G.R. No.

138334 August 25, 2003

ESTELA L. CRISOSTOMO, Petitioner,

vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.

DECISION

YNARES-SANTIAGO, J.:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan
Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed "Jewels of Europe". The package tour included the countries
of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the
booking fee was also waived because petitioner’s niece, Meriam Menor, was respondent
company’s ticketing manager.

Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 – a Wednesday
– to deliver petitioner’s travel documents and plane tickets. Petitioner, in turn, gave Menor the
full payment for the package tour. Menor then told her to be at the Ninoy Aquino International
Airport (NAIA) on Saturday, two hours before her flight on board British Airways.

Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to
take the flight for the first leg of her journey from Manila to Hongkong. To petitioner’s dismay,
she discovered that the flight she was supposed to take had already departed the previous day.
She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called
up Menor to complain.

Subsequently, Menor prevailed upon petitioner to take another tour – the "British Pageant" –
which included England, Scotland and Wales in its itinerary. For this tour package, petitioner
was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of
P26.60). She gave respondent US$300 or P7,980.00 as partial payment and commenced the trip
in July 1991.

Upon petitioner’s return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for "Jewels of Europe" and
the amount she owed respondent for the "British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount, contending that the same was non-
refundable.1 Petitioner was thus constrained to file a complaint against respondent for breach
of contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled to
Branch 59 of the Regional Trial Court of Makati City.
In her complaint,2 petitioner alleged that her failure to join "Jewels of Europe" was due to
respondent’s fault since it did not clearly indicate the departure date on the plane ticket.
Respondent was also negligent in informing her of the wrong flight schedule through its
employee Menor. She insisted that the "British Pageant" was merely a substitute for the
"Jewels of Europe" tour, such that the cost of the former should be properly set-off against the
sum paid for the latter.

For its part, respondent company, through its Operations Manager, Concepcion Chipeco,
denied responsibility for petitioner’s failure to join the first tour. Chipeco insisted that
petitioner was informed of the correct departure date, which was clearly and legibly printed on
the plane ticket. The travel documents were given to petitioner two days ahead of the
scheduled trip. Petitioner had only herself to blame for missing the flight, as she did not bother
to read or confirm her flight schedule as printed on the ticket.

Respondent explained that it can no longer reimburse the amount paid for "Jewels of Europe",
considering that the same had already been remitted to its principal in Singapore, Lotus Travel
Ltd., which had already billed the same even if petitioner did not join the tour. Lotus’ European
tour organizer, Insight International Tours Ltd., determines the cost of a package tour based on
a minimum number of projected participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked tour.3

Lastly, respondent maintained that the "British Pageant" was not a substitute for the package
tour that petitioner missed. This tour was independently procured by petitioner after realizing
that she made a mistake in missing her flight for "Jewels of Europe". Petitioner was allowed to
make a partial payment of only US$300.00 for the second tour because her niece was then an
employee of the travel agency. Consequently, respondent prayed that petitioner be ordered to
pay the balance of P12,901.00 for the "British Pageant" package tour.

After due proceedings, the trial court rendered a decision,4 the dispositive part of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty
Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43)
with legal interest thereon at the rate of twelve percent (12%) per annum starting
January 16, 1992, the date when the complaint was filed;

2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00)
Pesos as and for reasonable attorney’s fees;

3. Dismissing the defendant’s counterclaim, for lack of merit; and

4. With costs against the defendant.

SO ORDERED.5

The trial court held that respondent was negligent in erroneously advising petitioner of her
departure date through its employee, Menor, who was not presented as witness to rebut
petitioner’s testimony. However, petitioner should have verified the exact date and time of
departure by looking at her ticket and should have simply not relied on Menor’s verbal
representation. The trial court thus declared that petitioner was guilty of contributory
negligence and accordingly, deducted 10% from the amount being claimed as refund.

Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than respondent because
as a lawyer and well-traveled person, she should have known better than to simply rely on what
was told to her. This being so, she is not entitled to any form of damages. Petitioner also
forfeited her right to the "Jewels of Europe" tour and must therefore pay respondent the
balance of the price for the "British Pageant" tour. The dispositive portion of the judgment
appealed from reads as follows:

WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26,
1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the
plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00, representing
the balance of the price of the British Pageant Package Tour, the same to earn legal interest at
the rate of SIX PERCENT (6%) per annum, to be computed from the time the counterclaim was
filed until the finality of this decision. After this decision becomes final and executory, the rate
of TWELVE PERCENT (12%) interest per annum shall be additionally imposed on the total
obligation until payment thereof is satisfied. The award of attorney’s fees is DELETED. Costs
against the plaintiff-appellee.

SO ORDERED.6

Upon denial of her motion for reconsideration,7 petitioner filed the instant petition under Rule
45 on the following grounds:

It is respectfully submitted that the Honorable Court of Appeals committed a reversible

error in reversing and setting aside the decision of the trial court by ruling that the
petitioner is not entitled to a refund of the cost of unavailed "Jewels of Europe" tour she
being equally, if not more, negligent than the private respondent, for in the contract of
carriage the common carrier is obliged to observe utmost care and extra-ordinary
diligence which is higher in degree than the ordinary diligence required of the
passenger. Thus, even if the petitioner and private respondent were both negligent, the
petitioner cannot be considered to be equally, or worse, more guilty than the private
respondent. At best, petitioner’s negligence is only contributory while the private
 respondent [is guilty] of gross negligence making the principle of pari delicto
inapplicable in the case;

II

The Honorable Court of Appeals also erred in not ruling that the "Jewels of Europe" tour
was not indivisible and the amount paid therefor refundable;

III

The Honorable Court erred in not granting to the petitioner the consequential damages
due her as a result of breach of contract of carriage.8

Petitioner contends that respondent did not observe the standard of care required of a
common carrier when it informed her wrongly of the flight schedule. She could not be deemed
more negligent than respondent since the latter is required by law to exercise extraordinary
diligence in the fulfillment of its obligation. If she were negligent at all, the same is merely
contributory and not the proximate cause of the damage she suffered. Her loss could only be
attributed to respondent as it was the direct consequence of its employee’s gross negligence.

Petitioner’s contention has no merit.

By definition, a contract of carriage or transportation is one whereby a certain person or

association of persons obligate themselves to transport persons, things, or news from one place
to another for a fixed price.9 Such person or association of persons are regarded as carriers and
are classified as private or special carriers and common or public carriers.10 A common carrier is
defined under Article 1732 of the Civil Code as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the business
of transporting either passengers or goods and is therefore, neither a private nor a common
carrier. Respondent did not undertake to transport petitioner from one place to another since
its covenant with its customers is simply to make travel arrangements in their behalf.
Respondent’s services as a travel agency include procuring tickets and facilitating travel permits
or visas as well as booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately contracted
for her carriage to Europe. Respondent’s obligation to petitioner in this regard was simply to
see to it that petitioner was properly booked with the airline for the appointed date and time.
Her transport to the place of destination, meanwhile, pertained directly to the airline.
The object of petitioner’s contractual relation with respondent is the latter’s service of
arranging and facilitating petitioner’s booking, ticketing and accommodation in the package
tour. In contrast, the object of a contract of carriage is the transportation of passengers or
goods. It is in this sense that the contract between the parties in this case was an ordinary one
for services and not one of carriage. Petitioner’s submission is premised on a wrong
assumption.

The nature of the contractual relation between petitioner and respondent is determinative of
the degree of care required in the performance of the latter’s obligation under the contract. For
reasons of public policy, a common carrier in a contract of carriage is bound by law to carry
passengers as far as human care and foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the circumstances.11 As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its obligation, as petitioner claims.

Since the contract between the parties is an ordinary one for services, the standard of care
required of respondent is that of a good father of a family under Article 1173 of the Civil
Code.12 This connotes reasonable care consistent with that which an ordinarily prudent person
would have observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence.13

In the case at bar, the lower court found Menor negligent when she allegedly informed
petitioner of the wrong day of departure. Petitioner’s testimony was accepted as indubitable
evidence of Menor’s alleged negligent act since respondent did not call Menor to the witness
stand to refute the allegation. The lower court applied the presumption under Rule 131, Section
3 (e)14 of the Rules of Court that evidence willfully suppressed would be adverse if produced
and thus considered petitioner’s uncontradicted testimony to be sufficient proof of her claim.

On the other hand, respondent has consistently denied that Menor was negligent and
maintains that petitioner’s assertion is belied by the evidence on record. The date and time of
departure was legibly written on the plane ticket and the travel papers were delivered two days
in advance precisely so that petitioner could prepare for the trip. It performed all its obligations
to enable petitioner to join the tour and exercised due diligence in its dealings with the latter.

We agree with respondent.

Respondent’s failure to present Menor as witness to rebut petitioner’s testimony could not give
rise to an inference unfavorable to the former. Menor was already working in France at the
time of the filing of the complaint,15 thereby making it physically impossible for respondent to
present her as a witness. Then too, even if it were possible for respondent to secure Menor’s
testimony, the presumption under Rule 131, Section 3(e) would still not apply. The opportunity
and possibility for obtaining Menor’s testimony belonged to both parties, considering that
Menor was not just respondent’s employee, but also petitioner’s niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed evidence under
Rule 131, Section 3(e). Said presumption would logically be inoperative if the evidence is not
intentionally omitted but is simply unavailable, or when the same could have been obtained by
both parties.16

In sum, we do not agree with the finding of the lower court that Menor’s negligence concurred
with the negligence of petitioner and resultantly caused damage to the latter. Menor’s
negligence was not sufficiently proved, considering that the only evidence presented on this
score was petitioner’s uncorroborated narration of the events. It is well-settled that the party
alleging a fact has the burden of proving it and a mere allegation cannot take the place of
evidence.17 If the plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner facts upon which he bases his claim, the defendant is under no
obligation to prove his exception or defense.18

Contrary to petitioner’s claim, the evidence on record shows that respondent exercised due
diligence in performing its obligations under the contract and followed standard procedure in
rendering its services to petitioner. As correctly observed by the lower court, the plane
ticket19 issued to petitioner clearly reflected the departure date and time, contrary to
petitioner’s contention. The travel documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and procured the
plane tickets. It arranged petitioner’s hotel accommodation as well as food, land transfers and
sightseeing excursions, in accordance with its avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised due
diligence in the conduct of her affairs, there would have been no reason for her to miss the
flight. Needless to say, after the travel papers were delivered to petitioner, it became
incumbent upon her to take ordinary care of her concerns. This undoubtedly would require that
she at least read the documents in order to assure herself of the important details regarding
the trip.

The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the obligation as
the nature of the obligation so demands.20 There is no fixed standard of diligence applicable to
each and every contractual obligation and each case must be determined upon its particular
facts. The degree of diligence required depends on the circumstances of the specific obligation
and whether one has been negligent is a question of fact that is to be determined after taking
into account the particulars of each case.21 1âwphi1

The lower court declared that respondent’s employee was negligent. This factual finding,
however, is not supported by the evidence on record. While factual findings below are
generally conclusive upon this court, the rule is subject to certain exceptions, as when the trial
court overlooked, misunderstood, or misapplied some facts or circumstances of weight and
substance which will affect the result of the case.22

In the case at bar, the evidence on record shows that respondent company performed its duty
diligently and did not commit any contractual breach. Hence, petitioner cannot recover and
must bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of
Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay
respondent the amount of P12,901.00 representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the rate of 6% per annum, to be computed
from the time the counterclaim was filed until the finality of this Decision. After this Decision
becomes final and executory, the rate of 12% per annum shall be imposed until the obligation is
fully settled, this interim period being deemed to be by then an equivalent to a forbearance of
credit.23

SO ORDERED.
G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

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

MARTINEZ, J.:

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

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
19671 and renewed by the Energy Regulatory Board in 1992. 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor
of Batangas City. However, before the mayor's permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year
1993 pursuant to the Local Government Code3. The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable in four installments based on
the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in
the amount of P239,019.01 for the first quarter of 1993.

