G.R. No. 101089. April 7, 1993. goods are lost, destroyed or deteriorated.
goods are lost, destroyed or deteriorated. There are very few instances when
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO
DETERMINE COMMON CARRIER. Article 1732 of the Civil Code
defines a common carrier as "(a) person, corporation or firm, or association
engaged in the business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their services to the
public." The test to determine a common carrier is "whether the given
undertaking is a part of the business engaged in by the carrier which he has
held out to the general public as his occupation rather than the quantity or
extent of the business transacted." . . . The holding of the Court in De
Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of
the Civil Code, it held thus: "The above article makes no distinction between
one whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in local
idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguished
between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS
TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
ABSOLUTE. Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted negligently if the
the presumption of negligence does not attach and these instances are
enumerated in Article 1734. In those cases where the presumption is applied,
the common carrier must prove that it exercised extraordinary diligence in
order to overcome the presumption . . . The presumption of negligence was
raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence
to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED
NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. In De
Guzman vs. Court of Appeals, the Court held that hijacking, not being
included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have
been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or
irresistible threat, violence, or force. This is in accordance with Article 1745
of the Civil Code which provides: "Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable, unjust and contrary to public
policy . . . (6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible threat,
violences or force, is dispensed with or diminished"; In the same case, the
Supreme Court also held that: "Under Article 1745 (6) above, a common
carrier is held responsible and will not be allowed to divest or to diminish
such responsibility even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave of irresistible
threat, violence of force," We believe and so hold that the limits of the duty
of extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave
or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS
CONCLUSIVE. In this case, petitioner herself has made the admission
that she was in the trucking business, offering her trucks to those with cargo
to move. Judicial admissions are conclusive and no evidence is required to
prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES
A FACT. Petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF
AFFIANTS AVAILABLE AS WITNESSES. While the affidavit of
Juanito Morden, the truck helper in the hijacked truck, was presented as
evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the
affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS
WHAT LAW DEFINES IT TO BE. Granting that the said evidence were
not self-serving, the same were not sufficient to prove that the contract was
one of lease. It must be understood that a contract is what the law defines it
to be and not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of
Appeals in "RODOLFO A. CIPRIANO, doing business under the name
CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA
M. BASCOS, doing business under the name of BASCOS TRUCKING,
defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of
which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed
from, which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE
for short) entered into a hauling contract 2 with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul the latter's 2,000 m/tons
of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse
of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of
P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due
to theft, hijacking and non-delivery or damages to the cargo during transport
at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to
pay. Eventually, Cipriano filed a complaint for a sum of money and damages
with writ of preliminary attachment 4 for breach of a contract of carriage.
The prayer for a Writ of Preliminary Attachment was supported by an
affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57
the Rules of Court, whereby a writ of preliminary attachment may lawfully
issue, namely:
"(e) in an action against a party who has removed or disposed of his property,
or is about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by
the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all
legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17,
1987.
In her answer, petitioner interposed the following defenses: that there was no
contract of carriage since CIPTRADE leased her cargo truck to load the
cargo from Manila Port Area to Laguna; that CIPTRADE was liable to
petitioner in the amount of P11,000.00 for loading the cargo; that the truck
carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to
CIPTRADE and that petitioner and the police exerted all efforts to locate the
hijacked properties; that after preliminary investigation, an information for
robbery and carnapping were filed against Jose Opriano, et al.; and that
hijacking, being a force majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of
which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR
HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages
with legal interest of 12% per cent per annum to be counted from December
4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for
attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March
10, 1987 filed by defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed
the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following
assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT
LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF
THE RESPONDENT COURT THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT,
NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO
FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING
OF THE TRIAL COURT THAT PETITIONER'S MOTION TO
DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS
BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF
THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a
common carrier?; and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found
that she admitted in her answer that she did business under the name A.M.
Bascos Trucking and that said admission dispensed with the presentation by
private respondent, Rodolfo Cipriano, of proofs that petitioner was a
common carrier. The respondent Court also adopted in toto the trial court's
decision that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that petitioner was
a common carrier: the fact that the truck driver of petitioner, Maximo
Sanglay, received the cargo consisting of 400 bags of soya bean meal as
evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the
fact that control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner
was a common carrier, she alleged in this petition that the contract between
her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the
truck. She cited as evidence certain affidavits which referred to the contract
as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner
herself. 9 She further averred that Jesus Bascos confirmed in his testimony
his statement that the contract was a lease contract. 10 She also stated that:
she was not catering to the general public. Thus, in her answer to the
amended complaint, she said that she does business under the same style of
A.M. Bascos Trucking, offering her trucks for lease to those who have cargo
to move, not to the general public but to a few customers only in view of the
fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common
carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 12
In this case, petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they
offer their services only to a select group of people and because the private
respondents, plaintiffs in the lower court, did not object to the presentation of
affidavits by petitioner where the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of the Court in De Guzman vs.
Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil
Code, it held thus:
"The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial
and appellate courts have dismissed them as self-serving and petitioner
contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the
same were not sufficient to prove that the contract was one of lease. It must
be understood that a contract is what the law defines it to be and not what it
is called by the contracting parties. 15 Furthermore, petitioner presented no
other proof of the existence of the contract of lease. He who alleges a fact has
the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the
goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. 17 Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. 18 There are very few instances when the
presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs.
Court of Appeals, 20 the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he
must prove that the robbers or the hijackers acted with grave or irresistible
threat, violence, or force. This is in accordance with Article 1745 of the Civil
Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force, is
dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and
will not be allowed to divest or to diminish such responsibility even for
acts of strangers like thieves or robbers except where such thieves or robbers
in fact acted with grave or irresistible threat, violence or force. We believe
and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence
or force."
To establish grave and irresistible force, petitioner presented her accusatory
affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay".
However, both the trial court and the Court of Appeals have concluded that
these affidavits were not enough to overcome the presumption. Petitioner's
affidavit about the hijacking was based on what had been told her by Juanito
Morden. It was not a first-hand account. While it had been admitted in court
for lack of objection on the part of private respondent, the respondent Court
had discretion in assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review on certiorari, We
are not to determine the probative value of evidence but to resolve questions
of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the
hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck
helper in the hijacked truck, was presented as evidence in court, he himself
was a witness as could be gleaned from the contents of the petition.
Affidavits are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and
robbery against the accused named in said affidavits did not necessarily mean
that the contents of the affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial
issues involved, We find no reason to disturb the conclusion that the motion
to lift/dissolve the writ of preliminary attachment has been rendered moot
and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's
claim cannot be sustained. The petition is DISMISSED and the decision of
the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used
bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of
such scrap material, respondent would bring such material to Manila for
resale. He utilized two (2) six-wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan, respondent would load
his vehicles with cargo which various merchants wanted delivered to
differing establishments in Pangasinan. For that service, respondent charged
freight rates which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by
respondent himself, while 600 cartons were placed on board the other truck
which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other
600 boxes never reached petitioner, since the truck which carried these boxes
was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac,
by armed men who took with them the truck, its driver, his helper and the
cargo.
On 6 January 1971, petitioner commenced action against private respondent
in the Court of First Instance of Pangasinan, demanding payment of P
22,150.00, the claimed value of the lost merchandise, plus damages and
attorney's fees. Petitioner argued that private respondent, being a common
carrier, and having failed to exercise the extraordinary diligence required of
him by the law, should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and
argued that he could not be held responsible for the value of the lost goods,
such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private
respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court
had erred in considering him a common carrier; in finding that he had
habitually offered trucking services to the public; in not exempting him from
liability on the ground of force majeure; and in ordering him to pay damages
and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight "as a
casual
occupation a sideline to his scrap iron business" and not as a common
carrier. Petitioner came to this Court by way of a Petition for Review
assigning as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure;
and
3. that respondent was not liable for the value of the
undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto
Cendana may, under the facts earlier set forth, be properly characterized as a
common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local Idiom
as "a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733
deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service
of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such back-hauling was done
on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent's principal occupation was not the carriage of
goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common
carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm
acts as a common carrier, without regard to whether or not such carrier has
also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the necessary
certificate of public convenience, would be offensive to sound public policy;
that would be to reward private respondent precisely for failing to comply
with applicable statutory requirements. The business of a common carrier
impinges directly and intimately upon the safety and well being and property
of those members of the general community who happen to deal with such
carrier. The law imposes duties and liabilities upon common carriers for the
safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely
facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public
policy" 2 are held to a very high degree of care and diligence ("extraordinary
diligence") in the carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, "further expressed in Articles
1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods which they
carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or
other natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner
of the goods;
(4) The character-of the goods or defects in
the packing or-in the containers; and
(5) Order or act of competent public
authority.
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is
a closed list. Causes falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of Article 1735,
which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4
and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required
in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the
specific cause alleged in the instant case the hijacking of the carrier's
truck does not fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore, that the hijacking of
the carrier's vehicle must be dealt with under the provisions of Article 1735,
in other words, that the private respondent as common carrier is presumed to
have been at fault or to have acted negligently. This presumption, however,
may be overthrown by proof of extraordinary diligence on the part of private
respondent.
Petitioner insists that private respondent had not observed extraordinary
diligence in the care of petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent should have hired a security
guard presumably to ride with the truck carrying the 600 cartons of Liberty
filled milk. We do not believe, however, that in the instant case, the standard
of extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the risk of
his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of
the duty of extraordinary diligence in the vigilance over the goods carried in
the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over
goods is, under Article 1733, given additional specification not only by
Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article
1745 provides in relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public
policy:
xxx xxx xxx
(5) that the common carrier shall not be
responsible for the acts or omissions of his
or its employees;
(6) that the common carrier's liability for
acts committed by thieves, or of
robbers who donot act with grave or
irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not
responsible for the loss, destruction or
deterioration of goods on account of the
defective condition of the car vehicle, ship,
airplane or other equipment used in the
contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and
will not be allowed to divest or to diminish such responsibility even for
acts of strangers like thieves or robbers, except where such thieves or robbers
in fact acted "with grave or irresistible threat, violence or force." We believe
and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence
or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an
information for robbery in band was filed in the Court of First Instance of
Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar
Oria and one John Doe." There, the accused were charged with willfully and
unlawfully taking and carrying away with them the second truck, driven by
Manuel Estrada and loaded with the 600 cartons of Liberty filled milk
destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not
irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers
were armed with firearms. The robbers not only took away the truck and its
cargo but also kidnapped the driver and his helper, detaining them for several
days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The
Court of First Instance convicted all the accused of robbery, though not of
robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common carrier
and properly regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks of travel and
of transport of goods, and are not held liable for acts or events which cannot
be foreseen or are inevitable, provided that they shall have complied with the
rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that
private respondent Cendana is not liable for the value of the undelivered
merchandise which was lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED
and the Decision of the Court of Appeals dated 3 August 1977 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 125948. December 29, 1998]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-
AN, BATANGAS CITY and ADORACION C. ARELLANO, in
her official capacity as City Treasurer of Batangas, respondents.
DECISION
MARTINEZ, J.:
 This petition for review on certiorari assails the Decision of the Court
of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming
the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil
Case No. 4293, which dismissed petitioners' complaint for a business tax
refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No.
387, as amended, to contract, install and operate oil pipelines. The original
pipeline concession was granted in 1967 [1] and renewed by the Energy
Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with
the Office of the Mayor of Batangas City. However, before the mayor's
permit could be issued, the respondent City Treasurer required petitioner to
pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to
the Local Government Code.[3] The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable in four
installments based on the gross receipts for products pumped at GPS-1 for
the fiscal year 1993 which amounted to P181,681,151.00. In order not to
hamper its operations, petitioner paid the tax under protest in the amount
of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the
respondent City Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is engaged in the
business of transporting petroleum products from the Batangas refineries, via
pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is
exempt from paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax 'on contractors and other
independent contractors' under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy on transportation
contractors.
"The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said
section limits the imposition of fees and charges on business to such amounts
as may be commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for the license fee,
the imposition thereof based on gross receipts is violative of the aforecited
provision. The amount of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere regulatory imposition." [4]
On March 8, 1994, the respondent City Treasurer denied the protest
contending that petitioner cannot be considered engaged in transportation
business, thus it cannot claim exemption under Section 133 (j) of the Local
Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of
Batangas City a complaint[6] for tax refund with prayer for a writ of
preliminary injunction against respondents City of Batangas and Adoracion
Arellano in her capacity as City Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition and collection of the business tax
on its gross receipts violates Section 133 of the Local Government Code; (2)
the authority of cities to impose and collect a tax on the gross receipts of
"contractors and independent contractors" under Sec. 141 (e) and 151 does
not include the authority to collect such taxes on transportation contractors
for, as defined under Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer illegally and
erroneously imposed and collected the said tax, thus meriting the immediate
refund of the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot
be exempt from taxes under Section 133 (j) of the Local Government Code
as said exemption applies only to "transportation contractors and persons
engaged in the transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the term
"common carrier" which refers solely to ordinary carriers such as trucks,
trains, ships and the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or manner by which a
product is delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the
complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a
rule that tax exemptions are to be strictly construed against the taxpayer,
taxes being the lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic
Act 387, (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of
concession grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this
case (exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses
only common carriers so as not to overburden the
riding public or commuters with taxes. Plaintiff is
not a common carrier, but a special carrier extending
its services and facilities to a single specific or
"special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give
more and effective local autonomy to local
governments than the previous enactments, to make
them economically and financially viable to serve
the people and discharge their functions with a
concomitant obligation to accept certain devolution
of powers, x x x So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143 (e) and 151
of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition
for review. On February 27, 1995, we referred the case to the respondent
Court of Appeals for consideration and adjudication. [10] On November 29,
1995, the respondent court rendered a decision [11] affirming the trial court's
dismissal of petitioner's complaint. Petitioner's motion for reconsideration
was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a
Resolution dated November 11, 1996. [13] Petitioner moved for a
reconsideration which was granted by this Court in a Resolution [14] of
January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding
that (1) the petitioner is not a common carrier or a transportation contractor,
and (2) the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself
out to the public as engaged in the business of transporting persons or
property from place to place, for compensation, offering his services to the
public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any
person, corporation, firm or association engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods
is:
1. He must be engaged in the business of carrying goods for others
as a public employment, and must hold himself out as ready
to engage in the transportation of goods for person generally
as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his
business is confined;
3. He must undertake to carry by the method by which his business
is conducted and over his established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not
exclude it from the definition of a common carrier. In De Guzman vs. Court
of Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one
whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom,
as a 'sideline'). Article 1732 x x x avoids making any distinction between a
person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the 'general public,' i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We
think that Article 1877 deliberately refrained from making such
distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be
seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, 'public
service' includes:
'every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric light heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in
Section 133 (j) of the Local Government Code refers only to common
carriers transporting goods and passengers through moving vehicles or
vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common
carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact,
in the United States, oil pipe line operators are considered common carriers.
[17]
Under the Petroleum Act of the Philippines (Republic Act 387),
petitioner is considered a "common carrier." Thus, Article 86 thereof
provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall
have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum
as may be offered by others for transport, and to charge without
discrimination such rates as may have been approved by the Secretary of
Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public
utility. Pertinent portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum
x x and everything relating to the manufacture, refining, storage,
or transportation by special methods of petroleum, is hereby declared to
be a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a
"common carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 x x x. Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax as provided
for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following :
xxxxxxxxx
 (j) Taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or
freight by hire and common carriers by air, land or water,
except as provided in this Code."
The deliberations conducted in the House of Representatives on the
Local Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121
[now Sec. 131]. Common Limitations on the Taxing Powers of Local
Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed to be exempted
from the taxing powers of the local government units. May we know the
reason why the transportation business is being excluded from the taxing
powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section
121 (now Sec. 131), line 16, paragraph 5. It states that local government units
may not impose taxes on the business of transportation, except as otherwise
provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II,
one can see there that provinces have the power to impose a tax on business
enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of
taxes by local government units on the carrier business. Local
government units may impose taxes on top of what is already being imposed
by the National Internal Revenue Code which is the so-called "common
carriers tax." We do not want a duplication of this tax, so we just
provided for an exception under Section 125 [now Sec. 137] that a province
may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the taxing power
of the local government unit the imposition of business tax against common
carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on
its gross sales/earnings under the National Internal Revenue Code. [19] To tax
petitioner again on its gross receipts in its transportation of petroleum
business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
36801 is REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style
TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee
Ins. Co., Inc.) respondent.
MENDOZA, J.:
This is a petition for review of the decision, 1 dated May 31, 2001, of the
Court of Appeals, affirming the decision2of the Regional Trial Court, Makati
City, Branch 148, which ordered petitioner to pay respondent, as subrogee,
the amount of P93,112.00 with legal interest, representing the value of
damaged cargo handled by petitioner, 25% thereof as attorney's fees, and the
cost of the suit.1wphi1.nt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal
Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time
material to this case, petitioner entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting
paper and 124 reels of kraft liner board from the Port Area in Manila to
SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita,
Manila. The cargo was insured by respondent UCPB General Insurance Co.,
Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans,
arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were
unloaded from the vessel to the custody of the arrastre operator, Manila Port
Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her
contract with SMC, withdrew the cargo from the arrastre operator and
delivered it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the
goods were inspected by Marine Cargo Surveyors, who found that 15 reels of
the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft
liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract
for the aforementioned amount. In turn, respondent, as subrogee of SMC,
brought suit against petitioner in the Regional Trial Court, Branch 148,
Makati City, which, on December 20, 1995, rendered judgment finding
petitioner liable to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage
while in the custody of defendants. Evidence such as the Warehouse
Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries
appearing therein, classified as "TED" and "TSN", which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end
and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh.
"H" - "H-4-A") confirms the fact of the damaged condition of the
subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular,
which provides among others that:
" . . . we opine that damages sustained by shipment is
attributable to improper handling in transit presumably
whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
Accordingly, the trial court ordered petitioner to pay the following amounts
--
The evidence adduced by the defendants is not enough to sustain
[her] defense that [she is] are not liable. Defendant by reason of the
nature of [her] business should have devised ways and means in
order to prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to the
consignee. Defendant did not present any evidence on what
precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo [she]
shall perform such extraordinary diligence because of the nature of
the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the
goods are proved to have been lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is shifted to the
carrier to prove that he has exercised the extraordinary diligence
required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case
against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is incumbent
upon the carrier to prove that the loss was due to accident or some
other circumstances inconsistent with its liability." (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV,
1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same
time a common carrier is supposed [to] exercise [the] extraordinary
diligence required by law, hence the extraordinary responsibility lasts
from the time the goods are unconditionally placed in the possession
of and received by the carrier for transportation until the same are
delivered actually or constructively by the carrier to the consignee or
to the person who has the right to receive the same. 3
 1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this
petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON
THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS
A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.5
It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court
of Appeals held otherwise, then she is indeed not liable beyond what ordinary
diligence in the vigilance over the goods transported by her, would
require.6 Consequently, any damage to the cargo she agrees to transport
cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the
Court of Appeals, she is not a common carrier but a private carrier because,
as a customs broker and warehouseman, she does not indiscriminately hold
her services out to the public but only offers the same to select parties with
whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court
dismissed a similar contention and held the party to be a common carrier,
thus -
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public."
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
. . . Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one
who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service
of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x
x" 8
There is greater reason for holding petitioner to be a common carrier because
the transportation of goods is an integral part of her business. To uphold
petitioner's contention would be to deprive those with whom she contracts
the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for her customers, as already noted, is part and
parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each
case. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary
diligence in the vigilance over goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She
claims that the "spoilage or wettage" took place while the goods were in the
custody of either the carrying vessel "M/V Hayakawa Maru," which
transported the cargo to Manila, or the arrastre operator, to whom the goods
were unloaded and who allegedly kept them in open air for nine days from
July 14 to July 23, 1998 notwithstanding the fact that some of the containers
were deformed, cracked, or otherwise damaged, as noted in the Marine
Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door
distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of
water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly
detached loosened.10
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino
testified that he has no personal knowledge on whether the container vans
were first stored in petitioner's warehouse prior to their delivery to the
consignee. She likewise claims that after withdrawing the container vans
from the arrastre operator, her driver, Ricardo Nazarro, immediately
delivered the cargo to SMC's warehouse in Ermita, Manila, which is a mere
thirty-minute drive from the Port Area where the cargo came from. Thus, the
damage to the cargo could not have taken place while these were in her
custody.11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine
Cargo Surveyors indicates that when the shipper transferred the cargo in
question to the arrastre operator, these were covered by clean Equipment
Interchange Report (EIR) and, when petitioner's employees withdrew the
cargo from the arrastre operator, they did so without exception or protest
either with regard to the condition of container vans or their contents. The
Survey Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted
discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14
July 1990, containerized onto 30' x 20' secure metal vans, covered by
clean EIRs. Except for slight dents and paint scratches on side and
roof panels, these containers were deemed to have [been] received in
good condition.
....
Transfer/Delivery:
 On July 23, 1990, shipment housed onto 30' x 20' cargo containers
was [withdrawn] by Transorient Container Services, Inc. . . . without
exception.
[The cargo] was finally delivered to the consignee's storage
warehouse located at Tabacalera Compound, Romualdez Street,
Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port Services Inc.,
in good order and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-
appellant from the arrastre still in good order and condition as the
same were received by the former without exception, that is, without
any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant
would report it immediately to the consignee or make an exception
on the delivery receipt or note the same in the Warehouse Entry Slip
(WES). None of these took place. To put it simply, the defendant-
appellant received the shipment in good order and condition and
delivered the same to the consignee damaged. We can only conclude
that the damages to the cargo occurred while it was in the possession
of the defendant-appellant. Whenever the thing is lost (or damaged)
in the possession of the debtor (or obligor), it shall be presumed that
the loss (or damage) was due to his fault, unless there is proof to the
contrary. No proof was proffered to rebut this legal presumption and
the presumption of negligence attached to a common carrier in case
of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not have been damaged
while in her custody as she immediately delivered the containers to SMC's
compound, suffice it to say that to prove the exercise of extraordinary
diligence, petitioner must do more than merely show the possibility that
some other party could be responsible for the damage. It must prove that it
used "all reasonable means to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care in the handling
[thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides --
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
....
(4) The character of the goods or defects in the packing or in the
containers.
....
For this provision to apply, the rule is that if the improper packing or, in this
case, the defect/s in the container, is/are known to the carrier or his
employees or apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage resulting therefrom. 14 In
this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in the carriage
of goods in this case or that she is exempt from liability, the presumption of
negligence as provided under Art. 173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1wphi1.nt
SO ORDERED.
G.R. No. 147079 December 21, 2004
A.F. SANCHEZ BROKERAGE INC., petitioners,
vs.
THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents.
DECISION

CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate courts
Decision1 of August 10, 2000 reversing and setting aside the judgment of
Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B
which dismissed the complaint of respondent FGU Insurance Corporation
(FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez
Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of
KLM Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives
consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets
and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the
consignee, Wyeth-Suaco Laboratories, Inc.2The Femenal tablets were placed
in 124 cartons and the Nordiol tablets were placed in 20 cartons which were
packed together in one (1) LD3 aluminum container, while the Trinordial
tablets were packed in two pallets, each of which contained 30 cartons. 3
Wyeth-Suaco insured the shipment against all risks with FGU Insurance
which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy
No. 138.4
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino
International Airport (NAIA),5 it was discharged "without exception"6 and
delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located
also at the NAIA for safekeeping.7
In order to secure the release of the cargoes from the PSI and the Bureau of
Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which
had been its licensed broker since 1984.8 As its customs broker, Sanchez
Brokerage calculates and pays the customs duties, taxes and storage fees for
the cargo and thereafter delivers it to Wyeth-Suaco. 9
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of
Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt
for which, Official Receipt No. 016992,10 was issued. On the receipt, another
representative of Sanchez Brokerage, M. Sison, 11 acknowledged that he
received the cargoes consisting of three pieces in good condition.12
Wyeth-Suaco being a regular importer, the customs examiner did not inspect
the cargoes13 which were thereupon stripped from the aluminum
containers14 and loaded inside two transport vehicles hired by Sanchez
Brokerage.15
Among those who witnessed the release of the cargoes from the PSI
warehouse were Ruben Alonso and Tony Akas,16 employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor
and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of
FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. in Antipolo City for quality control check. 17 The delivery
receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery
consisted of one container with 144 cartons of Femenal and Nordiol and 1
pallet containing Trinordiol.18
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco,
acknowledged the delivery of the cargoes by affixing his signature on the
delivery receipt.19 Upon inspection, however, he, together with Ruben Alonzo
of Elite Surveyors, discovered that 44 cartons containing Femenal and
Nordiol tablets were in bad order.20 He thus placed a note above his signature
on the delivery receipt stating that 44 cartons of oral contraceptives were in
bad order. The remaining 160 cartons of oral contraceptives were accepted as
complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey
report21 dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3
cartons of Nordiol tablets were "wetted" (sic).22
The Elite Surveyors later issued Certificate No. CS-0731-1538/92 23 attached
to which was an "Annexed Schedule" whereon it was indicated that prior to
the loading of the cargoes to the brokers trucks at the NAIA, they were
inspected and found to be in "apparent good condition."24 Also noted was that
at the time of delivery to the warehouse of Hizon Laboratories Inc., slight to
heavy rains fell, which could account for the wetting of the 44 cartons of
Femenal and Nordiol tablets.25
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction
Report26 confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700
blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets
were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection 27 of
38 cartons of Femenal and 3 cartons of Nordiol on the ground that they were
"delivered to Hizon Laboratories with heavy water damaged (sic) causing the
cartons to sagged (sic) emitting a foul order and easily attracted flies." 28
Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez
Brokerage the payment of P191,384.25 representing the value of its loss
arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an
insurance claim against FGU Insurance which paid Wyeth-Suaco the amount
of P181,431.49 in settlement of its claim under Marine Risk Note Number
4995.
Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it
paid Wyeth-Suaco, Sanchez Brokerage, by letter31 of January 7, 1993,
disclaimed liability for the damaged goods, positing that the damage was due
to improper and insufficient export packaging; that when the sealed
containers were opened outside the PSI warehouse, it was discovered that
some of the loose cartons were wet,32 prompting its (Sanchez Brokerages)
representative Morales to inform the Import-Export Assistant of Wyeth-
Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter
advised to still deliver them to Hizon Laboratories where an adjuster would
assess the damage.33
Hence, the filing by FGU Insurance of a complaint for damages before the
Regional Trial Court of Makati City against the Sanchez Brokerage.
The trial court, by Decision34 of July 29, 1996, dismissed the complaint,
holding that the Survey Report prepared by the Elite Surveyors is bereft of
any evidentiary support and a mere product of pure guesswork. 35
On appeal, the appellate court reversed the decision of the trial court, it
holding that the Sanchez Brokerage engaged not only in the business of
customs brokerage but also in the transportation and delivery of the cargo of
its clients, hence, a common carrier within the context of Article 1732 of the
New Civil Code.36
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered
to petitioner in good order and condition but were in a damaged state when
delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage
is presumed negligent and upon it rested the burden of proving that it
exercised extraordinary negligence not only in instances when negligence is
directly proven but also in those cases when the cause of the damage is not
known or unknown.37
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the
Appellant is GRANTED. The Decision of the Court a quo is
REVERSED. Another Decision is hereby rendered in favor of the
Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the
principal amount of P181, 431.49, with interest thereupon at
the rate of 6% per annum, from the date of the Decision of
the Court, until the said amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the
amount of P20,000.00 as and by way of attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED. 38
Sanchez Brokerages Motion for Reconsideration having been denied by the
appellate courts Resolution of December 8, 2000 which was received by
petitioner on January 5, 2001, it comes to this Court on petition for certiorari
filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and
reversible error tantamount to abuse of discretion when it found petitioner a
"common carrier" within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of
action which petitioner should have taken was to file a petition for review on
certiorari since the sole office of a writ of certiorari is the correction of errors
of jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction and does not include correction of
the appellate courts evaluation of the evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a
common carrier, failed to overcome the presumption of negligence, it being
documented that petitioner withdrew from the warehouse of PSI the subject
shipment entirely in good order and condition.39
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action or proceedings
involved, may be appealed to this Court by filing a petition for review, which
would be but a continuation of the appellate process over the original case. 40
The Resolution of the Court of Appeals dated December 8, 2000 denying the
motion for reconsideration of its Decision of August 10, 2000 was received
by petitioner on January 5, 2001. Since petitioner failed to appeal within 15
days or on or before January 20, 2001, the appellate courts decision had
become final and executory. The filing by petitioner of a petition for
certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of
appeal.
In another vein, the rule is well settled that in a petition for certiorari, the
petitioner must prove not merely reversible error but also grave abuse of
discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside
the decision of the trial court based on its finding that petitioner is liable for
the damage to the cargo as a common carrier. What petitioner is ascribing is
an error of judgment, not of jurisdiction, which is properly the subject of an
ordinary appeal.
Where the issue or question involves or affects the wisdom or legal
soundness of the decision not the jurisdiction of the court to render said
decision the same is beyond the province of a petition for certiorari.41 The
supervisory jurisdiction of this Court to issue a cert writ cannot be exercised
in order to review the judgment of lower courts as to its intrinsic correctness,
either upon the law or the facts of the case. 42
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be
also a common carrier, as defined under Article 1732 of the Civil Code, to
wit:
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez
Brokerage, himself testified that the services the firm offers include the
delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs
broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in
cargos, and those upon approval of the importer, we prepare the entry
together for processing and claims from customs and finally deliver
the goods to the warehouse of the importer.43
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity.44 The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required
by law is bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under
Article 173345 of the Civil Code, extraordinary diligence in the vigilance over
the goods it transports according to all the circumstances of each case. In the
event that the goods are lost, destroyed or deteriorated, it is presumed to have
been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.46
The concept of "extra-ordinary diligence" was explained in Compania
Maritima v. Court of Appeals:47
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires."48
In the case at bar, it was established that petitioner received the cargoes from
the PSI warehouse in NAIA in good order and condition;49 and that upon
delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were
found to be in bad order, as noted in the Delivery Receipt 50 issued by
petitioner, and as indicated in the Survey Report of Elite Surveyors 51 and the
Destruction Report of Hizon Laboratories, Inc. 52
In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of the
shipper for failing to properly pack them and to the inherent characteristics of
the goods53 ; and that it should not be faulted for following the instructions of
Calicdan of Wyeth-Suaco to proceed with the delivery despite information
conveyed to the latter that some of the cartons, on examination outside the
PSI warehouse, were found to be wet.54
While paragraph No. 4 of Article 173455 of the Civil Code exempts a
common carrier from liability if the loss or damage is due to the character of
the goods or defects in the packing or in the containers, the rule is that if the
improper packing is known to the carrier or his employees or is apparent
upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of
liability for the resulting damage.56
If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo under
protest or with reservations duly noted on the receipt issued by PSI. But it
made no such protest or reservation.57
Moreover, as observed by the appellate court, if indeed petitioners
employees only examined the cargoes outside the PSI warehouse and found
some to be wet, they would certainly have gone back to PSI, showed to the
warehouseman the damage, and demanded then and there for Bad Order
documents or a certification confirming the damage. 58 Or, petitioner would
have presented, as witness, the employees of the PSI from whom Morales
and Domingo took delivery of the cargo to prove that, indeed, part of the
cargoes was already damaged when the container was allegedly opened
outside the warehouse.59
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no
rain fell that day. Instead, it asserts that some of the cargoes were already wet
on delivery by PSI outside the PSI warehouse but such notwithstanding
Calicdan directed Morales to proceed with the delivery to Hizon
Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of
Morales on July 29, 1992, he failed to specifically declare what time he
received the call. As to whether the call was made at the PSI warehouse when
the shipment was stripped from the airport containers, or when the cargoes
were already in transit to Antipolo, it is not determinable. Aside from that
phone call, petitioner admitted that it had no documentary evidence to prove
that at the time it received the cargoes, a part of it was wet, damaged or in
bad condition.60
The 4-page weather data furnished by PAGASA61 on request of Sanchez
Brokerage hardly impresses, no witness having identified it and interpreted
the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc.,
the oral contraceptives were damaged by rainwater while in transit to
Antipolo City is more likely then. Sanchez himself testified that in the past,
there was a similar instance when the shipment of Wyeth-Suaco was also
found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral
contraceptives, that arrived at the NAIA were damaged and claimed
by the Wyeth-Suaco without any question?
 WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted
(sic) but Wyeth-Suaco did not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there
was a cartoon (sic) wetted (sic) up to the bottom are wet specially
during rainy season.62
Since petitioner received all the cargoes in good order and condition at the
time they were turned over by the PSI warehouseman, and upon their
delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad
order, it was incumbent on petitioner to prove that it exercised extraordinary
diligence in the carriage of the goods. It did not, however. Hence, its
presumed negligence under Article 1735 of the Civil Code remains
unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is
hereby AFFIRMED.
Costs against petitioner.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision [1] of the Court of Appeal
well as its Resolution[2] dated September 28, 2001 denying the motion for reconsidera
which affirmed that of Branch 21 of the Regional Trial Court (RTC) of Manila in C
Case No. 92-63132[3] holding petitioner Schmitz Transport Brokerage Corpora
(Schmitz Transport), together with Black Sea Shipping Corporation (Black S
represented by its ship agent Inchcape Shipping Inc. (Inchcape), and Transport Ven
(TVI), solidarily liable for the loss of 37 hot rolled steel sheets in coil that were wa
overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the por
Ilyichevsk, Russia on board M/V Alexander Saveliev (a vessel of Russian registry
owned by Black Sea) 545 hot rolled steel sheets in coil weighing 6,992,450 metric ton
The cargoes, which were to be discharged at the port of Manila in favor of
consignee, Little Giant Steel Pipe Corporation (Little Giant), [4] were insured agains
risks with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Po
No. M-91-3747-TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine P
Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila S
Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure the requ
clearances, to receive the cargoes from the shipside, and to deliver them to its
consignees) warehouse at Cainta, Rizal, [7] in turn engaged the services of TVI to se
barge and tugboat at shipside.

