G.R. No. 101089. April 7, 1993. existence of the contract of lease.

He who alleges a fact has the

burden of proving it.
ESTRELLITA M. BASCOS, petitioners,
vs. 6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents. AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of
Juanito Morden, the truck helper in the hijacked truck, was presented
as evidence in court, he himself was a witness as could be gleaned
Modesto S. Bascos for petitioner.
from the contents of the petition. Affidavits are not considered the
best evidence if the affiants are available as witnesses.
Pelaez, Adriano & Gregorio for private respondent.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS
SYLLABUS WHAT LAW DEFINES IT TO BE. — Granting that the said evidence
were not self-serving, the same were not sufficient to prove that the
contract was one of lease. It must be understood that a contract is
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO what the law defines it to be and not what it is called by the
DETERMINE COMMON CARRIER. — Article 1732 of the Civil Code contracting parties.
defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, DECISION
offering their services to the public." The test to determine a common
carrier is "whether the given undertaking is a part of the business
CAMPOS, JR., J p:
engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business
transacted." . . . The holding of the Court in De Guzman vs. Court of This is a petition for review on certiorari of the decision ** of the Court
Appeals is instructive. In referring to Article 1732 of the Civil Code, it of Appeals in "RODOLFO A. CIPRIANO, doing business under the
held thus: "The above article makes no distinction between one name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs.
whose principal business activity is the carrying of persons or goods ESTRELLITA M. BASCOS, doing business under the name of
or both, and one who does such carrying only as an ancillary activity BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No.
(in local idiom, as a "sideline"). Article 1732 also carefully avoids 25216, the dispositive portion of which is quoted hereunder:
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
"PREMISES considered, We find no reversible error in the decision
offering such service on an occasional, episodic or unscheduled
appealed from, which is hereby affirmed in toto. Costs against
basis. Neither does Article 1732 distinguished between a carrier
appellant." 1
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 The facts, as gathered by this Court, are as follows:
think that Article 1732 deliberately refrained from making such
distinctions."
Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE for short) entered into a hauling contract 2 with Jibfair
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS Shipping Agency Corporation whereby the former bound itself to haul
TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE the latter's 2,000 m/tons of soya bean meal from Magallanes Drive,
ARISES; HOW PRESUMPTION OVERCAME; WHEN Del Pan, Manila to the warehouse of Purefoods Corporation in
PRESUMPTION MADE ABSOLUTE. — Common carriers are Calamba, Laguna. To carry out its obligation, CIPTRADE, through
obliged to observe extraordinary diligence in the vigilance over the Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to
goods transported by them. Accordingly, they are presumed to have transport and to deliver 400 sacks of soya bean meal worth
been at fault or to have acted negligently if the goods are lost, P156,404.00 from the Manila Port Area to Calamba, Laguna at the
destroyed or deteriorated. There are very few instances when the rate of P50.00 per metric ton. Petitioner failed to deliver the said
presumption of negligence does not attach and these instances are cargo. As a consequence of that failure, Cipriano paid Jibfair
enumerated in Article 1734. In those cases where the presumption is Shipping Agency the amount of the lost goods in accordance with the
applied, the common carrier must prove that it exercised contract which stated that:
extraordinary diligence in order to overcome the presumption . . . The
presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, "1. CIPTRADE shall be held liable and answerable for any loss in
bags due to theft, hijacking and non-delivery or damages to the cargo
private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of during transport at market value, . . ." 3
extraordinary diligence made the presumption conclusive against
her. Cipriano demanded reimbursement from petitioner but the latter
refused to pay. Eventually, Cipriano filed a complaint for a sum of
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED money and damages with writ of preliminary attachment 4 for breach
of a contract of carriage. The prayer for a Writ of Preliminary
NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In
De Guzman vs. Court of Appeals, the Court held that hijacking, not Attachment was supported by an affidavit 5 which contained the
being included in the provisions of Article 1734, must be dealt with following allegations:
under the provisions of Article 1735 and thus, the common carrier is
presumed to have been at fault or negligent. To exculpate the carrier "4. That this action is one of those specifically mentioned in Sec. 1,
from liability arising from hijacking, he must prove that the robbers or Rule 57 the Rules of Court, whereby a writ of preliminary attachment
the hijackers acted with grave or irresistible threat, violence, or force. may lawfully issue, namely:
This is in accordance with Article 1745 of the Civil Code which
provides: "Art. 1745. Any of the following or similar stipulations shall
be considered unreasonable, unjust and contrary to public policy . . . "(e) in an action against a party who has removed or disposed of his
(6) That the common carrier's liability for acts committed by thieves, property, or is about to do so, with intent to defraud his creditors;"
or of robbers who do not act with grave or irresistible threat,
violences or force, is dispensed with or diminished"; In the same 5. That there is no sufficient security for the claim sought to be
case, the Supreme Court also held that: "Under Article 1745 (6) enforced by the present action;
above, a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where such thieves or 6. That the amount due to the plaintiff in the above-entitled case is
robbers in fact acted "with grave of irresistible threat, violence of above all legal counterclaims;"
force," We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are The trial court granted the writ of preliminary attachment on February
reached where the goods are lost as a result of a robbery which is 17, 1987.
attended by "grave or irresistible threat, violence or force."
In her answer, petitioner interposed the following defenses: that there
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS was no contract of carriage since CIPTRADE leased her cargo truck
CONCLUSIVE. — In this case, petitioner herself has made the to load the cargo from Manila Port Area to Laguna; that CIPTRADE
admission that she was in the trucking business, offering her trucks was liable to petitioner in the amount of P11,000.00 for loading the
to those with cargo to move. Judicial admissions are conclusive and cargo; that the truck carrying the cargo was hijacked along Canonigo
no evidence is required to prove the same. St., Paco, Manila on the night of October 21, 1988; that the hijacking
was immediately reported to CIPTRADE and that petitioner and the
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO police exerted all efforts to locate the hijacked properties; that after
ALLEGES A FACT. — Petitioner presented no other proof of the preliminary investigation, an information for robbery and carnapping
were filed against Jose Opriano, et al.; and that hijacking, being a We agree with the respondent Court in its finding that petitioner is a
force majeure, exculpated petitioner from any liability to CIPTRADE. common carrier.

After trial, the trial court rendered a decision *** the dispositive Article 1732 of the Civil Code defines a common carrier as "(a)
portion of which reads as follows: person, corporation or firm, or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the public." The
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and
test to determine a common carrier is "whether the given undertaking
against defendant ordering the latter to pay the former:
is a part of the business engaged in by the carrier which he has held
out to the general public as his occupation rather than the quantity or
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR extent of the business transacted." 12 In this case, petitioner herself
HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual has made the admission that she was in the trucking business,
damages with legal interest of 12% per cent per annum to be offering her trucks to those with cargo to move. Judicial admissions
counted from December 4, 1986 until fully paid; are conclusive and no evidence is required to prove the same. 13

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for But petitioner argues that there was only a contract of lease because
attorney's fees; and they offer their services only to a select group of people and because
the private respondents, plaintiffs in the lower court, did not object to
the presentation of affidavits by petitioner where the transaction was
3. The costs of the suit.
referred to as a lease contract.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated Regarding the first contention, the holding of the Court in De Guzman
March 10, 1987 filed by defendant is DENIED for being moot and
vs. Court of Appeals 14 is instructive. In referring to Article 1732 of
academic. the Civil Code, it held thus:

SO ORDERED." 6
"The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
Petitioner appealed to the Court of Appeals but respondent Court who does such carrying only as an ancillary activity (in local idiom, as
affirmed the trial court's judgment. 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
Consequently, petitioner filed this petition where she makes the occasional, episodic or unscheduled basis. Neither does Article 1732
following assignment of errors; to wit: distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE services or solicits business only from a narrow segment of the
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND general population. We think that Article 1732 deliberately refrained
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT from making such distinctions."
LEASE OF CARGO TRUCK.
Regarding the affidavits presented by petitioner to the court, both the
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF trial and appellate courts have dismissed them as self-serving and
THE RESPONDENT COURT THAT THE CONTRACTUAL petitioner contests the conclusion. We are bound by the appellate
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE court's factual conclusions. Yet, granting that the said evidence were
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, not self-serving, the same were not sufficient to prove that the
NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE contract was one of lease. It must be understood that a contract is
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE what the law defines it to be and not what it is called by the
TO FORCE MAJEURE, NAMELY, HIJACKING. contracting parties. 15 Furthermore, petitioner presented no other
proof of the existence of the contract of lease. He who alleges a fact
has the burden of proving it. 16
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE
FINDING OF THE TRIAL COURT THAT PETITIONER'S MOTION
TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT Likewise, We affirm the holding of the respondent court that the loss
HAS BEEN RENDERED MOOT AND ACADEMIC BY THE of the goods was not due to force majeure.
DECISION OF THE MERITS OF THE CASE." 7
Common carriers are obliged to observe extraordinary diligence in
The petition presents the following issues for resolution: (1) was the vigilance over the goods transported by them. 17 Accordingly,
petitioner a common carrier?; and (2) was the hijacking referred to a they are presumed to have been at fault or to have acted negligently
force majeure? if the goods are lost, destroyed or deteriorated. 18 There are very
few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. 19 In those
The Court of Appeals, in holding that petitioner was a common cases where the presumption is applied, the common carrier must
carrier, found that she admitted in her answer that she did business prove that it exercised extraordinary diligence in order to overcome
under the name A.M. Bascos Trucking and that said admission the presumption.
dispensed with the presentation by private respondent, Rodolfo
Cipriano, of proofs that petitioner was a common carrier. The
respondent Court also adopted in toto the trial court's decision that In this case, petitioner alleged that hijacking constituted force
petitioner was a common carrier, Moreover, both courts appreciated majeure which exculpated her from liability for the loss of the cargo.
the following pieces of evidence as indicators that petitioner was a In De Guzman vs. Court of Appeals, 20 the Court held that hijacking,
common carrier: the fact that the truck driver of petitioner, Maximo not being included in the provisions of Article 1734, must be dealt
Sanglay, received the cargo consisting of 400 bags of soya bean with under the provisions of Article 1735 and thus, the common
meal as evidenced by a cargo receipt signed by Maximo Sanglay; carrier is presumed to have been at fault or negligent. To exculpate
the fact that the truck helper, Juanito Morden, was also an employee the carrier from liability arising from hijacking, he must prove that the
of petitioner; and the fact that control of the cargo was placed in robbers or the hijackers acted with grave or irresistible threat,
petitioner's care. violence, or force. This is in accordance with Article 1745 of the Civil
Code which provides:
In disputing the conclusion of the trial and appellate courts that
petitioner was a common carrier, she alleged in this petition that the "Art. 1745. Any of the following or similar stipulations shall be
contract between her and Rodolfo A. Cipriano, representing considered unreasonable, unjust and contrary to public policy;
CIPTRADE, was lease of the truck. She cited as evidence certain
affidavits which referred to the contract as "lease". These affidavits xxx xxx xxx
were made by Jesus Bascos 8 and by petitioner herself. 9 She
further averred that Jesus Bascos confirmed in his testimony his
statement that the contract was a lease contract. 10 She also stated (6) That the common carrier's liability for acts committed by thieves,
that: she was not catering to the general public. Thus, in her answer or of robbers who do not act with grave or irresistible threat,
to the amended complaint, she said that she does business under violences or force, is dispensed with or diminished;"
the same style of A.M. Bascos Trucking, offering her trucks for lease
to those who have cargo to move, not to the general public but to a In the same case, 21 the Supreme Court also held that:
few customers only in view of the fact that it is only a small business.
11
"Under Article 1745 (6) above, a common carrier is held responsible
— and will not be allowed to divest or to diminish such responsibility
— even for acts of strangers like thieves or robbers except where
such thieves or robbers in fact acted with grave or irresistible threat, with cost against plaintiff, and ordering plaintiff to pay the
violence or force. We believe and so hold that the limits of the duty of defendant on the counterclaim as follows:
extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is
1. The sum of P75,000.00 as unpaid freight and
attended by "grave or irresistible threat, violence or force."
P88,000.00 as demurrage with interest at the legal rate on
both amounts from April 7, 1976 until the same shall have
To establish grave and irresistible force, petitioner presented her been fully paid;
accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito
Morden's 24 "Salaysay". However, both the trial court and the Court
2. Attorney's fees and expenses of litigation in the sum of
of Appeals have concluded that these affidavits were not enough to
P100,000.00; and
overcome the presumption. Petitioner's affidavit about the hijacking
was based on what had been told her by Juanito Morden. It was not
a first-hand account. While it had been admitted in court for lack of 3. Costs of suit.
objection on the part of private respondent, the respondent Court had
discretion in assigning weight to such evidence. We are bound by the
SO ORDERED. 2
conclusion of the appellate court. In a petition for review on certiorari,
We are not to determine the probative value of evidence but to
resolve questions of law. Secondly, the affidavit of Jesus Bascos did On the other hand, the Court of Appeals ruled:
not dwell on how the hijacking took place. Thirdly, while the affidavit
of Juanito Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a witness as could be WHEREFORE, premises considered, the decision
gleaned from the contents of the petition. Affidavits are not appealed from is modified by reducing the award for
considered the best evidence if the affiants are available as demurrage to P44,000.00 and deleting the award for
witnesses. 25 The subsequent filing of the information for carnapping attorney's fees and expenses of litigation. Except as thus
and robbery against the accused named in said affidavits did not modified, the decision is AFFIRMED. There is no
necessarily mean that the contents of the affidavits were true pronouncement as to costs.
because they were yet to be determined in the trial of the criminal
cases. SO ORDERED. 3

The presumption of negligence was raised against petitioner. It was The Facts
petitioner's burden to overcome it. Thus, contrary to her assertion,
private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of The MV Vlasons I is a vessel which renders tramping service and, as
extraordinary diligence made the presumption conclusive against such, does not transport cargo or shipment for the general public. Its
her. services are available only to specific persons who enter into a
special contract of charter party with its owner. It is undisputed that
the ship is a private carrier. And it is in the capacity that its owner,
Having affirmed the findings of the respondent Court on the Vlasons Shipping, Inc., entered into a contract of affreightment or
substantial issues involved, We find no reason to disturb the contract of voyage charter hire with National Steel Corporation.
conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision
on the merits. The facts as found by Respondent Court of Appeals are as follows:

In the light of the foregoing analysis, it is Our opinion that the (1) On July 17, 1974, plaintiff National Steel Corporation
petitioner's claim cannot be sustained. The petition is DISMISSED (NSC) as Charterer and defendant Vlasons Shipping, Inc.
and the decision of the Court of Appeals is hereby AFFIRMED. (VSI) as Owner, entered into a Contract of Voyage Charter
Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's
vessel, the MV "VLASONS I" to make one (1) voyage to
SO ORDERED. load steel products at Iligan City and discharge them at
North Harbor, Manila, under the following terms and
conditions, viz:

1. . . .
G.R. No. 112287 December 12, 1997

2. Cargo: Full cargo of steel products of not less than

NATIONAL STEEL CORPORATION, petitioner, 2,500 MT, 10% more or less at Master's option.
vs.
COURT OF APPEALS AND VLASONS SHIPPING,
INC., respondents. 3. . . .

G.R. No. 112350 December 12, 1997 4. Freight/Payment: P30.00/metric ton, FIOST basis.
Payment upon presentation of Bill of Lading within fifteen
(15) days.
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL 5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
CORPORATION, respondents.
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
(Weather Working Day of 24 consecutive hours, Sundays
and Holidays Included).
PANGANIBAN, J.:
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
The Court finds occasion to apply the rules on the seaworthiness
of private carrier, its owner's responsibility for damage to the cargo 8. . . .
and its liability for demurrage and attorney's fees. The Court also
reiterates the well-known rule that findings of facts of trial courts, 9. Cargo Insurance: Charterer's and/or Shipper's must
when affirmed by the Court of Appeals, are binding on this Court. insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of the
The Case officers of the vessel.

Before us are two separate petitions for review filed by National Steel 10. Other terms: (a) All terms/conditions of NONYAZAI
Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which C/P [sic] or other internationally recognized Charter Party
assail the August 12, 1993 Decision of the Court of Appeals. 1 The Agreement shall form part of this Contract.
Court of Appeals modified the decision of the Regional Trial Court of
Pasig, Metro Manila, Branch 163 in Civil Case No. 23317. The RTC xxx xxx xxx
disposed as follows:

The terms "F.I.O.S.T." which is used in the shipping

WHEREFORE, judgment is hereby rendered in favor of business is a standard provision in the NANYOZAI Charter
defendant and against the plaintiff dismissing the complaint
Party which stands for "Freight In and Out including Plaintiff filed its complaint against defendant on April 21,
Stevedoring and Trading", which means that the handling, 1976 which was docketed as Civil Case No. 23317, CFI,
loading and unloading of the cargoes are the responsibility Rizal.
of the Charterer. Under Paragraph 5 of the NANYOZAI
Charter Party, it states, "Charterers to load, stow and
(6) In its complaint, plaintiff claimed that it sustained losses
discharge the cargo free of risk and expenses to owners. .
in the aforesaid amount of P941,145.18 as a result of the
. . (Emphasis supplied).
act, neglect and default of the master and crew in the
management of the vessel as well as the want of due
Under paragraph 10 thereof, it is provided that "(o)wners diligence on the part of the defendant to make the vessel
shall, before and at the beginning of the voyage, exercise seaworthy and to make the holds and all other parts of the
due diligence to make the vessel seaworthy and properly vessel in which the cargo was carried, fit and safe for its
manned, equipped and supplied and to make the holds reception, carriage and preservation — all in violation of
and all other parts of the vessel in which cargo is carried, defendant's undertaking under their Contract of Voyage
fit and safe for its reception, carriage and preservation. Charter Hire.
Owners shall not be liable for loss of or damage of the
cargo arising or resulting from: unseaworthiness unless
(7) In its answer, defendant denied liability for the alleged
caused by want of due diligence on the part of the owners
damage claiming that the MV "VLASONS I" was seaworthy
to make the vessel seaworthy, and to secure that the
in all respects for the carriage of plaintiff's cargo; that said
vessel is properly manned, equipped and supplied and to
vessel was not a "common carrier" inasmuch as she was
make the holds and all other parts of the vessel in which
under voyage charter contract with the plaintiff as charterer
cargo is carried, fit and safe for its reception, carriage and
under the charter party; that in the course of the voyage
preservation; . . . ; perils, dangers and accidents of the sea
from Iligan City to Manila, the MV "VLASONS I"
or other navigable waters; . . . ; wastage in bulk or weight
encountered very rough seas, strong winds and adverse
or any other loss or damage arising from inherent defect,
weather condition, causing strong winds and big waves to
quality or vice of the cargo; insufficiency of packing; . . . ;
continuously pound against the vessel and seawater to
latent defects not discoverable by due diligence; any other
overflow on its deck and hatch covers, that under the
cause arising without the actual fault or privity of Owners or
Contract of Voyage Charter Hire, defendant shall not be
without the fault of the agents or servants of owners."
responsible for losses/damages except on proven willful
negligence of the officers of the vessel, that the officers of
Paragraph 12 of said NANYOZAI Charter Party also said MV "VLASONS I" exercised due diligence and proper
provides that "(o)wners shall not be responsible for split, seamanship and were not willfully negligent; that
chafing and/or any damage unless caused by the furthermore the Voyage Charter Party provides that
negligence or default of the master and crew." loading and discharging of the cargo was on FIOST terms
which means that the vessel was free of risk and expense
in connection with the loading and discharging of the
(2) On August 6, 7 and 8, 1974, in accordance with the
cargo; that the damage, if any, was due to the inherent
Contract of Voyage Charter Hire, the MV "VLASONS I"
defect, quality or vice of the cargo or to the insufficient
loaded at plaintiffs pier at Iligan City, the NSC's shipment
packing thereof or to latent defect of the cargo not
of 1,677 skids of tinplates and 92 packages of hot rolled
discoverable by due diligence or to any other cause arising
sheets or a total of 1,769 packages with a total weight of
without the actual fault or privity of defendant and without
about 2,481.19 metric tons for carriage to Manila. The
the fault of the agents or servants of defendant;
shipment was placed in the three (3) hatches of the ship.
consequently, defendant is not liable; that the stevedores
Chief Mate Gonzalo Sabando, acting as agent of the
of plaintiff who discharged the cargo in Manila were
vessel[,] acknowledged receipt of the cargo on board and
negligent and did not exercise due care in the discharge of
signed the corresponding bill of lading, B.L.P.P. No. 0233
the cargo; land that the cargo was exposed to rain and
(Exhibit "D") on August 8, 1974.
seawater spray while on the pier or in transit from the pier
to plaintiff's warehouse after discharge from the vessel;
(3) The vessel arrived with the cargo at Pier 12, North and that plaintiff's claim was highly speculative and grossly
Harbor, Manila, on August 12, 1974. The following day, exaggerated and that the small stain marks or sweat marks
August 13, 1974, when the vessel's three (3) hatches on the edges of the tinplates were magnified and
containing the shipment were opened by plaintiff's agents, considered total loss of the cargo. Finally, defendant
nearly all the skids of tinplates and hot rolled sheets were claimed that it had complied with all its duties and
allegedly found to be wet and rusty. The cargo was obligations under the Voyage Charter Hire Contract and
discharged and unloaded by stevedores hired by the had no responsibility whatsoever to plaintiff. In turn, it
Charterer. Unloading was completed only on August 24, alleged the following counterclaim:
1974 after incurring a delay of eleven (11) days due to the
heavy rain which interrupted the unloading operations.
(a) That despite the full and proper
(Exhibit "E")
performance by defendant of its
obligations under the Voyage Charter
(4) To determine the nature and extent of the wetting and Hire Contract, plaintiff failed and
rusting, NSC called for a survey of the shipment by the refused to pay the agreed charter hire
Manila Adjusters and Surveyors Company (MASCO). In a of P75,000.00 despite demands made
letter to the NSC dated March 17, 1975 (Exhibit "G"), by defendant;
MASCO made a report of its ocular inspection conducted
on the cargo, both while it was still on board the vessel and
(b) That under their Voyage Charter
later at the NDC warehouse in Pureza St., Sta. Mesa,
Hire Contract, plaintiff had agreed to
Manila where the cargo was taken and stored. MASCO
pay defendant the sum of P8,000.00
reported that it found wetting and rusting of the packages
per day for demurrage. The vessel
of hot rolled sheets and metal covers of the tinplates; that
was on demurrage for eleven (11)
tarpaulin hatch covers were noted torn at various extents;
days in Manila waiting for plaintiff to
that container/metal casings of the skids were rusting all
discharge its cargo from the vessel.
over. MASCO ventured the opinion that "rusting of the
Thus, plaintiff was liable to pay
tinplates was caused by contact with SEA WATER
defendant demurrage in the total
sustained while still on board the vessel as a consequence
amount of P88,000.00.
of the heavy weather and rough seas encountered while
en route to destination (Exhibit "F"). It was also reported
that MASCO's surveyors drew at random samples of bad (c) For filing a clearly unfounded civil
order packing materials of the tinplates and delivered the action against defendant, plaintiff
same to the M.I.T. Testing Laboratories for analysis. On should be ordered to pay defendant
August 31, 1974, the M.I.T. Testing Laboratories issued attorney's fees and all expenses of
Report No. 1770 (Exhibit "I") which in part, states, "The litigation in the amount of not less than
analysis of bad order samples of packing materials . . . P100,000.00.
shows that wetting was caused by contact with SEA
WATER".
(8) From the evidence presented by both parties, the trial
court came out with the following findings which were set
(5) On September 6, 1974, on the basis of the aforesaid forth in its decision:
Report No. 1770, plaintiff filed with the defendant its claim
for damages suffered due to the downgrading of the
(a) The MV "VLASONS I" is a vessel
damaged tinplates in the amount of P941,145.18. Then on
of Philippine registry engaged in the
October 3, 1974, plaintiff formally demanded payment of
tramping service and is available for
said claim but defendant VSI refused and failed to pay.
hire only under special contracts of when rains occurred during the
charter party as in this particular case. discharging of the cargo thus allowing
rainwater to enter the hatches. It was
proven that the stevedores merely set
(b) That for purposes of the voyage
up temporary tents to cover the hatch
covered by the Contract of Voyage
openings in case of rain so that it
Charter Hire (Exh. "1"), the MV
would be easy for them to resume
VLASONS I" was covered by the
work when the rains stopped by just
required seaworthiness certificates
removing the tent or canvas. Because
including the Certification of
of this improper covering of the
Classification issued by an
hatches by the stevedores during the
international classification society, the
discharging and unloading operations
NIPPON KAIJI KYOKAI (Exh. "4");
which were interrupted by rains,
Coastwise License from the Board of
rainwater drifted into the cargo through
Transportation (Exh. "5"); International
the hatch openings. Pursuant to
Loadline Certificate from the Philippine
paragraph 5 of the NANYOSAI [sic]
Coast Guard (Exh. "6"); Cargo Ship
Charter Party which was expressly
Safety Equipment Certificate also from
made part of the Contract of Voyage
the Philippine Coast Guard (Exh. "7");
Charter Hire, the loading, stowing and
Ship Radio Station License (Exh. "8");
discharging of the cargo is the sole
Certificate of Inspection by the
responsibility of the plaintiff charterer
Philippine Coast Guard (Exh. "12");
and defendant carrier has no liability
and Certificate of Approval for
for whatever damage may occur or
Conversion issued by the Bureau of
maybe [sic] caused to the cargo in the
Customs (Exh. "9"). That being a
process.
vessel engaged in both overseas and
coastwise trade, the MV "VLASONS I"
has a higher degree of seaworthiness (g) It was also established that the
and safety. vessel encountered rough seas and
bad weather while en route from Iligan
City to Manila causing sea water to
(c) Before it proceeded to Iligan City to
splash on the ship's deck on account
perform the voyage called for by the
of which the master of the vessel (Mr.
Contract of Voyage Charter Hire, the
Antonio C. Dumlao) filed a "Marine
MV "VLASONS I" underwent
Protest" on August 13, 1974 (Exh.
drydocking in Cebu and was
"15"); which can be invoked by
thoroughly inspected by the Philippine
defendant as a force majeure that
Coast Guard. In fact, subject voyage
would exempt the defendant from
was the vessel's first voyage after the
liability.
drydocking. The evidence shows that
the MV "VLASONS I" was seaworthy
and properly manned, equipped and (h) Plaintiff did not comply with the
supplied when it undertook the requirement prescribed in paragraph 9
voyage. It has all the required of the Voyage Charter Hire contract
certificates of seaworthiness. that it was to insure the cargo because
it did not. Had plaintiff complied with
the requirement, then it could have
(d) The cargo/shipment was securely
recovered its loss or damage from the
stowed in three (3) hatches of the
insurer. Plaintiff also violated the
ship. The hatch openings were
charter party contract when it loaded
covered by hatchboards which were in
not only "steel products", i.e. steel
turn covered by two or double
bars, angular bars and the like but
tarpaulins. The hatch covers were
also tinplates and hot rolled sheets
water tight. Furthermore, under the
which are high grade cargo
hatchboards were steel beams to give
commanding a higher freight. Thus
support.
plaintiff was able to ship grade cargo
at a lower freight rate.
(e) The claim of the plaintiff that
defendant violated the contract of
(i) As regards defendant's
carriage is not supported by evidence.
counterclaim, the contract of voyage
The provisions of the Civil Code on
charter hire under Paragraph 4
common carriers pursuant to which
thereof, fixed the freight at P30.00 per
there exists a presumption of
metric ton payable to defendant carrier
negligence in case of loss or damage
upon presentation of the bill of lading
to the cargo are not applicable. As to
within fifteen (15) days. Plaintiff has
the damage to the tinplates which was
not paid the total freight due of
allegedly due to the wetting and
P75,000.00 despite demands. The
rusting thereof, there is unrebutted
evidence also showed that the plaintiff
testimony of witness Vicente
was required and bound under
Angliongto that tinplates "sweat" by
paragraph 7 of the same Voyage
themselves when packed even without
Charter Hire contract to pay
being in contract (sic) with water from
demurrage of P8,000.00 per day of
outside especially when the weather is
delay in the unloading of the cargoes.
bad or raining. The trust caused by
The delay amounted to eleven (11)
sweat or moisture on the tinplates may
days thereby making plaintiff liable to
be considered as a loss or damage
pay defendant for demurrage in the
but then, defendant cannot be held
amount of P88,000.00.
liable for it pursuant to Article 1734 of
the Civil Case which exempts the
carrier from responsibility for loss or Appealing the RTC decision to the Court of Appeals, NSC alleged six
damage arising from the "character of errors:
the goods . . ." All the 1,769 skids of
the tinplates could not have been
I
damaged by water as claimed by
plaintiff. It was shown as claimed by
plaintiff that the tinplates themselves The trial court erred in finding that the MV "VLASONS I"
were wrapped in kraft paper lining and was seaworthy, properly manned, equipped and supplied,
corrugated cardboards could not be and that there is no proof of willful negligence of the
affected by water from outside. vessel's officers.