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

Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our Company is exempt from 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 only common carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities to
a single specific or "special customer" under a
"special contract."

2. The Local Tax Code of 1992 was basically

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

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

Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996. 13Petitioner 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 16we ruled that:

The above article (Art. 1732, Civil Code) makes no distinction

between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a "sideline"). Article 1732 . .
. avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between
a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or
solicits business only from a narrow segment of the general
 population. We think that Article 1877 deliberately refrained from
making such distinctions.

So understood, the concept of "common carrier" under Article

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

every person that now or hereafter may own,

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

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

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are 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.
G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would
load his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent
for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati,
Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on
1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons
were loaded on a truck driven by respondent himself, while 600 cartons were placed on board
the other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere along
the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of
First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent,
being a common carrier, and having failed to exercise the extraordinary diligence required of
him by the law, should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he
could not be held responsible for the value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services to
the public; in not exempting him from liability on the ground of force majeure; and in ordering
him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner
came to this Court by way of a Petition for Review assigning as errors the following conclusions
of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo,
p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under
the facts earlier set forth, be properly characterized as a common carrier.

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

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

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

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733
deliberaom making such distinctions.

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

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

It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent's principal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged his customers
a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate
of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers. That liability arises the moment a person or firm acts as
a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary certificate of
public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business
of a common carrier impinges directly and intimately upon the safety and well being and
property of those members of the general community who happen to deal with such carrier.
The law imposes duties and liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to
a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as
well as of passengers. The specific import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article 1733, "further expressed in Articles
1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of
the following causes only:

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

calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration
which exempt the common carrier for responsibility therefor, is a closed list. Causes falling
outside the foregoing list, even if they appear to constitute a species of force majeure fall
within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the

preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article 1733.
(Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
alleged in the instant case — the hijacking of the carrier's truck — does not fall within any of
the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that
the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in
other words, that the private respondent as common carrier is presumed to have been at fault
or to have acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care
of petitioner's goods. Petitioner argues that in the circumstances of this case, private
respondent should have hired a security guard presumably to ride with the truck carrying the
600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the
standard of extraordinary diligence required private respondent to retain a security guard to
ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of
the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of
hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable,

unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts
or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by

thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and

(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment
used in the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed
to divest or to diminish such responsibility — even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold that the limits of the duty of extraordinary diligence
in the vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and carrying away
with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers
not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It
is necessary to recall that even common carriers are not made absolute insurers against all risks
of travel and of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of
an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.
G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners,

vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

Modesto S. Bascos for petitioner.

Pelaez, Adriano & Gregorio for private respondent.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. —

Article 1732 of the Civil Code 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, offering their services to the public." The test to
determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather
than the quantity or extent of the business transacted." . . . The holding of the Court in De
Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held
thus: "The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguished between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions."

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN

PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. — Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed
to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not
attach and these instances are enumerated in Article 1734. In those cases where the
presumption is applied, the common carrier must prove that it exercised 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,
private respondent need not introduce any evidence to prove her negligence. Her own failure
to adduce sufficient proof of extraordinary diligence made the presumption conclusive against
her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED
FROM LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that hijacking, not being
included in the provisions of Article 1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate
the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers
acted with grave or irresistible threat, violence, or force. 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 . . . (6) That the common carrier's
liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme
Court also held that: "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 of irresistible
threat, violence of force," We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence or force."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner

herself has made the admission that she was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are conclusive and no evidence is required to
prove the same.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF 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 from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are
available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS 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 what the law
defines it to be and not what it is called by the contracting parties.

DECISION

CAMPOS, JR., J p:

This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO
A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-
appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING,
defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted
hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which is
hereby affirmed in toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into
a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself
to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to
the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to
transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port
Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the
said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount
of the lost goods in accordance with the contract which stated that:

"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 during transport at market value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually,
Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment
4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was
supported by an affidavit 5 which contained the following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court,
whereby a writ of preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to do
so, with intent to defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the
cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any
liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as
follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering
the latter to pay the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to
be counted from December 4, 1986 until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's
judgment.

Consequently, petitioner filed this petition where she makes the following assignment of errors;
to wit:

"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE
OF CARGO TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT
THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.

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 HAS BEEN
RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted
in her answer that she did business under the name A.M. Bascos Trucking and that said
admission 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 petitioner was a common carrier, Moreover, both courts appreciated the
following pieces of evidence as indicators that petitioner was a common carrier: the fact that
the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of
soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of
the cargo was placed in petitioner's care.

In disputing the conclusion of the trial and appellate courts that petitioner was a common
carrier, she alleged in this petition that the contract between her and Rodolfo A. Cipriano,
representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which
referred to the contract as "lease". These affidavits 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 that: she was not catering
to the general public. Thus, in her answer to the amended complaint, she said that she does
business under 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 few customers only in view of the
fact that it is only a small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code 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, offering their services to the public." The test to
determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather
than the quantity or extent of the business transacted." 12 In this case, petitioner herself has
made the admission that she was in the trucking business, offering her trucks to those with
cargo to move. Judicial admissions are conclusive and no evidence is required to prove the
same. 13

But petitioner argues that there was only a contract of lease because 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
referred to as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is
instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts
have dismissed them as self-serving and petitioner contests the conclusion. We are bound by
the appellate court's factual conclusions. Yet, 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 what the law defines it to be and not what it is called by the
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

Likewise, We affirm the holding of the respondent court that the loss of the goods was not due
to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted
negligently 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 cases where the presumption is applied, the common carrier must
prove that it exercised extraordinary diligence in order to overcome the presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. 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;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:

"Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed
to divest or to diminish such responsibility — even for acts of strangers like thieves or robbers
except where such thieves or robbers in fact acted with grave or irresistible threat, violence or
force. We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus
Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the
Court of Appeals have concluded that these affidavits were not enough to 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
objection on the part of private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the 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 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 gleaned from the contents
of the petition. Affidavits are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and robbery against the
accused named in said affidavits did not necessarily mean that the contents of the affidavits
were true because they were yet to be determined in the trial of the criminal cases.

The presumption of negligence was raised against petitioner. It was 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 extraordinary
diligence made the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved, We
find no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision on the merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.

SO ORDERED.
G.R. No. 111127 July 26, 1996

MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA,
ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA,
YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN,
FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C.
CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES,
MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA,
MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC
and BERNADETTE FERRER, respondents.

MENDOZA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals1 in CA-GR No.
28245, dated September 30, 1992, which affirmed with modification the decision of the
Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay
damages to private respondent Amyline Antonio, and its resolution which denied petitioners'
motion for reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they
operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after
trying him out for two weeks, His job was to take school children to and from the St.
Scholastica's College in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry
from Manila to La Union and back in consideration of which private respondent paid petitioners
the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon.
However, as several members of the party were late, the bus did not leave the Tropical Hut at
the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil
drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being
his first trip to La Union), was forced to take a detour through the town of Baay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as "siete." The road was slippery
because it was raining, causing the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the
road and rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut
tree which it had hit fell on it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor
of the bus and pinned down by a wooden seat which came down by a wooden seat which came
off after being unscrewed. It took three persons to safely remove her from this portion. She
was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he
was not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road. He said that he saw the
curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30
kilometers per hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of
their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later
filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for
the damage to the latter's fence. On the basis of Escano's affidavit of desistance the case
against petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she underwent
and adduced evidence regarding the cost of her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Baay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Niño Hospital, also in the town of Ba-ay,
where she was given sedatives. An x-ray was taken and the damage to her spine was
determined to be too severe to be treated there. She was therefore brought to Manila, first to
the Philippine General Hospital and later to the Makati Medical Center where she underwent
an operation to correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the
defendants which ultimately resulted to the accident subject of this case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for damages, the
Court is therefore not in a position to award damages to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr.
& Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the
Civil Code of the Philippines and said defendants are ordered to pay jointly and severally to the
plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff

Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorney's fees;

6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio
but dismissed it with respect to the other plaintiffs on the ground that they failed to prove their
respective claims. The Court of Appeals modified the award of damages as follows:

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorney's fees; and

6) Costs of suit.

The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise
due care and precaution in the operation of his vehicle considering the time and the place of
the accident. The Court of Appeals held that the Fabres were themselves presumptively
negligent. Hence, this petition. Petitioners raise the following issues:
 I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE

INJURIES SUFFERED BY PRIVATE RESPONDENTS.

III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE

POSITIVE, UP TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual
employees do not have security of tenure, the award of P600,000.00, considering Amyline
Antonio's earnings, is without factual basis as there is no assurance that she would be regularly
earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory
that petitioners are liable for breach of contract of carriage or culpa contractual or on the
theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of
Appeals held, for although the relation of passenger and carrier is "contractual both in origin
and nature," nevertheless "the act that breaks the contract may be also a tort." 2 In either case,
the question is whether the bus driver, petitioner Porfirio Cabil, was negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the
bus, failed to exercise the diligence of a good father of the family in the selection and
supervision of their employee is fully supported by the evidence on record. These factual
findings of the two courts we regard as final and conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and as a
consequence, the road was slippery, and it was dark. He averred these facts to justify his failure
to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at
the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15
to 30 meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabil's first one outside of Manila, Cabil
should have driven his vehicle at a moderate speed. There is testimony 4 that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.

Considering the foregoing — the fact that it was raining and the road was slippery, that it was
dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal
speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was
grossly negligent and should be held liable for the injuries suffered by private respondent
Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervisions of
their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional driver's license. The employer should also examine the applicant for his
qualifications, experience and record of service. 5 Due diligence in supervision, on the other
hand, requires the formulation of rules and regulations for the guidance of employees and
issuance of proper instructions as well as actual implementation and monitoring of consistent
compliance with the rules.6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the
St. Scholastica's College in Metro Manila. 7They had hired him only after a two-week
apprenticeship. They had hired him only after a two-week apprenticeship. They had tested him
for certain matters, such as whether he could remember the names of the children he would be
taking to school, which were irrelevant to his qualification to drive on a long distance travel,
especially considering that the trip to La Union was his first. The existence of hiring procedures
and supervisory policies cannot be casually invoked to overturn the presumption of negligence
on the part of an employer. 8

Petitioners argue that they are not liable because (1) an earlier departure (made impossible by
the congregation's delayed meeting) could have a averted the mishap and (2) under the
contract, the WWCF was directly responsible for the conduct of the trip. Neither of these
contentions hold water. The hour of departure had not been fixed. Even if it had been, the
delay did not bear directly on the cause of the accident. With respect to the second contention,
it was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to
which he wishes to be conveyed, but exercises no other control over the conduct of the driver,
is not responsible for acts of negligence of the latter or prevented from recovering for injuries
suffered from a collision between the automobile and a train, caused by the negligence or the
automobile driver. 9

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did
not have to be engaged in the business of public transportation for the provisions of the Civil
Code on common carriers to apply to them. As this Court has held: 10

Art. 1732. Common carriers are persons, corporations, firms or associations

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

As common carriers, the Fabres were found to exercise "extraordinary diligence"

for the safe transportation of the passengers to their destination. This duty of
care is not excused by proof that they exercise the diligence of a good father of
the family in the selection and supervision of their employee. As Art. 1759 of the
Code provides:

Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees although such employees
may have acted beyond the scope of their authority or in violation of the orders
of the common carriers.

This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.

The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify
findings them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the
Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the
Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. 11 To the contrary, the award of
P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work
again has not been foreclosed. In fact she testified that one of her previous employers had
expressed willingness to employ her again.

