffered mental
anguish, mental torture, social humiliation, bismirched reputation and wounded
feeling, all amounting to a conservative amount of thirty thousand (P30,000.00)
Pesos.

To substantiate this aspect of apathy, private respondent testified 15

A I did not even notice that I was I think the last passenger or the last person out
of the PAL employees and army personnel that were left there. I did not notice
that when I was already outside of the building after our conversation.

Q What did you do next?

A I banished (sic) because it seems that there was a war not far from the airport.
The sound of guns and the soldiers were plenty.

Q After that what did you do?

A I tried to look for a transportation that could bring me down to the City of
Cotabato.

Q Were you able to go there?

A I was at about 7:00 o'clock in the evening more or less and it was a private jeep
that I boarded. I was even questioned why I and who am (sic) I then. Then I
explained my side that I am (sic) stranded passenger. Then they brought me
downtown at Cotabato.

Q During your conversation with the Manager were you not offered any vehicle
or transportation to Cotabato airport downtown?

A In fact I told him (Manager) now I am by-passed passenger here which is not
my destination what can you offer me. Then they answered, "it is not my fault.
Let us forget that."

Q In other words when the Manager told you that offer was there a vehicle ready?

A Not yet. Not long after that the Ford Fiera loaded with PAL personnel was
passing by going to the City of Cotabato and I stopped it to take me a ride because
there was no more available transportation but I was not accommodated.

Significantly, PAL did not seem to mind the introduction of evidence which
focused on its alleged negligence in caring for its stranded passengers. Well-
settled is the rule in evidence that the protest or objection against the admission of
evidence should be presented at the time the evidence is offered, and that the
proper time to make protest or objection to the admissibility of evidence is when
the question is presented to the witness or at the time the answer thereto is given.
16 There being no objection, such evidence becomes property of the case and all
the parties are amenable to any favorable or unfavorable effects resulting from the
evidence. 17

PAL instead attempted to rebut the aforequoted testimony. In the process, it failed
to substantiate its counter allegation for want of concrete proof 18 —

Atty. Rubin O. Rivera — PAL's counsel:

Q You said PAL refused to help you when you were in Cotabato, is that right?

Private respondent:

A Yes.

Q Did you ask them to help you regarding any offer of transportation or of any
other matter asked of them?

A Yes, he (PAL PERSONNEL) said what is? It is not our fault.

Q Are you not aware that one fellow passenger even claimed that he was given
Hotel accommodation because they have no money?

xxx xxx xxx

A No, sir, that was never offered to me. I said, I tried to stop them but they were
already riding that PAL pick-up jeep, and I was not accommodated.

Having joined in the issue over the alleged lack of care it exhibited towards its
passengers, PAL cannot now turn around and feign surprise at the outcome of the
case. When issues not raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects as if they had been
raised in the pleadings. 19

With regard to the award of damages affirmed by the appellate court, PAL argues
that the same is unfounded. It asserts that it should not be charged with the task of
looking after the passengers' comfort and convenience because the diversion of
the flight was due to a fortuitous event, and that if made liable, an added burden is
given to PAL which is over and beyond its duties under the contract of carriage. It
submits that granting arguendo that negligence exists, PAL cannot be liable in
damages in the absence of fraud or bad faith; that private respondent failed to
apprise PAL of the nature of his trip and possible business losses; and, that private
respondent himself is to be blamed for unreasonably refusing to use the free ticket
which PAL issued.

The contract of air carriage is a peculiar one. Being imbued with public interest,
the law requires common carriers to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances. 20 In Air France v. Carrascoso,
21 we held that —

A contract to transport passengers is quite different in kind and degree from any
other contractual relation. And this, because of the relation which an air carrier
sustains with the public. Its business is mainly with the travelling public. It invites
people to avail of the comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended with a public duty . . . .
( emphasis supplied).

The position taken by PAL in this case clearly illustrates its failure to grasp the
exacting standard required by law. Undisputably, PAL's diversion of its flight due
to inclement weather was a fortuitous event. Nonetheless, such occurrence did not
terminate PAL's contract with its passengers. Being in the business of air carriage
and the sole one to operate in the country, PAL is deemed equipped to deal with
situations as in the case at bar. What we said in one case once again must be
stressed, i.e., the relation of carrier and passenger continues until the latter has
been landed at the port of destination and has left the carrier's premises. 22 Hence,
PAL necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its stranded passengers until
they have reached their final destination. On this score, PAL grossly failed
considering the then ongoing battle between government forces and Muslim
rebels in Cotabato City and the fact that the private respondent was a stranger to
the place. As the appellate court correctly ruled —

While the failure of plaintiff in the first instance to reach his destination at Ozamis
City in accordance with the contract of carriage was due to the closure of the
airport on account of rain and inclement weather which was radioed to defendant
15 minutes before landing, it has not been disputed by defendant airline that
Ozamis City has no all-weather airport and has to cancel its flight to Ozamis City
or by-pass it in the event of inclement weather. Knowing this fact, it becomes the
duty of defendant to provide all means of comfort and convenience to its
passengers when they would have to be left in a strange place in case of such by-
passing. The steps taken by defendant airline company towards this end has not
been put in evidence, especially for those 7 others who were not accommodated in
the return trip to Cebu, only 6 of the 21 having been so accommodated. It appears
that plaintiff had to leave on the next flight 2 days later. If the cause of non-
fulfillment of the contract is due to a fortuitous event, it has to be the sole and
only cause (Art. 1755 CC., Art. 1733 C.C.) Since part of the failure to comply
with the obligation of common carrier to deliver its passengers safely to their
destination lay in the defendant's failure to provide comfort and convenience to its
stranded passengers using extra-ordinary diligence, the cause of non-fulfillment is
not solely and exclusively due to fortuitous event, but due to something which
defendant airline could have prevented, defendant becomes liable to plaintiff. 23

While we find PAL remiss in its duty of extending utmost care to private
respondent while being stranded in Cotabato City, there is no sufficient basis to
conclude that PAL failed to inform him about his non-accommodation on Flight
560, or that it was inattentive to his queries relative thereto.

On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato
City that —

3. Of the fifteen stranded passengers two pax elected to take F478 on August 05,
three pax opted to take F442 August 03. The remaining ten (10) including subject
requested that they be instead accommodated (sic) on F446 CBO-IGN the
following day where they intended to take the surface transportation to OZC. Mr.
Pedro Zapatos had by then been very vocal and boiceterous (sic) at the counter
and we tactfully managed to steer him inside the Station Agent's office. Mr. Pedro
Zapatos then adamantly insisted that all the diverted passengers should have been
given priority over the originating passengers of F560 whether confirmed or
otherwise. We explained our policies and after awhile he seemed pacified and
thereafter took his ticket (in-lieued (sic) to CBO-IGN, COCON basis), at the
counter in the presence of five other passengers who were waiting for their tickets
too. The rest of the diverted pax had left earlier after being assured their tickets
will be ready the following day. 24

Aforesaid Report being an entry in the course of business is prima facie evidence
of the facts therein stated. Private respondent, apart from his testimony, did not
offer any controverting evidence. If indeed PAL omitted to give information
about the options available to its diverted passengers, it would have been deluged
with complaints. But, only private respondent complained —

Atty. Rivera (for PAL)

Q I understand from you Mr. Zapatos that at the time you were waiting at
Cotabato Airport for the decision of PAL, you were not informed of the decision
until after the airplane left is that correct?

A Yes.