(f) The stevedores hired by the plaintiff II

to discharge the cargo of tinplates
were negligent in not closing the hatch
openings of the MV "VLASONS I"
 The trial court erred in finding that the rusting of NSC's I. Whether or not the provisions of the Civil Code of the
tinplates was due to the inherent nature or character of the Philippines on common carriers pursuant to which there
goods and not due to contact with seawater. exist[s] a presumption of negligence against the common
carrier in case of loss or damage to the cargo are
applicable to a private carrier.
III

II. Whether or not the terms and conditions of the Contract

The trial court erred in finding that the stevedores hired by
of Voyage Charter Hire, including the Nanyozai Charter,
NSC were negligent in the unloading of NSC's shipment.
are valid and binding on both contracting parties.

IV
The foregoing issues raised by the parties will be discussed under
the following headings:
The trial court erred in exempting VSI from liability on the
ground of force majeure.
1. Questions of Fact

V
2. Effect of NSC's Failure to Insure the Cargo

The trial court erred in finding that NSC violated the

3. Admissibility of Certificates Proving Seaworthiness
contract of voyage charter hire.

4. Demurrage and Attorney's Fees.

VI

The Court's Ruling

The trial court erred in ordering NSC to pay freight,
demurrage and attorney's fees, to VSI. 4
The Court affirms the assailed Decision of the Court of Appeals,
except in respect of the demurrage.
As earlier stated, the Court of Appeals modified the decision of the
trial court by reducing the demurrage from P88,000.00 to P44,000.00
and deleting the award of attorneys fees and expenses of litigation. Preliminary Matter: Common Carrier or Private Carrier?
NSC and VSI filed separate motions for reconsideration. In a
Resolution 5 dated October 20, 1993, the appellate court denied both
At the outset, it is essential to establish whether VSI contracted with
motions. Undaunted, NSC and VSI filed their respective petitions for
NSC as a common carrier or as a private carrier. The resolution of
review before this Court. On motion of VSI, the Court ordered on
this preliminary question determines the law, standard of diligence
February 14, 1994 the consolidation of these petitions. 6
and burden of proof applicable to the present case.

The Issues
Article 1732 of the Civil Code defines a common carrier as "persons,
corporations, firms or associations engaged in the business of
In its petition 7 and memorandum, 8 NSC raises the following carrying or transporting passengers or goods or both, by land, water,
questions of law and fact: or air, for compensation, offering their services to the public." It has
been held that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt to avail
Questions of Law
themselves of its transportation service for a fee. 11 A carrier which
does not qualify under the above test is deemed a private carrier.
1. Whether or not a charterer of a vessel is liable for "Generally, private carriage is undertaken by special agreement and
demurrage due to cargo unloading delays caused by the carrier does not hold himself out to carry goods for the general
weather interruption; public. The most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which the
charterer, a party other than the shipowner, obtains the use and
2. Whether or not the alleged "seaworthiness certificates" service of all or some part of a ship for a period of time or a voyage
(Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and "12") were or voyages." 12
admissible in evidence and constituted evidence of the
vessel's seaworthiness at the beginning of the voyages;
and In the instant case, it is undisputed that VSI did not offer its services
to the general public. As found by the Regional Trial Court, it carried
passengers or goods only for those it chose under a "special contract
3. Whether or not a charterer's failure to insure its cargo of charter party." 13 As correctly concluded by the Court of Appeals,
exempts the shipowner from liability for cargo damage. the MV Vlasons I "was not a common but a private
carrier." 14Consequently, the rights and obligations of VSI and NSC,
Questions of Fact including their respective liability for damage to the cargo, are
determined primarily by stipulations in their contract of private
carriage or charter party. 15 Recently, in Valenzuela Hardwood and
1. Whether or not the vessel was seaworthy and cargo- Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers
worthy; Shipping Corporation, 16 the Court ruled:

2. Whether or not vessel's officers and crew were negligent . . . in a contract of private carriage, the parties may freely
in handling and caring for NSC's cargo; stipulate their duties and obligations which perforce would
be binding on them. Unlike in a contract involving a
3. Whether or not NSC's cargo of tinplates did sweat common carrier, private carriage does not involve the
during the voyage and, hence, rusted on their own; and general public. Hence, the stringent provisions of the Civil
Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting
4. Whether or not NSC's stevedores were negligent and commercial goods as a private carrier. Consequently, the
caused the wetting[/]rusting of NSC's tinplates. public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the
In its separate petition, 9 VSI submits for the consideration of this protection given by law in contracts involving common
Court the following alleged errors of the CA: carriers. 17

A. The respondent Court of Appeals committed an error of Extent of VSI's Responsibility and
law in reducing the award of demurrage from P88,000.00 Liability Over NSC's Cargo
to P44,000.00.
It is clear from the parties' Contract of Voyage Charter Hire, dated
B. The respondent Court of Appeals committed an error of July 17, 1974, that VSI "shall not be responsible for losses except on
law in deleting the award of P100,000 for attorney's fees proven willful negligence of the officers of the vessel." The
and expenses of litigation. NANYOZAI Charter Party, which was incorporated in the parties'
contract of transportation further provided that the shipowner shall
not be liable for loss of or a damage to the cargo arising or resulting
Amplifying the foregoing, VSI raises the following issues in its from unseaworthiness, unless the same was caused by its lack of
memorandum: 10 due diligence to make the vessel seaworthy or to ensure that the
same was "properly manned, equipped and supplied," and to "make
the holds and all other parts of the vessel in which cargo [was] has the burden of proof. Thus, in its brief (pp. 10-11), after citing
carried, fit and safe for its reception, carriage and Clause 10 and Clause 12 of the NANYOZAI Charter Party
preservation." 18 The NANYOZAI Charter Party also provided that (incidentally plaintiff-appellant's [NSC's] interpretation of Clause 12 is
"[o]wners shall not be responsible for split, chafing and/or any not even correct), it argues that 'a careful examination of the
damage unless caused by the negligence or default of the master or evidence will show that VSI miserably failed to comply with any of
crew." 19 these obligation's as if defendant-appellee [VSI] had the burden of
proof." 21
Burden of Proof
First Issue: Questions of Fact
In view of the aforementioned contractual stipulations, NSC must
prove that the damage to its shipment was caused by VSI's willful Based on the foregoing, the determination of the following factual
negligence or failure to exercise due diligence in making MV Vlasons questions is manifestly relevant: (1) whether VSI exercised due
I seaworthy and fit for holding, carrying and safekeeping the cargo. diligence in making MV Vlasons I seaworthy for the intended purpose
Ineluctably, the burden of proof was placed on NSC by the parties' under the charter party; (2) whether the damage to the cargo should
agreement. be attributed to the willful negligence of the officers and crew of the
vessel or of the stevedores hired by NSC; and (3) whether the rusting
of the tinplates was caused by its own "sweat" or by contact with
This view finds further support in the Code of Commerce which
seawater.
pertinently provides:

These questions of fact were threshed out and decided by the trial
Art. 361. Merchandise shall be transported at the risk and
court, which had the firsthand opportunity to hear the parties'
venture of the shipper, if the contrary has not been
conflicting claims and to carefully weigh their respective evidence.
expressly stipulated.
The findings of the trial court were subsequently affirmed by the
Court of Appeals. Where the factual findings of both the trial court
Therefore, the damage and impairment suffered by the and the Court of Appeals coincide, the same are binding on this
goods during the transportation, due to fortuitous Court. 22 We stress that, subject to some exceptional
event, force majeure, or the nature and inherent defect of instances, 23 only questions of law — not questions of fact — may be
the things, shall be for the account and risk of the shipper. raised before this Court in a petition for review under Rule 45 of the
Rules of Court. After a thorough review of the case at bar, we find no
reason to disturb the lower court's factual findings, as indeed NSC
The burden of proof of these accidents is on the carrier. has not successfully proven the application of any of the aforecited
exceptions.
Art. 362. The carrier, however, shall be liable for damages
arising from the cause mentioned in the preceding article if Was MV Vlasons I Seaworthy?
proofs against him show that they occurred on account of
his negligence or his omission to take the precautions
usually adopted by careful persons, unless the shipper In any event, the records reveal that VSI exercised due diligence to
committed fraud in the bill of lading, making him to believe make the ship seaworthy and fit for the carriage of NSC's cargo of
that the goods were of a class or quality different from what steel and tinplates. This is shown by the fact that it was drylocked
they really were. and inspected by the Philippine Coast Guard before it proceeded to
Iligan City for its voyage to Manila under the contract of voyage
charter hire. 24 The vessel's voyage from Iligan to Manila was the
Because the MV Vlasons I was a private carrier, the shipowner's vessel's first voyage after drydocking. The Philippine Coast Guard
obligations are governed by the foregoing provisions of the Code of
Station in Cebu cleared it as seaworthy, fitted and equipped; it met all
Commerce and not by the Civil Code which, as a general rule, places requirements for trading as cargo vessel.25 The Court of Appeals
the prima faciepresumption of negligence on a common carrier. It is a itself sustained the conclusion of the trial court that MV Vlasons I was
hornbook doctrine that:
seaworthy. We find no reason to modify or reverse this finding of
both the trial and the appellate courts.
In an action against a private carrier for loss of, or injury to,
cargo, the burden is on the plaintiff to prove that the carrier
Who Were Negligent:
was negligent or unseaworthy, and the fact that the goods Seamen or Stevedores?
were lost or damaged while in the carrier's custody does
not put the burden of proof on the carrier.
As noted earlier, the NSC had the burden of proving that the damage
to the cargo was caused by the negligence of the officers and the
Since . . . a private carrier is not an insurer but undertakes crew of MV Vlasons I in making their vessel seaworthy and fit for the
only to exercise due care in the protection of the goods
carriage of tinplates. NSC failed to discharge this burden.
committed to its care, the burden of proving negligence or
a breach of that duty rests on plaintiff and proof of loss of,
or damage to, cargo while in the carrier's possession does Before us, NSC relies heavily on its claim that MV Vlasons I had
not cast on it the burden of proving proper care and used an old and torn tarpaulin or canvas to cover the hatches
diligence on its part or that the loss occurred from an through which the cargo was loaded into the cargo hold of the ship. It
excepted cause in the contract or bill of lading. However, in faults the Court of Appeals for failing to consider such claim as an
discharging the burden of proof, plaintiff is entitled to the "uncontroverted fact" 26 and denies that MV Vlasons I "was equipped
benefit of the presumptions and inferences by which the with new canvas covers in tandem with the old ones as indicated in
law aids the bailor in an action against a bailee, and since the Marine Protest . . ." 27 We disagree.
the carrier is in a better position to know the cause of the
loss and that it was not one involving its liability, the law
The records sufficiently support VSI's contention that the ship used
requires that it come forward with the information available
the old tarpaulin, only in addition to the new one used primarily to
to it, and its failure to do so warrants an inference or
make the ship's hatches watertight. The foregoing are clear from the
presumption of its liability. However, such inferences and
marine protest of the master of the MV Vlasons I, Antonio C. Dumlao,
presumptions, while they may affect the burden of coming
and the deposition of the ship's boatswain, Jose Pascua. The salient
forward with evidence, do not alter the burden of proof
portions of said marine protest read:
which remains on plaintiff, and, where the carrier comes
forward with evidence explaining the loss or damage, the
burden of going forward with the evidence is again on . . . That the M/V "VLASONS I" departed Iligan City or
plaintiff. about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates
consigned to National Steel Corporation; that before
Where the action is based on the shipowner's warranty of
departure, the vessel was rigged, fully equipped and
seaworthiness, the burden of proving a breach thereof and
cleared by the authorities; that on or about August 9, 1974,
that such breach was the proximate cause of the damage
while in the vicinity of the western part of Negros and
rests on plaintiff, and proof that the goods were lost or
Panay, we encountered very rough seas and strong winds
damaged while in the carrier's possession does not cast on
and Manila office was advised by telegram of the adverse
it the burden of proving seaworthiness. . . . Where the
weather conditions encountered; that in the morning of
contract of carriage exempts the carrier from liability for
August 10, 1974, the weather condition changed to worse
unseaworthiness not discoverable by due diligence, the
and strong winds and big waves continued pounding the
carrier has the preliminary burden of proving the exercise
vessel at her port side causing sea water to overflow on
of due diligence to make the vessel seaworthy. 20
deck andhatch (sic) covers and which caused the first layer
of the canvass covering to give way while the new canvass
In the instant case, the Court of Appeals correctly found the NSC covering still holding on;
"has not taken the correct position in relation to the question of who
 That the weather condition improved when we reached q And on top of the beams you said
Dumali Point protected by Mindoro; that we re-secured the there is a hatch board. How many
canvass covering back to position; that in the afternoon of pieces of wood are put on top?
August 10, 1974, while entering Maricaban Passage, we
were again exposed to moderate seas and heavy rains;
a Plenty, sir, because there are
that while approaching Fortune Island, we encountered
several pieces on top of the hatch
again rough seas, strong winds and big waves which
beam.
caused the same canvass to give way and leaving the new
canvass holding on;
q And is there a space between the
28 hatch boards?
xxx xxx xxx

a There is none, sir.

And the relevant portions of Jose Pascua's deposition are as follows:

q They are tight together?

q What is the purpose of the canvas
cover?
a Yes, sir.
a So that the cargo would not be
soaked with water. q How tight?

q And will you describe how the a Very tight, sir.

canvas cover was secured on the
hatch opening?
q Now, on top of the hatch boards,
according to you, is the canvass cover.
WITNESS How many canvas covers?

a It was placed flat on top of the hatch a Two, sir. 29

cover, with a little canvas flowing over
the sides and we place[d] a flat bar
over the canvas on the side of the That due diligence was exercised by the officers and the crew of
hatches and then we place[d] a the MV Vlasons I was further demonstrated by the fact that, despite
encountering rough weather twice, the new tarpaulin did not give way
stopper so that the canvas could not
be removed. and the ship's hatches and cargo holds remained waterproof. As
aptly stated by the Court of Appeals, ". . . we find no reason not to
sustain the conclusion of the lower court based on overwhelming
ATTY DEL ROSARIO evidence, that the MV 'VLASONS I' was seaworthy when it undertook
the voyage on August 8, 1974 carrying on board thereof plaintiff-
appellant's shipment of 1,677 skids of tinplates and 92 packages of
q And will you tell us the size of the
hot rolled sheets or a total of 1,769 packages from NSC's pier in
hatch opening? The length and the
Iligan City arriving safely at North Harbor, Port Area, Manila, on
width of the hatch opening.
August 12, 1974; . . . 30

a Forty-five feet by thirty-five feet, sir.

Indeed, NSC failed to discharge its burden to show negligence on the
part of the officers and the crew of MV Vlasons I. On the contrary, the
xxx xxx xxx records reveal that it was the stevedores of NSC who were negligent
in unloading the cargo from the ship.
q How was the canvas supported in
the middle of the hatch opening? The stevedores employed only a tent-like material to cover the
hatches when strong rains occasioned by a passing typhoon
disrupted the unloading of the cargo. This tent-like covering,
a There is a hatch board.
however, was clearly inadequate for keeping rain and seawater away
from the hatches of the ship. Vicente Angliongto, an officer of VSI,
ATTY DEL ROSARIO testified thus:

q What is the hatch board made of? ATTY ZAMORA:

a It is made of wood, with a handle. Q Now, during your testimony on

November 5, 1979, you stated on
August 14 you went on board the
q And aside from the hatch board, is
vessel upon notice from the National
there any other material there to cover Steel Corporation in order to conduct
the hatch? the inspection of the cargo. During the
course of the investigation, did you
a There is a beam supporting the chance to see the discharging
hatch board. operation?

q What is this beam made of? WITNESS:

a It is made of steel, sir. A Yes, sir, upon my arrival at the

vessel, I saw some of the tinplates
already discharged on the pier but
q Is the beam that was placed in the majority of the tinplates were inside
hatch opening covering the whole the hall, all the hatches were opened.
hatch opening?

Q In connection with these cargoes

a No, sir. which were unloaded, where is the
place.
q How many hatch beams were there
placed across the opening? A At the Pier.

a There are five beams in one hatch Q What was used to protect the same
opening. from weather?

ATTY DEL ROSARIO ATTY LOPEZ:

 We object, your Honor, this question with common sense and ordinary human experience. Vicente
was already asked. This particular Angliongto could not be blamed for calling the stevedores' attention
matter . . . the transcript of first and then the NSC's representative on location before formally
stenographic notes shows the same informing NSC of the negligence he had observed, because he was
was covered in the direct examination. not responsible for the stevedores or the unloading operations. In
fact, he was merely expressing concern for NSC which was
ultimately responsible for the stevedores it had hired and the
ATTY ZAMORA:
performance of their task to unload the cargo.

Precisely, your Honor, we would like to

We see no reason to reverse the trial and the appellate courts'
go on detail, this is the serious part of
findings and conclusions on this point, viz:
the testimony.

In the THIRD assigned error, [NSC] claims that the trial

COURT:
court erred in finding that the stevedores hired by NSC
were negligent in the unloading of NSC's shipment. We do
All right, witness may answer. not think so. Such negligence according to the trial court is
evident in the stevedores hired by [NSC], not closing the
hatch of MV 'VLASONS I' when rains occurred during the
ATTY LOPEZ: discharging of the cargo thus allowing rain water and
seawater spray to enter the hatches and to drift to and fall
Q What was used in order to protect on the cargo. It was proven that the stevedores merely set
the cargo from the weather? up temporary tents or canvas to cover the hatch openings
when it rained during the unloading operations so that it
would be easier for them to resume work after the rains
A A base of canvas was used as cover stopped by just removing said tents or canvass. It has also
on top of the tin plates, and tents were been shown that on August 20, 1974, VSI President
built at the opening of the hatches. Vicente Angliongto wrote [NSC] calling attention to the
manner the stevedores hired by [NSC] were discharging
Q You also stated that the hatches the cargo on rainy days and the improper closing of the
were already opened and that there hatches which allowed continuous heavy rain water to leak
were tents constructed at the opening through and drip to the tinplates' covers and [Vicente
of the hatches to protect the cargo Angliongto] also suggesting that due to four (4) days
from the rain. Now, will you describe continuos rains with strong winds that the hatches be
[to] the Court the tents constructed. totally closed down and covered with canvas and the hatch
tents lowered. (Exh. "13"). This letter was received by
[NSC] on 22 August 1974 while discharging operations
A The tents are just a base of canvas were still going on (Exhibit "13-A").33
which look like a tent of an Indian
camp raise[d] high at the middle with
the whole side separated down to the The fact that NSC actually accepted and proceeded to remove the
hatch, the size of the hatch and it is cargo from the ship during unfavorable weather will not make VSI
soaks [sic] at the middle because of liable for any damage caused thereby. In passing, it may be noted
those weather and this can be used that the NSC may seek indemnification, subject to the laws on
only to temporarily protect the cargo prescription, from the stevedoring company at fault in the discharge
from getting wet by rains. operations. "A stevedore company engaged in discharging cargo . . .
has the duty to load the cargo . . . in a prudent manner, and it is liable
for injury to, or loss of, cargo caused by its negligence . . . and where
Q Now, is this procedure adopted by the officers and members and crew of the vessel do nothing and
the stevedores of covering tents have no responsibility in the discharge of cargo by stevedores . . . the
proper? vessel is not liable for loss of, or damage to, the cargo caused by the
negligence of the
A No, sir, at the time they were stevedores . . ." 34 as in the instant case.
discharging the cargo, there was a
typhoon passing by and the hatch tent Do Tinplates "Sweat"?
was not good enough to hold all of it to
prevent the water soaking through the
canvass and enter the cargo. The trial court relied on the testimony of Vicente Angliongto in finding
that ". . . tinplates 'sweat' by themselves when packed even without
being in contact with water from outside especially when the weather
Q In the course of your inspection, is bad or
Mr. Anglingto [sic], did you see in fact raining . . ." 35 The Court of Appeals affirmed the trial court's finding.
the water enter and soak into the
canvass and tinplates.
A discussion of this issue appears inconsequential and unnecessary.
As previously discussed, the damage to the tinplates was occasioned
A Yes, sir, the second time I went not by airborne moisture but by contact with rain and seawater which
there, I saw it. the stevedores negligently allowed to seep in during the unloading.

Q As owner of the vessel, did you not Second Issue: Effect of NSC's Failure to
advise the National Steel Corporation Insure the Cargo
[of] the procedure adopted by its
stevedores in discharging the cargo
particularly in this tent covering of the The obligation of NSC to insure the cargo stipulated in the Contract
hatches? of Voyage Charter Hire is totally separate and distinct from the
contractual or statutory responsibility that may be incurred by VSI for
damage to the cargo caused by the willful negligence of the officers
A Yes, sir, I did the first time I saw it, I and the crew of MV Vlasons I. Clearly, therefore, NSC's failure to
called the attention of the stevedores insure the cargo will not affect its right, as owner and real party in
but the stevedores did not mind at all, interest, to file an action against VSI for damages caused by the
so, called the attention of the latter's willful negligence. We do not find anything in the charter party
representative of the National Steel that would make the liability of VSI for damage to the cargo
but nothing was done, just the same. contingent on or affected in any manner by NSC's obtaining an
Finally, I wrote a letter to them. 31 insurance over the cargo.