With respect to the other awards, while the decisions of the trial court and the Court of Appeals
do not sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for quasi
delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of
moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of
contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art.
2220, since Cabil's gross negligence amounted to bad faith.12 Amyline Antonio's testimony, as
well as the testimonies of her father and copassengers, fully establish the physical suffering and
mental anguish she endured as a result of the injuries caused by petitioners' negligence.

The award of exemplary damages and attorney's fees was also properly made. However, for the
same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and
reduce the award of attorney's fees, inasmuch as private respondents, in whose favor the
awards were made, have not appealed. 13

As above stated, the decision of the Court of Appeals can be sustained either on the theory
of quasi delict or on that of breach of contract. The question is whether, as the two courts
below held, petitioners, who are the owners and driver of the bus, may be made to respond
jointly and severally to private respondent. We hold that they may be. In Dangwa
Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those in this case, this Court held the
bus company and the driver jointly and severally liable for damages for injuries suffered by a
passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when
a fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding
bus and suffered injuries, was held also jointly and severally liable with the bus company to the
injured passengers.

The same rule of liability was applied in situations where the negligence of the driver of the bus
on which plaintiff was riding concurred with the negligence of a third party who was the driver
of another vehicle, thus causing an accident. In Anuran v. Buño, 16 Batangas Laguna Tayabas
Bus Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of
Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the
vehicle were jointly and severally held liable to the injured passenger or the latters' heirs. The
basis of this allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:

Nor should it make any difference that the liability of petitioner [bus owner]
springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez
vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of
another vehicle, the drivers as well as the owners of the two vehicles are jointly
and severally liable for damages. Some members of the Court, though, are of the
view that under the circumstances they are liable on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the
jeepney driver from liability to the injured passengers and their families while holding the
owners of the jeepney jointly and severally liable, but that is because that case was expressly
tried and decided exclusively on the theory of culpa contractual. As this Court there explained:

The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and
Carreon (the jeepney owners) were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held
jointly and severally liable with carrier in case of breach of the contract of carriage. The
rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier
is exclusively responsible therefore to the passenger, even if such breach be due to the
negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April
29, 1966, 16 SCRA 742). 22

As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them to allege alternative causes of
action and join as many parties as may be liable on such causes of action 23 so long as private
respondent and her coplaintiffs do not recover twice for the same injury. What is clear from the
cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus,
justifying the holding that the carrier and the driver were jointly and severally liable because
their separate and distinct acts concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to

award of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent
Amyline Antonio the following amounts:

1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline

Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorney's fees; and

6) costs of suit.

SO ORDERED.
G.R. No. 186312 June 29, 2010

SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,

vs.
SUN HOLIDAYS, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 1 against
Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages
arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on
September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas
from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was
by virtue of a tour package-contract with respondent that included transportation to and from
the Resort and the point of departure in Batangas.

Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account
of the incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of September 10, 2000, but was advised to stay for another
night because of strong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to
Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and
into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one after the
other, M/B Coco Beach III capsized putting all passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing
the captain, Matute and the other passengers who reached the surface asked him what they
could do to save the people who were still trapped under the boat. The captain replied "Iligtas
niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22
persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island.
Eight passengers, including petitioners’ son and his wife, died during the incident.

At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for
Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of
$900.3

Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the
death of their son in the amount of at least ₱4,000,000.

Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of ₱10,000 to petitioners upon their signing of a waiver.

As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected,
alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco
Beach III to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric,
Geophysical and Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.6

In its Answer,7 respondent denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew members.
Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its
passengers; contrary to petitioners’ allegation, there was no storm on September 11, 2000 as
the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to capacity
and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged
that it is entitled to an award for attorney’s fees and litigation expenses amounting to not less
than ₱300,000.

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires
four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is
clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is
clearance from the Resort’s assistant manager.8 He added that M/B Coco Beach III met all four
conditions on September 11, 2000,9 but a subasco or squall, characterized by strong winds and
big waves, suddenly occurred, causing the boat to capsize.10

By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’
Complaint and respondent’s Counterclaim.

Petitioners’ Motion for Reconsideration having been denied by Order dated September 2,
2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding,
among other things, that the trial court correctly ruled that respondent is a private carrier
which is only required to observe ordinary diligence; that respondent in fact observed
extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the
proximate cause of the incident was a squall, a fortuitous event.

Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review.15

Petitioners maintain the position they took before the trial court, adding that respondent is a
common carrier since by its tour package, the transporting of its guests is an integral part of its
resort business. They inform that another division of the appellate court in fact held respondent
liable for damages to the other survivors of the incident.

Upon the other hand, respondent contends that petitioners failed to present evidence to prove
that it is a common carrier; that the Resort’s ferry services for guests cannot be considered as
ancillary to its business as no income is derived therefrom; that it exercised extraordinary
diligence as shown by the conditions it had imposed before allowing M/B Coco Beach III to sail;
that the incident was caused by a fortuitous event without any contributory negligence on its
part; and that the other case wherein the appellate court held it liable for damages involved
different plaintiffs, issues and evidence.16

The petition is impressed with merit.

Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent as a

common carrier.

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

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits business only
from a narrow segment of the general population. We think that Article 1733 deliberately
refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:

. . . every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine repair shop,
wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public
services . . .18 (emphasis and underscoring supplied.)

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondent’s ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And the
tour packages it offers, which include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the public.

That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in
arriving at the tour package price. That guests who opt not to avail of respondent’s ferry
services pay the same amount is likewise inconsequential. These guests may only be deemed to
have overpaid.

As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has
deliberately refrained from making distinctions on whether the carrying of persons or goods is
the carrier’s principal business, whether it is offered on a regular basis, or whether it is offered
to the general public. The intent of the law is thus to not consider such distinctions. Otherwise,
there is no telling how many other distinctions may be concocted by unscrupulous businessmen
engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities
of common carriers.

Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case.19 They are bound to carry
the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed
that the common carrier is at fault or negligent. In fact, there is even no need for the court to
make an express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence.21

Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions
of voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent’s
position does not impress.

The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in
Northern Luzon which would also affect the province of Mindoro. 22 By the testimony of Dr.
Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under such
weather condition.23

A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other people’s lives at risk. The extraordinary diligence required of common
carriers demands that they take care of the goods or lives entrusted to their hands as if they
were their own. This respondent failed to do.

Respondent’s insistence that the incident was caused by a fortuitous event does not impress
either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been
such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and
(d) the obligor must have been free from any participation in the aggravation of the resulting
injury to the creditor.24

To fully free a common carrier from any liability, the fortuitous event must have been
the proximate and only causeof the loss. And it should have exercised due diligence to prevent
or minimize the loss before, during and after the occurrence of the fortuitous event. 25

Respondent cites the squall that occurred during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was
expected under the weather condition of September 11, 2000. Moreover, evidence shows that
M/B Coco Beach III suffered engine trouble before it capsized and sank.26 The incident was,
therefore, not completely free from human intervention.
The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the occurrence
of the squall.

Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach of its
contract of carriage that results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000. 29

As for damages representing unearned income, the formula for its computation is:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living
expenses).

Life expectancy is determined in accordance with the formula:

2 / 3 x [80 — age of deceased at the time of death]30

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at
death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.31

The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses.32 The loss is not equivalent to the entire
earnings of the deceased, but only such portion as he would have used to support his
dependents or heirs. Hence, to be deducted from his gross earnings are the necessary expenses
supposed to be used by the deceased for his own needs.33

In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency
Corp. v. Borja34teaches that when, as in this case, there is no showing that the living expenses
constituted the smaller percentage of the gross income, the living expenses are fixed at half of
the gross income.

Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:

Life expectancy = 2/3 x [80 - age of deceased at the time of death]

2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 35 which,
when converted to Philippine peso applying the annual average exchange rate of $1 = ₱44 in
2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is thus computed as follows:

Net Earning = life expectancy x (gross annual income - reasonable and

Capacity necessary living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)
Net Earning
= ₱8,316,000
Capacity

Respecting the award of moral damages, since respondent common carrier’s breach of contract
of carriage resulted in the death of petitioners’ son, following Article 1764 vis-à-vis Article 2206
of the Civil Code, petitioners are entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence required of
common carriers, it is presumed to have acted recklessly, thus warranting the award too of
exemplary damages, which are granted in contractual obligations if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.37

Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as

moral damages and ₱100,000 as exemplary damages.381avvphi1

Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for payment of interest in the concept of actual and
compensatory damages, subject to the following rules, to wit —

1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
 with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the quantification
of damages may be deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
(emphasis supplied).

Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the
rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the
immediately cited guideline in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the
following: (1) ₱50,000 as indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as indemnity
for Ruelito’s loss of earning capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as
exemplary damages; (5) 10% of the total amount adjudged against respondent as attorneys
fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.

SO ORDERED.
G.R. No. 179446 January 10, 2011

LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,

vs.
GLODEL BROKERAGE CORPORATION and R&B INSURANCE CORPORATION, Respondents.

DECISION

MENDOZA, J.:

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

THE FACTS:

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

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

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

Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the copper
cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount of ₱1,903,335.39. After the requisite investigation and adjustment,
R&B Insurance paid Columbia the amount of ₱1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel
before the Regional Trial Court, Branch 14, Manila (RTC), docketed as Civil Case No. 02-103040.
It sought reimbursement of the amount it had paid to Columbia for the loss of the subject
cargo. It claimed that it had been subrogated "to the right of the consignee to recover from the
party/parties who may be held legally liable for the loss."2

On November 19, 2003, the RTC rendered a decision3 holding Glodel liable for damages for the
loss of the subject cargo and dismissing Loadmasters’ counterclaim for damages and attorney’s
fees against R&B Insurance. The dispositive portion of the decision reads:

WHEREFORE, all premises considered, the plaintiff having established by preponderance of

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

1. To pay plaintiff R&B Insurance Corporation the sum of ₱1,896,789.62 as actual and
compensatory damages, with interest from the date of complaint until fully paid;

2. To pay plaintiff R&B Insurance Corporation the amount equivalent to 10% of the
principal amount recovered as and for attorney’s fees plus ₱1,500.00 per appearance in
Court;

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

expenses.

WHEREAS, the defendant Loadmasters Customs Services, Inc.’s counterclaim for damages and
attorney’s fees against plaintiff are hereby dismissed.

With costs against defendant Glodel Brokerage Corporation.

SO ORDERED.4

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

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

Considering that appellee is an agent of appellant Glodel, whatever liability the latter owes to
appellant R&B Insurance Corporation as insurance indemnity must likewise be the amount it
shall be paid by appellee Loadmasters.

WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED in that the appellee
Loadmasters is likewise held liable to appellant Glodel in the amount of ₱1,896,789.62
representing the insurance indemnity appellant Glodel has been held liable to appellant R&B
Insurance Corporation.
Appellant Glodel’s appeal to absolve it from any liability is herein DISMISSED.

SO ORDERED.5

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

ISSUES

1. Can Petitioner Loadmasters be held liable to Respondent Glodel in spite of the fact
that the latter respondent Glodel did not file a cross-claim against it (Loadmasters)?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage Service, Inc.
v. Phoenix Assurance Company of New York,/McGee & Co., Inc.19 where this Court held that a
tort may arise despite the absence of a contractual relationship, to wit:

We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against
Mindanao Terminal, from which the present case has arisen, states a cause of action. The
present action is based on quasi-delict, arising from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte Produce. Even assuming that both Phoenix and
McGee have only been subrogated in the rights of Del Monte Produce, who is not a party to the
contract of service between Mindanao Terminal and Del Monte, still the insurance carriers may
have a cause of action in light of the Court’s consistent ruling that the act that breaks the
contract may be also a tort. In fine, a liability for tort may arise even under a contract, where
tort is that which breaches the contract. In the present case, Phoenix and McGee are not suing
for damages for injuries arising from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal handled the cargoes belonging to Del
Monte Produce. Despite the absence of contractual relationship between Del Monte Produce
and Mindanao Terminal, the allegation of negligence on the part of the defendant should be
sufficient to establish a cause of action arising from quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:

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

xxxx

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

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

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

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

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

Accordingly, there can be no contract of agency between the parties. Loadmasters never
represented Glodel. Neither was it ever authorized to make such representation. It is a settled
rule that the basis for agency is representation, that is, the agent acts for and on behalf of the
principal on matters within the scope of his authority and said acts have the same legal effect
as if they were personally executed by the principal. On the part of the principal, there must be
an actual intention to appoint or an intention naturally inferable from his words or actions,
while on the part of the agent, there must be an intention to accept the appointment and act
on it.23 Such mutual intent is not obtaining in this case.