COURT:

Q What do you mean by "yes"? You meant you were not informed?

A Yes, I was not informed of their decision, that they will only accommodate few
passengers.

Q Aside from you there were many other stranded passengers?

A I believed, yes.

Q And you want us to believe that PAL did not explain (to) any of these
passengers about the decision regarding those who will board the aircraft back to
Cebu?

A No, Sir.

Q Despite these facts Mr. Zapatos did any of the other passengers complained
(sic) regarding that incident?

xxx xxx xxx

A There were plenty of argument and I was one of those talking about my case.

Q Did you hear anybody complained (sic) that he has not been informed of the
decision before the plane left for Cebu?

A No. 25

Admittedly, private respondent's insistence on being given priority in

accommodation was unreasonable considering the fortuitous event and that there
was a sequence to be observed in the booking, i.e., in the order the passengers
checked-in at their port of origin. His intransigence in fact was the main cause for
his having to stay at the airport longer than was necessary.

Atty. Rivera:

Q And, you were saying that despite the fact that according to your testimony
there were at least 16 passengers who were stranded there in Cotabato airport
according to your testimony, and later you said that there were no other people
left there at that time, is that correct?

A Yes, I did not see anyone there around. I think I was the only civilian who was
left there.

Q Why is it that it took you long time to leave that place?

A Because I was arguing with the PAL personnel. 26

Anent the plaint that PAL employees were disrespectful and inattentive toward
private respondent, the records are bereft of evidence to support the same. Thus,
the ruling of respondent Court of Appeals in this regard is without basis. 27 On
the contrary, private respondent was attended to not only by the personnel of PAL
but also by its Manager." 28

In the light of these findings, we find the award of moral damages of Fifty
Thousand Pesos (P50,000.00) unreasonably excessive; hence, we reduce the same
to Ten Thousand Pesos (P10,000.00). Conformably herewith, the award of
exemplary damages is also reduced to five Thousand Pesos (5,000.00). Moral
damages are not intended to enrich the private respondent. They are awarded only
to enable the injured party to obtain means, diversion or amusements that will
serve to alleviate the moral suffering he has undergone by reason of the
defendant's culpable action. 29

With regard to the award of actual damages in the amount of P5,000.00

representing private respondent's alleged business losses occasioned by his stay at
Cotabato City, we find the same unwarranted. Private respondent's testimony that
he had a scheduled business "transaction of shark liver oil supposedly to have
been consummated on August 3, 1975 in the morning" and that "since (private
respondent) was out for nearly two weeks I missed to buy about 10 barrels of
shark liver oil,"30 are purely speculative. Actual or compensatory damages
cannot be presumed but must be duly proved with reasonable degree of certainty.
A court cannot rely on speculation, conjecture or guesswork as to the fact and
amount of damages, but must depend upon competent proof that they have
suffered and on evidence of the actual amount thereof. 31

Macam vs. Court of Appeals, 313 SCRA 77 (1999)

On 4 April 1989 petitioner Benito Macam, doing business under the name and
style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and
operated by respondent China Ocean Shipping Co., through local agent
respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500
boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG
99012 and exported through Letter of Credit No. HK 1031/30 issued by National
Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of
fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG
99013 and exported through Letter of Credit No. HK 1032/30 also issued by
PAKISTAN BANK. The Bills of Lading contained the following pertinent
provision: "One of the Bills of Lading must be surrendered duly endorsed in
exchange for the goods or delivery order.1 The shipment was bound for
Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of
Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and
commercial invoices were submitted to petitioner's depository bank, Consolidated
Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in
advance the total value of the shipment of US$20,223.46.1âwphi1.nêt

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM

directly to GPC, not to PAKISTAN BANK, and without the required bill of
lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN
BANK such that the latter, still in possession of the original bills of lading,
refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-
paid petitioner the value of the shipment, it demanded payment from respondent
WALLEM through five (5) letters but was refused. Petitioner was thus allegedly
constrained to return the amount involved to SOLIDBANK, then demanded
payment from respondent WALLEM in writing but to no avail.

On 25 September 1991 petitioner sought collection of the value of the shipment of

US$20,223.46 or its equivalent of P546,033.42 from respondents before the
Regional Trial Court of Manila, based on delivery of the shipment to GPC
without presentation of the bills of lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without

presentation of the bills of lading and bank guarantee per request of petitioner
himself because the shipment consisted of perishable goods. The telex dated 5
April 1989 conveying such request read —
AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT
TO RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L2 and bank
guarantee since for prepaid shipt ofrt charges already fully paid our end . . . .3

Respondents explained that it is a standard maritime practice, when immediate

delivery is of the essence, for the shipper to request or instruct the carrier to
deliver the goods to the buyer upon arrival at the port of destination without
requiring presentation of the bill of lading as that usually takes time. As proof
thereof, respondents apprised the trial court that for the duration of their two-year
business relationship with petitioner concerning similar shipments to GPC
deliveries were effected without presentation of the bills of lading.4 Respondents
advanced next that the refusal of PAKISTAN BANK to pay the letters of credit to
SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity
and Quality. Respondents counterclaimed for attorney's fees and costs of suit.

On 14 May 1993 the trial court ordered respondents to pay, jointly and severally,
the following amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until
full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The
counterclaims were dismissed for lack of merit.5 The trial court opined that
respondents breached the provision in the bill of lading requiring that "one of the
Bills of Lading must be surrendered duly endorsed in exchange for the goods or
delivery order," when they released the shipment to GPC without presentation of
the bills of lading and the bank guarantee that should have been issued by
PAKISTAN BANK in lieu of the bills of lading. The trial court added that the
shipment should not have been released to GPC at all since the instruction
contained in the telex was to arrange delivery to the respective consignees and not
to any party. The trial court observed that the only role of GPC in the transaction
as notify party was precisely to be notified of the arrival of the cargoes in
Hongkong so it could in turn duly advise the consignee.

Respondent Court of Appeals appreciated the evidence in a different manner.

According to it, as established by previous similar transactions between the
parties, shipped cargoes were sometimes actually delivered not to the consignee
but to notify party GPC without need of the bills of lading or bank guarantee.6
Moreover, the bills of lading were viewed by respondent court to have been
properly superseded by the telex instruction and to implement the instruction, the
delivery of the shipment must be to GPC, the real importer/buyer of the goods as
shown by the export invoices,7 and not to PAKISTAN BANK since the latter
could very well present the bills of lading in its possession; likewise, if it were the
PAKISTAN BANK to which the cargoes were to be strictly delivered it would no
longer be proper to require a bank guarantee. Respondent court noted that besides,
GPC was listed as a consignee in the telex. It observed further that the demand
letter of petitioner to respondents never complained of misdelivery of goods.
Lastly, respondent court found that petitioner's claim of having reimbursed the
amount involved to SOLIDBANK was unsubstantiated. Thus, on 13 March 1996
respondent court set aside the decision of the trial court and dismissed the
complaint together with the counterclaims.8 On 5 July 1996 reconsideration was
denied.9

Petitioner submits that the fact that the shipment was not delivered to the
consignee as stated in the bill of lading or to a party designated or named by the
consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from
the text of the telex, assuming there was such an instruction, the delivery of the
shipment without the required bill of lading or bank guarantee should be made
only to the designated consignee, referring to PAKISTAN BANK.