NSC attempts to discredit the testimony of Angliongto by questioning Third Issue: Admissibility of Certificates
his failure to complain immediately about the stevedores' negligence Proving Seaworthiness
on the first day of unloading, pointing out that he wrote his letter to
petitioner only seven days later. 32 The Court is not persuaded.
Angliongto's candid answer in his aforequoted testimony satisfactorily NSC's contention that MV Vlasons I was not seaworthy is anchored
explained the delay. Seven days lapsed because he first called the on the alleged inadmissibility of the certificates of seaworthiness
attention of the stevedores, then the NSC's representative, about the offered in evidence by VSI. The said certificates include the following:
negligent and defective procedure adopted in unloading the cargo.
This series of actions constitutes a reasonable response in accord 1. Certificate of Inspection of the Philippines Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard the four-day laytime allowed it did not lapse, having been tolled by
unfavorable weather condition in view of the WWDSHINC
qualification agreed upon by the parties. Clearly, it was error for the
3. International Load Line Certificate from the Philippine Coast Guard
trial court and the Court of Appeals to have found and affirmed
respectively that NSC incurred eleven days of delay in unloading the
4. Coastwise License from the Board of Transportation cargo. The trial court arrived at this erroneous finding by subtracting
from the twelve days, specifically August 13, 1974 to August 24,
1974, the only day of unloading unhampered by unfavorable weather
5. Certificate of Approval for Conversion issued by the Bureau of or rain, which was August 22, 1974. Based on our previous
Customs 36
discussion, such finding is a reversible error. As mentioned, the
respondent appellate court also erred in ruling that NSC was liable to
NSC argues that the certificates are hearsay for not having been VSI for demurrage, even if it reduced the amount by half.
presented in accordance with the Rules of Court. It points out that
Exhibits 3, 4 and 11 allegedly are "not written records or acts of
Attorney's Fees
public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not
"evidenced by official publications or certified true copies" as required
by Sections 25 and 26, Rule 132, of the Rules of Court. 37 VSI assigns as error of law the Court of Appeals' deletion of the
award of attorney's fees. We disagree. While VSI was compelled to
litigate to protect its rights, such fact by itself will not justify an award
After a careful examination of these exhibits, the Court rules that of attorney's fees under Article 2208 of the Civil Code when ". . . no
Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not
sufficient showing of bad faith would be reflected in a party's
been properly offered as evidence. Exhibits 3 and 4 are certificates persistence in a case other than an erroneous conviction of the
issued by private parties, but they have not been proven by one who righteousness of his cause . . ." 44 Moreover, attorney's fees may not
saw the writing executed, or by evidence of the genuineness of the
be awarded to a party for the reason alone that the judgment
handwriting of the maker, or by a subscribing witness. Exhibits, 5, 6, rendered was favorable to the latter, as this is tantamount to
7, 8, 9, and 12 are photocopies, but their admission under the best imposing a premium on one's right to litigate or seek judicial redress
evidence rule have not been demonstrated. of legitimate grievances. 45

We find, however, that Exhibit 11 is admissible under a well-settled Epilogue

exception to the hearsay rule per Section 44 of Rule 130 of the Rules
of Court, which provides that "(e)ntries in official records made in the
performance of a duty by a public officer of the Philippines, or by a At bottom, this appeal really hinges on a factual issue: when, how
person in the performance of a duty specially enjoined by law, and who caused the damage to the cargo? Ranged against NSC are
areprima facie evidence of the facts therein stated." 38 Exhibit 11 is an two formidable truths. First, both lower courts found that such
original certificate of the Philippine Coast Guard in Cebu issued by damage was brought about during the unloading process when rain
Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel and seawater seeped through the cargo due to the fault or
'VLASONS I' was drydocked . . . and PCG Inspectors were sent on negligence of the stevedores employed by it. Basic is the rule that
board for inspection . . . After completion of drydocking and duly factual findings of the trial court, when affirmed by the Court of
inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo Appeals, are binding on the Supreme Court. Although there are
vessel, is in seaworthy condition, meets all requirements, fitted and settled exceptions, NSC has not satisfactorily shown that this case is
equipped for trading as a cargo vessel was cleared by the Philippine one of them. Second, the agreement between the parties — the
Coast Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's Contract of Voyage Charter Hire — placed the burden of proof for
claim, therefore, is obviously misleading and erroneous. such loss or damage upon the shipper, not upon the shipowner.
Such stipulation, while disadvantageous to NSC, is valid because the
parties entered into a contract of private charter, not one of common
At any rate, it should be stressed that NSC has the burden of proving carriage. Basic too is the doctrine that courts cannot relieve a parry
that MV Vlasons I was not seaworthy. As observed earlier, the vessel from the effects of a private contract freely entered into, on the
was a private carrier and, as such, it did not have the obligation of a
ground that it is allegedly one-sided or unfair to the plaintiff. The
common carrier to show that it was seaworthy. Indeed, NSC glaringly charter party is a normal commercial contract and its stipulations are
failed to discharge its duty of proving the willful negligence of VSI in agreed upon in consideration of many factors, not the least of which
making the ship seaworthy resulting in damage to its cargo. Assailing
is the transport price which is determined not only by the actual costs
the genuineness of the certificate of seaworthiness is not sufficient but also by the risks and burdens assumed by the shipper in regard
proof that the vessel was not seaworthy. to possible loss or damage to the cargo. In recognition of such
factors, the parties even stipulated that the shipper should insure the
Fourth Issue: Demurrage and Attorney's Fees cargo to protect itself from the risks it undertook under the charter
party. That NSC failed or neglected to protect itself with such
insurance should not adversely affect VSI, which had nothing to do
The contract of voyage charter hire provides inter alia: with such failure or neglect.

xxx xxx xxx WHEREFORE, premises considered, the instant consolidated

petitions are hereby DENIED. The questioned Decision of the Court
2. Cargo: Full cargo of steel products of not less than of Appeals is AFFIRMED with the MODIFICATION that the
2,500 MT, 10% more or less at Master's option. demurrage awarded to VSI is deleted. No pronouncement as to
costs.
xxx xxx xxx
SO ORDERED.
6. Loading/Discharging Rate: 750 tons per WWDSHINC.

7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. 39

G.R. No. 148496 March 19, 2002
The Court defined demurrage in its strict sense as the compensation
provided for in the contract of affreightment for the detention of the VIRGINES CALVO doing business under the name and style
vessel beyond the laytime or that period of time agreed on for loading TRANSORIENT CONTAINER TERMINAL SERVICES,
and unloading of cargo. 40 It is given to compensate the shipowner for INC., petitioner,
the nonuse of the vessel. On the other hand, the following is well- vs.
settled: UCPB GENERAL INSURANCE CO., INC. (formerly Allied
Guarantee Ins. Co., Inc.) respondent.
Laytime runs according to the particular clause of the
charter party. . . . If laytime is expressed in "running days," MENDOZA, J.:
this means days when the ship would be run continuously,
and holidays are not excepted. A qualification of "weather
This is a petition for review of the decision,1 dated May 31, 2001, of
permitting" excepts only those days when bad weather
the Court of Appeals, affirming the decision2of the Regional Trial
reasonably prevents the work contemplated. 41
Court, Makati City, Branch 148, which ordered petitioner to pay
respondent, as subrogee, the amount of P93,112.00 with legal
In this case, the contract of voyage charter hire provided for a four- interest, representing the value of damaged cargo handled by
day laytime; it also qualified laytime as WWDSHINC or weather petitioner, 25% thereof as attorney's fees, and the cost of the
working days Sundays and holidays included. 42 The running of suit.1âwphi1.nêt
laytime was thus made subject to the weather, and would cease to
run in the event unfavorable weather interfered with the unloading of
The facts are as follows:
cargo. 43Consequently, NSC may not be held liable for demurrage as
Petitioner Virgines Calvo is the owner of Transorient Container the goods are unconditionally placed in the possession of
Terminal Services, Inc. (TCTSI), a sole proprietorship customs and received by the carrier for transportation until the same
broker. At the time material to this case, petitioner entered into a are delivered actually or constructively by the carrier to the
contract with San Miguel Corporation (SMC) for the transfer of 114 consignee or to the person who has the right to receive the
reels of semi-chemical fluting paper and 124 reels of kraft liner board same.3
from the Port Area in Manila to SMC's warehouse at the Tabacalera
Compound, Romualdez St., Ermita, Manila. The cargo was insured
Accordingly, the trial court ordered petitioner to pay the following
by respondent UCPB General Insurance Co., Inc.
amounts --

On July 14, 1990, the shipment in question, contained in 30 metal

1. The sum of P93,112.00 plus interest;
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, 2. 25% thereof as lawyer's fee;
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 3. Costs of suit.4
Marine Cargo Surveyors, who found that 15 reels of the semi-
chemical fluting paper were "wet/stained/torn" and 3 reels of kraft The decision was affirmed by the Court of Appeals on appeal. Hence
liner board were likewise torn. The damage was placed this petition for review on certiorari.
at P93,112.00.
Petitioner contends that:
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 I. THE COURT OF APPEALS COMMITTED SERIOUS
Court, Branch 148, Makati City, which, on December 20, 1995, AND REVERSIBLE ERROR [IN] DECIDING THE CASE
rendered judgment finding petitioner liable to respondent for the NOT ON THE EVIDENCE PRESENTED BUT ON PURE
damage to the shipment. SURMISES, SPECULATIONS AND MANIFESTLY
MISTAKEN INFERENCE.

The trial court held:

II. THE COURT OF APPEALS COMMITTED SERIOUS
AND REVERSIBLE ERROR IN CLASSIFYING THE
It cannot be denied . . . that the subject cargoes sustained PETITIONER AS A COMMON CARRIER AND NOT AS
damage while in the custody of defendants. Evidence such PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD
as the Warehouse Entry Slip (Exh. "E"); the Damage ITS SERVICES TO THE PUBLIC.5
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 It will be convenient to deal with these contentions in the inverse
tearrage at the middle of the subject damaged cargoes order, for if petitioner is not a common carrier, although both the trial
respectively, coupled with the Marine Cargo Survey Report court and the Court of Appeals held otherwise, then she is indeed not
(Exh. "H" - "H-4-A") confirms the fact of the damaged liable beyond what ordinary diligence in the vigilance over the goods
condition of the subject cargoes. The surveyor[s'] report transported by her, would require.6 Consequently, any damage to the
(Exh. "H-4-A") in particular, which provides among others cargo she agrees to transport cannot be presumed to have been due
that: to her fault or negligence.

" . . . we opine that damages sustained by Petitioner contends that contrary to the findings of the trial court and
shipment is attributable to improper handling in the Court of Appeals, she is not a common carrier but a private
transit presumably whilst in the custody of the carrier because, as a customs broker and warehouseman, she does
broker . . . ." 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.
is a finding which cannot be traversed and overturned.
The contention has no merit. In De Guzman v. Court of Appeals,7 the
The evidence adduced by the defendants is not enough to Court dismissed a similar contention and held the party to be a
sustain [her] defense that [she is] are not liable. Defendant common carrier, thus -
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 The Civil Code defines "common carriers" in the following terms:
of and to forthwith deliver to the consignee. Defendant did
not present any evidence on what precaution [she] "Article 1732. Common carriers are persons, corporations,
performed to prevent [the] said incident, hence the firms or associations engaged in the business of carrying
presumption is that the moment the defendant accepts the or transporting passengers or goods or both, by land,
cargo [she] shall perform such extraordinary diligence water, or air for compensation, offering their services to the
because of the nature of the cargo. public."

.... The above article makes no distinction between one

whose principal business activity is the carrying of persons
Generally speaking under Article 1735 of the Civil Code, if or goods or both, and one who does such carrying only as
the goods are proved to have been lost, destroyed or an ancillary activity . . . Article 1732 also carefully avoids
deteriorated, common carriers are presumed to have been making any distinction between a person or enterprise
at fault or to have acted negligently, unless they prove that offering transportation service on aregular or scheduled
they have observed the extraordinary diligence required by basis and one offering such service on an occasional,
law. The burden of the plaintiff, therefore, is to prove episodic or unscheduled [Link] does Article 1732
merely that the goods he transported have been lost, distinguish between a carrier offering its services to the
destroyed or deteriorated. Thereafter, the burden is shifted "general public," i.e., the general community or population,
to the carrier to prove that he has exercised the and one who offers services or solicits business only from
extraordinary diligence required by law. Thus, it has been a narrowsegment of the general population. We think that
held that the mere proof of delivery of goods in good order Article 1732 deliberately refrained from making such
to a carrier, and of their arrival at the place of destination in distinctions.
bad order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how the So understood, the concept of "common carrier" under
injury occurred, the carrier must be held responsible. It is Article 1732 may be seen to coincide neatly with the notion
incumbent upon the carrier to prove that the loss was due of "public service," under the Public Service Act
to accident or some other circumstances inconsistent with (Commonwealth Act No. 1416, as amended) which at least
its liability." (cited in Commercial Laws of the Philippines by partially supplements the law on common carriers set forth
Agbayani, p. 31, Vol. IV, 1989 Ed.) in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
Defendant, being a customs brother, warehouseman and
at the same time a common carrier is supposed [to] " x x x every person that now or hereafter may
exercise [the] extraordinary diligence required by law, own, operate, manage, or control in the
hence the extraordinary responsibility lasts from the time Philippines, for hire or compensation, with
 general or limited clientele, whether permanent, Contrary to petitioner's assertion, the Survey Report (Exh. H) of the
occasional or accidental, and done for general Marine Cargo Surveyors indicates that when the shipper transferred
business purposes, any common the cargo in question to the arrastre operator, these were covered by
carrier, railroad, street railway, traction railway, clean Equipment Interchange Report (EIR) and, when petitioner's
subway motor vehicle, either for freight or employees withdrew the cargo from the arrastre operator, they did so
passenger, or both, with or without fixed route without exception or protest either with regard to the condition of
and whatever may be its classification, freight or container vans or their contents. The Survey Report pertinently reads
carrier service of any class, express service, --
steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of
Details of Discharge:
passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, Shipment, provided with our protective supervision was
electric light, heat and power, water supply and noted discharged ex vessel to dock of Pier #13 South
power petroleum, sewerage system, wire or Harbor, Manila on 14 July 1990, containerized onto 30' x
wireless communications systems, wire or 20' secure metal vans, covered by clean EIRs. Except for
wireless broadcasting stations and other similar slight dents and paint scratches on side and roof panels,
public services. x x x" 8 these containers were deemed to have [been] received in
good condition.
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 Transfer/Delivery:
customers, as already noted, is part and parcel of petitioner's
business. On July 23, 1990, shipment housed onto 30' x 20' cargo
containers was [withdrawn] by Transorient Container
Services, Inc. . . . without exception.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:

Common carriers, from the nature of their business and for [The cargo] was finally delivered to the consignee's storage
reasons of public policy, are bound to observe warehouse located at Tabacalera Compound, Romualdez
extraordinary diligence in the vigilance over the goods and Street, Ermita, Manila from July 23/25, 1990.12
for the safety of the passengers transported by them,
according to all the circumstances of each case. . . . As found by the Court of Appeals:

In Compania Maritima v. Court of Appeals,9 the meaning of From the [Survey Report], it [is] clear that the shipment
"extraordinary diligence in the vigilance over goods" was explained was discharged from the vessel to the arrastre, Marina
thus: 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
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to would have been a report to that effect made by the
know and to follow the required precaution for avoiding arrastre operator. The cargoes were withdrawn by the
defendant-appellant from the arrastre still in good order
damage to, or destruction of the goods entrusted to it for
sale, carriage and delivery. It requires common carriers to and condition as the same were received by the
render service with the greatest skill and foresight and "to former without exception, that is, without any report of
damage or loss. Surely, if the container vans were
use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to deformed, cracked, distorted or dented, the defendant-
exercise due care in the handling and stowage, including appellant would report it immediately to the consignee or
make an exception on the delivery receipt or note the
such methods as their nature requires."
same in the Warehouse Entry Slip (WES). None of these
took place. To put it simply, the defendant-appellant
In the case at bar, petitioner denies liability for the damage to the received the shipment in good order and condition and
cargo. She claims that the "spoilage or wettage" took place while the delivered the same to the consignee damaged. We can
goods were in the custody of either the carrying vessel "M/V only conclude that the damages to the cargo occurred
Hayakawa Maru," which transported the cargo to Manila, or the while it was in the possession of the defendant-appellant.
arrastre operator, to whom the goods were unloaded and who Whenever the thing is lost (or damaged) in the possession
allegedly kept them in open air for nine days from July 14 to July 23, of the debtor (or obligor), it shall be presumed that the loss
1998 notwithstanding the fact that some of the containers were (or damage) was due to his fault, unless there is proof to
deformed, cracked, or otherwise damaged, as noted in the Marine the contrary. No proof was proffered to rebut this legal
Survey Report (Exh. H), to wit: presumption and the presumption of negligence attached
to a common carrier in case of loss or damage to the
goods.13
MAXU-2062880 - rain gutter deformed/cracked

Anent petitioner's insistence that the cargo could not have been
ICSU-363461-3 - left side rubber gasket on door
damaged while in her custody as she immediately delivered the
distorted/partly loose
containers to SMC's compound, suffice it to say that to prove the
exercise of extraordinary diligence, petitioner must do more than
PERU-204209-4 - with pinholes on roof panel right merely show the possibility that some other party could be
portion 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
TOLU-213674-3 - wood flooring we[t] and/or with
[thereof]." Petitioner failed to do this.
signs of water soaked

Nor is there basis to exempt petitioner from liability under Art.

MAXU-201406-0 - with dent/crack on roof panel
1734(4), which provides --

ICSU-412105-0 - rubber gasket on left side/door

Common carriers are responsible for the loss, destruction,
panel partly detached loosened.10
or deterioration of the goods, unless the same is due to
any of the following causes only:
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, (4) The character of the goods or defects in the packing or
Ricardo Nazarro, immediately delivered the cargo to SMC's in the containers.
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
For this provision to apply, the rule is that if the improper packing or, "Under the law on obligation and contract, negligence or
in this case, the defect/s in the container, is/are known to the carrier fault is not presumed. The law on quasi delict provides for
or his employees or apparent upon ordinary observation, but he some presumption of negligence but only upon the
nevertheless accepts the same without protest or exception attendance of some circumstances. Thus, Article 2185
notwithstanding such condition, he is not relieved of liability for provides:
damage resulting therefrom.14 In this case, petitioner accepted the
cargo without exception despite the apparent defects in some of the
‘Art. 2185. Unless there is proof to the contrary,
container vans. Hence, for failure of petitioner to prove that she
it is presumed that a person driving a motor
exercised extraordinary diligence in the carriage of goods in this case
vehicle has been negligent if at the time of the
or that she is exempt from liability, the presumption of negligence as
mishap, he was violating any traffic regulation.’
provided under Art. 173515 holds.

"Evidence for the plaintiff shows no proof that defendant

WHEREFORE, the decision of the Court of Appeals, dated May 31,
was violating any traffic regulation. Hence, the presumption
2001, is AFFIRMED.1âwphi1.nêt
of negligence is not obtaining.

SO ORDERED.
"Considering that plaintiff failed to adduce evidence that
defendant is a common carrier and defendant’s driver was
the one negligent, defendant cannot be made liable for the
damages of the subject cargoes."2
G.R. No. 141910 August 6, 2002
The subsequent motion for reconsideration having been
denied,3 plaintiff interposed an appeal to the Court of Appeals,
FGU INSURANCE CORPORATION, petitioner, contending that the trial court had erred (a) in holding that the
vs. appellee corporation was not a common carrier defined under the law
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. and existing jurisprudence; and (b) in dismissing the complaint on a
EROLES, respondents. demurrer to evidence.

VITUG, J.: The Court of Appeals rejected the appeal of petitioner and ruled in
favor of GPS. The appellate court, in its decision of 10 June
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 1999,4 discoursed, among other things, that -
18 June 1994 thirty (30) units of Condura S.D. white refrigerators
aboard one of its Isuzu truck, driven by Lambert Eroles, from the "x x x in order for the presumption of negligence provided
plant site of Concepcion Industries, Inc., along South Superhighway for under the law governing common carrier (Article 1735,
in Alabang, Metro Manila, to the Central Luzon Appliances in Civil Code) to arise, the appellant must first prove that the
Dagupan City. While the truck was traversing the north diversion appellee is a common carrier. Should the appellant fail to
road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it prove that the appellee is a common carrier, the
collided with an unidentified truck, causing it to fall into a deep canal, presumption would not arise; consequently, the appellant
resulting in damage to the cargoes. would have to prove that the carrier was negligent.

FGU Insurance Corporation (FGU), an insurer of the shipment, paid "x x x xxx xxx
to Concepcion Industries, Inc., the value of the covered cargoes in
the sum of P204,450.00. FGU, in turn, being the subrogee of the
rights and interests of Concepcion Industries, Inc., sought "Because it is the appellant who insists that the appellees
reimbursement of the amount it had paid to the latter from GPS. can still be considered as a common carrier, despite its
Since the trucking company failed to heed the claim, FGU filed a `limited clientele,’ (assuming it was really a common
complaint for damages and breach of contract of carriage against carrier), it follows that it (appellant) has the burden of
GPS and its driver Lambert Eroles with the Regional Trial Court, proving the same. It (plaintiff-appellant) `must establish his
Branch 66, of Makati City. In its answer, respondents asserted that case by a preponderance of evidence, which means that
GPS was the exclusive hauler only of Concepcion Industries, Inc., the evidence as a whole adduced by one side is superior
since 1988, and it was not so engaged in business as a common to that of the other.’ (Summa Insurance Corporation vs.
carrier. Respondents further claimed that the cause of damage was Court of Appeals, 243 SCRA 175). This, unfortunately, the
purely accidental.1âwphi1.nêt appellant failed to do -- hence, the dismissal of the
plaintiff’s complaint by the trial court is justified.
The issues having thus been joined, FGU presented its evidence,
establishing the extent of damage to the cargoes and the amount it "x x x xxx xxx
had paid to the assured. GPS, instead of submitting its evidence,
filed with leave of court a motion to dismiss the complaint by way of
"Based on the foregoing disquisitions and considering the
demurrer to evidence on the ground that petitioner had failed to
circumstances that the appellee trucking corporation has
prove that it was a common carrier.
been `its exclusive contractor, hauler since 1970,
defendant has no choice but to comply with the directive of
The trial court, in its order of 30 April 1996,1 granted the motion to its principal,’ the inevitable conclusion is that the appellee
dismiss, explaining thusly: is a private carrier.

"Under Section 1 of Rule 131 of the Rules of Court, it is "x x x xxx xxx
provided that ‘Each party must prove his own affirmative
allegation, xxx.’
"x x x the lower court correctly ruled that 'the application of
the law on common carriers is not warranted and the
"In the instant case, plaintiff did not present any single presumption of fault or negligence on the part of a common
evidence that would prove that defendant is a common carrier in case of loss, damage or deterioration of good[s]
carrier. during transport under [article] 1735 of the Civil Code is not
availing.' x x x.
"x x x xxx xxx
"Finally, We advert to the long established rule that
conclusions and findings of fact of a trial court are entitled
"Accordingly, the application of the law on common carriers to great weight on appeal and should not be disturbed
is not warranted and the presumption of fault or negligence unless for strong and valid reasons."5
on the part of a common carrier in case of loss, damage or
deterioration of goods during transport under 1735 of the
Civil Code is not availing. Petitioner's motion for reconsideration was likewise denied; 6 hence,
the instant petition,7 raising the following issues:
"Thus, the laws governing the contract between the owner
of the cargo to whom the plaintiff was subrogated and the I
owner of the vehicle which transports the cargo are the
laws on obligation and contract of the Civil Code as well as
WHETHER RESPONDENT GPS MAY BE CONSIDERED
the law on quasi delicts.
AS A COMMON CARRIER AS DEFINED UNDER THE
LAW AND EXISTING JURISPRUDENCE.
 II use proper care. It affords reasonable evidence, in the absence of
explanation by the defendant, that the accident arose from want of
care.19 It is not a rule of substantive law and, as such, it does not
WHETHER RESPONDENT GPS, EITHER AS A
create an independent ground of liability. Instead, it is regarded as a
COMMON CARRIER OR A PRIVATE CARRIER, MAY BE
mode of proof, or a mere procedural convenience since it furnishes a
PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE
substitute for, and relieves the plaintiff of, the burden of producing
GOODS IT UNDERTOOK TO TRANSPORT SAFELY
specific proof of negligence. The maxim simply places on the
WERE SUBSEQUENTLY DAMAGED WHILE IN ITS
defendant the burden of going forward with the proof.20 Resort to the
PROTECTIVE CUSTODY AND POSSESSION.
doctrine, however, may be allowed only when (a) the event is of a
kind which does not ordinarily occur in the absence of negligence; (b)
III other responsible causes, including the conduct of the plaintiff and
third persons, are sufficiently eliminated by the evidence; and (c) the
indicated negligence is within the scope of the defendant's duty to the
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS
plaintiff.21 Thus, it is not applicable when an unexplained accident
APPLICABLE IN THE INSTANT CASE. may be attributable to one of several causes, for some of which the
defendant could not be responsible.22
On the first issue, the Court finds the conclusion of the trial court and
the Court of Appeals to be amply justified. GPS, being an exclusive Res ipsa loquitur generally finds relevance whether or not a
contractor and hauler of Concepcion Industries, Inc., rendering or contractual relationship exists between the plaintiff and the
offering its services to no other individual or entity, cannot be
defendant, for the inference of negligence arises from the
considered a common carrier. Common carriers are persons, circumstances and nature of the occurrence and not from the nature
corporations, firms or associations engaged in the business of of the relation of the parties.23 Nevertheless, the requirement that
carrying or transporting passengers or goods or both, by land, water,
responsible causes other than those due to defendant’s conduct
or air, for hire or compensation, offering their services to must first be eliminated, for the doctrine to apply, should be
the public,8 whether to the public in general or to a limited clientele in
understood as being confined only to cases of pure (non-contractual)
particular, but never on an exclusive basis.9 The true test of a
tort since obviously the presumption of negligence in culpa
common carrier is the carriage of passengers or goods, providing contractual, as previously so pointed out, immediately attaches by a
space for those who opt to avail themselves of its transportation failure of the covenant or its tenor. In the case of the truck driver,
service for a fee.10 Given accepted standards, GPS scarcely falls whose liability in a civil action is predicated on culpa acquiliana, while
within the term "common carrier." he admittedly can be said to have been in control and management
of the vehicle which figured in the accident, it is not equally shown,
The above conclusion nothwithstanding, GPS cannot escape from however, that the accident could have been exclusively due to his
liability. negligence, a matter that can allow, forthwith, res ipsa loquitur to
work against him.
In culpa contractual, upon which the action of petitioner rests as
being the subrogee of Concepcion Industries, Inc., the mere proof of If a demurrer to evidence is granted but on appeal the order of
the existence of the contract and the failure of its compliance dismissal is reversed, the movant shall be deemed to have waived
justify, prima facie, a corresponding right of relief.11 The law, the right to present evidence.24 Thus, respondent corporation may no
recognizing the obligatory force of contracts,12 will not permit a party longer offer proof to establish that it has exercised due care in
to be set free from liability for any kind of misperformance of the transporting the cargoes of the assured so as to still warrant a
contractual undertaking or a contravention of the tenor thereof.13 A remand of the case to the trial court.1âwphi1.nêt
breach upon the contract confers upon the injured party a valid cause
for recovering that which may have been lost or suffered. The WHEREFORE, the order, dated 30 April 1996, of the Regional Trial
remedy serves to preserve the interests of the promisee that may Court, Branch 66, of Makati City, and the decision, dated 10 June
include his "expectation interest," which is his interest in having the 1999, of the Court of Appeals, are AFFIRMED only insofar as
benefit of his bargain by being put in as good a position as he would
respondent Lambert M. Eroles is concerned, but said assailed order
have been in had the contract been performed, or his "reliance of the trial court and decision of the appellate court
interest," which is his interest in being reimbursed for loss caused by are REVERSEDas regards G.P. Sarmiento Trucking Corporation
reliance on the contract by being put in as good a position as he
which, instead, is hereby ordered to pay FGU Insurance Corporation
would have been in had the contract not been made; or his the value of the damaged and lost cargoes in the amount of
"restitution interest," which is his interest in having restored to him P204,450.00. No costs.
any benefit that he has conferred on the other party.14 Indeed,
agreements can accomplish little, either for their makers or for
society, unless they are made the basis for action.15 The effect of SO ORDERED.
every infraction is to create a new duty, that is, to make recompense
to the one who has been injured by the failure of another to observe
his contractual obligation16 unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally
that of the diligence of a good father of a family or, exceptionally by G.R. No. 98243 July 1, 1992
stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to
excuse him from his ensuing liability. ALEJANDRO ARADA, doing business under the name and style
"SOUTH NEGROS ENTERPRISES", petitioner,
vs.
Respondent trucking corporation recognizes the existence of a HONORABLE COURT OF APPEALS, respondents.
contract of carriage between it and petitioner’s assured, and admits
that the cargoes it has assumed to deliver have been lost or
damaged while in its custody. In such a situation, a default on, or
failure of compliance with, the obligation – in this case, the delivery of
the goods in its custody to the place of destination - gives rise to a PARAS, J.:
presumption of lack of care and corresponding liability on the part of
the contractual obligor the burden being on him to establish
otherwise. GPS has failed to do so. This is a petition for review on certiorari which seeks to annul and set
aside the decision * of the Court of Appeals dated April 8, 1991 in
CA-G.R. CV No. 20597 entitled "San Miguel Corporation v. Alejandro
Respondent driver, on the other hand, without concrete proof of his Arada, doing business under the name and style "South Negros
negligence or fault, may not himself be ordered to pay petitioner. The Enterprises", reversing the decision of the RTC, Seventh Judicial
driver, not being a party to the contract of carriage between Region, Branch XII, Cebu City, ordering petitioner to pay the private
petitioner’s principal and defendant, may not be held liable under the respondent tho amount of P172,284.80 representing the value of the
agreement. A contract can only bind the parties who have entered cargo lost on board the ill-fated, M/L Maya with interest thereon at
into it or their successors who have assumed their personality or their the legal rate from the date of the filing of the complaint on March 25,
juridical position.17 Consonantly with the axiom res inter alios acta 1983 until fully paid, and the costs.
aliis neque nocet prodest, such contract can neither favor nor
prejudice a third person. Petitioner’s civil action against the driver can
only be based on culpa aquiliana, which, unlike culpa The undisputed facts of the case are as follows: Alejandro Arada,
contractual, would require the claimant for damages to prove herein petitioner, is the proprietor and operator of the firm South
negligence or fault on the part of the defendant.18 Negros Enterprises which has been organized and established for
more than ten (10) years. It is engaged in the business of small scale
shipping as a common carrier, servicing the hauling of cargoes of
A word in passing. Res ipsa loquitur, a doctrine being invoked by different corporations and companies with the five (5) vessels it was
petitioner, holds a defendant liable where the thing which caused the operating (Rollo, p. 121).
injury complained of is shown to be under the latter’s management
and the accident is such that, in the ordinary course of things, cannot
be expected to happen if those who have its management or control
On March 24, 1982. petitioner entered into a contract with private WHEREFORE, judgment is hereby rendered as
respondent to safely transport as a common carrier, cargoes of the follows:
latter from San Carlos City, Negros Occidental to Mandaue City
using one of petitioner's vessels, M/L Maya. The cargoes of private
(1) With respect to the first cause of action, claim
respondent consisted of 9,824 cases of beer empties valued at
of plaintiff is hereby dismissed;
P176,824.80, were itemized as follows:

(2) Under the second cause of action, defendant

NO. CARGO VALUE must pay plaintiff the sum of P2,000.00;
OF
CASES
(3) In the third cause of action, the defendant
must pay plaintiff the sum of P2,849.20;
7,515 PPW P136.773.00
CS STENIE
MTS (4) Since the plaintiff has withheld the payment
of P12,997.47 due the defendynt, the plaintiff
1,542 PLW 23,438.40 should deduct the amount of P4,849.20 from the
CS GRANDE P12,997.47 and the balance of P8,148.27 must
MTS be paid to the defendant; and

58 CS G.E. 1,276.00 (5) Defendant's counterclaim not having been

PLASTIC substantiated by evidence is likewise dismissed.
MTS NO COSTS. (Orig. Record, pp. 193-195).