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

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

There is no contribution between joint tortfeasors whose liability is solidary since both of them
are liable for the total damage. Where the concurrent or successive negligent acts or omissions
of two or more persons, although acting independently, are in combination the direct and
proximate cause of a single injury to a third person, it is impossible to determine in what
proportion each contributed to the injury and either of them is responsible for the whole
injury. Where their concurring negligence resulted in injury or damage to a third party, they
become joint tortfeasors and are solidarily liable for the resulting damage under Article 2194 of
the Civil Code. [Emphasis supplied]

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

Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach of contract
of service as the latter is primarily liable for the loss of the subject cargo. In this case, however,
it cannot succeed in seeking judicial sanction against Loadmasters because the records disclose
that it did not properly interpose a cross-claim against the latter. Glodel did not even pray that
Loadmasters be liable for any and all claims that it may be adjudged liable in favor of R&B
Insurance. Under the Rules, a compulsory counterclaim, or a cross-claim, not set up shall be
barred.25Thus, a cross-claim cannot be set up for the first time on appeal.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on
equitable grounds. "Equity, which has been aptly described as ‘a justice outside legality,’ is
applied only in the absence of, and never against, statutory law or judicial rules of
procedure."26 The Court cannot be a lawyer and take the cudgels for a party who has been at
fault or negligent.

WHEREFORE, the petition is PARTIALLY GRANTED. The August 24, 2007 Decision of the Court of
Appeals is MODIFIED to read as follows:

WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs Services, Inc.

and respondent Glodel Brokerage Corporation jointly and severally liable to respondent R&B
Insurance Corporation for the insurance indemnity it paid to consignee Columbia Wire & Cable
Corporation and ordering both parties to pay, jointly and severally, R&B Insurance Corporation
a] the amount of ₱1,896,789.62 representing the insurance indemnity; b] the amount
equivalent to ten (10%) percent thereof for attorney’s fees; and c] the amount of ₱22,427.18
for litigation expenses.

The cross-claim belatedly prayed for by respondent Glodel Brokerage Corporation against
petitioner Loadmasters Customs Services, Inc. is DENIED.

SO ORDERED.
G.R. No. 150255. April 22, 2005

SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners,

vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA
SHIPPING AND DODWELL now INCHCAPE SHIPPING SERVICES, Respondents.

DECISION

CARPIO-MORALES, J.:

On petition for review is the June 27, 2001 Decision1 of the Court of Appeals, as well as its
Resolution2 dated September 28, 2001 denying the motion for reconsideration, which affirmed
that of Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-631323 holding
petitioner Schmitz Transport Brokerage Corporation (Schmitz Transport), together with Black
Sea Shipping Corporation (Black Sea), represented by its ship agent Inchcape Shipping Inc.
(Inchcape), and Transport Venture (TVI), solidarily liable for the loss of 37 hot rolled steel sheets
in coil that were washed overboard a barge.

On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia
on board M/V "Alexander Saveliev" (a vessel of Russian registry and owned by Black Sea) 545
hot rolled steel sheets in coil weighing 6,992,450 metric tons.

The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little
Giant Steel Pipe Corporation (Little Giant),4 were insured against all risks with Industrial
Insurance Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747-TIS.5

The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority
(PPA) assigned it a place of berth at the outside breakwater at the Manila South Harbor. 6

Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to
receive the cargoes from the shipside, and to deliver them to its (the consignee’s) warehouse at
Cainta, Rizal,7 in turn engaged the services of TVI to send a barge and tugboat at shipside.

On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the barge "Erika V" to
shipside.8

By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the
vessel, left and returned to the port terminal.9 At 9:00 p.m., arrastre operator Ocean Terminal
Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the barge.

By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement
due to an approaching storm, the unloading unto the barge of the 37 coils was
accomplished.10 No tugboat pulled the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves, 11 the crew of the barge
abandoned it and transferred to the vessel. The barge pitched and rolled with the waves and
eventually capsized, washing the 37 coils into the sea.12 At 7:00 a.m., a tugboat finally arrived to
pull the already empty and damaged barge back to the pier.13

Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover
the lost cargoes proved futile.14

Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of
₱5,246,113.11. Little Giant thereupon executed a subrogation receipt15 in favor of Industrial
Insurance.

Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea
through its representative Inchcape (the defendants) before the RTC of Manila, for the recovery
of the amount it paid to Little Giant plus adjustment fees, attorney’s fees, and litigation
expenses.16

Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while
typhoon signal No. 1 was raised in Metro Manila.17

By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for
unloading the cargoes outside of the breakwater notwithstanding the storm signal.18 The
dispositive portion of the decision reads:

WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff,
ordering the defendants to pay plaintiff jointly and severally the sum of ₱5,246,113.11 with
interest from the date the complaint was filed until fully satisfied, as well as the sum of
₱5,000.00 representing the adjustment fee plus the sum of 20% of the amount recoverable
from the defendants as attorney’s fees plus the costs of suit. The counterclaims and cross
claims of defendants are hereby DISMISSED for lack of [m]erit.19

To the trial court’s decision, the defendants Schmitz Transport and TVI filed a joint motion for
reconsideration assailing the finding that they are common carriers and the award of excessive
attorney’s fees of more than ₱1,000,000. And they argued that they were not motivated by
gross or evident bad faith and that the incident was caused by a fortuitous event. 20

By resolution of February 4, 1998, the trial court denied the motion for reconsideration. 21

All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001,
affirmed in toto the decision of the trial court, 22 it finding that all the defendants were common
carriers — Black Sea and TVI for engaging in the transport of goods and cargoes over the seas as
a regular business and not as an isolated transaction,23 and Schmitz Transport for entering into
a contract with Little Giant to transport the cargoes from ship to port for a fee.24
In holding all the defendants solidarily liable, the appellate court ruled that "each one was
essential such that without each other’s contributory negligence the incident would not have
happened and so much so that the person principally liable cannot be distinguished with
sufficient accuracy."25

In discrediting the defense of fortuitous event, the appellate court held that "although
defendants obviously had nothing to do with the force of nature, they however had control of
where to anchor the vessel, where discharge will take place and even when the discharging will
commence."26

The defendants’ respective motions for reconsideration having been denied by Resolution 27 of
September 28, 2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present
petition against TVI, Industrial Insurance and Black Sea.

Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal,
consignee Little Giant, hence, the transportation contract was by and between Little Giant and
TVI.28

By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI
were required to file their respective Comments.29

By its Comment, Black Sea argued that the cargoes were received by the consignee through
petitioner in good order, hence, it cannot be faulted, it having had no control and supervision
thereover.30

For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and
transferred them unto the barge upon the instruction of petitioner.31

In issue then are:

(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of
negligence on the part of petitioner Black Sea and TVI, and

(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and
TVI.

When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and
all liability arising therefrom:

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be foreseen, or which though foreseen,
were inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligation, must be
independent of human will; (2) it must be impossible to foresee the event which constitute the
caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the
obligor must be free from any participation in the aggravation of the injury resulting to the
creditor.32

[T]he principle embodied in the act of God doctrine strictly requires that the act must be
occasioned solely by the violence of nature. Human intervention is to be excluded from creating
or entering into the cause of the mischief. When the effect is found to be in part the result of
the participation of man, whether due to his active intervention or neglect or failure to act, the
whole occurrence is then humanized and removed from the rules applicable to the acts of
God.33

The appellate court, in affirming the finding of the trial court that human intervention in the
form of contributory negligence by all the defendants resulted to the loss of the cargoes, 34 held
that unloading outside the breakwater, instead of inside the breakwater, while a storm signal
was up constitutes negligence.35 It thus concluded that the proximate cause of the loss was
Black Sea’s negligence in deciding to unload the cargoes at an unsafe place and while a typhoon
was approaching.36

From a review of the records of the case, there is no indication that there was greater risk in
loading the cargoes outside the breakwater. As the defendants proffered, the weather on
October 26, 1991 remained normal with moderate sea condition such that port operations
continued and proceeded normally.37

The weather data report,38 furnished and verified by the Chief of the Climate Data Section of
PAG-ASA and marked as a common exhibit of the parties, states that while typhoon signal No. 1
was hoisted over Metro Manila on October 23-31, 1991, the sea condition at the port of Manila
at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. It cannot, therefore, be said that
the defendants were negligent in not unloading the cargoes upon the barge on October 26,
1991 inside the breakwater.

That no tugboat towed back the barge to the pier after the cargoes were completely loaded by
12:30 in the morning39 is, however, a material fact which the appellate court failed to properly
consider and appreciate40 — the proximate cause of the loss of the cargoes. Had the barge been
towed back promptly to the pier, the deteriorating sea conditions notwithstanding, the loss
could have been avoided. But the barge was left floating in open sea until big waves set in at
5:30 a.m., causing it to sink along with the cargoes.41 The loss thus falls outside the "act of God
doctrine."

The proximate cause of the loss having been determined, who among the parties is/are
responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the appellate court, finds that petitioner is
a common carrier. For it undertook to transport the cargoes from the shipside of "M/V
Alexander Saveliev" to the consignee’s warehouse at Cainta, Rizal. As the appellate court put it,
"as long as a person or corporation holds [itself] to the public for the purpose of transporting
goods as [a] business, [it] is already considered a common carrier regardless if [it] owns the
vehicle to be used or has to hire one."42 That petitioner is a common carrier, the testimony of
its own Vice-President and General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes reflects so.

Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President
and General Manager of said Company?

Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the
company. I also handle the various division heads of the company for operation matters, and all
other related functions that the President may assign to me from time to time, Sir.

Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell
the Honorable Court if you came to know the company by the name Little Giant Steel Pipe
Corporation?

A: Yes, Sir. Actually, we are the brokerage firm of that Company.

Q: And since when have you been the brokerage firm of that company, if you can recall?

A: Since 1990, Sir.

Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you
perform in behalf of this company?

A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also
in-charged of the delivery of the goods to their warehouses. We also handled the clearances of
their shipment at the Bureau of Customs, Sir.

xxx

Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with
regards to this shipment? What work did you do with this shipment?

A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of
[the] cargo[es] from lighter to BASECO then to the truck and to the warehouse, Sir.

Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to
perform, what equipment do (sic) you require or did you use in order to effect this unloading,
transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to
lighter, and on this we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was]
in-charged (sic) of the barges. Also, in BASECO compound we are leasing cranes to have the
cargo unloaded from the barge to trucks, [and] then we used trucks to deliver [the cargoes] to
the consignee’s warehouse, Sir.

Q: And whose trucks do you use from BASECO compound to the consignee’s warehouse?

A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.

xxx

ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to
contract for the barges of Transport Ventures Incorporated in this particular operation?