We are not persuaded. The submission of petitioner that "the fact that the
shipment was not delivered to the consignee as stated in the Bill of Lading or to a
party designated or named by the consignee constitutes a misdelivery thereof" is a
deviation from his cause of action before the trial court. It is clear from the
allegation in his complaint that it does not deal with misdelivery of the cargoes
but of delivery to GPC without the required bills of lading and bank guarantee —

6. The goods arrived in Hongkong and were released by the defendant Wallem
directly to the buyer/notify party, Great Prospect Company and not to the
consignee, the National Bank of Pakistan, Hongkong, without the required bills of
lading and bank guarantee for the release of the shipment issued by the consignee
of the goods . . . .10

Even going back to an event that transpired prior to the filing of the present case
or when petitioner wrote respondent WALLEM demanding payment of the value
of the cargoes, misdelivery of the cargoes did not come into the picture —

We are writing you on behalf of our client, Ben-Mac Enterprises who informed us
that Bills of Lading No. 99012 and 99013 with a total value of US$20,223.46
were released to Great Prospect, Hongkong without the necessary bank guarantee.
We were further informed that the consignee of the goods, National Bank of
Pakistan, Hongkong, did not release or endorse the original bills of lading. As a
result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor
the importer, Great Prospect Company, Hongkong, paid our client for the goods . .
. .11

At any rate, we shall dwell on petitioner's submission only as a prelude to our

discussion on the imputed liability of respondents concerning the shipped goods.
Article 1736 of the Civil Code provides —

Art. 1736. The extraordinary responsibility of the common carriers lasts from the
time the goods are unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of article 1738.12
We emphasize that the extraordinary responsibility of the common carriers lasts
until actual or constructive delivery of the cargoes to the consignee or to the
person who has a right to receive them. PAKISTAN BANK was indicated in the
bills of lading as consignee whereas GPC was the notify party. However, in the
export invoices GPC was clearly named as buyer/importer. Petitioner also
referred to GPC as such in his demand letter to respondent WALLEM and in his
complaint before the trial court. This premise draws us to conclude that the
delivery of the cargoes to GPC as buyer/importer which, conformably with Art.
1736 had, other than the consignee, the right to receive them14 was proper.

The real issue is whether respondents are liable to petitioner for releasing the
goods to GPC without the bills of lading or bank guarantee.

Respondents submitted in evidence a telex dated 5 April 1989 as basis for

delivering the cargoes to GPC without the bills of lading and bank guarantee. The
telex instructed delivery of various shipments to the respective consignees without
need of presenting the bill of lading and bank guarantee per the respective
shipper's request since "for prepaid shipt ofrt charges already fully paid."
Petitioner was named therein as shipper and GPC as consignee with respect to
Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes the
existence of such instruction and claims that this evidence is self-serving.

From the testimony of petitioner, we gather that he has been transacting with GPC
as buyer/importer for around two (2) or three (3) years already. When mangoes
and watermelons are in season, his shipment to GPC using the facilities of
respondents is twice or thrice a week. The goods are released to GPC. It has been
the practice of petitioner to request the shipping lines to immediately release
perishable cargoes such as watermelons and fresh mangoes through telephone
calls by himself or his "people." In transactions covered by a letter of credit, bank
guarantee is normally required by the shipping lines prior to releasing the goods.
But for buyers using telegraphic transfers, petitioner dispenses with the bank
guarantee because the goods are already fully paid. In his several years of
business relationship with GPC and respondents, there was not a single instance
when the bill of lading was first presented before the release of the cargoes. He
admitted the existence of the telex of 3 July 1989 containing his request to deliver
the shipment to the consignee without presentation of the bill of lading15 but not
the telex of 5 April 1989 because he could not remember having made such
request.

Consider pertinent portions of petitioner's testimony —

Q: Are you aware of any document which would indicate or show that your
request to the defendant Wallem for the immediate release of your fresh fruits,
perishable goods, to Great Prospect without the presentation of the original Bill of
Lading?
A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested
immediate release of the cargo because there was immediate payment.

Q: And you are referring, therefore, to this copy Telex release that you mentioned
where your Company's name appears Ben-Mac?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of
Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company.

Atty. Ventura:

Q: Is that the telegraphic transfer?

A: Yes, actually, all the shippers partially request for the immediate release of the
goods when they are perishable. I thought Wallem Shipping Lines is not neophyte
in the business. As far as LC is concerned, Bank guarantee is needed for the
immediate release of the goods . . . .15

Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable
goods to ask the shipping lines to release immediately the shipment. Is that
correct?

A: Yes, sir.

Q: Now, it is also the practice of the shipper to allow the shipping lines to release
the perishable goods to the importer of goods without a Bill of Lading or Bank
guarantee?

A: No, it cannot be without the Bank Guarantee.

Atty. Hernandez:

Q: Can you tell us an instance when you will allow the release of the perishable
goods by the shipping lines to the importer without the Bank guarantee and
without the Bill of Lading?

A: As far as telegraphic transfer is concerned.

Q: Can you explain (to) this Honorable Court what telegraphic transfer is?

A: Telegraphic transfer, it means advance payment that I am already fully

paid . . . .

Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know
and can you recall that any of your shipment was released to Great Prospect by
Wallem through telegraphic transfer?

A: I could not recall but there were so many instances sir.

Q: Mr. Witness, do you confirm before this Court that in previous shipments of
your goods through Wallem, you requested Wallem to release immediately your
perishable goods to the buyer?

A: Yes, that is the request of the shippers of the perishable goods . . . .16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your
goods immediately even without the presentation of OBL, how do you course it?

A: Usually, I call up the Shipping Lines, sir . . . .17

Q: You also testified you made this request through phone calls. Who of you
talked whenever you made such phone call?

A: Mostly I let my people to call, sir. (sic)

Q: So everytime you made a shipment on perishable goods you let your people to
call? (sic)

A: Not everytime, sir.

Q: You did not make this request in writing?

A: No, sir. I think I have no written request with Wallem . . . .18

Against petitioner's claim of "not remembering" having made a request for

delivery of subject cargoes to GPC without presentation of the bills of lading and
bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures
in his testimony. He declared that it was his practice to ask the shipping lines to
immediately release shipment of perishable goods through telephone calls by
himself or his "people." He no longer required presentation of a bill of lading nor
of a bank guarantee as a condition to releasing the goods in case he was already
fully paid. Thus, taking into account that subject shipment consisted of perishable
goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not
hard to believe the claim of respondent WALLEM that petitioner indeed
requested the release of the goods to GPC without presentation of the bills of
lading and bank guarantee.

The instruction in the telex of 5 April 1989 was "to deliver the shipment to
respective consignees." And so petitioner argues that, assuming there was such an
instruction, the consignee referred to was PAKISTAN BANK. We find the
argument too simplistic. Respondent court analyzed the telex in its entirety and
correctly arrived at the conclusion that the consignee referred to was not
PAKISTAN BANK but GPC —

There is no mistake that the originals of the two (2) subject Bills of Lading are
still in the possession of the Pakistani Bank. The appealed decision affirms this
fact. Conformably, to implement the said telex instruction, the delivery of the
shipment must be to GPC, the notify party or real importer/buyer of the goods and
not the Pakistani Bank since the latter can very well present the original Bills of
Lading in its possession. Likewise, if it were the Pakistani Bank to whom the
cargoes were to be strictly delivered, it will no longer be proper to require a bank
guarantee as a substitute for the Bill of Lading. To construe otherwise will render
meaningless the telex instruction. After all, the cargoes consist of perishable fresh
fruits and immediate delivery thereof to the buyer/importer is essentially a factor
to reckon with. Besides, GPC is listed as one among the several consignees in the
telex (Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M
shipment (not any party) to respective consignees without presentation of OB/L
and bank guarantee . . . .20

Apart from the foregoing obstacles to the success of petitioner's cause, petitioner
failed to substantiate his claim that he returned to SOLIDBANK the full amount
of the value of the cargoes. It is not far-fetched to entertain the notion, as did
respondent court, that he merely accommodated SOLIDBANK in order to recover
the cost of the shipped cargoes from respondents. We note that it was
SOLIDBANK which initially demanded payment from respondents through five
(5) letters. SOLIDBANK must have realized the absence of privity of contract
between itself and respondents. That is why petitioner conveniently took the
cudgels for the bank.