24 CS PLP MTS 456.00

Thereafter, private respondent appealed said decision to the Court of
Appeals claiming that the trial court erred in —
37 CS CS 673.40
WOODEN
MTS (1) holding that nothing was shown that the
defendant, or any of his employees who manned
8 CS LAGERLITE 128.00 the M/L Maya was negligent in any way nor did
PLASTIC they fail to observe extraordinary diligence over
MTS the cargoes of the plaintiff; and

640 CS STENEI 14,080.00 (2) holding that the sinking of said vessel was
PLASTIC caused by the storm, consequently, dismissing
MTS the claim of plaintiff in its first cause of action for
breach of contract of carriage of goods (Rollo,
9,824 P176,824.80 pp. 33-34; Decision, pp. 3-4).
CS
In its decision Promulgated on April 8, 1991, the Court of Appeals
reversed the decision of the court a quo, the dispositive portion and
On March 24, 1982, petitioner thru its crew master, Mr. Vivencio the dispositive part of its decision reads as:
Babao, applied for a clearance with the Philippine Coast Guard for
M/L Maya to leave the port of San Carlos City, but due to a typhoon,
it was denied clearance by SNI Antonio Prestado PN who was then WHEREFORE, that part of the Judgment
assigned at San Carlos City Coast Guard Detachment (Rollo, p. appeal6d from is REVERSED and the appellee
122). Aleiandro Arada, doing business by the name
and style, "South Negros Enterprises", ordered
(sic) to pay unto the appellant San Miguel
On March 25, 1982 M/L Maya was given clearance as there was no Corporation the amount of P176,824.80
storm and the sea was calm. Hence, said vessel left for Mandaue representing the value of the cargo lost on board
City. While it was navigating towards Cebu, a typhoon developed and the ill-fated vessel, M/L Maya, with interest
said vessel was buffeted on all its sides by big waves. Its rudder was thereon at the legal rate from date of the filing of
destroyed and it drifted for sixteen (16) hours although its engine was the complaint on March 25, 1983, until fully paid,
running. and the costs. (Rollo, p. 37)

On March 27, 1982 at about 4:00 a.m., the vessel sank with The Court of Appeals ruled that "in view of his failure to observe
whatever was left of its cargoes. The crew was rescued by a passing extraordinary diligence over the cargo in question and his negligence
pump boat and was brought to Calanggaman Island. Later in the previous to the sinking of the carrying vessel, as above shown, the
afternoon, they were brought to Palompon, Leyte, where Vivencio appellee is liable to the appellant for the value of the lost cargo.
Babao filed a marine protest (Rollo, p. 10).

Hence the present recourse.

On the basis of such marine protest, the Board of Marine Inquiry
conducted a hearing of the sinking of M/L Maya wherein private
respondent was duly represented. Said Board made its findings and On November 20, 1991, this Court gave due course to the petition.
recommendation dated November 7, 1983, the dispositive portion of The pivotal issue to be resolved is whether or not petitioner is liable
which reads as: for the value of the lost cargoes.

WHEREFORE, premises considered, this Board Petitioner contends that it was not in the exercise of its function as a
recommends as it is hereby recommended that common carrier when it entered into a contract with private
the owner/operator, officers and crew of M/L respondent,but was then acting as a private carrier not bound by the
Maya be exonerated or absolved from any requirement of extraordinary diligence (Rollo, p. 15) and that the
administrative liability on account of this incident factual findings of the Board of Marine Inquiry and the Special Board
(Exh. 1). of Marine Inquiry are binding and conclusive on the Court (Rollo, pp.
16-17).
The Board's report containing its findings and recommendation was
then forwarded to the headquarters of the Philippine Coast Guard for Private respondent counters that M/L Maya was in the exercise of its
appropriate action. On the basis of such report, the Commandant of function as a common carrier and its failure to observe the
the Philippine Coast Guard rendered a decision dated December 21, extraordinary diligence required of it in the vigilance over their
1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator cargoes makes Petitioner liable for the value of said cargoes.
officers and crew of the ill-fated M/L Maya from any administrative
liability on account of said incident (Exh. 2). The petition is devoid of merit.

On March 25, 1983, Private respondent filed a complaint in the Common carriers are persons, corporations, firms or associations
Regional Trial Court its first cause of action being for the recovery of engaged in the business of carrying or transporting passengers or
the value of the cargoes anchored on breach of contract of carriage. goods or both, by land, water or air, for compensation offering their
After due hearing, said court rendered a decision dated July 18, services to the public (Art. 1732 of the New Civil Code).
1988, the dispositive portion of which reads
In the case at bar, there is no doubt that petitioner was exercising its Respondent court's conclusion as to the negligence of petitioner is
function as a common carrier when it entered into a contract with supported by evidence. It will be noted that Vivencio Babao knew of
private respondent to carry and transport the latter's cargoes. This the impending typhoon on March 24, 1982 when the Philippine Coast
fact is best supported by the admission of petitioner's son, Mr. Eric Guard denied M/L Maya the issuance of a clearance to sail. Less
Arada, who testified as the officer-in-charge for operations of South than 24 hours elapsed since the time of the denial of said clearance
Negros Enterprises in Cebu City. In substance his testimony on and the time a clearance to sail was finally issued on March 25,
January 14, 1985 is as follows: 1982. Records will show that Babao did not ascertain where the
typhoon was headed by the use of his vessel's barometer and radio
(Rorlo, p. 142). Neither did the captain of the vessel monitor and
Q. How many vessels are
record the weather conditions everyday as required by Art, 612 of the
you operating?
Code of Commerce (Rollo, pp. 142-143). Had he done so while
navigating for 31 hours, he could have anticipated the strong winds
A. There were all in all and big waves and taken shelter (Rollo, pp- 36; 145). His testimony
around five (5). on May 4, 1982 is as follows:

Q. And you were entering to Q. Did you not check on

service hauling of cargoes to your own where the typhoon
different companies, is that was?
correct?
A. No. sir. (TSN, May 4,
A. Yes, sir. 1982, pp. 58-59)

Q. In one word, the South Noteworthy is the fact that as Per official records of the
Negros Enterprises is Climatological Division of the Philippine Atmospheric, Geophysical
engaged in the business of and Astronomical Services Administration (PAG-ASA for brevity)
common carriers, is that issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr.
correct? as to the weather and sea conditions that prevailed in the vicinity of
Catmon, Cebu during the period March 25-27, 1982, the sea
conditions on March 25, 1982 were slight to rough and the weather
A. Yes, sir, conditions then prevailing during those times were cloudy skies with
rainshowers and the small waves grew larger and larger, to wit:
Q. And in fact, at the time of
the hauling of the San
Miguel Beer,
SPEEDit was also in WAVE HT. SEA WEATHER
the same category as a
common KNOTS
carrier? (METERS) CONDITIONS

March
A. Yes, sir,
25

(TSN. pp. 3-4, Jan. 29, 1985) 8 AM 15 1-2 slight

A common carrier, both from the nature of its business and for
insistent reasons of public policy is burdened by law with the duty of
exercising extraordinary diligence not only in ensuring the safety of
passengers, but in caring for the goods transported by it. The loss or
destruction or deterioration of goods turned over to2 the
PM common 20-25 2.0-3.0 moderate
carrier for the conveyance to a designated destination raises instantly
a presumption of fault or negligence on the part of the carrier, save
only where such loss, destruction or damage arises from extreme to rough
circumstances such as a natural disaster or calamity ... (Benedicto v.
IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547) (Emphasis
supplied). 8 PM 30 3.7 rough

In order that the common carrier may be exempted from

responsibility, the natural disaster must have been
the proximate andonly cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize the loss
before, during and after the occurrence of flood, storm or other
natural disaster in order that the common carrier may be exempted
from liability for the destruction or deterioration of the goods (Article
1739, New Civil Code).

In the instant case, the appellate court was correct in finding that
petitioner failed to observe the extraordinary diligence over the cargo
in question and he or the master in his employ was negligent
previous to the sinking of the carrying vessel. In substance, the
decision reads:

... VIVENCIO BABAO, the master of the carrying

vessel, knew that there was a typboon coming
before his departure but did not check where it
was.

xxx xxx xxx

2 AM 30 3.7 rough

If only for the fact that he was first denied

clearance to depart on March 24, 1982,
obviously because of a typhoon coming, Babao,
as master of the vessel, should have verified first
where the typhoon was before departing on
March 25, 1982. True, the sea was calm at
departure time. But that might be the calm
before the storm. Prudence dictates that he
should have ascertained first where the storm
was before departing as it might be on his path.
(Rollo, pp. 35-36)
 WHEREFORE, Judgment is hereby rendered
orderingtheSouth Sea Surety and Insurance Co.,
direction
Inc. to pay of the sum of TWO MILLION
plaintiff
the wind;
PESOS (P2,000,000.00) representing the value
of the policy of the lost logs with legal interest
thereonSpindrift
from the date of demand on February 2,
begins
1984 until the amount is fully paid or in the
alternative, defendant Seven Brothers Shipping
Corporation to pay plaintiff the amount of TWO
(Exh. 3) MILLION PESOS (2,000,000.00) representing
the value of lost logs plus legal interest from the
A common carrier is obliged to observe extraordinary diligence and date of demand on April 24, 1984 until full
the failure of Babao to ascertain the direction of the storm and the payment thereof; the reasonable attorney's fees
weather condition of the path they would be traversing, constitute in the amount equivalent to five (5) percent of
lack of foresight and minimum vigilance over its cargoes taking into the amount of the claim and the costs of the suit.
account the surrounding circumstances of the case.
Plaintiff is hereby ordered to pay defendant
While the goods are in the possession of the carrier, it is but fair that Seven Brothers Shipping Corporation the sum of
it exercises extraordinary diligence in protecting them from loss or TWO HUNDRED THIRTY THOUSAND PESOS
damage, and if loss occurs, the law presumes that it was due to the (P230,000.00) representing the balance of the
carrier's fault or negligence; that is necessary to protect the interest stipulated freight charges.
of the shipper which is at the mercy of the carrier (Art. 1756, Civil
Code, Aboitiz Shipping Corporation v. Court of Appeals, G.R. No. Defendant South Sea Surety and Insurance
89757, Aug. 6, 1990, 188 SCRA 387). Company's counterclaim is hereby dismissed.

Furthermore, the records show that the crew of M/L Maya did not In its assailed Decision, Respondent Court of Appeals held:
have the required qualifications provided for in P.D. No. 97 or the
Philippine Merchant Marine Officers Law, all of whom were
unlicensed. While it is true that they were given special permit to man WHEREFORE, the appealed judgment is hereby
the vessel, such permit was issued at the risk and responsibility of AFFIRMED except in so far (sic) as the liability of
the owner (Rollo, p. 36). the Seven Brothers Shipping Corporation to the
plaintiff is concerned which is hereby
REVERSED and SET ASIDE. 3
Finally, petitioner claims that the factual findings of the Special Board
of Marine Inquiry exonerating the owner/operator, crew officers of the
ill-fated vessel M/L Maya from any administrative liability is binding The Facts
on the court.
The factual antecedents of this case as narrated in the Court of
In rejecting petitioner's claim, respondent court was correct in ruling Appeals Decision are as follows:
that "such exoneration was but with respect to the administrative
liability of the owner/operator, officers and crew of the ill-fated" It appears that on 16 January 1984, plaintiff
vessel. It could not have meant exoneration of appellee from liability (Valenzuela Hardwood and Industrial Supply,
as a common carrier for his failure to observe extraordinary diligence Inc.) entered into an agreement with the
in the vigilance over the goods it was transporting and for the defendant Seven Brothers (Shipping
negligent acts or omissions of his employees. Such is the function of Corporation) whereby the latter undertook to
the Court, not the Special Board of Marine Inquiry." (Rollo, P. 37, load on board its vessel M/V Seven Ambassador
Annex A, p. 7) the former's lauan round logs numbering 940 at
the port of Maconacon, Isabela for shipment to
The Philippine Merchant Marine Rules and Regulations particularly Manila.
Chapter XVI thereof entitled "Marine Investigation and Suspension
and Revocation Proceedings" prescribes the Rules governing On 20 January 1984, plaintiff insured the logs
maritime casualties or accidents, the rules and Procedures in against loss and/or damage with defendant
administrative investigation of all maritime cases within the South Sea Surety and Insurance Co., Inc. for
jurisdiction or cognizance of the Philippine Coast Guard and the P2,000,000.00 and the latter issued its Marine
grounds for suspension and revocation of licenses/certificates of Cargo Insurance Policy No. 84/24229 for
marine officers and seamen (1601 — SCOPE); clearly, limiting the P2,000,000.00 on said date.
jurisdiction of the Board of Marine Inquiry and Special Board of
Marine Inquiry to the administrative aspect of marine casualties in so
far as it involves the shipowners and officers. On 24 January 1984, the plaintiff gave the check
in payment of the premium on the insurance
policy to Mr. Victorio Chua.
PREMISES CONSIDERED, the appealed decision is AFFIRMED.

In the meantime, the said vessel M/V Seven

SO ORDERED. Ambassador sank on 25 January 1984 resulting
in the loss of the plaintiff's insured logs.

On 30 January 1984, a check for P5,625.00

(Exh. "E") to cover payment of the premium and
G.R. No. 102316 June 30, 1997
documentary stamps due on the policy was
tendered due to the insurer but was not
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY accepted. Instead, the South Sea Surety and
INC., petitioner, Insurance Co., Inc. cancelled the insurance
vs. policy it issued as of the date of the inception for
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING non-payment of the premium due in accordance
CORPORATION, respondents. with Section 77 of the Insurance Code.

On 2 February 1984, plaintiff demanded from

defendant South Sea Surety and Insurance Co.,
Inc. the payment of the proceeds of the policy
PANGANIBAN, J.:
but the latter denied liability under the policy.
Plaintiff likewise filed a formal claim with
Is a stipulation in a charter party that the "(o)wners shall not be defendant Seven Brothers Shipping Corporation
responsible for loss, split, short-landing, breakages and any kind of for the value of the lost logs but the latter denied
damages to the cargo" 1 valid? This is the main question raised in the claim.
this petition for review assailing the Decision of Respondent Court of
Appeals 2 in CA-G.R. No. CV-20156 promulgated on October 15,
After due hearing and trial, the court a
1991. The Court of Appeals modified the judgment of the Regional
quo rendered judgment in favor of plaintiff and
Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive
against defendants. Both defendants shipping
portion of which reads:
corporation and the surety company appealed.
 Defendant-appellant Seven Brothers Shipping The primary issue to be resolved before us is
Corporation impute (sic) to the court a quo the whether defendants shipping corporation and the
following assignment of errors, to wit: surety company are liable to the plaintiff for the
latter's lost logs. 4
A. The lower court erred in holding that the
proximate cause of the sinking of the vessel The Court of Appeals affirmed in part the RTC judgment by
Seven Ambassadors, was not due to fortuitous sustaining the liability of South Sea Surety and Insurance Company
event but to the negligence of the captain in ("South Sea"), but modified it by holding that Seven Brothers
stowing and securing the logs on board, causing Shipping Corporation ("Seven Brothers") was not liable for the lost
the iron chains to snap and the logs to roll to the cargo. 5 In modifying the RTC judgment, the respondent appellate
portside. court ratiocinated thus:

B. The lower court erred in declaring that the It appears that there is a stipulation in the charter
non-liability clause of the Seven Brothers party that the ship owner would be exempted
Shipping Corporation from logs (sic) of the cargo from liability in case of loss.
stipulated in the charter party is void for being
contrary to public policy invoking article 1745 of
The court a quo erred in applying the provisions
the New Civil Code.
of the Civil Code on common carriers to
establish the liability of the shipping corporation.
C. The lower court erred in holding defendant- The provisions on common carriers should not
appellant Seven Brothers Shipping Corporation be applied where the carrier is not acting as
liable in the alternative and ordering/directing it such but as a private carrier.
to pay plaintiff-appellee the amount of two million
(2,000,000.00) pesos representing the value of
Under American jurisprudence, a common
the logs plus legal interest from date of demand
carrier undertaking to carry a special cargo or
until fully paid.
chartered to a special person only, becomes a
private carrier.
D. The lower court erred in ordering defendant-
appellant Seven Brothers Shipping Corporation
As a private carrier, a stipulation exempting the
to pay appellee reasonable attorney's fees in the
owner from liability even for the negligence of its
amount equivalent to 5% of the amount of the
agent is valid (Home Insurance Company, Inc.
claim and the costs of the suit.
vs. American Steamship Agencies, Inc., 23
SCRA 24).
E. The lower court erred in not awarding
defendant-appellant Seven Brothers Corporation
The shipping corporation should not therefore be
its counter-claim for attorney's fees.
held liable for the loss of the logs. 6

F. The lower court erred in not dismissing the

South Sea and herein Petitioner Valenzuela Hardwood and Industrial
complaint against Seven Brothers Shipping
Supply, Inc. ("Valenzuela") filed separate petitions for review before
Corporation.
this Court. In a Resolution dated June 2, 1995, this Court denied the
petition of South
Defendant-appellant South Sea Surety and Insurance Co., Inc. Sea. 7 There the Court found no reason to reverse the factual
assigns the following errors: findings of the trial court and the Court of Appeals that Chua was
indeed an authorized agent of South Sea when he received
Valenzuela's premium payment for the marine cargo insurance policy
A. The trial court erred in holding that Victorio
which was thus binding on the insurer. 8
Chua was an agent of defendant-appellant
South Sea Surety and Insurance Company, Inc.
and likewise erred in not holding that he was the The Court is now called upon to resolve the petition for review filed
representative of the insurance broker Columbia by Valenzuela assailing the CA Decision which exempted Seven
Insurance Brokers, Ltd. Brothers from any liability for the lost cargo.

B. The trial court erred in holding that Victorio The Issue

Chua received compensation/commission on the
premiums paid on the policies issued by the
Petitioner Valenzuela's arguments resolve around a single issue:
defendant-appellant South Sea Surety and
"whether or not respondent Court (of Appeals) committed a
Insurance Company, Inc.
reversible error in upholding the validity of the stipulation in the
charter party executed between the petitioner and the private
C. The trial court erred in not applying Section respondent exempting the latter from liability for the loss of
77 of the Insurance Code. petitioner's logs arising from the negligence of its (Seven Brothers')
captain." 9
D. The trial court erred in disregarding the
"receipt of payment clause" attached to and The Court's Ruling
forming part of the Marine Cargo Insurance
Policy No. 84/24229.
The petition is not meritorious.

E. The trial court in disregarding the statement of

Validity of Stipulation is Lis Mota
account or bill stating the amount of premium
and documentary stamps to be paid on the
policy by the plaintiff-appellee. The charter party between the petitioner and private respondent
stipulated that the "(o)wners shall not be responsible for loss, split,
short-landing, breakages and any kind of damages to the
F. The trial court erred in disregarding the
cargo." 10 The validity of this stipulation is the lis mota of this case.
endorsement of cancellation of the policy due to
non-payment of premium and documentary
stamps. It should be noted at the outset that there is no dispute between the
parties that the proximate cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo was the "snapping of
G. The trial court erred in ordering defendant-
the iron chains and the subsequent rolling of the logs to the portside
appellant South Sea Surety and Insurance
due to the negligence of the captain in stowing and securing the logs
Company, Inc. to pay plaintiff-appellee
on board the vessel and not due to fortuitous event." 11 Likewise
P2,000,000.00 representing value of the policy
undisputed is the status of Private Respondent Seven Brothers as a
with legal interest from 2 February 1984 until the
private carrier when it contracted to transport the cargo of Petitioner
amount is fully paid,
Valenzuela. Even the latter admits this in its petition. 12

H. The trial court erred in not awarding to the

The trial court deemed the charter party stipulation void for being
defendant-appellant the attorney's fees alleged
contrary to public policy, 13 citing Article 1745 of the Civil Code which
and proven in its counterclaim.
provides:
 Art. 1745. Any of the following or similar negligence of its agent is not against public
stipulations shall be considered unreasonable, policy, and is deemed valid.
unjust and contrary to public policy:
Such doctrine We find reasonable. The Civil
(1) That the goods are transported at the risk of Code provisions on common carriers should not
the owner or shipper; be applied where the carrier is not acting as
such but as a private carrier. The stipulation in
the charter party absolving the owner from
(2) That the common carrier will not be liable for
liability for loss due to the negligence of its agent
any loss, destruction, or deterioration of the
would be void if the strict public policy governing
goods;
common carriers is applied. Such policy has no
force where the public at large is not involved, as
(3) That the common carrier need not observe in this case of a ship totally chartered for the
any diligence in the custody of the goods; used of a single party. 19(Emphasis supplied.)