A: Firstly, we don’t own any barges. That is why we hired the services of another firm whom we
know [al]ready for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied) 43

It is settled that under a given set of facts, a customs broker may be regarded as a common
carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of
Appeals,44 held:

The appellate court did not err in finding petitioner, a customs broker, to be also a common
carrier, as defined under Article 1732 of the Civil Code, to wit,

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.

xxx

Article 1732 does not distinguish between one whose principal business activity is the carrying
of goods and one who does such carrying only as an ancillary activity. The contention,
therefore, of petitioner that it is not a common carrier but a customs broker whose principal
function is to prepare the correct customs declaration and proper shipping documents as
required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for
pecuniary consideration.45

And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held that as the transportation of
goods is an integral part of a customs broker, the customs broker is also a common carrier. For
to declare otherwise "would be to deprive those with whom [it] contracts the protection which
the law affords them notwithstanding the fact that the obligation to carry goods for [its]
customers, is part and parcel of petitioner’s business."47
As for petitioner’s argument that being the agent of Little Giant, any negligence it committed
was deemed the negligence of its principal, it does not persuade.

True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In
effecting the transportation of the cargoes from the shipside and into Little Giant’s warehouse,
however, petitioner was discharging its own personal obligation under a contact of carriage.

Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler48 to
provide the barge and the tugboat. In their Service Contract,49 while Little Giant was named as
the consignee, petitioner did not disclose that it was acting on commission and was chartering
the vessel for Little Giant.50 Little Giant did not thus automatically become a party to the Service
Contract and was not, therefore, bound by the terms and conditions therein.

Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but
it can maintain a cause of action for negligence.51

In the case of TVI, while it acted as a private carrier for which it was under no duty to observe
extraordinary diligence, it was still required to observe ordinary diligence to ensure the proper
and careful handling, care and discharge of the carried goods.

Thus, Articles 1170 and 1173 of the Civil Code provide:

ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.

ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which
is required by the nature of the obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows bad faith, the provisions of
articles 1171 and 2202, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the performance,
that which is expected of a good father of a family shall be required.

Was the reasonable care and caution which an ordinarily prudent person would have used in
the same situation exercised by TVI?52

This Court holds not.

TVI’s failure to promptly provide a tugboat did not only increase the risk that might have been
reasonably anticipated during the shipside operation, but was the proximate cause of the loss.
A man of ordinary prudence would not leave a heavily loaded barge floating for a considerable
number of hours, at such a precarious time, and in the open sea, knowing that the barge does
not have any power of its own and is totally defenseless from the ravages of the sea. That it was
nighttime and, therefore, the members of the crew of a tugboat would be charging overtime
pay did not excuse TVI from calling for one such tugboat.

As for petitioner, for it to be relieved of liability, it should, following Article 1739 53 of the Civil
Code, prove that it exercised due diligence to prevent or minimize the loss, before, during and
after the occurrence of the storm in order that it may be exempted from liability for the loss of
the goods.

While petitioner sent checkers54 and a supervisor55 on board the vessel to counter-check the
operations of TVI, it failed to take all available and reasonable precautions to avoid the loss.
After noting that TVI failed to arrange for the prompt towage of the barge despite the
deteriorating sea conditions, it should have summoned the same or another tugboat to extend
help, but it did not.

This Court holds then that petitioner and TVI are solidarily liable56 for the loss of the cargoes.
The following pronouncement of the Supreme Court is instructive:

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176 and related provisions, in conjunction with Article 2180 of the Civil
Code. x x x [O]ne might ask further, how then must the liability of the common carrier, on one
hand, and an independent contractor, on the other hand, be described? It would be solidary. A
contractual obligation can be breached by tort and when the same act or omission causes the
injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the
Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort
is that which breaches the contract. Stated differently, when an act which constitutes a breach
of contract would have itself constituted the source of a quasi-delictual liability had no contract
existed between the parties, the contract can be said to have been breached by tort, thereby
allowing the rules on tort to apply.57

As for Black Sea, its duty as a common carrier extended only from the time the goods were
surrendered or unconditionally placed in its possession and received for transportation until
they were delivered actually or constructively to consignee Little Giant.58

Parties to a contract of carriage may, however, agree upon a definition of delivery that extends
the services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the
shipment provides that delivery be made "to the port of discharge or so near thereto as she
may safely get, always afloat."59 The delivery of the goods to the consignee was not from "pier
to pier" but from the shipside of "M/V Alexander Saveliev" and into barges, for which reason
the consignee contracted the services of petitioner. Since Black Sea had constructively
delivered the cargoes to Little Giant, through petitioner, it had discharged its duty. 60

In fine, no liability may thus attach to Black Sea.

Respecting the award of attorney’s fees in an amount over ₱1,000,000.00 to Industrial

Insurance, for lack of factual and legal basis, this Court sets it aside. While Industrial Insurance
was compelled to litigate its rights, such fact by itself does not justify the award of attorney’s
fees under Article 2208 of the Civil Code. For no sufficient showing of bad faith would be
reflected in a party’s persistence in a case other than an erroneous conviction of the
righteousness of his cause.61 To award attorney’s fees to a party just because the judgment is
rendered in its favor would be tantamount to imposing a premium on one’s right to litigate or
seek judicial redress of legitimate grievances.62

On the award of adjustment fees: The adjustment fees and expense of divers were incurred by
Industrial Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost
cargo. They do not constitute actual damages.63

As for the court a quo’s award of interest on the amount claimed, the same calls for
modification following the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals64 that when
the demand cannot be reasonably established at the time the demand is made, the interest
shall begin to run not from the time the claim is made judicially or extrajudicially but from the
date the judgment of the court is made (at which the time the quantification of damages may
be deemed to have been reasonably ascertained).65

WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage
Corporation, and Transport Venture Incorporation jointly and severally liable for the amount of
₱5,246,113.11 with the MODIFICATION that interest at SIX PERCENT per annum of the amount
due should be computed from the promulgation on November 24, 1997 of the decision of the
trial court.

Costs against petitioner.

SO ORDERED.
G.R. No. 149038 April 9, 2003

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner,

vs.
PKS SHIPPING COMPANY, respondent.

VITUG, J.:

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

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

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

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

Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of
the trial court. The appellate court ruled that evidence to establish that PKS Shipping was a
common carrier at the time it undertook to transport the bags of cement was wanting because
the peculiar method of the shipping company’s carrying goods for others was not generally held
out as a business but as a casual occupation. It then concluded that PKS Shipping, not being a
common carrier, was not expected to observe the stringent extraordinary diligence required of
common carriers in the care of goods. The appellate court, moreover, found that the loss of the
goods was sufficiently established as having been due to fortuitous event, negating any liability
on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed a patent
error in ruling that PKS Shipping is not a common carrier and that it is not liable for the loss of
the subject cargo. The fact that respondent has a limited clientele, petitioner argues, does not
militate against respondent’s being a common carrier and that the only way by which such
carrier can be held exempt for the loss of the cargo would be if the loss were caused by natural
disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the Philippine
area of responsibility and that, even if it did, respondent would not be exempt from liability
because its employees, particularly the tugmaster, have failed to exercise due diligence to
prevent or minimize the loss.

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

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

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

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

"Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water,
or air for compensation, offering their services to the public."

Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it
defines "public service" to be –

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

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

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

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

Much of the distinction between a "common or public carrier" and a "private or special carrier"
lies in the character of the business, such that if the undertaking is an isolated transaction, not a
part of the business or occupation, and the carrier does not hold itself out to carry the goods
for the general public or to a limited clientele, although involving the carriage of goods for a
fee,3 the person or corporation providing such service could very well be just a private carrier. A
typical case is that of a charter party which includes both the vessel and its crew, such as in a
bareboat or demise, where the charterer obtains the use and service of all or some part of a
ship for a period of time or a voyage or voyages4 and gets the control of the vessel and its
crew.5 Contrary to the conclusion made by the appellate court, its factual findings indicate that
PKS Shipping has engaged itself in the business of carrying goods for others, although for a
limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this
area indicates more than just a casual activity on its part.6 Neither can the concept of a
common carrier change merely because individual contracts are executed or entered into with
patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier
to escape liability by the simple expedient of entering into those distinct agreements with
clients.
Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence
demanded of common carriers, Article 1733 of the Civil Code requires common carriers to
observe extraordinary diligence in the vigilance over the goods they carry. In case of loss,
destruction or deterioration of goods, common carriers are presumed to have been at fault or
to have acted negligently, and the burden of proving otherwise rests on them. 7 The provisions
of Article 1733, notwithstanding, common carriers are exempt from liability for loss,
destruction, or deterioration of the goods due to any of the following causes:

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

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

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

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

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

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

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

All given then, the appellate court did not err in its judgment absolving PKS Shipping from
liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.

SO ORDERED.
G.R. No. 141910 August 6, 2002

FGU INSURANCE CORPORATION, petitioner,

vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.

VITUG, J.:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert
Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing
the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to
the cargoes.

FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the
subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of
the amount it had paid to the latter from GPS. Since the trucking company failed to heed the
claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its
driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents further
claimed that the cause of damage was purely accidental.1âwphi1.nêt

The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting
its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a common carrier.

The trial court, in its order of 30 April 1996,1 granted the motion to dismiss, explaining thusly:

"Under Section 1 of Rule 131 of the Rules of Court, it is provided that ‘Each party must
prove his own affirmative allegation, xxx.’

"In the instant case, plaintiff did not present any single evidence that would prove that
defendant is a common carrier.

"x x x xxx xxx

"Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss,
 damage or deterioration of goods during transport under 1735 of the Civil Code is not
availing.

"Thus, the laws governing the contract between the owner of the cargo to whom the
plaintiff was subrogated and the owner of the vehicle which transports the cargo are the
laws on obligation and contract of the Civil Code as well as the law on quasi delicts.

"Under the law on obligation and contract, negligence or fault is not presumed. The law
on quasi delict provides for some presumption of negligence but only upon the
attendance of some circumstances. Thus, Article 2185 provides:

‘Art. 2185. Unless there is proof to the contrary, it is presumed that a person
driving a motor vehicle has been negligent if at the time of the mishap, he was
violating any traffic regulation.’

"Evidence for the plaintiff shows no proof that defendant was violating any traffic
regulation. Hence, the presumption of negligence is not obtaining.

"Considering that plaintiff failed to adduce evidence that defendant is a common carrier
and defendant’s driver was the one negligent, defendant cannot be made liable for the
damages of the subject cargoes."2

The subsequent motion for reconsideration having been denied,3 plaintiff interposed an appeal
to the Court of Appeals, contending that the trial court had erred (a) in holding that the
appellee corporation was not a common carrier defined under the law and existing
jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence.

The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999,4 discoursed, among other things, that -

"x x x in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that
the appellee is a common carrier. Should the appellant fail to prove that the appellee is
a common carrier, the presumption would not arise; consequently, the appellant would
have to prove that the carrier was negligent.

"x x x xxx xxx

"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its `limited clientele,’ (assuming it was really a common
carrier), it follows that it (appellant) has the burden of proving the same. It (plaintiff-
appellant) `must establish his case by a preponderance of evidence, which means that
the evidence as a whole adduced by one side is superior to that of the other.’ (Summa
Insurance Corporation vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the
 appellant failed to do -- hence, the dismissal of the plaintiff’s complaint by the trial court
is justified.

"x x x xxx xxx

"Based on the foregoing disquisitions and considering the circumstances that the
appellee trucking corporation has been `its exclusive contractor, hauler since 1970,
defendant has no choice but to comply with the directive of its principal,’ the inevitable
conclusion is that the appellee is a private carrier.

"x x x xxx xxx

"x x x the lower court correctly ruled that 'the application of the law on common carriers
is not warranted and the presumption of fault or negligence on the part of a common
carrier in case of loss, damage or deterioration of good[s] during transport under
[article] 1735 of the Civil Code is not availing.' x x x.

"Finally, We advert to the long established rule that conclusions and findings of fact of a
trial court are entitled to great weight on appeal and should not be disturbed unless for
strong and valid reasons."5

Petitioner's motion for reconsideration was likewise denied;6 hence, the instant
petition,7 raising the following issues:

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED

UNDER THE LAW AND EXISTING JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER,

MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO
TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE
CUSTODY AND POSSESSION.

III

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.

