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[G.R. No. 71929 :  December 4, 1990.

] domestic and international airports, and filled out the forms


prescribed by ALITALIA for people in her predicament. However,
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and
her baggage could not be found. Completely distraught and
FELIPA E. PABLO, Respondents.
discouraged, she returned to Manila without attending the
  meeting in Ispra, Italy. : nad
Dr. Felipa Pablo — an associate professor in the University of the Once back in Manila she demanded that ALITALIA make reparation
Philippines, 1 and a research grantee of the Philippine Atomic for the damages thus suffered by her. ALITALIA offered her "free
Energy Agency — was invited to take part at a meeting of the airline tickets to compensate her for any alleged damages. . . ." She
Department of Research and Isotopes of the Joint FAO-IAEA rejected the offer, and forthwith commenced the action 6 which
Division of Atomic Energy in Food and Agriculture of the United has given rise to the present appellate proceedings.
Nations in Ispra, Italy. 2 She was invited in view of her specialized
knowledge in "foreign substances in food and the agriculture As it turned out, Prof. Pablo's suitcases were in fact located and
environment." She accepted the invitation, and was then forwarded to Ispra, 7 Italy, but only on the day after her scheduled
scheduled by the organizers, to read a paper on "The Fate of appearance and participation at the U.N. meeting there. 8 Of
Radioactive Fusion Products Contaminating Vegetable Crops." 3 course Dr. Pablo was no longer there to accept delivery; she was
The program announced that she would be the second speaker on already on her way home to Manila. And for some reason or other,
the first day of the meeting. 4 To fulfill this engagement, Dr. Pablo the suitcases were not actually restored to Prof. Pablo by ALITALIA
booked passage on petitioner airline, ALITALIA. until eleven (11) months later, and four (4) months after institution
of her action. 9
She arrived in Milan on the day before the meeting in accordance
with the itinerary and time table set for her by ALITALIA. She was After appropriate proceedings and trial, the Court of First Instance
however told by the ALITALIA personnel there at Milan that her rendered judgment in Dr. Pablo's favor: 10
luggage was "delayed inasmuch as the same . . . (was) in one of "(1) Ordering the defendant (ALITALIA) to pay . . . (her) the
the succeeding flights from Rome to Milan." 5 Her luggage sum of TWENTY THOUSAND PESOS (P20,000.00), Philippine
consisted of two (2) suitcases: one contained her clothing and Currency, by way of nominal damages;
other personal items; the other, her scientific papers, slides and
(2) Ordering the defendant to pay . . . (her) the sum of FIVE
other research material. But the other flights arriving from Rome
THOUSAND PESOS (P5,000.00), Philippine Currency, as and
did not have her baggage on board.
for attorney's fees; (and)
By then feeling desperate, she went to Rome to try to locate her
(3) Ordering the defendant to pay the costs of the suit."
bags herself. There, she inquired about her suitcases in the
ALITALIA appealed to the Intermediate Appellate Court but failed In addition, ALITALIA postulates that it was error for the
to obtain a reversal of the judgment. 11 Indeed, the Appellate Intermediate Appellate Court to have refused to pass on all the
Court not only affirmed the Trial Court's decision but also assigned errors and in not stating the facts and the law on which
increased the award of nominal damages payable by ALITALIA to its decision is based. 15
P40,000.00. 12 That increase it justified as follows: 13 Under the Warsaw Convention, 16 an air carrier is made liable for
"Considering the circumstances, as found by the Trial Court damages for:
and the negligence committed by defendant, the amount of 1) the death, wounding or other bodily injury of a
P20,000.00 under present inflationary conditions as passenger if the accident causing it took place on board the
awarded . . . to the plaintiff as nominal damages, is too little aircraft or in the course of its operations of embarking or
to make up for the plaintiff's frustration and disembarking; 17
disappointment in not being able to appear at said
conference; and for the embarrassment and humiliation 2) the destruction or loss of, or damage to, any registered
she suffered from the academic community for failure to luggage or goods, if the occurrence causing it took place
carry out an official mission for which she was singled out during the carriage by air;" 18 and
by the faculty to represent her institution and the country. 3) delay in the transportation by air of passengers, luggage
After weighing carefully all the considerations, the amount or goods. 19
awarded to the plaintiff for nominal damages and
attorney's fees should be increased to the cost of her round In these cases, it is provided in the Convention that the "action for
trip air fare or at the present rate of peso to the dollar at damages, however, founded, can only be brought subject to
P40,000,00." conditions and limits set out" therein. 20

ALITALIA has appealed to this Court on Certiorari. Here, it seeks to The Convention also purports to limit the liability of the carriers in
make basically the same points it tried to make before the Trial the following manner: 21
Court and the Intermediate Appellate Court, i.e.: 1. In the carriage of passengers the liability of the carrier
1) that the Warsaw Convention should have been applied for each passenger is limited to the sum of 250,000
to limit ALITALIA'S liability; and francs . . . Nevertheless, by special contract, the carrier and
the passenger may agree to a higher limit of liability.: nad
2) that there is no warrant in fact or in law for the award to
Dr. Pablo of nominal damages and attorney's fees. 14 2. a) In the carriage of registered baggage and of cargo, the
liability of the carrier is limited to a sum of 250 francs per
kilogramme, unless the passenger or consignor has made,
at the time when the package was handed over to the offered in writing to the plaintiff within a period of six
carrier, a special declaration of interest in delivery at months from the date of the occurrence causing the
destination and has paid a supplementary sum if the case damage, or before the commencement of the action, if that
so requires. In that case the carrier will be liable to pay a is later.
sum not exceeding the declared sum, unless he proves that The Warsaw Convention however denies to the carrier availment
sum is greater than the actual value to the consignor at "of the provisions which exclude or limit his liability, if the damage
delivery. is caused by his wilful misconduct or by such default on his part as,
b) In the case of loss, damage or delay of part of registered in accordance with the law of the court seized of the case, is
baggage or cargo, or of any object contained therein, the considered to be equivalent to wilful misconduct," or "if the
weight to be taken into consideration in determining the damage is (similarly) caused . . by any agent of the carrier acting
amount to which the carrier's liability is limited shall be within the scope of his employment."  22 The Hague Protocol
only the total weight of the package or packages amended the Warsaw Convention by removing the provision that
concerned. Nevertheless, when the loss, damage or delay if the airline took all necessary steps to avoid the damage, it could
of a part of the registered baggage or cargo, or of an object exculpate itself completely,  23 and declaring the stated limits of
contained therein, affects the value of other packages liability not applicable "if it is proved that the damage resulted
covered by the same baggage check or the same air way from an act or omission of the carrier, its servants or agents, done
bill, the total weight of such package or packages shall also with intent to cause damage or recklessly and with knowledge that
be taken into consideration in determining the limit of damage would probably result." The same deletion was effected by
liability. the Montreal Agreement of 1966, with the result that a passenger
could recover unlimited damages upon proof of wilful
3. As regards objects of which the passenger takes charge
misconduct.  24 
himself the liability of the carrier is limited to 5000 francs
per passenger. The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an
4. The limits prescribed . . shall not prevent the court from
absolute limit of the extent of that liability. Such a proposition is
awarding, in accordance with its own law, in addition, the
not borne out by the language of the Convention, as this Court has
whole or part of the court costs and of the other expenses
now, and at an earlier time, pointed out.  25 Moreover, slight
of litigation incurred by the plaintiff. The foregoing
reflection readily leads to the conclusion that it should be deemed
provision shall not apply if the amount of the damages
a limit of liability only in those cases where the cause of the death
awarded, excluding court costs and other expenses of the
or injury to person, or destruction, loss or damage to property or
litigation, does not exceed the sum which the carrier has
delay in its transport is not attributable to or attended by any where there was satisfactory evidence of malice or bad faith
wilful misconduct, bad faith, recklessness, or otherwise improper attributable to its officers and employees.  29 Thus, an air carrier
conduct on the part of any official or employee for which the was sentenced to pay not only compensatory but also moral and
carrier is responsible, and there is otherwise no special or exemplary damages, and attorney's fees, for instance, where its
extraordinary form of resulting injury. The Convention's provisions, employees rudely put a passenger holding a first-class ticket in the
in short, do not "regulate or exclude liability for other breaches of tourist or economy section,  30 or ousted a brown Asiatic from the
contract by the carrier"  26 or misconduct of its officers and plane to give his seat to a white man,  31 or gave the seat of a
employees, or for some particular or exceptional type of damage. passenger with a confirmed reservation to another,  32 or
Otherwise, "an air carrier would be exempt from any liability for subjected a passenger to extremely rude, even barbaric treatment,
damages in the event of its absolute refusal, in bad faith, to as by calling him a "monkey."  33 
comply with a contract of carriage, which is absurd."  27 Nor may it In the case at bar, no bad faith or otherwise improper conduct may
for a moment be supposed that if a member of the aircraft be ascribed to the employees of petitioner airline; and Dr. Pablo's
complement should inflict some physical injury on a passenger, or luggage was eventually returned to her, belatedly, it is true, but
maliciously destroy or damage the latter's property, the without appreciable damage. The fact is, nevertheless, that some
Convention might successfully be pleaded as the sole gauge to special species of injury was caused to Dr. Pablo because petitioner
determine the carrier's liability to the passenger. Neither may the ALITALIA misplaced her baggage and failed to deliver it to her at
Convention be invoked to justify the disregard of some the time appointed — a breach of its contract of carriage, to be
extraordinary sort of damage resulting to a passenger and preclude sure — with the result that she was unable to read the paper and
recovery therefor beyond the limits set by said Convention. It is in make the scientific presentation (consisting of slides,
this sense that the Convention has been applied, or ignored, autoradiograms or films, tables and tabulations) that she had
depending on the peculiar facts presented by each case.:-cralaw painstakingly labored over, at the prestigious international
In Pan American World Airways, Inc. v. I.A.C.,  28 for example, the conference, to attend which she had traveled hundreds of miles, to
Warsaw Convention was applied as regards the limitation on the her chagrin and embarrassment and the disappointment and
carrier's liability, there being a simple loss of baggage without any annoyance of the organizers. She felt, not unreasonably, that the
otherwise improper conduct on the part of the officials or invitation for her to participate at the conference, extended by the
employees of the airline or other special injury sustained by the Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture
passenger. of the United Nations, was a singular honor not only to herself, but
to the University of the Philippines and the country as well, an
On the other hand, the Warsaw Convention has invariably been
opportunity to make some sort of impression among her
held inapplicable, or as not restrictive of the carrier's liability,
colleagues in that field of scientific activity. The opportunity to
claim this honor or distinction was irretrievably lost to her because and proof, that Dr. Pablo's right had been violated or invaded by it
of Alitalia's breach of its contract. — absent any claim for actual or compensatory damages, the
prayer thereof having been voluntarily deleted by Dr. Pablo upon
Apart from this, there can be no doubt that Dr. Pablo underwent
the return to her of her baggage — necessarily raised the issue of
profound distress and anxiety, which gradually turned to panic and
nominal damages.: rd
finally despair, from the time she learned that her suitcases were
missing up to the time when, having gone to Rome, she finally This Court also agrees that respondent Court of Appeals correctly
realized that she would no longer be able to take part in the awarded attorney's fees to Dr. Pablo, and the amount of P5,000.00
conference. As she herself put it, she "was really shocked and set by it is reasonable in the premises. The law authorizes recovery
distraught and confused." of attorney's fees inter alia where, as here, "the defendant's act or
omission has compelled the plaintiff to litigate with third persons
Certainly, the compensation for the injury suffered by Dr. Pablo
or to incur expenses to protect his interest,"  34 or "where the
cannot under the circumstances be restricted to that prescribed by
court deems it just and equitable."  35 
the Warsaw Convention for delay in the transport of baggage.
WHEREFORE, no error being perceived in the challenged decision
She is not, of course, entitled to be compensated for loss or
of the Court of Appeals, it appearing on the contrary to be entirely
damage to her luggage. As already mentioned, her baggage was
in accord with the facts and the law, said decision is hereby
ultimately delivered to her in Manila, tardily but safely. She is
AFFIRMED, with costs against the petitioner.
however entitled to nominal damages — which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been SO ORDERED.
violated or invaded by the defendant, may be vindicated and
recognized, and not for the purpose of indemnifying the plaintiff G.R. No. 94149 May 5, 1992
for any loss suffered — and this Court agrees that the respondent AMERICAN HOME ASSURANCE, COMPANY, petitioner, 
Court of Appeals correctly set the amount thereof at P40,000.00. vs.
As to the purely technical argument that the award to her of such THE COURT OF APPEALS and NATIONAL MARINE CORPORATION
nominal damages is precluded by her omission to include a specific and/or NATIONAL MARINE CORPORATION (Manila), respondents.
claim therefor in her complaint, it suffices to draw attention to her
general prayer, following her plea for moral and exemplary Both petitioner American Home Assurance Co. and the respondent
damages and attorney's fees, "for such other and further just and National Marine Corporation are foreign corporations licensed to
equitable relief in the premises," which certainly is broad enough do business in the Philippines, the former through its branch. The
to comprehend an application as well for nominal damages. American Home Assurance Company (Philippines), Inc. and the
Besides, petitioner should have realized that the explicit assertion,
latter through its branch. The National Marine Corporation and 25% of the total amount due as attorney's fees, by filing a
(Manila) (Rollo, p. 20, Annex L, p.1). complaint for recovery of sum of money (Petition, p. 4).
That on or about June 19, 1988, Cheng Hwa Pulp Corporation Respondent, National Marine Corporation, filed a motion to
shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp from dismiss dated August 7, 1989 stating that American Home
Haulien, Taiwan on board "SS Kaunlaran", which is owned and Assurance Company had no cause of action based on Article 848 of
operated by herein respondent National Marine Corporation with the Code of Commerce which provides "that claims for averages
Registration No. PID-224. The said shipment was consigned to shall not be admitted if they do not exceed 5% of the interest
Mayleen Paper, Inc. of Manila, which insured the shipment with which the claimant may have in the vessel or in the cargo if it be
herein petitioner American Home Assurance Co. as evidenced by gross average and 1% of the goods damaged if particular average,
Bill of Lading No. HLMN-01. deducting in both cases the expenses of appraisal, unless there is
On June 22, 1988, the shipment arrived in Manila and was an agreement to the contrary." It contended that based on the
discharged into the custody of the Marina Port Services, Inc., for allegations of the complaint, the loss sustained in the case was
eventual delivery to the consignee-assured. However, upon P35,506.75 which is only .18% of P17,420,000.00, the total value of
delivery of the shipment to Mayleen Paper, Inc., it was found that the cargo.
122 bales had either been damaged or lost. The loss was calculated On the other hand, petitioner countered that Article 848 does not
to be 4,360 kilograms with an estimated value of P61,263.41. apply as it refers to averages and that a particular average
Mayleen Paper, Inc. then duly demanded indemnification from presupposes that the loss or damages is due to an inherent defect
respondent National Marine Corporation for the aforesaid of the goods, an accident of the sea, or a force majeure or the
damages/losses in the shipment but, for apparently no justifiable negligence of the crew of the carrier, while claims for damages due
reason, said demand was not heeded (Petition, p. 4). to the negligence of the common carrier are governed by the Civil
As the shipment was insured with petitioner in the amount of Code provisions on Common Carriers.
US$837,500.00, Mayleen Paper, Inc. sought recovery from the In its order dated November 23, 1989, the Regional Trial Court
former. Upon demand and submission of proper documentation, sustained private respondent's contention. In part it stated:
American Home Assurance paid Mayleen Paper, Inc. the adjusted Before the Court for resolution is a motion for reconsideration filed
amount of P31,506.75 for the damages/losses suffered by the by defendant through counsel dated October 6, 1989.
shipment, hence, the former was subrogated to the rights and The record shows that last August 8, 1989, defendant through
interests on Mayleen Paper, Inc. counsel filed a motion to dismiss plaintiff's complaint.
On June 6, 1989, the petitioner, as subrogee, then brought suit Resolving the said motion last September 18, 1989, the court ruled
against respondent for the recovery of the amount of P31.506.75 to defer resolution thereof until after trial on the merits. In the
motion now under consideration, defendant prays for the
reconsideration of the order of September 18, 1989 and in lieu of all (Ibid., citing California Canneries Co. v. Canton Ins. Office 25
thereof, another order be entered dismissing plaintiff's complaint. Cal. App. 303, 143 p. 549-553).
There appears to be good reasons for the court to take a second From the foregoing definition, it is clear that the damage on the
look at the issues raised by the defendant. cargo in question, is in the nature of the "particular average." Since
xxx xxx xxx the loss is less than 1% to the value of the cargo and there appears
It is not disputed defendants that the loss suffered by the to be no allegations as to any agreement defendants and the
shipment is only .18% or less that 1% of the interest of the consignee of the goods to the contrary, by express provision of the
consignee on the cargo Invoking the provision of the Article 848 of law, plaintiff is barred from suing for recovery.
the Code of Commerce which reads: WHEREOF, plaintiff's complaint is hereby dismissed for lack of
Claims for average shall not be admitted if they do not exceed five cause of action. (Rollo, p. 27; Annex A, pp. 3-4).
percent of the interest which the claimant may have in the vessels The petitioner then filed a motion for reconsideration of the order
or cargo if it is gross average, and one percent of the goods of dismissal but same was denied by the court in its order dated
damaged if particular average,  deducting in both cases the January 26, 1990 (supra).
expenses of appraisal, unless there is an agreement to the Instead of filing an appeal from the order of the court a
contrary. (Emphasis supplied) quo dismissing the complaint for recovery of a sum of money,
defendant claims that plaintiff is barred from suing for recovery. American Home Assurance Company filed a petition
Decisive in this case in whether the loss suffered by the cargo in for certiorari with the Court of Appeals to set aside the two orders
question is a "particular average." or respondent judge in said court (Rollo, p. 25).
Particular average, is a loss happening to the ship, freight, or cargo But the Court of Appeals in its decision dated May 30, 1990,
which is not be (sic) shared by contributing among all those dismissed the petition as constituting plain errors of law and not
interested, but must be borne by the owner of the subject to grave abuse of discretion correctible by certiorari (a Special Civil
which it occurs. (Black's Law Dictionary, Revised Fourth Edition, p. Action). If at all, respondent court ruled that there are errors of
172, citing Bargett v. Insurance Co. 3 Bosw. [N.Y.] 395). judgment subject to correction by certiorari as a mode of appeal
as distinguished from general average which but the appeal is to the Supreme Court under Section 17 of the
is a contribution by the several interests engaged in the maritime Judiciary Act of 1948 as amended by Republic Act No. 5440.
venture to make good the loss of one of them for the voluntary Otherwise stated, respondent Court opined that the proper
sacrifice of a part of the ship or cargo to save the residue of the remedy is a petition for review on certiorari with the Supreme
property and the lives of those on board, or for extraordinary Court on pure questions of law (Rollo, p. 30).
expenses necessarily incurred for the common benefit and safety Hence, this petition.
In a resolution dated December 10, 1990, this Court gave due in conducting its business is regulated by the Civil Code primarily
course to the petition and required both parties to file their and suppletorily by the Code of Commerce; and that respondent
respective memoranda (Rollo, p. 58). court refused to consider the Bill of Lading as the law governing
The procedural issue in this case is whether or not certiorari was the parties.
the proper remedy in the case before the Court of Appeals. Private respondent countered that in all matters not covered by
The Court of Appeals ruled that appeal is the proper remedy, for the Civil Code, the rights and obligations of the parties shall be
aside from the fact that the two orders dismissing the complaint governed by the Code of Commerce and by special laws
for lack of cause of action are final orders within the meaning of as provided for in Article 1766 of the Civil Code; that Article 806,
Rule 41, Section 2 of the Rules of Court, subject petition raised 809 and 848 of the Code of Commerce should be applied
questions which if at all, constituting grave abuse of discretion suppletorily as they provide for the extent of the common carriers'
correctible by certiorari. liability.
Evidently, the Court of Appeals did not err in dismissing the This issue has been resolved by this Court in National Development
petition for certiorari for as ruled by this Court, an order of Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern Shipping Lines,
dismissal whether right or wrong is a final order, hence, a proper Inc. v. I.A.C., 150 SCRA 469, 470 [1987] where it was held that "the
subject of appeal, not certiorari (Marahay v. Melicor, 181 SCRA 811 law of the country to which the goods are to be transported
(1990]). However, where the fact remains that respondent Court persons the liability of the common carrier in case of their loss,
of Appeals obviously in the broader interests of justice, destruction or deterioration." (Article 1753, Civil Code). Thus, for
nevertheless proceeded to decide the petition for certiorari and cargoes transported to the Philippines as in the case at bar, the
ruled on specific points raised therein in a manner akin to what liability of the carrier is governed primarily by the Civil Code and in
would have been done on assignments of error in a regular appeal, all matters not regulated by said Code, the rights and obligations of
the petition therein was therefore disposed of on the merits and common carrier shall be governed by the Code of Commerce and
not on a dismissal due to erroneous choice of remedies or by special laws (Article 1766, Civil Code).
technicalities (Cruz v. I.A.C., 169 SCRA 14 (1989]). Hence, a review Corollary thereto, the Court held further that under Article 1733 of
of the decision of the Court of Appeals on the merits against the the Civil Code, common carriers from the nature of their business
petitioner in this case is in order. and for reasons of public policy are bound to observe
On the main controversy, the pivotal issue to be resolved is the extraordinary diligence in the vigilance over the goods and for the
application of the law on averages (Articles 806, 809 and 848 of safety of passengers transported by them according to all
the Code of Commerce). circumstances of each case. Thus, under Article 1735 of the same
Petitioner avers that respondent court failed to consider that Code, in all cases other than those mentioned in Article 1734
respondent National Marine Corporation being a common carrier, thereof, the common carrier shall be presumed to have been at
fault or to have acted negligently, unless it proves that it has evident that the Code of Commerce provisions on averages cannot
observed the extraordinary diligence required by law (Ibid., p. apply.
595). On the other hand, Article 1734 of the Civil Code provides that
But more importantly, the Court ruled that common carriers common carriers are responsible for loss, destruction or
cannot limit their liability for injury or loss of goods where such deterioration of the goods, unless due to any of the causes
injury or loss was caused by its own negligence. Otherwise stated, enumerated therein. It is obvious that the case at bar does not fall
the law on averages under the Code of Commerce cannot be under any of the exceptions. Thus, American Home Assurance
applied in determining liability where there is negligence (Ibid., p. Company is entitled to reimbursement of what it paid to Mayleen
606). Paper, Inc. as insurer.
Under the foregoing principle and in line with the Civil Code's Accordingly, it is evident that the findings of respondent Court of
mandatory requirement of extraordinary diligence on common Appeals, affirming the findings and conclusions of the court a
carriers in the car care of goods placed in their stead, it is but quo are not supported by law and jurisprudence.
reasonable to conclude that the issue of negligence must first be PREMISES CONSIDERED, (1) the decisions of both the Court of
addressed before the proper provisions of the Code of Commerce Appeals and the Regional Trial Court of Manila, Branch 41,
on the extent of liability may be applied. appealed from are REVERSED; and (2) private respondent National
The records show that upon delivery of the shipment in question Marine Corporation is hereby ordered to reimburse the subrogee,
of Mayleen's warehouse in Manila, 122 bales were found to be petitioner American Home Assurance Company, the amount of
damaged/lost with straps cut or loose, calculated by the so-called P31,506.75.
"percentage method" at 4,360 kilograms and amounting to SO ORDERED.
P61,263.41 (Rollo, p. 68). Instead of presenting proof of the G.R. No. 166250               July 26, 2010
exercise of extraordinary diligence as required by law, National UNSWORTH TRANSPORT INTERNATIONAL (PHILS.),
Marine Corporation (NMC) filed its Motion to Dismiss dated INC., Petitioner, 
August 7, 1989, hypothetically admitting the truth of the facts vs.
alleged in the complaint to the effect that the loss or damage to COURT OF APPEALS and PIONEER INSURANCE AND SURETY
the 122 bales was due to the negligence or fault of NMC (Rollo, p. CORPORATION, Respondents.
179). As ruled by this Court, the filing of a motion to dismiss on the
ground of lack of cause of action carries with it the admission of On August 31, 1992, the shipper Sylvex Purchasing Corporation
the material facts pleaded in the complaint (Sunbeam Convenience delivered to UTI a shipment of 27 drums of various raw materials
Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Such being the case, it is for pharmaceutical manufacturing, consisting of: "1) 3 drums (of)
extracts, flavoring liquid, flammable liquid x x x banana flavoring;
2) 2 drums (of) flammable liquids x x x turpentine oil; 2 pallets. loaded on a truck with Plate No. PCK-434 facilitated by Champs for
STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B delivery to Unilab’s warehouse. The materials were noted to be
Complex Extract."4 UTI issued Bill of Lading No. C320/C15991- complete and in good order in the gate pass.14 On the same day,
2,5covering the aforesaid shipment. The subject shipment was the shipment arrived in Unilab’s warehouse and was immediately
insured with private respondent Pioneer Insurance and Surety surveyed by an independent surveyor, J.G. Bernas Adjusters &
Corporation in favor of Unilab against all risks in the amount of Surveyors, Inc. (J.G. Bernas). The Report stated:
₱1,779,664.77 under and by virtue of Marine Risk Note Number 1-p/bag torn on side contents partly spilled 
MC RM UL 0627 926 and Open Cargo Policy No. HO-022-RIU.7 1-s/drum #7 punctured and retaped on bottom side content
On the same day that the bill of lading was issued, the shipment lacking
was loaded in a sealed 1x40 container van, with no. APLU-982012, 5-drums shortship/short delivery15
boarded on APL’s vessel M/V "Pres. Jackson," Voyage 42, and On October 23 and 28, 1992, the same independent surveyor
transshipped to APL’s M/V "Pres. Taft"8 for delivery to petitioner in conducted final inspection surveys which yielded the same results.
favor of the consignee United Laboratories, Inc. (Unilab). Consequently, Unilab’s quality control representative rejected one
On September 30, 1992, the shipment arrived at the port of paper bag containing dried yeast and one steel drum containing
Manila. On October 6, 1992, petitioner received the said shipment Vitamin B Complex as unfit for the intended purpose.16
in its warehouse after it stamped the Permit to Deliver Imported On November 7, 1992, Unilab filed a formal claim17 for the damage
Goods9 procured by the Champs Customs Brokerage.10 Three days against private respondent and UTI. On November 20, 1992, UTI
thereafter, or on October 9, 1992, Oceanica Cargo Marine denied liability on the basis of the gate pass issued by Jardine that
Surveyors Corporation (OCMSC) conducted a stripping survey of the goods were in complete and good condition; while private
the shipment located in petitioner’s warehouse. The survey results respondent paid the claimed amount on March 23, 1993. By virtue
stated: of the Loss and Subrogation Receipt18 issued by Unilab in favor of
2-pallets STC 40 bags Dried Yeast, both in good order condition private respondent, the latter filed a complaint for Damages
and properly sealed against APL, UTI and petitioner with the RTC of Makati.19 The case
19- steel drums STC Vitamin B Complex Extract, all in good order was docketed as Civil Case No. 93-3473 and was raffled to Branch
condition and properly sealed 134.
1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on After the termination of the pre-trial conference, trial on the
side, with approx. spilling of 1%11 merits ensued. On February 22, 2001, the RTC decided in favor of
On October 15, 1992, the arrastre Jardine Davies Transport private respondent and against APL, UTI and petitioner, the
Services, Inc. (Jardine) issued Gate Pass No. 761412 which stated dispositive portion of which reads:
that "22 drums13 Raw Materials for Pharmaceutical Mfg." were
WHEREFORE, judgment is hereby rendered in favor of plaintif issuance of a bill of lading inasmuch as a bill of lading is not
PIONEER INSURANCE & SURETY CORPORATION and against the indispensable for the execution of a contract of carriage.21
defendants AMERICAN PRESIDENT LINES and UNSWORTH Unsatisfied, petitioner comes to us in this petition for review on
TRANSPORT INTERNATIONAL (PHILS.), INC. (now known as JUGRO certiorari, raising the following issues:
TRANSPORT INT’L., PHILS.), ordering the latter to pay, jointly and 1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
severally, the former the following amounts: COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED THIRTY OR EXCESS OF JURISDICTION IN UPHOLDING THE DECISION OF THE
ONE and 27/100 (Php76,231.27) with interest at the legal rate of REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001, AWARDING
6% per annum to be computed starting from September 30, 1993 THE SUM OF SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE
until fully paid, for and as actual damages; AND 27/100 PESOS (PHP76,231.27) WITH LEGAL INTEREST AT 6%
2. The amount equivalent to 25% of the total sum as attorney’s PER ANNUM AS ACTUAL DAMAGES AND 25% AS ATTORNEY’S
fees; FEES.
3. Cost of this litigation. 2. WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.
SO ORDERED.20 3. WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED
On appeal, the CA affirmed the RTC decision on April 29, 2004. The ORDINARY DILIGENCE.
CA rejected UTI’s defense that it was merely a forwarder, declaring 4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY
instead that it was a common carrier. The appellate court added ESTABLISHED THE ALLEGED DAMAGE TO ITS CARGO.22
that by issuing the Bill of Lading, UTI acknowledged receipt of the Petitioner admits that it is a forwarder but disagrees with the CA’s
goods and agreed to transport and deliver them at a specific place conclusion that it is a common carrier. It also questions the
to a person named or his order. The court further concluded that appellate court’s findings that it failed to establish that it exercised
upon the delivery of the subject shipment to petitioner’s extraordinary or ordinary diligence in the vigilance over the subject
warehouse, its liability became similar to that of a depositary. As shipment. As to the damages allegedly suffered by private
such, it ought to have exercised ordinary diligence in the care of respondent, petitioner counters that they were not sufficiently
the goods. And as found by the RTC, the CA agreed that petitioner proven. Lastly, it insists that its liability, in any event, should be
failed to exercise the required diligence. The CA also rejected limited to $500 pursuant to the package limitation rule. Indeed,
petitioner’s claim that its liability should be limited to $500 per petitioner wants us to review the factual findings of the RTC and
package pursuant to the Carriage of Goods by Sea Act (COGSA) the CA and to evaluate anew the evidence presented by the
considering that the value of the shipment was declared pursuant parties. 
to the letter of credit and the pro forma invoice. As to APL, the The petition is partly meritorious.
court considered it as a common carrier notwithstanding the non-
Well established is the rule that factual questions may not be It is undisputed that UTI issued a bill of lading in favor of Unilab.
raised in a petition for review on certiorari as clearly stated in Pursuant thereto, petitioner undertook to transport, ship, and
Section 1, Rule 45 of the Rules of Court, viz.: deliver the 27 drums of raw materials for pharmaceutical
Section 1. Filing of petition with Supreme Court. – A party desiring manufacturing to the consignee. 
to appeal by certiorari from a judgment or final order or resolution A bill of lading is a written acknowledgement of the receipt of
of the Court of Appeals, the Sandiganbayan, the Regional Trial goods and an agreement to transport and to deliver them at a
Court or other courts whenever authorized by law, may file with specified place to a person named or on his or her order.25 It
the Supreme Court a verified petition for review on certiorari. The operates both as a receipt and as a contract. It is a receipt for the
petition shall raise only questions of law which must be distinctly goods shipped and a contract to transport and 
set forth. deliver the same as therein stipulated. As a receipt, it recites the
Admittedly, petitioner is a freight forwarder. The term "freight date and place of shipment, describes the goods as to quantity,
forwarder" refers to a firm holding itself out to the general public weight, dimensions, identification marks, condition, quality, and
(other than as a pipeline, rail, motor, or water carrier) to provide value. As a contract, it names the contracting parties, which
transportation of property for compensation and, in the ordinary include the consignee; fixes the route, destination, and freight rate
course of its business, (1) to assemble and consolidate, or to or charges; and stipulates the rights and obligations assumed by
provide for assembling and consolidating, shipments, and to the parties.26
perform or provide for break-bulk and distribution operations of Undoubtedly, UTI is liable as a common carrier. Common carriers,
the shipments; (2) to assume responsibility for the transportation as a general rule, are presumed to have been at fault or negligent
of goods from the place of receipt to the place of destination; and if the goods they transported deteriorated or got lost or destroyed.
(3) to use for any part of the transportation a carrier subject to the That is, unless they prove that they exercised extraordinary
federal law pertaining to common carriers.231avvphi1 diligence in transporting the goods. In order to avoid responsibility
A freight forwarder’s liability is limited to damages arising from its for any loss or damage, therefore, they have the burden of proving
own negligence, including negligence in choosing the carrier; that they observed such diligence.27 Mere proof of delivery of the
however, where the forwarder contracts to deliver goods to their goods in good order to a common carrier and of their arrival in bad
destination instead of merely arranging for their transportation, it order at their destination constitutes a prima facie case of fault or
becomes liable as a common carrier for loss or damage to goods. A negligence against the carrier. If no adequate explanation is given
freight forwarder assumes the responsibility of a carrier, which as to how the deterioration, loss, or destruction of the goods
actually executes the transport, even though the forwarder does happened, the transporter shall be held responsible.28
not carry the merchandise itself.24 Though it is not our function to evaluate anew the evidence
presented, we refer to the records of the case to show that, as
correctly found by the RTC and the CA, petitioner failed to rebut common carriers are governed by the Code of Commerce and
the prima facie presumption of negligence in the carriage of the special laws. Thus, the COGSA supplements the Civil Code by
subject shipment.  establishing a provision limiting the carrier’s liability in the absence
First, as stated in the bill of lading, the subject shipment was of a shipper’s declaration of a higher value in the bill of
received by UTI in apparent good order and condition in New York, lading.30 Section 4(5) of the COGSA provides:
United States of America. Second, the OCMSC Survey Report (5) Neither the carrier nor the ship shall in any event be or become
stated that one steel drum STC Vitamin B Complex Extract was liable for any loss or damage to or in connection with the
discovered to be with a cut/hole on the side, with approximate transportation of goods in an amount exceeding $500 per package
spilling of 1%. Third, though Gate Pass No. 7614, issued by Jardine, of lawful money of the United States, or in case of goods not
noted that the subject shipment was in good order and condition, shipped in packages, per customary freight unit, or the equivalent
it was specifically stated that there were 22 (should be 27 drums of that sum in other currency, unless the nature and value of such
per Bill of Lading No. C320/C15991-2) drums of raw materials for goods have been declared by the shipper before shipment and
pharmaceutical manufacturing. Last, J.G. Bernas’ Survey Report inserted in the bill of lading. This declaration, if embodied in the
stated that "1-s/drum was punctured and retaped on the bottom bill of lading, shall be prima facie evidence, but shall not be
side and the content was lacking, and there was a short delivery of conclusive on the carrier.