In view of petitioner's utter failure to establish the liability of respondents over the
cargoes, no reversible error was committed by respondent court in ruling against
him.

Virgines Calvo doing business under the name and style Transorient
Container Terminal Services, Inc. vs. UCPB General Insurance Co., Inc.,
G.R. No. 148496, March 19, 2002

This is a petition for review of the decision,1 dated May 31, 2001, of the Court of
Appeals, affirming the decision2 of the Regional Trial Court, Makati City, Branch
148, which ordered petitioner to pay respondent, as subrogee, the amount of
P93,112.00 with legal interest, representing the value of damaged cargo handled
by petitioner, 25% thereof as attorney's fees, and the cost of the suit.1âwphi1.nêt

The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal

Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time material
to this case, petitioner entered into a contract with San Miguel Corporation (SMC)
for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft
liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera
Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent
UCPB General Insurance Co., Inc.

On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in
Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from
the vessel to the custody of the arrastre operator, Manila Port Services, Inc. From
July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew
the cargo from the arrastre operator and delivered it to SMC's warehouse in
Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo
Surveyors, who found that 15 reels of the semi-chemical fluting paper were
"wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage
was placed at P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for
the aforementioned amount. In turn, respondent, as subrogee of SMC, brought
suit against petitioner in the Regional Trial Court, Branch 148, Makati City,
which, on December 20, 1995, rendered judgment finding petitioner liable to
respondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the
custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the
Damage Report (Exh. "F") with entries appearing therein, classified as "TED" and
"TSN", which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage
at the end and tearrage at the middle of the subject damaged cargoes respectively,
coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the
fact of the damaged condition of the subject cargoes. The surveyor[s'] report
(Exh. "H-4-A") in particular, which provides among others that:

" . . . we opine that damages sustained by shipment is attributable to improper

handling in transit presumably whilst in the custody of the broker . . . ."

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense
that [she is] are not liable. Defendant by reason of the nature of [her] business
should have devised ways and means in order to prevent the damage to the
cargoes which it is under obligation to take custody of and to forthwith deliver to
the consignee. Defendant did not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the presumption is that the
moment the defendant accepts the cargo [she] shall perform such extraordinary
diligence because of the nature of the cargo.
....

Generally speaking under Article 1735 of the Civil Code, if the goods are proved
to have been lost, destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they have
observed the extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove
that he has exercised the extraordinary diligence required by law. Thus, it has
been held that the mere proof of delivery of goods in good order to a carrier, and
of their arrival at the place of destination in bad order, makes out a prima facie
case against the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon the carrier to
prove that the loss was due to accident or some other circumstances inconsistent
with its liability." (cited in Commercial Laws of the Philippines by Agbayani, p.
31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a

common carrier is supposed [to] exercise [the] extraordinary diligence required by
law, hence the extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of and received by the carrier for
transportation until the same are delivered actually or constructively by the carrier
to the consignee or to the person who has the right to receive the same.3

Accordingly, the trial court ordered petitioner to pay the following amounts --

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyer's fee;

3. Costs of suit.4

The decision was affirmed by the Court of Appeals on appeal. Hence this petition
for review on certiorari.

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE

ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED
BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY
MISTAKEN INFERENCE.

II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE

ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER
AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS
SERVICES TO THE PUBLIC.5

It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court of
Appeals held otherwise, then she is indeed not liable beyond what ordinary
diligence in the vigilance over the goods transported by her, would require.6
Consequently, any damage to the cargo she agrees to transport cannot be
presumed to have been due to her fault or negligence.

Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs
broker and warehouseman, she does not indiscriminately hold her services out to
the public but only offers the same to select parties with whom she may contract
in the conduct of her business.

The contention has no merit. In De Guzman v. Court of Appeals,7 the Court

dismissed a similar contention and held the party to be a common carrier, thus -

The Civil Code defines "common carriers" in the following terms:

"Article 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public."

The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity . . . Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only
from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen
to coincide neatly with the notion of "public service," under the Public Service
Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, "public service" includes:

" x x x every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x x" 8

There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioner's
contention would be to deprive those with whom she contracts the protection
which the law affords them notwithstanding the fact that the obligation to carry
goods for her customers, as already noted, is part and parcel of petitioner's
business.

Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:

Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all
the circumstances of each case. . . .

In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary

diligence in the vigilance over goods" was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires."

In the case at bar, petitioner denies liability for the damage to the cargo. She
claims that the "spoilage or wettage" took place while the goods were in the
custody of either the carrying vessel "M/V Hayakawa Maru," which transported
the cargo to Manila, or the arrastre operator, to whom the goods were unloaded
and who allegedly kept them in open air for nine days from July 14 to July 23,
1998 notwithstanding the fact that some of the containers were deformed,
cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to
wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detached

loosened.10

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino

testified that he has no personal knowledge on whether the container vans were
first stored in petitioner's warehouse prior to their delivery to the consignee. She
likewise claims that after withdrawing the container vans from the arrastre
operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMC's
warehouse in Ermita, Manila, which is a mere thirty-minute drive from the Port
Area where the cargo came from. Thus, the damage to the cargo could not have
taken place while these were in her custody.11

Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo
Surveyors indicates that when the shipper transferred the cargo in question to the
arrastre operator, these were covered by clean Equipment Interchange Report
(EIR) and, when petitioner's employees withdrew the cargo from the arrastre
operator, they did so without exception or protest either with regard to the
condition of container vans or their contents. The Survey Report pertinently reads
--

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex

vessel to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized
onto 30' x 20' secure metal vans, covered by clean EIRs. Except for slight dents
and paint scratches on side and roof panels, these containers were deemed to have
[been] received in good condition.

....

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30' x 20' cargo containers was
[withdrawn] by Transorient Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignee's storage warehouse located at
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25,
1990.12

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the
vessel to the arrastre, Marina Port Services Inc., in good order and condition as
evidenced by clean Equipment Interchange Reports (EIRs). Had there been any
damage to the shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-appellant from
the arrastre still in good order and condition as the same were received by the
former without exception, that is, without any report of damage or loss. Surely, if
the container vans were deformed, cracked, distorted or dented, the defendant-
appellant would report it immediately to the consignee or make an exception on
the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of
these took place. To put it simply, the defendant-appellant received the shipment
in good order and condition and delivered the same to the consignee damaged.
We can only conclude that the damages to the cargo occurred while it was in the
possession of the defendant-appellant. Whenever the thing is lost (or damaged) in
the possession of the debtor (or obligor), it shall be presumed that the loss (or
damage) was due to his fault, unless there is proof to the contrary. No proof was
proffered to rebut this legal presumption and the presumption of negligence
attached to a common carrier in case of loss or damage to the goods.13

Anent petitioner's insistence that the cargo could not have been damaged while in
her custody as she immediately delivered the containers to SMC's compound,
suffice it to say that to prove the exercise of extraordinary diligence, petitioner
must do more than merely show the possibility that some other party could be
responsible for the damage. It must prove that it used "all reasonable means to
ascertain the nature and characteristic of goods tendered for [transport] and that
[it] exercise[d] due care in the handling [thereof]." Petitioner failed to do this.