On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to
be amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a
common carrier. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for
hire or compensation, offering their services to the public,8 whether to the public in general or
to a limited clientele in particular, but never on an exclusive basis.9 The true test of a common
carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee.10Given accepted standards, GPS scarcely falls
within the term "common carrier."

The above conclusion nothwithstanding, GPS cannot escape from liability.

In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.11 The law, recognizing the
obligatory force of contracts,12 will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. 13 A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee
that may include his "expectation interest," which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract been
performed, or his "reliance interest," which is his interest in being reimbursed for loss caused
by reliance on the contract by being put in as good a position as he would have been in had the
contract not been made; or his "restitution interest," which is his interest in having restored to
him any benefit that he has conferred on the other party.14 Indeed, agreements can accomplish
little, either for their makers or for society, unless they are made the basis for action.15 The
effect of every infraction is to create a new duty, that is, to make recompense to the one who
has been injured by the failure of another to observe his contractual obligation 16 unless he can
show extenuating circumstances, like proof of his exercise of due diligence (normally that of the
diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous
event, to excuse him from his ensuing liability.

Respondent trucking corporation recognizes the existence of a contract of carriage between it

and petitioner’s assured, and admits that the cargoes it has assumed to deliver have been lost
or damaged while in its custody. In such a situation, a default on, or failure of compliance with,
the obligation – in this case, the delivery of the goods in its custody to the place of destination -
gives rise to a presumption of lack of care and corresponding liability on the part of the
contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.

Respondent driver, on the other hand, without concrete proof of his negligence or fault, may
not himself be ordered to pay petitioner. The driver, not being a party to the contract of
carriage between petitioner’s principal and defendant, may not be held liable under the
agreement. A contract can only bind the parties who have entered into it or their successors
who have assumed their personality or their juridical position.17 Consonantly with the axiom res
inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioner’s civil action against the driver can only be based on culpa aquiliana, which,
unlike culpa contractual, would require the claimant for damages to prove negligence or fault
on the part of the defendant.18

A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant
liable where the thing which caused the injury complained of is shown to be under the latter’s
management and the accident is such that, in the ordinary course of things, cannot be expected
to happen if those who have its management or control use proper care. It affords reasonable
evidence, in the absence of explanation by the defendant, that the accident arose from want of
care.19 It is not a rule of substantive law and, as such, it does not create an independent ground
of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it
furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of
negligence. The maxim simply places on the defendant the burden of going forward with the
proof.20 Resort to the doctrine, however, may be allowed only when (a) the event is of a kind
which does not ordinarily occur in the absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the
plaintiff.21 Thus, it is not applicable when an unexplained accident may be attributable to one of
several causes, for some of which the defendant could not be responsible.22

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties.23 Nevertheless, the requirement that responsible causes other than those due to
defendant’s conduct must first be eliminated, for the doctrine to apply, should be understood
as being confined only to cases of pure (non-contractual) tort since obviously the presumption
of negligence in culpa contractual, as previously so pointed out, immediately attaches by a
failure of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action
is predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right to present evidence.24 Thus, respondent
corporation may no longer offer proof to establish that it has exercised due care in transporting
the cargoes of the assured so as to still warrant a remand of the case to the trial
court.1âwphi1.nêt

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati
City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar
as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and
decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation
which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the damaged
and lost cargoes in the amount of P204,450.00. No costs. SO ORDERED.
G.R. No. 148496 March 19, 2002

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER
TERMINAL SERVICES, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.

MENDOZA, J.:

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

The facts are as follows:

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

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

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

The trial court held:

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

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

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

is a finding which cannot be traversed and overturned.

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

....

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

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

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

1. The sum of P93,112.00 plus interest;

 2. 25% thereof as lawyer's fee;

3. Costs of suit.4

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

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING
THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS
AND MANIFESTLY MISTAKEN INFERENCE.

II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN

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

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

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

The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a similar
contention and held the party to be a common carrier, thus -

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

"Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water,
or air for compensation, offering their services to the public."

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

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

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

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

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

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

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

vigilance over goods" was explained thus:

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

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

MAXU-2062880 - rain gutter deformed/cracked

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

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

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

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

ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.10

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

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

Details of Discharge:

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

Transfer/Delivery:

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

[The cargo] was finally delivered to the consignee's storage warehouse located at
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990. 12

As found by the Court of Appeals:

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

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

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

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

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

....

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s
in the container, is/are known to the carrier or his employees or apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for damage resulting
therefrom.14 In this case, petitioner accepted the cargo without exception despite the apparent
defects in some of the container vans. Hence, for failure of petitioner to prove that she
exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from
liability, the presumption of negligence as provided under Art. 1735 15 holds.

WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1âwphi1.nêt

SO ORDERED.
G.R. No. 172822 Petitioner,

MOF COMPANY, INC., Petitioner,

vs.
SHIN YANG BROKERAGE CORPORATION Respondent.

DECISION

DEL CASTILLO, J.:

The necessity of proving lies with the person who sues.

The refusal of the consignee named in the bill of lading to pay the freightage on the claim that it
is not privy to the contract of affreightment propelled the shipper to sue for collection of
money, stressing that its sole evidence, the bill of lading, suffices to prove that the consignee is
bound to pay. Petitioner now comes to us by way of Petition for Review on Certiorari1 under
Rule 45 praying for the reversal of the Court of Appeals' (CA) judgment that dismissed its action
for sum of money for insufficiency of evidence.

Factual Antecedents

On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila
secondhand cars and other articles on board the vessel Hanjin Busan 0238W. The bill of lading
covering the shipment, i.e., Bill of Lading No. HJSCPUSI14168303,2 which was prepared by the
carrier Hanjin Shipping Co., Ltd. (Hanjin), named respondent Shin Yang Brokerage Corp. (Shin
Yang) as the consignee and indicated that payment was on a "Freight Collect" basis, i.e., that
the consignee/receiver of the goods would be the one to pay for the freight and other charges
in the total amount of ₱57,646.00.3

The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc.
(MOF), Hanjin’s exclusive general agent in the Philippines, repeatedly demanded the payment
of ocean freight, documentation fee and terminal handling charges from Shin Yang. The latter,
however, failed and refused to pay contending that it did not cause the importation of the
goods, that it is only the Consolidator of the said shipment, that the ultimate consignee did not
endorse in its favor the original bill of lading and that the bill of lading was prepared without its
consent.

Thus, on March 19, 2003, MOF filed a case for sum of money before the Metropolitan Trial
Court of Pasay City (MeTC Pasay) which was docketed as Civil Case No. 206-03 and raffled to
Branch 48. MOF alleged that Shin Yang, a regular client, caused the importation and shipment
of the goods and assured it that ocean freight and other charges would be paid upon arrival of
the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly breached its obligation
to pay. MOF argued that Shin Yang, as the named consignee in the bill of lading, entered itself
as a party to the contract and bound itself to the "Freight Collect" arrangement. MOF thus
prayed for the payment of ₱57,646.00 representing ocean freight, documentation fee and
terminal handling charges as well as damages and attorney’s fees.

Claiming that it is merely a consolidator/forwarder and that Bill of Lading No.

HJSCPUSI14168303 was not endorsed to it by the ultimate consignee, Shin Yang denied any
involvement in shipping the goods or in promising to shoulder the freightage. It asserted that it
never authorized Halla Trading Co. to ship the articles or to have its name included in the bill of
lading. Shin Yang also alleged that MOF failed to present supporting documents to prove that it
was Shin Yang that caused the importation or the one that assured payment of the shipping
charges upon arrival of the goods in Manila.

Ruling of the Metropolitan Trial Court

On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision4 in favor of MOF. It
ruled that Shin Yang cannot disclaim being a party to the contract of affreightment because:

x x x it would appear that defendant has business transactions with plaintiff. This is evident
from defendant’s letters dated 09 May 2002 and 13 May 2002 (Exhibits "1" and "2",
defendant’s Position Paper) where it requested for the release of refund of container deposits x
x x. [In] the mind of the Court, by analogy, a written contract need not be necessary; a mutual
understanding [would suffice]. Further, plaintiff would have not included the name of the
defendant in the bill of lading, had there been no prior agreement to that effect.

In sum, plaintiff has sufficiently proved its cause of action against the defendant and the latter
is obliged to honor its agreement with plaintiff despite the absence of a written contract. 5

The dispositive portion of the MeTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and

against the defendant, ordering the latter to pay plaintiff as follows:

1. ₱57,646.00 plus legal interest from the date of demand until fully paid,

2. ₱10,000.00 as and for attorney’s fees and

3. the cost of suit.

SO ORDERED.6

Ruling of the Regional Trial Court

The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the Decision of the
MeTC. It held that:
MOF and Shin Yang entered into a contract of affreightment which Black’s Law Dictionary
defined as a contract with the ship owner to hire his ship or part of it, for the carriage of goods
and generally take the form either of a charter party or a bill of lading.

The bill of lading contain[s] the information embodied in the contract.

Article 652 of the Code of Commerce provides that the charter party must be in writing;
however, Article 653 says: "If the cargo should be received without charter party having been
signed, the contract shall be understood as executed in accordance with what appears in the
bill of lading, the sole evidence of title with regard to the cargo for determining the rights and
obligations of the ship agent, of the captain and of the charterer". Thus, the Supreme Court
opined in the Market Developers, Inc. (MADE) vs. Honorable Intermediate Appellate Court and
Gaudioso Uy, G.R. No. 74978, September 8, 1989, this kind of contract may be oral. In another
case, Compania Maritima vs. Insurance Company of North America, 12 SCRA 213 the contract
of affreightment by telephone was recognized where the oral agreement was later confirmed
by a formal booking.

xxxx

Defendant is liable to pay the sum of ₱57,646.00, with interest until fully paid, attorney’s fees
of ₱10,000.00 [and] cost of suit.

Considering all the foregoing, this Court affirms in toto the decision of the Court a quo.

SO ORDERED.7

Ruling of the Court of Appeals

Seeing the matter in a different light, the CA dismissed MOF’s complaint and refused to award
any form of damages or attorney’s fees. It opined that MOF failed to substantiate its claim that
Shin Yang had a hand in the importation of the articles to the Philippines or that it gave its
consent to be a consignee of the subject goods. In its March 22, 2006 Decision,8 the CA said:

This Court is persuaded [that except] for the Bill of Lading, respondent has not presented any
other evidence to bolster its claim that petitioner has entered [into] an agreement of
affreightment with respondent, be it verbal or written. It is noted that the Bill of Lading was
prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal while respondent is the
former’s agent. (p. 43, rollo)

The conclusion of the court a quo, which was upheld by the RTC Pasay City, Branch 108 xxx is
purely speculative and conjectural. A court cannot rely on speculations, conjectures or
guesswork, but must depend upon competent proof and on the basis of the best evidence
obtainable under the circumstances. Litigation cannot be properly resolved by suppositions,
deductions or even presumptions, with no basis in evidence, for the truth must have to be
determined by the hard rules of admissibility and proof (Lagon vs. Hooven Comalco Industries,
Inc. 349 SCRA 363).

While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods
shipped; second, it is a contract by which three parties, namely, the shipper, the carrier and the
consignee who undertake specific responsibilities and assume stipulated obligations (Belgian
Overseas Chartering and Shipping N.V. vs. Phil. First Insurance Co., Inc., 383 SCRA 23), x x x if
the same is not accepted, it is as if one party does not accept the contract. Said the Supreme
Court:

"A bill of lading delivered and accepted constitutes the contract of carriage[,] even though not
signed, because the acceptance of a paper containing the terms of a proposed contract
generally constitutes an acceptance of the contract and of all its terms and conditions of which
the acceptor has actual or constructive notice" (Keng Hua Paper Products Co., Inc. vs. CA, 286
SCRA 257).