5-drums."  In the present case, the shipper did not declare a higher valuation
All these conclusively prove the fact of shipment in good order and of the goods to be shipped. Contrary to the CA’s conclusion, the
condition, and the consequent damage to one steel drum of insertion of the words "L/C No. LC No. 1-187-008394/ NY 69867
Vitamin B Complex Extract while in the possession of petitioner covering shipment of raw materials for pharmaceutical Mfg. x x x"
which failed to explain the reason for the damage. Further, cannot be the basis of petitioner’s liability.31 Furthermore, the
petitioner failed to prove that it observed the extraordinary insertion of an invoice number does not in itself sufficiently and
diligence and precaution which the law requires a common carrier convincingly show that petitioner had knowledge of the value of
to exercise and to follow in order to avoid damage to or the cargo.32
destruction of the goods entrusted to it for safe carriage and In light of the foregoing, petitioner’s liability should be limited to
delivery.29 $500 per steel drum. In this case, as there was only one drum lost,
However, we affirm the applicability of the Package Limitation Rule private respondent is entitled to receive only $500 as damages for
under the COGSA, contrary to the RTC and the CA’s findings. the loss. In addition to said amount, as aptly held by the trial court,
It is to be noted that the Civil Code does not limit the liability of an interest rate of 6% per annum should also be imposed, plus
the common carrier to a fixed amount per package. In all matters 25% of the total sum as attorney’s fees.
not regulated by the Civil Code, the rights and obligations of
WHEREFORE, premises considered, the petition is PARTIALLY
GRANTED. The Court of Appeals Decision dated April 29, 2004 and
Resolution dated November 26, 2004 are AFFIRMED with
MODIFICATION by reducing the principal amount due private
respondent Pioneer Insurance and Surety Corporation from
₱76,231.27 to $500, with interest of 6% per annum from date of
demand, and 25% of the amount due as attorney’s fees.
The other aspects of the assailed Decision and Resolution STAND.
SO ORDERED.

G.R. No. 112287 December 12, 1997


NATIONAL STEEL CORPORATION, petitioner, 
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner, 
vs.
COURT OF APPEALS AND NATIONAL STEEL The MV Vlasons I  is a vessel which renders tramping service and,
CORPORATION, respondents. as such, does not transport cargo or shipment for the general
public. Its services are available only to specific persons who enter
The Case into a special contract of charter party with its owner. It is
Before us are two separate petitions for review filed by National undisputed that the ship is a private carrier. And it is in the
Steel Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of capacity that its owner, Vlasons Shipping, Inc., entered into a
which assail the August 12, 1993 Decision of the Court of contract of affreightment or contract of voyage charter hire with
Appeals.1 The Court of Appeals modified the decision of the National Steel Corporation.
Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil The facts as found by Respondent Court of Appeals are as follows:
Case No. 23317. The RTC disposed as follows: (1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as
WHEREFORE, judgment is hereby rendered in favor of defendant Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner,
and against the plaintiff dismissing the complaint with cost against entered into a Contract of Voyage Charter Hire (Exhibit "B"; also
plaintiff, and ordering plaintiff to pay the defendant on the Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to
counterclaim as follows: make one (1) voyage to load steel products at Iligan City and
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as discharge them at North Harbor, Manila, under the following terms
demurrage with interest at the legal rate on both amounts from and conditions, viz:
April 7, 1976 until the same shall have been fully paid; 1. . . .
2. Attorney's fees and expenses of litigation in the sum of 2. Cargo: Full cargo of steel products of not less than 2,500 MT,
P100,000.00; and 10% more or less at Master's option.
3. Costs of suit. 3. . . .
SO ORDERED.2 4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon
On the other hand, the Court of Appeals ruled: presentation of Bill of Lading within fifteen (15) days.
WHEREFORE, premises considered, the decision appealed from is 5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
modified by reducing the award for demurrage to P44,000.00 and 6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather
deleting the award for attorney's fees and expenses of litigation. Working Day of 24 consecutive hours, Sundays and Holidays
Except as thus modified, the decision is AFFIRMED. There is no Included).
pronouncement as to costs. 7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
SO ORDERED.3 8. . . .
The Facts
9. Cargo Insurance: Charterer's and/or Shipper's must insure the latent defects not discoverable by due diligence; any other cause
cargoes. Shipowners not responsible for losses/damages except on arising without the actual fault or privity of Owners or without the
proven willful negligence of the officers of the vessel. fault of the agents or servants of owners."
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or Paragraph 12 of said NANYOZAI Charter Party also provides that
other internationally recognized Charter Party Agreement shall "(o)wners shall not be responsible for split, chafing and/or any
form part of this Contract. damage unless caused by the negligence or default of the master
xxx xxx xxx and crew."
The terms "F.I.O.S.T." which is used in the shipping business is a (2) On August 6, 7 and 8, 1974, in accordance with the Contract of
standard provision in the NANYOZAI Charter Party which stands for Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier
"Freight In and Out including Stevedoring and Trading", which at Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92
means that the handling, loading and unloading of the cargoes are packages of hot rolled sheets or a total of 1,769 packages with a
the responsibility of the Charterer. Under Paragraph 5 of the total weight of about 2,481.19 metric tons for carriage to Manila.
NANYOZAI Charter Party, it states, "Charterers to load, stow and The shipment was placed in the three (3) hatches of the ship. Chief
discharge the cargo free of risk and expenses to owners. . . . Mate Gonzalo Sabando, acting as agent of the vessel[,]
(Emphasis supplied). acknowledged receipt of the cargo on board and signed the
Under paragraph 10 thereof, it is provided that "(o)wners shall, corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on
before and at the beginning of the voyage, exercise due diligence August 8, 1974.
to make the vessel seaworthy and properly manned, equipped and (3) The vessel arrived with the cargo at Pier 12, North Harbor,
supplied and to make the holds and all other parts of the vessel in Manila, on August 12, 1974. The following day, August 13, 1974,
which cargo is carried, fit and safe for its reception, carriage and when the vessel's three (3) hatches containing the shipment were
preservation. Owners shall not be liable for loss of or damage of opened by plaintiff's agents, nearly all the skids of tinplates and
the cargo arising or resulting from: unseaworthiness unless caused hot rolled sheets were allegedly found to be wet and rusty. The
by want of due diligence on the part of the owners to make the cargo was discharged and unloaded by stevedores hired by the
vessel seaworthy, and to secure that the vessel is properly Charterer. Unloading was completed only on August 24, 1974 after
manned, equipped and supplied and to make the holds and all incurring a delay of eleven (11) days due to the heavy rain which
other parts of the vessel in which cargo is carried, fit and safe for interrupted the unloading operations. (Exhibit "E")
its reception, carriage and preservation; . . . ; perils, dangers and (4) To determine the nature and extent of the wetting and rusting,
accidents of the sea or other navigable waters; . . . ; wastage in NSC called for a survey of the shipment by the Manila Adjusters
bulk or weight or any other loss or damage arising from inherent and Surveyors Company (MASCO). In a letter to the NSC dated
defect, quality or vice of the cargo; insufficiency of packing; . . . ; March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular
inspection conducted on the cargo, both while it was still on board parts of the vessel in which the cargo was carried, fit and safe for
the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, its reception, carriage and preservation — all in violation of
Manila where the cargo was taken and stored. MASCO reported defendant's undertaking under their Contract of Voyage Charter
that it found wetting and rusting of the packages of hot rolled Hire.
sheets and metal covers of the tinplates; that tarpaulin hatch (7) In its answer, defendant denied liability for the alleged damage
covers were noted torn at various extents; that container/metal claiming that the MV "VLASONS I" was seaworthy in all respects
casings of the skids were rusting all over. MASCO ventured the for the carriage of plaintiff's cargo; that said vessel was not a
opinion that "rusting of the tinplates was caused by contact with "common carrier" inasmuch as she was under voyage charter
SEA WATER sustained while still on board the vessel as a contract with the plaintiff as charterer under the charter party;
consequence of the heavy weather and rough seas encountered that in the course of the voyage from Iligan City to Manila, the MV
while en route to destination (Exhibit "F"). It was also reported "VLASONS I" encountered very rough seas, strong winds and
that MASCO's surveyors drew at random samples of bad order adverse weather condition, causing strong winds and big waves to
packing materials of the tinplates and delivered the same to the continuously pound against the vessel and seawater to overflow
M.I.T. Testing Laboratories for analysis. On August 31, 1974, the on its deck and hatch covers, that under the Contract of Voyage
M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit "I") Charter Hire, defendant shall not be responsible for
which in part, states, "The analysis of bad order samples of packing losses/damages except on proven willful negligence of the officers
materials . . . shows that wetting was caused by contact with SEA of the vessel, that the officers of said MV "VLASONS I" exercised
WATER". due diligence and proper seamanship and were not willfully
(5) On September 6, 1974, on the basis of the aforesaid Report No. negligent; that furthermore the Voyage Charter Party provides that
1770, plaintiff filed with the defendant its claim for damages loading and discharging of the cargo was on FIOST terms which
suffered due to the downgrading of the damaged tinplates in the means that the vessel was free of risk and expense in connection
amount of P941,145.18. Then on October 3, 1974, plaintiff formally with the loading and discharging of the cargo; that the damage, if
demanded payment of said claim but defendant VSI refused and any, was due to the inherent defect, quality or vice of the cargo or
failed to pay. Plaintiff filed its complaint against defendant on April to the insufficient packing thereof or to latent defect of the cargo
21, 1976 which was docketed as Civil Case No. 23317, CFI, Rizal. not discoverable by due diligence or to any other cause arising
(6) In its complaint, plaintiff claimed that it sustained losses in the without the actual fault or privity of defendant and without the
aforesaid amount of P941,145.18 as a result of the act, neglect and fault of the agents or servants of defendant; consequently,
default of the master and crew in the management of the vessel as defendant is not liable; that the stevedores of plaintiff who
well as the want of due diligence on the part of the defendant to discharged the cargo in Manila were negligent and did not exercise
make the vessel seaworthy and to make the holds and all other due care in the discharge of the cargo; land that the cargo was
exposed to rain and seawater spray while on the pier or in transit the required seaworthiness certificates including the Certification
from the pier to plaintiff's warehouse after discharge from the of Classification issued by an international classification society, the
vessel; and that plaintiff's claim was highly speculative and grossly NIPPON KAIJI KYOKAI (Exh. "4"); Coastwise License from the Board
exaggerated and that the small stain marks or sweat marks on the of Transportation (Exh. "5"); International Loadline Certificate from
edges of the tinplates were magnified and considered total loss of the Philippine Coast Guard (Exh. "6"); Cargo Ship Safety Equipment
the cargo. Finally, defendant claimed that it had complied with all Certificate also from the Philippine Coast Guard (Exh. "7"); Ship
its duties and obligations under the Voyage Charter Hire Contract Radio Station License (Exh. "8"); Certificate of Inspection by the
and had no responsibility whatsoever to plaintiff. In turn, it alleged Philippine Coast Guard (Exh. "12"); and Certificate of Approval for
the following counterclaim: Conversion issued by the Bureau of Customs (Exh. "9"). That being
(a) That despite the full and proper performance by defendant of a vessel engaged in both overseas and coastwise trade, the MV
its obligations under the Voyage Charter Hire Contract, plaintiff "VLASONS I" has a higher degree of seaworthiness and safety.
failed and refused to pay the agreed charter hire of P75,000.00 (c) Before it proceeded to Iligan City to perform the voyage called
despite demands made by defendant; for by the Contract of Voyage Charter Hire, the MV "VLASONS I"
(b) That under their Voyage Charter Hire Contract, plaintiff had underwent drydocking in Cebu and was thoroughly inspected by
agreed to pay defendant the sum of P8,000.00 per day for the Philippine Coast Guard. In fact, subject voyage was the vessel's
demurrage. The vessel was on demurrage for eleven (11) days in first voyage after the drydocking. The evidence shows that the MV
Manila waiting for plaintiff to discharge its cargo from the vessel. "VLASONS I" was seaworthy and properly manned, equipped and
Thus, plaintiff was liable to pay defendant demurrage in the total supplied when it undertook the voyage. It has all the required
amount of P88,000.00. certificates of seaworthiness.
(c) For filing a clearly unfounded civil action against defendant, (d) The cargo/shipment was securely stowed in three (3) hatches
plaintiff should be ordered to pay defendant attorney's fees and all of the ship. The hatch openings were covered by hatchboards
expenses of litigation in the amount of not less than P100,000.00. which were in turn covered by two or double tarpaulins. The hatch
(8) From the evidence presented by both parties, the trial court covers were water tight. Furthermore, under the hatchboards
came out with the following findings which were set forth in its were steel beams to give support.
decision: (e) The claim of the plaintiff that defendant violated the contract
(a) The MV "VLASONS I" is a vessel of Philippine registry engaged of carriage is not supported by evidence. The provisions of the Civil
in the tramping service and is available for hire only under special Code on common carriers pursuant to which there exists a
contracts of charter party as in this particular case. presumption of negligence in case of loss or damage to the cargo
(b) That for purposes of the voyage covered by the Contract of are not applicable. As to the damage to the tinplates which was
Voyage Charter Hire (Exh. "1"), the MV VLASONS I" was covered by allegedly due to the wetting and rusting thereof, there is
unrebutted testimony of witness Vicente Angliongto that tinplates (g) It was also established that the vessel encountered rough seas
"sweat" by themselves when packed even without being in and bad weather while en route from Iligan City to Manila causing
contract (sic) with water from outside especially when the weather sea water to splash on the ship's deck on account of which the
is bad or raining. The trust caused by sweat or moisture on the master of the vessel (Mr. Antonio C. Dumlao) filed a "Marine
tinplates may be considered as a loss or damage but then, Protest" on August 13, 1974 (Exh. "15"); which can be invoked by
defendant cannot be held liable for it pursuant to Article 1734 of defendant as a force majeure that would exempt the defendant
the Civil Case which exempts the carrier from responsibility for loss from liability.
or damage arising from the "character of the goods . . ." All the (h) Plaintiff did not comply with the requirement prescribed in
1,769 skids of the tinplates could not have been damaged by water paragraph 9 of the Voyage Charter Hire contract that it was to
as claimed by plaintiff. It was shown as claimed by plaintiff that the insure the cargo because it did not. Had plaintiff complied with the
tinplates themselves were wrapped in kraft paper lining and requirement, then it could have recovered its loss or damage from
corrugated cardboards could not be affected by water from the insurer. Plaintiff also violated the charter party contract when
outside. it loaded not only "steel products", i.e. steel bars, angular bars and
(f) The stevedores hired by the plaintiff to discharge the cargo of the like but also tinplates and hot rolled sheets which are high
tinplates were negligent in not closing the hatch openings of the grade cargo commanding a higher freight. Thus plaintiff was able
MV "VLASONS I" when rains occurred during the discharging of the to ship grade cargo at a lower freight rate.
cargo thus allowing rainwater to enter the hatches. It was proven (i) As regards defendant's counterclaim, the contract of voyage
that the stevedores merely set up temporary tents to cover the charter hire under Paragraph 4 thereof, fixed the freight at P30.00
hatch openings in case of rain so that it would be easy for them to per metric ton payable to defendant carrier upon presentation of
resume work when the rains stopped by just removing the tent or the bill of lading within fifteen (15) days. Plaintiff has not paid the
canvas. Because of this improper covering of the hatches by the total freight due of P75,000.00 despite demands. The evidence also
stevedores during the discharging and unloading operations which showed that the plaintiff was required and bound under paragraph
were interrupted by rains, rainwater drifted into the cargo through 7 of the same Voyage Charter Hire contract to pay demurrage of
the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] P8,000.00 per day of delay in the unloading of the cargoes. The
Charter Party which was expressly made part of the Contract of delay amounted to eleven (11) days thereby making plaintiff liable
Voyage Charter Hire, the loading, stowing and discharging of the to pay defendant for demurrage in the amount of P88,000.00.
cargo is the sole responsibility of the plaintiff charterer and Appealing the RTC decision to the Court of Appeals, NSC alleged six
defendant carrier has no liability for whatever damage may occur errors:
or maybe [sic] caused to the cargo in the process. I
The trial court erred in finding that the MV "VLASONS I" was In its petition7 and memorandum,8 NSC raises the following
seaworthy, properly manned, equipped and supplied, and that questions of law and fact:
there is no proof of willful negligence of the vessel's officers. Questions of Law
II 1. Whether or not a charterer of a vessel is liable for demurrage
The trial court erred in finding that the rusting of NSC's tinplates due to cargo unloading delays caused by weather interruption;
was due to the inherent nature or character of the goods and not 2. Whether or not the alleged "seaworthiness certificates" (Exhibits
due to contact with seawater. "3", "4", "5", "6", "7", "8", "9", "11" and "12") were admissible in
III evidence and constituted evidence of the vessel's seaworthiness at
The trial court erred in finding that the stevedores hired by NSC the beginning of the voyages; and
were negligent in the unloading of NSC's shipment. 3. Whether or not a charterer's failure to insure its cargo exempts
IV the shipowner from liability for cargo damage.
The trial court erred in exempting VSI from liability on the ground Questions of Fact
of force majeure. 1. Whether or not the vessel was seaworthy and cargo-worthy;
V 2. Whether or not vessel's officers and crew were negligent in
The trial court erred in finding that NSC violated the contract of handling and caring for NSC's cargo;
voyage charter hire. 3. Whether or not NSC's cargo of tinplates did sweat during the
VI voyage and, hence, rusted on their own; and
The trial court erred in ordering NSC to pay freight, demurrage and 4. Whether or not NSC's stevedores were negligent and caused the
attorney's fees, to VSI.4 wetting[/]rusting of NSC's tinplates.
As earlier stated, the Court of Appeals modified the decision of the In its separate petition,9 VSI submits for the consideration of this
trial court by reducing the demurrage from P88,000.00 to Court the following alleged errors of the CA:
P44,000.00 and deleting the award of attorneys fees and expenses A. The respondent Court of Appeals committed an error of law in
of litigation. NSC and VSI filed separate motions for reducing the award of demurrage from P88,000.00 to P44,000.00.
reconsideration. In a Resolution5 dated October 20, 1993, the B. The respondent Court of Appeals committed an error of law in
appellate court denied both motions. Undaunted, NSC and VSI filed deleting the award of P100,000 for attorney's fees and expenses of
their respective petitions for review before this Court. On motion litigation.
of VSI, the Court ordered on February 14, 1994 the consolidation Amplifying the foregoing, VSI raises the following issues in its
of these petitions.6 memorandum:10
The Issues I. Whether or not the provisions of the Civil Code of the Philippines
on common carriers pursuant to which there exist[s] a
presumption of negligence against the common carrier in case of himself out to carry goods for the general public. The most typical,
loss or damage to the cargo are applicable to a private carrier. although not the only form of private carriage, is the charter party,
II. Whether or not the terms and conditions of the Contract of a maritime contract by which the charterer, a party other than the
Voyage Charter Hire, including the Nanyozai Charter, are valid and shipowner, obtains the use and service of all or some part of a ship
binding on both contracting parties. for a period of time or a voyage or voyages."12
The foregoing issues raised by the parties will be discussed under In the instant case, it is undisputed that VSI did not offer its
the following headings: services to the general public. As found by the Regional Trial Court,
1. Questions of Fact it carried passengers or goods only for those it chose under a
2. Effect of NSC's Failure to Insure the Cargo "special contract of charter party." 13 As correctly concluded by the
3. Admissibility of Certificates Proving Seaworthiness Court of Appeals, the MV Vlasons I "was not a common but a
4. Demurrage and Attorney's Fees. private carrier."14Consequently, the rights and obligations of VSI
The Court's Ruling and NSC, including their respective liability for damage to the
The Court affirms the assailed Decision of the Court of Appeals, cargo, are determined primarily by stipulations in their contract of
except in respect of the demurrage. private carriage or charter party.15 Recently, in Valenzuela
Preliminary Matter: Common Carrier or Private Carrier? Hardwood and Industrial Supply, Inc., vs. Court of Appeals and
At the outset, it is essential to establish whether VSI contracted Seven Brothers Shipping Corporation,16 the Court ruled:
with NSC as a common carrier or as a private carrier. The . . . in a contract of private carriage, the parties may freely
resolution of this preliminary question determines the law, stipulate their duties and obligations which perforce would be
standard of diligence and burden of proof applicable to the binding on them. Unlike in a contract involving a common carrier,
present case. private carriage does not involve the general public. Hence, the
Article 1732 of the Civil Code defines a common carrier as stringent provisions of the Civil Code on common carriers
"persons, corporations, firms or associations engaged in the protecting the general public cannot justifiably be applied to a ship
business of carrying or transporting passengers or goods or both, transporting commercial goods as a private carrier. Consequently,
by land, water, or air, for compensation, offering their services to the public policy embodied therein is not contravened by
the public." It has been held that the true test of a common carrier stipulations in a charter party that lessen or remove the protection
is the carriage of passengers or goods, provided it has space, given by law in contracts involving common carriers.17
for all who opt to avail themselves of its transportation service for Extent of VSI's Responsibility and
a fee.11 A carrier which does not qualify under the above test is Liability Over NSC's Cargo
deemed a private carrier. "Generally, private carriage is It is clear from the parties' Contract of Voyage Charter Hire, dated
undertaken by special agreement and the carrier does not hold July 17, 1974, that VSI "shall not be responsible for losses except
on proven willful negligence of the officers of the vessel." The Art. 362. The carrier, however, shall be liable for damages arising
NANYOZAI Charter Party, which was incorporated in the parties' from the cause mentioned in the preceding article if proofs against
contract of transportation further provided that the shipowner him show that they occurred on account of his negligence or his
shall not be liable for loss of or a damage to the cargo arising or omission to take the precautions usually adopted by careful
resulting from unseaworthiness, unless the same was caused by its persons, unless the shipper committed fraud in the bill of lading,
lack of due diligence to make the vessel seaworthy or to ensure making him to believe that the goods were of a class or quality
that the same was "properly manned, equipped and supplied," and different from what they really were.
to "make the holds and all other parts of the vessel in which cargo Because the MV Vlasons I was a private carrier, the shipowner's
[was] carried, fit and safe for its reception, carriage and obligations are governed by the foregoing provisions of the Code
preservation."18 The NANYOZAI Charter Party also provided that of Commerce and not by the Civil Code which, as a general rule,
"[o]wners shall not be responsible for split, chafing and/or any places the prima faciepresumption of negligence on a common
damage unless caused by the negligence or default of the master carrier. It is a hornbook doctrine that:
or crew."19 In an action against a private carrier for loss of, or injury to, cargo,
Burden of Proof the burden is on the plaintiff to prove that the carrier was
In view of the aforementioned contractual stipulations, NSC must negligent or unseaworthy, and the fact that the goods were lost or
prove that the damage to its shipment was caused by VSI's willful damaged while in the carrier's custody does not put the burden of
negligence or failure to exercise due diligence in making MV proof on the carrier.
Vlasons I seaworthy and fit for holding, carrying and safekeeping Since . . . a private carrier is not an insurer but undertakes only to
the cargo. Ineluctably, the burden of proof was placed on NSC by exercise due care in the protection of the goods committed to its
the parties' agreement. care, the burden of proving negligence or a breach of that duty
This view finds further support in the Code of Commerce which rests on plaintiff and proof of loss of, or damage to, cargo while in
pertinently provides: the carrier's possession does not cast on it the burden of proving
Art. 361. Merchandise shall be transported at the risk and venture proper care and diligence on its part or that the loss occurred from
of the shipper, if the contrary has not been expressly stipulated. an excepted cause in the contract or bill of lading. However, in
Therefore, the damage and impairment suffered by the goods discharging the burden of proof, plaintiff is entitled to the benefit
during the transportation, due to fortuitous event, force majeure, of the presumptions and inferences by which the law aids the
or the nature and inherent defect of the things, shall be for the bailor in an action against a bailee, and since the carrier is in a
account and risk of the shipper. better position to know the cause of the loss and that it was not
The burden of proof of these accidents is on the carrier. one involving its liability, the law requires that it come forward
with the information available to it, and its failure to do so
warrants an inference or presumption of its liability. However, such and crew of the vessel or of the stevedores hired by NSC; and (3)
inferences and presumptions, while they may affect the burden of whether the rusting of the tinplates was caused by its own "sweat"
coming forward with evidence, do not alter the burden of proof or by contact with seawater.
which remains on plaintiff, and, where the carrier comes forward These questions of fact were threshed out and decided by the trial
with evidence explaining the loss or damage, the burden of going court, which had the firsthand opportunity to hear the parties'
forward with the evidence is again on plaintiff. conflicting claims and to carefully weigh their respective evidence.
Where the action is based on the shipowner's warranty of The findings of the trial court were subsequently affirmed by the
seaworthiness, the burden of proving a breach thereof and that Court of Appeals. Where the factual findings of both the trial court
such breach was the proximate cause of the damage rests on and the Court of Appeals coincide, the same are binding on this
plaintiff, and proof that the goods were lost or damaged while in Court.22 We stress that, subject to some exceptional
the carrier's possession does not cast on it the burden of proving instances,23only questions of law — not questions of fact — may
seaworthiness. . . . Where the contract of carriage exempts the be raised before this Court in a petition for review under Rule 45
carrier from liability for unseaworthiness not discoverable by due of the Rules of Court. After a thorough review of the case at bar,
diligence, the carrier has the preliminary burden of proving the we find no reason to disturb the lower court's factual findings, as
exercise of due diligence to make the vessel seaworthy.20 indeed NSC has not successfully proven the application of any of
In the instant case, the Court of Appeals correctly found the NSC the aforecited exceptions.
"has not taken the correct position in relation to the question of Was MV Vlasons I Seaworthy?
who has the burden of proof. Thus, in its brief (pp. 10-11), after In any event, the records reveal that VSI exercised due diligence to
citing Clause 10 and Clause 12 of the NANYOZAI Charter Party make the ship seaworthy and fit for the carriage of NSC's cargo of
(incidentally plaintiff-appellant's [NSC's] interpretation of Clause 12 steel and tinplates. This is shown by the fact that it was drylocked
is not even correct), it argues that 'a careful examination of the and inspected by the Philippine Coast Guard before it proceeded
evidence will show that VSI miserably failed to comply with any of to Iligan City for its voyage to Manila under the contract of voyage
these obligation's as if defendant-appellee [VSI] had the burden of  charter hire.24The vessel's voyage from Iligan to Manila was the
proof."21 vessel's  first voyage after drydocking. The Philippine Coast Guard
First Issue: Questions of Fact Station in Cebu cleared it as seaworthy, fitted and equipped; it met
Based on the foregoing, the determination of the following factual all requirements for trading as cargo vessel.25 The Court of Appeals
questions is manifestly relevant: (1) whether VSI exercised due itself sustained the conclusion of the trial court that MV Vlasons
diligence in making MV Vlasons I seaworthy for the intended I was seaworthy. We find no reason to modify or reverse this
purpose under the charter party; (2) whether the damage to the finding of both the trial and the appellate courts.
cargo should be attributed to the willful negligence of the officers
Who Were Negligent: to overflow on deck andhatch (sic) covers and which caused the
Seamen or Stevedores? first layer of the canvass covering to give way while the new
As noted earlier, the NSC had the burden of proving that the canvass covering still holding on;
damage to the cargo was caused by the negligence of the officers That the weather condition improved when we reached Dumali
and the crew of MV Vlasons I in making their vessel seaworthy and Point protected by Mindoro; that we re-secured the canvass
fit for the carriage of tinplates. NSC failed to discharge this burden. covering back to position; that in the afternoon of August 10, 1974,
Before us, NSC relies heavily on its claim that MV Vlasons I had while entering Maricaban Passage, we were again exposed to
used an old and torn tarpaulin or canvas to cover the hatches moderate seas and heavy rains; that while approaching Fortune
through which the cargo was loaded into the cargo hold of the Island, we encountered again rough seas, strong winds and big
ship. It faults the Court of Appeals for failing to consider such claim waves which caused the same canvass to give way and leaving the
as an "uncontroverted fact"26 and denies that MV Vlasons I "was new canvass holding on;
equipped with new canvas covers in tandem with the old ones as xxx xxx xxx 28
indicated in the Marine Protest . . ."27 We disagree. And the relevant portions of Jose Pascua's deposition are as
The records sufficiently support VSI's contention that the ship used follows:
the old tarpaulin, only in addition to the new one used primarily to q What is the purpose of the canvas cover?
make the ship's hatches watertight. The foregoing are clear from a So that the cargo would not be soaked with water.
the marine protest of the master of the MV Vlasons I, Antonio C. q And will you describe how the canvas cover was secured on the
Dumlao, and the deposition of the ship's boatswain, Jose Pascua. hatch opening?
The salient portions of said marine protest read: WITNESS
. . . That the M/V "VLASONS I" departed Iligan City or about 0730 a It was placed flat on top of the hatch cover, with a little canvas
hours of August 8, 1974, loaded with approximately 2,487.9 tons of flowing over the sides and we place[d] a flat bar over the canvas
steel plates and tin plates consigned to National Steel Corporation; on the side of the hatches and then we place[d] a stopper so that
that before departure, the vessel was rigged, fully equipped and the canvas could not be removed.
cleared by the authorities; that on or about August 9, 1974, while ATTY DEL ROSARIO
in the vicinity of the western part of Negros and Panay, we q And will you tell us the size of the hatch opening? The length and
encountered very rough seas and strong winds and Manila office the width of the hatch opening.
was advised by telegram of the adverse weather conditions a Forty-five feet by thirty-five feet, sir.
encountered; that in the morning of August 10, 1974, the weather x x x           x x x          x x x
condition changed to worse and strong winds and big waves q How was the canvas supported in the middle of the hatch
continued pounding the vessel at her port side causing sea water opening?
a There is a hatch board. despite encountering rough weather twice, the new tarpaulin did
ATTY DEL ROSARIO not give way and the ship's hatches and cargo holds remained
q What is the hatch board made of? waterproof. As aptly stated by the Court of Appeals, ". . . we find
a It is made of wood, with a handle. no reason not to sustain the conclusion of the lower court based
q And aside from the hatch board, is there any other material on overwhelming evidence, that the MV 'VLASONS I' was
there to cover the hatch? seaworthy when it undertook the voyage on August 8, 1974
a There is a beam supporting the hatch board. carrying on board thereof plaintiff-appellant's shipment of 1,677
q What is this beam made of? skids of tinplates and 92 packages of hot rolled sheets or a total of
a It is made of steel, sir. 1,769 packages from NSC's pier in Iligan City arriving safely at
q Is the beam that was placed in the hatch opening covering the North Harbor, Port Area, Manila, on August 12, 1974; . . .30
whole hatch opening? Indeed, NSC failed to discharge its burden to show negligence on
a No, sir. the part of the officers and the crew of MV Vlasons I. On the
q How many hatch beams were there placed across the opening?  contrary, the records reveal that it was the stevedores of NSC who
a There are five beams in one hatch opening. were negligent in unloading the cargo from the ship.
ATTY DEL ROSARIO The stevedores employed only a tent-like material to cover the
q And on top of the beams you said there is a hatch board. How hatches when strong rains occasioned by a passing typhoon
many pieces of wood are put on top? disrupted the unloading of the cargo. This tent-like covering,
a Plenty, sir, because there are several pieces on top of the hatch however, was clearly inadequate for keeping rain and seawater
beam. away from the hatches of the ship. Vicente Angliongto, an officer
q And is there a space between the hatch boards? of VSI, testified thus:
a There is none, sir. ATTY ZAMORA:
q They are tight together? Q Now, during your testimony on November 5, 1979, you stated
a Yes, sir. on August 14 you went on board the vessel upon notice from the
q How tight? National Steel Corporation in order to conduct the inspection of
a Very tight, sir. the cargo. During the course of the investigation, did you chance to
q Now, on top of the hatch boards, according to you, is the canvass see the discharging operation?
cover. How many canvas covers? WITNESS:
a Two, sir.29 A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates
That due diligence was exercised by the officers and the crew of already discharged on the pier but majority of the tinplates were
the MV Vlasons I  was further demonstrated by the fact that, inside the hall, all the hatches were opened.
Q In connection with these cargoes which were unloaded, where is hold all of it to prevent the water soaking through the canvass and
the place. enter the cargo.
A At the Pier. Q In the course of your inspection, Mr. Anglingto [sic], did you see
Q What was used to protect the same from weather? in fact the water enter and soak into the canvass and tinplates.
ATTY LOPEZ: A Yes, sir, the second time I went there, I saw it.
We object, your Honor, this question was already asked. This Q As owner of the vessel, did you not advise the National Steel
particular matter . . . the transcript of stenographic notes shows Corporation [of] the procedure adopted by its stevedores in
the same was covered in the direct examination. discharging the cargo particularly in this tent covering of the
ATTY ZAMORA: hatches?
Precisely, your Honor, we would like to go on detail, this is the A Yes, sir, I did the first time I saw it, I called the attention of the
serious part of the testimony. stevedores but the stevedores did not mind at all, so, called the
COURT: attention of the representative of the National Steel but nothing
All right, witness may answer. was done, just the same. Finally, I wrote a letter to them.31
ATTY LOPEZ: NSC attempts to discredit the testimony of Angliongto by
Q What was used in order to protect the cargo from the weather? questioning his failure to complain immediately about the
A A base of canvas was used as cover on top of the tin plates, and stevedores' negligence on the first day of unloading, pointing out
tents were built at the opening of the hatches. that he wrote his letter to petitioner only seven days later.32 The
Q You also stated that the hatches were already opened and that Court is not persuaded. Angliongto's candid answer in his
there were tents constructed at the opening of the hatches to aforequoted testimony satisfactorily explained the delay. Seven
protect the cargo from the rain. Now, will you describe [to] the days lapsed because he first called the attention of the stevedores,
Court the tents constructed. then the NSC's representative, about the negligent and defective
A The tents are just a base of canvas which look like a tent of an procedure adopted in unloading the cargo. This series of actions
Indian camp raise[d] high at the middle with the whole side constitutes a reasonable response in accord with common sense
separated down to the hatch, the size of the hatch and it is soaks and ordinary human experience. Vicente Angliongto could not be
[sic] at the middle because of those weather and this can be used blamed for calling the stevedores' attention first and then the
only to temporarily protect the cargo from getting wet by rains. NSC's representative on location before formally informing NSC of
Q Now, is this procedure adopted by the stevedores of covering the negligence he had observed, because he was not responsible
tents proper? for the stevedores or the unloading operations. In fact, he was
A No, sir, at the time they were discharging the cargo, there was a merely expressing concern for NSC which was ultimately
typhoon passing by and the hatch tent was not good enough to
responsible for the stevedores it had hired and the performance of prescription, from the stevedoring company at fault in the
their task to unload the cargo. discharge operations. "A stevedore company engaged in
We see no reason to reverse the trial and the appellate courts' discharging cargo . . . has the duty to load the cargo . . . in a
findings and conclusions on this point, viz: prudent manner, and it is liable for injury to, or loss of, cargo
In the THIRD assigned error, [NSC] claims that the trial court erred caused by its negligence . . . and where the officers and members
in finding that the stevedores hired by NSC were negligent in the and crew of the vessel do nothing and have no responsibility in the
unloading of NSC's shipment. We do not think so. Such negligence discharge of cargo by stevedores . . . the vessel is not liable for loss
according to the trial court is evident in the stevedores hired by of, or damage to, the cargo caused by the negligence of the 
[NSC], not closing the hatch of MV 'VLASONS I' when rains stevedores . . ."34 as in the instant case.
occurred during the discharging of the cargo thus allowing rain Do Tinplates "Sweat"?
water and seawater spray to enter the hatches and to drift to and The trial court relied on the testimony of Vicente Angliongto in
fall on the cargo. It was proven that the stevedores merely set up finding that ". . . tinplates 'sweat' by themselves when packed even
temporary tents or canvas to cover the hatch openings when it without being in contact with water from outside especially when
rained during the unloading operations so that it would be easier the weather is bad or 
35
for them to resume work after the rains stopped by just removing raining . . ."  The Court of Appeals affirmed the trial court's
said tents or canvass. It has also been shown that on August 20, finding.