Nor is there basis to exempt petitioner from liability under Art. 1734(4), which
provides --

Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:

....

(4) The character of the goods or defects in the packing or in the containers.

....

For this provision to apply, the rule is that if the improper packing or, in this case,
the defect/s in the container, is/are known to the carrier or his employees or
apparent upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of liability
for damage resulting therefrom.14 In this case, petitioner accepted the cargo
without exception despite the apparent defects in some of the container vans.
Hence, for failure of petitioner to prove that she exercised extraordinary diligence
in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 173515 holds.

Vector Shipping Corp. and Francisco Soriano vs. Adelfo B. Macasa, 559
SCRA 97 (2008)

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA)
Decision2 dated September 24, 2003, which affirmed with modification the
Decision3 of the Regional Trial Court (RTC), Branch 17 of Davao City, dated
May 5, 1995.

The Facts

On December 19, 1987, spouses Cornelio (Cornelio) and Anacleta Macasa

(Anacleta), together with their eight-year-old grandson, Ritchie Macasa, (Ritchie)
boarded the MV Doña Paz, owned and operated by respondent Sulpicio Lines,
Inc. (Sulpicio Lines), at Tacloban, Leyte bound for Manila. On the fateful evening
of December 20, 1987, MV Doña Paz collided with the MT Vector, an oil tanker
owned and operated by petitioners Vector Shipping Corporation (Vector
Shipping) and Francisco Soriano (Soriano), which at the time was loaded with
860,000 gallons of gasoline and other petroleum products, in the vicinity of
Dumali Point, Tablas Strait, between Marinduque and Oriental Mindoro. Only
twenty-six persons survived: 24 passengers of MV Doña Paz and 2 crew members
of MT Vector. Both vessels were never retrieved. Worse, only a few of the
victims' bodies, who either drowned or were burned alive, were recovered.
Cornelio, Anacleta and Ritchie were among the victims whose bodies have yet to
be recovered up to this day.

Respondents Adelfo, Emilia, Timoteo, and Cornelio, Jr., all surnamed Macasa,
are the children of Cornelio and Anacleta. On the other hand, Timoteo and his
wife, respondent Rosario Macasa, are the parents of Ritchie (the Macasas). Some
of the Macasas went to the North Harbor in Manila to await the arrival of
Cornelio, Anacleta and Ritchie. When they heard the news that MV Doña Paz
was rammed at sea by another vessel, bewildered, the Macasas went to the office
of Sulpicio Lines to check on the veracity of the news, but the latter denied that
such an incident occurred. According to the Macasas, Sulpicio Lines was
uncooperative and was reluctant to entertain their inquiries. Later, they were
forced to rely on their own efforts to search for the bodies of their loved ones, but
to no avail.

The Macasas manifested that before they filed a case in court, Sulpicio Lines,
through counsel, intimated its intention to settle, and offered the amount of
P250,000.00 for the death of Cornelio, Anacleta and Ritchie. The Macasas
rejected the said offer. Thus, on October 2, 1991, the Macasas filed a Complaint
for Damages arising out of breach of contract of carriage against Sulpicio Lines
before the RTC. The complaint imputed negligence to Sulpicio Lines because it
was remiss in its obligations as a common carrier. The Macasas prayed for civil
indemnity in the amount of P800,000.00 for the death of Cornelio, Anacleta and
Ritchie, as well as for Cornelio's and Anacleta's alleged unearned income since
they were both working as vocational instructors before their demise. The
Macasas also claimed P100,000.00 as actual and compensatory damages for the
lost cash, checks, jewelries and other personal belongings of the latter,
P600,000.00 in moral damages, P100,000.00 by way of exemplary damages, and
P100,000.00 as costs and attorney's fees.

Sulpicio Lines traversed the complaint, alleging, among others that (1) MV Doña
Paz was seaworthy in all aspects; (2) it exercised extraordinary diligence in
transporting their passengers and goods; (3) it acted in good faith as it gave
immediate assistance to the survivors and kin of the victims; (4) the sinking of
MV Doña Paz was without contributory negligence on its part; and (5) the
collision was MT Vector's fault since it was allowed to sail with an expired
coastwise license, expired certificate of inspection and it was manned by
unqualified and incompetent crew members per findings of the Board of Marine
Inquiry (BMI) in BMI Case No. 653-87 which had exonerated Sulpicio Lines
from liability. Thus, Sulpicio Lines filed a Third-Party Complaint against Vector
Shipping, Soriano and Caltex Philippines Inc. (Caltex), the charterer of MT
Vector.

Trial on the merits ensued.

The RTC's Ruling

In its Decision4 dated May 5, 1995, the RTC awarded P200,000.00 as civil
indemnity for the death of Cornelio, Anacleta and Ritchie; P100,000.00 as actual
damages; P500,000.00 as moral damages; P100,000.00 as exemplary damages;
and P50,000.00 as attorney's fees. The case was disposed of in this wise:

Accordingly, as a result of this decision, on plaintiffs' complaint against third-

party (sic) defendant Sulpicio Lines Inc., third-party defendant Caltex Philippines,
Inc. and third-party defendant MT Vector Shipping Corporation and/or Francisco
Soriano, are liable against defendant third-party plaintiff, Sulpicio Lines, for
reimbursement, subrogation and indemnity on all amounts, defendant Sulpicio
Lines was ordered liable against plaintiffs, by way of actual, moral, exemplary
damages and attorney's fee, MT Vector Shipping Lines and/or Francisco Soriano,
third-party defendants, are ordered jointly and severally, liable to pay third-party
plaintiff, Sulpicio Lines, by way of reimbursement, subrogation and indemnity, of
all the above amounts, ordered against defendant Sulpicio Lines, Inc., to pay in
favor of plaintiff, with interest and cost of suit.

SO ORDERED.5
Aggrieved, Sulpicio Lines, Caltex, Vector Shipping and Soriano appealed to the
CA.

The CA's Ruling

In the assailed Decision6 dated September 24, 2003, the CA held:

WHEREFORE, all premises considered, the assailed decision is hereby modified

in that third-party defendant-appellant Caltex Phils., Inc. is hereby exonerated
from liability. The P100,000 actual damages is deleted while the indemnity for
(sic) is reduced to P150,000. All other aspects of the appealed judgment are
perforce affirmed.