SO ORDERED. On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge E
V to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the b
alongside the vessel, left and returned to the port terminal. [9] At 9:00 p.m., arr
[G.R. No. 150255. April 22, 2005] operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from
vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had bec
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, inclement due to an approaching storm, the unloading unto the barge of the 37 coils
vs. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE accomplished.[10] No tugboat pulled the barge back to the pier, however.
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, respondents. At around 5:30 a.m. of October 27, 1991, due to strong waves, [11] the crew o
barge abandoned it and transferred to the vessel. The barge pitched and rolled with
waves and eventually capsized, washing the 37 coils into the sea. [12] At 7:00 a.m., aIn holding all the defendants solidarily liable, the appellate court ruled that each
tugboat finally arrived to pull the already empty and damaged barge back to the pier. was essential such that without each others contributory negligence the incident would
have happened and so much so that the person principally liable cannot be distingui
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance
with sufficient accuracy.[25]
to recover the lost cargoes proved futile.[14]
In discrediting the defense of fortuitous event, the appellate court held that altho
Little Giant thus filed a formal claim against Industrial Insurance which paid itdefendants
the obviously had nothing to do with the force of nature, they however had co
[15]
amount of P5,246,113.11. Little Giant thereupon executed a subrogation receipt of where to anchor the vessel, where discharge will take place and even when
of Industrial Insurance. discharging will commence.[26]
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and The defendants respective motions for reconsideration having been denied
Black Sea through its representative Inchcape (the defendants) before the RTC of Manila, Resolution[27] of September 28, 2001, Schmitz Transport (hereinafter referred to
for the recovery of the amount it paid to Little Giant plus adjustment fees, attorneys petitioner)
fees, filed the present petition against TVI, Industrial Insurance and Black Sea.
and litigation expenses.[16]
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting fo
Industrial Insurance faulted the defendants for undertaking the unloading ofprincipal,the consignee Little Giant, hence, the transportation contract was by and betw
cargoes while typhoon signal No. 1 was raised in Metro Manila. [17] Little Giant and TVI.[28]
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants By Resolution of January 23, 2002, herein respondents Industrial Insurance, B
negligent for unloading the cargoes outside of the breakwater notwithstanding the storm Sea, and TVI were required to file their respective Comments. [29]
signal.[18] The dispositive portion of the decision reads:
By its Comment, Black Sea argued that the cargoes were received by the consi
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, through petitioner in good order, hence, it cannot be faulted, it having had no control
ordering the defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 supervision thereover.[30]
with interest from the date the complaint was filed until fully satisfied, as well as the sum
For its part, TVI maintained that it acted as a passive party as it merely received
of P5,000.00 representing the adjustment fee plus the sum of 20% of the amount
cargoes and transferred them unto the barge upon the instruction of petitioner. [31]
recoverable from the defendants as attorneys fees plus the costs of suit. The counterclaims
and cross claims of defendants are hereby DISMISSED for lack of [m]erit. [19] In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of
To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint
act of negligence on the part of petitioner Black Sea and TVI, and
motion for reconsideration assailing the finding that they are common carriers and the
award of excessive attorneys fees of more than P1,000,000. And they argued that they(2) If there was negligence, whether liability for the loss may attach to Black
were not motivated by gross or evident bad faith and that the incident was caused petitioner
by a and TVI.
fortuitous event. [20]
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any p
By resolution of February 4, 1998, the trial court denied the motionfrom for any and all liability arising therefrom:
reconsideration. [21]
All the defendants appealed to the Court of Appeals which, by decision of JuneART.27, 1174. Except in cases expressly specified by the law, or when it is other
[22] declared
2001, affirmed in toto the decision of the trial court, it finding that all the defendants by stipulation, or when the nature of the obligation requires the assumptio
were common carriers Black Sea and TVI for engaging in the transport of goods and risk, no person shall be responsible for those events which could not be foreseen, or w
cargoes over the seas as a regular business and not as an isolated transaction, though foreseen, were inevitable.
Schmitz Transport for entering into a contract with Little Giant to transport the cargoes
from ship to port for a fee.[24] In order, to be considered a fortuitous event, however, (1) the cause of the unfore
and unexpected occurrence, or the failure of the debtor to comply with his obliga
must be independent of human will; (2) it must be impossible to foresee the event which Contrary to petitioners insistence, this Court, as did the appellate court, finds
constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3)petitioner
the is a common carrier. For it undertook to transport the cargoes from the ship
occurrence must be such as to render it impossible for the debtor to fulfill his obligation
of M/V
in Alexander Saveliev to the consignees warehouse at Cainta, Rizal. As the appe
any manner; and (4) the obligor must be free from any participation in the aggravation court
of put it, as long as a person or corporation holds [itself] to the public for the pur
the injury resulting to the creditor.[32] of transporting goods as [a] business, [it] is already considered a common ca
regardless if [it] owns the vehicle to be used or has to hire one. [42] That petitioner
[T]he principle embodied in the act of God doctrine strictly requires that the act must common
be carrier, the testimony of its own Vice-President and General Manager Noel
occasioned solely by the violence of nature. Human intervention is to be excluded from that part of the services it offers to its clients as a brokerage firm includes
transportation
creating or entering into the cause of the mischief. When the effect is found to be in part of cargoes reflects so.
the result of the participation of man, whether due to his active intervention or neglect or
Atty. Jubay: Will you please tell us what [are you] functions x x x as Execu
failure to act, the whole occurrence is then humanized and removed from the rules
Vice-President and General Manager of said Company?
applicable to the acts of God.[33]
Mr. Aro: Well, I oversee the entire operation of the brokerage and trans
The appellate court, in affirming the finding of the trial court that human intervention business of the company. I also handle the various division heads of
in the form of contributory negligence by all the defendants resulted to the loss of the company for operation matters, and all other related functions that
cargoes,[34] held that unloading outside the breakwater, instead of inside the breakwater, President may assign to me from time to time, Sir.
while a storm signal was up constitutes negligence. [35] It thus concluded that the proximate
Q: Now, in connection [with] your duties and functions as you mentioned,
cause of the loss was Black Seas negligence in deciding to unload the cargoes at an unsafe
you please tell the Honorable Court if you came to know the compan
place and while a typhoon was approaching.[36]
the name Little Giant Steel Pipe Corporation?
From a review of the records of the case, there is no indication that there was greater
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
risk in loading the cargoes outside the breakwater. As the defendants proffered, the
weather on October 26, 1991 remained normal with moderate sea condition such that port Q: And since when have you been the brokerage firm of that company, if
operations continued and proceeded normally.[37] can recall?
The weather data report,[38] furnished and verified by the Chief of the Climate Data
Section of PAG-ASA and marked as a common exhibit of the parties, states that while A: Since 1990, Sir.
typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991, the sea
condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was Q: Now, you said that you are the brokerage firm of this Company. What w
moderate. It cannot, therefore, be said that the defendants were negligent in not unloading or duty did you perform in behalf of this company?
the cargoes upon the barge on October 26, 1991 inside the breakwater. A: We handled the releases (sic) of their cargo[es] from the Bureau
That no tugboat towed back the barge to the pier after the cargoes were completely Customs. We [are] also in-charged of the delivery of the goods to
[39]
loaded by 12:30 in the morning is, however, a material fact which the appellate court warehouses. We also handled the clearances of their shipment at the Bu
[40]
failed to properly consider and appreciate the proximate cause of the loss of the cargoes. of Customs, Sir.
Had the barge been towed back promptly to the pier, the deteriorating sea conditions
notwithstanding, the loss could have been avoided. But the barge was left floating in open xxx
sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes
loss thus falls outside the act of God doctrine. Q: Now, what precisely [was] your agreement with this Little Giant Steel
Corporation with regards to this shipment? What work did you do with
The proximate cause of the loss having been determined, who among the parties shipment?
is/are responsible therefor?
 A: We handled the unloading of the cargo[es] from vessel to lighter and thenArticle
the 1732 does not distinguish between one whose principal business activity is
delivery of [the] cargo[es] from lighter to BASECO then to the truck andcarrying
to of goods and one who does such carrying only as an ancillary activity.
the warehouse, Sir. contention, therefore, of petitioner that it is not a common carrier but a customs br
whose principal function is to prepare the correct customs declaration and proper ship
Q: Now, in connection with this work which you are doing, Mr. Witness, youdocuments
are as required by law is bereft of merit. It suffices that petitioner undertake
supposed to perform, what equipment do (sic) you require or did you use in the goods for pecuniary consideration.[45]
deliver
order to effect this unloading, transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as
[from] vessel to lighter, and on this we hired or we sub-contracted transportation
with of goods is an integral part of a customs broker, the customs broker is a
[T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges common carrier. For to declare otherwise would be to deprive those with whom
in BASECO compound we are leasing cranes to have the cargo unloaded contracts the protection which the law affords them notwithstanding the fact that
obligation to carry goods for [its] customers, is part and parcel of petitioners business.
from the barge to trucks, [and] then we used trucks to deliver [the cargoes]
to the consignees warehouse, Sir.
As for petitioners argument that being the agent of Little Giant, any negligen
Q: And whose trucks do you use from BASECO compound to the consignees committed was deemed the negligence of its principal, it does not persuade.
warehouse?
True, petitioner was the broker-agent of Little Giant in securing the release of
A: We utilized of (sic) our own trucks and we have some other contracted cargoes. In effecting the transportation of the cargoes from the shipside and into L
trucks, Sir. Giants warehouse, however, petitioner was discharging its own personal obligation u
a contact of carriage.
xxx Petitioner, which did not have any barge or tugboat, engaged the services of TV
handler[48] to provide the barge and the tugboat. In their Service Contract, [49] while L
ATTY. JUBAY: Will you please explain to us, to the Honorable Court whyGiant
is it was named as the consignee, petitioner did not disclose that it was acting
you have to contract for the barges of Transport Ventures Incorporated in
commission and was chartering the vessel for Little Giant. [50] Little Giant did not
this particular operation? automatically become a party to the Service Contract and was not, therefore, bound by
terms and conditions therein.
A: Firstly, we dont own any barges. That is why we hired the services of another
firm whom we know [al]ready for quite sometime, which is Transport Not being a party to the service contract, Little Giant cannot directly sue TVI b
Ventures, Inc. (Emphasis supplied)[43] thereon but it can maintain a cause of action for negligence.[51]
It is settled that under a given set of facts, a customs broker may be regarded as a In the case of TVI, while it acted as a private carrier for which it was under no
common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court
to observe extraordinary diligence, it was still required to observe ordinary diligenc
of Appeals,[44] held: ensure the proper and careful handling, care and discharge of the carried goods.