1974, VSI President Vicente Angliongto wrote [NSC] calling A discussion of this issue appears inconsequential and
attention to the manner the stevedores hired by [NSC] were unnecessary. As previously discussed, the damage to the tinplates
discharging the cargo on rainy days and the improper closing of was occasioned not by airborne moisture but by contact with rain
the hatches which allowed continuous heavy rain water to leak and seawater which the stevedores negligently allowed to seep in
through and drip to the tinplates' covers and [Vicente Angliongto] during the unloading.
also suggesting that due to four (4) days continuos rains with Second Issue: Effect of NSC's Failure to
strong winds that the hatches be totally closed down and covered Insure the Cargo
with canvas and the hatch tents lowered. (Exh. "13"). This letter The obligation of NSC to insure the cargo stipulated in the Contract
was received by [NSC] on 22 August 1974 while discharging of Voyage Charter Hire is totally separate and distinct from the
operations were still going on (Exhibit "13-A").33 contractual or statutory responsibility that may be incurred by VSI
The fact that NSC actually accepted and proceeded to remove the for damage to the cargo caused by the willful negligence of the
cargo from the ship during unfavorable weather will not make VSI officers and the crew of MV Vlasons I. Clearly, therefore, NSC's
liable for any damage caused thereby. In passing, it may be noted failure to insure the cargo will not affect its right, as owner and
that the NSC may seek indemnification, subject to the laws on real party in interest, to file an action against VSI for damages
caused by the latter's willful negligence. We do not find anything in Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their admission
the charter party that would make the liability of VSI for damage under the best evidence rule have not been demonstrated.
to the cargo contingent on or affected in any manner by NSC's We find, however, that Exhibit 11 is admissible under a well-settled
obtaining an insurance over the cargo. exception to the hearsay rule per Section 44 of Rule 130 of the
Third Issue: Admissibility of Certificates Rules of Court, which provides that "(e)ntries in official records
Proving Seaworthiness made in the performance of a duty by a public officer of the
NSC's contention that MV Vlasons I was not seaworthy is anchored Philippines, or by a person in the performance of a duty specially
on the alleged inadmissibility of the certificates of seaworthiness enjoined by law, are prima facie evidence of the facts therein
offered in evidence by VSI. The said certificates include the stated."38 Exhibit 11 is an original certificate of the Philippine Coast
following: Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to
1. Certificate of Inspection of the Philippines Coast Guard at Cebu the effect that "the vessel 'VLASONS I' was drydocked . . . and PCG
2. Certificate of Inspection from the Philippine Coast Guard Inspectors were sent on board for inspection . . . After completion
3. International Load Line Certificate from the Philippine Coast of drydocking and duly inspected by PCG Inspectors, the vessel
Guard 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all
4. Coastwise License from the Board of Transportation requirements, fitted and equipped for trading as a cargo vessel was
5. Certificate of Approval for Conversion issued by the Bureau of cleared by the Philippine Coast Guard and sailed for Cebu Port on
Customs36 July 10, 1974." (sic) NSC's claim, therefore, is obviously misleading
NSC argues that the certificates are hearsay for not having been and erroneous.
presented in accordance with the Rules of Court. It points out that At any rate, it should be stressed that NSC has the burden of
Exhibits 3, 4 and 11 allegedly are "not written records or acts of proving that MV Vlasons I was not seaworthy. As observed earlier,
public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not the vessel was a private carrier and, as such, it did not have the
"evidenced by official publications or certified true copies" as obligation of a common carrier to show that it was seaworthy.
required by Sections 25 and 26, Rule 132, of the Rules of Court.37 Indeed, NSC glaringly failed to discharge its duty of proving the
After a careful examination of these exhibits, the Court rules that willful negligence of VSI in making the ship seaworthy resulting in
Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not damage to its cargo. Assailing the genuineness of the certificate of
been properly offered as evidence. Exhibits 3 and 4 are certificates seaworthiness is not sufficient proof that the vessel was not
issued by private parties, but they have not been proven by one seaworthy.
who saw the writing executed, or by evidence of the genuineness Fourth Issue: Demurrage and Attorney's Fees
of the handwriting of the maker, or by a subscribing witness. The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, August 13, 1974 to August 24, 1974, the only day of unloading
10% more or less at Master's option. unhampered by unfavorable weather or rain, which was August 22,
xxx xxx xxx 1974. Based on our previous discussion, such finding is a reversible
6. Loading/Discharging Rate: 750 tons per WWDSHINC. error. As mentioned, the respondent appellate court also erred in
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.39 ruling that NSC was liable to VSI for demurrage, even if it reduced
The Court defined demurrage in its strict sense as the the amount by half.
compensation provided for in the contract of affreightment for the Attorney's Fees
detention of the vessel beyond the laytime or that period of time VSI assigns as error of law the Court of Appeals' deletion of the
agreed on for loading and unloading of cargo.40It is given to award of attorney's fees. We disagree. While VSI was compelled to
compensate the shipowner for the nonuse of the vessel. On the litigate to protect its rights, such fact by itself will not justify an
other hand, the following is well-settled: award of attorney's fees under Article 2208 of the Civil Code when
Laytime runs according to the particular clause of the charter ". . . no sufficient showing of bad faith would be reflected in a
party. . . . If laytime is expressed in "running days," this means days party's persistence in a case other than an erroneous conviction of
when the ship would be run continuously, and holidays are not the righteousness of his cause . . ."44 Moreover, attorney's fees may
excepted. A qualification of "weather permitting" excepts only not be awarded to a party for the reason alone that the judgment
those days when bad weather reasonably prevents the work rendered was favorable to the latter, as this is tantamount to
contemplated.41 imposing a premium on one's right to litigate or seek judicial
In this case, the contract of voyage charter hire provided for a redress of legitimate grievances.45
four-day laytime; it also qualified laytime as WWDSHINC or Epilogue
weather working days Sundays and holidays included.42 The At bottom, this appeal really hinges on a factual issue: when, how
running of laytime was thus made subject to the weather, and and who caused the damage to the cargo? Ranged against NSC are
would cease to run in the event unfavorable weather interfered two formidable truths. First, both lower courts found that such
with the unloading of cargo.43 Consequently, NSC may not be held damage was brought about during the unloading process when
liable for demurrage as the four-day laytime allowed it did not rain and seawater seeped through the cargo due to the fault or
lapse, having been tolled by unfavorable weather condition in view negligence of the stevedores employed by it. Basic is the rule that
of the WWDSHINC qualification agreed upon by the parties. factual findings of the trial court, when affirmed by the Court of
Clearly, it was error for the trial court and the Court of Appeals to Appeals, are binding on the Supreme Court. Although there are
have found and affirmed respectively that NSC incurred eleven settled exceptions, NSC has not satisfactorily shown that this case
days of delay in unloading the cargo. The trial court arrived at this is one of them. Second, the agreement between the parties — the
erroneous finding by subtracting from the twelve days, specifically Contract of Voyage Charter Hire — placed the burden of proof for
such loss or damage upon the shipper, not upon the shipowner.
Such stipulation, while disadvantageous to NSC, is valid because
the parties entered into a contract of private charter, not one of
common carriage. Basic too is the doctrine that courts cannot
relieve a parry from the effects of a private contract freely entered
into, on the ground that it is allegedly one-sided or unfair to the
plaintiff. The charter party is a normal commercial contract and its G.R. No. 184300               July 11, 2012
stipulations are agreed upon in consideration of many factors, not MALAYAN INSURANCE CO., INC., Petitioner, 
the least of which is the transport price which is determined not vs.
only by the actual costs but also by the risks and burdens assumed PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE
by the shipper in regard to possible loss or damage to the cargo. In FORWARDER SERVICES, INC., Respondents.
recognition of such factors, the parties even stipulated that the
shipper should insure the cargo to protect itself from the risks it Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent
undertook under the charter party. That NSC failed or neglected to Reputable Forwarder Services, Inc. (Reputable) had been annually
protect itself with such insurance should not adversely affect VSI, executing a contract of carriage, whereby the latter undertook to
which had nothing to do with such failure or neglect. transport and deliver the former’s products to its customers,
WHEREFORE, premises considered, the instant consolidated dealers or salesmen.3 
petitions are hereby DENIED. The questioned Decision of the Court On November 18, 1993, Wyeth procured Marine Policy No. MAR
of Appeals is AFFIRMED with the MODIFICATION that the 13797 (Marine Policy) from respondent Philippines First Insurance
demurrage awarded to VSI is deleted. No pronouncement as to Co., Inc. (Philippines First) to secure its interest over its own
costs. products. Philippines First thereby insured Wyeth’s nutritional,
SO ORDERED. pharmaceutical and other products usual or incidental to the
insured’s business while the same were being transported or
shipped in the Philippines. The policy covers all risks of direct
physical loss or damage from any external cause, if by land, and
provides a limit of P6,000,000.00 per any one land vehicle.
On December 1, 1993, Wyeth executed its annual contract of
carriage with Reputable. It turned out, however, that the contract
was not signed by Wyeth’s representative/s.4 Nevertheless, it was
admittedly signed by Reputable’s representatives, the terms
thereof faithfully observed by the parties and, as previously stated,
the same contract of carriage had been annually executed by the Consequently, Philippines First instituted an action for sum of
parties every year since 1989.5  money against Reputable on August 12, 1996.8 In its complaint,
Under the contract, Reputable undertook to answer for "all risks Philippines First stated that Reputable is a "private corporation
with respect to the goods and shall be liable to the COMPANY engaged in the business of a common carrier." In its
(Wyeth), for the loss, destruction, or damage of the answer,9 Reputable claimed that it is a private carrier. It also
goods/products due to any and all causes whatsoever, including claimed that it cannot be made liable under the contract of
theft, robbery, flood, storm, earthquakes, lightning, and other carriage with Wyeth since the contract was not signed by Wyeth’s
force majeure while the goods/products are in transit and until representative and that the cause of the loss was force majeure,
actual delivery to the customers, salesmen, and dealers of the i.e., the hijacking incident.
COMPANY".6  Subsequently, Reputable impleaded Malayan as third-party
The contract also required Reputable to secure an insurance policy defendant in an effort to collect the amount covered in the SR
on Wyeth’s goods.7 Thus, on February 11, 1994, Reputable signed a Policy. According to Reputable, "it was validly insured with
Special Risk Insurance Policy (SR Policy) with petitioner Malayan Malayan for P1,000,000.00 with respect to the lost products under
for the amount of P1,000,000.00. the latter’s Insurance Policy No. SR-0001-02577 effective February
On October 6, 1994, during the effectivity of the Marine Policy and 1, 1994 to February 1, 1995" and that the SR Policy covered the
SR Policy, Reputable received from Wyeth 1,000 boxes of Promil risk of robbery or hijacking.10 
infant formula worth P2,357,582.70 to be delivered by Reputable Disclaiming any liability, Malayan argued, among others, that
to Mercury Drug Corporation in Libis, Quezon City. Unfortunately, under Section 5 of the SR Policy, the insurance does not cover any
on the same date, the truck carrying Wyeth’s products was loss or damage to property which at the time of the happening of
hijacked by about 10 armed men. They threatened to kill the truck such loss or damage is insured by any marine policy and that the
driver and two of his helpers should they refuse to turn over the SR Policy expressly excluded third-party liability.
truck and its contents to the said highway robbers. The hijacked After trial, the RTC rendered its Decision11 finding Reputable liable
truck was recovered two weeks later without its cargo. to Philippines First for the amount of indemnity it paid to Wyeth,
On March 8, 1995, Philippines First, after due investigation and among others. In turn, Malayan was found by the RTC to be liable
adjustment, and pursuant to the Marine Policy, paid Wyeth to Reputable to the extent of the policy coverage. The dispositive
P2,133,257.00 as indemnity. Philippines First then demanded portion of the RTC decision provides:
reimbursement from Reputable, having been subrogated to the WHEREFORE, on the main Complaint, judgment is hereby rendered
rights of Wyeth by virtue of the payment. The latter, however, finding [Reputable] liable for the loss of the Wyeth products and
ignored the demand. orders it to pay Philippines First the following:
1. the amount of P2,133,257.00 representing the amount paid by Malayan argued that inasmuch as there was already a marine
Philippines First to Wyeth for the loss of the products in question; policy issued by Philippines First securing the same subject matter
2. the amount of P15,650.00 representing the adjustment fees paid against loss and that since the monetary coverage/value of the
by Philippines First to hired adjusters/surveyors; Marine Policy is more than enough to indemnify the hijacked
3. the amount of P50,000.00 as attorney’s fees; and cargo, Philippines First alone must bear the loss.
4. the costs of suit. Malayan sought the dismissal of the third-party complaint against
On the third-party Complaint, judgment is hereby rendered finding it. In the alternative, it prayed that it be held liable for no more
Malayan liable to indemnify [Reputable] the following: than P468,766.70, its alleged pro-rata share of the loss based on
1. the amount of P1,000,000.00 representing the proceeds of the the amount covered by the policy, subject to the provision of
insurance policy; Section 12 of the SR Policy, which states:
2. the amount of P50,000.00 as attorney’s fees; and 12. OTHER INSURANCE CLAUSE. If at the time of any loss or
3. the costs of suit. damage happening to any property hereby insured, there be any
SO ORDERED.12  other subsisting insurance or insurances, whether effected by the
Dissatisfied, both Reputable and Malayan filed their respective insured or by any other person or persons, covering the same
appeals from the RTC decision. property, the company shall not be liable to pay or contribute
Reputable asserted that the RTC erred in holding that its contract more than its ratable proportion of such loss or damage.
of carriage with Wyeth was binding despite Wyeth’s failure to sign On February 29, 2008, the CA rendered the assailed decision
the same. Reputable further contended that the provisions of the sustaining the ruling of the RTC, the decretal portion of which
contract are unreasonable, unjust, and contrary to law and public reads:
policy. WHEREFORE, in view of the foregoing, the assailed Decision dated
For its part, Malayan invoked Section 5 of its SR Policy, which 29 September 2000, as modified in the Order dated 21 July 2001, is
provides: AFFIRMED with MODIFICATION in that the award of attorney’s
Section 5. INSURANCE WITH OTHER COMPANIES. The insurance fees in favor of Reputable is DELETED.
does not cover any loss or damage to property which at the time SO ORDERED.13 
of the happening of such loss or damage is insured by or would but The CA ruled, among others, that: (1) Reputable is estopped from
for the existence of this policy, be insured by any Fire or Marine assailing the validity of the contract of carriage on the ground of
policy or policies except in respect of any excess beyond the lack of signature of Wyeth’s representative/s; (2) Reputable is
amount which would have been payable under the Fire or Marine liable under the contract for the value of the goods even if the
policy or policies had this insurance not been effected. same was lost due to fortuitous event; and (3) Section 12 of the SR
Policy prevails over Section 5, it being the latter provision;
however, since the ratable proportion provision of Section 12 the CA ruling that Malayan is liable to Philippines First for the full
applies only in case of double insurance, which is not present, then amount of its policy coverage and not merely a ratable portion
it should not be applied and Malayan should be held liable for the thereof under Section 12 of the SR Policy.
full amount of the policy coverage, that is, P1,000,000.00.14  Finally, Philippines First contends that the factual finding that
On March 14, 2008, Malayan moved for reconsideration of the Reputable is a private carrier should be accorded the highest
assailed decision but it was denied by the CA in its Resolution degree of respect and must be considered conclusive between the
dated August 28, 2008.15  parties, and that a review of such finding by the Court is not
Hence, this petition. warranted under the circumstances. As to its alleged judicial
Malayan insists that the CA failed to properly resolve the issue on admission that Reputable is a common carrier, Philippines First
the "statutory limitations on the liability of common carriers" and proffered the declaration made by Reputable that it is a private
the "difference between an ‘other insurance clause’ and an ‘over carrier. Said declaration was allegedly reiterated by Reputable in
insurance clause’." its third party complaint, which in turn was duly admitted by
Malayan also contends that the CA erred when it held that Malayan in its answer to the said third-party complaint. In
Reputable is a private carrier and should be bound by the addition, Reputable even presented evidence to prove that it is a
contractual stipulations in the contract of carriage. This argument private carrier.
is based on its assertion that Philippines First judicially admitted in As to the applicability of Sections 5 and 12 in the SR Policy,
its complaint that Reputable is a common carrier and as such, Philippines First reiterated the ruling of the CA. Philippines First,
Reputable should not be held liable pursuant to Article 1745(6) of however, prayed for a slight modification of the assailed decision,
the Civil Code.16 Necessarily, if Reputable is not liable for the loss, praying that Reputable and Malayan be rendered solidarily liable
then there is no reason to hold Malayan liable to Reputable. to it in the amount of P998,000.00, which represents the balance
Further, Malayan posits that there resulted in an impairment of from the P1,000.000.00 coverage of the SR Policy after deducting
contract when the CA failed to apply the express provisions of P2,000.00 under Section 10 of the said SR Policy.17 
Section 5 (referred to by Malayan as over insurance clause) and Issues
Section 12 (referred to by Malayan as other insurance clause) of its The liability of Malayan under the SR Policy hinges on the following
SR Policy as these provisions could have been read together there issues for resolution:
being no actual conflict between them. 1) Whether Reputable is a private carrier;
Reputable, meanwhile, contends that it is exempt from liability for 2) Whether Reputable is strictly bound by the stipulations in its
acts committed by thieves/robbers who act with grave or contract of carriage with Wyeth, such that it should be liable for
irresistible threat whether it is a common carrier or a any risk of loss or damage, for any cause whatsoever, including
private/special carrier. It, however, maintains the correctness of that due to theft or robbery and other force majeure;
3) Whether the RTC and CA erred in rendering "nugatory" Sections and binding upon him.22 In this case, the pleader or the plaintiff
5 and Section 12 of the SR Policy; and who alleged that Reputable is a common carrier was Philippines
4) Whether Reputable should be held solidarily liable with Malayan First. It cannot, by any stretch of imagination, be made conclusive
for the amount of P998,000.00 due to Philippines First. as against Reputable whose nature of business is in question.
The Court’s Ruling It should be stressed that Philippines First is not privy to the SR
On the first issue – Reputable is a private carrier. Policy between Wyeth and Reputable; rather, it is a mere subrogee
The Court agrees with the RTC and CA that Reputable is a private to the right of Wyeth to collect from Reputable under the terms of
carrier. Well-entrenched in jurisprudence is the rule that factual the contract of carriage. Philippines First is not in any position to
findings of the trial court, especially when affirmed by the make any admission, much more a definitive pronouncement, as
appellate court, are accorded the highest degree of respect and to the nature of Reputable’s business and there appears no other
considered conclusive between the parties, save for certain connection between Philippines First and Reputable which
exceptional and meritorious circumstances, none of which are suggests mutual familiarity between them.
present in this case.18  Moreover, records show that the alleged judicial admission of
Malayan relies on the alleged judicial admission of Philippines First Philippines First was essentially disputed by Reputable when it
in its complaint that Reputable is a common carrier.19 Invoking stated in paragraphs 2, 4, and 11 of its answer that it is actually a
Section 4, Rule 129 of the Rules on Evidence that "an admission private or special carrier.23 In addition, Reputable stated in
verbal or written, made by a party in the course of the proceeding paragraph 2 of its third-party complaint that it is "a private carrier
in the same case, does not require proof," it is Malayan’s position engaged in the carriage of goods."24 Such allegation was, in turn,
that the RTC and CA should have ruled that admitted by Malayan in paragraph 2 of its answer to the third-
Reputable is a common carrier. Consequently, pursuant to Article party complaint.25 There is also nothing in the records which show
1745(6) of the Civil Code, the liability of Reputable for the loss of that Philippines First persistently maintained its stance that
Wyeth’s goods should be dispensed with, or at least diminished. Reputable is a common carrier or that it even contested or proved
It is true that judicial admissions, such as matters alleged in the otherwise Reputable’s position that it is a private or special carrier.
pleadings do not require proof, and need not be offered to be Hence, in the face of Reputable’s contrary admission as to the
considered by the court. "The court, for the proper decision of the nature of its own business, what was stated by Philippines First in
case, may and should consider, without the introduction of its complaint is reduced to nothing more than mere allegation,
evidence, the facts admitted by the parties."20 The rule on judicial which must be proved for it to be given any weight or value. The
admission, however, also states that such allegation, statement, or settled rule is that mere allegation is not proof.26 
admission is conclusive as against the pleader,21 and that the facts More importantly, the finding of the RTC and CA that Reputable is
alleged in the complaint are deemed admissions of the plaintiff a special or private carrier is warranted by the evidence on record,
primarily, the unrebutted testimony of Reputable’s Vice President are in transit and until actual delivery to Wyeth’s customers,
and General Manager, Mr. William Ang Lian Suan, who expressly salesmen and dealers.31 
stated in open court that Reputable serves only one customer, On the third issue – other insurance vis-à-vis over insurance.
Wyeth.27  Malayan refers to Section 5 of its SR Policy as an "over insurance
Under Article 1732 of the Civil Code, common carriers are persons, clause" and to Section 12 as a "modified ‘other insurance’
corporations, firms, or associations engaged in the business of clause".32 In rendering inapplicable said provisions in the SR Policy,
carrying or transporting passenger or goods, or both by land, water the CA ruled in this wise:
or air for compensation, offering their services to the public. On Since Sec. 5 calls for Malayan’s complete absolution in case the
the other hand, a private carrier is one wherein the carriage is other insurance would be sufficient to cover the entire amount of
generally undertaken by special agreement and it does not hold the loss, it is in direct conflict with Sec. 12 which provides only for
itself out to carry goods for the general public.28 A common carrier a pro-rated contribution between the two insurers. Being the later
becomes a private carrier when it undertakes to carry a special provision, and pursuant to the rules on interpretation of contracts,
cargo or chartered to a special person only.29 For all intents and Sec. 12 should therefore prevail.
purposes, therefore, Reputable operated as a private/special xxxx
carrier with regard to its contract of carriage with Wyeth. x x x The intention of both Reputable and Malayan should be given
On the second issue – Reputable is bound by the terms of the effect as against the wordings of Sec. 12 of their contract, as it was
contract of carriage. intended by the parties to operate only in case of double
The extent of a private carrier’s obligation is dictated by the insurance, or where the benefits of the policies of both plaintiff-
stipulations of a contract it entered into, provided its stipulations, appellee and Malayan should pertain to Reputable alone. But since
clauses, terms and conditions are not contrary to law, morals, the court a quo correctly ruled that there is no double insurance in
good customs, public order, or public policy. "The Civil Code this case inasmuch as Reputable was not privy thereto, and
provisions on common carriers should not be applied where the therefore did not stand to benefit from the policy issued by
carrier is not acting as such but as a private carrier. Public policy plaintiff-appellee in favor of Wyeth, then Malayan’s stand should
governing common carriers has no force where the public at large be rejected.
is not involved."30  To rule that Sec. 12 operates even in the absence of double
Thus, being a private carrier, the extent of Reputable’s liability is insurance would work injustice to Reputable which, despite paying
fully governed by the stipulations of the contract of carriage, one premiums for a P1,000,000.00 insurance coverage, would not be
of which is that it shall be liable to Wyeth for the loss of the entitled to recover said amount for the simple reason that the
goods/products due to any and all causes whatsoever, including same property is covered by another insurance policy, a policy to
theft, robbery and other force majeure while the goods/products which it was not a party to and much less, from which it did not
stand to benefit. Plainly, this unfair situation could not have been not covered by the other insurance policy. In interpreting the
the intention of both Reputable and Malayan in signing the "other insurance clause" in Geagonia, the Court ruled that the
insurance contract in question.33  prohibition applies only in case of double insurance. The Court
In questioning said ruling, Malayan posits that Sections 5 and 12 ruled that in order to constitute a violation of the clause, the other
are separate provisions applicable under distinct circumstances. insurance must be upon same subject matter, the same interest
Malayan argues that "it will not be completely absolved under therein, and the same risk. Thus, even though the multiple
Section 5 of its policy if it were the assured itself who obtained insurance policies involved were all issued in the name of the same
additional insurance coverage on the same property and the loss assured, over the same subject matter and covering the same risk,
incurred by Wyeth’s cargo was more than that insured by it was ruled that there was no violation of the "other insurance
Philippines First’s marine policy. On the other hand, Section 12 will clause" since there was no double insurance.
not completely absolve Malayan if additional insurance coverage Section 12 of the SR Policy, on the other hand, is the over
on the same cargo were obtained by someone besides Reputable, insurance clause. More particularly, it covers the situation where
in which case Malayan’s SR policy will contribute or share ratable there is over insurance due to double insurance. In such case,
proportion of a covered cargo loss."34  Section 15 provides that Malayan shall "not be liable to pay or
Malayan’s position cannot be countenanced. contribute more than its ratable proportion of such loss or
Section 5 is actually the other insurance clause (also called damage." This is in accord with the principle of contribution
"additional insurance" and "double insurance"), one akin to provided under Section 94(e) of the Insurance Code,37 which states
Condition No. 3 in issue in Geagonia v. CA,35 which validity was that "where the insured is over insured by double insurance, each
upheld by the Court as a warranty that no other insurance exists. insurer is bound, as between himself and the other insurers, to
The Court ruled that Condition No. 336 is a condition which is not contribute ratably to the loss in proportion to the amount for
proscribed by law as its incorporation in the policy is allowed by which he is liable under his contract."
Section 75 of the Insurance Code. It was also the Court’s finding Clearly, both Sections 5 and 12 presuppose the existence of a
that unlike the other insurance clauses, Condition No. 3 does not double insurance. The pivotal question that now arises is whether
absolutely declare void any violation thereof but expressly there is double insurance in this case such that either Section 5 or
provides that the condition "shall not apply when the total Section 12 of the SR Policy may be applied.
insurance or insurances in force at the time of the loss or damage By the express provision of Section 93 of the Insurance Code,
is not more than P200,000.00." double insurance exists where the same person is insured by
In this case, similar to Condition No. 3 in Geagonia, Section 5 does several insurers separately in respect to the same subject and
not provide for the nullity of the SR Policy but simply limits the interest. The requisites in order for double insurance to arise are
liability of Malayan only up to the excess of the amount that was as follows:38 
1. The person insured is the same; over insurance by double insurance cannot likewise exist. Hence,
2. Two or more insurers insuring separately; as correctly ruled by the RTC and CA, neither Section 5 nor Section
3. There is identity of subject matter; 12 of the SR Policy can be applied.
4. There is identity of interest insured; and Apart from the foregoing, the Court is also wont to strictly
5. There is identity of the risk or peril insured against. construe the controversial provisions of the SR Policy against
In the present case, while it is true that the Marine Policy and the Malayan.1âwphi1 This is in keeping with the rule that:
SR Policy were both issued over the same subject matter, i.e. "Indemnity and liability insurance policies are construed in
goods belonging to Wyeth, and both covered the same peril accordance with the general rule of resolving any ambiguity
insured against, it is, however, beyond cavil that the said policies therein in favor of the insured, where the contract or policy is
were issued to two different persons or entities. It is undisputed prepared by the insurer. A contract of insurance, being a contract
that Wyeth is the recognized insured of Philippines First under its of adhesion, par excellence, any ambiguity therein should be
Marine Policy, while Reputable is the recognized insured of resolved against the insurer; in other words, it should be construed
Malayan under the SR Policy. The fact that Reputable procured liberally in favor of the insured and strictly against the insurer.
Malayan’s SR Policy over the goods of Wyeth pursuant merely to Limitations of liability should be regarded with extreme jealousy
the stipulated requirement under its contract of carriage with the and must be construed in such a way as to preclude the insurer
latter does not make Reputable a mere agent of Wyeth in from noncompliance with its obligations."40 
obtaining the said SR Policy. Moreover, the CA correctly ruled that:
The interest of Wyeth over the property subject matter of both To rule that Sec. 12 operates even in the absence of double
insurance contracts is also different and distinct from that of insurance would work injustice to Reputable which, despite paying
Reputable’s. The policy issued by Philippines First was in premiums for a P1,000,000.00 insurance coverage, would not be
consideration of the legal and/or equitable interest of Wyeth over entitled to recover said amount for the simple reason that the
its own goods. On the other hand, what was issued by Malayan to same property is covered by another insurance policy, a policy to
Reputable was over the latter’s insurable interest over the safety which it was not a party to and much less, from which it did not
of the goods, which may become the basis of the latter’s liability in stand to benefit. x x x41 
case of loss or damage to the property and falls within the On the fourth issue – Reputable is not solidarily liable with
contemplation of Section 15 of the Insurance Code.39  Malayan.
Therefore, even though the two concerned insurance policies were There is solidary liability only when the obligation expressly so
issued over the same goods and cover the same risk, there arises states, when the law so provides or when the nature of the
no double insurance since they were issued to two different obligation so requires.
persons/entities having distinct insurable interests. Necessarily,
In Heirs of George Y. Poe v. Malayan lnsurance Company., BRITISH AIRWAYS, petitioner, 
lnc.,42 the Court ruled that: vs.
Where the insurance contract provides for indemnity against COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE
liability to third persons, the liability of the insurer is direct and AIRLINES, respondents.
such third persons can directly sue the insurer. The direct liability
of the insurer under indemnity contracts against third party[- ] The material and relevant facts are as follows:
liability does not mean, however, that the insurer can be held On April 16, 1989, Mahtani decided to visit his relatives in Bombay,
solidarily liable with the insured and/or the other parties found at India. In anticipation of his visit, he obtained the services of a
fault, since they are being held liable under different obligations. certain Mr. Gumar to prepare his travel plans. The latter, in turn,
The liability of the insured carrier or vehicle owner is based on purchased a ticket from BA where the following itinerary was
tort, in accordance with the provisions of the Civil Code; while that indicated:3
of the insurer arises from contract, particularly, the insurance
CARRIER FLIGHT DATE TIME
policy:43 (Citation omitted and emphasis supplied)
Suffice it to say that Malayan's and Reputable's respective liabilities MANILA MNL PR 310 Y 16 APR. 1730
arose from different obligations- Malayan's is based on the SR
Policy while Reputable's is based on the contract of carriage. HONGKONG HKG BA 20 M 16 APR. 2100
All told, the Court finds no reversible error in the judgment sought
to be reviewed. BOMBAY BOM BA 19 M 23 APR. 0840
WHEREFORE, premises considered, the petition is DENIED. The
Decision dated February 29, 2008 and Resolution dated August 28, HONGKONG HKG PR 311 Y
2008 of the Court of Appeals in CA-G.R. CV No. 71204 are hereby
AFFIRMED. MANILA MNL
Cost against petitioner Malayan Insurance Co., Inc.
SO ORDERED. Since BA had no direct flights from Manila to Bombay, Mahtani
had to take a flight to Hongkong via PAL, and upon arrival in
Hongkong he had to take a connecting flight to Bombay on board
BA.
Prior to his departure, Mahtani checked in at the PAL counter in
Manila his two pieces of luggage containing his clothings and
personal effects, confident that upon reaching Hongkong, the same
G.R. No. 121824 January 29, 1998 would be transferred to the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered Fifty Thousand (P50,000.00) Pesos for moral and actual damages
that his luggage was missing and that upon inquiry from the BA and twenty percent (20%) of the total amount imposed against
representatives, he was told that the same might have been the defendant for attorney's fees and costs of this action.
diverted to London. After patiently waiting for his luggage for one The Third-Party Complaint against third-party defendant Philippine
week, BA finally advised him to file a claim by accomplishing the Airlines is DISMISSED for lack of cause of action.
"Property Irregularity Report."4 SO ORDERED.
Back in the Philippines, specifically on June 11, 1990, Mahtani filed Dissatisfied, BA appealed to the Court of Appeals, which however,
his complaint for damages and attorney's fees 5 against BA and Mr. affirmed the trial court's findings. Thus:
Gumar before the trial court, docketed as Civil Case No. CEB-9076. WHEREFORE, in view of all the foregoing considerations, finding
On September 4, 1990, BA filed its answer with counter claim6 to the Decision appealed from to be in accordance with law and
the complaint raising, as special and affirmative defenses, that evidence, the same is hereby AFFIRMED in toto, with costs against
Mahtani did not have a cause of action against it. Likewise, on defendant-appellant.
November 9, 1990, BA filed a third-party complaint 7 against PAL SO ORDERED. 10
alleging that the reason for the non-transfer of the luggage was BA is now before us seeking the reversal of the Court of Appeals'
due to the latter's late arrival in Hongkong, thus leaving hardly any decision.
time for the proper transfer of Mahtani's luggage to the BA aircraft In essence, BA assails the award of compensatory damages and
bound for Bombay. attorney's fees, as well as the dismissal of its third-party complaint
On February 25, 1991, PAL filed its answer to the third-party against PAL.11
complaint, wherein it disclaimed any liability, arguing that there Regarding the first assigned issue, BA asserts that the award of
was, in fact, adequate time to transfer the luggage to BA facilities compensatory damages in the separate sum of P7,000.00 for the
in Hongkong. Furthermore, the transfer of the luggage to loss of Mahtani's two pieces of luggage was without basis since
Hongkong authorities should be considered as transfer to BA.8 Mahtani in his complaint12 stated the following as the value of his
After appropriate proceedings and trial, on March 4, 1993, the trial personal belongings:
court rendered its decision in favor of Mahtani, 9 the dispositive 8. On the said travel, plaintiff took with him the following items
portion of which reads as follows: and its corresponding value, to wit:
WHEREFORE, premises considered, judgment is rendered for the 1. personal belonging P10,000.00
plaintiff and against the defendant for which defendant is ordered 2. gifts for his parents and relatives $5,000.00
to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for Moreover, he failed to declare a higher valuation with respect to
the value of the two (2) suit cases; Four Hundred U.S. ($400.00) his luggage, a condition provided for in the ticket, which reads:13
Dollars representing the value of the contents of plaintiff's luggage;
Liability for loss, delay, or damage to baggage is limited unless a members of his family in Bombay, the most that can be expected
higher value is declared in advance and additional charges are for compensation of his lost luggage (2 suit cases) is Twenty U.S.
paid: Dollars ($20.00) per kilo, or combined value of Four Hundred
1. For most international travel (including domestic corporations of ($400.00) U.S. Dollars for Twenty kilos representing the contents
international journeys) the liability limit is approximately U.S. $9.07 plus Seven Thousand (P7,000.00) Pesos representing the purchase
per pound (U.S. $20.000) per kilo for checked baggage and U.S. price of the two (2) suit cases.