In the present case, petitioner did not only [refuse to] accept the bill of lading, but it likewise
disown[ed] the shipment x x x. [Neither did it] authorize Halla Trading Company or anyone to
ship or export the same on its behalf.

It is settled that a contract is upheld as long as there is proof of consent, subject matter and
cause (Sta. Clara Homeowner’s Association vs. Gaston, 374 SCRA 396). In the case at bar, there
is not even any iota of evidence to show that petitioner had given its consent.

"He who alleges a fact has the burden of proving it and a mere allegation is not evidence"
(Luxuria Homes Inc. vs. CA, 302 SCRA 315).

The 40-footer van contains goods of substantial value. It is highly improbable for petitioner not
to pay the charges, which is very minimal compared with the value of the goods, in order that it
could work on the release thereof.

For failure to substantiate its claim by preponderance of evidence, respondent has not
established its case against petitioner.9

Petitioners filed a motion for reconsideration but it was denied in a Resolution 10 dated May 25,
2006. Hence, this petition for review on certiorari.

Petitioner’s Arguments

In assailing the CA’s Decision, MOF argues that the factual findings of both the MeTC and RTC
are entitled to great weight and respect and should have bound the CA. It stresses that the
appellate court has no justifiable reason to disturb the lower courts’ judgments because their
conclusions are well-supported by the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower courts as purely
‘speculative and conjectural’. According to MOF, the bill of lading, which expressly stated Shin
Yang as the consignee, is the best evidence of the latter’s actual participation in the
transportation of the goods. Such document, validly entered, stands as the law among the
shipper, carrier and the consignee, who are all bound by the terms stated therein. Besides, a
carrier’s valid claim after it fulfilled its obligation cannot just be rejected by the named
consignee upon a simple denial that it ever consented to be a party in a contract of
affreightment, or that it ever participated in the preparation of the bill of lading. As against Shin
Yang’s bare denials, the bill of lading is the sufficient preponderance of evidence required to
prove MOF’s claim. MOF maintains that Shin Yang was the one that supplied all the details in
the bill of lading and acquiesced to be named consignee of the shipment on a ‘Freight Collect’
basis.

Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid its obligation to
pay, because it never objected to being named as the consignee in the bill of lading and that it
only protested when the shipment arrived in the Philippines, presumably due to a botched
transaction between it and Halla Trading Co. Furthermore, Shin Yang’s letters asking for the
refund of container deposits highlight the fact that it was aware of the shipment and that it
undertook preparations for the intended release of the shipment.

Respondent’s Arguments

Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it consented
to take part in the contract of affreightment. Shin Yang argues that MOF miserably failed to
present any evidence to prove that it was the one that made preparations for the subject
shipment, or that it is an ‘actual shipping practice’ that forwarders/consolidators as consignees
are the ones that provide carriers details and information on the bills of lading.

Shin Yang contends that a bill of lading is essentially a contract between the shipper and the
carrier and ordinarily, the shipper is the one liable for the freight charges. A consignee, on the
other hand, is initially a stranger to the bill of lading and can be liable only when the bill of
lading specifies that the charges are to be paid by the consignee. This liability arises from either
a) the contract of agency between the shipper/consignor and the consignee; or b) the
consignee’s availment of the stipulation pour autrui drawn up by and between the shipper/
consignor and carrier upon the consignee’s demand that the goods be delivered to it. Shin Yang
contends that the fact that its name was mentioned as the consignee of the cargoes did not
make it automatically liable for the freightage because it never benefited from the shipment. It
never claimed or accepted the goods, it was not the shipper’s agent, it was not aware of its
designation as consignee and the original bill of lading was never endorsed to it.

Issue

The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is
bound by the stipulations thereof. Corollarily, whether respondent who was not an agent of the
shipper and who did not make any demand for the fulfillment of the stipulations of the bill of
lading drawn in its favor is liable to pay the corresponding freight and handling charges.

Our Ruling

Since the CA and the trial courts arrived at different conclusions, we are constrained to depart
from the general rule that only errors of law may be raised in a Petition for Review on Certiorari
under Rule 45 of the Rules of Court and will review the evidence presented.11

The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the
intervention of the consignee. However, the latter can be bound by the stipulations of the bill
of lading when a) there is a relation of agency between the shipper or consignor and the
consignee or b) when the consignee demands fulfillment of the stipulation of the bill of lading
which was drawn up in its favor.12

In Keng Hua Paper Products Co., Inc. v. Court of Appeals,13 we held that once the bill of lading is
received by the consignee who does not object to any terms or stipulations contained therein,
it constitutes as an acceptance of the contract and of all of its terms and conditions, of which
the acceptor has actual or constructive notice.1avvphi1

In Mendoza v. Philippine Air Lines, Inc.,14 the consignee sued the carrier for damages but
nevertheless claimed that he was never a party to the contract of transportation and was a
complete stranger thereto. In debunking Mendoza’scontention, we held that:

x x x First, he insists that the articles of the Code of Commerce should be applied; that he
invokes the provisions of said Code governing the obligations of a common carrier to make
prompt delivery of goods given to it under a contract of transportation. Later, as already said,
he says that he was never a party to the contract of transportation and was a complete stranger
to it, and that he is now suing on a tort or a violation of his rights as a stranger (culpa aquiliana).
If he does not invoke the contract of carriage entered into with the defendant company, then
he would hardly have any leg to stand on. His right to prompt delivery of the can of film at the
Pili Air Port stems and is derived from the contract of carriage under which contract, the PAL
undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore
that contract and the obligation to carry and to deliver and right to prompt delivery disappear.
Common carriers are not obligated by law to carry and to deliver merchandise, and persons are
not vested with the right to prompt delivery, unless such common carriers previously assume
the obligation. Said rights and obligations are created by a specific contract entered into by the
parties. In the present case, the findings of the trial court which as already stated, are
accepted by the parties and which we must accept are to the effect that the LVN Pictures Inc.
and Jose Mendoza on one side, and the defendant company on the other, entered into a
contract of transportation (p. 29, Rec. on Appeal). One interpretation of said finding is that
the LVN Pictures Inc. through previous agreement with Mendoza acted as the latter's agent.
When he negotiated with the LVN Pictures Inc. to rent the film 'Himala ng Birhen' and show it
during the Naga town fiesta, he most probably authorized and enjoined the Picture Company
to ship the film for him on the PAL on September 17th. Another interpretation is that even if
the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza
for the time being, made Mendoza a consignee. [Mendoza made himself a party to the
contract of transportaion when he appeared at the Pili Air Port armed with the copy of the
Air Way Bill (Exh. 1) demanding the delivery of the shipment to him.] The very citation made
by appellant in his memorandum supports this view. Speaking of the possibility of a conflict
between the order of the shipper on the one hand and the order of the consignee on the other,
as when the shipper orders the shipping company to return or retain the goods shipped while
the consignee demands their delivery, Malagarriga in his book Codigo de Comercio Comentado,
Vol. 1, p. 400, citing a decision of the Argentina Court of Appeals on commercial matters, cited
by Tolentino in Vol. II of his book entitled 'Commentaries and Jurisprudence on the Commercial
Laws of the Philippines' p. 209, says that the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of the bill of lading appears with such bill
of lading before the carrier and makes himself a party to the contract. Prior to that time he is
a stranger to the contract.

Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of
the old Civil Code (now Art. 1311, second paragraph) which reads thus:

‘Should the contract contain any stipulation in favor of a third person, he may demand its
fulfillment provided he has given notice of his acceptance to the person bound before the
stipulation has been revoked.'

Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier
contains the stipulations of delivery to Mendoza as consignee. His demand for the delivery of
the can of film to him at the Pili Air Port may be regarded as a notice of his acceptance of the
stipulation of the delivery in his favor contained in the contract of carriage and delivery. In
this case he also made himself a party to the contract, or at least has come to court to
enforce it. His cause of action must necessarily be founded on its breach.15(Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the shipper
and the carrier, becomes a party to the contract by reason of either a) the relationship of
agency between the consignee and the shipper/ consignor; b) the unequivocal acceptance of
the bill of lading delivered to the consignee, with full knowledge of its contents or c) availment
of the stipulation pour autrui, i.e., when the consignee, a third person, demands before the
carrier the fulfillment of the stipulation made by the consignor/shipper in the consignee’s favor,
specifically the delivery of the goods/cargoes shipped.16

In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla
Trading, Co. to ship the goods on its behalf; or that it got hold of the bill of lading covering the
shipment or that it demanded the release of the cargo. Basic is the rule in evidence that the
burden of proof lies upon him who asserts it, not upon him who denies, since, by the nature of
things, he who denies a fact cannot produce any proof of it.17 Thus, MOF has the burden to
controvert all these denials, it being insistent that Shin Yang asserted itself as the consignee and
the one that caused the shipment of the goods to the Philippines.

In civil cases, the party having the burden of proof must establish his case by preponderance of
evidence,18 which means evidence which is of greater weight, or more convincing than that
which is offered in opposition to it.19 Here, MOF failed to meet the required quantum of proof.
Other than presenting the bill of lading, which, at most, proves that the carrier acknowledged
receipt of the subject cargo from the shipper and that the consignee named is to shoulder the
freightage, MOF has not adduced any other credible evidence to strengthen its cause of action.
It did not even present any witness in support of its allegation that it was Shin Yang which
furnished all the details indicated in the bill of lading and that Shin Yang consented to shoulder
the shipment costs. There is also nothing in the records which would indicate that Shin Yang
was an agent of Halla Trading Co. or that it exercised any act that would bind it as a named
consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish its
cause against respondent.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated March
22, 2006 dismissing petitioner’s complaint and the Resolution dated May 25, 2006 denying the
motion for reconsideration are AFFIRMED.

SO ORDERED.
G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND
GENERAL SERVICES, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November
15, 1989 of the Court of Appeals1 affirming the decision of the trial court2 in ordering petitioner
British Airways, Inc. to pay private respondent First International Trading and General Services
actual damages, moral damages, corrective or exemplary damages, attorney's fees and the
costs as well as the Resolution dated February 15, 19903 denying petitioner's Motion for
Reconsideration in the appealed decision.

It appears on record that on February 15, 1981, private respondent First International Trading
and General Services Co., a duly licensed domestic recruitment and placement agency, received
a telex message from its principal ROLACO Engineering and Contracting Services in Jeddah,
Saudi Arabia to recruit Filipino contract workers in behalf of said principal.4

During the early part of March 1981, said principal paid to the Jeddah branch of petitioner
British Airways, Inc. airfare tickets for 93 contract workers with specific instruction to transport
said workers to Jeddah on or before March 30, 1981.

As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the
93 workers, private respondent was immediately informed by petitioner that its principal had
forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel agent, ADB
Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said
workers, thereby compelling private respondent to borrow money in the amount of
P304,416.00 in order to purchase airline tickets from the other airlines as evidenced by the cash
vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave
immediately since the visas of said workers are valid only for 45 days and the Bureau of
Employment Services mandates that contract workers must be sent to the job site within a
period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the
petitioner that it had received a prepaid ticket advice from its Jeddah branch for the
transportation of 27 contract workers. Immediatety, private respondent instructed its travel
agent to book the 27 contract workers with the petitioner but the latter was only able to book
and confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight
only 9 workers were able to board said flight while the remaining 7 workers were rebooked to
June 30, 1981 which bookings were again cancelled by the petitioner without any prior notice
to either private respondent or the workers. Thereafter, the 7 workers were rebooked to the
July 4,1981 flight of petitioner with 6 more workers booked for said flight. Unfortunately, the
confirmed bookings of the 13 workers were again cancelled and rebooked to July 7, 1981.

On July 6, 1981, private respondent paid the travel tax of the said workers as required by the
petitioner but when the receipt of the tax payments was submitted, the latter informed private
respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight.
However, the confirmed seats of said workers were again cancelled without any prior notice
either to the private respondent or said workers. The 12 workers were finally able to leave for
Jeddah after private respondent had bought tickets from the other airlines.