The appellate court did not err in finding petitioner, a customs broker, to be also a Thus, Articles 1170 and 1173 of the Civil Code provide:
common carrier, as defined under Article 1732 of the Civil Code, to wit,
ART. 1170. Those who in the performance of their obligations are guilty of fr
Art. 1732. Common carriers are persons, corporations, firms or associations engaged negligence,
in or delay, and those who in any manner contravene the tenor thereof, are li
for damages.
the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public.
ART. 1173. The fault or negligence of the obligor consists in the omission of
xxx diligence which is required by the nature of the obligation and corresponds with
circumstances of the persons, of the time and of the place. When negligence showsthe badCivil Code. x x x [O]ne might ask further, how then must the liability of the com
faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply. carrier, on one hand, and an independent contractor, on the other hand, be describe
would be solidary. A contractual obligation can be breached by tort and when the sam
If the law or contract does not state the diligence which is to be observed inorthe omission causes the injury, one resulting in culpa contractual and the other in c
performance, that which is expected of a good father of a family shall be required. aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort
arise even under a contract, where tort is that which breaches the contract. St
Was the reasonable care and caution which an ordinarily prudent person would differently,
have when an act which constitutes a breach of contract would have i
used in the same situation exercised by TVI? [52] constituted the source of a quasi-delictual liability had no contract existed between
parties, the contract can be said to have been breached by tort, thereby allowing the r
This Court holds not. on tort to apply.[57]
TVIs failure to promptly provide a tugboat did not only increase the risk that might
have been reasonably anticipated during the shipside operation, but was the proximateAs for Black Sea, its duty as a common carrier extended only from the time the g
cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge were surrendered or unconditionally placed in its possession and received
floating for a considerable number of hours, at such a precarious time, and in the opentransportation
sea, until they were delivered actually or constructively to consignee L
Giant.[58]
knowing that the barge does not have any power of its own and is totally defenseless from
the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a Parties to a contract of carriage may, however, agree upon a definition of deli
tugboat would be charging overtime pay did not excuse TVI from calling for one that suchextends the services rendered by the carrier. In the case at bar, Bill of Lading N
tugboat. covering the shipment provides that delivery be made to the port of discharge or so
thereto as she may safely get, always afloat.[59] The delivery of the goods to the consi
As for petitioner, for it to be relieved of liability, it should, following Article
1739[53] of the Civil Code, prove that it exercised due diligence to prevent or minimizewas
the not from pier to pier but from the shipside of M/V Alexander Saveliev and
loss, before, during and after the occurrence of the storm in order that it may be exempted for which reason the consignee contracted the services of petitioner. Since B
barges,
from liability for the loss of the goods. Sea had constructively delivered the cargoes to Little Giant, through petitioner, it
discharged its duty.[60]
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-
check the operations of TVI, it failed to take all available and reasonable precautions to In fine, no liability may thus attach to Black Sea.
avoid the loss. After noting that TVI failed to arrange for the prompt towage of the barge Respecting the award of attorneys fees in an amount over P1,000,000.00 to Indus
despite the deteriorating sea conditions, it should have summoned the same or another Insurance, for lack of factual and legal basis, this Court sets it aside. While Indus
tugboat to extend help, but it did not. Insurance was compelled to litigate its rights, such fact by itself does not justify the aw
This Court holds then that petitioner and TVI are solidarily liable [56] for the loss ofofthe
attorneys fees under Article 2208 of the Civil Code. For no sufficient showing of
cargoes. The following pronouncement of the Supreme Court is instructive: faith would be reflected in a partys persistence in a case other than an erron
conviction of the righteousness of his cause. [61] To award attorneys fees to a party
The foundation of LRTAs liability is the contract of carriage and its obligation because
to the judgment is rendered in its favor would be tantamount to imposing a prem
indemnify the victim arises from the breach of that contract by reason of its failure to on ones right to litigate or seek judicial redress of legitimate grievances. [62]
exercise the high diligence required of the common carrier. In the discharge of its On the award of adjustment fees: The adjustment fees and expense of divers w
commitment to ensure the safety of passengers, a carrier may choose to hire its incurred own by Industrial Insurance in its voluntary but unsuccessful efforts to locate
employees or avail itself of the services of an outsider or an independent firm to undertake
retrieve the lost cargo. They do not constitute actual damages. [63]
the task. In either case, the common carrier is not relieved of its responsibilities under the
contract of carriage. As for the court a quos award of interest on the amount claimed, the same call
modification following the ruling in Eastern Shipping Lines, Inc. v. Court
Appeals[64] that when the demand cannot be reasonably established at the time the dem
Should Prudent be made likewise liable? If at all, that liability could only be for tort under
the provisions of Article 2176 and related provisions, in conjunction with Article 2180 is made,
of the interest shall begin to run not from the time the claim is made judiciall
extrajudicially but from the date the judgment of the court is made (at which the timeSamhwa
[65]
quantification of damages may be deemed to have been reasonably ascertained).
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport
& Brokerage Corporation, and Transport Venture Incorporation jointly and severally liable
for the amount of P5,246,113.11 with the MODIFICATION that interest at SIX NSCP, for its part, issued Bill of Lading No. NSGPBSML512565 [3] in
PERCENT per annum of the amount due should be computed from the promulgation
November 24, 1997 of the decision of the trial court.
Costs against petitioner.
SO ORDERED.
[G.R. No. 161833. July 8, 2005]
PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,
vs. UNKNOWN OWNER OF THE VESSEL M/V NATIONAL
HONOR, NATIONAL SHIPPING CORPORATION OF THE
PHILIPPINES and INTERNATIONAL CONTAINER
SERVICES, INC., respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules of
Civil Procedure assailing the Decision [1] dated January 19, 2004 of the Court
of Appeals (CA) in CA-G.R. CV No. 57357 which affirmed the Decision
dated February 17, 1997 of the Regional Trial Court (RTC) of Manila,
Branch 37, in Civil Case No. 95-73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a
shipment of four units of parts and accessories in the port of Pusan, Korea,
on board the vessel M/V National Honor,represented in the Philippines by its
agent, National Shipping Corporation of the Philippines (NSCP). The
shipment was for delivery to Manila, Philippines. Freight forwarder,
the Inter-Trans Co., Ltd., issued Bill of Lading No. SH9410306 [2] in the
name of the shipper consigned to the order of Metropolitan Bank and Trust
Company with arrival notice in Manila to ultimate consignee Blue Mono
International Company, Incorporated (BMICI), Binondo, Manila.
theonname of the freight forwarder, as shipper, consigned to the order of
Stamm International Inc., Makati, Philippines. It is provided therein that:
12. This Bill of Lading shall be prima facie evidence of the receipt of the
Carrier in apparent good order and condition except as, otherwise, noted of
the total number of Containers or other packages or units enumerated
overleaf. Proof to the contrary shall be admissible when this Bill of Lading
has been transferred to a third party acting in good faith. No representation is
made by the Carrier as to the weight, contents, measure, quantity, quality,
description, condition, marks, numbers, or value of the Goods and the Carrier
shall be under no responsibility whatsoever in respect of such description or
particulars.
13. The shipper, whether principal or agent, represents and warrants that
the goods are properly described, marked, secured, and packed and may be
handled in ordinary course without damage to the goods, ship, or property or
persons and guarantees the correctness of the particulars, weight or each
piece or package and description of the goods and agrees to ascertain and to
disclose in writing on shipment, any condition, nature, quality, ingredient or
characteristic that may cause damage, injury or detriment to the goods, other
property, the ship or to persons, and for the failure to do so the shipper agrees
to be liable for and fully indemnify the carrier and hold it harmless in respect
of any injury or death of any person and loss or damage to cargo or property.
The carrier shall be responsible as to the correctness of any such mark,
descriptions or representations.[4]
The shipment was contained in two wooden crates, namely, Crate No. 1
and Crate No. 2, complete and in good order condition, covered by
Commercial Invoice No. YJ-73564 DTD [5] and a Packing List.[6] There were
no markings on the outer portion of the crates except the name of the
consignee.[7] Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs.
It contained the following articles: one (1) unit Lathe Machine complete with
parts and accessories; one (1) unit Surface Grinder complete with parts and
accessories; and one (1) unit Milling Machine complete with parts and
accessories. On the flooring of the wooden crates were three wooden battens
placed side by side to support the weight of the cargo. Crate No. 2, on the
other hand, measured 10 cubic meters and weighed 2,060 kgs. The Lathe
Machine was stuffed in the crate. The shipment had a total invoice value of
US$90,000.00 C&F Manila.[8] It was insured for P2,547,270.00 with the
Philippine Charter Insurance Corporation (PCIC) thru its general agent,
Family Insurance and Investment Corporation, [9] under Marine Risk Note No.
68043 dated October 24, 1994.[10]
The M/V National Honor arrived at the Manila International Container
Terminal (MICT) on November 14, 1995. The International Container
Terminal Services, Incorporated (ICTSI) was furnished with a copy of the
crate cargo list and bill of lading, and it knew the contents of the crate. [11] The
following day, the vessel started discharging its cargoes using its winch
crane. The crane was operated by Olegario Balsa, a winchman from
the ICTSI,[12] the exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the
crew and the surveyor of the ICTSI, conducted an inspection of the cargo.
[13]
They inspected the hatches, checked the cargo and found it in apparent
good condition.[14] Claudio Cansino, the stevedore of the ICTSI, placed two
sling cables on each end of Crate No. 1. [15] No sling cable was fastened on the
mid-portion of the crate. In Dauzs experience, this was a normal procedure.
[16]
As the crate was being hoisted from the vessels hatch, the mid-portion of
the wooden flooring suddenly snapped in the air, about five feet high from
the vessels twin deck, sending all its contents crashing down hard,
[17]
resulting in extensive damage to the shipment.
BMICIs customs broker, JRM Incorporated, took delivery of the cargo
in such damaged condition.[18] Upon receipt of the damaged shipment,
BMICI found that the same could no longer be used for the intended
purpose. The Mariners Adjustment Corporation hired by PCIC conducted a
survey and declared that the packing of the shipment was considered
insufficient. It ruled out the possibility of taxes due to insufficiency of
packing. It opined that three to four pieces of cable or wire rope slings, held
in all equal setting, never by-passing the center of the crate, should have been
used, considering that the crate contained heavy machinery. [19]
BMICI subsequently filed separate claims against the NSCP, [20] the
ICTSI,[21] and its insurer, the PCIC,[22] for US$61,500.00. When the other
companies denied liability, PCIC paid the claim and was issued a
Subrogation Receipt[23] for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila,
Branch 35, a Complaint for Damages[24] against the Unknown owner of the
vessel M/V National Honor, NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the
defendants. It prayed, among others
WHEREFORE, it is respectfully prayed of this Honorable Court that
judgment be rendered ordering defendants to pay plaintiff, jointly or in the
alternative, the following:
1. Actual damages in the amount of P1,740,634.50 plus legal
interest at the time of the filing of this complaint until fully
paid;
2. Attorneys fees in the amount of P100,000.00;
3. Cost of suit.[25]
ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim
against its co-defendant NSCP, claiming that the loss/damage of the shipment
was caused exclusively by the defective material of the wooden battens of
the shipment, insufficient packing or acts of the shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified
that the wooden battens placed on the wooden flooring of the crate was of
good material but was not strong enough to support the weight of the
machines inside the crate. He averred that most stevedores did not know
how to read and write; hence, he placed the sling cables only on those
portions of the crate where the arrow signs were placed, as in the case of
fragile cargo. He said that unless otherwise indicated by arrow signs, the
ICTSI used only two cable slings on each side of the crate and would not
place a sling cable in the mid-section. [26] He declared that the crate fell from
the cranes because the wooden batten in the mid-portion was broken as it was
being lifted.[27] He concluded that the loss/damage was caused by the failure
of the shipper or its packer to place wooden battens of strong materials under
the flooring of the crate, and to place a sign in its mid-term section where the
sling cables would be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co.,
Inc. that the damage to the cargo could be attributed to insufficient packing
and unbalanced weight distribution of the cargo inside the crate as evidenced
by the types and shapes of items found.[28]
The trial court rendered judgment for PCIC and ordered the complaint
dismissed, thus:
WHEREFORE, the complaint of the plaintiff, and the respective
counterclaims of the two defendants are dismissed, with costs against the
plaintiff.
SO ORDERED.[29]
According to the trial court, the loss of the shipment contained in Crate
No. 1 was due to the internal defect and weakness of the materials used in the
fabrication of the crates. The middle wooden batten had a hole (bukong-
bukong). The trial court rejected the certification [30] of the shipper, stating
that the shipment was properly packed and secured, as mere hearsay and
devoid of any evidentiary weight, the affiant not having testified.
[31]
Not satisfied, PCIC appealed to the CA which rendered judgment on
