1
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper
Case for Transpo
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.
DECISION
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the following:(a) the 30 January 1997
decision[1] of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4 October 1991 [2] of the
Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR to pay private respondent
Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing of the complaint
until fully paid, P8,000 as attorneys fees, and the costs of the suit; and (b) its resolution of 19 November
1997,[3] denying LOADSTARs motion for reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V Cherokee (hereafter, the vessel) the following
goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and others; and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including
TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The vessel, in turn, was insured by Prudential Guarantee &
Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its way to Manila from the port of Nasipit,
Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its
shipment, the consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid
P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel
was due to the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the
insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MICs claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods and claimed that the sinking of
its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it,
LOADSTAR being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the
insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate the
matter to the Court of Appeals, which, however, agreed with the trial court and affirmed its decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
on that fateful voyage. The court noted that the charter of the vessel was limited to the ship, but
LOADSTAR retained control over its crew.[4]
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in
determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been
seaworthy, it could have withstood the natural and inevitable action of the sea on 20 November 1984,
when the condition of the sea was moderate. The vessel sank, not because of force majeure, but
because it was not seaworthy. LOADSTARS allegation that the sinking was probably due to the
convergence of the winds, as stated by a PAGASA expert, was not duly proven at the trial. The
limited liability rule, therefore, is not applicable considering that, in this case, there was an actual
finding of negligence on the part of the carrier.[5]
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said
provisions bind only the shipper/consignee and the carrier. When MIC paid the shipper for the goods
insured, it was subrogated to the latters rights as against the carrier, LOADSTAR. [6]
5) There was a clear breach of the contract of carriage when the shippers goods never reached their
destination. LOADSTARs defense of diligence of a good father of a family in the training and selection
of its crew is unavailing because this is not a proper or complete defense in culpa contractual.
6) Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are
delivered on board a ship in good order and condition, and the shipowner delivers them to the shipper
in bad order and condition, it then devolves upon the shipowner to both allege and prove that the
goods were damaged by reason of some fact which legally exempts him from liability. Transportation
of the merchandise at the risk and venture of the shipper means that the latter bears the risk of loss or
deterioration of his goods arising from fortuitous events, force majeure, or the inherent nature and
defects of the goods, but not those caused by the presumed negligence or fault of the carrier, unless
otherwise proved.[7]
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V Cherokee a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued a
certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo.
In refutation, MIC argues that the issue as to the classification of the M/V Cherokee was not timely raised below;
hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood products for
delivery to one consignee, it was also carrying passengers as part of its regular business. Moreover, the bills of lading
in this case made no mention of any charter party but only a statement that the vessel was a general cargo
carrier. Neither was there any special arrangement between LOADSTAR and the shipper regarding the shipment of
the cargo. The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been
negligent, and the burden of proving otherwise devolved upon MIC.[8]
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the
vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety
engineers of the Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the time
was experienced, licensed and unquestionably competent. With all these precautions, there could be no other
conclusion except that LOADSTAR exercised the diligence of a good father of a family in ensuring the vessels
seaworthiness.

LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force
majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine
until the next day when the vessel sank due to strong waves. MICs witness, Gracelia Tapel, fully established the
existence of two typhoons, WELFRING and YOLING, inside the Philippine area of responsibility. In fact, on 20
November 1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa Island. Tapel also
testified that the convergence of winds brought about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was being shipped at owners risk, LOADSTAR was not liable for any
loss or damage to the same. Therefore, the Court of Appeals erred in holding that the provisions of the bills of lading
apply only to the shipper and the carrier, and not to the insurer of the goods, which conclusion runs counter to the
Supreme Courts ruling in the case of St. Paul Fire & Marine Insurance Co. v. Macondray & Co., Inc., [9] and National
Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen Phils., Inc.[10]
Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been instituted beyond the
period stated in the bills of lading for instituting the same suits based upon claims arising from shortage, damage, or
non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action. The vessel sank on
20 November 1984; yet, the case for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due
to force majeure, because the same concurred with LOADSTARs fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be
deemed waived.
Thirdly, the limited liability theory is not applicable in the case at bar because LOADSTAR was at fault or
negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its knowledge
of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier
be issued a certificate of public convenience, and this public character is not altered by the fact that the carriage of the
goods in question was periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship
Agencies, Inc.,[11] where this Court held that a common carrier transporting special cargo or chartering the vessel to a
special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the
charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict policy
governing common carriers is upheld. Such policy has no force where the public at large is not involved, as in the
case of a ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and
Industrial Supply, Inc. v. Court of Appeals[12] and National Steel Corp. v. Court of Appeals,[13] both of which upheld
the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that the factual
settings are different. The records do not disclose that the M/V Cherokee, on the date in question, undertook to carry
a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to
show any special arrangement, but only a general provision to the effect that the M/V Cherokee was a general cargo
carrier.[14] Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears
to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially
where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier
under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals,[15] the Court juxtaposed the
statutory definition of common carriers with the peculiar circumstances of that case, viz.:
The Civil Code defines common carriers in the following terms:
2
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.
xxx
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 backhauling was done on a
periodic or occasional rather than regular or scheduled manner, and even though private
respondents 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 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.