SO ORDERED.7

The Issues

Hence, this Petition raising the following issues:

1) May the decision of the Board Marine Inquiry (BMI) which, to date, is still
pending with the Department of National Defense (DND) and, therefore, deemed
vacated as it is not yet final and executory, be binding upon the court?cralawred

2) In the absence of clear, convincing, solid, and concrete proof of including, but
not limited to, absence of eyewitnesses on that tragic maritime incident on 20
December 1987, will it be in consonance with law, logic, principles of physics,
and/or allied science, to hold that MT VECTOR is the vessel solely at fault and
responsible for the collision? How about MV DOÑA PAZ, a bigger ship of
2,324.08 gross tonnage (5-deck cargo passenger vessel, then cruising at 16.5
knots)? As compared to MT VECTOR of 629.82 gross tonner tanker, then
cruising at 4.5 knots? May it be considered that, as between the two vessels, MV
DOÑA PAZ could ha[ve] avoid[ed] such collision had there been an official on
the bridge, and that MV DOÑA PAZ could had been earlier alarmed by its radar
for an approaching vessel?cralawred

3) May VECTOR and SORIANO be held liable to indemnify/reimburse

SULPICIO the amounts it is ordered to pay the MACASA's because SULPICIO's
liability arises from breach of contract of carriage, inasmuch as in "culpa
contractual" it is sufficient to prove the existence of the contract, because carrier
is presumed to be at fault or to have acted negligently it being its duty to exercise
extraordinary diligence, and cannot make the [safety] of its passengers dependent
upon the diligence of VECTOR and SORIANO?cralawred

4) Will it be in accord with existing law and/or jurisprudence that both vessels
(MV DOÑA PAZ and MT VECTOR) be declared mutually at fault and, therefore,
each must [bear] its own loss? In the absence of CLEAR and CONVINCING
proof[,] who is solely at fault?8

Petitioners posit that the factual findings of the BMI are not binding on the Court
as such is limited to administrative liabilities and does not absolve the common
carrier from its failure to observe extraordinary diligence; that this Court's ruling
in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.9 is not res adjudicata to this
case, since there were several other cases which did not reach this Court but,
however, attained finality, previously holding that petitioners and Sulpicio Lines
are jointly and severally liable to the victims;10 that the collision was solely due
to the fault of MV Doña Paz as it was guilty of navigational fault and negligence;
that due to the absence of the ship captain and other competent officers who were
not at the bridge at the time of collision, and running at a speed of 16.5 knots, it
was the MV Doña Paz which rammed MT Vector; and that it was improbable for
a slower vessel like MT Vector which, at the time, was running at a speed of
merely 4.5 knots to ram a much faster vessel like the MV Doña Paz.11

On the other hand, Sulpicio Lines claims that this Court's ruling in Caltex
(Philippines), Inc. v. Sulpicio Lines, Inc.12 is res adjudicata to this case being of
similar factual milieu and that the same is the law of the case on the matter; that
the BMI proceedings are administrative in nature and can proceed independently
of any civil action filed with the regular courts; that the BMI findings, as affirmed
by the Philippine Coast Guard, holding that MT Vector was solely at fault at the
time of collision, were based on substantial evidence and by reason of its special
knowledge and technical expertise, the BMI's findings of facts are generally
accorded respect by the courts; and that, as such, said BMI factual findings cannot
be the subject of the instant Petition for Review asking this Court to look again
into the pieces of evidence already presented. Thus, Sulpicio Lines prays that the
instant Petition be denied for lack of merit.13

In their memorandum, the Macasas manifest that they are basically concerned
with their claims against Sulpicio Lines for breach of contract of carriage. The
Macasas opine that the arguments raised by Sulpicio Lines in its attempt to avoid
liability to the Macasas are without basis in fact and in law because the RTC's
Decision is supported by applicable provisions of law and settled jurisprudence on
contract of carriage. However, they disagree with the CA on the deletion of the
RTC's award of P100,000.00 actual damages. The CA's simple justification that if
indeed the victims had such huge amount of money, they could have traveled by
plane instead of taking the MV Doña Paz, according to the Macasas, is unjust,
misplaced and adds insult to injury. They insist that the claim for actual damages
was duly established in the hearings before the RTC by ample proof that Cornelio
and Anacleta were both professionals; that they were in possession of personal
effects and jewelries; and that since it was the Christmas season, the spouses
intended a vacation in Manila and buy things to bring home as gifts. The Macasas
also appeal that the reduction of the civil indemnity for the death of Cornelio,
Anacleta and Ritchie from P200,000.00 to P150,000.00 be reconsidered. Thus, the
Macasas pray that the RTC Decision be affirmed in toto and/or the CA Decision
be modified with respect to the deleted award of actual damages and the reduced
civil indemnity for the death of the victims.14

This Court's Ruling

The instant Petition lacks merit.

It is a well-established doctrine that in Petitions for Review on Certiorari under

Rule 45 of the Rules of Civil Procedure, only questions of law may be raised by
the parties and passed upon by this Court. This Court defined a question of law, as
distinguished from a question of fact, to wit:

A question of law arises when there is doubt as to what the law is on a certain
state of facts, while there is a question of fact when the doubt arises as to the truth
or falsity of the alleged facts. For a question to be one of law, the same must not
involve an examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on what the
law provides on the given set of circumstances. Once it is clear that the issue
invites a review of the evidence presented, the question posed is one of fact. Thus,
the test of whether a question is one of law or of fact is not the appellation given
to such question by the party raising the same; rather, it is whether the appellate
court can determine the issue raised without reviewing or evaluating the evidence,
in which case, it is a question of law; otherwise it is a question of fact.15

Petitioners' insistence that MV Doña Paz was at fault at the time of the collision
will entail this Court's review and determination of the weight, credence, and
probative value of the evidence presented. This Court is being asked to evaluate
the pieces of evidence which were adequately passed upon by both the RTC and
the CA. Without doubt, this matter is essentially factual in character and,
therefore, outside the ambit of a Petition for Review on Certiorariunder Rule 45 of
the Rules of Civil Procedure. Petitioners ought to remember that this Court is not
a trier of facts. It is not for this Court to weigh these pieces of evidence all over
again.16

Likewise, we take judicial notice17 of our decision in Caltex (Philippines), Inc. v.

Sulpicio Lines, Inc.18 In that case, while Caltex was exonerated from any third-
party liability, this Court sustained the CA ruling that Vector Shipping and
Soriano are liable to reimburse and indemnify Sulpicio Lines for whatever
damages, attorney's fees and costs the latter is adjudged to pay the victims therein.

Petitioners' invocation of the pendency before this Court of Francisco Soriano v.

Sulpicio Lines, Inc.19 along with Vector Shipping Corporation and Francisco
Soriano v. American Home Assurance Co. and Sulpicio Lines, Inc.20 is
unavailing. It may be noted that in a Resolution dated February 13, 2006, this
Court denied the petition in Francisco Soriano v. Sulpicio Lines, Inc. for its
failure to sufficiently show that the CA committed any reversible error in the
challenged decision as to warrant the exercise of this Court's discretionary
appellate jurisdiction. As a result, the CA decision21 dated November 17, 2003
holding that Sulpicio Lines has a right to reimbursement and indemnification
from the third-party defendants Soriano and Vector Shipping, who are the same
petitioners in this case, was sustained by this Court. Considering that in the cases
which have reached this Court, we have consistently upheld the third-party
liability of petitioners, we see no cogent reason to deviate from this
ruling.chanrobles virtual law library

Moreover, in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.,22 we held that MT

Vector fits the definition of a common carrier under Article 173223 of the New
Civil Code. Our ruling in that case is instructive:

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship.
For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel involved in its
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code.

The provisions owed their conception to the nature of the business of common
carriers. This business is impressed with a special public duty. The public must of
necessity rely on the care and skill of common carriers in the vigilance over the
goods and safety of the passengers, especially because with the modern
development of science and invention, transportation has become more rapid,
more complicated and somehow more hazardous. For these reasons, a passenger
or a shipper of goods is under no obligation to conduct an inspection of the ship
and its crew, the carrier being obliged by law to impliedly warrant its
seaworthiness.