January 19, 2004 affirming in toto the appealed decision, with this fallo
WHEREFORE, the decision of the Regional Trial Court of Manila, Branch
35, dated February 17, 1997, is AFFIRMED.
SO ORDERED.[32]
The appellate court held, inter alia, that it was bound by the finding of
facts of the RTC, especially so where the evidence in support thereof is more
than substantial. It ratiocinated that the loss of the shipment was due to an
excepted cause [t]he character of the goods or defects in the packing or in the
containers and the failure of the shipper to indicate signs to notify the
stevedores that extra care should be employed in handling the shipment. [33] It
blamed the shipper for its failure to use materials of stronger quality to
support the heavy machines and to indicate an arrow in the middle portion of
the cargo where additional slings should be attached. [34] The CA concluded
that common carriers are not absolute insurers against all risks in the
transport of the goods.[35]
Hence, this petition by the PCIC, where it alleges that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW
IN NOT HOLDING THAT RESPONDENT COMMON CARRIER IS
LIABLE FOR THE DAMAGE SUSTAINED BY THE SHIPMENT IN THE
POSSESSION OF THE ARRASTRE OPERATOR.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW
IN NOT APPLYING THE STATUTORY PRESUMPTION OF FAULT AND
NEGLIGENCE IN THE CASE AT BAR.
III.
THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE
FACTS IN FINDING THAT THE DAMAGE SUSTAINED BY THE
[SHIPMENT] WAS DUE TO ITS DEFECTIVE PACKING AND NOT TO
THE FAULT AND NEGLIGENCE OF THE RESPONDENTS.[36]
The petitioner asserts that the mere proof of receipt of the shipment by
the common carrier (to the carrier) in good order, and their arrival at the
place of destination in bad order makes out a prima facie case against it; in
such case, it is liable for the loss or damage to the cargo absent satisfactory
explanation given by the carrier as to the exercise of extraordinary diligence.
The petitioner avers that the shipment was sufficiently packed in wooden
boxes, as shown by the fact that it was accepted on board the vessel and
arrived in Manila safely. It emphasizes that the respondents did not contest
the contents of the bill of lading, and that the respondents knew that the
manner and condition of the packing of the cargo was normal and barren of
defects. It maintains that it behooved the respondent ICTSI to place three to
four cables or wire slings in equal settings, including the center portion of the
crate to prevent damage to the cargo:
[A] simple look at the manifesto of the cargo and the bill of lading would
have alerted respondents of the nature of the cargo consisting of thick and
heavy machinery. Extra-care should have been made and extended in the
discharge of the subject shipment. Had the respondent only bothered to
check the list of its contents, they would have been nervous enough to place
additional slings and cables to support those massive machines, which were
composed almost entirely of thick steel, clearly intended for heavy
industries. As indicated in the list, the boxes contained one lat[h]e machine,
one milling machine and one grinding machine-all coming with complete
parts and accessories. Yet, not one among the respondents were cautious
enough. Here lies the utter failure of the respondents to observed
extraordinary diligence in the handling of the cargo in their custody and
possession, which the Court of Appeals should have readily observed in its
appreciation of the pertinent facts.[37]
 The petitioner posits that the loss/damage was caused by the
mishandling of the shipment by therein respondent ICTSI, the arrastre
operator, and not by its negligence.
The petitioner insists that the respondents did not observe extraordinary
diligence in the care of the goods. It argues that in the performance of its
obligations, the respondent ICTSI should observe the same degree of
diligence as that required of a common carrier under the New Civil Code of
the Philippines. Citing Eastern Shipping Lines, Inc. v. Court of Appeals,[38] it
posits that respondents are liable in solidum to it, inasmuch as both are
charged with the obligation to deliver the goods in good condition to its
consignee, BMICI.
Respondent NSCP counters that if ever respondent ICTSI is adjudged
liable, it is not solidarily liable with it. It further avers that the carrier cannot
discharge directly to the consignee because cargo discharging is the
monopoly of the arrastre. Liability, therefore, falls solely upon the shoulder
of respondent ICTSI, inasmuch as the discharging of cargoes from the vessel
was its exclusive responsibility. Besides, the petitioner is raising questions of
facts, improper in a petition for review on certiorari.[39]
Respondent ICTSI avers that the issues raised are factual, hence,
improper under Rule 45 of the Rules of Court. It claims that it is merely a
depository and not a common carrier; hence, it is not obliged to exercise
extraordinary diligence. It reiterates that the loss/damage was caused by the
failure of the shipper or his packer to place a sign on the sides and middle
portion of the crate that extra care should be employed in handling the
shipment, and that the middle wooden batten on the flooring of the crate had
a hole. The respondent asserts that the testimony of Anthony Abarquez, who
conducted his investigation at the site of the incident, should prevail over that
of Rolando Balatbat. As an alternative, it argues that if ever adjudged liable,
its liability is limited only to P3,500.00 as expressed in the liability clause of
Gate Pass CFS-BR-GP No. 319773.
The petition has no merit.
The well-entrenched rule in our jurisdiction is that only questions of law
may be entertained by this Court in a petition for review on certiorari. This
rule, however, is not ironclad and admits certain exceptions, such as when (1)
the conclusion is grounded on speculations, surmises or conjectures; (2) the
inference is manifestly mistaken, absurd or impossible; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of facts;
(5) the findings of fact are conflicting; (6) there is no citation of specific
evidence on which the factual findings are based; (7) the findings of absence
of facts are contradicted by the presence of evidence on record; (8) the
findings of the Court of Appeals are contrary to those of the trial court; (9)
the Court of Appeals manifestly overlooked certain relevant and undisputed
facts that, if properly considered, would justify a different conclusion; (10)
the findings of the Court of Appeals are beyond the issues of the case; and
(11) such findings are contrary to the admissions of both parties. [40]
We have reviewed the records and find no justification to warrant the
application of any exception to the general rule.
We agree with the contention of the petitioner that common carriers,
from the nature of their business and for reasons of public policy, are
mandated to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them, according to all the
circumstances of each case. [41] The Court has defined extraordinary diligence
in the vigilance over the goods as follows:
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for sale, carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and to use all reasonable means to
ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as
their nature requires.[42]
The common carriers duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for
their acceptance, by the person entitled to receive them. [43] When the goods
shipped are either lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not
be an express finding of negligence to hold it liable. [44] To overcome the
presumption of negligence in the case of loss, destruction or deterioration of
the goods, the common carrier must prove that it exercised extraordinary
diligence.[45]
However, under Article 1734 of the New Civil Code, the presumption of
negligence does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or
calamity;
2. Act of the public enemy in war, whether international or civil;
 3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the
containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil
Code which exempts the common carrier for the loss or damage to the cargo
is a closed list.[46] To exculpate itself from liability for the loss/damage to the
cargo under any of the causes, the common carrier is burdened to prove any
of the aforecited causes claimed by it by a preponderance of evidence. If the
carrier succeeds, the burden of evidence is shifted to the shipper to prove that
the carrier is negligent.[47]
Defect is the want or absence of something necessary for completeness
or perfection; a lack or absence of something essential to completeness; a
deficiency in something essential to the proper use for the purpose for which
a thing is to be used.[48] On the other hand, inferior means of poor quality,
mediocre, or second rate. [49] A thing may be of inferior quality but not
necessarily defective. In other words, defectiveness is not synonymous with
inferiority.
In the present case, the trial court declared that based on the record, the
loss of the shipment was caused by the negligence of the petitioner as the
shipper:
The same may be said with respect to defendant ICTSI. The breakage and
collapse of Crate No. 1 and the total destruction of its contents were not
imputable to any fault or negligence on the part of said defendant in handling
the unloading of the cargoes from the carrying vessel, but was due solely to
the inherent defect and weakness of the materials used in the fabrication of
said crate.
The crate should have three solid and strong wooden batten placed side by
side underneath or on the flooring of the crate to support the weight of its
contents. However, in the case of the crate in dispute, although there were
three wooden battens placed side by side on its flooring, the middle wooden
batten, which carried substantial volume of the weight of the crates contents,
had a knot hole or bukong-bukong, which considerably affected, reduced and
weakened its strength. Because of the enormous weight of the machineries
inside this crate, the middle wooden batten gave way and collapsed. As the
combined strength of the other two wooden battens were not sufficient to
hold and carry the load, they too simultaneously with the middle wooden
battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea.
There is nothing in the record which would indicate that defendant ICTSI
had any role in the choice of the materials used in fabricating this crate. Said
defendant, therefore, cannot be held as blame worthy for the loss of the
machineries contained in Crate No. 1.[50]
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions mentioned in Article 1734
of the Civil Code, particularly number (4) thereof, i.e., the character of the
goods or defects in the packing or in the containers. The trial court found
that the breakage of the crate was not due to the fault or negligence of ICTSI,
but to the inherent defect and weakness of the materials used in the
fabrication of the said crate.
Upon examination of the records, We find no compelling reason to depart
from the factual findings of the trial court.
It appears that the wooden batten used as support for the flooring was not
made of good materials, which caused the middle portion thereof to give way
when it was lifted. The shipper also failed to indicate signs to notify the
stevedores that extra care should be employed in handling the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court their duties
and responsibilities:
Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the
sling is placed, Maam.
Q: When the crates have arrows drawn and where you placed the
slings, what do you do with these crates?
A: A sling is placed on it, Maam.
Q: After you placed the slings, what do you do with the crates?
A: After I have placed a sling properly, I ask the crane (sic) to
haul it, Maam.
Q: Now, what, if any, were written or were marked on the crate?
A: The thing that was marked on the cargo is an arrow just like of
a chain, Maam.
 Q: And where did you see or what parts of the crate did you see petitioner, the latter represented and warranted that the goods were properly
those arrows? packed, and disclosed in writing the condition, nature, quality or
A: At the corner of the crate, Maam. characteristic that may cause damage, injury or detriment to the goods.
Absent any signs on the shipment requiring the placement of a sling cable in
Q: How many arrows did you see? the mid-portion of the crate, the respondent ICTSI was not obliged to do so.
A: Four (4) on both sides, Maam.
The statement in the Bill of Lading, that the shipment was in apparent
Q: What did you do with the arrows? good condition, is sufficient to sustain a finding of absence of defects in the
A: When I saw the arrows, thats where I placed the slings, Maam. merchandise. Case law has it that such statement will create a prima
Q: Now, did you find any other marks on the crate? facie presumption only as to the external condition and not to that not open to
A: Nothing more, Maam. inspection.[53]
Q: Now, Mr. Witness, if there are no arrows, would you place IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for
slings on the parts where there are no arrows? lack of merit.
A: You can not place slings if there are no arrows, Maam. SO ORDERED.
Appellants allegation that since the cargo arrived safely from the port of THIRD DIVISION
[P]usan, Korea without defect, the fault should be attributed to the arrastre
operator who mishandled the cargo, is without merit. The cargo fell while it
was being carried only at about five (5) feet high above the ground. It would LEA MER INDUSTRIES, INC., G.R. No. 161745
not have so easily collapsed had the cargo been properly packed. The Petitioner,
shipper should have used materials of stronger quality to support the heavy Present
machines. Not only did the shipper fail to properly pack the cargo, it also Panganiban, J.,
failed to indicate an arrow in the middle portion of the cargo where Chairman,
additional slings should be attached. At any rate, the issue of negligence is - versus - Sandoval-Gutierrez,
factual in nature and in this regard, it is settled that factual findings of the Corona,
lower courts are entitled to great weight and respect on appeal, and, in fact, Carpio Morales, and
accorded finality when supported by substantial evidence. [51] Garcia, JJ
Promulgated:
We agree with the trial and appellate courts. MALAYAN INSURANCE CO., INC.,*
Respondent. September 30, 2005
The petitioner failed to adduce any evidence to counter that of x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
respondent ICTSI. The petitioner failed to rebut the testimony of Dauz, that
the crates were sealed and that the contents thereof could not be seen from DECISION
the outside.[52] While it is true that the crate contained machineries and spare
parts, it cannot thereby be concluded that the respondents knew or should
have known that the middle wooden batten had a hole, or that it was not PANGANIBAN, J.:
strong enough to bear the weight of the shipment.
There is no showing in the Bill of Lading that the shipment was in good
order or condition when the carrier received the cargo, or that the three
wooden battens under the flooring of the cargo were not defective or
insufficient or inadequate. On the other hand, under Bill of Lading No.
NSGPBSML512565 issued by the respondent NSCP and accepted by the
 ommon carriers are bound to observe extraordinary diligence in their