$400 per passenger for unchecked baggage. However, as earlier stated, it is the position of BA that there
Before we resolve the issues raised by BA, it is needful to state should have been no separate award for the luggage and the
that the nature of an airline's contract of carriage partakes of two contents thereof since Mahtani failed to declare a separate higher
types, namely: a contract to deliver a cargo or merchandise to its valuation for the luggage,18 and therefore, its liability is limited, at
destination and a contract to transport passengers to their most, only to the amount stated in the ticket.
destination. A business intended to serve the traveling public Considering the facts of the case, we cannot assent to such
primarily, it is imbued with public interest, hence, the law specious argument.
governing common carriers imposes an exacting Admittedly, in a contract of air carriage a declaration by the
14
standard.  Neglect or malfeasance by the carrier's employees passenger of a higher value is needed to recover a greater amount.
could predictably furnish bases for an action for damages.15 Article 22(1) of the Warsaw Convention,19 provides as follows:
In the instant case, it is apparent that the contract of carriage was x x x           x x x          x x x
between Mahtani and BA. Moreover, it is indubitable that his (2) In the transportation of checked baggage and goods, the
luggage never arrived in Bombay on time. Therefore, as in a liability of the carrier shall be limited to a sum of 250 francs per
number of cases16 we have assessed the airlines' culpability in the kilogram, unless the consignor has made, at time the package was
form of damages for breach of contract involving misplaced handed over to the carrier, a special declaration of the value at
luggage. delivery and has paid a supplementary sum if the case so requires.
In determining the amount of compensatory damages in this kind In that case the carrier will be liable to pay a sum not exceeding
of cases, it is vital that the claimant satisfactorily prove during the the declared sum, unless he proves that the sum is greater than
trial the existence of the factual basis of the damages and its the actual value to the consignor at delivery.
causal connection to defendant's acts.17 American jurisprudence provides that an air carrier is not liable for
In this regard, the trial court granted the following award as the loss of baggage in an amount in excess of the limits specified in
compensatory damages: the tariff which was filed with the proper authorities, such tariff
Since plaintiff did not declare the value of the contents in his being binding, on the passenger regardless of the passenger's lack
luggage and even failed to show receipts of the alleged gifts for the
of knowledge thereof or assent thereto.20 This doctrine is However, such right is a mere privilege which can be waived.
recognized in this jurisdiction.21 Necessarily, the objection must be made at the earliest
Notwithstanding the foregoing, we have, nevertheless, ruled opportunity, lest silence when there is opportunity to speak may
against blind reliance on adhesion contracts where the facts and operate as a waiver of objections.25 BA has precisely failed in this
circumstances justify that they should be disregarded.22 regard.
In addition, we have held that benefits of limited liability are To compound matters for BA, its counsel failed, not only to
subject to waiver such as when the air carrier failed to raise timely interpose a timely objection, but even conducted his own cross-
objections during the trial when questions and answers regarding examination as well.26 In the early case of Abrenica v. Gonda,27 we
the actual claims and damages sustained by the passenger were ruled that:
asked.23 . . . (I)t has been repeatedly laid down as a rule of evidence that a
Given the foregoing postulates, the inescapable conclusion is that protest or objection against the admission of any evidence must be
BA had waived the defense of limited liability when it allowed made at the proper time, and that if not so made it will be
Mahtani to testify as to the actual damages he incurred due to the understood to have been waived. The proper time to make a
misplacement of his luggage, without any objection. In this regard, protest or objection is when, from the question addressed to the
we quote the pertinent transcript of stenographic notes of witness, or from the answer thereto, or from the presentation of
Mahtani's direct testimony:24 proof, the inadmissibility of evidence is, or may be inferred.
Q — How much are you going to ask from this court? Needless to say, factual findings of the trial court, as affirmed by
A — P100,000.00. the Court of Appeals, are entitled to great respect.28 Since the
Q — What else? actual value of the luggage involved appreciation of evidence, a
A — Exemplary damages. task within the competence of the Court of Appeals, its ruling
Q — How much? regarding the amount is assuredly a question of fact, thus, a
A — P100,000.00. finding not reviewable by this Court.29
Q — What else? As to the issue of the dismissal of BA's third-party complaint
A — The things I lost, $5,000.00 for the gifts I lost and my personal against PAL, the Court of Appeals justified its ruling in this wise,
belongings, P10,000.00. and we quote:30
Q — What about the filing of this case? Lastly, we sustain the trial court's ruling dismissing appellant's
A — The court expenses and attorney's fees is 30%. third-party complaint against PAL.
Indeed, it is a well-settled doctrine that where the proponent The contract of air transportation in this case pursuant to the
offers evidence deemed by counsel of the adverse party to be ticket issued by appellant to plaintiff-appellee was exclusively
inadmissible for any reason, the latter has the right to object. between the plaintiff Mahtani and defendant-appellant BA. When
plaintiff boarded the PAL plane from Manila to Hongkong, PAL was proliferation of law suits and of disposing expeditiously in one
merely acting as a subcontractor or agent of BA. This is shown by litigation the entire subject matter arising from one particular set
the fact that in the ticket issued by appellant to plaintiff-appellee, of facts.
it is specifically provided on the "Conditions of Contract," Undeniably, for the loss of his luggage, Mahtani is entitled to
paragraph 4 thereof that: damages from BA, in view of their contract of carriage. Yet, BA
4. . . . carriage to be performed hereunder by several successive adamantly disclaimed its liability and instead imputed it to PAL
carriers is regarded as a single operation. which the latter naturally denies. In other words, BA and PAL are
The rule that carriage by plane although performed by successive blaming each other for the incident.
carriers is regarded as a single operation and that the carrier In resolving this issue, it is worth observing that the contract of air
issuing the passenger's ticket is considered the principal party and transportation was exclusively between Mahtani and BA, the latter
the other carrier merely subcontractors or agent, is a settled issue. merely endorsing the Manila to Hongkong leg of the former's
We cannot agree with the dismissal of the third-complaint. journey to PAL, as its subcontractor or agent. In fact, the fourth
In Firestone Tire and Rubber Company of the Philippines paragraph of the "Conditions of Contracts" of the ticket32issued by
v. Tempengko,31 we expounded on the nature of a third-party BA to Mahtani confirms that the contract was one of continuous
complaint thus: air transportation from Manila to Bombay.
The third-party complaint is, therefore, a procedural device 4. . . . carriage to be performed hereunder by several successive
whereby a "third party" who is neither a party nor privy to the act carriers is regarded as a single operation.
or deed complained of by the plaintiff, may be brought into the Prescinding from the above discussion, it is undisputed that PAL, in
case with leave of court, by the defendant, who acts, as third-party transporting Mahtani from Manila to Hongkong acted as the agent
plaintiff to enforce against such third-party defendant a right for of BA.
contribution, indemnity, subrogation or any other relief, in respect Parenthetically, the Court of Appeals should have been cognizant
of the plaintiff's claim. The third-party complaint is actually of the well-settled rule that an agent is also responsible for any
independent of and separate and distinct from the plaintiff's negligence in the performance of its function.33 and is liable for
complaint. Were it not for this provision of the Rules of Court, it damages which the principal may suffer by reason of its negligent
would have to be filed independently and separately from the act.34 Hence, the Court of Appeals erred when it opined that BA,
original complaint by the defendant against the third-party. But being the principal, had no cause of action against PAL, its agent or
the Rules permit defendant to bring in a third-party defendant or sub-contractor.
so to speak, to litigate his separate cause of action in respect of Also, it is worth mentioning that both BA and PAL are members of
plaintiff's claim against a third-party in the original and principal the International Air Transport Association (IATA), wherein
case with the object of avoiding circuitry of action and unnecessary member airlines are regarded as agents of each other in the
issuance of the tickets and other matters pertaining to their this particular situation. In that case, we recognized that a carrier
relationship.35 Therefore, in the instant case, the contractual (PAL), acting as an agent of another carrier, is also liable for its
relationship between BA and PAL is one of agency, the former own negligent acts or omission in the performance of its duties.
being the principal, since it was the one which issued the Accordingly, to deny BA the procedural remedy of filing a third-
confirmed ticket, and the latter the agent. party complaint against PAL for the purpose of ultimately
Our pronouncement that BA is the principal is consistent with our determining who was primarily at fault as between them, is
ruling in Lufthansa German Airlines v.Court of Appeals.36 In that without legal basis. After all, such proceeding is in accord with the
case, Lufthansa issued a confirmed ticket to Tirso Antiporda doctrine against multiplicity of cases which would entail receiving
covering five-leg trip aboard different airlines. Unfortunately, Air the same or similar evidence for both cases and enforcing separate
Kenya, one of the airlines which was to carry Antiporda to a judgments therefor. It must be borne in mind that the purpose of a
specific destination "bumped" him off. third-party complaint is precisely to avoid delay and circuitry of
An action for damages was filed against Lufthansa which, however, action and to enable the controversy to be disposed of in one
denied any liability, contending that its responsibility towards its suit.38 It is but logical, fair and equitable to allow BA to sue PAL for
passenger is limited to the occurrence of a mishap on its own line. indemnification, if it is proven that the latter's negligence was the
Consequently, when Antiporda transferred to Air Kenya, its proximate cause of Mahtani's unfortunate experience, instead of
obligation as a principal in the contract of carriage ceased; from totally absolving PAL from any liability.
there on, it merely acted as a ticketing agent for Air Kenya. WHEREFORE, in view of the foregoing, the decision of the Court of
In rejecting Lufthansa's argument, we ruled: Appeals in CA-G.R. CV No. 43309 dated September 7, 1995 is
In the very nature of their contract, Lufthansa is clearly the hereby MODIFIED, reinstating the third-party complaint filed by
principal in the contract of carriage with Antiporda and remains to British Airways dated November 9, 1990 against Philippine Airlines.
be so, regardless of those instances when actual carriage was to be No costs.
performed by various carriers. The issuance of confirmed Lufthansa SO ORDERED.
ticket in favor of Antiporda covering his entire five-leg trip abroad
successive carriers concretely attest to this.
Since the instant petition was based on breach of contract of
carriage, Mahtani can only sue BA alone, and not PAL, since the
latter was not a party to the contract. However, this is not to say
that PAL is relieved from any liability due to any of its negligent
acts. In China Air Lines, Ltd. v. Court of Appeals,37 while not exactly
in point, the case, however, illustrates the principle which governs
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
G.R. No. L-47822 December 22, 1988
with them the truck, its driver, his helper and the cargo. 
PEDRO DE GUZMAN, petitioner, 
On 6 January 1971, petitioner commenced action against private
vs.
respondent in the Court of First Instance of Pangasinan,
COURT OF APPEALS and ERNESTO CENDANA, respondents.
demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued We consider first the issue of whether or not private respondent
that private respondent, being a common carrier, and having failed Ernesto Cendana may, under the facts earlier set forth, be properly
to exercise the extraordinary diligence required of him by the law, characterized as a common carrier. 
should be held liable for the value of the undelivered goods.  The Civil Code defines "common carriers" in the following terms: 
In his Answer, private respondent denied that he was a common Article 1732. Common carriers are persons, corporations, firms or
carrier and argued that he could not be held responsible for the associations engaged in the business of carrying or transporting
value of the lost goods, such loss having been due to force passengers or goods or both, by land, water, or air for
majeure.  compensation, offering their services to the public. 
On 10 December 1975, the trial court rendered a Decision 1 finding The above article makes no distinction between one
private respondent to be a common carrier and holding him liable whose principal business activity is the carrying of persons or
for the value of the undelivered goods (P 22,150.00) as well as for goods or both, and one who does such carrying only as
P 4,000.00 as damages and P 2,000.00 as attorney's fees.  an ancillary activity (in local Idiom as "a sideline"). Article 1732 also
On appeal before the Court of Appeals, respondent urged that the carefully avoids making any distinction between a person or
trial court had erred in considering him a common carrier; in enterprise offering transportation service on a regular or
finding that he had habitually offered trucking services to the scheduled basis and one offering such service on an occasional,
public; in not exempting him from liability on the ground of force episodic or unscheduled basis. Neither does Article 1732 distinguish
majeure; and in ordering him to pay damages and attorney's fees.  between a carrier offering its services to the "general public," i.e.,
The Court of Appeals reversed the judgment of the trial court and the general community or population, and one who offers services
held that respondent had been engaged in transporting return or solicits business only from a narrow segment of the general
loads of freight "as a casual population. We think that Article 1733 deliberaom making such
occupation — a sideline to his scrap iron business" and not as a distinctions. 
common carrier. Petitioner came to this Court by way of a Petition So understood, the concept of "common carrier" under Article
for Review assigning as errors the following conclusions of the 1732 may be seen to coincide neatly with the notion of "public
Court of Appeals:  service," under the Public Service Act (Commonwealth Act No.
1. that private respondent was not a common carrier;  1416, as amended) which at least partially supplements the law on
2. that the hijacking of respondent's truck was force majeure; and  common carriers set forth in the Civil Code. Under Section 13,
3. that respondent was not liable for the value of the undelivered paragraph (b) of the Public Service Act, "public service" includes: 
cargo. (Rollo, p. 111)  ... 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 implementing regulations and has been granted a certificate of
carrier, railroad, street railway, traction railway, subway motor public convenience or other franchise. To exempt private
vehicle, either for freight or passenger, or both, with or without respondent from the liabilities of a common carrier because he has
fixed route and whatever may be its classification, freight or carrier not secured the necessary certificate of public convenience, would
service of any class, express service, steamboat, or steamship line, be offensive to sound public policy; that would be to reward
pontines, ferries and water craft, engaged in the transportation of private respondent precisely for failing to comply with applicable
passengers or freight or both, shipyard, marine repair shop, wharf statutory requirements. The business of a common carrier
or dock, ice plant, impinges directly and intimately upon the safety and well being
ice-refrigeration plant, canal, irrigation system, gas, electric light, and property of those members of the general community who
heat and power, water supply and power petroleum, sewerage happen to deal with such carrier. The law imposes duties and
system, wire or wireless communications systems, wire or wireless liabilities upon common carriers for the safety and protection of
broadcasting stations and other similar public services. ... those who utilize their services and the law cannot allow a
(Emphasis supplied)  common carrier to render such duties and liabilities merely
It appears to the Court that private respondent is properly facultative by simply failing to obtain the necessary permits and
characterized as a common carrier even though he merely "back- authorizations. 
hauled" goods for other merchants from Manila to Pangasinan, We turn then to the liability of private respondent as a common
although such back-hauling was done on a periodic or occasional carrier. 
rather than regular or scheduled manner, and even though private Common carriers, "by the nature of their business and for reasons
respondent's principal occupation was not the carriage of goods of public policy" 2 are held to a very high degree of care and
for others. There is no dispute that private respondent charged his diligence ("extraordinary diligence") in the carriage of goods as
customers a fee for hauling their goods; that fee frequently fell well as of passengers. The specific import of extraordinary
below commercial freight rates is not relevant here.  diligence in the care of goods transported by a common carrier is,
The Court of Appeals referred to the fact that private respondent according to Article 1733, "further expressed in Articles 1734,1735
held no certificate of public convenience, and concluded he was and 1745, numbers 5, 6 and 7" of the Civil Code. 
not a common carrier. This is palpable error. A certificate of public Article 1734 establishes the general rule that common carriers are
convenience is not a requisite for the incurring of liability under responsible for the loss, destruction or deterioration of the goods
the Civil Code provisions governing common carriers. That liability which they carry, "unless the same is due to any of the following
arises the moment a person or firm acts as a common carrier, causes only: 
without regard to whether or not such carrier has also complied (1) Flood, storm, earthquake, lightning or other natural disaster or
with the requirements of the applicable regulatory statute and calamity;
(2) Act of the public enemy in war, whether international or civil; should have hired a security guard presumably to ride with the
(3) Act or omission of the shipper or owner of the goods; truck carrying the 600 cartons of Liberty filled milk. We do not
(4) The character-of the goods or defects in the packing or-in the believe, however, that in the instant case, the standard of
containers; and extraordinary diligence required private respondent to retain a
(5) Order or act of competent public authority.  security guard to ride with the truck and to engage brigands in a
It is important to point out that the above list of causes of loss, firelight at the risk of his own life and the lives of the driver and his
destruction or deterioration which exempt the common carrier for helper. 
responsibility therefor, is a closed list. Causes falling outside the The precise issue that we address here relates to the specific
foregoing list, even if they appear to constitute a species of force requirements of the duty of extraordinary diligence in the vigilance
majeure fall within the scope of Article 1735, which provides as over the goods carried in the specific context of hijacking or armed
follows:  robbery. 
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 As noted earlier, the duty of extraordinary diligence in the
of the preceding article, if the goods are lost, destroyed or vigilance over goods is, under Article 1733, given additional
deteriorated, common carriers are presumed to have been at fault specification not only by Articles 1734 and 1735 but also by Article
or to have acted negligently, unless they prove that they observed 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part: 
extraordinary diligence as required in Article 1733. (Emphasis Any of the following or similar stipulations shall be considered
supplied)  unreasonable, unjust and contrary to public policy: 
Applying the above-quoted Articles 1734 and 1735, we note firstly xxx xxx xxx
that the specific cause alleged in the instant case — the hijacking (5) that the common carrier shall not be responsible for the acts or
of the carrier's truck — does not fall within any of the five (5) omissions of his or its employees; 
categories of exempting causes listed in Article 1734. It would (6) that the common carrier's liability for acts committed by
follow, therefore, that the hijacking of the carrier's vehicle must be thieves, or of robbers who donot act with grave or
dealt with under the provisions of Article 1735, in other words, irresistible threat, violence or force, is dispensed with or
that the private respondent as common carrier is presumed to diminished; and 
have been at fault or to have acted negligently. This presumption, (7) that the common carrier shall not responsible for the loss,
however, may be overthrown by proof of extraordinary diligence destruction or deterioration of goods on account of the defective
on the part of private respondent.  condition of the car vehicle, ship, airplane or other equipment
Petitioner insists that private respondent had not observed used in the contract of carriage. (Emphasis supplied) 
extraordinary diligence in the care of petitioner's goods. Petitioner Under Article 1745 (6) above, a common carrier is held responsible
argues that in the circumstances of this case, private respondent — and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or absolute insurers against all risks of travel and of transport of
robbers, except where such thieves or robbers in fact acted "with goods, and are not held liable for acts or events which cannot be
grave or irresistible threat, violence or force." We believe and so foreseen or are inevitable, provided that they shall have complied
hold that the limits of the duty of extraordinary diligence in the with the rigorous standard of extraordinary diligence. 
vigilance over the goods carried are reached where the goods are We, therefore, agree with the result reached by the Court of
lost as a result of a robbery which is attended by "grave or Appeals that private respondent Cendana is not liable for the value
irresistible threat, violence or force."  of the undelivered merchandise which was lost because of an
In the instant case, armed men held up the second truck owned by event entirely beyond private respondent's control. 
private respondent which carried petitioner's cargo. The record ACCORDINGLY, the Petition for Review on certiorari is hereby
shows that an information for robbery in band was filed in the DENIED and the Decision of the Court of Appeals dated 3 August
Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 1977 is AFFIRMED. No pronouncement as to costs. 
entitled "People of the Philippines v. Felipe Boncorno, Napoleon SO ORDERED.
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
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
G.R. No. 125948 December 29, 1998
reads:
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, 
Please note that our Company (FPIC) is a pipeline operator with a
vs.
government concession granted under the Petroleum Act. It is
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
engaged in the business of transporting petroleum products from
BATANGAS CITY and ADORACION C. ARELLANO, in her official
the Batangas refineries, via pipeline, to Sucat and JTF Pandacan
capacity as City Treasurer of Batangas, respondents.
Terminals. As such, our Company is exempt from paying tax on
gross receipts under Section 133 of the Local Government Code of cities to impose and collect a tax on the gross receipts of
1991 . . . . "contractors and independent contractors" under Sec. 141 (e) and
Moreover, Transportation contractors are not included in the 151 does not include the authority to collect such taxes on
enumeration of contractors under Section 131, Paragraph (h) of transportation contractors for, as defined under Sec. 131 (h), the
the Local Government Code. Therefore, the authority to impose term "contractors" excludes transportation contractors; and, (3)
tax "on contractors and other independent contractors" under the City Treasurer illegally and erroneously imposed and collected
Section 143, Paragraph (e) of the Local Government Code does not the said tax, thus meriting the immediate refund of the tax paid.7
include the power to levy on transportation contractors. Traversing the complaint, the respondents argued that petitioner
The imposition and assessment cannot be categorized as a mere cannot be exempt from taxes under Section 133 (j) of the Local
fee authorized under Section 147 of the Local Government Code. Government Code as said exemption applies only to
The said section limits the imposition of fees and charges on "transportation contractors and persons engaged in the
business to such amounts as may be commensurate to the cost of transportation by hire and common carriers by air, land and
regulation, inspection, and licensing. Hence, assuming arguendo water." Respondents assert that pipelines are not included in the
that FPIC is liable for the license fee, the imposition thereof based term "common carrier" which refers solely to ordinary carriers
on gross receipts is violative of the aforecited provision. The such as trucks, trains, ships and the like. Respondents further posit
amount of P956,076.04 (P239,019.01 per quarter) is not that the term "common carrier" under the said code pertains to
commensurate to the cost of regulation, inspection and licensing. the mode or manner by which a product is delivered to its
The fee is already a revenue raising measure, and not a mere destination.8
regulatory imposition.4 On October 3, 1994, the trial court rendered a decision dismissing
On March 8, 1994, the respondent City Treasurer denied the the complaint, ruling in this wise:
protest contending that petitioner cannot be considered engaged . . . Plaintiff is either a contractor or other independent contractor.
in transportation business, thus it cannot claim exemption under . . . the exemption to tax claimed by the plaintiff has become
Section 133 (j) of the Local Government Code.5 unclear. It is a rule that tax exemptions are to be strictly construed
On June 15, 1994, petitioner filed with the Regional Trial Court of against the taxpayer, taxes being the lifeblood of the government.
Batangas City a complaint6 for tax refund with prayer for writ of Exemption may therefore be granted only by clear and
preliminary injunction against respondents City of Batangas and unequivocal provisions of law.
Adoracion Arellano in her capacity as City Treasurer. In its Plaintiff claims that it is a grantee of a pipeline concession under
complaint, petitioner alleged, inter alia, that: (1) the imposition Republic Act 387. (Exhibit A) whose concession was lately renewed
and collection of the business tax on its gross receipts violates by the Energy Regulatory Board (Exhibit B). Yet neither said law
Section 133 of the Local Government Code; (2) the authority of
nor the deed of concession grant any tax exemption upon the Resolution 14 of January 22, 1997. Thus, the petition was
plaintiff. reinstated.
Even the Local Government Code imposes a tax on franchise Petitioner claims that the respondent Court of Appeals erred in
holders under Sec. 137 of the Local Tax Code. Such being the holding that (1) the petitioner is not a common carrier or a
situation obtained in this case (exemption being unclear and transportation contractor, and (2) the exemption sought for by
equivocal) resort to distinctions or other considerations may be of petitioner is not clear under the law.
help: There is merit in the petition.
1. That the exemption granted under Sec. 133 (j) encompasses A "common carrier" may be defined, broadly, as one who holds
only common carriers so as not to overburden the riding public or himself out to the public as engaged in the business of
commuters with taxes. Plaintiff  is not a common carrier, but a transporting persons or property from place to place, for
special carrier extending its services and facilities to a single compensation, offering his services to the public generally.
specific or "special customer" under a "special contract." Art. 1732 of the Civil Code defines a "common carrier" as "any
2. The Local Tax Code of 1992 was basically enacted to give more person, corporation, firm or association engaged in the business of
and effective local autonomy to local governments than the carrying or transporting passengers or goods or both, by land,
previous enactments, to make them economically and financially water, or air, for compensation, offering their services to the
viable to serve the people and discharge their functions with a public."
concomitant obligation to accept certain devolution of powers, . . . The test for determining whether a party is a common carrier of
So, consistent with this policy even franchise grantees are taxed goods is:
(Sec. 137) and contractors are also taxed under Sec. 143 (e) and 1. He must be engaged in the business of carrying goods for others
151 of the Code.9 as a public employment, and must hold himself out as ready to
Petitioner assailed the aforesaid decision before this Court via a engage in the transportation of goods for person generally as a
petition for review. On February 27, 1995, we referred the case to business and not as a casual occupation;
the respondent Court of Appeals for consideration and 2. He must undertake to carry goods of the kind to which his
adjudication. 10 On November 29, 1995, the respondent court business is confined;
rendered a decision 11 affirming the trial court's dismissal of 3. He must undertake to carry by the method by which his
petitioner's complaint. Petitioner's motion for reconsideration was business is conducted and over his established roads; and
denied on July 18, 1996. 12 4. The transportation must be for hire. 15
Hence, this petition. At first, the petition was denied due course in Based on the above definitions and requirements, there is no
a Resolution dated November 11, 1996. 13Petitioner moved for a doubt that petitioner is a common carrier. It is engaged in the
reconsideration which was granted by this Court in a business of transporting or carrying goods,  i.e. petroleum
products, for hire as a public employment. It undertakes to carry either for freight or passenger, or both, with or without fixed route
for all persons indifferently, that is, to all persons who choose to and whatever may be its classification, freight or carrier service of
employ its services, and transports the goods by land and for any class, express service, steamboat, or steamship line, pontines,
compensation. The fact that petitioner has a limited clientele does ferries and water craft, engaged in the transportation
not exclude it from the definition of a common carrier. In De of passengers or freight or both, shipyard, marine repair shop,
Guzman vs. Court of Appeals  16we ruled that: wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
The above article (Art. 1732, Civil Code) makes no distinction system gas, electric light heat and power, water supply andpower
between one whose principal business activity is the carrying of petroleum, sewerage system, wire or wireless communications
persons or goods or both, and one who does such carrying only as systems, wire or wireless broadcasting stations and other similar
an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . public services. (Emphasis Supplied)
avoids making any distinction between a person or enterprise Also, respondent's argument that the term "common carrier" as
offering transportation service on a  regular or scheduled basis and used in Section 133 (j) of the Local Government Code refers only to
one offering such service on an occasional, episodic or common carriers transporting goods and passengers through
unscheduled basis. Neither does Article 1732 distinguish between a moving vehicles or vessels either by land, sea or water, is
carrier offering its services to the "general public," i.e., the general erroneous.
community or population, and one who offers services or solicits As correctly pointed out by petitioner, the definition of "common
business only from a narrow segment of the general population. carriers" in the Civil Code makes no distinction as to the means of
We think that Article 1877 deliberately refrained from making such transporting, as long as it is by land, water or air. It does not
distinctions. provide that the transportation of the passengers or goods should
So understood, the concept of "common carrier" under Article be by motor vehicle. In fact, in the United States, oil pipe line
1732 may be seen to coincide neatly with the notion of "public operators are considered common carriers. 17
service," under the Public Service Act (Commonwealth Act No. Under the Petroleum Act of the Philippines (Republic Act 387),
1416, as amended) which at least partially supplements the law on petitioner is considered a "common carrier." Thus, Article 86
common carriers set forth in the Civil Code. Under Section 13, thereof provides that:
paragraph (b) of the Public Service Act, "public service" includes: Art. 86. Pipe line concessionaire as common carrier. — A pipe line
every person that now or hereafter may own, operate. manage, or shall have the preferential right to utilize installations for the
control in the Philippines, for hire or compensation, with general transportation of petroleum owned by him, but is obligated to
or limited clientele, whether permanent, occasional or accidental, utilize the remaining transportation capacity pro rata for the
and done for general business purposes, any common carrier, transportation of such other petroleum as may be offered by
railroad, street railway, traction railway, subway motor vehicle, others for transport, and to charge without discrimination such
rates as may have been approved by the Secretary of Agriculture The deliberations conducted in the House of Representatives on
and Natural Resources. the Local Government Code of 1991 are illuminating:
Republic Act 387 also regards petroleum operation as a public MR. AQUINO (A). Thank you, Mr. Speaker.
utility. Pertinent portion of Article 7 thereof provides: Mr. Speaker, we would like to proceed to page 95, line
that everything relating to the exploration for and exploitation of 1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the
petroleum . . . and everything relating to the manufacture, Taxing Powers of Local Government Units." . . .
refining, storage, or transportation by special methods of MR. AQUINO (A.). Thank you Mr. Speaker.
petroleum, is hereby declared to be a public utility. (Emphasis Still on page 95, subparagraph 5, on taxes on the business of
Supplied) transportation. This appears to be one of those being deemed to
The Bureau of Internal Revenue likewise considers the petitioner a be exempted from the taxing powers of the local government
"common carrier." In BIR Ruling No. 069-83, it declared: units. May we know the reason why the transportation business is
. . . since [petitioner] is a pipeline concessionaire that is engaged being excluded from the taxing powers of the local government
only in transporting petroleum products, it is considered a units?
common carrier under Republic Act No. 387 . . . . Such being the MR. JAVIER (E.). Mr. Speaker, there is an exception contained in
case, it is not subject to withholding tax prescribed by Revenue Section 121 (now Sec. 131), line 16, paragraph 5. It states that local
Regulations No. 13-78, as amended. government units may not impose taxes on the business of
From the foregoing disquisition, there is no doubt that petitioner is transportation, except as otherwise provided in this code.
a "common carrier" and, therefore, exempt from the business tax Now, Mr. Speaker, if the Gentleman would care to go to page 98 of
as provided for in Section 133 (j), of the Local Government Code, Book II, one can see there that provinces have the power to
to wit: impose a tax on business enjoying a franchise at the rate of not
Sec. 133. Common Limitations on the Taxing Powers of Local more than one-half of 1 percent of the gross annual receipts. So,
Government Units. — Unless otherwise provided herein, the transportation contractors who are enjoying a franchise would be
exercise of the taxing powers of provinces, cities, municipalities, subject to tax by the province. That is the exception, Mr. Speaker.
and barangays shall not extend to the levy of the following: What we want to guard against here, Mr. Speaker, is the
x x x           x x x          x x x imposition of taxes by local government units on the carrier
(j) Taxes on the gross receipts of transportation contractors and business. Local government units may impose taxes on top of what
persons engaged in the transportation of passengers or freight by is already being imposed by the National Internal Revenue Code
hire and common carriers by air, land or water, except as provided which is the so-called "common carriers tax." We do not want a
in this Code. 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 M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General
a specific rate. Milling Corporation in Manila, evidenced by Bill of Lading No.
MR. AQUINO (A.). Thank you for that clarification, Mr. PTD/Man-4.5The shipment was insured by the private respondent
Speaker. . . . 18 Prudential Guarantee and Assurance, Inc. against loss or damage
It is clear that the legislative intent in excluding from the taxing for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.6
power of the local government unit the imposition of business tax On July 25, 1990, the carrying vessel arrived in Manila and the
against common carriers is to prevent a duplication of the so- cargo was transferred to the custody of the petitioner Asia
called "common carrier's tax." Lighterage and Shipping, Inc. The petitioner was contracted by the
Petitioner is already paying three (3%) percent common carrier's consignee as carrier to deliver the cargo to consignee's warehouse
tax on its gross sales/earnings under the National Internal Revenue at Bo. Ugong, Pasig City.
Code. 19 To tax petitioner again on its gross receipts in its On August 15, 1990, 900 metric tons of the shipment was loaded
transportation of petroleum business would defeat the purpose of on barge PSTSI III, evidenced by Lighterage Receipt No. 03647 for
the Local Government Code. delivery to consignee. The cargo did not reach its destination.
WHEREFORE, the petition is hereby GRANTED. The decision of the It appears that on August 17, 1990, the transport of said cargo was
respondent Court of Appeals dated November 29, 1995 in CA-G.R. suspended due to a warning of an incoming typhoon. On August
SP No. 36801 is REVERSED and SET ASIDE. 22, 1990, the petitioner proceeded to pull the barge to Engineering
SO ORDERED. Island off Baseco to seek shelter from the approaching typhoon.
PSTSI III was tied down to other barges which arrived ahead of it
while weathering out the storm that night. A few days after, the
barge developed a list because of a hole it sustained after hitting
an unseen protuberance underneath the water. The petitioner
filed a Marine Protest on August 28, 1990.8 It likewise secured the
services of Gaspar Salvaging Corporation which refloated the
G.R. No. 147246            August 19, 2003 barge.9 The hole was then patched with clay and cement.
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,  The barge was then towed to ISLOFF terminal before it finally
vs. headed towards the consignee's wharf on September 5, 1990.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND Upon reaching the Sta. Mesa spillways, the barge again ran
ASSURANCE, INC., respondents. aground due to strong current. To avoid the complete sinking of
On June 13, 1990, 3,150 metric tons of Better Western White the barge, a portion of the goods was transferred to three other
Wheat in bulk, valued at US$423,192.354 was shipped by Marubeni barges.10
American Corporation of Portland, Oregon on board the vessel
The next day, September 6, 1990, the towing bits of the barge trial court with modification. The dispositive portion of its decision
broke. It sank completely, resulting in the total loss of the reads:
remaining cargo.11 A second Marine Protest was filed on WHEREFORE, the decision appealed from is hereby AFFIRMED with
September 7, 1990.12 modification in the sense that the salvage value of P201,379.75
On September 14, 1990, a bidding was conducted to dispose of the shall be deducted from the amount of P4,104,654.22. Costs against
damaged wheat retrieved and loaded on the three other appellant.
barges.13 The total proceeds from the sale of the salvaged cargo SO ORDERED.
was P201,379.75.14 Petitioner's Motion for Reconsideration dated June 3, 2000 was
On the same date, September 14, 1990, consignee sent a claim likewise denied by the appellate court in a Resolution promulgated
letter to the petitioner, and another letter dated September 18, on February 21, 2001.
1990 to the private respondent for the value of the lost cargo. Hence, this petition. Petitioner submits the following errors
On January 30, 1991, the private respondent indemnified the allegedly committed by the appellate court, viz:19
consignee in the amount of P4,104,654.22.15Thereafter, as (1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY
subrogee, it sought recovery of said amount from the petitioner, NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
but to no avail. DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT
On July 3, 1991, the private respondent filed a complaint against PETITIONER IS A COMMON CARRIER.
the petitioner for recovery of the amount of indemnity, attorney's (2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY
fees and cost of suit.16 Petitioner filed its answer with NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
counterclaim.17 DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE
The Regional Trial Court ruled in favor of the private respondent. FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF
The dispositive portion of its Decision states: THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON
WHEREFORE, premises considered, judgment is hereby rendered CARRIERS, "THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY
ordering defendant Asia Lighterage & Shipping, Inc. liable to pay THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES
plaintiff Prudential Guarantee & Assurance Co., Inc. the sum ENUMERATED."
of P4,104,654.22 with interest from the date complaint was filed (3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY
on July 3, 1991 until fully satisfied plus 10% of the amount NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
awarded as and for attorney's fees. Defendant's counterclaim is DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY
hereby DISMISSED. With costs against defendant.18 CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE
Petitioner appealed to the Court of Appeals insisting that it is not a DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY
common carrier. The appellate court affirmed the decision of the OF THE CONSIGNEE'S CARGO.