Thus, we are disposed to agree with the findings of the CA when it aptly held:

We are not swayed by the lengthy disquisition of MT Vector and Francisco

Soriano urging this Court to absolve them from liability. All evidence points to
the fact that it was MT Vector's negligent officers and crew which caused it to
ram into MV Doña Paz. More so, MT Vector was found to be carrying expired
coastwise license and permits and was not properly manned. As the records would
also disclose, there is a defect in the ignition system of the vessel, and it was not
convincingly shown whether the necessitated repairs were in fact undertaken
before the said ship had set to sea. In short, MT Vector was unseaworthy at the
time of the mishap. That the said vessel was allowed to set sail when it was, to
everyone in the group's knowledge, not fit to do so translates into rashness and
imprudence.24

We reiterate, anew, the rule that findings of fact of the CA are generally binding
and conclusive on this Court.25 While this Court has recognized several
exceptions26 to this rule, none of these exceptions finds application in this case. It
bears emphasis also that this Court accords respect to the factual findings of the
trial court, especially if affirmed by the CA on appeal. Unless the trial court
overlooked substantial matters that would alter the outcome of the case, this Court
will not disturb such findings. In any event, we have meticulously reviewed the
records of the case and found no reason to depart from the rule.27

Lastly, we cannot turn a blind eye to this gruesome maritime tragedy which is
now a dark page in our nation's history. We commiserate with all the victims,
particularly with the Macasas who were denied justice for almost two decades in
this case. To accept petitioners' submission that this Court, along with the RTC
and the CA, should await the review by the Department of National Defense of
the BMI findings, would, in effect, limit the courts' jurisdiction to expeditiously
try, hear and decide cases filed before them. It would not only prolong the
Macasas' agony but would result in yet another tragedy at the expense of speedy
justice. This, we cannot allow.

R Transport Corporation vs. Pante, G.R. No. 162104, September 15, 2009

This is a petition for review on certiorari1 of the Decision dated October 7, 2003
of the Court of Appeals in CA-G.R. CV No. 76170, and its Resolution dated
February 5, 2004, denying petitioner’s motion for reconsideration. The Court of
Appeals affirmed the Decision of the Regional Trial Court (RTC) of Gapan City,
Branch 35, dated January 26, 2002, holding petitioner liable to respondent for
damages for physical injuries sustained by respondent due to a vehicular accident.

The facts2 are as follows:

Petitioner R Transport Corporation, represented by its owner and president,

Rizalina Lamzon,3 is a common carrier engaged in operating a bus line
transporting passengers to Gapan, Nueva Ecija from Cubao, Quezon City and
back.

At about 3:00 a.m. of January 27, 1995, respondent Eduardo Pante rode
petitioner’s R. L. Bus Liner with Plate Number CVW-635 and Body Number
94810 in Cubao, Quezon City bound for Gapan, Nueva Ecija. Respondent paid
the sum of ₱48.00 for his fare, and he was issued bus ticket number 555401.4

While traveling along the Doña Remedios Trinidad Highway in Baliuag, Bulacan,
the bus hit a tree and a house due to the fast and reckless driving of the bus driver,
Johnny Merdiquia. Respondent sustained physical injuries as a result of the
vehicular accident. He was brought by an unidentified employee of petitioner to
the Baliuag District Hospital, where respondent was diagnosed to have sustained a
"laceration frontal area, with fracture of the right humerus,"5 or the bone that
extends from the shoulder to the elbow of the right arm. Respondent underwent an
operation for the fracture of the right humerus per Certification dated February
17, 1995 issued by Dr. Virginia C. Cabling of the Baliuag District Hospital.6

The hospital's Statement of Account showed that respondent’s operation and

confinement cost ₱22,870.00.7 Respondent also spent ₱8,072.60 for his
medication. He was informed that he had to undergo a second operation after two
years of rest.8 He was unemployed for almost a year after his first operation
because Goldilocks, where he worked as a production crew, refused to accept him
with his disability as he could not perform his usual job.9

By way of initial assistance, petitioner gave respondent's wife, Analiza P. Pante,

the sum of ₱7,000.00, which was spent for the stainless steel instrument used in
his fractured arm.10

After the first operation, respondent demanded from petitioner, through its
manager, Michael Cando, the full payment or reimbursement of his medical and
hospitalization expenses, but petitioner refused payment.11

Four years later, respondent underwent a second operation. He spent ₱15,170.00

for medical and hospitalization expenses.12

On March 14, 1995, respondent filed a Complaint13 for damages against

petitioner with the RTC of Gapan City, Branch 35 (trial court) for the injuries he
sustained as a result of the vehicular accident.

In its Answer,14 petitioner put up the defense that it had always exercised the
diligence of a good father of a family in the selection and supervision of its
employees, and that the accident was a force majeure for which it should not be
held liable.

At the pre-trial on October 4, 1995, petitioner was declared in default,15 which

was reconsidered by the trial court on December 12, 199516 upon finding that
petitioner had earlier filed a Motion to Transfer Date of Hearing. Trial was first
set on February 26, 1996, and from then on trial was postponed several times on
motion of petitioner.

Six years later, on October 24, 2001, respondent’s direct examination was
concluded. His cross-examination was reset to December 5, 2001 due to the
absence of petitioner and its counsel.17 It was again reset to January 23, 200218
upon petitioner’s motion. On January 23, 2002, petitioner, through its new
counsel, asked for another postponement on the ground that he was not ready.
Hence, the cross-examination of respondent was reset to March 13, 2002.19

On March 13, 2002, petitioner was declared to have waived its right to cross-
examine respondent due to the absence of petitioner and its counsel, and
respondent was allowed to offer his exhibits within five days.20 Petitioner’s
motion for reconsideration dated April 4, 200221 was denied on May 7, 2002.22

In the hearing of June 19, 2002, petitioner was declared to have waived its right to
present evidence on motion of respondent’s counsel in view of the unexplained
absence of petitioner and its counsel despite prior notice. The case was declared
submitted for decision.23

On June 26, 2002, the trial court rendered a Decision, the dispositive portion of
which reads:

WHEREFORE, premises considered, judgment is hereby rendered finding the

plaintiffs to be entitled to damages and ordering defendants to [pay]:

1.) ₱39,112.60 as actual damages;

2.) ₱50,000.00 as moral damages;

3.) ₱50,000.00 as exemplary damages;

4.) Twenty-five percent (25%) of the total of which shall

constitute a lien as contingent fee of plaintiff’s counsel.24

SO ORDERED.

The trial court held that the provisions of the Civil Code on common carriers
govern this case. Article 1756 of the Civil Code states that "[i]n case of death of
or injuries to passengers, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed by Articles 1733 and 1755." The trial court ruled that
since petitioner failed to dispute said presumption despite the many opportunities
given to it, such presumption of negligence stands.

Petitioner appealed the decision of the trial court to the Court of Appeals.

In its Decision dated October 7, 2003, the Court of Appeals affirmed the decision
of the trial court, the dispositive portion of which reads:

WHEREFORE, for lack of merit, the appeal is DENIED and the Decision
appealed from is AFFIRMED in toto. With double costs against the appellant.25

Petitioner’s motion for reconsideration was denied for lack of merit in the
Resolution of the Court of Appeals dated February 5, 2004.26

Hence, petitioner filed this petition raising the following issues:

I

THE HONORABLE COURT OF APPEALS, TENTH DIVISION GRAVELY

ERRED IN NOT GIVING DUE COURSE TO THE DEFENDANT-
APPELLANT'S MOTION FOR RECONSIDERATION OF THE DECISION
PROMULGATED ON OCTOBER 7, 2003, THEREBY DEPRIVING
PETITIONER'S FUNDAMENTAL RIGHT TO DUE PROCESS.