vigilance over the goods entrusted to them, as required by the nature of

C The Facts
their business and for reasons of public policy. Consequently, the law

presumes that common carriers are at fault or negligent for any loss or Ilian Silica Mining entered into a contract of carriage with Lea Mer

damage to the goods that they transport. In the present case, the evidence Industries, Inc., for the shipment of 900 metric tons of silica sand valued

at P565,000.[5]Consigned to Vulcan Industrial and Mining Corporation, the

submitted by petitioner to overcome this presumption was sorely insufficient.
cargo was to be transported from Palawan to Manila. On October 25, 1991,

the silica sand was placed on board Judy VII, a barge leased by Lea Mer.
The Case
[6]
During the voyage, the vessel sank, resulting in the loss of the cargo. [7]

Before us is a Petition for Review [1] under Rule 45 of the Rules of

Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the
Court, assailing the October 9, 2002 Decision[2] and the December 29, 2003
lost cargo.[8] To recover the amount paid and in the exercise of its right of
[3]
Resolution of the Court of Appeals (CA) in CA-GR CV No. 66028. The
subrogation, Malayan demanded reimbursement from Lea Mer, which
challenged Decision disposed as follows:
refused to comply. Consequently, Malayan instituted a Complaint with the
WHEREFORE, the appeal is GRANTED. The
December 7, 1999 decision of the Regional Trial Court of Regional Trial Court (RTC) of Manila on September 4, 1992, for the
Manila, Branch 42 in Civil Case No. 92-63159 is
hereby REVERSED and SET ASIDE. [Petitioner] is collection of P565,000 representing the amount that respondent had paid
ordered to pay the [herein respondent] the value of the lost
cargo in the amount of P565,000.00. Costs against the Vulcan.[9]
[herein petitioner].[4]
On October 7, 1999, the trial court dismissed the Complaint, upon

finding that the cause of the loss was a fortuitous event. [10] The RTC noted
The assailed Resolution denied reconsideration.

that the vessel had sunk because of the bad weather condition brought about
by Typhoon Trining. The court ruled that petitioner had no advance
knowledge of the incoming typhoon, and that the vessel had been cleared by
the Philippine Coast Guard to travel from Palawan to Manila. [11]
Ruling of the Court of Appeals
loss of the cargo subject of this case was caused by
fortuitous event for which herein petitioner could not be held
liable.
C. Whether or not the respondent, Court of Appeals, had
committed serious error and grave abuse of discretion in
disregarding the testimony of the witness from the
MARINA, Engr. Jacinto Lazo y Villegal, to the effect that
the vessel Judy VII was seaworthy at the time of incident
and further in disregarding the testimony of the PAG-ASA
weather specialist, Ms. Rosa Barba y Saliente, to the effect
that typhoon Trining did not hit Metro Manila or Palawan.[14]

Reversing the trial court, the CA held that the vessel was not seaworthy when
In the main, the issues are as follows: (1) whether petitioner is liable for the
it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioners
loss of the cargo, and (2) whether the survey report of Jesus Cortez is
fault, not by a fortuitous event.[12]

admissible in evidence.

Hence, this recourse.[13]

The Courts Ruling

The Issues

The Petition has no merit.

Petitioner states the issues in this wise: First Issue:
Liability for Loss of Cargo
A. Whether or not the survey report of the cargo surveyor,
Jesus Cortez, who had not been presented as a witness of the
said report during the trial of this case before the lower court
can be admitted in evidence to prove the alleged facts cited
in the said report. Question of Fact

B. Whether or not the respondent, Court of Appeals, had

validly or legally reversed the finding of fact of the Regional
Trial Court which clearly and unequivocally held that the
The resolution of the present case hinges on whether the loss of the cargo
was due to a fortuitous event. This issue involves primarily a question of fact,
notwithstanding petitioners claim that it pertains only to a question of law. As
a general rule, questions of fact may not be raised in a petition for review.
[15]
The present case serves as an exception to this rule, because the factual
findings of the appellate and the trial courts vary. [16] This Court meticulously
reviewed the records, but found no reason to reverse the CA.
Rule on Common Carriers
Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods, or both -- by
land, water, or air -- when this service is offered to the public for
compensation.[17] Petitioner is clearly a common carrier, because it offers to
the public its business of transporting goods through its vessels. [18]
Thus, the Court corrects the trial courts finding that petitioner became a
private carrier when Vulcan chartered it. [19] Charter parties are classified as
contracts of demise (or bareboat) and affreightment, which are distinguished
as follows:
Under the demise or bareboat charter of the vessel,
the charterer will generally be considered as owner for the
voyage or service stipulated. The charterer mans the vessel
with his own people and becomes, in effect, the owner pro
hac vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command
and navigation thereof to the charterer; anything short of
such a complete transfer is a contract of affreightment (time
or voyage charter party) or not a charter party at all. [20]
The distinction is significant, because a demise or bareboat charter
indicates a business undertaking that is private in character. [21] Consequently,
the rights and obligations of the parties to a contract of private carriage are
governed principally by their stipulations, not by the law on common
carriers.[22]
 [26]
The Contract in the present case was one of affreightment, as shown This presumption can be rebutted only by proof that they observed

by the fact that it was petitioners crew that manned the tugboat M/V extraordinary diligence, or that the loss or damage was occasioned by any of

Ayalit and controlled the barge Judy VII.[23] Necessarily, petitioner was a the following causes:[27]

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

common carrier, and the pertinent law governs the present factual
disaster or calamity;
(2) Act of the public enemy in war, whether international or
circumstances. civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority. [28]
Extraordinary Diligence Required

Common carriers are bound to observe extraordinary diligence in their

Rule on Fortuitous Events
vigilance over the goods and the safety of the passengers they transport, as

required by the nature of their business and for reasons of public policy. Article 1174 of the Civil Code provides that no person shall be responsible

[24]
Extraordinary diligence requires rendering service with the greatest skill for a fortuitous event which could not be foreseen, or which, though

and foresight to avoid damage and destruction to the goods entrusted for foreseen, was inevitable. Thus, if the loss or damage was due to such an

carriage and delivery.[25] event, a common carrier is exempted from liability.