The issues to be resolved are: In the case at bar, the principal business of the petitioner is that of
(1) Whether the petitioner is a common carrier; and, lighterage and drayage22 and it offers its barges to the public for
(2) Assuming the petitioner is a common carrier, whether it carrying or transporting goods by water for compensation.
exercised extraordinary diligence in its care and custody of the Petitioner is clearly a common carrier. In De Guzman, supra,23 we
consignee's cargo. considered private respondent Ernesto Cendaña to be a common
On the first issue, we rule that petitioner is a common carrier. carrier even if his principal occupation was not the carriage of
Article 1732 of the Civil Code defines common carriers as persons, goods for others, but that of buying used bottles and scrap metal
corporations, firms or associations engaged in the business of in Pangasinan and selling these items in Manila.
carrying or transporting passengers or goods or both, by land, We therefore hold that petitioner is a common carrier whether its
water, or air, for compensation, offering their services to the carrying of goods is done on an irregular rather than scheduled
public. manner, and with an only limited clientele. A common carrier need
Petitioner contends that it is not a common carrier but a private not have fixed and publicly known routes. Neither does it have to
carrier. Allegedly, it has no fixed and publicly known route, maintain terminals or issue tickets.
maintains no terminals, and issues no tickets. It points out that it is To be sure, petitioner fits the test of a common carrier as laid
not obliged to carry indiscriminately for any person. It is not bound down in Bascos vs. Court of Appeals.24 The test to determine a
to carry goods unless it consents. In short, it does not hold out its common carrier is "whether the given undertaking is a part of the
services to the general public.20 business engaged in by the carrier which he has held out to the
We disagree. general public as his occupation rather than the quantity or extent
In De Guzman vs. Court of Appeals,21 we held that the definition of the business transacted."25 In the case at bar, the petitioner
of common carriers in Article 1732 of the Civil Code makes no admitted that it is engaged in the business of shipping and
distinction between one whose principal business activity is the lighterage,26 offering its barges to the public, despite its limited
carrying of persons or goods or both, and one who does such clientele for carrying or transporting goods by water for
carrying only as an ancillary activity. We also did not distinguish compensation.27
between a person or enterprise offering transportation service on On the second issue, we uphold the findings of the lower courts
a regular or scheduled basis and one offering such service on an that petitioner failed to exercise extraordinary diligence in its care
occasional, episodic or unscheduled basis. Further, we ruled that and custody of the consignee's goods.
Article 1732 does not distinguish between a carrier offering its Common carriers are bound to observe extraordinary diligence in
services to the general public, and one who offers services or the vigilance over the goods transported by them.28 They are
solicits business only from a narrow segment of the general presumed to have been at fault or to have acted negligently if the
population. goods are lost, destroyed or deteriorated.29 To overcome the
presumption of negligence in the case of loss, destruction or it recklessly exposed the cargo to further damage. A portion of the
deterioration of the goods, the common carrier must prove that it cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-
exercised extraordinary diligence. There are, however, exceptions Gatue Adjustment Co., Inc., states:
to this rule. Article 1734 of the Civil Code enumerates the instances CROSS-EXAMINATION BY ATTY. DONN LEE:31
when the presumption of negligence does not attach: x x x           x x x           x x x
Art. 1734. Common carriers are responsible for the loss, q     -     Can you tell us what else transpired after that incident?
destruction, or deterioration of the goods, unless the same is due a     -     After the first accident, through the initiative of the barge
to any of the following causes only: owners, they tried to pull out the barge from the place of the
(1) Flood, storm, earthquake, lightning, or other natural disaster or accident, and bring it to the anchor terminal for safety, then after
calamity; deciding if the vessel is stabilized, they tried to pull it to the
(2) Act of the public enemy in war, whether international or civil; consignee's warehouse, now while on route another accident
(3) Act or omission of the shipper or owner of the goods; occurred, now this time the barge totally hitting something in the
(4) The character of the goods or defects in the packing or in the course.
containers; q     -     You said there was another accident, can you tell the court
(5) Order or act of competent public authority. the nature of the second accident?
In the case at bar, the barge completely sank after its towing bits a     -     The sinking, sir.
broke, resulting in the total loss of its cargo. Petitioner claims that q     -     Can you tell the nature . . . can you tell the court, if you
this was caused by a typhoon, hence, it should not be held liable know what caused the sinking?
for the loss of the cargo. However, petitioner failed to prove that a     -     Mostly it was related to the first accident because there
the typhoon is the proximate and only cause of the loss of the was already a whole (sic) on the bottom part of the barge.
goods, and that it has exercised due diligence before, during and x x x           x x x           x x x
after the occurrence of the typhoon to prevent or minimize the This is not all. Petitioner still headed to the consignee's wharf
loss.30 The evidence show that, even before the towing bits of the despite knowledge of an incoming typhoon. During the time that
barge broke, it had already previously sustained damage when it the barge was heading towards the consignee's wharf on
hit a sunken object while docked at the Engineering Island. It even September 5, 1990, typhoon "Loleng" has already entered the
suffered a hole. Clearly, this could not be solely attributed to the Philippine area of responsibility.32 A part of the testimony of
typhoon. The partly-submerged vessel was refloated but its hole Robert Boyd, Cargo Operations Supervisor of the petitioner,
was patched with only clay and cement. The patch work was reveals:
merely a provisional remedy, not enough for the barge to sail DIRECT-EXAMINATION BY ATTY. LEE:33
safely. Thus, when petitioner persisted to proceed with the voyage, x x x           x x x           x x x
q     -     Now, Mr. Witness, did it not occur to you it might be safer a     -     Yes, sir.
to just allow the Barge to lie where she was instead of towing it? q     -     And yet you proceeded to the premises of the GMC?
a     -     Since that time that the Barge was refloated, GMC a     -     ISLOFF Terminal is far from Manila Bay and anytime even
(General Milling Corporation, the consignee) as I have said was in a with the typhoon if you are already inside the vicinity or inside
hurry for their goods to be delivered at their Wharf since they Pasig entrance, it is a safe place to tow upstream.
needed badly the wheat that was loaded in PSTSI-3. It was needed Accordingly, the petitioner cannot invoke the occurrence of the
badly by the consignee. typhoon as force majeure to escape liability for the loss sustained
q     -     And this is the reason why you towed the Barge as you by the private respondent. Surely, meeting a typhoon head-on falls
did? short of due diligence required from a common carrier. More
a     -     Yes, sir. importantly, the officers/employees themselves of petitioner
x x x           x x x           x x x admitted that when the towing bits of the vessel broke that caused
CROSS-EXAMINATION BY ATTY. IGNACIO:34 its sinking and the total loss of the cargo upon reaching the Pasig
x x x           x x x           x x x River, it was no longer affected by the typhoon. The typhoon then
q     -     And then from ISLOFF Terminal you proceeded to the is not the proximate cause of the loss of the cargo; a human
premises of the GMC? Am I correct? factor, i.e., negligence had intervened.
a     -     The next day, in the morning, we hired for additional two IN VIEW THEREOF, the petition is DENIED. The Decision of the
(2) tugboats as I have stated. Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and
q     -     Despite of the threats of an incoming typhoon as you its Resolution dated February 21, 2001 are hereby AFFIRMED.
testified a while ago? Costs against petitioner.
a     -     It is already in an inner portion of Pasig River. The typhoon SO ORDERED.
would be coming and it would be dangerous if we are in the
vicinity of Manila Bay.
q     -     But the fact is, the typhoon was incoming? Yes or no?
a     -     Yes.
q     -     And yet as a standard operating procedure of your
Company, you have to secure a sort of Certification to determine
the weather condition, am I correct?
a     -     Yes, sir.
q     -     So, more or less, you had the knowledge of the incoming
typhoon, right?
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
G.R. No. 101089. April 7, 1993. making such distinctions."
ESTRELLITA M. BASCOS, petitioners,  2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS
vs. TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents. HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
Modesto S. Bascos for petitioner. ABSOLUTE. — Common carriers are obliged to observe
Pelaez, Adriano & Gregorio for private respondent. extraordinary diligence in the vigilance over the goods transported
SYLLABUS by them. Accordingly, they are presumed to have been at fault or
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE to have acted negligently if the goods are lost, destroyed or
COMMON CARRIER. — Article 1732 of the Civil Code defines a deteriorated. There are very few instances when the presumption
common carrier as "(a) person, corporation or firm, or association of negligence does not attach and these instances are enumerated
engaged in the business of carrying or transporting passengers or in Article 1734. In those cases where the presumption is applied,
goods or both, by land, water or air, for compensation, offering the common carrier must prove that it exercised extraordinary
their services to the public." The test to determine a common diligence in order to overcome the presumption . . . The
presumption of negligence was raised against petitioner. It was 4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE.
petitioner's burden to overcome it. Thus, contrary to her assertion, — In this case, petitioner herself has made the admission that she
private respondent need not introduce any evidence to prove her was in the trucking business, offering her trucks to those with
negligence. Her own failure to adduce sufficient proof of cargo to move. Judicial admissions are conclusive and no evidence
extraordinary diligence made the presumption conclusive against is required to prove the same.
her. 5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; FACT. — Petitioner presented no other proof of the existence of
HOW CARRIER ABSOLVED FROM LIABILITY. — In De Guzman vs. the contract of lease. He who alleges a fact has the burden of
Court of Appeals, the Court held that hijacking, not being included proving it.
in the provisions of Article 1734, must be dealt with under the 6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF
provisions of Article 1735 and thus, the common carrier is AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of
presumed to have been at fault or negligent. To exculpate the Juanito Morden, the truck helper in the hijacked truck, was
carrier from liability arising from hijacking, he must prove that the presented as evidence in court, he himself was a witness as could
robbers or the hijackers acted with grave or irresistible threat, be gleaned from the contents of the petition. Affidavits are not
violence, or force. This is in accordance with Article 1745 of the considered the best evidence if the affiants are available as
Civil Code which provides: "Art. 1745. Any of the following or witnesses.
similar stipulations shall be considered unreasonable, unjust and 7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT
contrary to public policy . . . (6) That the common carrier's liability LAW DEFINES IT TO BE. — Granting that the said evidence were
for acts committed by thieves, or of robbers who do not act with not self-serving, the same were not sufficient to prove that the
grave or irresistible threat, violences or force, is dispensed with or contract was one of lease. It must be understood that a contract is
diminished"; In the same case, the Supreme Court also held that: what the law defines it to be and not what it is called by the
"Under Article 1745 (6) above, a common carrier is held contracting parties.
responsible — and will not be allowed to divest or to diminish DECISION
such responsibility — even for acts of strangers like thieves or CAMPOS, JR., J p:
robbers, except where such thieves or robbers in fact acted "with This is a petition for review on certiorari of the decision ** of the
grave of irresistible threat, violence of force," We believe and so Court of Appeals in "RODOLFO A. CIPRIANO, doing business under
hold that the limits of the duty of extraordinary diligence in the the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs.
vigilance over the goods carried are reached where the goods are ESTRELLITA M. BASCOS, doing business under the name of BASCOS
lost as a result of a robbery which is attended by "grave or TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the
irresistible threat, violence or force." dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision "(e) in an action against a party who has removed or disposed of
appealed from, which is hereby affirmed in toto. Costs against his property, or is about to do so, with intent to defraud his
appellant." 1  creditors;"
The facts, as gathered by this Court, are as follows: 5. That there is no sufficient security for the claim sought to be
Rodolfo A. Cipriano representing Cipriano Trading Enterprise enforced by the present action;
(CIPTRADE for short) entered into a hauling contract 2 with Jibfair 6. That the amount due to the plaintiff in the above-entitled case is
Shipping Agency Corporation whereby the former bound itself to above all legal counterclaims;"
haul the latter's 2,000 m/tons of soya bean meal from Magallanes The trial court granted the writ of preliminary attachment on
Drive, Del Pan, Manila to the warehouse of Purefoods Corporation February 17, 1987.
in Calamba, Laguna. To carry out its obligation, CIPTRADE, through In her answer, petitioner interposed the following defenses: that
Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) there was no contract of carriage since CIPTRADE leased her cargo
to transport and to deliver 400 sacks of soya bean meal worth truck to load the cargo from Manila Port Area to Laguna; that
P156,404.00 from the Manila Port Area to Calamba, Laguna at the CIPTRADE was liable to petitioner in the amount of P11,000.00 for
rate of P50.00 per metric ton. Petitioner failed to deliver the said loading the cargo; that the truck carrying the cargo was hijacked
cargo. As a consequence of that failure, Cipriano paid Jibfair along Canonigo St., Paco, Manila on the night of October 21, 1988;
Shipping Agency the amount of the lost goods in accordance with that the hijacking was immediately reported to CIPTRADE and that
the contract which stated that: petitioner and the police exerted all efforts to locate the hijacked
"1. CIPTRADE shall be held liable and answerable for any loss in properties; that after preliminary investigation, an information for
bags due to theft, hijacking and non-delivery or damages to the robbery and carnapping were filed against Jose Opriano, et al.; and
cargo during transport at market value, . . ." 3  that hijacking, being a force majeure, exculpated petitioner from
Cipriano demanded reimbursement from petitioner but the latter any liability to CIPTRADE. 
refused to pay. Eventually, Cipriano filed a complaint for a sum of After trial, the trial court rendered a decision *** the dispositive
money and damages with writ of preliminary attachment 4 for portion of which reads as follows:
breach of a contract of carriage. The prayer for a Writ of "WHEREFORE, judgment is hereby rendered in favor of plaintiff
Preliminary Attachment was supported by an affidavit 5 which and against defendant ordering the latter to pay the former:
contained the following allegations: 1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR
"4. That this action is one of those specifically mentioned in Sec. 1, HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual
Rule 57 the Rules of Court, whereby a writ of preliminary damages with legal interest of 12% per cent per annum to be
attachment may lawfully issue, namely: counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for The Court of Appeals, in holding that petitioner was a common
attorney's fees; and carrier, found that she admitted in her answer that she did
3. The costs of the suit. business under the name A.M. Bascos Trucking and that said
The "Urgent Motion To Dissolve/Lift preliminary Attachment" admission dispensed with the presentation by private respondent,
dated March 10, 1987 filed by defendant is DENIED for being moot Rodolfo Cipriano, of proofs that petitioner was a common carrier.
and academic. The respondent Court also adopted in toto the trial court's decision
SO ORDERED." 6  that petitioner was a common carrier, Moreover, both courts
Petitioner appealed to the Court of Appeals but respondent Court appreciated the following pieces of evidence as indicators that
affirmed the trial court's judgment. petitioner was a common carrier: the fact that the truck driver of
Consequently, petitioner filed this petition where she makes the petitioner, Maximo Sanglay, received the cargo consisting of 400
following assignment of errors; to wit: bags of soya bean meal as evidenced by a cargo receipt signed by
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE Maximo Sanglay; the fact that the truck helper, Juanito Morden,
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE was also an employee of petitioner; and the fact that control of
RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF the cargo was placed in petitioner's care. 
CARGO TRUCK. In disputing the conclusion of the trial and appellate courts that
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE petitioner was a common carrier, she alleged in this petition that
RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP the contract between her and Rodolfo A. Cipriano, representing
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE CIPTRADE, was lease of the truck. She cited as evidence certain
OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING affidavits which referred to the contract as "lease". These affidavits
PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE were made by Jesus Bascos 8 and by petitioner herself. 9 She
CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING. further averred that Jesus Bascos confirmed in his testimony his
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING statement that the contract was a lease contract. 10 She also
OF THE TRIAL COURT THAT PETITIONER'S MOTION TO stated that: she was not catering to the general public. Thus, in her
DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS answer to the amended complaint, she said that she does business
BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE under the same style of A.M. Bascos Trucking, offering her trucks
MERITS OF THE CASE." 7  for lease to those who have cargo to move, not to the general
The petition presents the following issues for resolution: (1) was public but to a few customers only in view of the fact that it is only
petitioner a common carrier?; and (2) was the hijacking referred to a small business. 11 
a force majeure? 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) business only from a narrow segment of the general population.
person, corporation or firm, or association engaged in the business We think that Article 1732 deliberately refrained from making such
of carrying or transporting passengers or goods or both, by land, distinctions."
water or air, for compensation, offering their services to the Regarding the affidavits presented by petitioner to the court, both
public." The test to determine a common carrier is "whether the the trial and appellate courts have dismissed them as self-serving
given undertaking is a part of the business engaged in by the and petitioner contests the conclusion. We are bound by the
carrier which he has held out to the general public as his appellate court's factual conclusions. Yet, granting that the said
occupation rather than the quantity or extent of the business evidence were not self-serving, the same were not sufficient to
transacted." 12 In this case, petitioner herself has made the prove that the contract was one of lease. It must be understood
admission that she was in the trucking business, offering her trucks that a contract is what the law defines it to be and not what it is
to those with cargo to move. Judicial admissions are conclusive called by the contracting parties. 15 Furthermore, petitioner
and no evidence is required to prove the same. 13  presented no other proof of the existence of the contract of lease.
But petitioner argues that there was only a contract of lease He who alleges a fact has the burden of proving it. 16 
because they offer their services only to a select group of people Likewise, We affirm the holding of the respondent court that the
and because the private respondents, plaintiffs in the lower court, loss of the goods was not due to force majeure.
did not object to the presentation of affidavits by petitioner where Common carriers are obliged to observe extraordinary diligence in
the transaction was referred to as a lease contract. the vigilance over the goods transported by them. 17 Accordingly,
Regarding the first contention, the holding of the Court in De they are presumed to have been at fault or to have acted
Guzman vs. Court of Appeals 14 is instructive. In referring to Article negligently if the goods are lost, destroyed or deteriorated. 18
1732 of the Civil Code, it held thus: There are very few instances when the presumption of negligence
"The above article makes no distinction between one whose does not attach and these instances are enumerated in Article
principal business activity is the carrying of persons or goods or 1734. 19 In those cases where the presumption is applied, the
both, and one who does such carrying only as an ancillary activity common carrier must prove that it exercised extraordinary
(in local idiom, as a "sideline"). Article 1732 also carefully avoids diligence in order to overcome the presumption. 
making any distinction between a person or enterprise offering In this case, petitioner alleged that hijacking constituted force
transportation service on a regular or scheduled basis and one majeure which exculpated her from liability for the loss of the
offering such service on an occasional, episodic or unscheduled cargo. In De Guzman vs. Court of Appeals, 20 the Court held that
basis. Neither does Article 1732 distinguish between a carrier hijacking, not being included in the provisions of Article 1734, must
offering its services to the "general public," i.e., the general be dealt with under the provisions of Article 1735 and thus, the
community or population, and one who offers services or solicits common carrier is presumed to have been at fault or negligent. To
exculpate the carrier from liability arising from hijacking, he must appellate court. In a petition for review on certiorari, We are not
prove that the robbers or the hijackers acted with grave or to determine the probative value of evidence but to resolve
irresistible threat, violence, or force. This is in accordance with questions of law. Secondly, the affidavit of Jesus Bascos did not
Article 1745 of the Civil Code which provides: dwell on how the hijacking took place. Thirdly, while the affidavit
"Art. 1745. Any of the following or similar stipulations shall be of Juanito Morden, the truck helper in the hijacked truck, was
considered unreasonable, unjust and contrary to public policy; presented as evidence in court, he himself was a witness as could
xxx xxx xxx be gleaned from the contents of the petition. Affidavits are not
(6) That the common carrier's liability for acts committed by considered the best evidence if the affiants are available as
thieves, or of robbers who do not act with grave or irresistible witnesses. 25 The subsequent filing of the information for
threat, violences or force, is dispensed with or diminished;" carnapping and robbery against the accused named in said
In the same case, 21 the Supreme Court also held that: affidavits did not necessarily mean that the contents of the
"Under Article 1745 (6) above, a common carrier is held affidavits were true because they were yet to be determined in the
responsible — and will not be allowed to divest or to diminish trial of the criminal cases.
such responsibility — even for acts of strangers like thieves or The presumption of negligence was raised against petitioner. It
robbers except where such thieves or robbers in fact acted with was petitioner's burden to overcome it. Thus, contrary to her
grave or irresistible threat, violence or force. We believe and so assertion, private respondent need not introduce any evidence to
hold that the limits of the duty of extraordinary diligence in the prove her negligence. Her own failure to adduce sufficient proof of
vigilance over the goods carried are reached where the goods are extraordinary diligence made the presumption conclusive against
lost as a result of a robbery which is attended by "grave or her.
irresistible threat, violence or force." Having affirmed the findings of the respondent Court on the
To establish grave and irresistible force, petitioner presented her substantial issues involved, We find no reason to disturb the
accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito conclusion that the motion to lift/dissolve the writ of preliminary
Morden's 24 "Salaysay". However, both the trial court and the attachment has been rendered moot and academic by the decision
Court of Appeals have concluded that these affidavits were not on the merits. 
enough to overcome the presumption. Petitioner's affidavit about In the light of the foregoing analysis, it is Our opinion that the
the hijacking was based on what had been told her by Juanito petitioner's claim cannot be sustained. The petition is DISMISSED
Morden. It was not a first-hand account. While it had been and the decision of the Court of Appeals is hereby AFFIRMED.
admitted in court for lack of objection on the part of private SO ORDERED.
respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the
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
G.R. No. 148496      March 19, 2002 Trial Court, Branch 148, Makati City, which, on December 20, 1995,
VIRGINES CALVO doing business under the name and style rendered judgment finding petitioner liable to respondent for the
TRANSORIENT CONTAINER TERMINAL SERVICES, INC., petitioner,  damage to the shipment.
vs. The trial court held:
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee It cannot be denied . . . that the subject cargoes sustained damage
Ins. Co., Inc.) respondent.  while in the custody of defendants. Evidence such as the
Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh. "F")
The facts are as follows: with entries appearing therein, classified as "TED" and "TSN",
Petitioner Virgines Calvo is the owner of Transorient Container which the claims processor, Ms. Agrifina De Luna, claimed to be
Terminal Services, Inc. (TCTSI), a sole proprietorship customs tearrage at the end and tearrage at the middle of the subject
broker. At the time material to this case, petitioner entered into a damaged cargoes respectively, coupled with the Marine Cargo
contract with San Miguel Corporation (SMC) for the transfer of 114 Survey Report (Exh. "H" - "H-4-A") confirms the fact of the
reels of semi-chemical fluting paper and 124 reels of kraft liner damaged condition of the subject cargoes. The surveyor[s'] report
board from the Port Area in Manila to SMC's warehouse at the (Exh. "H-4-A") in particular, which provides among others that:
Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo " . . . we opine that damages sustained by shipment is attributable
was insured by respondent UCPB General Insurance Co., Inc. to improper handling in transit presumably whilst in the custody of
On July 14, 1990, the shipment in question, contained in 30 metal the broker . . . ."
vans, arrived in Manila on board "M/V Hayakawa Maru" and, after is a finding which cannot be traversed and overturned.
24 hours, were unloaded from the vessel to the custody of the The evidence adduced by the defendants is not enough to sustain
arrastre operator, Manila Port Services, Inc. From July 23 to July [her] defense that [she is] are not liable. Defendant by reason of
the nature of [her] business should have devised ways and means placed in the possession of and received by the carrier for
in order to prevent the damage to the cargoes which it is under transportation until the same are delivered actually or
obligation to take custody of and to forthwith deliver to the constructively by the carrier to the consignee or to the person who
consignee. Defendant did not present any evidence on what has the right to receive the same.3
precaution [she] performed to prevent [the] said incident, hence Accordingly, the trial court ordered petitioner to pay the following
the presumption is that the moment the defendant accepts the amounts --
cargo [she] shall perform such extraordinary diligence because of 1. The sum of P93,112.00 plus interest; 
the nature of the cargo. 2. 25% thereof as lawyer's fee;
.... 3. Costs of suit.4
Generally speaking under Article 1735 of the Civil Code, if the The decision was affirmed by the Court of Appeals on appeal.
goods are proved to have been lost, destroyed or deteriorated, Hence this petition for review on certiorari.
common carriers are presumed to have been at fault or to have Petitioner contends that:
acted negligently, unless they prove that they have observed the I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
extraordinary diligence required by law. The burden of the ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE
plaintiff, therefore, is to prove merely that the goods he PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND
transported have been lost, destroyed or deteriorated. Thereafter, MANIFESTLY MISTAKEN INFERENCE.
the burden is shifted to the carrier to prove that he has exercised II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
the extraordinary diligence required by law. Thus, it has been held ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER
that the mere proof of delivery of goods in good order to a carrier, AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD
and of their arrival at the place of destination in bad order, makes ITS SERVICES TO THE PUBLIC.5
out a prima facie case against the carrier, so that if no explanation It will be convenient to deal with these contentions in the inverse
is given as to how the injury occurred, the carrier must be held order, for if petitioner is not a common carrier, although both the
responsible. It is incumbent upon the carrier to prove that the loss trial court and the Court of Appeals held otherwise, then she is
was due to accident or some other circumstances inconsistent with indeed not liable beyond what ordinary diligence in the vigilance
its liability." (cited in Commercial Laws of the Philippines by over the goods transported by her, would require.6 Consequently,
Agbayani, p. 31, Vol. IV, 1989 Ed.) any damage to the cargo she agrees to transport cannot be
Defendant, being a customs brother, warehouseman and at the presumed to have been due to her fault or negligence.
same time a common carrier is supposed [to] exercise [the] Petitioner contends that contrary to the findings of the trial court
extraordinary diligence required by law, hence the extraordinary and the Court of Appeals, she is not a common carrier but a
responsibility lasts from the time the goods are unconditionally private carrier because, as a customs broker and warehouseman,
she does not indiscriminately hold her services out to the public " x x x every person that now or hereafter may own, operate,
but only offers the same to select parties with whom she may manage, or control in the Philippines, for hire or
contract in the conduct of her business.  compensation, with general or limited clientele, whether
The contention has no merit. In De Guzman v. Court of permanent, occasional or accidental, and done for general business
Appeals,7 the Court dismissed a similar contention and held the purposes, any common carrier, railroad, street railway, traction
party to be a common carrier, thus - railway, subway motor vehicle, either for freight or passenger, or
The Civil Code defines "common carriers" in the following terms: both, with or without fixed route and whatever may be its
"Article 1732. Common carriers are persons, corporations, firms or classification, freight or carrier service of any class, express service,
associations engaged in the business of carrying or transporting steamboat, or steamship line, pontines, ferries and water craft,
passengers or goods or both, by land, water, or air for engaged in the transportation of passengers or freight or both,
compensation, offering their services to the public." shipyard, marine repair shop, wharf or dock, ice plant, ice-
The above article makes no distinction between one refrigeration plant, canal, irrigation system, gas, electric light, heat
whose principal business activity is the carrying of persons or and power, water supply and power petroleum, sewerage system,
goods or both, and one who does such carrying only as wire or wireless communications systems, wire or wireless
an ancillary activity . . . Article 1732 also carefully avoids making broadcasting stations and other similar public services. x x x" 8
any distinction between a person or enterprise offering There is greater reason for holding petitioner to be a common
transportation service on a regular or scheduled basis and one carrier because the transportation of goods is an integral part of
offering such service on an occasional, episodic or unscheduled her business. To uphold petitioner's contention would be to
basis.  Neither does Article 1732 distinguish between a carrier deprive those with whom she contracts the protection which the
offering its services to the "general public," i.e., the general law affords them notwithstanding the fact that the obligation to
community or population, and one who offers services or solicits carry goods for her customers, as already noted, is part and parcel
business only from a narrow segment of the general population. of petitioner's business. 
We think that Article 1732 deliberately refrained from making such Now, as to petitioner's liability, Art. 1733 of the Civil Code
distinctions. provides: 
So understood, the concept of "common carrier" under Article Common carriers, from the nature of their business and for
1732 may be seen to coincide neatly with the notion of "public reasons of public policy, are bound to observe extraordinary
service," under the Public Service Act (Commonwealth Act No. diligence in the vigilance over the goods and for the safety of the
1416, as amended) which at least partially supplements the law on passengers transported by them, according to all the
common carriers set forth in the Civil Code. Under Section 13, circumstances of each case. . . .
paragraph (b) of the Public Service Act, "public service" includes:
In Compania Maritima v. Court of Appeals,9 the meaning of In addition, petitioner claims that Marine Cargo Surveyor Ernesto
"extraordinary diligence in the vigilance over goods" was explained Tolentino testified that he has no personal knowledge on whether
thus: the container vans were first stored in petitioner's warehouse prior
The extraordinary diligence in the vigilance over the goods to their delivery to the consignee. She likewise claims that after
tendered for shipment requires the common carrier to know and withdrawing the container vans from the arrastre operator, her
to follow the required precaution for avoiding damage to, or driver, Ricardo Nazarro, immediately delivered the cargo to SMC's
destruction of the goods entrusted to it for sale, carriage and warehouse in Ermita, Manila, which is a mere thirty-minute drive
delivery. It requires common carriers to render service with the from the Port Area where the cargo came from. Thus, the damage
greatest skill and foresight and "to use all reasonable means to to the cargo could not have taken place while these were in her
ascertain the nature and characteristic of goods tendered for custody.11
shipment, and to exercise due care in the handling and stowage, Contrary to petitioner's assertion, the Survey Report (Exh. H) of the
including such methods as their nature requires." Marine Cargo Surveyors indicates that when the shipper
In the case at bar, petitioner denies liability for the damage to the transferred the cargo in question to the arrastre operator, these
cargo. She claims that the "spoilage or wettage" took place while were covered by clean Equipment Interchange Report (EIR) and,
the goods were in the custody of either the carrying vessel "M/V when petitioner's employees withdrew the cargo from the arrastre
Hayakawa Maru," which transported the cargo to Manila, or the operator, they did so without exception or protest either with
arrastre operator, to whom the goods were unloaded and who regard to the condition of container vans or their contents. The
allegedly kept them in open air for nine days from July 14 to July Survey Report pertinently reads --
23, 1998 notwithstanding the fact that some of the containers Details of Discharge:
were deformed, cracked, or otherwise damaged, as noted in the Shipment, provided with our protective supervision was noted
Marine Survey Report (Exh. H), to wit: discharged ex vessel to dock of Pier #13 South Harbor, Manila on
MAXU-2062880      -       rain gutter deformed/cracked  14 July 1990, containerized onto 30' x 20' secure metal vans,
ICSU-363461-3      -       left side rubber gasket on door covered by clean EIRs. Except for slight dents and paint scratches
distorted/partly loose on side and roof panels, these containers were deemed to have
PERU-204209-4    -       with pinholes on roof panel right portion [been] received in good condition.
TOLU-213674-3     -       wood flooring we[t] and/or with signs of ....
water soaked Transfer/Delivery:
MAXU-201406-0     -       with dent/crack on roof panel  On July 23, 1990, shipment housed onto 30' x 20' cargo containers
ICSU-412105-0      -       rubber gasket on left side/door panel partly was [withdrawn] by Transorient Container Services,
detached loosened.10 Inc. . . . without exception.
[The cargo] was finally delivered to the consignee's storage exercise of extraordinary diligence, petitioner must do more than
warehouse located at Tabacalera Compound, Romualdez Street, merely show the possibility that some other party could be
Ermita, Manila from July 23/25, 1990.12 responsible for the damage. It must prove that it used "all
As found by the Court of Appeals:  reasonable means to ascertain the nature and characteristic of
From the [Survey Report], it [is] clear that the shipment was goods tendered for [transport] and that [it] exercise[d] due care in
discharged from the vessel to the arrastre, Marina Port Services the handling [thereof]." Petitioner failed to do this. 
Inc., in good order and condition as evidenced by clean Equipment Nor is there basis to exempt petitioner from liability under Art.
Interchange Reports (EIRs). Had there been any damage to the 1734(4), which provides --
shipment, there would have been a report to that effect made by Common carriers are responsible for the loss, destruction, or
the arrastre operator. The cargoes were withdrawn by the deterioration of the goods, unless the same is due to any of the
defendant-appellant from the arrastre still in good order and following causes only:
condition as the same were received by the former without ....
exception, that is, without any report of damage or loss. Surely, if (4) The character of the goods or defects in the packing or in the
the container vans were deformed, cracked, distorted or dented, containers.
the defendant-appellant would report it immediately to the ....
consignee or make an exception on the delivery receipt or note the For this provision to apply, the rule is that if the improper packing
same in the Warehouse Entry Slip (WES). None of these took or, in this case, the defect/s in the container, is/are known to the
place. To put it simply, the defendant-appellant received the carrier or his employees or apparent upon ordinary observation,
shipment in good order and condition and delivered the same to but he nevertheless accepts the same without protest or exception
the consignee damaged. We can only conclude that the damages notwithstanding such condition, he is not relieved of liability for
to the cargo occurred while it was in the possession of the damage resulting therefrom.14 In this case, petitioner accepted the
defendant-appellant. Whenever the thing is lost (or damaged) in cargo without exception despite the apparent defects in some of
the possession of the debtor (or obligor), it shall be presumed that the container vans. Hence, for failure of petitioner to prove that
the loss (or damage) was due to his fault, unless there is proof to she exercised extraordinary diligence in the carriage of goods in
the contrary. No proof was proffered to rebut this legal this case or that she is exempt from liability, the presumption of
presumption and the presumption of negligence attached to a negligence as provided under Art. 173515 holds.
common carrier in case of loss or damage to the goods.13 WHEREFORE, the decision of the Court of Appeals, dated May 31,
Anent petitioner's insistence that the cargo could not have been 2001, is AFFIRMED.1âwphi1.nêt
damaged while in her custody as she immediately delivered the SO ORDERED.
containers to SMC's compound, suffice it to say that to prove the
Schmitz Transport, whose services the consignee engaged to
secure the requisite clearances, to receive the cargoes from the
G.R. No. 150255. April 22, 2005 shipside, and to deliver them to its (the consignee’s) warehouse at
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners,  Cainta, Rizal,7 in turn engaged the services of TVI to send a barge
vs. and tugboat at shipside.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE COMPANY, On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani"
LTD., and BLACK SEA SHIPPING AND DODWELL now INCHCAPE towed the barge "Erika V" to shipside.8 
SHIPPING SERVICES, Respondents. By 7:00 p.m. also of October 26, 1991, the tugboat, after
On petition for review is the June 27, 2001 Decision1 of the Court of positioning the barge alongside the vessel, left and returned to the
Appeals, as well as its Resolution2 dated September 28, 2001 port terminal.9 At 9:00 p.m., arrastre operator Ocean Terminal
denying the motion for reconsideration, which affirmed that of Services Inc. commenced to unload 37 of the 545 coils from the
Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case vessel unto the barge.