II

THE HONORABLE COURT OF APPEALS, TENTH DIVISION FURTHER

GRAVELY ERRED IN AFFIRMING IN TOTO THE DECISION OF THE
REGIONAL TRIAL COURT OF GAPAN CITY, BRANCH 35,
PARTICULARLY IN AWARDING DAMAGES TO THE RESPONDENT
WITHOUT PRESENTING ANY SUBSTANTIAL EVIDENCE.

III

THE HONORABLE COURT OF APPEALS, TENTH DIVISION, IN

AFFIRMING IN TOTO THE DECISION OF THE REGIONAL TRIAL COURT
OF GAPAN CITY, BRANCH 35, HAS COMMITTED GRAVE AND
REVERSIBLE ERROR IN ITS FINDING OF FACTS AND APPLICATION OF
[THE] LAW.27

The main issue is whether or not petitioner is liable to respondent for damages.

The Court affirms the decision of the Court of Appeals that petitioner is liable for
damages.

Under the Civil Code, common carriers, like petitioner bus company, from the
nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported by them,
according to all the circumstances of each case.28 They are bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.29

Article 1756 of the Civil Code states that "[i]n case of death of or injuries to
passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as
prescribed by Articles 1733 and 1755."

Further, Article 1759 of the Civil Code provides that "[c]ommon carriers are
liable for the death or injury to passengers through the negligence or willful acts
of the former's employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common carriers. This
liability of the common carriers does not cease upon proof that they exercised all
the diligence of a good father of a family in the selection and supervision of their
employees."30

In this case, the testimonial evidence of respondent showed that petitioner,

through its bus driver, failed to observe extraordinary diligence, and was,
therefore, negligent in transporting the passengers of the bus safely to Gapan,
Nueva Ecija on January 27, 1995, since the bus bumped a tree and a house, and
caused physical injuries to respondent. Article 1759 of the Civil Code explicitly
states that the common carrier is liable for the death or injury to passengers
through the negligence or willful acts of its employees, and that such liability does
not cease upon proof that the common carrier exercised all the diligence of a good
father of a family in the selection and supervision of its employees. Hence, even if
petitioner was able to prove that it exercised the diligence of a good father of the
family in the selection and supervision of its bus driver, it is still liable to
respondent for the physical injuries he sustained due to the vehicular accident.31

Petitioner cannot complain that it was denied due process when the trial court
waived its right to present evidence, because it only had itself to blame for its
failure to attend the hearing scheduled for reception of its evidence on June 19,
2002. The trial court stated, thus:

It is noteworthy to state that during the course of the proceeding of this case,
defendant (petitioner) and its counsel hardly appeared in court and only made
innumerable motions to reset the hearings to the point that this case x x x dragged
[on] for seven years from its filing up to the time that it has been submitted for
decision. And for the unexplained absence of counsel for defendant in the hearing
set last June 19, 2002 despite repeated resetting, upon motion of the counsel for
plaintiff (respondent), Atty. Ireneo Romano, its right to present its evidence was
considered waived.32

In Silverio, Sr. v. Court of Appeals,33 the Court held that petitioner therein was
not denied due process when the records of the case showed that he was amply
given the opportunity to present his evidence, which he, however, waived. There
is no denial of due process where a party was given an opportunity to be heard.34

Next, petitioner contends that the Court of Appeals erred in denying its motion for
reconsideration of the appellate court’s Decision dated October 7, 2003.

The contention is unmeritorious.

The Court of Appeals has the discretion to deny petitioner’s motion for
reconsideration since it found that there was no cogent reason to warrant
reconsideration of its Decision dated October 7, 2003. According to the appellate
court, it had already considered, if not squarely ruled upon, the arguments raised
in petitioner’s motion for reconsideration.35
Moreover, petitioner contends that the Court of Appeals erred in affirming the
decision of the trial court, which awarded actual damages in the amount of
₱22,870.00 based on the statement of account issued by the Baliuag District
Hospital and not based on an official receipt. Petitioner argues that the statement
of account is not the best evidence.

The contention is without merit.

As cited by the Court of Appeals in its Decision, Jarco Marketing Corporation v.

Court of Appeals36 awarded actual damages for hospitalization expenses that was
evidenced by a statement of account issued by the Makati Medical Center. Hence,
the statement of account is admissible evidence of hospital expenses incurred by
respondent.

Petitioner also contends that the award of moral damages is not proper, because it
is not recoverable in actions for damages predicated on breach of the contract of
transportation under Articles 2219 and 2220 of the Civil Code.37

The Court is not persuaded.

The Court of Appeals correctly sustained the award of moral damages, citing
Spouses Ong v. Court of Appeals,38 which awarded moral damages to paying
passengers, who suffered physical injuries on board a bus that figured in an
accident. Spouses Ong held that a person is entitled to the integrity of his body
and if that integrity is violated, damages are due and assessable. Thus, the usual
practice is to award moral damages for physical injuries sustained. In Spouses
Ong, the Court awarded moral damages in the amount of ₱50,000.00 to a
passenger who was deemed to have suffered mental anguish and anxiety because
her right arm could not function in a normal manner. Another passenger, who
suffered injuries on his left chest, right knee, right arm and left eye, was awarded
moral damages in the amount of ₱30,000.00 for the mental anxiety and anguish
he suffered from the accident.

In this case, respondent sustained a "laceration frontal area, with fracture of the
right humerus" due to the vehicular accident. He underwent an operation for the
fracture of the bone extending from the shoulder to the elbow of his right arm.
After a few years of rest, he had to undergo a second operation. Respondent,
therefore, suffered physical pain, mental anguish and anxiety as a result of the
vehicular accident. Hence, the award of moral damages in the amount of
₱50,000.00 is proper.

Petitioner likewise contends that the award of exemplary damages is improper,

because it did not act in a wanton, fraudulent, reckless, oppressive or malevolent
manner.

The contention is without merit.

Article 2232 of the Civil Code states that "[i]n contracts and quasi-contracts, the
court may award exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. In this case, respondent’s
testimonial evidence showed that the bus driver, Johnny Merdiquia, was driving
the bus very fast in a reckless, negligent and imprudent manner; hence, the bus hit
a tree and a house along the highway in Baliuag, Bulacan. The award of
exemplary damages is, therefore, proper. The award of exemplary damages is
justified to serve as an example or as a correction for the public good.39

Further, the Court affirms the award of attorney’s fees to respondent’s counsel.
The Court notes that respondent filed his Complaint for damages on March 14,
1995 as pauper-litigant. The award of legal fees by the trial court to respondent’s
counsel was a contingent fee of 25 percent of the total amount of damages, which
shall constitute a lien on the total amount awarded. The said award was affirmed
by the Court of Appeals. Twenty-five percent of the total damages is equivalent to
₱34,778.15. The award of legal fees is commensurate to the effort of respondent’s
counsel, who attended to the case in the trial court for seven years, and who
finally helped secure redress for the injury sustained by respondent after 14 years.

Lastly, petitioner contends that the medical certificate presented in evidence is

without probative value since respondent failed to present as witness Dr. Virginia
Cabling to affirm the content of said medical certificate.

The contention lacks merit. The Court of Appeals correctly held that the medical
certificate is admissible since petitioner failed to object to the presentation of the
evidence.40