(4) That the common carrier shall exercise a Indeed, where the reason for the rule ceases, the rule itself does not
degree of diligence less than that of a good apply. The general public enters into a contract of transportation with
father of a family, or of a man of ordinary common carriers without a hand or a voice in the preparation thereof.
prudence in the vigilance over the movables The riding public merely adheres to the contract; even if the public
transported; wants to, it cannot submit its own stipulations for the approval of the
common carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted in tickets,
(5) That the common carrier shall not be
invoices or other documents over which the riding public has no
responsible for the acts or omissions of his or its understanding or, worse, no choice. Compared to the general public,
employees; a charterer in a contract of private carriage is not similarly situated. It
can — and in fact it usually does — enter into a free and voluntary
(6) That the common carrier's liability for acts agreement. In practice, the parties in a contract of private carriage
committed by thieves, or of robbers who do not can stipulate the carrier's obligations and liabilities over the shipment
act with grave or irresistible threat, violence or which, in turn, determine the price or consideration of the charter.
force, is dispensed with or diminished; Thus, a charterer, in exchange for convenience and economy, may
opt to set aside the protection of the law on common carriers. When
the charterer decides to exercise this option, he takes a normal
(7) That the common carrier is not responsible business risk.
for the loss, destruction, or deterioration of
goods on account of the defective condition of
the car, vehicle, ship, airplane or other Petitioner contends that the rule in Home Insurance is not applicable
equipment used in the contract of carriage. to the present case because it "covers only a stipulation exempting a
private carrier from liability for the negligence of his agent, but it does
not apply to a stipulation exempting a private carrier like private
Petitioner Valenzuela adds that the stipulation is void for being respondent from the negligence of his employee or servant which is
contrary to Articles 586 and 587 of the Code of Commerce 14 and the situation in this case." 20 This contention of petitioner is bereft of
Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and merit, for it raises a distinction without any substantive difference.
paragraph 1, Article 1409 of the Civil Code, 15 petitioner further The case Home Insurance specifically dealt with "the liability of the
contends that said stipulation "gives no duty or obligation to the shipowner for acts or negligence of its captain and crew" 21 and a
private respondent to observe the diligence of a good father of a charter party stipulation which "exempts the owner of the vessel from
family in the custody and transportation of the cargo." any loss or damage or delay arising from any other source, even
from the neglect or fault of the captain or crew or some other person
The Court is not persuaded. As adverted to earlier, it is undisputed employed by the owner on
that private respondent had acted as a private carrier in transporting board, for whose acts the owner would ordinarily be liable except for
petitioner's lauan logs. Thus, Article 1745 and other Civil Code said paragraph." 22 Undoubtedly, Home Insurance is applicable to the
provisions on common carriers which were cited by petitioner may case at bar.
not be applied unless expressly stipulated by the parties in their
charter party. 16 The naked assertion of petitioner that the American rule enunciated
in Home Insurance is not the rule in the Philippines 23 deserves scant
In a contract of private carriage, the parties may validly stipulate that consideration. The Court there categorically held that said rule was
responsibility for the cargo rests solely on the charterer, exempting "reasonable" and proceeded to apply it in the resolution of that case.
the shipowner from liability for loss of or damage to the cargo caused Petitioner miserably failed to show such circumstances or arguments
even by the negligence of the ship captain. Pursuant to Article which would necessitate a departure from a well-settled rule.
1306 17 of the Civil Code, such stipulation is valid because it is freely Consequently, our ruling in said case remains a binding judicial
entered into by the parties and the same is not contrary to law, precedent based on the doctrine of stare decisis and Article 8 of the
morals, good customs, public order, or public policy. Indeed, their Civil Code which provides that "(j)udicial decisions applying or
contract of private carriage is not even a contract of adhesion. We interpreting the laws or the Constitution shall form part of the legal
stress that in a contract of private carriage, the parties may freely system of the Philippines."
stipulate their duties and obligations which perforce would be binding
on them. Unlike in a contract involving a common carrier, private In fine, the respondent appellate court aptly stated that "[in the case
carriage does not involve the general public. Hence, the stringent of] a private carrier, a stipulation exempting the owner from liability
provisions of the Civil Code on common carriers protecting the even for the negligence of its agents is valid." 24
general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public
policy embodied therein is not contravened by stipulations in a Other Arguments
charter party that lessen or remove the protection given by law in
contracts involving common carriers.
On the basis of the foregoing alone, the present petition may already
be denied; the Court, however, will discuss the other arguments of
The issue posed in this case and the arguments raised by petitioner petitioner for the benefit and satisfaction of all concerned.
are not novel; they were resolved long ago by this Court in Home
Insurance Co. vs. American Steamship Agencies, Inc. 18 In that case,
Articles 586 and 587, Code of Commerce
the trial court similarly nullified a stipulation identical to that involved
in the present case for being contrary to public policy based on
Article 1744 of the Civil Code and Article 587 of the Code of Petitioner Valenzuela insists that the charter party stipulation is
Commerce. Consequently, the trial court held the shipowner liable for contrary to Articles 586 and 587 of the Code of Commerce which
damages resulting for the partial loss of the cargo. This Court confer on petitioner the right to recover damages from the shipowner
reversed the trial court and laid down, through Mr. Justice Jose P. and ship agent for the acts or conduct of the captain. 25 We are not
Bengzon, the following well-settled observation and doctrine: persuaded. Whatever rights petitioner may have under the
aforementioned statutory provisions were waived when it entered into
the charter party.
The provisions of our Civil Code on common
carriers were taken from Anglo-American law.
Under American jurisprudence, a common Article 6 of the Civil Code provides that "(r)ights may be waived,
carrier undertaking to carry a special cargo or unless the waiver is contrary to law, public order, public policy,
chartered to a special person only, becomes a morals, or good customs, or prejudicial to a person with a right
private carrier. As a private carrier, a stipulation recognized by law." As a general rule, patrimonial rights may be
exempting the owner from liability for the waived as opposed to rights to personality and family rights which
may not be made the subject of waiver. 26 Being patently and vs. Yangco Steamship Co. 39 in support of its contention that the
undoubtedly patrimonial, petitioner's right conferred under said shipowner be held liable for damages. 40 These however are not on
articles may be waived. This, the petitioner did by acceding to the all fours with the present case because they do not involve a similar
contractual stipulation that it is solely responsible or any damage to factual milieu or an identical stipulation in the charter party expressly
the cargo, thereby exempting the private carrier from any exempting the shipowner form responsibility for any damage to the
responsibility for loss or damage thereto. Furthermore, as discussed cargo.
above, the contract of private carriage binds petitioner and private
respondent alone; it is not imbued with public policy considerations
Effect of the South Sea Resolution
for the general public or third persons are not affected thereby.

In its memorandum, Seven Brothers argues that petitioner has no

Articles 1170 and 1173, Civil Code
cause of action against it because this Court has earlier affirmed the
liability of South Sea for the loss suffered by petitioner. Private
Petitioner likewise argues that the stipulation subject of this respondent submits that petitioner is not legally entitled to collect
controversy is void for being contrary to Articles 1170 and 1173 of twice for a single loss. 41 In view of the above disquisition upholding
the Civil Code 27 which read: the validity of the questioned charter party stipulation and holding
that petitioner may not recover from private respondent, the present
issue is moot and academic. It suffices to state that the Resolution of
Art. 1170. Those who in the performance of their
this Court dated June 2, 1995 42 affirming the liability of South Sea
obligations are guilty of fraud, negligence, or
does not, by itself, necessarily preclude the petitioner from
delay, and those who in any manner contravene
proceeding against private respondent. An aggrieved party may still
the tenor thereof, are liable for damages
recover the deficiency for the person causing the loss in the event
the amount paid by the insurance company does not fully cover the
Art. 1173. The fault or negligence of the obligor loss. Article 2207 of the Civil Code provides:
consists in the omission of that diligence which is
required by the nature of the obligation and
Art. 2207. If the plaintiff's property has been
corresponds with the circumstances of the
insured, and he has received indemnity for the
persons, of the time and of the place. When
insurance company for the injury or loss arising
negligence shows bad faith, the provisions of
out of the wrong or breach of contract
articles 1171 and 2201, shall apply.
complained of, the insurance company shall be
subrogated to the rights of the insured against
If the law does not state the diligence which is to the wrongdoer or the person who has violated
be observed in the performance, that which is the contract. If the amount paid by the insurance
expected of a good father of a family shall be company does not fully cover the injury or loss,
required. the aggrieved party shall be entitled to recover
the deficiency form the person causing the loss
or injury.
The Court notes that the foregoing articles are applicable only to the
obligor or the one with an obligation to perform. In the instant case,
Private Respondent Seven Brothers is not an obligor in respect of the WHEREFORE, premises considered, the petition is hereby DENIED
cargo, for this obligation to bear the loss was shifted to petitioner by for its utter failure to show any reversible error on the part of
virtue of the charter party. This shifting of responsibility, as earlier Respondent Court. The assailed Decision is AFFIRMED.
observed, is not void. The provisions cited by petitioner are,
therefore, inapplicable to the present case.
SO ORDERED.

Moreover, the factual milieu of this case does not justify the
application of the second paragraph of Article 1173 of the Civil Code
which prescribes the standard of diligence to be observed in the
event the law or the contract is silent. In the instant case, Article 362 G.R. No. 70876 July 19, 1990
of the Code of Commerce 28 provides the standard of ordinary
diligence for the carriage of goods by a carrier. The standard of
diligence under this statutory provision may, however, be modified in MA. LUISA BENEDICTO, petitioner,
a contract of private carriage as the petitioner and private respondent vs.
had done in their charter party. HON. INTERMEDIATE APPELLATE COURT and GREENHILLS
WOOD INDUSTRIES COMPANY, [Link].

Cases Cited by Petitioner Inapplicable

Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for
petitioner.
Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in
turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and
argues that the public policy considerations stated there vis-a- Abelardo V. Viray for private respondent.
vis contractual stipulations limiting the carrier's liability be applied
"with equal force" to this case. 31 It also cites Manila Railroad
Co. vs. Compañia Transatlantica 32 and contends that stipulations
exempting a party from liability for damages due to negligence
"should not be countenanced" and should be "strictly construed" FELICIANO, J.:
against the party claiming its benefit. 33 We disagree.
This Petition for Review asks us to set aside the Decision of the then
The cases of Shewaram and Ysmael both involve a common carrier; Intermediate Appellate Court dated 30 January 1985 in A.C.-G.R. CV
thus, they necessarily justify the application of such policy No. 01454, which affirmed in toto the decision of the Regional Trial
considerations and concomitantly stricter rules. As already discussed Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the
above, the public policy considerations behind the rigorous treatment RTC held petitioner Ma. Luisa Benedicto liable to pay private
of common carriers are absent in the case of private carriers. Hence, respondent Greenhills Wood Industries Company, Inc. ("Greenhills")
the stringent laws applicable to common carriers are not applied to the amounts of P16,016.00 and P2,000.00 representing the cost of
private carries. The case of Manila Railroad is also inapplicable Greenhills' lost sawn lumber and attorney's fees, respectively.
because the action for damages there does not involve a contract for
transportation. Furthermore, the defendant therein made a "promise Private respondent Greenhills, a lumber manufacturing firm with
to use due care in the lifting operations" and, consequently, it was business address at Dagupan City, operates sawmill in Maddela,
"bound by its undertaking"'; besides, the exemption was intended to Quirino.
cover accidents due to hidden defects in the apparatus or other
unforseeable occurrences" not caused by its "personal negligence."
This promise was thus constructed to make sense together with the Sometime in May 1980, private respondent bound itself to sell and
stipulation against liability for damages. 34 In the present case, we deliver to Blue Star Mahogany, Inc., ("Blue Star") a company with
stress that the private respondent made no such promise. The business operations in Valenzuela, Bulacan 100,000 board feet of
agreement of the parties to exempt the shipowner from responsibility sawn lumber with the understanding that an initial delivery would be
for any damage to the cargo and place responsibility over the same made on 15 May 1980. 1 To effect its first delivery, private
to petitioner is the lone stipulation considered now by this Court. respondent's resident manager in Maddela, Dominador Cruz,
contracted Virgilio Licuden, the driver of a cargo truck bearing Plate
No. 225 GA TH to transport its sawn lumber to the consignee Blue
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Star in Valenzuela, Bulacan. This cargo truck was registered in the
Costelo, 35 Walter A. Smith & Co. [Link] Gibson Lumber name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven
Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta
Development Co. vs. Steamship "Pompey" 38 and Limpangco Sons
Trucking, a business enterprise engaged in hauling freight, with main falsely representing himself to be an agent of the carrier prevents
office in B.F. Homes, Parañaque. liability from attaching to the registered owner.

On 15 May 1980, Cruz in the presence and with the consent of driver The Court considers that petitioner has failed to show that appellate
Licuden, supervised the loading of 7,690 board feet of sawn lumber court committed reversible error in affirming the trial court's holding
with invoice value of P16,918.00 aboard the cargo truck. Before the that petitioner was liable for the cost of the sawn lumber plus
cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to damages.
Licuden Charge Invoices Nos. 3259 and 3260 both of which were
initialed by the latter at the bottom left corner. 2 The first invoice was
There is no dispute that petitioner Benedicto has been holding
for the amount of P11,822.80 representing the value of 5,374 board
herself out to the public as engaged in the business of hauling or
feet of sawn lumber, while the other set out the amount of P5,095.20
transporting goods for hire or compensation. Petitioner Benedicto is,
as the value of 2,316 board feet. Cruz instructed Licuden to give the
in brief, a common carrier.
original copies of the two (2) invoices to the consignee upon arrival in
Valenzuela, Bulacan 3and to retain the duplicate copies in order that
he could afterwards claim the freightage from private respondent's The prevailing doctrine on common carriers makes the registered
Manila office. 4 owner liable for consequences flowing from the operations of the
carrier, even though the specific vehicle involved may already have
been transferred to another person. This doctrine rests upon the
On 16 May 1980, the Manager of Blue Star called up by long
principle that in dealing with vehicles registered under the Public
distance telephone Greenhills' president, Henry Lee Chuy, informing
Service Law, the public has the right to assume that the registered
him that the sawn lumber on board the subject cargo truck had not
owner is the actual or lawful owner thereof It would be very difficult
yet arrived in Valenzuela, Bulacan. The latter in turn informed
and often impossible as a practical matter, for members of the
Greenhills' resident manager in its Maddela saw-mill of what had
general public to enforce the rights of action that they may have for
happened. In a letter 5 dated 18 May 1980, Blue Star's administrative
injuries inflicted by the vehicles being negligently operated if they
and personnel manager, Manuel R. Bautista, formally informed
should be required to prove who the actual owner is. 11 The
Greenhills' president and general manager that Blue Star still had not
registered owner is not allowed to deny liability by proving the identity
received the sawn lumber which was supposed to arrive on 15 May
of the alleged transferee. Thus, contrary to petitioner's claim, private
1980 and because of this delay, "they were constrained to look for
respondent is not required to go beyond the vehicle's certificate of
other suppliers."
registration to ascertain the owner of the carrier. In this regard, the
letter presented by petitioner allegedly written by Benjamin Tee
On 25 June 1980, after confirming the above with Blue Star and after admitting that Licuden was his driver, had no evidentiary value not
trying vainly to persuade it to continue with their contract, private only because Benjamin Tee was not presented in court to testify on
respondent Greenhill's filed Criminal Case No. 668 against driver this matter but also because of the aforementioned doctrine. To
Licuden for estafa. Greenhills also filed against petitioner Benedicto permit the ostensible or registered owner to prove who the actual
Civil Case No. D-5206 for recovery of the value of the lost sawn owner is, would be to set at naught the purpose or public policy
lumber plus damages before the RTC of Dagupan City. which infuses that doctrine.

In her answer, 6 petitioner Benedicto denied liability alleging that she In fact, private respondent had no reason at all to doubt the authority
was a complete stranger to the contract of carriage, the subject truck of Licuden to enter into a contract of carriage on behalf of the
having been earlier sold by her to Benjamin Tee, on 28 February registered owner. It appears that, earlier, in the first week of May
1980 as evidenced by a deed of sale. 7She claimed that the truck had 1980, private respondent Greenhills had contracted Licuden who was
remained registered in her name notwithstanding its earlier sale to then driving the same cargo truck to transport and carry a load of
Tee because the latter had paid her only P50,000.00 out of the total sawn lumber from the Maddela sawmill to Dagupan City. 12 No one
agreed price of P68,000.00 However, she averred that Tee had been came forward to question that contract or the authority of Licuden to
operating the said truck in Central Luzon from that date (28 February represent the owner of the carrier truck.
1980) onwards, and that, therefore, Licuden was Tee's employee and
not hers.
Moreover, assuming the truth of her story, petitioner Benedicto
retained registered ownership of the freight truck for her own benefit
On 20 June 1983, based on the finding that petitioner Benedicto was and convenience, that is, to secure the payment of the balance of the
still the registered owner of the subject truck, and holding that selling price of the truck. She may have been unaware of the legal
Licuden was her employee, the trial court adjudged as follows: security device of chattel mortgage; or she, or her buyer, may have
been unwilling to absorb the expenses of registering a chattel
mortgage over the truck. In either case, considerations both of public
WHEREFORE, in the light of the foregoing
policy and of equity require that she bear the consequences flowing
considerations, this Court hereby renders
from registered ownership of the subject vehicle.
judgment against defendant Maria Luisa
Benedicto, ordering her to pay the Greenhills
Wood Industries Co. Inc., thru its President and Petitioner Benedicto, however, insists that the said principle should
General Manager, the amount of P16,016 cost of apply only to cases involving negligence and resulting injury to or
the sawn lumber loaded on the cargo truck, with death of passengers, and not to cases involving merely carriage of
legal rate of interest from the filing of the goods. We believe otherwise.
complaint to pay attorney's fees in the amount of
P2,000.00; and to pay the costs of this suit.
A common carrier, both from the nature of its business and for
insistent reasons of public policy, is burdened by the law with the
SO ORDERED. 8 duty of exercising extraordinary diligence not only in ensuring the
safety of passengers but also in caring for goods transported by
it. 13 The loss or destruction or deterioration of goods turned over to
On 30 January 1985, upon appeal by petitioner, the Intermediate
the common carrier for conveyance to a designated destination,
Appellate Court affirmed 9 the decision of the trial court in toto. Like
raises instantly a presumption of fault or negligence on the part of the
the trial court, the appellate court held that since petitioner was the
carrier, save only where such loss, destruction or damage arises
registered owner of the subject vehicle, Licuden the driver of the
from extreme circumstances such as a natural disaster or calamity or
truck, was her employee, and that accordingly petitioner should be
act of the public enemy in time of war, or from an act or omission of
responsible for the negligence of said driver and bear the loss of the
the shipper himself or from the character of the goods or their
sawn lumber plus damages. Petitioner moved for reconsideration,
packaging or container. 14
without success. 10

This presumption may be overcome only by proof of extraordinary

In the present Petition for Review, the sole issue raised is whether or
diligence on the part of the carrier. 15 Clearly, to permit a common
not under the facts and applicable law, the appellate court was
carrier to escape its responsibility for the passengers or goods
correct in finding that petitioner, being the registered owner of the
transported by it by proving a prior sale of the vehicle or means of
carrier, should be held liable for the value of the undelivered or lost
transportation to an alleged vendee would be to attenuate drastically
sawn lumber.
the carrier's duty of extraordinary diligence. It would also open wide
the door to collusion between the carrier and the supposed vendee
Petitioner urges that she could not be held answerable for the loss of and to shifting liability from the carrier to one without financial
the cargo, because the doctrine which makes the registered owner of capability to respond for the resulting damages. In other words, the
a common carrier vehicle answerable to the public for the negligence thrust of the public policy here involved is as sharp and real in the
of the driver despite the sale of the vehicle to another person, applies case of carriage of goods as it is in the transporting of human beings.
only to cases involving death of or injury to passengers. What applies Thus, to sustain petitioner Benedicto's contention, that is, to require
in the present case, according to petitioner, is the rule that a contract the shipper to go behind a certificate of registration of a public utility
of carriage requires proper delivery of the goods to and acceptance vehicle, would be utterly subversive of the purpose of the law and
by the carrier. Thus, petitioner contends that the delivery to a person doctrine.
Petitioner further insists that there was no perfected contract of The explanation of the presence of a sack of melons on the platform
carriage for the reason that there was no proof that her consent or where the plaintiff alighted is found in the fact that it was the
that of Tee had been obtained; no proof that the driver, Licuden was customary season for harvesting these melons and a large lot had
authorized to bind the registered owner; and no proof that the parties been brought to the station for the shipment to the market. They were
had agreed on the freightage to be paid. contained in numerous sacks which has been piled on the platform in
a row one upon another. The testimony shows that this row of sacks
was so placed of melons and the edge of platform; and it is clear that
Once more, we are not persuaded by petitioner's arguments which
the fall of the plaintiff was due to the fact that his foot alighted upon
appear to be a transparent attempt to evade statutory
one of these melons at the moment he stepped upon the platform.
responsibilities. Driver Licuden was entrusted with possession and
His statement that he failed to see these objects in the darkness is
control of the freight truck by the registered owner (and by the
readily to be credited.
alleged secret owner, for that matter).i•t•c-aüsl Driver Licuden, under
the circumstances, was clothed with at least implied authority to
contract to carry goods and to accept delivery of such goods for The plaintiff was drawn from under the car in an unconscious
carriage to a specified destination. That the freight to be paid may- condition, and it appeared that the injuries which he had received
not have been fixed before loading and carriage, did not prevent the were very serious. He was therefore brought at once to a certain
contract of carriage from arising, since the freight was at least hospital in the city of Manila where an examination was made and his
determinable if not fixed by the tariff schedules in petitioner's main arm was amputated. The result of this operation was unsatisfactory,
business office. Put in somewhat different terms, driver Licuden is in and the plaintiff was then carried to another hospital where a second
law regarded as the employee and agent of the petitioner, for whose operation was performed and the member was again amputated
acts petitioner must respond. A contract of carriage of goods was higher up near the shoulder. It appears in evidence that the plaintiff
shown; the sawn lumber was loaded on board the freight truck; loss expended the sum of P790.25 in the form of medical and surgical
or non-delivery of the lumber at Blue Star's premises in Valenzuela, fees and for other expenses in connection with the process of his
Bulacan was also proven; and petitioner has not proven either that curation.
she had exercised extraordinary diligence to prevent such loss or
non-delivery or that the loss or non-delivery was due to some
Upon August 31, 1915, he instituted this proceeding in the Court of
casualty or force majeure inconsistent with her liability. 16 Petitioner's
First Instance of the city of Manila to recover damages of the
liability to private respondent Greenhills was thus fixed and complete,
defendant company, founding his action upon the negligence of the
without prejudice to petitioner's right to proceed against her putative
servants and employees of the defendant in placing the sacks of
transferee Benjamin Tee and driver Licuden for reimbursement or
melons upon the platform and leaving them so placed as to be a
contribution. 17
menace to the security of passenger alighting from the company's
trains. At the hearing in the Court of First Instance, his Honor, the
WHEREFORE, the Petition for Review is DENIED for lack of merit trial judge, found the facts substantially as above stated, and drew
and the Decision of the former Intermediate Appellate Court dated 30 therefrom his conclusion to the effect that, although negligence was
January 1985 is hereby AFFIRMED. Costs against petitioner. attributable to the defendant by reason of the fact that the sacks of
melons were so placed as to obstruct passengers passing to and
from the cars, nevertheless, the plaintiff himself had failed to use due
SO ORDERED.
caution in alighting from the coach and was therefore precluded form
recovering. Judgment was accordingly entered in favor of the
defendant company, and the plaintiff appealed.

G.R. No. L-12191 October 14, 1918 It can not be doubted that the employees of the railroad company
were guilty of negligence in piling these sacks on the platform in the
manner above stated; that their presence caused the plaintiff to fall
JOSE CANGCO, plaintiff-appellant,
as he alighted from the train; and that they therefore constituted an
vs. effective legal cause of the injuries sustained by the plaintiff. It
MANILA RAILROAD CO., defendant-appellee.
necessarily follows that the defendant company is liable for the
damage thereby occasioned unless recovery is barred by the
Ramon Sotelo for appellant. plaintiff's own contributory negligence. In resolving this problem it is
Kincaid & Hartigan for appellee. necessary that each of these conceptions of liability, to-wit, the
primary responsibility of the defendant company and the contributory
negligence of the plaintiff should be separately examined.

It is important to note that the foundation of the legal liability of the

FISHER, J.: defendant is the contract of carriage, and that the obligation to
respond for the damage which plaintiff has suffered arises, if at all,
At the time of the occurrence which gave rise to this litigation the from the breach of that contract by reason of the failure of defendant
plaintiff, Jose Cangco, was in the employment of Manila Railroad to exercise due care in its performance. That is to say, its liability is
Company in the capacity of clerk, with a monthly wage of P25. He direct and immediate, differing essentially, in legal viewpoint from
lived in the pueblo of San Mateo, in the province of Rizal, which is that presumptive responsibility for the negligence of its servants,
located upon the line of the defendant railroad company; and in imposed by article 1903 of the Civil Code, which can be rebutted by
coming daily by train to the company's office in the city of Manila proof of the exercise of due care in their selection and supervision.
where he worked, he used a pass, supplied by the company, which Article 1903 of the Civil Code is not applicable to obligations arising
entitled him to ride upon the company's trains free of charge. Upon ex contractu, but only to extra-contractual obligations — or to use the
the occasion in question, January 20, 1915, the plaintiff arose from technical form of expression, that article relates only
his seat in the second class-car where he was riding and, making, his to culpa aquiliana and not to culpa contractual.
exit through the door, took his position upon the steps of the coach,
seizing the upright guardrail with his right hand for support. Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and
1104 of the Civil Code, clearly points out this distinction, which was
On the side of the train where passengers alight at the San Mateo also recognized by this Court in its decision in the case of
station there is a cement platform which begins to rise with a Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In
moderate gradient some distance away from the company's office commenting upon article 1093 Manresa clearly points out the
and extends along in front of said office for a distance sufficient to difference between "culpa, substantive and independent, which of
cover the length of several coaches. As the train slowed down itself constitutes the source of an obligation between persons not
another passenger, named Emilio Zuñiga, also an employee of the formerly connected by any legal tie" and culpa considered as an
railroad company, got off the same car, alighting safely at the point accident in the performance of an obligation already existing . . . ."
where the platform begins to rise from the level of the ground. When
the train had proceeded a little farther the plaintiff Jose Cangco In the Rakes case (supra) the decision of this court was made to rest
stepped off also, but one or both of his feet came in contact with a squarely upon the proposition that article 1903 of the Civil Code is
sack of watermelons with the result that his feet slipped from under not applicable to acts of negligence which constitute the breach of a
him and he fell violently on the platform. His body at once rolled from contract.
the platform and was drawn under the moving car, where his right
arm was badly crushed and lacerated. It appears that after the
plaintiff alighted from the train the car moved forward possibly six Upon this point the Court said:
meters before it came to a full stop.
The acts to which these articles [1902 and 1903 of the Civil
The accident occurred between 7 and 8 o'clock on a dark night, and Code] are applicable are understood to be those not
as the railroad station was lighted dimly by a single light located growing out of pre-existing duties of the parties to one
some distance away, objects on the platform where the accident another. But where relations already formed give rise to
occurred were difficult to discern especially to a person emerging duties, whether springing from contract or quasi-contract,
from a lighted car. then breaches of those duties are subject to article 1101,
 1103, and 1104 of the same code. (Rakes vs. Atlantic, Gulf On the other hand, the liability of masters and employers for the
and Pacific Co., 7 Phil. Rep., 359 at 365.) negligent acts or omissions of their servants or agents, when such
acts or omissions cause damages which amount to the breach of a
contact, is not based upon a mere presumption of the master's
This distinction is of the utmost importance. The liability, which, under
negligence in their selection or control, and proof of exercise of the
the Spanish law, is, in certain cases imposed upon employers with
utmost diligence and care in this regard does not relieve the master
respect to damages occasioned by the negligence of their employees
of his liability for the breach of his contract.
to persons to whom they are not bound by contract, is not based, as
in the English Common Law, upon the principle of respondeat
superior — if it were, the master would be liable in every case and Every legal obligation must of necessity be extra-contractual or
unconditionally — but upon the principle announced in article 1902 of contractual. Extra-contractual obligation has its source in the breach
the Civil Code, which imposes upon all persons who by their fault or or omission of those mutual duties which civilized society imposes
negligence, do injury to another, the obligation of making good the upon it members, or which arise from these relations, other than
damage caused. One who places a powerful automobile in the hands contractual, of certain members of society to others, generally
of a servant whom he knows to be ignorant of the method of embraced in the concept of status. The legal rights of each member
managing such a vehicle, is himself guilty of an act of negligence of society constitute the measure of the corresponding legal duties,
which makes him liable for all the consequences of his imprudence. mainly negative in character, which the existence of those rights
The obligation to make good the damage arises at the very instant imposes upon all other members of society. The breach of these
that the unskillful servant, while acting within the scope of his general duties whether due to willful intent or to mere inattention, if
employment causes the injury. The liability of the master is personal productive of injury, give rise to an obligation to indemnify the injured
and direct. But, if the master has not been guilty of any negligence party. The fundamental distinction between obligations of this
whatever in the selection and direction of the servant, he is not liable character and those which arise from contract, rests upon the fact
for the acts of the latter, whatever done within the scope of his that in cases of non-contractual obligation it is the wrongful or
employment or not, if the damage done by the servant does not negligent act or omission itself which creates the vinculum juris,
amount to a breach of the contract between the master and the whereas in contractual relations the vinculum exists independently of
person injured. the breach of the voluntary duty assumed by the parties when
entering into the contractual relation.
It is not accurate to say that proof of diligence and care in the
selection and control of the servant relieves the master from liability With respect to extra-contractual obligation arising from negligence,
for the latter's acts — on the contrary, that proof shows that the whether of act or omission, it is competent for the legislature to elect
responsibility has never existed. As Manresa says (vol. 8, p. 68) the — and our Legislature has so elected — whom such an obligation is
liability arising from extra-contractual culpa is always based upon a imposed is morally culpable, or, on the contrary, for reasons of public
voluntary act or omission which, without willful intent, but by mere policy, to extend that liability, without regard to the lack of moral
negligence or inattention, has caused damage to another. A master culpability, so as to include responsibility for the negligence of those
who exercises all possible care in the selection of his servant, taking person who acts or mission are imputable, by a legal fiction, to others
into consideration the qualifications they should possess for the who are in a position to exercise an absolute or limited control over
discharge of the duties which it is his purpose to confide to them, and them. The legislature which adopted our Civil Code has elected to
directs them with equal diligence, thereby performs his duty to third limit extra-contractual liability — with certain well-defined exceptions
persons to whom he is bound by no contractual ties, and he incurs — to cases in which moral culpability can be directly imputed to the
no liability whatever if, by reason of the negligence of his servants, persons to be charged. This moral responsibility may consist in
even within the scope of their employment, such third person suffer having failed to exercise due care in the selection and control of
damage. True it is that under article 1903 of the Civil Code the law one's agents or servants, or in the control of persons who, by reason
creates a presumption that he has been negligent in the selection or of their status, occupy a position of dependency with respect to the
direction of his servant, but the presumption is rebuttable and yield to person made liable for their conduct.
proof of due care and diligence in this respect.
The position of a natural or juridical person who has undertaken by
The supreme court of Porto Rico, in interpreting identical provisions, contract to render service to another, is wholly different from that to
as found in the Porto Rico Code, has held that these articles are which article 1903 relates. When the sources of the obligation upon
applicable to cases of extra-contractual culpa exclusively. which plaintiff's cause of action depends is a negligent act or
(Carmona vs. Cuesta, 20 Porto Rico Reports, 215.) omission, the burden of proof rests upon plaintiff to prove the
negligence — if he does not his action fails. But when the facts
averred show a contractual undertaking by defendant for the benefit
This distinction was again made patent by this Court in its decision in
of plaintiff, and it is alleged that plaintiff has failed or refused to
the case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which
perform the contract, it is not necessary for plaintiff to specify in his
was an action brought upon the theory of the extra-contractual
pleadings whether the breach of the contract is due to willful fault or
liability of the defendant to respond for the damage caused by the
to negligence on the part of the defendant, or of his servants or
carelessness of his employee while acting within the scope of his
agents. Proof of the contract and of its nonperformance is
employment. The Court, after citing the last paragraph of article 1903
sufficientprima facie to warrant a recovery.
of the Civil Code, said:

As a general rule . . . it is logical that in case of extra-

From this article two things are apparent: (1) That when an
contractual culpa, a suing creditor should assume the
injury is caused by the negligence of a servant or
burden of proof of its existence, as the only fact upon
employee there instantly arises a presumption of law that
which his action is based; while on the contrary, in a case
there was negligence on the part of the master or employer
of negligence which presupposes the existence of a
either in selection of the servant or employee, or in
contractual obligation, if the creditor shows that it exists
supervision over him after the selection, or both; and (2)
and that it has been broken, it is not necessary for him to
that that presumption is juris tantum and not juris et de
prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p.
jure, and consequently, may be rebutted. It follows
76]).
necessarily that if the employer shows to the satisfaction of
the court that in selection and supervision he has
exercised the care and diligence of a good father of a As it is not necessary for the plaintiff in an action for the breach of a
family, the presumption is overcome and he is relieved contract to show that the breach was due to the negligent conduct of
from liability. defendant or of his servants, even though such be in fact the actual
cause of the breach, it is obvious that proof on the part of defendant
that the negligence or omission of his servants or agents caused the
This theory bases the responsibility of the master
breach of the contract would not constitute a defense to the action. If
ultimately on his own negligence and not on that of his
the negligence of servants or agents could be invoked as a means of
servant. This is the notable peculiarity of the Spanish law
discharging the liability arising from contract, the anomalous result
of negligence. It is, of course, in striking contrast to the
would be that person acting through the medium of agents or
American doctrine that, in relations with strangers, the
servants in the performance of their contracts, would be in a better
negligence of the servant in conclusively the negligence of
position than those acting in person. If one delivers a valuable watch
the master.
to watchmaker who contract to repair it, and the bailee, by a personal
negligent act causes its destruction, he is unquestionably liable.
The opinion there expressed by this Court, to the effect that in case Would it be logical to free him from his liability for the breach of his
of extra-contractual culpa based upon negligence, it is necessary that contract, which involves the duty to exercise due care in the
there shall have been some fault attributable to the defendant preservation of the watch, if he shows that it was his servant whose
personally, and that the last paragraph of article 1903 merely negligence caused the injury? If such a theory could be accepted,
establishes a rebuttable presumption, is in complete accord with the juridical persons would enjoy practically complete immunity from
authoritative opinion of Manresa, who says (vol. 12, p. 611) that the damages arising from the breach of their contracts if caused by
liability created by article 1903 is imposed by reason of the breach of negligent acts as such juridical persons can of necessity only act
the duties inherent in the special relations of authority or superiority through agents or servants, and it would no doubt be true in most
existing between the person called upon to repair the damage and instances that reasonable care had been taken in selection and
the one who, by his act or omission, was the cause of it. direction of such servants. If one delivers securities to a banking
corporation as collateral, and they are lost by reason of the out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in
negligence of some clerk employed by the bank, would it be just and the course of the performance of a contractual undertaking or its
reasonable to permit the bank to relieve itself of liability for the itself the source of an extra-contractual undertaking obligation, its
breach of its contract to return the collateral upon the payment of the essential characteristics are identical. There is always an act or
debt by proving that due care had been exercised in the selection omission productive of damage due to carelessness or inattention on
and direction of the clerk? the part of the defendant. Consequently, when the court holds that a
defendant is liable in damages for having failed to exercise due care,
either directly, or in failing to exercise proper care in the selection
This distinction between culpa aquiliana, as the source of an
and direction of his servants, the practical result is identical in either
obligation, and culpa contractual as a mere incident to the
case. Therefore, it follows that it is not to be inferred, because the
performance of a contract has frequently been recognized by the
court held in the Yamada case that defendant was liable for the
supreme court of Spain. (Sentencias of June 27, 1894; November
damages negligently caused by its servants to a person to whom it
20, 1896; and December 13, 1896.) In the decisions of November 20,
was bound by contract, and made reference to the fact that the
1896, it appeared that plaintiff's action arose ex contractu, but that
defendant was negligent in the selection and control of its servants,
defendant sought to avail himself of the provisions of article 1902 of
that in such a case the court would have held that it would have been
the Civil Code as a defense. The Spanish Supreme Court rejected
a good defense to the action, if presented squarely upon the theory
defendant's contention, saying:
of the breach of the contract, for defendant to have proved that it did
in fact exercise care in the selection and control of the servant.
These are not cases of injury caused, without any pre-
existing obligation, by fault or negligence, such as those to
The true explanation of such cases is to be found by directing the
which article 1902 of the Civil Code relates, but of
attention to the relative spheres of contractual and extra-contractual
damages caused by the defendant's failure to carry out the
obligations. The field of non- contractual obligation is much more
undertakings imposed by the contracts . . . .
broader than that of contractual obligations, comprising, as it does,
the whole extent of juridical human relations. These two fields,
A brief review of the earlier decision of this court involving the liability figuratively speaking, concentric; that is to say, the mere fact that a
of employers for damage done by the negligent acts of their servants person is bound to another by contract does not relieve him from
will show that in no case has the court ever decided that the extra-contractual liability to such person. When such a contractual
negligence of the defendant's servants has been held to constitute a relation exists the obligor may break the contract under such
defense to an action for damages for breach of contract. conditions that the same act which constitutes the source of an extra-
contractual obligation had no contract existed between the parties.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held
that the owner of a carriage was not liable for the damages caused The contract of defendant to transport plaintiff carried with it, by
by the negligence of his driver. In that case the court commented on implication, the duty to carry him in safety and to provide safe means
the fact that no evidence had been adduced in the trial court that the of entering and leaving its trains (civil code, article 1258). That duty,
defendant had been negligent in the employment of the driver, or that being contractual, was direct and immediate, and its non-
he had any knowledge of his lack of skill or carefulness. performance could not be excused by proof that the fault was morally
imputable to defendant's servants.
In the case of Baer Senior & Co's Successors vs. Compania Maritima
(6 Phil. Rep., 215), the plaintiff sued the defendant for damages The railroad company's defense involves the assumption that even
caused by the loss of a barge belonging to plaintiff which was granting that the negligent conduct of its servants in placing an
allowed to get adrift by the negligence of defendant's servants in the obstruction upon the platform was a breach of its contractual
course of the performance of a contract of towage. The court held, obligation to maintain safe means of approaching and leaving its
citing Manresa (vol. 8, pp. 29, 69) that if the "obligation of the trains, the direct and proximate cause of the injury suffered by
defendant grew out of a contract made between it and the plaintiff . . . plaintiff was his own contributory negligence in failing to wait until the
we do not think that the provisions of articles 1902 and 1903 are train had come to a complete stop before alighting. Under the
applicable to the case." doctrine of comparative negligence announced in the Rakes case
(supra), if the accident was caused by plaintiff's own negligence, no
liability is imposed upon defendant's negligence and plaintiff's
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff
negligence merely contributed to his injury, the damages should be
sued the defendant to recover damages for the personal injuries apportioned. It is, therefore, important to ascertain if defendant was
caused by the negligence of defendant's chauffeur while driving in fact guilty of negligence.
defendant's automobile in which defendant was riding at the time.
The court found that the damages were caused by the negligence of
the driver of the automobile, but held that the master was not liable, It may be admitted that had plaintiff waited until the train had come to
although he was present at the time, saying: a full stop before alighting, the particular injury suffered by him could
not have occurred. Defendant contends, and cites many authorities
in support of the contention, that it is negligence per se for a
. . . unless the negligent acts of the driver are continued for passenger to alight from a moving train. We are not disposed to
a length of time as to give the owner a reasonable
subscribe to this doctrine in its absolute form. We are of the opinion
opportunity to observe them and to direct the driver to that this proposition is too badly stated and is at variance with the
desist therefrom. . . . The act complained of must be experience of every-day life. In this particular instance, that the train
continued in the presence of the owner for such length of
was barely moving when plaintiff alighted is shown conclusively by
time that the owner by his acquiescence, makes the the fact that it came to stop within six meters from the place where he
driver's acts his own. stepped from it. Thousands of person alight from trains under these
conditions every day of the year, and sustain no injury where the
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage company has kept its platform free from dangerous obstructions.
& Taxicab Co. (33 Phil. Rep., 8), it is true that the court rested its There is no reason to believe that plaintiff would have suffered any
conclusion as to the liability of the defendant upon article 1903, injury whatever in alighting as he did had it not been for defendant's
although the facts disclosed that the injury complaint of by plaintiff negligent failure to perform its duty to provide a safe alighting place.
constituted a breach of the duty to him arising out of the contract of
transportation. The express ground of the decision in this case was
We are of the opinion that the correct doctrine relating to this subject
that article 1903, in dealing with the liability of a master for the is that expressed in Thompson's work on Negligence (vol. 3, sec.
negligent acts of his servants "makes the distinction between private 3010) as follows:
individuals and public enterprise;" that as to the latter the law creates
a rebuttable presumption of negligence in the selection or direction of
servants; and that in the particular case the presumption of The test by which to determine whether the passenger has
negligence had not been overcome. been guilty of negligence in attempting to alight from a
moving railway train, is that of ordinary or reasonable care.
It is to be considered whether an ordinarily prudent person,
It is evident, therefore that in its decision Yamada case, the court of the age, sex and condition of the passenger, would have
treated plaintiff's action as though founded in tort rather than as
acted as the passenger acted under the circumstances
based upon the breach of the contract of carriage, and an disclosed by the evidence. This care has been defined to
examination of the pleadings and of the briefs shows that the be, not the care which may or should be used by the
questions of law were in fact discussed upon this theory. Viewed
prudent man generally, but the care which a man of
from the standpoint of the defendant the practical result must have ordinary prudence would use under similar circumstances,
been the same in any event. The proof disclosed beyond doubt that to avoid injury." (Thompson, Commentaries on Negligence,
the defendant's servant was grossly negligent and that his vol. 3, sec. 3010.)
negligence was the proximate cause of plaintiff's injury. It also
affirmatively appeared that defendant had been guilty of negligence
in its failure to exercise proper discretion in the direction of the Or, it we prefer to adopt the mode of exposition used by this court in
servant. Defendant was, therefore, liable for the injury suffered by Picart vs. Smith (37 Phil. rep., 809), we may say that the test is this;
plaintiff, whether the breach of the duty were to be regarded as Was there anything in the circumstances surrounding the plaintiff at
constituting culpa aquiliana or culpa contractual. As Manresa points the time he alighted from the train which would have admonished a
person of average prudence that to get off the train under the 29110, ordering LOADSTAR to pay private respondent Manila
conditions then existing was dangerous? If so, the plaintiff should Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal
have desisted from alighting; and his failure so to desist was interest from the filing of the compliant until fully paid, P8,000 as
contributory negligence.1awph![Link] attorney's fees, and the costs of the suit; and (b) its resolution of 19
November 1997, 3 denying LOADSTAR's motion for reconsideration
of said decision.
As the case now before us presents itself, the only fact from which a
conclusion can be drawn to the effect that plaintiff was guilty of
contributory negligence is that he stepped off the car without being The facts are undisputed.1âwphi1.nêt
able to discern clearly the condition of the platform and while the train
was yet slowly moving. In considering the situation thus presented, it
On 19 November 1984, LOADSTAR received on board its M/V
should not be overlooked that the plaintiff was, as we find, ignorant of
"Cherokee" (hereafter, the vessel) the following goods for shipment:
the fact that the obstruction which was caused by the sacks of
melons piled on the platform existed; and as the defendant was
bound by reason of its duty as a public carrier to afford to its a) 705 bales of lawanit hardwood;
passengers facilities for safe egress from its trains, the plaintiff had a
right to assume, in the absence of some circumstance to warn him to
b) 27 boxes and crates of tilewood assemblies
the contrary, that the platform was clear. The place, as we have
already stated, was dark, or dimly lighted, and this also is proof of a and the others ;and
failure upon the part of the defendant in the performance of a duty
owing by it to the plaintiff; for if it were by any possibility concede that c) 49 bundles of mouldings R & W (3) Apitong
it had right to pile these sacks in the path of alighting passengers, the Bolidenized.
placing of them adequately so that their presence would be revealed.
The goods, amounting to P6,067,178, were insured for the same
As pertinent to the question of contributory negligence on the part of amount with MIC against various risks including "TOTAL LOSS BY
the plaintiff in this case the following circumstances are to be noted: TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was
The company's platform was constructed upon a level higher than insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI)
that of the roadbed and the surrounding ground. The distance from for P4 million. On 20 November 1984, on its way to Manila from the
the steps of the car to the spot where the alighting passenger would port of Nasipit, Agusan del Norte, the vessel, along with its cargo,
place his feet on the platform was thus reduced, thereby decreasing sank off Limasawa Island. As a result of the total loss of its shipment,
the risk incident to stepping off. The nature of the platform, the consignee made a claim with LOADSTAR which, however,
constructed as it was of cement material, also assured to the ignored the same. As the insurer, MIC paid P6,075,000 to the
passenger a stable and even surface on which to alight. insured in full settlement of its claim, and the latter executed a
Furthermore, the plaintiff was possessed of the vigor and agility of subrogation receipt therefor.
young manhood, and it was by no means so risky for him to get off
while the train was yet moving as the same act would have been in
an aged or feeble person. In determining the question of contributory On 4 February 1985, MIC filed a complaint against LOADSTAR and
negligence in performing such act — that is to say, whether the PGAI, alleging that the sinking of the vessel was due to the fault and
passenger acted prudently or recklessly — the age, sex, and negligence of LOADSTAR and its employees. It also prayed that
physical condition of the passenger are circumstances necessarily PGAI be ordered to pay the insurance proceeds from the loss the
affecting the safety of the passenger, and should be considered. vessel directly to MIC, said amount to be deducted from MIC's claim
Women, it has been observed, as a general rule are less capable from LOADSTAR.
than men of alighting with safety under such conditions, as the nature
of their wearing apparel obstructs the free movement of the limbs. In its answer, LOADSTAR denied any liability for the loss of the
Again, it may be noted that the place was perfectly familiar to the shipper's goods and claimed that sinking of its vessel was due
plaintiff as it was his daily custom to get on and of the train at this to force majeure. PGAI, on the other hand, averred that MIC had no
station. There could, therefore, be no uncertainty in his mind with cause of action against it, LOADSTAR being the party insured. In any
regard either to the length of the step which he was required to take event, PGAI was later dropped as a party defendant after it paid the
or the character of the platform where he was alighting. Our insurance proceeds to LOADSTAR.
conclusion is that the conduct of the plaintiff in undertaking to alight
while the train was yet slightly under way was not characterized by
imprudence and that therefore he was not guilty of contributory As stated at the outset, the court a quo rendered judgment in favor of
negligence. MIC, prompting LOADSTAR to elevate the matter to the court of
Appeals, which, however, agreed with the trial court and affirmed its
decision in toto.
The evidence shows that the plaintiff, at the time of the accident, was
earning P25 a month as a copyist clerk, and that the injuries he has
suffered have permanently disabled him from continuing that In dismissing LOADSTAR's appeal, the appellate court made the
employment. Defendant has not shown that any other gainful following observations:
occupation is open to plaintiff. His expectancy of life, according to the
standard mortality tables, is approximately thirty-three years. We are 1) LOADSTAR cannot be
of the opinion that a fair compensation for the damage suffered by considered a private carrier
him for his permanent disability is the sum of P2,500, and that he is on the sole ground that
also entitled to recover of defendant the additional sum of P790.25 there was a single shipper
for medical attention, hospital services, and other incidental on that fateful voyage. The
expenditures connected with the treatment of his injuries. court noted that the charter
of the vessel was limited to
The decision of lower court is reversed, and judgment is hereby the ship, but LOADSTAR
rendered plaintiff for the sum of P3,290.25, and for the costs of both retained control over its
instances. So ordered. crew. 4

2) As a common carrier, it is
the Code of Commerce, not
the Civil Code, which should
G.R. No. 131621 September 28, 1999 be applied in determining
the rights and liabilities of
LOADSTAR SHIPPING CO., INC., petitioner, the parties.
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO., 3) The vessel was not
INC., respondents. seaworthy because it was
undermanned on the day of
the voyage. If it had been
seaworthy, it could have
withstood the "natural and
DAVIDE, JR., C.J.: inevitable action of the sea"
on 20 November 1984,
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this when the condition of the
petition for review on certiorari under Rule 45 of the 1997 Rules of sea was moderate. The
vessel sank, not because
Civil Procedure, seeks to reverse and set aside the following: (a) the
30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV of force majeure, but
No. 36401, which affirmed the decision of 4 October 1991 2 of the because it was not
Regional Trial Court of Manila, Branch 16, in Civil Case No. 85- seaworthy. LOADSTAR'S
allegation that the sinking
 was probably due to the passengers as part of its regular business. Moreover, the bills of
"convergence of the winds," lading in this case made no mention of any charter party but only a
as stated by a PAGASA statement that the vessel was a "general cargo carrier." Neither was
expert, was not duly proven there any "special arrangement" between LOADSTAR and the
at the trial. The "limited shipper regarding the shipment of the cargo. The singular fact that
liability" rule, therefore, is the vessel was carrying a particular type of cargo for one shipper is
not applicable considering not sufficient to convert the vessel into a private carrier.
that, in this case, there was
an actual finding of
As regards the second error, LOADSTAR argues that as a private
negligence on the part of the
carrier, it cannot be presumed to have been negligent, and the
carrier. 5
burden of proving otherwise devolved upon MIC. 8

4) Between MIC and

LOADSTAR also maintains that the vessel was seaworthy. Before
LOADSTAR, the provisions
the fateful voyage on 19 November 1984, the vessel was allegedly
of the Bill of Lading do not
dry docked at Keppel Philippines Shipyard and was duly inspected
apply because said
by the maritime safety engineers of the Philippine Coast Guard, who
provisions bind only the
certified that the ship was fit to undertake a voyage. Its crew at the
shipper/consignee and the
time was experienced, licensed and unquestionably competent. With
carrier. When MIC paid the
all these precautions, there could be no other conclusion except that
shipper for the goods
LOADSTAR exercised the diligence of a good father of a family in
insured, it was subrogated
ensuring the vessel's seaworthiness.
to the latter's rights as
against the carrier,
LOADSTAR. 6 LOADSTAR further claims that it was not responsible for the loss of
the cargo, such loss being due to force majeure. It points out that
when the vessel left Nasipit, Agusan del Norte, on 19 November
5) There was a clear breach
1984, the weather was fine until the next day when the vessel sank
of the contract of carriage
due to strong waves. MCI's witness, Gracelia Tapel, fully established
when the shipper's goods
the existence of two typhoons, "WELFRING" and "YOLING," inside
never reached their
the Philippine area of responsibility. In fact, on 20 November 1984,
destination. LOADSTAR's
signal no. 1 was declared over Eastern Visayas, which includes
defense of "diligence of a
Limasawa Island. Tapel also testified that the convergence of winds
good father of a family" in
brought about by these two typhoons strengthened wind velocity in
the training and selection of
the area, naturally producing strong waves and winds, in turn,
its crew is unavailing
causing the vessel to list and eventually sink.
because this is not a proper
or complete defense
in culpa contractual. LOADSTAR goes on to argue that, being a private carrier, any
agreement limiting its liability, such as what transpired in this case, is
valid. Since the cargo was being shipped at "owner's risk,"
6) "Art. 361 (of the Code of
LOADSTAR was not liable for any loss or damage to the same.
Commerce) has been
Therefore, the Court of Appeals erred in holding that the provisions of
judicially construed to mean
the bills of lading apply only to the shipper and the carrier, and not to
that when goods are
the insurer of the goods, which conclusion runs counter to the
delivered on board a ship in
Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v.
good order and condition,
Macondray & Co., Inc., 9 and National Union Fire Insurance
and the shipowner delivers
Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
them to the shipper in bad
order and condition, it then
devolves upon the Finally, LOADSTAR avers that MIC's claim had already prescribed,
shipowner to both allege the case having been instituted beyond the period stated in the bills
and prove that the goods of lading for instituting the same — suits based upon claims arising
were damaged by reason of from shortage, damage, or non-delivery of shipment shall be
some fact which legally instituted within sixty days from the accrual of the right of action. The
exempts him from liability." vessel sank on 20 November 1984; yet, the case for recovery was
Transportation of the filed only on 4 February 1985.
merchandise at the risk and
venture of the shipper
means that the latter bears MIC, on the other hand, claims that LOADSTAR was liable,
notwithstanding that the loss of the cargo was due toforce majeure,
the risk of loss or
deterioration of his goods because the same concurred with LOADSTAR's fault or negligence.
arising from fortuitous
events, force majeure, or the Secondly, LOADSTAR did not raise the issue of prescription in the
inherent nature and defects court below; hence, the same must be deemed waived.
of the goods, but not those
caused by the presumed
negligence or fault of the Thirdly, the " limited liability " theory is not applicable in the case at
carrier, unless otherwise bar because LOADSTAR was at fault or negligent, and because it
proved. 7 failed to maintain a seaworthy vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is tantamount to
negligence.
The errors assigned by LOADSTAR boil down to a determination of
the following issues:
We find no merit in this petition.