No. 92-631323 holding petitioner Schmitz Transport Brokerage By 12:30 a.m. of October 27, 1991 during which the weather
Corporation (Schmitz Transport), together with Black Sea Shipping condition had become inclement due to an approaching storm, the
Corporation (Black Sea), represented by its ship agent Inchcape unloading unto the barge of the 37 coils was accomplished.10 No
Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily tugboat pulled the barge back to the pier, however.
liable for the loss of 37 hot rolled steel sheets in coil that were At around 5:30 a.m. of October 27, 1991, due to strong
washed overboard a barge. waves,11 the crew of the barge abandoned it and transferred to the
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from vessel. The barge pitched and rolled with the waves and eventually
the port of Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a capsized, washing the 37 coils into the sea.12 At 7:00 a.m., a
vessel of Russian registry and owned by Black Sea) 545 hot rolled tugboat finally arrived to pull the already empty and damaged
steel sheets in coil weighing 6,992,450 metric tons. barge back to the pier.13 
The cargoes, which were to be discharged at the port of Manila in Earnest efforts on the part of both the consignee Little Giant and
favor of the consignee, Little Giant Steel Pipe Corporation (Little Industrial Insurance to recover the lost cargoes proved futile.14 
Giant),4 were insured against all risks with Industrial Insurance Little Giant thus filed a formal claim against Industrial Insurance
Company Ltd. (Industrial Insurance) under Marine Policy No. M-91- which paid it the amount of ₱5,246,113.11. Little Giant thereupon
3747-TIS.5  executed a subrogation receipt15 in favor of Industrial Insurance.
The vessel arrived at the port of Manila on October 24, 1991 and Industrial Insurance later filed a complaint against Schmitz
the Philippine Ports Authority (PPA) assigned it a place of berth at Transport, TVI, and Black Sea through its representative Inchcape
the outside breakwater at the Manila South Harbor.6  (the defendants) before the RTC of Manila, for the recovery of the
amount it paid to Little Giant plus adjustment fees, attorney’s fees, transaction,23 and Schmitz Transport for entering into a contract
and litigation expenses.16  with Little Giant to transport the cargoes from ship to port for a
Industrial Insurance faulted the defendants for undertaking the fee.24 
unloading of the cargoes while typhoon signal No. 1 was raised in In holding all the defendants solidarily liable, the appellate court
Metro Manila.17  ruled that "each one was essential such that without each other’s
By Decision of November 24, 1997, Branch 21 of the RTC held all contributory negligence the incident would not have happened
the defendants negligent for unloading the cargoes outside of the and so much so that the person principally liable cannot be
breakwater notwithstanding the storm signal.18 The dispositive distinguished with sufficient accuracy."25 
portion of the decision reads: In discrediting the defense of fortuitous event, the appellate court
WHEREFORE, premises considered, the Court renders judgment in held that "although defendants obviously had nothing to do with
favor of the plaintiff, ordering the defendants to pay plaintiff the force of nature, they however had control of where to anchor
jointly and severally the sum of ₱5,246,113.11 with interest from the vessel, where discharge will take place and even when the
the date the complaint was filed until fully satisfied, as well as the discharging will commence."26 
sum of ₱5,000.00 representing the adjustment fee plus the sum of The defendants’ respective motions for reconsideration having
20% of the amount recoverable from the defendants as attorney’s been denied by Resolution27 of September 28, 2001, Schmitz
fees plus the costs of suit. The counterclaims and cross claims of Transport (hereinafter referred to as petitioner) filed the present
defendants are hereby DISMISSED for lack of [m]erit.19  petition against TVI, Industrial Insurance and Black Sea.
To the trial court’s decision, the defendants Schmitz Transport and Petitioner asserts that in chartering the barge and tugboat of TVI,
TVI filed a joint motion for reconsideration assailing the finding it was acting for its principal, consignee Little Giant, hence, the
that they are common carriers and the award of excessive transportation contract was by and between Little Giant and TVI.28 
attorney’s fees of more than ₱1,000,000. And they argued that By Resolution of January 23, 2002, herein respondents Industrial
they were not motivated by gross or evident bad faith and that the Insurance, Black Sea, and TVI were required to file their respective
incident was caused by a fortuitous event. 20  Comments.29 
By resolution of February 4, 1998, the trial court denied the motion By its Comment, Black Sea argued that the cargoes were received
for reconsideration. 21  by the consignee through petitioner in good order, hence, it
All the defendants appealed to the Court of Appeals which, by cannot be faulted, it having had no control and supervision
decision of June 27, 2001, affirmed in toto the decision of the trial thereover.30 
court, 22 it finding that all the defendants were common carriers — For its part, TVI maintained that it acted as a passive party as it
Black Sea and TVI for engaging in the transport of goods and merely received the cargoes and transferred them unto the barge
cargoes over the seas as a regular business and not as an isolated upon the instruction of petitioner.31 
In issue then are: The appellate court, in affirming the finding of the trial court that
(1) Whether the loss of the cargoes was due to a fortuitous event, human intervention in the form of contributory negligence by all
independent of any act of negligence on the part of petitioner the defendants resulted to the loss of the cargoes,34 held that
Black Sea and TVI, and unloading outside the breakwater, instead of inside the
(2) If there was negligence, whether liability for the loss may breakwater, while a storm signal was up constitutes negligence.35 It
attach to Black Sea, petitioner and TVI. thus concluded that the proximate cause of the loss was Black
When a fortuitous event occurs, Article 1174 of the Civil Code Sea’s negligence in deciding to unload the cargoes at an unsafe
absolves any party from any and all liability arising therefrom: place and while a typhoon was approaching.36 
ART. 1174. Except in cases expressly specified by the law, or when From a review of the records of the case, there is no indication
it is otherwise declared by stipulation, or when the nature of the that there was greater risk in loading the cargoes outside the
obligation requires the assumption of risk, no person shall be breakwater. As the defendants proffered, the weather on October
responsible for those events which could not be foreseen, or which 26, 1991 remained normal with moderate sea condition such that
though foreseen, were inevitable. port operations continued and proceeded normally.37 
In order, to be considered a fortuitous event, however, (1) the The weather data report,38 furnished and verified by the Chief of
cause of the unforeseen and unexpected occurrence, or the failure the Climate Data Section of PAG-ASA and marked as a common
of the debtor to comply with his obligation, must be independent exhibit of the parties, states that while typhoon signal No. 1 was
of human will; (2) it must be impossible to foresee the event which hoisted over Metro Manila on October 23-31, 1991, the sea
constitute the caso fortuito, or if it can be foreseen it must be condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of
impossible to avoid; (3) the occurrence must be such as to render October 26, 1991 was moderate. It cannot, therefore, be said that
it impossible for the debtor to fulfill his obligation in any manner; the defendants were negligent in not unloading the cargoes upon
and (4) the obligor must be free from any participation in the the barge on October 26, 1991 inside the breakwater.
aggravation of the injury resulting to the creditor.32  That no tugboat towed back the barge to the pier after the cargoes
[T]he principle embodied in the act of God doctrine strictly were completely loaded by 12:30 in the morning39 is, however, a
requires that the act must be occasioned solely by the violence of material fact which the appellate court failed to properly consider
nature. Human intervention is to be excluded from creating or and appreciate40 — the proximate cause of the loss of the cargoes.
entering into the cause of the mischief. When the effect is found Had the barge been towed back promptly to the pier, the
to be in part the result of the participation of man, whether due to deteriorating sea conditions notwithstanding, the loss could have
his active intervention or neglect or failure to act, the whole been avoided. But the barge was left floating in open sea until big
occurrence is then humanized and removed from the rules waves set in at 5:30 a.m., causing it to sink along with the
applicable to the acts of God.33  cargoes.41 The loss thus falls outside the "act of God doctrine."
The proximate cause of the loss having been determined, who Q: Now, you said that you are the brokerage firm of this Company.
among the parties is/are responsible therefor? What work or duty did you perform in behalf of this company?
Contrary to petitioner’s insistence, this Court, as did the appellate A: We handled the releases (sic) of their cargo[es] from the Bureau
court, finds that petitioner is a common carrier. For it undertook to of Customs. We [are] also in-charged of the delivery of the goods
transport the cargoes from the shipside of "M/V Alexander to their warehouses. We also handled the clearances of their
Saveliev" to the consignee’s warehouse at Cainta, Rizal. As the shipment at the Bureau of Customs, Sir.
appellate court put it, "as long as a person or corporation holds xxx
[itself] to the public for the purpose of transporting goods as [a] Q: Now, what precisely [was] your agreement with this Little Giant
business, [it] is already considered a common carrier regardless if Steel Pipe Corporation with regards to this shipment? What work
[it] owns the vehicle to be used or has to hire one."42 That did you do with this shipment?
petitioner is a common carrier, the testimony of its own Vice- A: We handled the unloading of the cargo[es] from vessel to
President and General Manager Noel Aro that part of the services lighter and then the delivery of [the] cargo[es] from lighter to
it offers to its clients as a brokerage firm includes the BASECO then to the truck and to the warehouse, Sir.
transportation of cargoes reflects so. Q: Now, in connection with this work which you are doing, Mr.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Witness, you are supposed to perform, what equipment do (sic)
Executive Vice-President and General Manager of said Company? you require or did you use in order to effect this unloading,
Mr. Aro: Well, I oversee the entire operation of the brokerage and transfer and delivery to the warehouse?
transport business of the company. I also handle the various A: Actually, we used the barges for the ship side operations, this
division heads of the company for operation matters, and all other unloading [from] vessel to lighter, and on this we hired or we sub-
related functions that the President may assign to me from time to contracted with [T]ransport Ventures, Inc. which [was] in-charged
time, Sir. (sic) of the barges. Also, in BASECO compound we are leasing
Q: Now, in connection [with] your duties and functions as you cranes to have the cargo unloaded from the barge to trucks, [and]
mentioned, will you please tell the Honorable Court if you came to then we used trucks to deliver [the cargoes] to the consignee’s
know the company by the name Little Giant Steel Pipe warehouse, Sir.
Corporation? Q: And whose trucks do you use from BASECO compound to the
A: Yes, Sir. Actually, we are the brokerage firm of that Company. consignee’s warehouse?
Q: And since when have you been the brokerage firm of that A: We utilized of (sic) our own trucks and we have some other
company, if you can recall? contracted trucks, Sir.
A: Since 1990, Sir. xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court notwithstanding the fact that the obligation to carry goods for [its]
why is it you have to contract for the barges of Transport Ventures customers, is part and parcel of petitioner’s business."47 
Incorporated in this particular operation? As for petitioner’s argument that being the agent of Little Giant,
A: Firstly, we don’t own any barges. That is why we hired the any negligence it committed was deemed the negligence of its
services of another firm whom we know [al]ready for quite principal, it does not persuade.
sometime, which is Transport Ventures, Inc. (Emphasis supplied)43  True, petitioner was the broker-agent of Little Giant in securing the
It is settled that under a given set of facts, a customs broker may release of the cargoes. In effecting the transportation of the
be regarded as a common carrier. Thus, this Court, in A.F. Sanchez cargoes from the shipside and into Little Giant’s warehouse,
Brokerage, Inc. v. The Honorable Court of Appeals,44 held: however, petitioner was discharging its own personal obligation
The appellate court did not err in finding petitioner, a customs under a contact of carriage.
broker, to be also a common carrier, as defined under Article 1732 Petitioner, which did not have any barge or tugboat, engaged the
of the Civil Code, to wit, services of TVI as handler48 to provide the barge and the tugboat.
Art. 1732. Common carriers are persons, corporations, firms or In their Service Contract,49 while Little Giant was named as the
associations engaged in the business of carrying or transporting consignee, petitioner did not disclose that it was acting on
passengers or goods or both, by land, water, or air, for commission and was chartering the vessel for Little Giant.50 Little
compensation, offering their services to the public. Giant did not thus automatically become a party to the Service
xxx Contract and was not, therefore, bound by the terms and
Article 1732 does not distinguish between one whose principal conditions therein.
business activity is the carrying of goods and one who does such Not being a party to the service contract, Little Giant
carrying only as an ancillary activity. The contention, therefore, of cannot directly sue TVI based thereon but it can maintain a cause
petitioner that it is not a common carrier but a customs broker of action for negligence.51 
whose principal function is to prepare the correct customs In the case of TVI, while it acted as a private carrier for which it
declaration and proper shipping documents as required by law is was under no duty to observe extraordinary diligence, it was still
bereft of merit. It suffices that petitioner undertakes to deliver the required to observe ordinary diligence to ensure the proper and
goods for pecuniary consideration.45  careful handling, care and discharge of the carried goods.
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held Thus, Articles 1170 and 1173 of the Civil Code provide:
that as the transportation of goods is an integral part of a customs ART. 1170. Those who in the performance of their obligations are
broker, the customs broker is also a common carrier. For to guilty of fraud, negligence, or delay, and those who in any manner
declare otherwise "would be to deprive those with whom [it] contravene the tenor thereof, are liable for damages.
contracts the protection which the law affords them
ART. 1173. The fault or negligence of the obligor consists in the despite the deteriorating sea conditions, it should have summoned
omission of that diligence which is required by the nature of the the same or another tugboat to extend help, but it did not.
obligation and corresponds with the circumstances of the persons, This Court holds then that petitioner and TVI are solidarily
of the time and of the place. When negligence shows bad faith, the liable56 for the loss of the cargoes. The following pronouncement of
provisions of articles 1171 and 2202, paragraph 2, shall apply. the Supreme Court is instructive:
If the law or contract does not state the diligence which is to be The foundation of LRTA’s liability is the contract of carriage and its
observed in the performance, that which is expected of a good obligation to indemnify the victim arises from the breach of that
father of a family shall be required. contract by reason of its failure to exercise the high diligence
Was the reasonable care and caution which an ordinarily prudent required of the common carrier. In the discharge of its
person would have used in the same situation exercised by TVI?52  commitment to ensure the safety of passengers, a carrier may
This Court holds not. choose to hire its own employees or avail itself of the services of
TVI’s failure to promptly provide a tugboat did not only increase an outsider or an independent firm to undertake the task. In either
the risk that might have been reasonably anticipated during the case, the common carrier is not relieved of its responsibilities
shipside operation, but was the proximate cause of the loss. A under the contract of carriage.
man of ordinary prudence would not leave a heavily loaded barge Should Prudent be made likewise liable? If at all, that liability could
floating for a considerable number of hours, at such a precarious only be for tort under the provisions of Article 2176 and related
time, and in the open sea, knowing that the barge does not have provisions, in conjunction with Article 2180 of the Civil Code. x x
any power of its own and is totally defenseless from the ravages of x [O]ne might ask further, how then must the liability of the
the sea. That it was nighttime and, therefore, the members of the common carrier, on one hand, and an independent contractor, on
crew of a tugboat would be charging overtime pay did not excuse the other hand, be described? It would be solidary. A contractual
TVI from calling for one such tugboat. obligation can be breached by tort and when the same act or
As for petitioner, for it to be relieved of liability, it should, omission causes the injury, one resulting in culpa contractual and
following Article 173953 of the Civil Code, prove that it exercised the other in culpa aquiliana, Article 2194 of the Civil Code can well
due diligence to prevent or minimize the loss, before, during and apply. In fine, a liability for tort may arise even under a contract,
after the occurrence of the storm in order that it may be exempted where tort is that which breaches the contract. Stated differently,
from liability for the loss of the goods. when an act which constitutes a breach of contract would have
While petitioner sent checkers54 and a supervisor55 on board the itself constituted the source of a quasi-delictual liability had no
vessel to counter-check the operations of TVI, it failed to take all contract existed between the parties, the contract can be said to
available and reasonable precautions to avoid the loss. After noting have been breached by tort, thereby allowing the rules on tort to
that TVI failed to arrange for the prompt towage of the barge apply.57 
As for Black Sea, its duty as a common carrier extended only from voluntary but unsuccessful efforts to locate and retrieve the lost
the time the goods were surrendered or unconditionally placed in cargo. They do not constitute actual damages.63 
its possession and received for transportation until they were As for the court a quo’s award of interest on the amount claimed,
delivered actually or constructively to consignee Little Giant.58  the same calls for modification following the ruling in Eastern
Parties to a contract of carriage may, however, agree upon a Shipping Lines, Inc. v. Court of Appeals64 that when the demand
definition of delivery that extends the services rendered by the cannot be reasonably established at the time the demand is made,
carrier. In the case at bar, Bill of Lading No. 2 covering the the interest shall begin to run not from the time the claim is made
shipment provides that delivery be made "to the port of judicially or extrajudicially but from the date the judgment of the
discharge or so near thereto as she may safely get, always court is made (at which the time the quantification of damages
afloat."59 The delivery of the goods to the consignee was not from may be deemed to have been reasonably ascertained).65 
"pier to pier" but from the shipside of "M/V Alexander Saveliev" WHEREFORE, judgment is hereby rendered ordering petitioner
and into barges, for which reason the consignee contracted the Schmitz Transport & Brokerage Corporation, and Transport
services of petitioner. Since Black Sea had constructively delivered Venture Incorporation jointly and severally liable for the amount of
the cargoes to Little Giant, through petitioner, it had discharged its ₱5,246,113.11 with the MODIFICATION that interest at SIX
duty.60  PERCENT per annum of the amount due should be computed from
In fine, no liability may thus attach to Black Sea. the promulgation on November 24, 1997 of the decision of the trial
Respecting the award of attorney’s fees in an amount over court.
₱1,000,000.00 to Industrial Insurance, for lack of factual and legal Costs against petitioner.
basis, this Court sets it aside. While Industrial Insurance was SO ORDERED.
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. G.R. No. 147079             December 21, 2004
For no sufficient showing of bad faith would be reflected in a A.F. SANCHEZ BROKERAGE INC., petitioners, 
party’s persistence in a case other than an erroneous conviction of vs.
the righteousness of his cause.61 To award attorney’s fees to a THE HON. COURT OF APPEALS and FGU INSURANCE
party just because the judgment is rendered in its favor would be CORPORATION, respondents.
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 DECISION
expense of divers were incurred by Industrial Insurance in its
CARPIO MORALES, J.: On July 29, 1992, Mitzi Morales and Ernesto Mendoza,
Before this Court on a petition for Certiorari is the appellate representatives of Sanchez Brokerage, paid PSI storage fee
court’s Decision1 of August 10, 2000 reversing and setting aside the amounting to P8,572.35 a receipt for which, Official Receipt No.
judgment of Branch 133, Regional Trial Court of Makati City, in Civil 016992,10 was issued. On the receipt, another representative of
Case No. 93-76B which dismissed the complaint of respondent FGU Sanchez Brokerage, M. Sison,11 acknowledged that he received the
Insurance Corporation (FGU Insurance) against petitioner A.F. cargoes consisting of three pieces in good condition.12 
Sanchez Brokerage, Inc. (Sanchez Brokerage). Wyeth-Suaco being a regular importer, the customs examiner did
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an not inspect the cargoes13 which were thereupon stripped from the
aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany oral aluminum containers14 and loaded inside two transport vehicles
contraceptives consisting of 86,800 Blisters Femenal tablets, hired by Sanchez Brokerage.15 
14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets Among those who witnessed the release of the cargoes from the
for delivery to Manila in favor of the consignee, Wyeth-Suaco PSI warehouse were Ruben Alonso and Tony Akas,16 employees of
Laboratories, Inc.2 The Femenal tablets were placed in 124 cartons Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and
and the Nordiol tablets were placed in 20 cartons which were cargo surveyor and insurance claim adjusters firm engaged by
packed together in one (1) LD3 aluminum container, while the Wyeth-Suaco on behalf of FGU Insurance.
Trinordial tablets were packed in two pallets, each of which Upon instructions of Wyeth-Suaco, the cargoes were delivered to
contained 30 cartons.3  Hizon Laboratories Inc. in Antipolo City for quality control
Wyeth-Suaco insured the shipment against all risks with FGU check.17 The delivery receipt, bearing No. 07037 dated July 29,
Insurance which issued Marine Risk Note No. 4995 pursuant to 1992, indicated that the delivery consisted of one container with
Marine Open Policy No. 138.4  144 cartons of Femenal and Nordiol and 1 pallet containing
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino Trinordiol.18 
International Airport (NAIA),5 it was discharged "without On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco,
exception"6 and delivered to the warehouse of the Philippine acknowledged the delivery of the cargoes by affixing his signature
Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.7  on the delivery receipt.19 Upon inspection, however, he, together
In order to secure the release of the cargoes from the PSI and the with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons
Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez containing Femenal and Nordiol tablets were in bad order.20 He
Brokerage which had been its licensed broker since 1984.8 As its thus placed a note above his signature on the delivery receipt
customs broker, Sanchez Brokerage calculates and pays the stating that 44 cartons of oral contraceptives were in bad order.
customs duties, taxes and storage fees for the cargo and thereafter The remaining 160 cartons of oral contraceptives were accepted as
delivers it to Wyeth-Suaco.9  complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU
survey report21 dated July 31, 1992 stating that 41 cartons of Insurance.
Femenal tablets and 3 cartons of Nordiol tablets were "wetted" On demand by FGU Insurance for payment of the amount
(sic).22  of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by
The Elite Surveyors later issued Certificate No. CS-0731- letter31 of January 7, 1993, disclaimed liability for the damaged
1538/9223 attached to which was an "Annexed Schedule" whereon goods, positing that the damage was due to improper and
it was indicated that prior to the loading of the cargoes to the insufficient export packaging; that when the sealed containers
broker’s trucks at the NAIA, they were inspected and found to be were opened outside the PSI warehouse, it was discovered that
in "apparent good condition."24 Also noted was that at the time of some of the loose cartons were wet,32 prompting its (Sanchez
delivery to the warehouse of Hizon Laboratories Inc., slight to Brokerage’s) representative Morales to inform the Import-Export
heavy rains fell, which could account for the wetting of the 44 Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of
cartons of Femenal and Nordiol tablets.25  the cargoes but that the latter advised to still deliver them to Hizon
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Laboratories where an adjuster would assess the damage.33 
Report26 confirming that 38 x 700 blister packs of Femenal tablets, Hence, the filing by FGU Insurance of a complaint for damages
3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of before the Regional Trial Court of Makati City against the Sanchez
Nordiol tablets were heavily damaged with water and emitted foul Brokerage.
smell. The trial court, by Decision34 of July 29, 1996, dismissed the
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials complaint, holding that the Survey Report prepared by the Elite
Rejection27 of 38 cartons of Femenal and 3 cartons of Nordiol on Surveyors is bereft of any evidentiary support and a mere product
the ground that they were "delivered to Hizon Laboratories with of pure guesswork.35 
heavy water damaged (sic) causing the cartons to sagged (sic) On appeal, the appellate court reversed the decision of the trial
emitting a foul order and easily attracted flies."28  court, it holding that the Sanchez Brokerage engaged not only in
Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from the business of customs brokerage but also in the transportation
Sanchez Brokerage the payment of P191,384.25 representing the and delivery of the cargo of its clients, hence, a common carrier
value of its loss arising from the damaged tablets. within the context of Article 1732 of the New Civil Code.36 
As the Sanchez Brokerage refused to heed the demand, Wyeth- Noting that Wyeth-Suaco adduced evidence that the cargoes were
Suaco filed an insurance claim against FGU Insurance which paid delivered to petitioner in good order and condition but were in a
Wyeth-Suaco the amount of P181,431.49 in settlement of its claim damaged state when delivered to Wyeth-Suaco, the appellate
under Marine Risk Note Number 4995. court held that Sanchez Brokerage is presumed negligent and upon
it rested the burden of proving that it exercised extraordinary
negligence not only in instances when negligence is directly proven appellate court’s evaluation of the evidence and factual findings
but also in those cases when the cause of the damage is not thereon.
known or unknown.37  On the merits, respondent FGU Insurance contends that petitioner,
The appellate court thus disposed:  as a common carrier, failed to overcome the presumption of
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant negligence, it being documented that petitioner withdrew from the
is GRANTED. The Decision of the Court a quo is REVERSED. Another warehouse of PSI the subject shipment entirely in good order and
Decision is hereby rendered in favor of the Appellant and against condition.39 
the Appellee as follows: The petition fails.
1. The Appellee is hereby ordered to pay the Appellant the Rule 45 is clear that decisions, final orders or resolutions of the
principal amount of P181, 431.49, with interest thereupon at the Court of Appeals in any case, i.e., regardless of the nature of the
rate of 6% per annum, from the date of the Decision of the Court, action or proceedings involved, may be appealed to this Court by
until the said amount is paid in full; filing a petition for review, which would be but a continuation of
2. The Appellee is hereby ordered to pay to the Appellant the the appellate process over the original case.40 
amount of P20,000.00 as and by way of attorney’s fees; and The Resolution of the Court of Appeals dated December 8, 2000
3. The counterclaims of the Appellee are DISMISSED.38  denying the motion for reconsideration of its Decision of August
Sanchez Brokerage’s Motion for Reconsideration having been 10, 2000 was received by petitioner on January 5, 2001. Since
denied by the appellate court’s Resolution of December 8, 2000 petitioner failed to appeal within 15 days or on or before January
which was received by petitioner on January 5, 2001, it comes to 20, 2001, the appellate court’s decision had become final and
this Court on petition for certiorari filed on March 6, 2001. executory. The filing by petitioner of a petition for certiorari on
In the main, petitioner asserts that the appellate court committed March 6, 2001 cannot serve as a substitute for the lost remedy of
grave and reversible error tantamount to abuse of discretion when appeal. 
it found petitioner a "common carrier" within the context of Article In another vein, the rule is well settled that in a petition for
1732 of the New Civil Code. certiorari, the petitioner must prove not merely reversible error
Respondent FGU Insurance avers in its Comment that the proper but also grave abuse of discretion amounting to lack or excess of
course of action which petitioner should have taken was to file a jurisdiction.
petition for review on certiorari since the sole office of a writ of Petitioner alleges that the appellate court erred in reversing and
certiorari is the correction of errors of jurisdiction including the setting aside the decision of the trial court based on its finding that
commission of grave abuse of discretion amounting to lack or petitioner is liable for the damage to the cargo as a common
excess of jurisdiction and does not include correction of the carrier. What petitioner is ascribing is an error of judgment, not of
jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal petitioner that it is not a common carrier but a customs broker
soundness of the decision – not the jurisdiction of the court to whose principal function is to prepare the correct customs
render said decision – the same is beyond the province of a declaration and proper shipping documents as required by law is
petition for certiorari.41 The supervisory jurisdiction of this Court to bereft of merit. It suffices that petitioner undertakes to deliver the
issue a cert  writ cannot be exercised in order to review the goods for pecuniary consideration.
judgment of lower courts as to its intrinsic correctness, either upon In this light, petitioner as a common carrier is mandated to
the law or the facts of the case.42  observe, under Article 173345 of the Civil Code, extraordinary
Procedural technicalities aside, the petition still fails.  diligence in the vigilance over the goods it transports according to
The appellate court did not err in finding petitioner, a customs all the circumstances of each case. In the event that the goods are
broker, to be also a common carrier, as defined under Article 1732 lost, destroyed or deteriorated, it is presumed to have been at
of the Civil Code, to wit: fault or to have acted negligently, unless it proves that it observed
Art. 1732. Common carriers are persons, corporations, firms or extraordinary diligence.46 
associations engaged in the business of carrying or transporting The concept of "extra-ordinary diligence" was explained
passengers or goods or both, by land, water, or air, for in Compania Maritima v. Court of Appeals:47 
compensation, offering their services to the public. The extraordinary diligence in the vigilance over the goods
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of tendered for shipment requires the common carrier to know and
Sanchez Brokerage, himself testified that the services the firm to follow the required precaution for avoiding damage to, or
offers include the delivery of goods to the warehouse of the destruction of the goods entrusted to it for sale, carriage and
consignee or importer. delivery. It requires common carriers to render service with the
ATTY. FLORES: greatest skill and foresight and "to use all reasonable means to
Q: What are the functions of these license brokers, license customs ascertain the nature and characteristics of goods tendered for
broker? shipment, and to exercise due care in the handling and stowage,
WITNESS: including such methods as their nature requires."48 
As customs broker, we calculate the taxes that has to be paid in In the case at bar, it was established that petitioner received the
cargos, and those upon approval of the importer, we prepare the cargoes from the PSI warehouse in NAIA in good order and
entry together for processing and claims from customs and condition;49 and that upon delivery by petitioner to Hizon
finally deliver the goods to the warehouse of the importer.43  Laboratories Inc., some of the cargoes were found to be in bad
Article 1732 does not distinguish between one whose principal order, as noted in the Delivery Receipt50 issued by petitioner, and
business activity is the carrying of goods and one who does such as indicated in the Survey Report of Elite Surveyors51 and the
carrying only as an ancillary activity.44 The contention, therefore, of Destruction Report of Hizon Laboratories, Inc.52 
In an attempt to free itself from responsibility for the damage to indeed, part of the cargoes was already damaged when the
the goods, petitioner posits that they were damaged due to the container was allegedly opened outside the warehouse.59 
fault or negligence of the shipper for failing to properly pack them Petitioner goes on to posit that contrary to the report of Elite
and to the inherent characteristics of the goods53 ; and that it Surveyors, no rain fell that day. Instead, it asserts that some of the
should not be faulted for following the instructions of Calicdan of cargoes were already wet on delivery by PSI outside the PSI
Wyeth-Suaco to proceed with the delivery despite information warehouse but such notwithstanding Calicdan directed Morales to
conveyed to the latter that some of the cartons, on examination proceed with the delivery to Hizon Laboratories, Inc.
outside the PSI warehouse, were found to be wet.54  While Calicdan testified that he received the purported telephone
While paragraph No. 4 of Article 173455 of the Civil Code exempts a call of Morales on July 29, 1992, he failed to specifically declare
common carrier from liability if the loss or damage is due to the what time he received the call. As to whether the call was made at
character of the goods or defects in the packing or in the the PSI warehouse when the shipment was stripped from the
containers, the rule is that if the improper packing is known to the airport containers, or when the cargoes were already in transit to
carrier or his employees or is apparent upon ordinary observation, Antipolo, it is not determinable. Aside from that phone call,
but he nevertheless accepts the same without protest or exception petitioner admitted that it had no documentary evidence to prove
notwithstanding such condition, he is not relieved of liability for that at the time it received the cargoes, a part of it was wet,
the resulting damage.56  damaged or in bad condition.60 
If the claim of petitioner that some of the cartons were already The 4-page weather data furnished by PAGASA61 on request of
damaged upon delivery to it were true, then it should naturally Sanchez Brokerage hardly impresses, no witness having identified
have received the cargo under protest or with reservations duly it and interpreted the technical terms thereof.
noted on the receipt issued by PSI. But it made no such protest or The possibility on the other hand that, as found by Hizon
reservation.57  Laboratories, Inc., the oral contraceptives were damaged by
Moreover, as observed by the appellate court, if indeed rainwater while in transit to Antipolo City is more likely then.
petitioner’s employees only examined the cargoes outside the PSI Sanchez himself testified that in the past, there was a similar
warehouse and found some to be wet, they would certainly have instance when the shipment of Wyeth-Suaco was also found to be
gone back to PSI, showed to the warehouseman the damage, and wet by rain.
demanded then and there for Bad Order documents or a ATTY. FLORES:
certification confirming the damage.58 Or, petitioner would have Q: Was there any instance that a shipment of this nature, oral
presented, as witness, the employees of the PSI from whom contraceptives, that arrived at the NAIA were damaged and
Morales and Domingo took delivery of the cargo to prove that, claimed by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were
wetted (sic) but Wyeth-Suaco did not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that
there was a cartoon (sic)  wetted (sic) up to the bottom are wet
specially during rainy season.62  G.R. No. 141910            August 6, 2002
FGU INSURANCE CORPORATION, petitioner, 
Since petitioner received all the cargoes in good order and
condition at the time they were turned over by the PSI vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M.
warehouseman, and upon their delivery to Hizon Laboratories, Inc.
a portion thereof was found to be in bad order, it was incumbent EROLES, respondents.
VITUG, J.:
on petitioner to prove that it exercised extraordinary diligence in
the carriage of the goods. It did not, however. Hence, its presumed G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on
18 June 1994 thirty (30) units of Condura S.D. white refrigerators
negligence under Article 1735 of the Civil Code remains
unrebutted. aboard one of its Isuzu truck, driven by Lambert Eroles, from the
plant site of Concepcion Industries, Inc., along South Superhighway
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals
is hereby AFFIRMED. in Alabang, Metro Manila, to the Central Luzon Appliances in
Dagupan City. While the truck was traversing the north diversion
Costs against petitioner.
SO ORDERED. 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., ‘Art. 2185. Unless there is proof to the contrary, it is presumed
since 1988, and it was not so engaged in business as a common that a person driving a motor vehicle has been negligent if at the
carrier. Respondents further claimed that the cause of damage was time of the mishap, he was violating any traffic regulation.’
purely accidental.1âwphi1.nêt "Evidence for the plaintiff shows no proof that defendant was
The issues having thus been joined, FGU presented its evidence, violating any traffic regulation. Hence, the presumption of
establishing the extent of damage to the cargoes and the amount negligence is not obtaining.
it had paid to the assured. GPS, instead of submitting its evidence, "Considering that plaintiff failed to adduce evidence that
filed with leave of court a motion to dismiss the complaint by way defendant is a common carrier and defendant’s driver was the one
of demurrer to evidence on the ground that petitioner had failed negligent, defendant cannot be made liable for the damages of the
to prove that it was a common carrier. subject cargoes."2
The trial court, in its order of 30 April 1996,1 granted the motion to The subsequent motion for reconsideration having been
dismiss, explaining thusly: denied,3 plaintiff interposed an appeal to the Court of Appeals,
"Under Section 1 of Rule 131 of the Rules of Court, it is provided contending that the trial court had erred (a) in holding that the
that ‘Each party must prove his own affirmative allegation, xxx.’ appellee corporation was not a common carrier defined under the
"In the instant case, plaintiff did not present any single evidence law and existing jurisprudence; and (b) in dismissing the complaint
that would prove that defendant is a common carrier. on a demurrer to evidence.