Jurisprudence defines the elements of a fortuitous event as follows:

Common carriers are presumed to have been at fault or to have acted (a) the cause of the unforeseen and unexpected occurrence, or the failure of

negligently for loss or damage to the goods that they have transported. the debtors to comply with their obligations, must have been independent of
human will; (b) the event that constituted the caso fortuito must have been exercised extraordinary diligence to avoid the loss, or that the loss had been

impossible to foreseeor, if foreseeable, impossible to avoid; (c) the occasioned by a fortuitous event -- an exempting circumstance.

occurrence must have been such as to render it impossible for the debtors to

fulfill their obligation in a normal manner; and (d) the obligor must have It was precisely this circumstance that petitioner cited to escape

been free from any participation in the aggravation of the resulting injury to liability. Lea Mer claimed that the loss of the cargo was due to the bad

the creditor.[29] weather condition brought about by Typhoon Trining. [32] Evidence was

presented to show that petitioner had not been informed of the incoming

To excuse the common carrier fully of any liability, the fortuitous typhoon, and that the Philippine Coast Guard had given it clearance to begin

event must have been the proximate and only cause of the loss. [30] Moreover, the voyage.[33] On October 25, 1991, the date on which the voyage

it should have exercised due diligence to prevent or minimize the loss before, commenced and the barge sank, Typhoon Trining was allegedly far from

during and after the occurrence of the fortuitous event. [31] Palawan, where the storm warning was only Signal No. 1. [34]

The evidence presented by petitioner in support of its defense of

Loss in the Instant Case fortuitous event was sorely insufficient. As required by the pertinent law, it

was not enough for the common carrier to show that there was an unforeseen
There is no controversy regarding the loss of the cargo in the present case. As
or unexpected occurrence. It had to show that it was free from any fault -- a
the common carrier, petitioner bore the burden of proving that it had
fact it miserably failed to prove.
 First, petitioner presented no evidence that it had attempted to
Second, the alleged fortuitous event was not the sole and proximate
minimize or prevent the loss before, during or after the alleged fortuitous
cause of the loss. There is a preponderance of evidence that the barge was not
event.[35] Its witness, Joey A. Draper, testified that he could no longer
seaworthy when it sailed for Manila. [38] Respondent was able to prove that, in
remember whether anything had been done to minimize loss when water
the hull of the barge, there were holes that might have caused or aggravated
started entering the barge.[36]This fact was confirmed during his cross-
the sinking.[39]Because the presumption of negligence or fault applied to
examination, as shown by the following brief exchange:
petitioner, it was incumbent upon it to show that there were no holes; or, if
Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other
there were, that they did not aggravate the sinking.
precautionary measure[s] exercised by you and the
crew of Judy VII so as to prevent the los[s] or
sinking of barge Judy VII?

xxxxxxxxx
Petitioner offered no evidence to rebut the existence of the holes. Its
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action witness, Domingo A. Luna, testified that the barge was in tip-top or excellent
taken by the officers and crew of tugboat Ayalit and
barge Judy VII x x x to prevent the sinking of barge
Judy VII? condition,[40] but that he had not personally inspected it when it left Palawan.

xxxxxxxxx [41]

Court:
Mr. witness, did the captain of that tugboat give any
instruction on how to save the barge Judy VII?
The submission of the Philippine Coast Guards Certificate of
Joey Draper:
I can no longer remember sir, because that happened [a] long
time ago.[37] Inspection of Judy VII, dated July 31, 1991, did not conclusively prove that
the barge was seaworthy.[42] The regularity of the issuance of the Certificate is The facts reveal that Cortezs Survey Report was used in the testimonies of

disputably presumed.[43] It could be contradicted by competent evidence, respondents witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a

which respondent offered. Moreover, this evidence did not necessarily take cargo marine surveyor and the vice-president of Toplis and Harding

into account the actual condition of Company.[47] Soriano testified that the Survey Report had been used in

the vessel at the time of the commencement of the voyage. [44] preparing the final Adjustment Report conducted by their company. [48] The

final Report showed that the barge was not seaworthy because of the
Second Issue:
Admissibility of the Survey Report
existence of the holes. Manlapig testified that he had prepared that Report

after taking into account the findings of the surveyor, as well as the pictures

Petitioner claims that the Survey Report [45] prepared by Jesus Cortez, the and the sketches of the place where the sinking occurred. [49] Evidently, the

cargo surveyor, should not have been admitted in evidence. The Court partly existence of the holes was proved by the testimonies of the witnesses, not

agrees. Because he did not testify during the trial, [46] then the Report that he merely by Cortez Survey Report.

had prepared was hearsay and therefore inadmissible for the purpose of
Rule on Independently
Relevant Statement
proving the truth of its contents.

That witnesses must be examined and presented during the trial, [50] and that
The Survey Report Not the Sole Evidence
their testimonies must be confined to personal knowledge is required by the

rules on evidence, from which we quote:

 Section 36. Testimony generally confined to
referral to Cortezs Report was in relation to Manlapigs final Adjustment
personal knowledge; hearsay excluded. A witness can testify
only to those facts which he knows of his personal
knowledge; that is, which are derived from his own Report. Evidently, it was the existence of the Survey Report that was testified
perception, except as otherwise provided in these rules. [51]
to. The admissibility of that Report as part of the testimonies of the witnesses

was correctly ruled upon by the trial court.

On this basis, the trial court correctly refused to admit Jesus Cortezs

Affidavit, which respondent had offered as evidence. [52] Well-settled is the

At any rate, even without the Survey Report, petitioner has already failed to
rule that, unless the affiant is presented as a witness, an affidavit is
overcome the presumption of fault that applies to common carriers.
[53]
considered hearsay.

WHEREFORE, the Petition is DENIED and the assailed Decision

An exception to the foregoing rule is that on independently relevant and Resolution are AFFIRMED. Costs against petitioner.

statements. A report made by a person is admissible if it is intended to prove

SO ORDERED.
[54]
the tenor, not the truth, of the statements. Independent of the truth or the
CEBU SALVAGE CORPORATION, G.R. No. 150403
Petitioner,
falsity of the statement given in the report, the fact that it has been made is Present:

relevant. Here, the hearsay rule does not apply. [55] PUNO, C.J., Chairperson
,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
In the instant case, the challenged Survey Report prepared by Cortez was GARCIA, JJ.

PHILIPPINE HOME
admitted only as part of the testimonies of respondents witnesses. The ASSURANCE
CORPORATION,
Respondent. Promulgated: discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils.,

January 25, 2007 Inc.[8]

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
Pursuant to the contract, on December 23, 1984, petitioner received

DECISION and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo

which left Ayungon for Tagoloan the next day.[9] The shipment never reached
CORONA, J.:
its destination, however, because the M/T Espiritu Santo sank in the

afternoon of December 24, 1984 off the beach of Opol,Misamis Oriental,

May a carrier be held liable for the loss of cargo resulting from the sinking of
resulting in the total loss of the cargo.[10]
a ship it does not own?

MCCII filed a claim for the loss of the shipment with its insurer, respondent
This is the issue presented for the Courts resolution in this petition for review
Philippine Home Assurance Corporation.[11] Respondent paid the claim in the
on certiorari[1] assailing the March 16, 2001 decision [2] and September 17,
amount of P211,500and was subrogated to the rights of MCCII. [12] Thereafter,
2001 resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 40473
it filed a case in the RTC[13] against petitioner for reimbursement of the
which in turn affirmed the December 27, 1989 decision [4] of the Regional
amount it paid MCCII.
Trial Court (RTC), Branch 145, Makati, MetroManila.[5]

The pertinent facts follow. After trial, the RTC rendered judgment in favor of respondent. It

ordered petitioner to pay respondent P211,500 plus legal interest, attorneys

On November 12, 1984, petitioner Cebu Salvage Corporation (as
fees equivalent to 25% of the award and costs of suit.
carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer)

entered into a voyage charter [6] wherein petitioner was to load 800 to 1,100
On appeal, the CA affirmed the decision of the RTC. Hence, this
metric tons of silica quartz on board the
petition.
M/T Espiritu Santo[7] at Ayungon, Negros Occidental for transport to and
 Petitioner and MCCII entered into a voyage charter, also known as a Based on the agreement signed by the parties and the testimony of

contract of affreightment wherein the ship was leased for a single voyage for petitioners operations manager, it is clear that it was a contract of carriage

the conveyance of goods, in consideration of the payment of freight. [14] Under petitioner signed with MCCII.It actively negotiated and

a voyage charter, the shipowner retains the possession, command and solicited MCCIIs account, offered its services to ship the silica quartz and

navigation of the ship, the charterer or freighter merely having use of the proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the

space in the vessel in return for his payment of freight. [15] An owner who M/T Shirley (as previously agreed upon in the voyage charter) since these

retains possession of the ship remains liable as carrier and must answer for vessels had broken down.[20]

loss or non-delivery of the goods received for transportation. [16]

There is no dispute that petitioner was a common carrier. At the time

of the loss of the cargo, it was engaged in the business of carrying and
Petitioner argues that the CA erred when it affirmed the RTC finding
transporting goods by water, for compensation, and offered its services to the
that the voyage charter it entered into with MCCII was a contract of carriage.
public.[21]
[17]
It insists that the agreement was merely a contract of hire wherein MCCII
From the nature of their business and for reasons of public policy,
hired the vessel from its owner, ALS Timber Enterprises (ALS). [18] Not being
common carriers are bound to observe extraordinary diligence over the goods
the owner of the M/T Espiritu Santo, petitioner did not have control and
they transport according to the circumstances of each case. [22] In the event of
supervision over the vessel, its master and crew. [19] Thus, it could not be held
loss of the goods, common carriers are responsible, unless they can prove
liable for the loss of the shipment caused by the sinking of a ship it did not that this was brought about by the causes specified in Article 1734 of the

own. Civil Code.[23] In all other cases, common carriers are presumed to be at fault

We disagree. or to have acted negligently, unless they prove that they observed

extraordinary diligence.[24]
 Petitioner was the one which contracted with MCCII for the
transport of the cargo. It had control over what vessel it would use. All
throughout its dealings with MCCII, it represented itself as a common
carrier. The fact that it did not own the vessel it decided to use to
consummate the contract of carriage did not negate its character and duties as
a common carrier. The MCCII (respondents subrogor) could not be
reasonably expected to inquire about the ownership of the vessels which
petitioner carrier offered to utilize. As a practical matter, it is very difficult
and often impossible for the general public to enforce its rights of action
under a contract of carriage if it should be required to know who the actual
owner of the vessel is.[25] In fact, in this case, the voyage charter itself
denominated petitioner as the owner/operator of the vessel. [26]
Petitioner next contends that if there was a contract of carriage, then
it was between MCCII and ALS as evidenced by the bill of lading ALS
[27]
issued.
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence
the fact that the goods had been received for transportation. It was not signed
by MCCII, as in fact it was simply signed by the supercargo of ALS. [28] This
is consistent with the fact that MCCII did not contract directly with ALS.
While it is true that a bill of lading may serve as the contract of carriage
between the parties,[29] it cannot prevail over the express provision of the
voyage charter that MCCII and petitioner executed:
[I]n cases where a Bill of Lading has been issued by a carrier
covering goods shipped aboard a vessel under a charter
party, and the charterer is also the holder of the bill of lading,
the bill of lading operates as the receipt for the goods, and as
document of title passing the property of the goods, but not
as varying the contract between the charterer and
the shipowner. The Bill of Lading becomes, therefore, only a
receipt and not the contract of carriage in a charter of the
entire vessel, for the contract is the Charter Party, and is the
law between the parties who are bound by its terms and
condition provided that these are not contrary to law, morals,
good customs, public order and public policy. [30]
Finally, petitioner asserts that MCCII should be held liable for its
own loss since the voyage charter stipulated that cargo insurance was for
the charterers account.[31] This deserves scant consideration. This simply
meant that the charterer would take care of having the goods insured. It could
not exculpate the carrier from liability for the breach of its contract of
carriage. The law, in fact, prohibits it and condemns it as unjust and contrary
to public policy.[32]
To summarize, a contract of carriage of goods was shown to exist;
the cargo was loaded on board the vessel; loss or non-delivery of the cargo
was proven; and petitioner failed to prove that it exercised extraordinary
diligence to prevent such loss or that it was due to some casualty
or force majeure. The voyage charter here being a contract of affreightment,