(1) Is the M/V "Cherokee" a

private or a common Anent the first assigned error, we hold that LOADSTAR is a common
carrier? carrier. It is not necessary that the carrier be issued a certificate of
public convenience, and this public character is not altered by the
fact that the carriage of the goods in question was periodic,
(2) Did LOADSTAR observe occasional, episodic or unscheduled.
due and/or ordinary
diligence in these premises.
In support of its position, LOADSTAR relied on the 1968 case
of Home Insurance Co. v. American Steamship Agencies,
Regarding the first issue, LOADSTAR submits that the vessel was a Inc., 11 where this Court held that a common carrier transporting
private carrier because it was not issued certificate of public special cargo or chartering the vessel to a special person becomes a
convenience, it did not have a regular trip or schedule nor a fixed private carrier that is not subject to the provisions of the Civil Code.
route, and there was only "one shipper, one consignee for a special Any stipulation in the charter party absolving the owner from liability
cargo." for loss due to the negligence of its agent is void only if the strict
policy governing common carriers is upheld. Such policy has no force
In refutation, MIC argues that the issue as to the classification of the where the public at is not involved, as in the case of a ship totally
M/V "Cherokee" was not timely raised below; hence, it is barred by chartered for the use of a single party. LOADSTAR also
estoppel. While it is true that the vessel had on board only the cargo cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of
Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of
of wood products for delivery to one consignee, it was also carrying
which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case liabilities upon common carriers for the safety
at bar for the simple reason that the factual settings are different. The and protection of those who utilize their services
records do not disclose that the M/V "Cherokee," on the date in and the law cannot allow a common carrier to
question, undertook to carry a special cargo or was chartered to a render such duties and liabilities merely
special person only. There was no charter party. The bills of lading facultative by simply failing to obtain the
failed to show any special arrangement, but only a general provision necessary permits and authorizations.
to the effect that the M/V"Cherokee" was a "general cargo
carrier." 14 Further, the bare fact that the vessel was carrying a
Moving on to the second assigned error, we find that the M/V
particular type of cargo for one shipper, which appears to be purely
"Cherokee" was not seaworthy when it embarked on its voyage on 19
coincidental, is not reason enough to convert the vessel from a
November 1984. The vessel was not even sufficiently manned at the
common to a private carrier, especially where, as in this case, it was
time. "For a vessel to be seaworthy, it must be adequately equipped
shown that the vessel was also carrying passengers.
for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in
Under the facts and circumstances obtaining in this case, seaworthy condition its vessel involved in a contract of carriage is a
LOADSTAR fits the definition of a common carrier under Article 1732 clear breach of its duty prescribed in Article 1755 of the Civil
of the Civil Code. In the case of De Guzman v. Court of Code." 16
Appeals, 15 the Court juxtaposed the statutory definition of "common
carriers" with the peculiar circumstances of that case, viz.:
Neither do we agree with LOADSTAR's argument that the "limited
liability" theory should be applied in this case. The doctrine of limited
The Civil Code defines "common carriers" in the following terms: liability does not apply where there was negligence on the part of the
vessel owner or agent. 17 LOADSTAR was at fault or negligent in not
maintaining a seaworthy vessel and in having allowed its vessel to
Art. 1732. Common carriers
sail despite knowledge of an approaching typhoon. In any event, it
are persons, corporations,
did not sink because of any storm that may be deemed asforce
firms or associations
majeure, inasmuch as the wind condition in the performance of its
engaged in the business of
duties, LOADSTAR cannot hide behind the "limited liability" doctrine
carrying or transporting
to escape responsibility for the loss of the vessel and its cargo.
passengers or goods or
both, by land, water, or air
for compensation, offering LOADSTAR also claims that the Court of Appeals erred in holding it
their services to the public. liable for the loss of the goods, in utter disregard of this Court's
pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray &
Co., Inc., 18 andNational Union Fire Insurance v. Stolt-Nielsen Phils.,
The above article makes no distinction between
Inc. 19 It was ruled in these two cases that after paying the claim of
one whose principal business activity is the
the insured for damages under the insurance policy, the insurer is
carrying of persons or goods or both, and one
subrogated merely to the rights of the assured, that is, it can recover
who does such carrying only as ancillary activity
only the amount that may, in turn, be recovered by the latter. Since
(in local idiom, as "a sideline". Article 1732 also
the right of the assured in case of loss or damage to the goods is
carefully avoids making any distinction between
limited or restricted by the provisions in the bills of lading, a suit by
a person or enterprise offering transportation
the insurer as subrogee is necessarily subject to the same limitations
service on a regular or scheduled basis and one
and restrictions. We do not agree. In the first place, the cases relied
offering such service on an occasional, episodic
on by LOADSTAR involved a limitation on the carrier's liability to an
or unscheduled basis. Neither does Article 1732
amount fixed in the bill of lading which the parties may enter into,
distinguish between a carrier offering its services
provided that the same was freely and fairly agreed upon (Articles
to the "general public," i.e., the general
1749-1750). On the other hand, the stipulation in the case at bar
community or population, and one who offers
effectively reduces the common carrier's liability for the loss or
services or solicits business only from a
destruction of the goods to a degree less than extraordinary (Articles
narrow segment of the general population. We
1744 and 1745), that is, the carrier is not liable for any loss or
think that Article 1733 deliberately refrained from
damage to shipments made at "owner's risk." Such stipulation is
making such distinctions.
obviously null and void for being contrary to public policy." 20 It has
been said:
xxx xxx xxx
Three kinds of stipulations have often been
It appears to the Court that private respondent is made in a bill of lading. The first one exempting
properly characterized as a common carrier the carrier from any and all liability for loss or
even though he merely "back-hauled" goods for damage occasioned by its own negligence. The
other merchants from Manila to Pangasinan, second is one providing for an unqualified
although such backhauling was done on a limitation of such liability to an agreed valuation.
periodic or occasional rather than regular or And the third is one limiting the liability of the
scheduled manner, and eventhough private carrier to an agreed valuation unless the shipper
respondent's principal occupation was not the declares a higher value and pays a higher rate
carriage of goods for others. There is no dispute of. freight. According to an almost uniform weight
that private respondent charged his customers a of authority, the first and second kinds of
fee for hauling their goods; that fee frequently fell stipulations are invalid as being contrary to
below commercial freight rates is not relevant public policy, but the third is valid and
here. enforceable. 21

The Court of Appeals referred to the fact that Since the stipulation in question is null and void, it follows
private respondent held no certificate of public that when MIC paid the shipper, it was subrogated to all
convenience, and concluded he was not a the rights which the latter has against the common carrier,
common carrier. This is palpable error. A LOADSTAR.
certificate of public convenience is not a
requisite for the incurring of liability under the
Neither is there merit to the contention that the claim in this case was
Civil Code provisions governing common
barred by prescription. MIC's cause of action had not yet prescribed
carriers. That liability arises the moment a
at the time it was concerned. Inasmuch as neither the Civil Code nor
person or firm acts as a common carrier, without
the Code of Commerce states a specific prescriptive period on the
regard to whether or not such carrier has also
matter, the Carriage of Goods by Sea Act (COGSA) — which
complied with the requirements of the applicable
provides for a one-year period of limitation on claims for loss of, or
regulatory statute and implementing regulations
damage to, cargoes sustained during transit — may be applied
and has been granted a certificate of public
suppletorily to the case at bar. This one-year prescriptive period also
convenience or other franchise. To exempt
applies to the insurer of the goods. 22 In this case, the period for filing
private respondent from the liabilities of a
the action for recovery has not yet elapsed. Moreover, a stipulation
common carrier because he has not secured the
reducing the one-year period is null and void; 23 it must, accordingly,
necessary certificate of public convenience,
be struck down.
would be offensive to sound public policy; that
would be to reward private respondent precisely
for failing to comply with applicable statutory WHEREFORE, the instant petition is DENIED and the challenged
requirements The business of a common carrier decision of 30 January 1997 of the Court of Appeals in CA-G.R. CV
impinges directly and intimately upon the safety No. 36401 is AFFIRMED. Costs against petitioner.1âwphi1.nêt
and well being and property of those members of
the general community who happen to deal with
SO ORDERED.
such carrier. The law imposes duties and
G.R. No. L-69044 May 29, 1987 under Section 4(2) (b) of the Carriage of Goods by Sea Act
(COGSA); and that when the loss of fire is established, the burden of
proving negligence of the vessel is shifted to the cargo shipper.
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT On September 15, 1980, the Trial Court rendered judgment in favor
INSURANCE & SURETY CORPORATION,respondents. of NISSHIN and DOWA in the amounts of US $46,583.00 and US
$11,385.00, respectively, with legal interest, plus attorney's fees of
P5,000.00 and costs. On appeal by petitioner, the then Court of
No. 71478 May 29, 1987
Appeals on September 10, 1984, affirmed with modification the Trial
Court's judgment by decreasing the amount recoverable by DOWA to
EASTERN SHIPPING LINES, INC., petitioner, US $1,000.00 because of $500 per package limitation of liability
vs. under the COGSA.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA
FIRE & MARINE INSURANCE CO., LTD.,respondents.
Hence, this Petition for Review on certiorari by Petitioner Carrier.

Both Petitions were initially denied for lack of merit. G.R. No. 69044
on January 16, 1985 by the First Division, and G. R. No. 71478 on
MELENCIO-HERRERA, J.: September 25, 1985 by the Second Division. Upon Petitioner
Carrier's Motion for Reconsideration, however, G.R. No. 69044 was
given due course on March 25, 1985, and the parties were required
These two cases, both for the recovery of the value of cargo to submit their respective Memoranda, which they have done.
insurance, arose from the same incident, the sinking of the M/S
ASIATICA when it caught fire, resulting in the total loss of ship and
cargo. On the other hand, in G.R. No. 71478, Petitioner Carrier sought
reconsideration of the Resolution denying the Petition for Review and
moved for its consolidation with G.R. No. 69044, the lower-numbered
The basic facts are not in controversy:
case, which was then pending resolution with the First Division. The
same was granted; the Resolution of the Second Division of
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S September 25, 1985 was set aside and the Petition was given due
ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, course.
Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of calorized lance At the outset, we reject Petitioner Carrier's claim that it is not the
pipes in 28 packages valued at P256,039.00 consigned to Philippine operator of the M/S Asiatica but merely a charterer thereof. We note
Blooming Mills Co., Inc., and 7 cases of spare parts valued at that in G.R. No. 69044, Petitioner Carrier stated in its Petition:
P92,361.75, consigned to Central Textile Mills, Inc. Both sets of
goods were insured against marine risk for their stated value with
respondent Development Insurance and Surety Corporation. There are about 22 cases of the "ASIATICA"
pending in various courts where various plaintiffs
are represented by various counsel representing
In G.R. No. 71478, during the same period, the same vessel took on various consignees or insurance companies.
board 128 cartons of garment fabrics and accessories, in two (2) The common defendant in these cases is
containers, consigned to Mariveles Apparel Corporation, and two
petitioner herein, being the operator of said
cases of surveying instruments consigned to Aman Enterprises and vessel. ... 1
General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co., for US
$46,583.00, and the 2 cases by respondent Dowa Fire & Marine Petitioner Carrier should be held bound to said admission. As a
Insurance Co., Ltd., for US $11,385.00. general rule, the facts alleged in a party's pleading are deemed
admissions of that party and binding upon it. 2 And an admission in
one pleading in one action may be received in evidence against the
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, pleader or his successor-in-interest on the trial of another action to
resulting in the total loss of ship and cargo. The respective which he is a party, in favor of a party to the latter action. 3
respondent Insurers paid the corresponding marine insurance values
to the consignees concerned and were thus subrogated unto the
rights of the latter as the insured. The threshold issues in both cases are: (1) which law should govern
— the Civil Code provisions on Common carriers or the Carriage of
Goods by Sea Act? and (2) who has the burden of proof to show
G.R. NO. 69044 negligence of the carrier?

On May 11, 1978, respondent Development Insurance & Surety

On the Law Applicable
Corporation (Development Insurance, for short), having been
subrogated unto the rights of the two insured companies, filed suit
against petitioner Carrier for the recovery of the amounts it had paid The law of the country to which the goods are to be transported
to the insured before the then Court of First instance of Manila, governs the liability of the common carrier in case of their loss,
Branch XXX (Civil Case No. 6087). destruction or deterioration. 4 As the cargoes in question were
transported from Japan to the Philippines, the liability of Petitioner
Carrier is governed primarily by the Civil Code. 5 However, in all
Petitioner-Carrier denied liability mainly on the ground that the loss matters not regulated by said Code, the rights and obligations of
was due to an extraordinary fortuitous event, hence, it is not liable common carrier shall be governed by the Code of Commerce and by
under the law. special laws. 6 Thus, the Carriage of Goods by Sea Act, a special
law, is suppletory to the provisions of the Civil Code. 7
On August 31, 1979, the Trial Court rendered judgment in favor of
Development Insurance in the amounts of P256,039.00 and
On the Burden of Proof
P92,361.75, respectively, with legal interest, plus P35,000.00 as
attorney's fees and costs. Petitioner Carrier took an appeal to the
then Court of Appeals which, on August 14, 1984, affirmed. Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over goods, according to all
Petitioner Carrier is now before us on a Petition for Review on the circumstances of each case. 8 Common carriers are responsible
Certiorari.
for the loss, destruction, or deterioration of the goods unless the
same is due to any of the following causes only:
G.R. NO. 71478
(1) Flood, storm, earthquake, lightning or other
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. natural disaster or calamity;
NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd.
(DOWA, for brevity), as subrogees of the insured, filed suit against xxx xxx xxx 9
Petitioner Carrier for the recovery of the insured value of the cargo
lost with the then Court of First Instance of Manila, Branch 11 (Civil
Case No. 116151), imputing unseaworthiness of the ship and non- Petitioner Carrier claims that the loss of the vessel by fire exempts it
observance of extraordinary diligence by petitioner Carrier. from liability under the phrase "natural disaster or calamity. "
However, we are of the opinion that fire may not be considered a
natural disaster or calamity. This must be so as it arises almost
Petitioner Carrier denied liability on the principal grounds that the fire invariably from some act of man or by human means. 10 It does not
which caused the sinking of the ship is an exempting circumstance fall within the category of an act of God unless caused by
lightning 11 or by other natural disaster or calamity. 12 It may even before the same was noticed; " and that "after the cargoes were
be caused by the actual fault or privity of the carrier. 13 stored in the hatches, no regular inspection was made as to their
condition during the voyage." The foregoing suffices to show that the
circumstances under which the fire originated and spread are such
Article 1680 of the Civil Code, which considers fire as an
as to show that Petitioner Carrier or its servants were negligent in
extraordinary fortuitous event refers to leases of rural lands where a
connection therewith. Consequently, the complete defense afforded
reduction of the rent is allowed when more than one-half of the fruits
by the COGSA when loss results from fire is unavailing to Petitioner
have been lost due to such event, considering that the law adopts a
Carrier.
protection policy towards agriculture. 14

On the US $500 Per Package Limitation:

As the peril of the fire is not comprehended within the exception in
Article 1734, supra, Article 1735 of the Civil Code provides that all
cases than those mention in Article 1734, the common carrier shall Petitioner Carrier avers that its liability if any, should not exceed US
be presumed to have been at fault or to have acted negligently, $500 per package as provided in section 4(5) of the COGSA, which
unless it proves that it has observed the extraordinary deligence reads:
required by law.
(5) Neither the carrier nor the ship shall in any
In this case, the respective Insurers. as subrogees of the cargo event be or become liable for any loss or
shippers, have proven that the transported goods have been lost. damage to or in connection with the
Petitioner Carrier has also proved that the loss was caused by fire. transportation of goods in an amount exceeding
The burden then is upon Petitioner Carrier to proved that it has $500 per package lawful money of the United
exercised the extraordinary diligence required by law. In this regard, States, or in case of goods not shipped in
the Trial Court, concurred in by the Appellate Court, made the packages, per customary freight unit, or the
following Finding of fact: equivalent of that sum in other currency, unless
the nature and value of such goods have been
declared by the shipper before shipment and
The cargoes in question were, according to the
inserted in bill of lading. This declaration if
witnesses defendant placed in hatches No, 2
embodied in the bill of lading shall be prima facie
and 3 cf the vessel, Boatswain Ernesto Pastrana
evidence, but all be conclusive on the carrier.
noticed that smoke was coming out from hatch
No. 2 and hatch No. 3; that where the smoke
was noticed, the fire was already big; that the fire By agreement between the carrier, master or
must have started twenty-four 24) our the same agent of the carrier, and the shipper another
was noticed; that carbon dioxide was ordered maximum amount than that mentioned in this
released and the crew was ordered to open the paragraph may be fixed: Provided, That such
hatch covers of No, 2 tor commencement of fire maximum shall not be less than the figure above
fighting by sea water: that all of these effort were named. In no event shall the carrier be Liable for
not enough to control the fire. more than the amount of damage actually
sustained.
Pursuant to Article 1733, common carriers are
bound to extraordinary diligence in the vigilance xxx xxx xxx
over the goods. The evidence of the defendant
did not show that extraordinary vigilance was
Article 1749 of the New Civil Code also allows the limitations of
observed by the vessel to prevent the
liability in this wise:
occurrence of fire at hatches numbers 2 and 3.
Defendant's evidence did not likewise show he
amount of diligence made by the crew, on Art. 1749. A stipulation that the common carrier's
orders, in the care of the cargoes. What appears liability as limited to the value of the goods
is that after the cargoes were stored in the appearing in the bill of lading, unless the shipper
hatches, no regular inspection was made as to or owner declares a greater value, is binding.
their condition during the voyage. Consequently,
the crew could not have even explain what could
have caused the fire. The defendant, in the It is to be noted that the Civil Code does not of itself limit the liability
of the common carrier to a fixed amount per package although the
Court's mind, failed to satisfactorily show that
extraordinary vigilance and care had been made Code expressly permits a stipulation limiting such liability. Thus, the
by the crew to prevent the occurrence of the fire. COGSA which is suppletory to the provisions of the Civil Code, steps
in and supplements the Code by establishing a statutory provision
The defendant, as a common carrier, is liable to
the consignees for said lack of deligence limiting the carrier's liability in the absence of a declaration of a
required of it under Article 1733 of the Civil higher value of the goods by the shipper in the bill of lading. The
Code. 15 provisions of the Carriage of Goods [Link] Act on limited liability are
as much a part of a bill of lading as though physically in it and as
much a part thereof as though placed therein by agreement of the
Having failed to discharge the burden of proving that it had exercised parties. 16
the extraordinary diligence required by law, Petitioner Carrier cannot
escape liability for the loss of the cargo.
In G.R. No. 69044, there is no stipulation in the respective Bills of
Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for
And even if fire were to be considered a "natural disaster" within the the loss or destruction of the goods. Nor is there a declaration of a
meaning of Article 1734 of the Civil Code, it is required under Article higher value of the goods. Hence, Petitioner Carrier's liability should
1739 of the same Code that the "natural disaster" must have been not exceed US $500 per package, or its peso equivalent, at the time
the "proximate and only cause of the loss," and that the carrier has of payment of the value of the goods lost, but in no case "more than
"exercised due diligence to prevent or minimize the loss before, the amount of damage actually sustained."
during or after the occurrence of the disaster. " This Petitioner Carrier
has also failed to establish satisfactorily.
The actual total loss for the 5,000 pieces of calorized lance pipes
was P256,039 (Exhibit "C"), which was exactly the amount of the
Nor may Petitioner Carrier seek refuge from liability under the insurance coverage by Development Insurance (Exhibit "A"), and the
Carriage of Goods by Sea Act, It is provided therein that: amount affirmed to be paid by respondent Court. The goods were
shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by
$500 would result in a product of $14,000 which, at the current
Sec. 4(2). Neither the carrier nor the ship shall
exchange rate of P20.44 to US $1, would be P286,160, or "more
be responsible for loss or damage arising or
than the amount of damage actually sustained." Consequently, the
resulting from
aforestated amount of P256,039 should be upheld.

(b) Fire, unless caused by the actual fault or

With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their
privity of the carrier.
actual value was P92,361.75 (Exhibit "I"), which is likewise the
insured value of the cargo (Exhibit "H") and amount was affirmed to
xxx xxx xxx be paid by respondent Court. however, multiplying seven (7) cases
by $500 per package at the present prevailing rate of P20.44 to US
$1 (US $3,500 x P20.44) would yield P71,540 only, which is the
In this case, both the Trial Court and the Appellate Court, in effect,
amount that should be paid by Petitioner Carrier for those spare
found, as a fact, that there was "actual fault" of the carrier shown by
parts, and not P92,361.75.
"lack of diligence" in that "when the smoke was noticed, the fire was
already big; that the fire must have started twenty-four (24) hours
In G.R. No. 71478, in so far as the two (2) cases of surveying Certainly, if the individual
instruments are concerned, the amount awarded to DOWA which crates or cartons prepared
was already reduced to $1,000 by the Appellate Court following the by the shipper and
statutory $500 liability per package, is in order. containing his goods can
rightly be considered
"packages" standing by
In respect of the shipment of 128 cartons of garment fabrics in two
themselves, they do not
(2) containers and insured with NISSHIN, the Appellate Court also
suddenly lose that character
limited Petitioner Carrier's liability to $500 per package and affirmed
upon being stowed in a
the award of $46,583 to NISSHIN. it multiplied 128 cartons
carrier's container. I would
(considered as COGSA packages) by $500 to arrive at the figure of
liken these containers to
$64,000, and explained that "since this amount is more than the
detachable stowage
insured value of the goods, that is $46,583, the Trial Court was
compartments of the ship.
correct in awarding said amount only for the 128 cartons, which
They simply serve to divide
amount is less than the maximum limitation of the carrier's liability."
the ship's overall cargo
stowage space into smaller,
We find no reversible error. The 128 cartons and not the two (2) more serviceable loci.
containers should be considered as the shipping unit. Shippers' packages are
quite literally "stowed" in the
containers utilizing
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 stevedoring practices and
(1981), the consignees of tin ingots and the shipper of floor covering materials analogous to
brought action against the vessel owner and operator to recover for
those employed in traditional
loss of ingots and floor covering, which had been shipped in vessel on board stowage.
— supplied containers. The U.S. District Court for the Southern
District of New York rendered judgment for the plaintiffs, and the
defendant appealed. The United States Court of Appeals, Second In Yeramex International v. S.S. Tando,, 1977
Division, modified and affirmed holding that: A.M.C. 1807 (E.D. Va.) rev'd on other grounds,
595 F 2nd 943 (4 Cir. 1979), another district with
many maritime cases followed Judge Beeks'
When what would ordinarily be considered reasoning in Matsushita and similarly rejected
packages are shipped in a container supplied by the functional economics test. Judge Kellam held
the carrier and the number of such units is that when rolls of polyester goods are packed
disclosed in the shipping documents, each of into cardboard cartons which are then placed in
those units and not the container constitutes the
containers, the cartons and not the containers
"package" referred to in liability limitation are the packages.
provision of Carriage of Goods by Sea Act.
Carriage of Goods by Sea Act, 4(5), 46
U.S.C.A.& 1304(5). xxx xxx xxx

Even if language and purposes of Carriage of The case of Smithgreyhound v. M/V Eurygenes, 18 followed the
Goods by Sea Act left doubt as to whether Mitsui test:
carrier-furnished containers whose contents are
disclosed should be treated as packages, the
Eurygenes concerned a shipment of stereo
interest in securing international uniformity would
equipment packaged by the shipper into cartons
suggest that they should not be so treated.
which were then placed by the shipper into a
Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.
carrier- furnished container. The number of
1304(5).
cartons was disclosed to the carrier in the bill of
lading. Eurygenes followed the Mitsui test and
... After quoting the statement in Leather's Best, treated the cartons, not the container, as the
supra, 451 F 2d at 815, that treating a container COGSA packages. However, Eurygenes
as a package is inconsistent with the indicated that a carrier could limit its liability to
congressional purpose of establishing a $500 per container if the bill of lading failed to
reasonable minimum level of liability, Judge disclose the number of cartons or units within the
Beeks wrote, 414 F. Supp. at 907 (footnotes container, or if the parties indicated, in clear and
omitted): unambiguous language, an agreement to treat
the container as the package.
Although this approach has
not completely escaped (Admiralty Litigation in
criticism, there is, Perpetuum: The Continuing
nonetheless, much to Saga of Package Limitations
commend it. It gives needed and Third World Delivery
recognition to the Problems by Chester D.
responsibility of the courts to Hooper & Keith L. Flicker,
construe and apply the published in Fordham
statute as enacted, however International Law Journal,
great might be the Vol. 6, 1982-83, Number 1)
temptation to "modernize" or (Emphasis supplied)
reconstitute it by artful
judicial gloss. If COGSA's
In this case, the Bill of Lading (Exhibit "A") disclosed the following
package limitation scheme
data:
suffers from internal illness,
Congress alone must
undertake the surgery. 2 Containers
There is, in this regard,
obvious wisdom in the Ninth
(128) Cartons)
Circuit's conclusion in
Hartford that technological
advancements, whether or Men's Garments Fabrics and Accessories
not forseeable by the Freight Prepaid
COGSA promulgators, do
not warrant a distortion or
artificial construction of the Say: Two (2) Containers Only.
statutory term "package." A
ruling that these large Considering, therefore, that the Bill of Lading clearly disclosed the
reusable metal pieces of contents of the containers, the number of cartons or units, as well as
transport equipment qualify the nature of the goods, and applying the ruling in
as COGSA packages — at the Mitsui and Eurygenes cases it is clear that the 128 cartons, not
least where, as here, they the two (2) containers should be considered as the shipping unit
were carrier owned and subject to the $500 limitation of liability.
supplied — would amount to
just such a distortion.
True, the evidence does not disclose whether the containers involved WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that
herein were carrier-furnished or not. Usually, however, containers are petitioner Eastern Shipping Lines shall pay the Development
provided by the carrier. 19 In this case, the probability is that they Insurance and Surety Corporation the amount of P256,039 for the
were so furnished for Petitioner Carrier was at liberty to pack and twenty-eight (28) packages of calorized lance pipes, and P71,540 for
carry the goods in containers if they were not so packed. Thus, at the the seven (7) cases of spare parts, with interest at the legal rate from
dorsal side of the Bill of Lading (Exhibit "A") appears the following the date of the filing of the complaint on June 13, 1978, plus P5,000
stipulation in fine print: as attorney's fees, and the costs.

11. (Use of Container) Where the goods receipt 2) In [Link].71478,the judgment is hereby affirmed.
of which is acknowledged on the face of this Bill
of Lading are not already packed into
SO ORDERED.
container(s) at the time of receipt, the Carrier
shall be at liberty to pack and carry them in any
type of container(s).