"x x x           x x x           x x x The Court of Appeals rejected the appeal of petitioner and ruled in
"Accordingly, the application of the law on common carriers is not favor of GPS. The appellate court, in its decision of 10 June
warranted and the presumption of fault or negligence on the part 1999,4 discoursed, among other things, that -
of a common carrier in case of loss, damage or deterioration of "x x x in order for the presumption of negligence provided for
goods during transport under 1735 of the Civil Code is not availing. under the law governing common carrier (Article 1735, Civil Code)
"Thus, the laws governing the contract between the owner of the to arise, the appellant must first prove that the appellee is a
cargo to whom the plaintiff was subrogated and the owner of the common carrier. Should the appellant fail to prove that the
vehicle which transports the cargo are the laws on obligation and appellee is a common carrier, the presumption would not arise;
contract of the Civil Code as well as the law on quasi delicts. consequently, the appellant would have to prove that the carrier
"Under the law on obligation and contract, negligence or fault is was negligent.
not presumed. The law on quasi delict provides for some "x x x           x x x           x x x
presumption of negligence but only upon the attendance of some "Because it is the appellant who insists that the appellees can still
circumstances. Thus, Article 2185 provides: 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- WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR
appellant) `must establish his case by a preponderance of A PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN
evidence, which means that the evidence as a whole adduced by NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT
one side is superior to that of the other.’ (Summa Insurance SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS
Corporation vs. Court of Appeals, 243 SCRA 175). This, PROTECTIVE CUSTODY AND POSSESSION.
unfortunately, the appellant failed to do -- hence, the dismissal of III
the plaintiff’s complaint by the trial court is justified. WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN
"x x x           x x x           x x x THE INSTANT CASE.
"Based on the foregoing disquisitions and considering the On the first issue, the Court finds the conclusion of the trial court
circumstances that the appellee trucking corporation has been `its and the Court of Appeals to be amply justified. GPS, being an
exclusive contractor, hauler since 1970, defendant has no choice exclusive contractor and hauler of Concepcion Industries, Inc.,
but to comply with the directive of its principal,’ the inevitable rendering or offering its services to no other individual or entity,
conclusion is that the appellee is a private carrier. cannot be considered a common carrier. Common carriers are
"x x x           x x x           x x x persons, corporations, firms or associations engaged in the
"x x x the lower court correctly ruled that 'the application of the business of carrying or transporting passengers or goods or both,
law on common carriers is not warranted and the presumption of by land, water, or air, for hire or compensation, offering their
fault or negligence on the part of a common carrier in case of loss, services to the public,8 whether to the public in general or to a
damage or deterioration of good[s] during transport under [article] limited clientele in particular, but never on an exclusive basis.9 The
1735 of the Civil Code is not availing.' x x x. true test of a common carrier is the carriage of passengers or
"Finally, We advert to the long established rule that conclusions goods, providing space for those who opt to avail themselves of its
and findings of fact of a trial court are entitled to great weight on transportation service for a fee.10Given accepted standards, GPS
appeal and should not be disturbed unless for strong and valid scarcely falls within the term "common carrier."
reasons."5 The above conclusion nothwithstanding, GPS cannot escape from
Petitioner's motion for reconsideration was likewise liability.
denied;6 hence, the instant petition,7 raising the following issues: In culpa contractual, upon which the action of petitioner rests as
I being the subrogee of Concepcion Industries, Inc., the mere proof
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON of the existence of the contract and the failure of its compliance
CARRIER AS DEFINED UNDER THE LAW AND EXISTING justify, prima facie, a corresponding right of relief.11 The law,
JURISPRUDENCE. recognizing the obligatory force of contracts,12 will not permit a
II party to be set free from liability for any kind of misperformance of
the contractual undertaking or a contravention of the tenor liability on the part of the contractual obligor the burden being on
thereof.13 A breach upon the contract confers upon the injured him to establish otherwise. GPS has failed to do so.
party a valid cause for recovering that which may have been lost or Respondent driver, on the other hand, without concrete proof of
suffered. The remedy serves to preserve the interests of the his negligence or fault, may not himself be ordered to pay
promisee that may include his "expectation interest," which is his petitioner. The driver, not being a party to the contract of carriage
interest in having the benefit of his bargain by being put in as good between petitioner’s principal and defendant, may not be held
a position as he would have been in had the contract been liable under the agreement. A contract can only bind the parties
performed, or his "reliance interest," which is his interest in being who have entered into it or their successors who have assumed
reimbursed for loss caused by reliance on the contract by being their personality or their juridical position.17 Consonantly with the
put in as good a position as he would have been in had the axiom res inter alios acta aliis neque nocet prodest, such contract
contract not been made; or his "restitution interest," which is his can neither favor nor prejudice a third person. Petitioner’s civil
interest in having restored to him any benefit that he has action against the driver can only be based on culpa
conferred on the other party.14 Indeed, agreements can accomplish aquiliana, which, unlike culpa contractual, would require the
little, either for their makers or for society, unless they are made claimant for damages to prove negligence or fault on the part of
the basis for action.15 The effect of every infraction is to create a the defendant.18
new duty, that is, to make recompense to the one who has been A word in passing. Res ipsa loquitur,  a doctrine being invoked by
injured by the failure of another to observe his contractual petitioner, holds a defendant liable where the thing which caused
obligation16 unless he can show extenuating circumstances, like the injury complained of is shown to be under the latter’s
proof of his exercise of due diligence (normally that of the management and the accident is such that, in the ordinary course
diligence of a good father of a family or, exceptionally by of things, cannot be expected to happen if those who have its
stipulation or by law such as in the case of common carriers, that management or control use proper care. It affords reasonable
of extraordinary diligence) or of the attendance of fortuitous evidence, in the absence of explanation by the defendant, that the
event, to excuse him from his ensuing liability. accident arose from want of care.19 It is not a rule of substantive
Respondent trucking corporation recognizes the existence of a law and, as such, it does not create an independent ground of
contract of carriage between it and petitioner’s assured, and liability. Instead, it is regarded as a mode of proof, or a mere
admits that the cargoes it has assumed to deliver have been lost or procedural convenience since it furnishes a substitute for, and
damaged while in its custody. In such a situation, a default on, or relieves the plaintiff of, the burden of producing specific proof of
failure of compliance with, the obligation – in this case, the negligence. The maxim simply places on the defendant the burden
delivery of the goods in its custody to the place of destination - of going forward with the proof.20 Resort to the doctrine, however,
gives rise to a presumption of lack of care and corresponding may be allowed only when (a) the event is of a kind which does
not ordinarily occur in the absence of negligence; (b) other WHEREFORE, the order, dated 30 April 1996, of the Regional Trial
responsible causes, including the conduct of the plaintiff and third Court, Branch 66, of Makati City, and the decision, dated 10 June
persons, are sufficiently eliminated by the evidence; and (c) the 1999, of the Court of Appeals, are AFFIRMED only insofar as
indicated negligence is within the scope of the defendant's duty to respondent Lambert M. Eroles is concerned, but said assailed
the plaintiff.21 Thus, it is not applicable when an unexplained order of the trial court and decision of the appellate court
accident may be attributable to one of several causes, for some of are REVERSED as regards G.P. Sarmiento Trucking Corporation
which the defendant could not be responsible.22 which, instead, is hereby ordered to pay FGU Insurance
Res ipsa loquitur generally finds relevance whether or not a Corporation the value of the damaged and lost cargoes in the
contractual relationship exists between the plaintiff and the amount of P204,450.00. No costs.
defendant, for the inference of negligence arises from the SO ORDERED.
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
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 on the plane ticket. The travel documents were given to petitioner
Menor to complain. two days ahead of the scheduled trip. Petitioner had only herself
Subsequently, Menor prevailed upon petitioner to take another to blame for missing the flight, as she did not bother to read or
tour – the "British Pageant" – which included England, Scotland confirm her flight schedule as printed on the ticket.
and Wales in its itinerary. For this tour package, petitioner was Respondent explained that it can no longer reimburse the amount
asked anew to pay US$785.00 or P20,881.00 (at the then prevailing paid for "Jewels of Europe", considering that the same had already
exchange rate of P26.60). She gave respondent US$300 or been remitted to its principal in Singapore, Lotus Travel Ltd., which
P7,980.00 as partial payment and commenced the trip in July 1991. had already billed the same even if petitioner did not join the tour.
Upon petitioner’s return from Europe, she demanded from Lotus’ European tour organizer, Insight International Tours Ltd.,
respondent the reimbursement of P61,421.70, representing the determines the cost of a package tour based on a minimum
difference between the sum she paid for "Jewels of Europe" and number of projected participants. For this reason, it is accepted
the amount she owed respondent for the "British Pageant" tour. industry practice to disallow refund for individuals who failed to
Despite several demands, respondent company refused to take a booked tour.3 
reimburse the amount, contending that the same was non- Lastly, respondent maintained that the "British Pageant" was not a
refundable.1 Petitioner was thus constrained to file a complaint substitute for the package tour that petitioner missed. This tour
against respondent for breach of contract of carriage and was independently procured by petitioner after realizing that she
damages, which was docketed as Civil Case No. 92-133 and raffled made a mistake in missing her flight for "Jewels of Europe".
to Branch 59 of the Regional Trial Court of Makati City. Petitioner was allowed to make a partial payment of only
In her complaint,2 petitioner alleged that her failure to join "Jewels US$300.00 for the second tour because her niece was then an
of Europe" was due to respondent’s fault since it did not clearly employee of the travel agency. Consequently, respondent prayed
indicate the departure date on the plane ticket. Respondent was that petitioner be ordered to pay the balance of P12,901.00 for the
also negligent in informing her of the wrong flight schedule "British Pageant" package tour.
through its employee Menor. She insisted that the "British After due proceedings, the trial court rendered a decision,4 the
Pageant" was merely a substitute for the "Jewels of Europe" tour, dispositive part of which reads:
such that the cost of the former should be properly set-off against WHEREFORE, premises considered, judgment is hereby rendered
the sum paid for the latter. as follows:
For its part, respondent company, through its Operations Manager, 1. Ordering the defendant to return and/or refund to the plaintiff
Concepcion Chipeco, denied responsibility for petitioner’s failure the amount of Fifty Three Thousand Nine Hundred Eighty Nine
to join the first tour. Chipeco insisted that petitioner was informed Pesos and Forty Three Centavos (P53,989.43) with legal interest
of the correct departure date, which was clearly and legibly printed
thereon at the rate of twelve percent (12%) per annum starting P12,901.00, representing the balance of the price of the British
January 16, 1992, the date when the complaint was filed; Pageant Package Tour, the same to earn legal interest at the rate
2. Ordering the defendant to pay the plaintiff the amount of Five of SIX PERCENT (6%) per annum, to be computed from the time
Thousand (P5,000.00) Pesos as and for reasonable attorney’s fees; the counterclaim was filed until the finality of this decision. After
3. Dismissing the defendant’s counterclaim, for lack of merit; and this decision becomes final and executory, the rate of TWELVE
4. With costs against the defendant. PERCENT (12%) interest per annum shall be additionally imposed
SO ORDERED.5  on the total obligation until payment thereof is satisfied. The
The trial court held that respondent was negligent in erroneously award of attorney’s fees is DELETED. Costs against the plaintiff-
advising petitioner of her departure date through its employee, appellee.
Menor, who was not presented as witness to rebut petitioner’s SO ORDERED.6 
testimony. However, petitioner should have verified the exact date Upon denial of her motion for reconsideration,7 petitioner filed the
and time of departure by looking at her ticket and should have instant petition under Rule 45 on the following grounds:
simply not relied on Menor’s verbal representation. The trial court I
thus declared that petitioner was guilty of contributory negligence It is respectfully submitted that the Honorable Court of Appeals
and accordingly, deducted 10% from the amount being claimed as committed a reversible error in reversing and setting aside the
refund. decision of the trial court by ruling that the petitioner is not
Respondent appealed to the Court of Appeals, which likewise entitled to a refund of the cost of unavailed "Jewels of Europe"
found both parties to be at fault. However, the appellate court tour she being equally, if not more, negligent than the private
held that petitioner is more negligent than respondent because as respondent, for in the contract of carriage the common carrier is
a lawyer and well-traveled person, she should have known better obliged to observe utmost care and extra-ordinary diligence which
than to simply rely on what was told to her. This being so, she is is higher in degree than the ordinary diligence required of the
not entitled to any form of damages. Petitioner also forfeited her passenger. Thus, even if the petitioner and private respondent
right to the "Jewels of Europe" tour and must therefore pay were both negligent, the petitioner cannot be considered to be
respondent the balance of the price for the "British Pageant" tour. equally, or worse, more guilty than the private respondent. At
The dispositive portion of the judgment appealed from reads as best, petitioner’s negligence is only contributory while the private
follows: respondent [is guilty] of gross negligence making the principle of
WHEREFORE, premises considered, the decision of the Regional pari delicto inapplicable in the case;
Trial Court dated October 26, 1995 is hereby REVERSED and SET II
ASIDE. A new judgment is hereby ENTERED requiring the plaintiff-
appellee to pay to the defendant-appellant the amount of
The Honorable Court of Appeals also erred in not ruling that the Respondent did not undertake to transport petitioner from one
"Jewels of Europe" tour was not indivisible and the amount paid place to another since its covenant with its customers is simply to
therefor refundable; make travel arrangements in their behalf. Respondent’s services as
III a travel agency include procuring tickets and facilitating travel
The Honorable Court erred in not granting to the petitioner the permits or visas as well as booking customers for tours.
consequential damages due her as a result of breach of contract of While petitioner concededly bought her plane ticket through the
carriage.8  efforts of respondent company, this does not mean that the latter
Petitioner contends that respondent did not observe the standard ipso facto is a common carrier. At most, respondent acted merely
of care required of a common carrier when it informed her as an agent of the airline, with whom petitioner ultimately
wrongly of the flight schedule. She could not be deemed more contracted for her carriage to Europe. Respondent’s obligation to
negligent than respondent since the latter is required by law to petitioner in this regard was simply to see to it that petitioner was
exercise extraordinary diligence in the fulfillment of its obligation. properly booked with the airline for the appointed date and time.
If she were negligent at all, the same is merely contributory and Her transport to the place of destination, meanwhile, pertained
not the proximate cause of the damage she suffered. Her loss directly to the airline.
could only be attributed to respondent as it was the direct The object of petitioner’s contractual relation with respondent is
consequence of its employee’s gross negligence. the latter’s service of arranging and facilitating petitioner’s
Petitioner’s contention has no merit. booking, ticketing and accommodation in the package tour. In
By definition, a contract of carriage or transportation is one contrast, the object of a contract of carriage is the transportation
whereby a certain person or association of persons obligate of passengers or goods. It is in this sense that the contract
themselves to transport persons, things, or news from one place to between the parties in this case was an ordinary one for services
another for a fixed price.9 Such person or association of persons and not one of carriage. Petitioner’s submission is premised on a
are regarded as carriers and are classified as private or special wrong assumption.
carriers and common or public carriers.10 A common carrier is The nature of the contractual relation between petitioner and
defined under Article 1732 of the Civil Code as persons, respondent is determinative of the degree of care required in the
corporations, firms or associations engaged in the business of performance of the latter’s obligation under the contract. For
carrying or transporting passengers or goods or both, by land, reasons of public policy, a common carrier in a contract of carriage
water or air, for compensation, offering their services to the public. is bound by law to carry passengers as far as human care and
It is obvious from the above definition that respondent is not an foresight can provide using the utmost diligence of very cautious
entity engaged in the business of transporting either passengers or persons and with due regard for all the circumstances.11 As earlier
goods and is therefore, neither a private nor a common carrier. stated, however, respondent is not a common carrier but a travel
agency. It is thus not bound under the law to observe We agree with respondent.
extraordinary diligence in the performance of its obligation, as Respondent’s failure to present Menor as witness to rebut
petitioner claims. petitioner’s testimony could not give rise to an inference
Since the contract between the parties is an ordinary one for unfavorable to the former. Menor was already working in France
services, the standard of care required of respondent is that of a at the time of the filing of the complaint,15 thereby making it
good father of a family under Article 1173 of the Civil Code.12 This physically impossible for respondent to present her as a witness.
connotes reasonable care consistent with that which an ordinarily Then too, even if it were possible for respondent to secure
prudent person would have observed when confronted with a Menor’s testimony, the presumption under Rule 131, Section 3(e)
similar situation. The test to determine whether negligence would still not apply. The opportunity and possibility for obtaining
attended the performance of an obligation is: did the defendant in Menor’s testimony belonged to both parties, considering that
doing the alleged negligent act use that reasonable care and Menor was not just respondent’s employee, but also petitioner’s
caution which an ordinarily prudent person would have used in the niece. It was thus error for the lower court to invoke the
same situation? If not, then he is guilty of negligence.13  presumption that respondent willfully suppressed evidence under
In the case at bar, the lower court found Menor negligent when Rule 131, Section 3(e). Said presumption would logically be
she allegedly informed petitioner of the wrong day of departure. inoperative if the evidence is not intentionally omitted but is
Petitioner’s testimony was accepted as indubitable evidence of simply unavailable, or when the same could have been obtained by
Menor’s alleged negligent act since respondent did not call Menor both parties.16 
to the witness stand to refute the allegation. The lower court In sum, we do not agree with the finding of the lower court that
applied the presumption under Rule 131, Section 3 (e)14 of the Menor’s negligence concurred with the negligence of petitioner
Rules of Court that evidence willfully suppressed would be adverse and resultantly caused damage to the latter. Menor’s negligence
if produced and thus considered petitioner’s uncontradicted was not sufficiently proved, considering that the only evidence
testimony to be sufficient proof of her claim. presented on this score was petitioner’s uncorroborated narration
On the other hand, respondent has consistently denied that Menor of the events. It is well-settled that the party alleging a fact has the
was negligent and maintains that petitioner’s assertion is belied by burden of proving it and a mere allegation cannot take the place of
the evidence on record. The date and time of departure was evidence.17 If the plaintiff, upon whom rests the burden of proving
legibly written on the plane ticket and the travel papers were his cause of action, fails to show in a satisfactory manner facts
delivered two days in advance precisely so that petitioner could upon which he bases his claim, the defendant is under no
prepare for the trip. It performed all its obligations to enable obligation to prove his exception or defense.18 
petitioner to join the tour and exercised due diligence in its Contrary to petitioner’s claim, the evidence on record shows that
dealings with the latter. respondent exercised due diligence in performing its obligations
under the contract and followed standard procedure in rendering negligent is a question of fact that is to be determined after taking
its services to petitioner. As correctly observed by the lower court, into account the particulars of each case.21 1âwphi1
the plane ticket19 issued to petitioner clearly reflected the The lower court declared that respondent’s employee was
departure date and time, contrary to petitioner’s contention. The negligent. This factual finding, however, is not supported by the
travel documents, consisting of the tour itinerary, vouchers and evidence on record. While factual findings below are generally
instructions, were likewise delivered to petitioner two days prior to conclusive upon this court, the rule is subject to certain exceptions,
the trip. Respondent also properly booked petitioner for the tour, as when the trial court overlooked, misunderstood, or misapplied
prepared the necessary documents and procured the plane tickets. some facts or circumstances of weight and substance which will
It arranged petitioner’s hotel accommodation as well as food, land affect the result of the case.22 
transfers and sightseeing excursions, in accordance with its In the case at bar, the evidence on record shows that respondent
avowed undertaking. company performed its duty diligently and did not commit any
Therefore, it is clear that respondent performed its prestation contractual breach. Hence, petitioner cannot recover and must
under the contract as well as everything else that was essential to bear her own damage.
book petitioner for the tour. Had petitioner exercised due diligence WHEREFORE, the instant petition is DENIED for lack of merit. The
in the conduct of her affairs, there would have been no reason for decision of the Court of Appeals in CA-G.R. CV No. 51932 is
her to miss the flight. Needless to say, after the travel papers were AFFIRMED. Accordingly, petitioner is ordered to pay respondent
delivered to petitioner, it became incumbent upon her to take the amount of P12,901.00 representing the balance of the price of
ordinary care of her concerns. This undoubtedly would require that the British Pageant Package Tour, with legal interest thereon at the
she at least read the documents in order to assure herself of the rate of 6% per annum, to be computed from the time the
important details regarding the trip. counterclaim was filed until the finality of this Decision. After this
The negligence of the obligor in the performance of the obligation Decision becomes final and executory, the rate of 12% per annum
renders him liable for damages for the resulting loss suffered by shall be imposed until the obligation is fully settled, this interim
the obligee. Fault or negligence of the obligor consists in his failure period being deemed to be by then an equivalent to a forbearance
to exercise due care and prudence in the performance of the of credit.23 
obligation as the nature of the obligation so demands.20 There is no SO ORDERED.
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
G.R. No. 157917               August 29, 2012
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, 
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE,
NATIONAL RAILWAYS, and the COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the
eyes of the law. He is bound to observe extraordinary diligence in
the conduct of his business. He is presumed to be negligent when
death occurs to a passenger. His liability may include indemnity for
loss of earning capacity even if the deceased passenger may only
be an unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette
Perefia (Perefias) appeal the adverse decision promulgated on
November 13, 2002, by which the Court of Appeals (CA) affirmed
with modification the decision rendered on December 3, 1999 by
the Regional Trial Court (RTC), Branch 260, in Parañaque City that
had decreed them jointly and severally liable with Philippine
National Railways (PNR), their co-defendant, to Spouses Nicolas
and Teresita Zarate (Zarates) for the death of their 15-year old
son, Aaron John L. Zarate (Aaron), then a high school student of
Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students
from their respective residences in Parañaque City to Don Bosco in
Pasong Tamo, Makati City, and back. In their business, the Pereñas because he overtook the passenger bus on its left side. The train
used a KIA Ceres Van (van) with Plate No. PYA 896, which had the blew its horn to warn motorists of its approach. When the train
capacity to transport 14 students at a time, two of whom would be was about 50 meters away from the passenger bus and the van,
seated in the front beside the driver, and the others in the rear, Alano applied the ordinary brakes of the train. He applied the
with six students on either side. They employed Clemente Alfaro emergency brakes only when he saw that a collision was imminent.
(Alfaro) as driver of the van. The passenger bus successfully crossed the railroad tracks, but the
In June 1996, the Zarates contracted the Pereñas to transport van driven by Alfaro did not. The train hit the rear end of the van,
Aaron to and from Don Bosco. On August 22, 1996, as on previous and the impact threw nine of the 12 students in the rear, including
school days, the van picked Aaron up around 6:00 a.m. from the Aaron, out of the van. Aaron landed in the path of the train, which
Zarates’ residence. Aaron took his place on the left side of the van dragged his body and severed his head, instantaneously killing him.
near the rear door. The van, with its air-conditioning unit turned Alano fled the scene on board the train, and did not wait for the
on and the stereo playing loudly, ultimately carried all the 14 police investigator to arrive.
student riders on their way to Don Bosco. Considering that the Devastated by the early and unexpected death of Aaron, the
students were due at Don Bosco by 7:15 a.m., and that they were Zarates commenced this action for damages against Alfaro, the
already running late because of the heavy vehicular traffic on the Pereñas, PNR and Alano. The Pereñas and PNR filed their
South Superhighway, Alfaro took the van to an alternate route at respective answers, with cross-claims against each other, but
about 6:45 a.m. by traversing the narrow path underneath the Alfaro could not be served with summons.
Magallanes Interchange that was then commonly used by Makati- At the pre-trial, the parties stipulated on the facts and issues, viz:
bound vehicles as a short cut into Makati. At the time, the narrow A. FACTS:
path was marked by piles of construction materials and parked (1) That spouses Zarate were the legitimate parents of Aaron John
passenger jeepneys, and the railroad crossing in the narrow path L. Zarate;
had no railroad warning signs, or watchmen, or other responsible (2) Spouses Zarate engaged the services of spouses Pereña for the
persons manning the crossing. In fact, the bamboo barandilla was adequate and safe transportation carriage of the former spouses'
up, leaving the railroad crossing open to traversing motorists. son from their residence in Parañaque to his school at the Don
At about the time the van was to traverse the railroad crossing, Bosco Technical Institute in Makati City;
PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano), (3) During the effectivity of the contract of carriage and in the
was in the vicinity of the Magallanes Interchange travelling implementation thereof, Aaron, the minor son of spouses Zarate
northbound. As the train neared the railroad crossing, Alfaro drove died in connection with a vehicular/train collision which occurred
the van eastward across the railroad tracks, closely tailing a large while Aaron was riding the contracted carrier Kia Ceres van of
passenger bus. His view of the oncoming train was blocked spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided proximate cause of the vehicular collision, which resulted in the
with the train of PNR, at around 6:45 A.M. of August 22, 1996, death of plaintiff spouses' son;
within the vicinity of the Magallanes Interchange in Makati City, (2) Whether or not the defendant spouses Pereña being the
Metro Manila, Philippines; employer of defendant Alfaro are liable for any negligence which
(4) At the time of the vehicular/train collision, the subject site of may be attributed to defendant Alfaro;
the vehicular/train collision was a railroad crossing used by (3) Whether or not defendant Philippine National Railways being
motorists for crossing the railroad tracks; the operator of the railroad system is liable for negligence in failing
(5) During the said time of the vehicular/train collision, there were to provide adequate safety warning signs and railings in the area
no appropriate and safety warning signs and railings at the site commonly used by motorists for railroad crossings, constituting the
commonly used for railroad crossing; proximate cause of the vehicular collision which resulted in the
(6) At the material time, countless number of Makati bound death of the plaintiff spouses' son;
public utility and private vehicles used on a daily basis the site of (4) Whether or not defendant spouses Pereña are liable for breach
the collision as an alternative route and short-cut to Makati; of the contract of carriage with plaintiff-spouses in failing to
(7) The train driver or operator left the scene of the incident on provide adequate and safe transportation for the latter's son;
board the commuter train involved without waiting for the police (5) Whether or not defendants spouses are liable for actual, moral
investigator; damages, exemplary damages, and attorney's fees;
(8) The site commonly used for railroad crossing by motorists was (6) Whether or not defendants spouses Teodorico and Nanette
not in fact intended by the railroad operator for railroad crossing Pereña observed the diligence of employers and school bus
at the time of the vehicular collision; operators;
(9) PNR received the demand letter of the spouses Zarate; (7) Whether or not defendant-spouses are civilly liable for the
(10) PNR refused to acknowledge any liability for the accidental death of Aaron John Zarate;
vehicular/train collision; (8) Whether or not defendant PNR was grossly negligent in
(11) The eventual closure of the railroad crossing alleged by PNR operating the commuter train involved in the accident, in allowing
was an internal arrangement between the former and its project or tolerating the motoring public to cross, and its failure to install
contractor; and safety devices or equipment at the site of the accident for the
(12) The site of the vehicular/train collision was within the vicinity protection of the public;
or less than 100 meters from the Magallanes station of PNR. (9) Whether or not defendant PNR should be made to reimburse
B. ISSUES defendant spouses for any and whatever amount the latter may be
(1) Whether or not defendant-driver of the van is, in the held answerable or which they may be ordered to pay in favor of
performance of his functions, liable for negligence constituting the plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly (4) Moral damages in the amount of Php4,000,000.00;
and fully on the amounts claimed by the latter in their Complaint (5) Exemplary damages in the amount of Php1,000,000.00;
by reason of its gross negligence; (6) Attorney’s fees in the amount of Php200,000.00; and
(11) Whether or not defendant PNR is liable to defendants spouses (7) Cost of suit.
for actual, moral and exemplary damages and attorney's fees.2  SO ORDERED.
The Zarates’ claim against the Pereñas was upon breach of the On June 29, 2000, the RTC denied the Pereñas’ motion for
contract of carriage for the safe transport of Aaron; but that reconsideration,4 reiterating that the cooperative gross negligence
against PNR was based on quasi-delict under Article 2176, Civil of the Pereñas and PNR had caused the collision that led to the
Code. death of Aaron; and that the damages awarded to the Zarates
In their defense, the Pereñas adduced evidence to show that they were not excessive, but based on the established circumstances.
had exercised the diligence of a good father of the family in the The CA’s Ruling
selection and supervision of Alfaro, by making sure that Alfaro had Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
been issued a driver’s license and had not been involved in any PNR assigned the following errors, to wit:5 
vehicular accident prior to the collision; that their own son had The Court a quo erred in:
taken the van daily; and that Teodoro Pereña had sometimes 1. In finding the defendant-appellant Philippine National Railways
accompanied Alfaro in the van’s trips transporting the students to jointly and severally liable together with defendant-appellants
school. spouses Teodorico and Nanette Pereña and defendant-appellant
For its part, PNR tended to show that the proximate cause of the Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron
collision had been the reckless crossing of the van whose driver Zarate and damages.
had not first stopped, looked and listened; and that the narrow 2. In giving full faith and merit to the oral testimonies of plaintiffs-
path traversed by the van had not been intended to be a railroad appellees witnesses despite overwhelming documentary evidence
crossing for motorists. on record, supporting the case of defendants-appellants Philippine
Ruling of the RTC National Railways.
On December 3, 1999, the RTC rendered its decision,3 disposing: The Pereñas ascribed the following errors to the RTC, namely:
WHEREFORE, premises considered, judgment is hereby rendered in The trial court erred in finding defendants-appellants jointly and
favor of the plaintiff and against the defendants ordering them to severally liable for actual, moral and exemplary damages and
jointly and severally pay the plaintiffs as follows: attorney’s fees with the other defendants.
(1) (for) the death of Aaron- Php50,000.00; The trial court erred in dismissing the cross-claim of the appellants
(2) Actual damages in the amount of Php100,000.00; Pereñas against the Philippine National Railways and in not holding
(3) For the loss of earning capacity- Php2,109,071.00; the latter and its train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s be ₱ 110,716.65, inclusive of the thirteenth month pay. Multiplying
fees. this annual salary by Aaron’s life expectancy of 39.3 years, his
The trial court erred in awarding damages in the form of gross income would aggregate to ₱ 4,351,164.30, from which his
deceased’s loss of earning capacity in the absence of sufficient estimated expenses in the sum of ₱ 2,189,664.30 was deducted to
basis for such an award. finally arrive at P 2,161,500.00 as net income. Due to Aaron’s
On November 13, 2002, the CA promulgated its decision, affirming computed net income turning out to be higher than the amount
the findings of the RTC, but limited the moral damages to ₱ claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly
2,500,000.00; and deleted the attorney’s fees because the RTC did prayed for by them, was granted.
not state the factual and legal bases, to wit:6  On April 4, 2003, the CA denied the Pereñas’ motion for
WHEREFORE, premises considered, the assailed Decision of the reconsideration.8 
Regional Trial Court, Branch 260 of Parañaque City is AFFIRMED Issues
with the modification that the award of Actual Damages is reduced In this appeal, the Pereñas list the following as the errors
to ₱ 59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and committed by the CA, to wit:
the award for Attorney’s Fees is Deleted. I. The lower court erred when it upheld the trial court’s decision
SO ORDERED. holding the petitioners jointly and severally liable to pay damages
The CA upheld the award for the loss of Aaron’s earning capacity, with Philippine National Railways and dismissing their cross-claim
taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus against the latter.
Company and Manila Railroad Company,7 wherein the Court gave II. The lower court erred in affirming the trial court’s decision
the heirs of Cariaga a sum representing the loss of the deceased’s awarding damages for loss of earning capacity of a minor who was
earning capacity despite Cariaga being only a medical student at only a high school student at the time of his death in the absence
the time of the fatal incident. Applying the formula adopted in the of sufficient basis for such an award.
American Expectancy Table of Mortality:– III. The lower court erred in not reducing further the amount of
2/3 x (80 - age at the time of death) = life expectancy damages awarded, assuming petitioners are liable at all.
the CA determined the life expectancy of Aaron to be 39.3 years Ruling
upon reckoning his life expectancy from age of 21 (the age when The petition has no merit.
he would have graduated from college and started working for his 1.
own livelihood) instead of 15 years (his age when he died). Were the Pereñas and PNR jointly
Considering that the nature of his work and his salary at the time and severally liable for damages?
of Aaron’s death were unknown, it used the prevailing minimum The Zarates brought this action for recovery of damages against
wage of ₱ 280.00/day to compute Aaron’s gross annual salary to both the Pereñas and the PNR, basing their claim against the
Pereñas on breach of contract of carriage and against the PNR on or as a common/public carrier.10 A private carrier is one who,
quasi-delict. without making the activity a vocation, or without holding himself
The RTC found the Pereñas and the PNR negligent. The CA affirmed or itself out to the public as ready to act for all who may desire his
the findings. or its services, undertakes, by special agreement in a particular
We concur with the CA. instance only, to transport goods or persons from one place to
To start with, the Pereñas’ defense was that they exercised the another either gratuitously or for hire.11 The provisions on ordinary
diligence of a good father of the family in the selection and contracts of the Civil Code govern the contract of private
supervision of Alfaro, the van driver, by seeing to it that Alfaro had carriage.The diligence required of a private carrier is only ordinary,
a driver’s license and that he had not been involved in any that is, the diligence of a good father of the family. In contrast, a
vehicular accident prior to the fatal collision with the train; that common carrier is a person, corporation, firm or association
they even had their own son travel to and from school on a daily engaged in the business of carrying or transporting passengers or
basis; and that Teodoro Pereña himself sometimes accompanied goods or both, by land, water, or air, for compensation, offering
Alfaro in transporting the passengers to and from school. The RTC such services to the public.12 Contracts of common carriage are
gave scant consideration to such defense by regarding such governed by the provisions on common carriers of the Civil Code,
defense as inappropriate in an action for breach of contract of the Public Service Act,13 and other special laws relating to
carriage. transportation. A common carrier is required to observe
We find no adequate cause to differ from the conclusions of the extraordinary diligence, and is presumed to be at fault or to have
lower courts that the Pereñas operated as a common carrier; and acted negligently in case of the loss of the effects of passengers, or
that their standard of care was extraordinary diligence, not the the death or injuries to passengers.14 
ordinary diligence of a good father of a family. In relation to common carriers, the Court defined public use in the
Although in this jurisdiction the operator of a school bus service following terms in United States v. Tan Piaco,15 viz:
has been usually regarded as a private carrier,9 primarily because "Public use" is the same as "use by the public". The essential
he only caters to some specific or privileged individuals, and his feature of the public use is not confined to privileged individuals,
operation is neither open to the indefinite public nor for public but is open to the indefinite public. It is this indefinite or
use, the exact nature of the operation of a school bus service has unrestricted quality that gives it its public character. In determining
not been finally settled. This is the occasion to lay the matter to whether a use is public, we must look not only to the character of
rest. the business to be done, but also to the proposed mode of doing
A carrier is a person or corporation who undertakes to transport or it. If the use is merely optional with the owners, or the public
convey goods or persons from one place to another, gratuitously benefit is merely incidental, it is not a public use, authorizing the
or for hire. The carrier is classified either as a private/special carrier exercise of the jurisdiction of the public utility commission. There
must be, in general, a right which the law compels the owner to sewerage system, wire or wireless communications systems, wire
give to the general public. It is not enough that the general or wireless broadcasting stations and other similar public services.
prosperity of the public is promoted. Public use is not synonymous x x x.17 
with public interest. The true criterion by which to judge the Given the breadth of the aforequoted characterization of a
character of the use is whether the public may enjoy it by right or common carrier, the Court has considered as common carriers
only by permission. pipeline operators,18 custom brokers and warehousemen,19 and
In De Guzman v. Court of Appeals,16 the Court noted that Article barge operators20 even if they had limited clientèle.