the carrier was answerable for the loss of the goods received for
transportation.[33]
The idea proposed by petitioner is not only preposterous, it is also
dangerous. It says that a carrier that enters into a contract of carriage is not
liable to the charterer or shipper if it does not own the vessel it chooses to
use. MCCII never dealt with ALS and yet petitioner insists that MCCII
should sue ALS for reimbursement for its loss. Certainly, to permit a
common carrier to escape its responsibility for the goods it agreed to
transport (by the expedient of alleging non-ownership of the vessel it
employed) would radically derogate from the carrier's duty of extraordinary
diligence. It would also open the door to collusion between the carrier and
the supposed owner and to the possible shifting of liability from the carrier to
one without any financial capability to answer for the resulting damages. [34]
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.
SPOUSES DANTE CRUZ and G.R. No. 186312
LEONORA CRUZ,
Petitioners, Present:
CARPIO MORALES, J.,
Chairperson,
BRION,
- versus - BERSAMIN,
ABAD,* and
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
Respondent.
Promulgated:
June 29, 2010
x------------------------------------------------- x
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on
January 25, 2001[1] against Sun Holidays, Inc. (respondent) with the Regional
Trial Court (RTC) of Pasig City for damages arising from the death of their
son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11,
2000 on board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed
at Coco Beach Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September
9 to 11, 2000 was by virtue of a tour package-contract with respondent that
included transportation to and from the Resort and the point of departure in
Batangas.
Miguel C. Matute (Matute),[2] a scuba diving instructor and one of the
survivors, gave his account of the incident that led to the filing of the
complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally
scheduled to leave the Resort in the afternoon of September 10, 2000, but
was advised to stay for another night because of strong winds and heavy
rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort
guests including petitioners son and his wife trekked to the other side of
the Coco Beach mountain that was sheltered from the wind where they
boarded M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from
Puerto Galera and into the open seas, the rain and wind got stronger, causing
the boat to tilt from side to side and the captain to step forward to the front,
leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves
which came one after the other, M/B Coco Beach III capsized putting all
passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the
boat. Upon seeing the captain, Matute and the other passengers who reached
the surface asked him what they could do to save the people who were still
trapped under the boat. The captain replied Iligtas niyo na lang ang sarili
niyo (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in
Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded
on those two boats were 22 persons, consisting of 18 passengers and four
crew members, who were brought to Pisa Island. Eight passengers, including
petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a
contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd.
in Saudi Arabia, with a basic monthly salary of $900.[3]
Petitioners, by letter of October 26, 2000,[4] demanded indemnification from
respondent for the death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,[5] denied any
responsibility for the incident which it considered to be a fortuitous event. It
nevertheless offered, as an act of commiseration, the amount of P10,000 to
petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as earlier
reflected, alleging that respondent, as a common carrier, was guilty of
negligence in allowing M/B Coco Beach III to sail notwithstanding storm
warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.[6]
In its Answer,[7] respondent denied being a common carrier, alleging that its
boats are not available to the general public as they only ferry Resort guests
and crew members.Nonetheless, it claimed that it exercised the utmost
diligence in ensuring the safety of its passengers; contrary to petitioners
allegation, there was no storm on September 11, 2000as the Coast Guard in
fact cleared the voyage; and M/B Coco Beach III was not filled to capacity
and had sufficient life jackets for its passengers. By way of Counterclaim,
respondent alleged that it is entitled to an award for attorneys fees and
litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort
customarily requires four conditions to be met before a boat is allowed to
sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard,
(3) there is clearance from the captain and (4) there is clearance from the
[8]
Resorts assistant manager. He added that M/B Coco Beach III met all four
conditions on September 11, 2000,[9] but a subasco or squall, characterized by
strong winds and big waves, suddenly occurred, causing the boat to capsize.
[10]
By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed
petitioners Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order
[12]
dated September 2, 2005, they appealed to the Court of Appeals.
By Decision of August 19, 2008,[13] the appellate court denied
petitioners appeal, holding, among other things, that the trial court correctly
ruled that respondent is a private carrier which is only required to observe
ordinary diligence; that respondent in fact observed extraordinary diligence
in transporting its guests on board M/B Coco Beach III; and that the
proximate cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution
dated January 16, 2009,[14] they filed the present Petition for Review.[15]
Petitioners maintain the position they took before the trial court,
adding that respondent is a common carrier since by its tour package, the
transporting of its guests is an integral part of its resort business. They inform
that another division of the appellate court in fact held respondent liable for
damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present
evidence to prove that it is a common carrier; that the Resorts ferry services
for guests cannot be considered as ancillary to its business as no income is
derived therefrom; that it exercised extraordinary diligence as shown by the
conditions it had imposed before allowing M/B Coco Beach III to sail; that
the incident was caused by a fortuitous event without any contributory
negligence on its part; and that the other case wherein the appellate court
held it liable for damages involved different plaintiffs, issues and evidence. [16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals[17] in
characterizing respondent as a common carrier.
The Civil Code defines common carriers in the following
terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged
in the business of carrying or transporting
passengers or goods or both, by land, water,
or air for compensation, offering their
services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity(in local idiom, as a
sideline). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering
transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to
the general public, i.e., the general community or
population, and one who offers services or solicits business
only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained
from making such distinctions.
 So understood, the concept of common carrier under Article
1732 may be seen to coincide neatly with the notion of
public service, under the Public Service Act (Commonwealth That respondent does not charge a separate fee or fare for its ferry
Act No. 1416, as amended) which at least partially services is of no moment. It would be imprudent to suppose that it provides
supplements the law on common carriers set forth in the
Civil Code. Under Section 13, paragraph (b) of the Public said services at a loss. The Court is aware of the practice of beach resort
Service Act, public service includes: operators offering tour packages to factor the transportation fee in arriving at
the tour package price. That guests who opt not to avail of respondents ferry
. . . every person that now or hereafter may
own, operate, manage, or control in the services pay the same amount is likewise inconsequential. These guests may
Philippines, for hire or compensation, with only be deemed to have overpaid.
general or limited clientele, whether
permanent, occasional or accidental, and
done for general business purposes, any As De Guzman instructs, Article 1732 of the Civil Code defining common
common carrier, railroad, street railway,
traction railway, subway motor vehicle, carriers has deliberately refrained from making distinctions on whether the
either for freight or passenger, or both, with carrying of persons or goods is the carriers principal business, whether it is
or without fixed route and whatever may be
offered on a regular basis, or whether it is offered to the general public. The
its classification, freight or carrier service of
any class, express service, steamboat, or intent of the law is thus to not consider such distinctions.Otherwise, there is
steamship line, pontines, ferries and water no telling how many other distinctions may be concocted by unscrupulous
craft, engaged in the transportation of
passengers or freight or both, shipyard, businessmen engaged in the carrying of persons or goods in order to avoid
marine repair shop, wharf or dock, ice plant, the legal obligations and liabilities of common carriers.
ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power,
water supply and power petroleum, Under the Civil Code, common carriers, from the nature of their business and
sewerage system, wire or wireless
for reasons of public policy, are bound to observe extraordinary diligence for
communications systems, wire or wireless
broadcasting stations and other similar the safety of the passengers transported by them, according to all the
public services . . .[18] (emphasis and circumstances of each case.[19] They are bound to carry the passengers safely
underscoring supplied.)
as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances. [20]
Indeed, respondent is a common carrier. Its ferry services are so
intertwined with its main business as to be properly considered ancillary
thereto. The constancy of respondents ferry services in its resort operations is When a passenger dies or is injured in the discharge of a contract of
underscored by its having its own Coco Beach boats. And the tour packages carriage, it is presumed that the common carrier is at fault or negligent. In
it offers, which include the ferry services, may be availed of by anyone who fact, there is even no need for the court to make an express finding of fault or
can afford to pay the same. These services are thus available to the public. negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary
diligence.[21]
Respondent nevertheless harps on its strict compliance with the earlier
mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the
aggravation of the resulting injury to the creditor. [24]
To fully free a common carrier from any liability, the fortuitous event must

on September 11, 2000.Respondents position does not impress. have been the proximate and only cause of the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during and

The evidence shows that PAGASA issued 24-hour public weather forecasts after the occurrence of the fortuitous event. [25]

and tropical cyclone warnings for shipping on September 10 and 11, 2000
Respondent cites the squall that occurred during the voyage as the fortuitous
advising of tropical depressions in Northern Luzon which would also affect
event that overturned M/B Coco Beach III. As reflected above, however, the
the province of Mindoro.[22] By the testimony of Dr. Frisco Nilo, supervising
occurrence of squalls was expected under the weather condition
weather specialist of PAGASA, squalls are to be expected under such
of September 11, 2000. Moreover, evidence shows that M/B Coco Beach
weather condition.[23]
III suffered engine trouble before it capsized and sank. [26]The incident was,
therefore, not completely free from human intervention.
A very cautious person exercising the utmost diligence would thus not brave
such stormy weather and put other peoples lives at risk. The extraordinary The Court need not belabor how respondents evidence likewise fails to
diligence required of common carriers demands that they take care of the demonstrate that it exercised due diligence to prevent or minimize the loss
goods or lives entrusted to their hands as if they were their own. This before, during and after the occurrence of the squall.
respondent failed to do.

Article 1764[27] vis--vis Article 2206[28] of the Civil Code holds the
Respondents insistence that the incident was caused by a fortuitous
common carrier in breach of its contract of carriage that results in the death
event does not impress either.
of a passenger liable to pay the following: (1) indemnity for death, (2)
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and
indemnity for loss of earning capacity and (3) moral damages.
unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that
Petitioners are entitled to indemnity for the death of Ruelito which is
constituted the caso fortuito must have been impossible to foresee or, if
fixed at P50,000.[29]
foreseeable, impossible to avoid; (c) the occurrence must have been such as
 As for damages representing unearned income, the formula for its
computation is:
Life expectancy = 2/3 x [80 - age of deceased at the time of
Net Earning Capacity = life expectancy x (gross annual
income - reasonable and death]
necessary living expenses).
2/3 x [80 - 28]
Life expectancy is determined in accordance with the
formula: 2/3 x [52]

Life expectancy = 35
2 / 3 x [80 age of deceased at the time of death] [30]

Documentary evidence shows that Ruelito was earning a basic

The first factor, i.e., life expectancy, is computed by applying the monthly salary of $900[35] which, when converted to Philippine peso applying
formula (2/3 x [80 age at death]) adopted in the American Expectancy Table the annual average exchange rate of $1 = P44 in 2000,[36] amounts
[31]
of Mortality or the Actuarial of Combined Experience Table of Mortality. to P39,600. Ruelitos net earning capacity is thus computed as follows:
The second factor is computed by multiplying the life expectancy by
the net earnings of the deceased, i.e., the total earnings less expenses Net Earning Capacity = life expectancy x (gross annual income -
necessary in the creation of such earnings or income and less living and other reasonable and necessary living expenses).
incidental expenses.[32] The loss is not equivalent to the entire earnings of the
= 35 x (P475,200 - P237,600)
deceased, but only such portion as he would have used to support his = 35 x (P237,600)
dependents or heirs. Hence, to be deducted from his gross earnings are the
Net Earning Capacity = P8,316,000
necessary expenses supposed to be used by the deceased for his own needs.
[33]

Respecting the award of moral damages, since respondent common

In computing the third factor necessary living expense, Smith Bell
carriers breach of contract of carriage resulted in the death of petitioners son,
Dodwell Shipping Agency Corp. v. Borja[34] teaches that when, as in this case,
following Article 1764 vis--vis Article 2206 of the Civil Code, petitioners are
there is no showing that the living expenses constituted the smaller
entitled to moral damages.
percentage of the gross income, the living expenses are fixed at half of the
gross income.
Since respondent failed to prove that it exercised the extraordinary
diligence required of common carriers, it is presumed to have acted
Applying the above guidelines, the Court determines Ruelito's life
recklessly, thus warranting the award too of exemplary damages, which are
expectancy as follows:
granted in contractual obligations if the defendant acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. [37]
Under the circumstances, it is reasonable to award petitioners the
amount of P100,000 as moral damages and P100,000 as exemplary damages.
[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's fees may
also be awarded where exemplary damages are awarded. The Court finds
that 10% of the total amount adjudged against respondent is reasonable for
the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals [40] teaches
that when an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit
1. When the obligation is breached, and it consists in
the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of
the court is made (at which time the quantification of
damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum
of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with
certainty only in the present petition, the interest due shall be computed upon
the finality of this decision at the rate of 12% per annum until satisfaction, in
accordance with paragraph number 3 of the immediately cited guideline
in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19,
2008 is REVERSED and SET ASIDE. Judgment is rendered in favor of
petitioners ordering respondent to pay petitioners the following: (1) P50,000
as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for
Ruelitos loss of earning capacity; (3) P100,000 as moral
damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount
adjudged against respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of
12% per annum computed from the finality of this decision until full
payment.

SO ORDERED.