As a result of these incidents, private respondent sent a letter to petitioner demanding

compensation for the damages it had incurred by the latter's repeated failure to transport its
contract workers despite confirmed bookings and payment of the corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner
demanding the latter to pay the amount of P350,000.00 representing damages and unrealized
profit or income which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling
the hiring of the remaining recruited workers due to the delay in transporting the workers to
Jeddah.5

On January 27, 1982, private respondent filed a complaint for damages against petitioner with
the Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex
message from Jeddah on March 20, 1981 advising that the principal of private respondent had
prepaid the airfares of 100 persons to transport private respondent's contract workers from
Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and
limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice
consequently not even one of the alleged 93 contract workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract
workers of private respondent to Jeddah but the travel agent of the private respondent booked
only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers
boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine
Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C").6
Thereafter, private respondent's travel agent booked seats for 5 contract workers on
petitioner's July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers while
the other 3 passengers did not show up on said flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract
workers in addition to the previous 5 contract workers who were not able to board the July 4,
1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to
reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to
petitioner's failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic
cancellation of the bookings of private respondent's 12 contract workers. In the morning of July
7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried
to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines but both
airlines replied that no seat was available on that date and had to place the 12 workers on the
wait list. Said information was duly relayed to the private respondent and the 12 workers
before the scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive
portion of which reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of
P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of

P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or

exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as
attorney's fees; and

5. To pay the costs.7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the
trial court denied its Motion for Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the
dispositive portion of which reads:
 WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against
the appellant.8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there
being no perfected contract of carriage existing between them as no ticket was ever issued to
private respondent's contract workers and, therefore, the obligation of the petitioner to
transport said contract workers did not arise. Furthermore, private respondent's failure to
attach any ticket in the complaint further proved that it was never a party to the alleged
transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action
is an act or omission of one party in violation of the legal right or rights of the
other.9 Petitioner's repeated failures to transport private respondent's workers in its flight
despite confirmed booking of said workers clearly constitutes breach of contract and bad faith
on its part. In resolving petitioner's theory that private respondent has no cause of action in the
instant case, the appellate court correctly held that:

In dealing with the contract of common carriage of passengers for purpose of

accuracy, there are two (2) aspects of the same, namely: (a) the contract "to
carry (at some future time)," which contract is consensual and is necessarily
perfected by mere consent (See Article 1356, Civil Code of the Philippines), and
(b) the contract "of carriage" or "of common carriage" itself which should be
considered as a real contract for not until the carrier is actually used can the
carrier be said to have already assumed the obligation of a carrier. (Paras, Civil
Code Annotated, Vol. V, p. 429, Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is
consensual and is perfected by the mere consent of the parties.

There is no dispute as to the appellee's consent to the said contract "to carry" its
contract workers from Manila to Jeddah. The appellant's consent thereto, on the
other hand, was manifested by its acceptance of the PTA or prepaid ticket advice
that ROLACO Engineering has prepaid the airfares of the appellee's contract
workers advising the appellant that it must transport the contract workers on or
before the end of March, 1981 and the other batch in June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized
to issue a ticket and thus no ticket was yet issued, the fact remains that the
passage had already been paid for by the principal of the appellee, and the
appellant had accepted such payment. The existence of this payment was never
objected to nor questioned by the appellant in the lower court. Thus, the cause
or consideration which is the fare paid for the passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract "to
carry", such an object is the transport of the passengers from the place of
departure to the place of destination as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an oral

contract of carriage imposing reciprocal obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the
payment of the fare and its willingness for its contract workers to leave for their
place of destination.

On the other hand, the facts clearly show that appellant was remiss in its
obligation to transport the contract workers on their flight despite confirmation
and bookings made by appellee's travelling agent.

xxx xxx xxx

Besides, appellant knew very well that time was of the essence as the prepaid
ticket advice had specified the period of compliance therewith, and with
emphasis that it could only be used if the passengers fly on BA. Under the
circumstances, the appellant should have refused acceptance of the PTA from
appellee's principal or to at least inform appellee that it could not accommodate
the contract workers.

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for
the airfares of the appellee's contract workers who were recruited for ROLACO
Engineering and the said contract workers were the intended passengers in the
aircraft of the appellant, the said contract "to carry" also involved the appellee
for as recruiter he had to see to it that the contract workers should be
transported to ROLACO Engineering in Jeddah thru the appellant's
transportation. For that matter, the involvement of the appellee in the said
contract "to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee
thereof. 10
Petitioner also contends that the appellate court erred in awarding actual damages in the
amount of P308,016.00 to private respondent since all expenses had already been
subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of
P308,016.00 representing actual damages refers to private respondent's second cause of action
involving the expenses incurred by the latter which were not reimbursed by ROLACO
Engineering. However, in the Complaint 11 filed by private respondent, it was alleged that
private respondent suffered actual damages in the amount of P308,016.00 representing the
money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets
and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages
private respondent seeks to recover are the airline tickets and travel taxes it spent for its
workers which were already reimbursed by its principal and not for any other expenses it had
incurred in the process of recruiting said contract workers. Inasmuch as all expenses including
the processing fees incurred by private respondent had already been paid for by the latter's
principal on a staggered basis as admitted in open court by its managing director, Mrs.
Bienvenida Brusellas. 12 We do not find anymore justification in the appellate court's decision in
granting actual damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the
airfare tickets of its contract workers when petitioner failed to transport said workers, the
reimbursements made by its principal to private respondent failed to support the latter's claim
that it suffered actual damages as a result of petitioner's failure to transport said workers. It is
undisputed that private respondent had consistently admitted that its principal had reimbursed
all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate

compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved,
and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture
or guesswork as to the fact and amount of damages, but must depend upon competent proof
that they have suffered and on evidence of the actual amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the
injury suffered as a result of petitioner's failure to transport the former's workers because of
the latter's patent bad faith in the performance of its obligation. As correctly pointed out by the
appellate court:

As evidence had proved, there was complete failure on the part of the appellant
to transport the 93 contract workers of the appellee on or before March 30,
 1981 despite receipt of the payment for their airfares, and acceptance of the
same by the appellant, with specific instructions from the appellee's principal to
transport the contract workers on or before March 30, 1981. No previous notice
was ever registered by the appellant that it could not comply with the same. And
then followed the detestable act of appellant in unilaterally cancelling, booking
and rebooking unreasonably the flight of appellee's contract workers in June to
July, 1981 without prior notice. And all of these actuations of the appellant
indeed constitute malice and evident bad faith which had caused damage and
besmirched the reputation and business image of the appellee. 14

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record
shows that no claim for said damages was ever made by the petitioner immediately after their
alleged occurrence therefore said counterclaims were mere afterthoughts when private
respondent filed the present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award
of actual damages be deleted from said decision.

SO ORDERED.
G.R. No. 95582 October 7, 1991

DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y

MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO
CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by
Inocencia Cudiamat, respondents.

Francisco S. Reyes Law Office for petitioners.

Antonio C. de Guzman for private respondents.

REGALADO, J.:

On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for
the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25,
1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date,
while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner
corporation in a reckless and imprudent manner and without due regard to traffic rules and
regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat.
However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in
utter bad faith and without regard to the welfare of the victim, first brought his other
passengers and cargo to their respective destinations before banging said victim to the Lepanto
Hospital where he expired.

On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the
supervision of the employees, even as they add that they are not absolute insurers of the safety
of the public at large. Further, it was alleged that it was the victim's own carelessness and
negligence which gave rise to the subject incident, hence they prayed for the dismissal of the
complaint plus an award of damages in their favor by way of a counterclaim.

On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this
decretal portion:

IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito

Cudiamat was negligent, which negligence was the proximate cause of his death.
Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito
Cudiamat the sum of P10,000.00 which approximates the amount defendants initially
offered said heirs for the amicable settlement of the case. No costs.
 SO ORDERED. 2

Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3
in CA-G.R. CV No. 19504
promulgated on August 14, 1990, set aside the decision of the lower court, and ordered
petitioners to pay private respondents:

1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the
victim Pedrito Cudiamat;

2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;

3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and
compensatory damages;

4. The costs of this suit. 4

Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5
hence this
petition with the central issue herein being whether respondent court erred in reversing the
decision of the trial court and in finding petitioners negligent and liable for the damages
claimed.

It is an established principle that the factual findings of the Court of Appeals as a rule are final
and may not be reviewed by this Court on appeal. However, this is subject to settled
exceptions, one of which is when the findings of the appellate court are contrary to those of the
trial court, in which case a reexamination of the facts and evidence may be undertaken. 6

In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is guilty of
negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their conflicting factual
findings and legal conclusions.

The lower court, in declaring that the victim was negligent, made the following findings:

This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands
holding an umbrella. And, without having given the driver or the conductor any indication that he wishes to board the bus. But
defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard
to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's
lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to
assuage their feelings. This, also considering that initially, defendant common carrier had made overtures to amicably settle the
case. It did offer a certain monetary consideration to the victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:

From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop
when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss Abenoja alighted from
the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to board the bus as can be seen
from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the
bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the
platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.

Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and
in not waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus was at
the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as
common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code). 8

After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings
are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:

Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?

A The way going to the mines but it is not being pass(ed) by the bus.

Q And the incident happened before bunkhouse 56, is that not correct?

A It happened between 54 and 53 bunkhouses. 9

The bus conductor, Martin Anglog, also declared:

 Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident
that occurred?

A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.

Q What happened when you delivered this passenger at this particular place in Lepanto?

A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an
umbrella about a split second and I signalled again the driver, so the driver stopped and we went down and we saw Pedrito Cudiamat
asking for help because he was lying down.

Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was he?

A It is about two to three meters.

Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?

A At the back, sir. 10 (Emphasis supplied.)

The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between
Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is correct.
They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was run over by
the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus when it stopped.
Under such circumstances, it cannot be said that the deceased was guilty of negligence.

The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had
supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion there is no necessity
for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer
to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of
increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of the bus in this case was a breach
of such duty. 11

It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a
reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the
circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and
"was still in slow motion" at the point where the victim had boarded and was on its platform. 13

It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14
An ordinarily
prudent person would have made the attempt board the moving conveyance under the same
or similar circumstances. The fact that passengers board and alight from slowly moving vehicle
is a matter of common experience both the driver and conductor in this case could not have
been unaware of such an ordinary practice.

The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier passengers owes to its patrons extends
to persons boarding cars as well as to those alighting therefrom. 15

Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety of
the passengers transported by the according to all the circumstances of each case. 16
A common carrier is bound to carry
the passengers safely as far as human care and foresight can provide, using the utmost
diligence very cautious persons, with a due regard for all the circumstances. 17

It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or
negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract of carriage, the
carrier assumes the express obligation to transport the passenger to his destination safely and observe extraordinary diligence with a due
regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of
the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that
it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 18

Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for
medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous
indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but its
driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of the
victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted
by respondent court:

... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia
Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the
verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and
helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap,
since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20
In fact, it was
only after the refrigerator was unloaded that one of the passengers thought of sending
somebody to the house of the victim, as shown by the testimony of Virginia Abalos again, to
wit:

Q Why, what happened to your refrigerator at that particular time?

A I asked them to bring it down because that is the nearest place to our house and when
I went down and asked somebody to bring down the refrigerator, I also asked somebody
to call the family of Mr. Cudiamat.

COURT:

Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr.
Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21

With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual
damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the
entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings,
not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income
and minus living and other incidental expenses. 22

We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or
P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48 years old, in good
health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income as the basis,
and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on computation based on the net
earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the
death indemnity is hereby increased to P50,000.00. 23

WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby
AFFIRMED in all other respects.

SO ORDERED.