1732 of the Civil Code avoided any distinction between a person or As all the foregoing indicate, the true test for a common carrier is
an enterprise offering transportation on a regular or an isolated not the quantity or extent of the business actually transacted, or
basis; and has not distinguished a carrier offering his services to the number and character of the conveyances used in the activity,
the general public, that is, the general community or population, but whether the undertaking is a part of the activity engaged in by
from one offering his services only to a narrow segment of the the carrier that he has held out to the general public as his
general population. business or occupation. If the undertaking is a single transaction,
Nonetheless, the concept of a common carrier embodied in Article not a part of the general business or occupation engaged in, as
1732 of the Civil Code coincides neatly with the notion of public advertised and held out to the general public, the individual or the
service under the Public Service Act, which supplements the law on entity rendering such service is a private, not a common, carrier.
common carriers found in the Civil Code. Public service, according The question must be determined by the character of the business
to Section 13, paragraph (b) of the Public Service Act, includes: actually carried on by the carrier, not by any secret intention or
x x x every person that now or hereafter may own, operate, mental reservation it may entertain or assert when charged with
manage, or control in the Philippines, for hire or compensation, the duties and obligations that the law imposes.21 
with general or limited clientèle, whether permanent or Applying these considerations to the case before us, there is no
occasional, and done for the general business purposes, any question that the Pereñas as the operators of a school bus service
common carrier, railroad, street railway, traction railway, subway were: (a) engaged in transporting passengers generally as a
motor vehicle, either for freight or passenger, or both, with or business, not just as a casual occupation; (b) undertaking to carry
without fixed route and whatever may be its classification, freight passengers over established roads by the method by which the
or carrier service of any class, express service, steamboat, or business was conducted; and (c) transporting students for a fee.
steamship line, pontines, ferries and water craft, engaged in the Despite catering to a limited clientèle, the Pereñas operated as a
transportation of passengers or freight or both, shipyard, marine common carrier because they held themselves out as a ready
repair shop, ice-refrigeration plant, canal, irrigation system, gas, transportation indiscriminately to the students of a particular
electric light, heat and power, water supply and power petroleum,
school living within or near where they operated the service and observance of extraordinary diligence in seeing to the safe and
for a fee. secure carriage of the passengers to their destination. Until they
The common carrier’s standard of care and vigilance as to the did so in a credible manner, they stood to be held legally
safety of the passengers is defined by law. Given the nature of the responsible for the death of Aaron and thus to be held liable for all
business and for reasons of public policy, the common carrier is the natural consequences of such death.
bound "to observe extraordinary diligence in the vigilance over the There is no question that the Pereñas did not overturn the
goods and for the safety of the passengers transported by them, presumption of their negligence by credible evidence. Their
according to all the circumstances of each case."22 Article 1755 of defense of having observed the diligence of a good father of a
the Civil Code specifies that the common carrier should "carry the family in the selection and supervision of their driver was not
passengers safely as far as human care and foresight can provide, legally sufficient. According to Article 1759 of the Civil Code, their
using the utmost diligence of very cautious persons, with a due liability as a common carrier did not cease upon proof that they
regard for all the circumstances." To successfully fend off liability in exercised all the diligence of a good father of a family in the
an action upon the death or injury to a passenger, the common selection and supervision of their employee. This was the reason
carrier must prove his or its observance of that extraordinary why the RTC treated this defense of the Pereñas as inappropriate
diligence; otherwise, the legal presumption that he or it was at in this action for breach of contract of carriage.
fault or acted negligently would stand.23 No device, whether by The Pereñas were liable for the death of Aaron despite the fact
stipulation, posting of notices, statements on tickets, or otherwise, that their driver might have acted beyond the scope of his
may dispense with or lessen the responsibility of the common authority or even in violation of the orders of the common
carrier as defined under Article 1755 of the Civil Code. 24  carrier.27 In this connection, the records showed their driver’s
And, secondly, the Pereñas have not presented any compelling actual negligence. There was a showing, to begin with, that their
defense or reason by which the Court might now reverse the CA’s driver traversed the railroad tracks at a point at which the PNR did
findings on their liability. On the contrary, an examination of the not permit motorists going into the Makati area to cross the
records shows that the evidence fully supported the findings of the railroad tracks. Although that point had been used by motorists as
CA. a shortcut into the Makati area, that fact alone did not excuse
As earlier stated, the Pereñas, acting as a common carrier, were their driver into taking that route. On the other hand, with his
already presumed to be negligent at the time of the accident familiarity with that shortcut, their driver was fully aware of the
because death had occurred to their passenger.25 The presumption risks to his passengers but he still disregarded the risks.
of negligence, being a presumption of law, laid the burden of Compounding his lack of care was that loud music was playing
evidence on their shoulders to establish that they had not been inside the air-conditioned van at the time of the accident. The
negligent.26 It was the law no less that required them to prove their loudness most probably reduced his ability to hear the warning
horns of the oncoming train to allow him to correctly appreciate doing the alleged negligent act use that reasonable care and
the lurking dangers on the railroad tracks. Also, he sought to caution which an ordinarily prudent person would have used in the
overtake a passenger bus on the left side as both vehicles same situation? If not, then he is guilty of negligence. The law here
traversed the railroad tracks. In so doing, he lost his view of the in effect adopts the standard supposed to be supplied by the
train that was then coming from the opposite side of the imaginary conduct of the discreet paterfamilias of the Roman law.
passenger bus, leading him to miscalculate his chances of beating The existence of negligence in a given case is not determined by
the bus in their race, and of getting clear of the train. As a result, reference to the personal judgment of the actor in the situation
the bus avoided a collision with the train but the van got slammed before him. The law considers what would be reckless,
at its rear, causing the fatality. Lastly, he did not slow down or go blameworthy, or negligent in the man of ordinary intelligence and
to a full stop before traversing the railroad tracks despite knowing prudence and determines liability by that.
that his slackening of speed and going to a full stop were in The question as to what would constitute the conduct of a prudent
observance of the right of way at railroad tracks as defined by the man in a given situation must of course be always determined in
traffic laws and regulations.28 He thereby violated a specific traffic the light of human experience and in view of the facts involved in
regulation on right of way, by virtue of which he was immediately the particular case. Abstract speculation cannot here be of much
presumed to be negligent.29  value but this much can be profitably said: Reasonable men govern
The omissions of care on the part of the van driver constituted their conduct by the circumstances which are before them or
negligence,30 which, according to Layugan v. Intermediate known to them. They are not, and are not supposed to be,
Appellate Court,31 is "the omission to do something which a omniscient of the future. Hence they can be expected to take care
reasonable man, guided by those considerations which ordinarily only when there is something before them to suggest or warn of
regulate the conduct of human affairs, would do, or the doing of danger. Could a prudent man, in the case under consideration,
something which a prudent and reasonable man would not do,32 or foresee harm as a result of the course actually pursued? If so, it
as Judge Cooley defines it, ‘(t)he failure to observe for the was the duty of the actor to take precautions to guard against that
protection of the interests of another person, that degree of care, harm. Reasonable foresight of harm, followed by the ignoring of
precaution, and vigilance which the circumstances justly demand, the suggestion born of this prevision, is always necessary before
whereby such other person suffers injury.’"33  negligence can be held to exist. Stated in these terms, the proper
The test by which to determine the existence of negligence in a criterion for determining the existence of negligence in a given
particular case has been aptly stated in the leading case of Picart v. case is this: Conduct is said to be negligent when a prudent man in
Smith,34 thuswise: the position of the tortfeasor would have foreseen that an effect
The test by which to determine the existence of negligence in a harmful to another was sufficiently probable to warrant his
particular case may be stated as follows: Did the defendant in
foregoing the conduct or guarding against its consequences. whether jointly, severally, or in the alternative, in respect to or
(Emphasis supplied) arising out of the accident, and questions of fact and of law were
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ common as to the Zarates.36 Although the basis of the right to relief
driver was entirely negligent when he traversed the railroad tracks of the Zarates (i.e., breach of contract of carriage) against the
at a point not allowed for a motorist’s crossing despite being fully Pereñas was distinct from the basis of the Zarates’ right to relief
aware of the grave harm to be thereby caused to his passengers; against the PNR (i.e., quasi-delict under Article 2176, Civil Code),
and when he disregarded the foresight of harm to his passengers they nonetheless could be held jointly and severally liable by virtue
by overtaking the bus on the left side as to leave himself blind to of their respective negligence combining to cause the death of
the approach of the oncoming train that he knew was on the Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
opposite side of the bus. negligence despite the school van of the Pereñas traversing the
Unrelenting, the Pereñas cite Phil. National Railways v. railroad tracks at a point not dedicated by the PNR as a railroad
Intermediate Appellate Court,35 where the Court held the PNR crossing for pedestrians and motorists, because the PNR did not
solely liable for the damages caused to a passenger bus and its ensure the safety of others through the placing of crossbars, signal
passengers when its train hit the rear end of the bus that was then lights, warning signs, and other permanent safety barriers to
traversing the railroad crossing. But the circumstances of that case prevent vehicles or pedestrians from crossing there. The RTC
and this one share no similarities. In Philippine National Railways v. observed that the fact that a crossing guard had been assigned to
Intermediate Appellate Court, no evidence of contributory man that point from 7 a.m. to 5 p.m. was a good indicium that the
negligence was adduced against the owner of the bus. Instead, it PNR was aware of the risks to others as well as the need to control
was the owner of the bus who proved the exercise of the vehicular and other traffic there. Verily, the Pereñas and the
extraordinary diligence by preponderant evidence. Also, the PNR were joint tortfeasors.
records are replete with the showing of negligence on the part of 2.
both the Pereñas and the PNR. Another distinction is that the Was the indemnity for loss of
passenger bus in Philippine National Railways v. Intermediate Aaron’s earning capacity proper?
Appellate Court was traversing the dedicated railroad crossing The RTC awarded indemnity for loss of Aaron’s earning capacity.
when it was hit by the train, but the Pereñas’ school van traversed Although agreeing with the RTC on the liability, the CA modified
the railroad tracks at a point not intended for that purpose. the amount. Both lower courts took into consideration that Aaron,
At any rate, the lower courts correctly held both the Pereñas and while only a high school student, had been enrolled in one of the
the PNR "jointly and severally" liable for damages arising from the reputable schools in the Philippines and that he had been a normal
death of Aaron. They had been impleaded in the same complaint and able-bodied child prior to his death. The basis for the
as defendants against whom the Zarates had the right to relief, computation of Aaron’s earning capacity was not what he would
have become or what he would have wanted to be if not for his And, secondly, the fact that Aaron was then without a history of
untimely death, but the minimum wage in effect at the time of his earnings should not be taken against his parents and in favor of
death. Moreover, the RTC’s computation of Aaron’s life the defendants whose negligence not only cost Aaron his life and
expectancy rate was not reckoned from his age of 15 years at the his right to work and earn money, but also deprived his parents of
time of his death, but on 21 years, his age when he would have their right to his presence and his services as well. Our law itself
graduated from college. states that the loss of the earning capacity of the deceased shall be
We find the considerations taken into account by the lower courts the liability of the guilty party in favor of the heirs of the deceased,
to be reasonable and fully warranted. and shall in every case be assessed and awarded by the court
Yet, the Pereñas submit that the indemnity for loss of earning "unless the deceased on account of permanent physical disability
capacity was speculative and unfounded.1âwphi1 They cited not caused by the defendant, had no earning capacity at the time
People v. Teehankee, Jr.,37 where the Court deleted the indemnity of his death."38 Accordingly, we emphatically hold in favor of the
for victim Jussi Leino’s loss of earning capacity as a pilot for being indemnification for Aaron’s loss of earning capacity despite him
speculative due to his having graduated from high school at the having been unemployed, because compensation of this nature is
International School in Manila only two years before the shooting, awarded not for loss of time or earnings but for loss of the
and was at the time of the shooting only enrolled in the first deceased’s power or ability to earn money.39 
semester at the Manila Aero Club to pursue his ambition to This favorable treatment of the Zarates’ claim is not
become a professional pilot. That meant, according to the Court, unprecedented. In Cariaga v. Laguna Tayabas Bus Company and
that he was for all intents and purposes only a high school Manila Railroad Company,40 fourth-year medical student Edgardo
graduate. Carriaga’s earning capacity, although he survived the accident but
We reject the Pereñas’ submission. his injuries rendered him permanently incapacitated, was
First of all, a careful perusal of the Teehankee, Jr. case shows that computed to be that of the physician that he dreamed to become.
the situation there of Jussi Leino was not akin to that of Aaron The Court considered his scholastic record sufficient to justify the
here. The CA and the RTC were not speculating that Aaron would assumption that he could have finished the medical course and
be some highly-paid professional, like a pilot (or, for that matter, would have passed the medical board examinations in due time,
an engineer, a physician, or a lawyer). Instead, the computation of and that he could have possibly earned a modest income as a
Aaron’s earning capacity was premised on him being a lowly medical practitioner. Also, in People v. Sanchez,41 the Court opined
minimum wage earner despite his being then enrolled at a that murder and rape victim Eileen Sarmienta and murder victim
prestigious high school like Don Bosco in Makati, a fact that would Allan Gomez could have easily landed good-paying jobs had they
have likely ensured his success in his later years in life and at work. graduated in due time, and that their jobs would probably pay
them high monthly salaries from ₱ 10,000.00 to ₱ 15,000.00 upon
their graduation. Their earning capacities were computed at rates similarly situated like them the ever-present need for greater and
higher than the minimum wage at the time of their deaths due to constant vigilance in the conduct of a business imbued with public
their being already senior agriculture students of the University of interest.
the Philippines in Los Baños, the country’s leading educational WHEREFORE, we DENY the petition for review
institution in agriculture. on certiorari; AFFIRM the decision promulgated on November 13,
3. 2002; and ORDER the petitioners to pay the costs of suit.
Were the amounts of damages excessive? SO ORDERED.
The Pereñas plead for the reduction of the moral and exemplary
damages awarded to the Zarates in the respective amounts of ₱
2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts
were excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just and
reasonable under the established circumstances of this case
because they were intended by the law to assuage the Zarates’
deep mental anguish over their son’s unexpected and violent
death, and their moral shock over the senseless accident. That
amount would not be too much, considering that it would help the
Zarates obtain the means, diversions or amusements that would
alleviate their suffering for the loss of their child. At any rate,
reducing the amount as excessive might prove to be an injustice,
given the passage of a long time from when their mental anguish
was inflicted on them on August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we
should not reduce the amount if only to render effective the
desired example for the public good. As a common carrier, the
Pereñas needed to be vigorously reminded to observe their duty to
exercise extraordinary diligence to prevent a similarly senseless
accident from happening again. Only by an award of exemplary
damages in that amount would suffice to instill in them and others
Trial Court of Valenzuela, Metro Manila, Branch 171, the
dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea
Surety and Insurance Co., Inc. to pay plaintiff the sum of TWO
MILLION PESOS (P2,000,000.00) representing the value of the
policy of the lost logs with legal interest thereon from the date of
demand on February 2, 1984 until the amount is fully paid or in the
alternative, defendant Seven Brothers Shipping Corporation to pay
plaintiff the amount of TWO MILLION PESOS (2,000,000.00)
representing the value of lost logs plus legal interest from the date
of demand on April 24, 1984 until full payment thereof; the
reasonable attorney's fees in the amount equivalent to five (5)
percent of the amount of the claim and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers
Shipping Corporation the sum of TWO HUNDRED THIRTY
G.R. No. 102316 June 30, 1997 THOUSAND PESOS (P230,000.00) representing the balance of the
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY stipulated freight charges.
INC., petitioner,  Defendant South Sea Surety and Insurance Company's
vs. counterclaim is hereby dismissed.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING In its assailed Decision, Respondent Court of Appeals held:
CORPORATION, respondents. WHEREFORE, the appealed judgment is hereby AFFIRMED except
in so far (sic) as the liability of the Seven Brothers Shipping
PANGANIBAN, J.: Corporation to the plaintiff is concerned which is hereby REVERSED
Is a stipulation in a charter party that the "(o)wners shall not be and SET ASIDE. 3
responsible for loss, split, short-landing, breakages and any kind of The Facts
damages to the cargo" 1 valid? This is the main question raised in The factual antecedents of this case as narrated in the Court of
this petition for review assailing the Decision of Respondent Court Appeals Decision are as follows:
of Appeals 2 in CA-G.R. No. CV-20156 promulgated on October 15, It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood
1991. The Court of Appeals modified the judgment of the Regional and Industrial Supply, Inc.) entered into an agreement with the
defendant Seven Brothers (Shipping Corporation) whereby the
latter undertook to load on board its vessel M/V Seven A. The lower court erred in holding that the proximate cause of the
Ambassador the former's lauan round logs numbering 940 at the sinking of the vessel Seven Ambassadors, was not due to fortuitous
port of Maconacon, Isabela for shipment to Manila. event but to the negligence of the captain in stowing and securing
On 20 January 1984, plaintiff insured the logs against loss and/or the logs on board, causing the iron chains to snap and the logs to
damage with defendant South Sea Surety and Insurance Co., Inc. roll to the portside.
for P2,000,000.00 and the latter issued its Marine Cargo Insurance B. The lower court erred in declaring that the non-liability clause of
Policy No. 84/24229 for P2,000,000.00 on said date. the Seven Brothers Shipping Corporation from logs (sic) of the
On 24 January 1984, the plaintiff gave the check in payment of the cargo stipulated in the charter party is void for being contrary to
premium on the insurance policy to Mr. Victorio Chua. public policy invoking article 1745 of the New Civil Code.
In the meantime, the said vessel M/V Seven Ambassador sank on C. The lower court erred in holding defendant-appellant Seven
25 January 1984 resulting in the loss of the plaintiff's insured logs. Brothers Shipping Corporation liable in the alternative and
On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover ordering/directing it to pay plaintiff-appellee the amount of two
payment of the premium and documentary stamps due on the million (2,000,000.00) pesos representing the value of the logs plus
policy was tendered due to the insurer but was not accepted. legal interest from date of demand until fully paid.
Instead, the South Sea Surety and Insurance Co., Inc. cancelled the D. The lower court erred in ordering defendant-appellant Seven
insurance policy it issued as of the date of the inception for non- Brothers Shipping Corporation to pay appellee reasonable
payment of the premium due in accordance with Section 77 of the attorney's fees in the amount equivalent to 5% of the amount of
Insurance Code. the claim and the costs of the suit.
On 2 February 1984, plaintiff demanded from defendant South Sea E. The lower court erred in not awarding defendant-appellant
Surety and Insurance Co., Inc. the payment of the proceeds of the Seven Brothers Corporation its counter-claim for attorney's fees.
policy but the latter denied liability under the policy. Plaintiff F. The lower court erred in not dismissing the complaint against
likewise filed a formal claim with defendant Seven Brothers Seven Brothers Shipping Corporation.
Shipping Corporation for the value of the lost logs but the latter Defendant-appellant South Sea Surety and Insurance Co., Inc.
denied the claim. assigns the following errors:
After due hearing and trial, the court a quo rendered judgment in A. The trial court erred in holding that Victorio Chua was an agent
favor of plaintiff and against defendants. Both defendants shipping of defendant-appellant South Sea Surety and Insurance Company,
corporation and the surety company appealed. Inc. and likewise erred in not holding that he was the
Defendant-appellant Seven Brothers Shipping Corporation impute representative of the insurance broker Columbia Insurance
(sic) to the court a quo the following assignment of errors, to wit: Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received It appears that there is a stipulation in the charter party that the
compensation/commission on the premiums paid on the policies ship owner would be exempted from liability in case of loss.
issued by the defendant-appellant South Sea Surety and Insurance The court a quo erred in applying the provisions of the Civil Code
Company, Inc. on common carriers to establish the liability of the shipping
C. The trial court erred in not applying Section 77 of the Insurance corporation. The provisions on common carriers should not be
Code. applied where the carrier is not acting as such but as a private
D. The trial court erred in disregarding the "receipt of payment carrier.
clause" attached to and forming part of the Marine Cargo Under American jurisprudence, a common carrier undertaking to
Insurance Policy No. 84/24229. carry a special cargo or chartered to a special person only,
E. The trial court in disregarding the statement of account or bill becomes a private carrier.
stating the amount of premium and documentary stamps to be As a private carrier, a stipulation exempting the owner from
paid on the policy by the plaintiff-appellee. liability even for the negligence of its agent is valid (Home
F. The trial court erred in disregarding the endorsement of Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23
cancellation of the policy due to non-payment of premium and SCRA 24).
documentary stamps. The shipping corporation should not therefore be held liable for
G. The trial court erred in ordering defendant-appellant South Sea the loss of the logs. 6
Surety and Insurance Company, Inc. to pay plaintiff-appellee South Sea and herein Petitioner Valenzuela Hardwood and
P2,000,000.00 representing value of the policy with legal interest Industrial Supply, Inc. ("Valenzuela") filed separate petitions for
from 2 February 1984 until the amount is fully paid, review before this Court. In a Resolution dated June 2, 1995, this
H. The trial court erred in not awarding to the defendant-appellant Court denied the petition of South
7
the attorney's fees alleged and proven in its counterclaim. Sea.   There the Court found no reason to reverse the factual
The primary issue to be resolved before us is whether defendants findings of the trial court and the Court of Appeals that Chua was
shipping corporation and the surety company are liable to the indeed an authorized agent of South Sea when he received
plaintiff for the latter's lost logs. 4 Valenzuela's premium payment for the marine cargo insurance
The Court of Appeals affirmed in part the RTC judgment by policy which was thus binding on the insurer. 8
sustaining the liability of South Sea Surety and Insurance Company The Court is now called upon to resolve the petition for review
("South Sea"), but modified it by holding that Seven Brothers filed by Valenzuela assailing the CA Decision which exempted
Shipping Corporation ("Seven Brothers") was not liable for the lost Seven Brothers from any liability for the lost cargo.
cargo. 5 In modifying the RTC judgment, the respondent appellate The Issue
court ratiocinated thus:
Petitioner Valenzuela's arguments resolve around a single issue: (1) That the goods are transported at the risk of the owner or
"whether or not respondent Court (of Appeals) committed a shipper;
reversible error in upholding the validity of the stipulation in the (2) That the common carrier will not be liable for any loss,
charter party executed between the petitioner and the private destruction, or deterioration of the goods;
respondent exempting the latter from liability for the loss of (3) That the common carrier need not observe any diligence in the
petitioner's logs arising from the negligence of its (Seven Brothers') custody of the goods;
captain." 9 (4) That the common carrier shall exercise a degree of diligence
The Court's Ruling less than that of a good father of a family, or of a man of ordinary
The petition is not meritorious. prudence in the vigilance over the movables transported;
Validity of Stipulation is Lis Mota (5) That the common carrier shall not be responsible for the acts
The charter party between the petitioner and private respondent or omissions of his or its employees;
stipulated that the "(o)wners shall not be responsible for loss, split, (6) That the common carrier's liability for acts committed by
short-landing, breakages and any kind of damages to the thieves, or of robbers who do not act with grave or irresistible
cargo." 10 The validity of this stipulation is the lis mota of this case. threat, violence or force, is dispensed with or diminished;
It should be noted at the outset that there is no dispute between (7) That the common carrier is not responsible for the loss,
the parties that the proximate cause of the sinking of M/V Seven destruction, or deterioration of goods on account of the defective
Ambassadors resulting in the loss of its cargo was the "snapping of condition of the car, vehicle, ship, airplane or other equipment
the iron chains and the subsequent rolling of the logs to the used in the contract of carriage.
portside due to the negligence of the captain in stowing and Petitioner Valenzuela adds that the stipulation is void for being
securing the logs on board the vessel and not due to fortuitous contrary to Articles 586 and 587 of the Code of Commerce 14 and
event." 11 Likewise undisputed is the status of Private Respondent Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and
Seven Brothers as a private carrier when it contracted to transport paragraph 1, Article 1409 of the Civil Code, 15 petitioner further
the cargo of Petitioner Valenzuela. Even the latter admits this in its contends that said stipulation "gives no duty or obligation to the
petition. 12 private respondent to observe the diligence of a good father of a
The trial court deemed the charter party stipulation void for being family in the custody and transportation of the cargo."
contrary to public policy, 13 citing Article 1745 of the Civil Code The Court is not persuaded. As adverted to earlier, it is undisputed
which provides: that private respondent had acted as a private carrier in
Art. 1745. Any of the following or similar stipulations shall be transporting petitioner's lauan logs. Thus, Article 1745 and other
considered unreasonable, unjust and contrary to public policy: Civil Code provisions on common carriers which were cited by
petitioner may not be applied unless expressly stipulated by the Jose P. Bengzon, the following well-settled observation and
parties in their charter party. 16 doctrine:
In a contract of private carriage, the parties may validly stipulate The provisions of our Civil Code on common carriers were taken
that responsibility for the cargo rests solely on the charterer, from Anglo-American law. Under American jurisprudence, a
exempting the shipowner from liability for loss of or damage to the common carrier undertaking to carry a special cargo or chartered
cargo caused even by the negligence of the ship captain. Pursuant to a special person only, becomes a private carrier. As a private
to Article 1306 17 of the Civil Code, such stipulation is valid because carrier, a stipulation exempting the owner from liability for the
it is freely entered into by the parties and the same is not contrary negligence of its agent is not against public policy, and is deemed
to law, morals, good customs, public order, or public policy. valid.
Indeed, their contract of private carriage is not even a contract of Such doctrine We find reasonable. The Civil Code provisions on
adhesion. We stress that in a contract of private carriage, the common carriers should not be applied where the carrier is not
parties may freely stipulate their duties and obligations which acting as such but as a private carrier. The stipulation in the
perforce would be binding on them. Unlike in a contract involving charter party absolving the owner from liability for loss due to the
a common carrier, private carriage does not involve the general negligence of its agent would be void if the strict public policy
public. Hence, the stringent provisions of the Civil Code on governing common carriers is applied. Such policy has no force
common carriers protecting the general public cannot justifiably be where the public at large is not involved, as in this case of a ship
applied to a ship transporting commercial goods as a private totally chartered for the used of a single party. 19(Emphasis
carrier. Consequently, the public policy embodied therein is not supplied.)
contravened by stipulations in a charter party that lessen or Indeed, where the reason for the rule ceases, the rule itself does
remove the protection given by law in contracts involving common not apply. The general public enters into a contract of
carriers. transportation with common carriers without a hand or a voice in
The issue posed in this case and the arguments raised by petitioner the preparation thereof. The riding public merely adheres to the
are not novel; they were resolved long ago by this Court in Home contract; even if the public wants to, it cannot submit its own
Insurance Co. vs.  American Steamship Agencies, Inc. 18 In that case, stipulations for the approval of the common carrier. Thus, the law
the trial court similarly nullified a stipulation identical to that on common carriers extends its protective mantle against one-
involved in the present case for being contrary to public policy sided stipulations inserted in tickets, invoices or other documents
based on Article 1744 of the Civil Code and Article 587 of the Code over which the riding public has no understanding or, worse, no
of Commerce. Consequently, the trial court held the shipowner choice. Compared to the general public, a charterer in a contract
liable for damages resulting for the partial loss of the cargo. This of private carriage is not similarly situated. It can — and in fact it
Court reversed the trial court and laid down, through Mr. Justice usually does — enter into a free and voluntary agreement. In
practice, the parties in a contract of private carriage can stipulate a departure from a well-settled rule. Consequently, our ruling in
the carrier's obligations and liabilities over the shipment which, in said case remains a binding judicial precedent based on the
turn, determine the price or consideration of the charter. Thus, a doctrine of stare decisis and Article 8 of the Civil Code which
charterer, in exchange for convenience and economy, may opt to provides that "(j)udicial decisions applying or interpreting the laws
set aside the protection of the law on common carriers. When the or the Constitution shall form part of the legal system of the
charterer decides to exercise this option, he takes a normal Philippines."
business risk. In fine, the respondent appellate court aptly stated that "[in the
Petitioner contends that the rule in Home Insurance is not case of] a private carrier, a stipulation exempting the owner from
applicable to the present case because it "covers only a stipulation liability even for the negligence of its agents is valid." 24
exempting a private carrier from liability for the negligence of his Other Arguments
agent, but it does not apply to a stipulation exempting a private On the basis of the foregoing alone, the present petition may
carrier like private respondent from the negligence of his already be denied; the Court, however, will discuss the other
employee or servant which is the situation in this case." 20 This arguments of petitioner for the benefit and satisfaction of all
contention of petitioner is bereft of merit, for it raises a distinction concerned.
without any substantive difference. The case Home Articles 586 and 587, Code of Commerce
Insurance specifically dealt with "the liability of the shipowner for Petitioner Valenzuela insists that the charter party stipulation is
acts or negligence of its captain and crew" 21 and a charter party contrary to Articles 586 and 587 of the Code of Commerce which
stipulation which "exempts the owner of the vessel from any loss confer on petitioner the right to recover damages from the
or damage or delay arising from any other source, even from the shipowner and ship agent for the acts or conduct of the
neglect or fault of the captain or crew or some other person captain. 25 We are not persuaded. Whatever rights petitioner may
employed by the owner on have under the aforementioned statutory provisions were waived
board, for whose acts the owner would ordinarily be liable except when it entered into the charter party.
for said paragraph." 22 Undoubtedly, Home Insurance is applicable Article 6 of the Civil Code provides that "(r)ights may be waived,
to the case at bar. unless the waiver is contrary to law, public order, public policy,
The naked assertion of petitioner that the American rule morals, or good customs, or prejudicial to a person with a right
enunciated in Home Insurance is not the rule in the recognized by law." As a general rule, patrimonial rights may be
Philippines 23 deserves scant consideration. The Court there waived as opposed to rights to personality and family rights which
categorically held that said rule was "reasonable" and proceeded may not be made the subject of waiver. 26 Being patently and
to apply it in the resolution of that case. Petitioner miserably failed undoubtedly patrimonial, petitioner's right conferred under said
to show such circumstances or arguments which would necessitate articles may be waived. This, the petitioner did by acceding to the
contractual stipulation that it is solely responsible or any damage Moreover, the factual milieu of this case does not justify the
to the cargo, thereby exempting the private carrier from any application of the second paragraph of Article 1173 of the Civil
responsibility for loss or damage thereto. Furthermore, as Code which prescribes the standard of diligence to be observed in
discussed above, the contract of private carriage binds petitioner the event the law or the contract is silent. In the instant case,
and private respondent alone; it is not imbued with public policy Article 362 of the Code of Commerce 28 provides the standard of
considerations for the general public or third persons are not ordinary diligence for the carriage of goods by a carrier. The
affected thereby. standard of diligence under this statutory provision may, however,
Articles 1170 and 1173, Civil Code be modified in a contract of private carriage as the petitioner and
Petitioner likewise argues that the stipulation subject of this private respondent had done in their charter party.
controversy is void for being contrary to Articles 1170 and 1173 of Cases Cited by Petitioner Inapplicable
the Civil Code 27 which read: Petitioner cites Shewaram vs.  Philippine Airlines, Inc. 29 which, in
Art. 1170. Those who in the performance of their obligations are turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and
guilty of fraud, negligence, or delay, and those who in any manner argues that the public policy considerations stated there vis-a-
contravene the tenor thereof, are liable for damages vis contractual stipulations limiting the carrier's liability be applied
Art. 1173. The fault or negligence of the obligor consists in the "with equal force" to this case. 31 It also cites Manila Railroad
omission of that diligence which is required by the nature of the Co. vs.Compañia Transatlantica  32 and contends that stipulations
obligation and corresponds with the circumstances of the persons, exempting a party from liability for damages due to negligence
of the time and of the place. When negligence shows bad faith, the "should not be countenanced" and should be "strictly construed"
provisions of articles 1171 and 2201, shall apply. against the party claiming its benefit. 33We disagree.
If the law does not state the diligence which is to be observed in The cases of Shewaram and Ysmael both involve a common
the performance, that which is expected of a good father of a carrier; thus, they necessarily justify the application of such policy
family shall be required. considerations and concomitantly stricter rules. As already
The Court notes that the foregoing articles are applicable only to discussed above, the public policy considerations behind the
the obligor or the one with an obligation to perform. In the instant rigorous treatment of common carriers are absent in the case of
case, Private Respondent Seven Brothers is not an obligor in private carriers. Hence, the stringent laws applicable to common
respect of the cargo, for this obligation to bear the loss was shifted carriers are not applied to private carries. The case of Manila
to petitioner by virtue of the charter party. This shifting of Railroad is also inapplicable because the action for damages there
responsibility, as earlier observed, is not void. The provisions cited does not involve a contract for transportation. Furthermore, the
by petitioner are, therefore, inapplicable to the present case. defendant therein made a "promise to use due care in the lifting
operations" and, consequently, it was "bound by its undertaking"';
besides, the exemption was intended to cover accidents due to necessarily preclude the petitioner from proceeding against private
hidden defects in the apparatus or other unforseeable respondent. An aggrieved party may still recover the deficiency for
occurrences" not caused by its "personal negligence." This promise the person causing the loss in the event the amount paid by the
was thus constructed to make sense together with the stipulation insurance company does not fully cover the loss. Article 2207 of
against liability for damages. 34 In the present case, we stress that the Civil Code provides:
the private respondent made no such promise. The agreement of Art. 2207. If the plaintiff's property has been insured, and he has
the parties to exempt the shipowner from responsibility for any received indemnity for the insurance company for the injury or
damage to the cargo and place responsibility over the same to loss arising out of the wrong or breach of contract complained of,
petitioner is the lone stipulation considered now by this Court. the insurance company shall be subrogated to the rights of the
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez insured against the wrongdoer or the person who has violated the
Costelo, 35 Walter A. Smith & Co. vs.Cadwallader Gibson Lumber contract. If the amount paid by the insurance company does not
Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta fully cover the injury or loss, the aggrieved party shall be entitled
Development Co. vs.Steamship "Pompey"  38 and Limpangco Sons to recover the deficiency form the person causing the loss or
vs.  Yangco Steamship Co. 39 in support of its contention that the injury.
shipowner be held liable for damages. 40 These however are not on WHEREFORE, premises considered, the petition is hereby DENIED
all fours with the present case because they do not involve a for its utter failure to show any reversible error on the part of
similar factual milieu or an identical stipulation in the charter party Respondent Court. The assailed Decision is AFFIRMED.
expressly exempting the shipowner form responsibility for any SO ORDERED.
damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no
cause of action against it because this Court has earlier affirmed
the liability of South Sea for the loss suffered by petitioner. Private
respondent submits that petitioner is not legally entitled to collect
twice for a single loss. 41 In view of the above disquisition
upholding the validity of the questioned charter party stipulation
and holding that petitioner may not recover from private
respondent, the present issue is moot and academic. It suffices to
state that the Resolution of this Court dated June 2,
1995 42 affirming the liability of South Sea does not, by itself,

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