The foregoing would explain the use of the estimate "Say: Two (2) G.R. No. 119197 May 16, 1997
Containers Only" in the Bill of Lading, meaning that the goods could
probably fit in two (2) containers only. It cannot mean that the shipper
had furnished the containers for if so, "Two (2) Containers" appearing TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE &
as the first entry would have sufficed. and if there is any ambiguity in ASSURANCE, INC., and NEW ZEALAND INSURANCE CO.,
the Bill of Lading, it is a cardinal principle in the construction of LTD., petitioners,
contracts that the interpretation of obscure words or stipulations in a vs.
contract shall not favor the party who caused the obscurity. 20 This NORTH FRONT SHIPPING SERVICES, INC., and COURT OF
applies with even greater force in a contract of adhesion where a APPEALS, respondents.
contract is already prepared and the other party merely adheres to it,
like the Bill of Lading in this case, which is draw. up by the carrier. 21

On Alleged Denial of Opportunity to Present Deposition of Its BELLOSILLO, J.:

Witnesses: (in G.R. No. 69044 only)

TABACALERA INSURANCE CO., Prudential Guarantee &

Petitioner Carrier claims that the Trial Court did not give it sufficient Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition
time to take the depositions of its witnesses in Japan by written for review on certiorari, assail the 22 December 1994 decision of the
interrogatories. Court of Appeals and its Resolution of 16 February 1995 which
affirmed the 1 June 1993 decision of the Regional Trial Court
We do not agree. petitioner Carrier was given- full opportunity to dismissing their complaint for damages against North Front Shipping
present its evidence but it failed to do so. On this point, the Trial Services, Inc.
Court found:
On 2 August 1990, 20,234 sacks of corn grains valued at
xxx xxx xxx P3,500,640.00 were shipped on board North Front 777, a vessel
owned by North Front Shipping Services, Inc. The cargo was
consigned to Republic Flour Mills Corporation in Manila under Bill of
Indeed, since after November 6, 1978, to August Lading No. 001 1 and insured with the herein mentioned insurance
27, 1979, not to mention the time from June 27, companies. The vessel was inspected prior to actual loading by
1978, when its answer was prepared and filed in representatives of the shipper and was found fit to carry the
Court, until September 26, 1978, when the pre- merchandise. The cargo was covered with tarpaulins and wooden
trial conference was conducted for the last time, boards. The hatches were sealed and could only be opened by
the defendant had more than nine months to representatives of Republic Flour Mills Corporation.
prepare its evidence. Its belated notice to take
deposition on written interrogatories of its
witnesses in Japan, served upon the plaintiff on The vessel left Cagayan de Oro City on 2 August 1990 and arrived
August 25th, just two days before the hearing set Manila on 16 August 1990. Republic Flour Mills Corporation was
for August 27th, knowing fully well that it was its advised of its arrival but it did not immediately commence the
undertaking on July 11 the that the deposition of unloading operations. There were days when unloading had to be
the witnesses would be dispensed with if by next stopped due to variable weather conditions and sometimes for no
time it had not yet been obtained, only proves apparent reason at all. When the cargo was eventually unloaded
the lack of merit of the defendant's motion for there was a shortage of 26.333 metric tons. The remaining
postponement, for which reason it deserves no merchandise was already moldy, rancid and deteriorating. The
sympathy from the Court in that regard. The unloading operations were completed on 5 September 1990 or
defendant has told the Court since February 16, twenty (20) days after the arrival of the barge at the wharf of Republic
1979, that it was going to take the deposition of Flour Mills Corporation in Pasig City.
its witnesses in Japan. Why did it take until
August 25, 1979, or more than six months, to Precision Analytical Services, Inc., was hired to examine the corn
prepare its written interrogatories. Only the grains and determine the cause of deterioration. A Certificate of
defendant itself is to blame for its failure to Analysis was issued indicating that the corn grains had 18.56%
adduce evidence in support of its defenses. moisture content and the wetting was due to contact with salt water.
The mold growth was only incipient and not sufficient to make the
xxx xxx xxx 22 corn grains toxic and unfit for consumption. In fact the mold growth
could still be arrested by drying.
Petitioner Carrier was afforded ample time to present its side of the
case. 23 It cannot complain now that it was denied due process when Republic Flour Mills Corporation rejected the entire cargo and
the Trial Court rendered its Decision on the basis of the evidence formally demanded from North Front Shipping Services, Inc.,
adduced. What due process abhors is absolute lack of opportunity to payment for the damages suffered by it. The demands however were
be heard. 24 unheeded. The insurance companies were perforce obliged to pay
Republic Flour Mills Corporation P2,189,433.40.
On the Award of Attorney's Fees:
By virtue of the payment made by the insurance companies they
were subrogated to the rights of Republic Flour Mills Corporation.
Petitioner Carrier questions the award of attorney's fees. In both Thusly, they lodged a complaint for damages against North Front
cases, respondent Court affirmed the award by the Trial Court of Shipping Services, Inc., claiming that the loss was exclusively
attorney's fees of P35,000.00 in favor of Development Insurance in attributable to the fault and negligence of the carrier. The Marine
G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in Cargo Adjusters hired by the insurance companies conducted a
G.R. No. 71478. survey and found cracks in the bodega of the barge and heavy
concentration of molds on the tarpaulins and wooden boards. They
Courts being vested with discretion in fixing the amount of attorney's did not notice any seals in the hatches. The tarpaulins were not
fees, it is believed that the amount of P5,000.00 would be more brand new as there were patches on them, contrary to the claim of
reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. North Front Shipping Services, Inc., thus making it possible for water
71478 is affirmed. to seep in. They also discovered that the bulkhead of the barge was
rusty.
North Front Shipping Services, Inc., averred in refutation that it could dried would eventually deteriorate when stored in sealed and hot
not be made culpable for the loss and deterioration of the cargo as it compartments as in hatches of a ship. Equipped with this knowledge,
was never negligent. Captain Solomon Villanueva, master of the the master of the vessel and his crew should have undertaken
vessel, reiterated that the barge was inspected prior to the actual precautionary measures to avoid or lessen the cargo's possible
loading and was found adequate and seaworthy. In addition, they deterioration as they were presumed knowledgeable about the
were issued a permit to sail by the Coast Guard. The tarpaulins were nature of such cargo. But none of such measures was taken.
doubled and brand new and the hatches were properly sealed. They
did not encounter big waves hence it was not possible for water to
In Compania Maritima v. Court of Appeals 5 we ruled —
seep in. He further averred that the corn grains were farm wet and
not properly dried when loaded.
. . . Mere proof of delivery of the goods in good
order to a common carrier, and of their arrival at
The court below dismissed the complaint and ruled that the contract
the place of destination in bad order, makes
entered into between North Front Shipping Services, Inc., and
out prima facie case against the common carrier,
Republic Flour Mills Corporation was a charter-party agreement. As
so that if no explanation is given as to how the
such, only ordinary diligence in the care of goods was required of
loss, deterioration or destruction of the goods
North Front Shipping Services, Inc. The inspection of the barge by
occurred, the common carrier must be held
the shipper and the representatives of the shipping company before
responsible. Otherwise stated, it is incumbent
actual loading, coupled with the Permit to Sailissued by the Coast
upon the common carrier to prove that the loss,
Guard, sufficed to meet the degree of diligence required of the
deterioration or destruction was due to accident
carrier.
or some other circumstances inconsistent with its
liability . . .
On the other hand, the Court of Appeals ruled that as a common
carrier required to observe a higher degree of diligence North
The extraordinary diligence in the vigilance over
Front 777 satisfactorily complied with all the requirements hence was
the goods tendered for shipment requires the
issued a Permit to Sail after proper inspection. Consequently, the
common carrier to know and to follow the
complaint was dismissed and the motion for reconsideration rejected.
required precaution for avoiding damage to, or
destruction of the goods entrusted to it for safe
The charter-party agreement between North Front Shipping Services, carriage and delivery. It requires common
Inc., and Republic Flour Mills Corporation did not in any way convert carriers to render service with the greatest skill
the common carrier into a private carrier. We have already resolved and foresight and "to use all reasonable means
this issue with finality in Planters Products, Inc. v. Court of to ascertain the nature and characteristics of
Appeals 2 thus — goods tendered for shipment, and to exercise
due care in the handling and stowage, including
such methods as their nature requires"
A "charter-party" is defined as a contract by
(emphasis supplied).
which an entire ship, or some principal part
thereof, is let by the owner to another person for
a specified time or use; a contract of In fine, we find that the carrier failed to observe the
affreightment by which the owner of a ship or required extraordinary diligence in the vigilance over the goods
other vessel lets the whole or a part of her to a placed in its care. The proofs presented by North Front Shipping
merchant or other person for the conveyance of Services, Inc., were insufficient to rebut the prima facie presumption
goods, on a particular voyage, in consideration of private respondent's negligence, more so if we consider the
of the payment of freight . . . Contract of evidence adduced by petitioners.
affreightment may either be time charter,
wherein the vessel is leased to the charterer for
It is not denied by the insurance companies that the vessel was
a fixed period of time, or voyage charter, wherein
indeed inspected before actual loading and thatNorth Front 777 was
the ship is leased for a single voyage. In both
issued a Permit to Sail. They proved the fact of shipment and its
cases, the charter-party provides for the hire of
consequent loss or damage while in the actual possession of the
the vessel only, either for a determinate period of
carrier. Notably, the carrier failed to volunteer any explanation why
time or for a single or consecutive voyage, the
there was spoilage and how it occurred. On the other hand, it was
ship owner to supply the ship's store, pay for the
shown during the trial that the vessel had rusty bulkheads and the
wages of the master of the crew, and defray the
wooden boards and tarpaulins bore heavy concentration of molds.
expenses for the maintenance of the ship.
The tarpaulins used were not new, contrary to the claim of North
Front Shipping Services, Inc., as there were already several patches
Upon the other hand, the term "common or on them, hence, making it highly probable for water to enter.
public carrier" is defined in Art. 1732 of the Civil
Code. The definition extends to carriers either by
Laboratory analysis revealed that the corn grains were contaminated
land, air or water which hold themselves out as
with salt water. North Front Shipping Services, Inc., failed to rebut all
ready to engage in carrying goods or
these arguments. It did not even endeavor to establish that the loss,
transporting passengers or both for
destruction or deterioration of the goods was due to the following: (a)
compensation as a public employment and not
flood, storm, earthquake, lightning, or other natural disaster or
as a casual occupation . . .
calamity; (b) act of the public enemy in war, whether international or
civil; (c) act or omission of the shipper or owner of the goods; (d) the
It is therefore imperative that a public carrier character of the goods or defects in the packing or in the containers;
shall remain as such, notwithstanding the charter (e) order or act of competent public authority. 6 This is a closed list. If
of the whole or portion of a vessel by one or the cause of destruction, loss or deterioration is other than the
more persons, provided the charter is limited to enumerated circumstances, then the carrier is rightly liable therefor.
the shin only, as in the case of a time-charter or
voyage-charter (emphasis supplied).
However, we cannot attribute the destruction, loss or deterioration of
the cargo solely to the carrier. We find the consignee Republic Flour
North Front Shipping Services, Inc., is a corporation engaged in the Mills Corporation guilty of contributory negligence. It was seasonably
business of transporting cargo and offers its services indiscriminately notified of the arrival of the barge but did not immediately start the
to the public. It is without doubt a common carrier. As such it is unloading operations. No explanation was proffered by the consignee
required to observeextraordinary diligence in its vigilance over the as to why there was a delay of six (6) days. Had the unloading been
goods it transports. 3 When goods placed in its care are lost or commenced immediately the loss could have been completely
damaged, the carrier is presumed to have been at fault or to have avoided or at least minimized. As testified to by the chemist who
acted negligently. 4 North Front Shipping Services, Inc., therefore has analyzed the corn samples, the mold growth was only at its incipient
the burden of proving that it observed extraordinary diligence in order stage and could still be arrested by drying. The corn grains were not
to avoid responsibility for the lost cargo. yet toxic or unfit for consumption. For its contributory negligence,
Republic Flour Mills Corporation should share at least 40% of the
loss. 7
North Front Shipping Services, Inc., proved that the vessel was
inspected prior to actual loading by representatives of the shipper
and was found fit to take a load of corn grains. They were also WHEREFORE, the Decision of the Court of Appeals of 22 December
issued Permit to Sailby the Coast Guard. The master of the vessel 1994 and its Resolution of 16 February 1995 are REVERSED and
testified that the corn grains were farm wet when loaded. However, SET ASIDE. Respondent North Front Shipping Services, Inc., is
this testimony was disproved by the clean bill of lading issued by ordered to pay petitioners Tabacalera Insurance Co., Prudential
North Front Shipping Services, Inc., which did not contain a notation Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd.,
that the corn grains were wet and improperly dried. Having been in P1,313,660.00 which is 60% of the amount paid by the insurance
the service since 1968, the master of the vessel would have known companies to Republic Flour Mills Corporation, plus interest at the
at the outset that corn grains that were farm wet and not properly
rate of 12% per annum from the time this judgment becomes final WHEREFORE, judgment is hereby rendered in
until full payment. favor of the plaintiff and against the defendants
by ordering the latter to pay, jointly and
severally, the plaintiff the sum of P187,500.00,
SO ORDERED.
with legal interest thereon from August 29, 1980
until full payment thereof.

Defendants are also ordered to pay, in solidum,

G.R. No. 83613 February 21, 1990 the sum of P10,000.00 as attorney's fees to the
plaintiff, and to pay the costs of this suit.

FIREMAN'S FUND INSURANCE CO., petitioner,

vs. There shall be no award for exemplary damages
METRO PORT SERVICE, INC., (Formerly E. Razon, in favor of the plaintiff, for the reason that
Inc.), respondent. defendants are probably acting in good faith in
resisting the complaint. (Rollo, pp. 45-46)

Dollete, Blanco, Ejercito & Associates for petitioner.

All the defendants appealed to the Court of Appeals. Eventually,
Maersk Line and Compania General de Tabacos negotiated with the
Cruz, Durian, Agabin, Atienza, Alday & Tuason for respondent. petitioner for the settlement of the latter's claim and no longer
pursued their appeal.

On the appeal of the ARRASTRE, the Court of Appeals rendered a

GUTIERREZ, JR., J.: decision with the following dispositive portion:

This is a petition for review of the decision and resolution denying WHEREFORE, foregoing premises considered,
reconsideration of the Court of Appeals in CA-G.R. CV No. 00673 the decision of the court a quo insofar as herein
entitled "Fireman's Fund Insurance Co. v. Maersk Line, Compañia defendant-appellant is concerned is REVERSED
General de Tabacos de Filipinas and E. Razon, Inc." It is hereby ordered that the complaint against
herein defendant-appellant be dismissed. No
costs. (Rollo, p. 50)
The facts are as follows:
Reconsideration of the decision was denied in a resolution dated
Vulcan Industrial and Mining Corporation imported from the United May 23, 1988.
States several machineries and equipment which were loaded on
board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and
transhipped for Manila through the vessel S/S Maersk Tempo. Hence, the present recourse.

The cargo which was covered by a clean bill of lading issued by The petitioner raises this lone assignment of error:
Maersk Line and Compania General de Tabacos de Filipinas
(referred to as the CARRIER) consisted of the following: THE HONORABLE COURT OF APPEALS
ERRED IN LIMITING LIABILITY SOLELY ON
xxx xxx xxx CO-DEFENDANT MAERSK LINES,
CONTRARY TO THE FINDINGS OF FACTS OF
THE TRIAL COURT A QUO AND OTHER
1 piece truck mounted core drill FACTORS SHOWING CLEAR JOINT LIABILITY
OF DEFENDANTS IN SOLIDUM.
1 piece trailer mounted core drill
There is merit in this petition.
1 (40') container of 321 pieces steel tubings
This Court has held in a number of cases that findings of fact of the
1 (40') container of 170 pieces steel tubings Court of Appeals are, in general, conclusive on the Supreme Court
when supported by the evidence on record. The rule is not absolute,
however, and allows exceptions, which we find present in the case at
1 (40') container of 13 cases, 3 crates, 2 pallets bar. The respondent court's findings of facts are contrary to those of
and 26 mining machinery parts. (Rollo, p. 4) the trial court and appear to be contradicted by the evidence on
record thus calling for our review. (Metro Port Service, Inc. v. Court of
The shipment arrived at the port of Manila on June 3, 1979 and was Appeals, 131 SCRA 365 [1984]).
turned over complete and in good order condition to the arrastre
operator E. Razon Inc. (now Metro Port Service Inc. and referred to In absolving the ARRASTRE, the respondent Court ruled that
as the ARRASTRE). although Librando was an employee of the ARRASTRE, since he
was included in its payroll, he was technically and strictly an
At about 10:20 in the morning of June 8, 1979, a tractor operator, employee of Maersk Line in this particular instance when he drove
named Danilo Librando and employed by the ARRASTRE, was the tractor admittedly owned by the foreign shipping line. The Court
ordered to transfer the shipment to the Equipment Yard at Pier 3. ruled that he received instructions not from Metro Port but from
While Librando was maneuvering the tractor (owned and provided by Maersk Line relative to this job. He was performing a duty that
Maersk Line) to the left, the cargo fell from the chassis and hit one of properly pertained to Maersk Line which, for lack of a tractor
the container vans of American President Lines. It was discovered operator, had to get or hire from the ARRASTRE as per their
that there were no twist lock at the rear end of the chassis where the management contract. Nevertheless, Librando was not remiss in his
cargo was loaded. duty as tractor-driver considering that the proximate and direct cause
of the damage was the absence of twist locks in the rear end of the
chassis which Maersk Line failed to provide. The respondent court
There was heavy damage to the cargo as the parts of the thereby placed the entire burden of liability on the owner of the
machineries were broken, denied, cracked and no longer useful for Chassis which in this case was the foreign shipping company,
their purposes. Maersk Line.

The value of the damage was estimated at P187,500.00 which The foregoing conclusion disregarded the pertinent findings of facts
amount was paid by the petitioner insurance company to the made by the lower court which are supported by the evidence on
consignee, Vulcan Industrial and Mining Corporation. record, to wit:

The petitioner, under its subrogation rights, then filed a suit against 1. The accident occurred while the cargoes were
Maersk Line, Compania General de Tabacos (as agent) and E. in the custody of the arrastre operator.
Razon, Inc., for the recovery of the amount it paid the assured under
the covering insurance policy. On October 26, 1980, the trial court
rendered judgment, the decretal portion of which reads as follows: 2. The tractor operator was an employee of the
arrastre operator.

xxx xxx xxx

xxx xxx xxx
 4. By the management contract inasmuch as the the CONTRACTOR, its agent or employees in
foreign shipping company has no tractor the performance of the undertaking by it to be
operator in its employ, the arrastre provided the performed under the terms of the contract, and
operator. the CONTRACTOR hereby agree to and hold
the BUREAU at all times harmless therefrom and
whole or any part thereof. (Original Records, pp.
xxx xxx xxx
110-112; Emphasis supplied)

8. It was likewise the responsibility of the tractor

To carry out its duties, the ARRASTRE is required to provide cargo
operator, an employee of the arrastre operator to
handling equipment which includes among others trailers, chassis for
inspect the chassis and tractor before driving the
containers. In some cases, however, the shipping line has its own
same, but which obligation the operator failed to
cargo handling equipment.
do.

In this particular instance, the records reveal that Maersk Line

9. It was also the responsibility of the supervisor
provided the chassis and the tractor which carried the carried the
in the employ of the arrastre operator to see that
subject shipment. It merely requested the ARRASTRE to dispatch a
their men complied with their respective tasks,
tractor operator to drive the tractor inasmuch as the foreign shipping
which included the examination if the chassis
line did not have any truck operator in its employ. Such arrangement
has twist lock. (Rollo, pp. 44-45)
is allowed between the ARRASTRE and the CARRIER pursuant to
the Management Contract. It was clearly one of the services offered
The legal relationship between the consignee and the arrastre by the ARRASTRE. We agree with the petitioner that it is the
operator is akin to that of a depositor and warehouseman (Lua Kian ARRASTRE which had the sole discretion and prerogative to hire
v. Manila Railroad Co., 19 SCRA 5 [1967]). The relationship between and assign Librando to operate the tractor. It was also the
the consignee and the common carrier is similar to that of the ARRASTRE's sole decision to detail and deploy Librando for the
consignee and the arrastre operator (Northern Motors, Inc. v. Prince particular task from among its pool of tractor operators or drivers. It
Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the is, therefore, inacurrate to state that Librando should be considered
ARRASTRE to take good care of the goods that are in its custody an employee of Maersk Line on that specific occasion.
and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the
Handling cargo is mainly the s principal work so its driver/operators,
ARRASTRE and the CARRIER are therefore charged with and
"cargadors", or employees should observe the stand" and
obligated to deliver the goods in good condition to the consignee.
indispensable measures necessary to prevent losses and damage to
shipments under its custody. Since the ARRASTRE offered its
In general, the nature of the work of an arrastre operator covers the drivers for the operation of tractors in the handling of cargo and
handling of cargoes at piers and wharves (Visayan Cebu Terminal equipment, then the ARRASTRE should see to it that the drivers
Co., Inc. v. Commissioner of Internal Revenue, 13 SCRA 357 under its employ must exercise due diligence in the performance of
[1965]). This is embodied in the Management Contract drawn their work. From the testimonies of witnesses presented, we gather
between the Bureau of Customs and E. Razon Inc., as the Arrastre that driver/operator Librando was remiss in his duty. Benildez
Operator. The latter agreed to bind itself, to wit: Cepeda, an arrastre-investigator of Metro Port admitted that Librando
as tractor-operator should first have inspected the chassis and made
sure that the cargo was securely loaded on the chassis. He testified:
CLAIMS AND LIABILITY FOR LOSSES AND
DAMAGES
xxx xxx xxx
1. Responsibility and
Liability for Losses and Q My question is in your
Damages; investigation report including
enclosures, the principal
reason was that the chassis
Claims. — The CONTRACTOR shall, at its own has no rear twist lock?
expense handle all merchandise in the piers and
other designated places and at its own expense
perform all work undertaken by it hereunder A Yes, sir.
diligently and in skillful workmanlike and efficient
manner; That the CONTRACTOR shall be solely
Q Did you investigate
responsible as an independent CONTRACTOR,
whether the driver Librando
and hereby agrees to accept liability and to
inspected the the truck
promptly pay to the s hip company, consignee,
before he operated the
consignor or other interested party or parties for
same whether there was
the loss, damage, or non-delivery of cargoes to
rear twist lock or not?
the extent of the actual invoice value of each
package which in no case shall be more than
Three Thousand Five Hundred Pesos A I have asked him about
(P3,500.00) for each package unless the value that question whether he
of the importation is otherwise specified or had inspected the has any
manifested or communicated in writing together rear twist lock and the
with the invoice value and supported by a answer he did not inspect,
certified packing list to the CONTRACTOR by sir.
the interested party or parties before the
discharge of the goods, as well as all damage
Q As a operator, do you
that may be suffered on account of loss,
agree with me that it is the
damage, or destruction of any merchandise
duty also of Librando to see
while in custody or under the control of the
to it that the truck is in good
CONTRACTOR in any pier, shed, warehouse,
condition and fit to travel, is
facility; or other designated place under the
that correct?
supervision of the BUREAU, but said
CONTRACTOR shall not be responsible for the
condition of the contents of any package A Yes, sir.
received nor for the weight, nor for any loss,
injury or damage to the said cargo before or
while the goods are being received or remained Q And as a tractor operator
on the piers, sheds, warehouse or facility if the it is his duty to see to it that
the van mounted on top of
loss, injury or damage is caused by force
majeure, or other cause beyond the the tractor was properly is
CONTRACTORS control or capacity to prevent that correct?
or remedy; ...
A Yes, sir. (At pp. 18-20,
xxx xxx xxx T.S.N., February 17, 1982)

The CONTRACTOR shall be solely responsible Again Danilo Librando also admitted that it was usually his practice to
for any and all injury or damage that may arise inspect not only the tractor but the chassis as well but failed to do so
on account of the negligence or carelessness of in this particular instance.
 xxx xxx xxx A Yes, sir.

Q You mentioned of the Q Do you what to impress

absence of a twist lock. Will upon the Honorable Court
you tell us where is this twist that, by mere looking at a
lock supposed to be loaded chassis, the twist
located? lock cannot be seen by the
naked eye? Because the
van contained a hole in
A At the rear end of the
which the twist lock thus
chassis.
entered inside the hold and
locked itself. It is already
Q Before you operated the loaded. So. you cannot no
tractor which carried the longer see it.
mounted cord drill truck and
trailer did you examine if the
Q But if you closely examine
chasiss had any twist locks?
this chassis which has a
load of container van. You
A No, sir, because I can see whether a twist lock
presumed that it had twist is present or not?
locks and I was confident
that it had twist locks.
A Yes, sir. A twist lock is
present.
Q As a matter of procedure
and according to you, you
Q In other words, if the
examined the tractor, do you
driver of this tractor closely
not make it a practice to
examined this van, he could
examine whether the
have detected whether or
chassis had any twist locks?
not a twist lock is present?

A I used to do that but in

A Yes, sir. (pp. 33-35,
that particular instance I
T.S.N., March 23, 1982;
thought it had already its
Emphasis supplied)
twist locks. (p. 8, T.S.N.,
October 5, 1981)
Whether or not the twist lock can be seen by the naked eye when the
cargo has been loaded on the chassis, an efficient and diligent
It is true that Maersk Line is also at fault for not providing twist locks
tractor operator must nevertheless check if the cargo is securely
on the chassis. However, we find the testimony of Manuel Heraldez
loaded on the chassis.
who is the Motor Pool General Superintendent of Metro Port rather
significant. On cross-examination, he stated that:
We, therefore, find Metro Port Service Inc., solidarily liable in the
instant case for the negligence of its employee. With respect to the
Q In your experience, Mr.
limited liability of the ARRASTRE, the records disclose that the value
witness, do you know which
of the importation was relayed to the arrastre operator and in fact
is ahead of the placing of
processed by its chief claims examiner based on the documents
the container van or the
submitted.
placing of the twist lock on
the chassis?
WHEREFORE, the appealed judgment of respondent Court of
Appeals is hereby REVERSED and SET ASIDE and that of the Court
A The twist lock is already
of First Instance of Manila, 6th Judicial District, Branch II is
permanently attached on the
REINSTATED. No costs.
chassis, sir.

SO ORDERED.
Q Earlier, you mentioned
that you cannot see the twist
lock if the chassis is loaded,
correct?
G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as
City Treasurer of Batangas, respondents.

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801,
affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The
original pipeline concession was granted in 1967 1 and renewed by the Energy Regulatory Board in 1992. 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the
mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the
fiscal year 1993 pursuant to the Local Government Code 3. The respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993
which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads:

Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum
Act. It is engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on gross receipts under Section
133 of the Local Government Code of 1991 . . . .

Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph
(h) of the Local Government Code. Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the Local Government Code does not include the power to levy on
transportation contractors.

The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local
Government Code. The said section limits the imposition of fees and charges on business to such amounts as may be
commensurate to the cost of regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the
license fee, the imposition thereof based on gross receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and licensing. The fee
is already a revenue raising measure, and not a mere regulatory imposition. 4

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code. 5

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax refund with prayer for writ of
preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the
Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined
under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local
Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the
said code pertains to the mode or manner by which a product is delivered to its destination. 8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:

. . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly
construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only
by clear and unequivocal provisions of law.

Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A) whose concession was
lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any
tax exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being
the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses onlycommon carriers so as not to overburden the riding public or
commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities to a single specific or
"special customer" under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than the previous
enactments, to make them economically and financially viable to serve the people and discharge their functions with a concomitant
obligation to accept certain devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143 (e) and 151 of the Code. 9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration and adjudication. 10On November 29, 1995, the respondent court rendered a
decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18,
1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996. 13 Petitioner moved for a
reconsideration which was granted by this Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation
contractor, and (2) the exemption sought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his services to the public generally.

Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to
engage in the transportation of goods for person generally as a business and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;

3. He must undertake to carry by the method by which his business is conducted and over his established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact
that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16 we
ruled that:

The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making
any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1877 deliberately refrained from making such distinctions.

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

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

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to
common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof
provides that:

Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the preferential right to
utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the
remaining transportation capacity pro rata for the transportation of such other petroleum as may be
offered by others for transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:

that everything relating to the exploration for and exploitation of petroleum . . . and everything
relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is
hereby declared to be a public utility. (Emphasis Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:
 . . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum
products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case, it
is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:

xxx xxx xxx

(j) Taxes on the gross receipts of transportation contractors

and persons engaged in the transportation of passengers or
freight by hire and common carriers by air, land or water,
except as provided in this Code.

The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating:

MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local
Government Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one
of those being deemed to be exempted from the taxing powers of the local government units. May
we know the reason why the transportation business is being excluded from the taxing powers of
the local government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that
provinces have the power to impose a tax on business enjoying a franchise at the rate of not more
than one-half of 1 percent of the gross annual receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government
units on the carrier business. Local government units may impose taxes on top of what is already
being imposed by the National Internal Revenue Code which is the so-called "common carriers tax."
We do not want a duplication of this tax, so we just provided for an exception under Section 125
[now Sec. 137] that a province may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18

It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against
common carriers is to prevent a duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue
Code. 19 To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local
Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP
No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.