Moving on to the second assigned error, we find that the M/V Cherokee was not seaworthy when it embarked
on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers
and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. [16]
Neither do we agree with LOADSTARs argument that the limited liability theory should be applied in this
case. The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or
agent.[17] LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel
to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be
deemed as force majeure, inasmuch as the wind condition in the area where it sank was determined to be
moderate. Since it was remiss in the performance of its duties, LOADSTAR cannot hide behind the limited liability
doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter
disregard of this Courts pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc.,[18] and National
Union Fire Insurance v. Stolt-Nielsen Phils., Inc.[19] It was ruled in these two cases that after paying the claim of the
insured for damages under the insurance policy, the insurer is subrogated merely to the rights of the assured, that is,
it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case of
loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as
subrogee is necessarily subject to the same limitations and restrictions. We do not agree. In the first place, the cases
relied on by LOADSTAR involved a limitation on the carriers liability to an amount fixed in the bill of lading which the

parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the other
hand, the stipulation in the case at bar effectively reduces the common carriers liability for the loss or destruction of
the goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or
damage to shipments made at owners risk. Such stipulation is obviously null and void for being contrary to public
policy.[20] It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and
all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified
limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform
weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third
is valid and enforceable.[21]
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the
rights which the latter has against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MICs cause of
action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) which
provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit may
be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the
good.[22] In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing
the one-year period is null and void;[23] it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of
Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.
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.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals, affirming the
decision[2] of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as
subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by
petitioner, 25% thereof as attorneys fees, and the cost of the suit.
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 SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo
was insured by respondent UCPB General Insurance Co., Inc.
3
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 SMCs warehouse in Ermita, Manila. On July 25, 1990, the goods were
inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were
wet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In
turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148, Makati
City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the damage to the
shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants. Evidence such
as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F) with entries appearing therein, classified as TED
and TSN, which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the
middle of the subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. H - H-4-A)
confirms the fact of the damaged condition of the subject cargoes. The surveyor[s] report (Exh. H-4-A) in particular,
which provides among others that:
. . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably whilst in
the custody of the broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not liable. Defendant
by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the
cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. Defendant did not
present any evidence on what precaution [she] performed to prevent [the] said incident, hence the presumption is that
the moment the defendant accepts the cargo [she] shall perform such extraordinary diligence because of the nature of
the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that
they have observed the extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove
merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to
the carrier to prove that he has exercised the extraordinary diligence required by law. Thus, it has been held that the
mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order,
makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some
other circumstances inconsistent with its liability. (cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol.
IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed [to] exercise
[the] extraordinary diligence required by law, hence the extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of and received by the carrier for transportation until the same are delivered
actually or constructively by the carrier to the consignee or to the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following amounts
1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers 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]
4
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 petitioners 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 petitioners business.
Now, as to petitioners 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 petitioners 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 SMCs 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 petitioners 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 petitioners 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 consignees 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 petitioners insistence that the cargo could not have been damaged while in her custody as she
immediately delivered the containers to SMCs 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
5
some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the
carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art.
1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.
SO ORDERED.
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE
AND ASSURANCE, INC., respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R. CV No. 49195 and February 21, 2001
Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the Regional Trial Court of Manila which found
petitioner liable to pay private respondent the amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35 [4] was
shipped by Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for
delivery to the consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.[5] The
shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage
for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of the
petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as carrier to deliver the
cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage
Receipt No. 0364[7] for delivery to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming
typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek
shelter from the approaching typhoon. PSTSI III was tied down to other barges which arrived ahead of it while
weathering out the storm that night.A few days after, the barge developed a list because of a hole it sustained after
hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990.[8] It
likewise secured the services of Gaspar Salvaging Corporation which refloated the barge. [9] The hole was then
patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on
September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To
avoid the complete sinking of the barge, a portion of the goods was transferred to three other barges. [10]
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total
loss of the remaining cargo.[11] A second Marine Protest was filed on September 7, 1990.[12]
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on
the three other barges.[13] The total proceeds from the sale of the salvaged cargo was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another letter dated
September 18, 1990 to the private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of
indemnity, attorney's fees and cost of suit.[16] Petitioner filed its answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia Lighterage & Shipping,
Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from the
date complaint was filed on July 3, 1991 until fully satisfied plus 10% of the amount awarded as and for attorney's
fees. Defendant's counterclaim is hereby DISMISSED.With costs against defendant. [18]
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate court affirmed
the decision of the trial court with modification. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense that the salvage value
of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate court in a
Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW
AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD
THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW
AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE
PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF
THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE
FIVE (5) CASES ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW
AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE
AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and
custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly
known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately
for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the
general public.[20]
We disagree.
6
In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in Article 1732 of the 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. We also did not distinguish 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. Further, we ruled that Article 1732 does not distinguish between a carrier
offering its services to the general public, and one who offers services or solicits business only from a narrow segment
of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage[22] and it offers its
barges to the public for carrying or transporting goods by water for compensation. Petitioner is clearly a common
carrier. In De Guzman, supra,[23] we considered private respondent Ernesto Cendaa to be a common carrier even if
his principal occupation was not the carriage of goods for others, but that of buying used bottles and scrap metal in
Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an irregular rather
than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known
routes. Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals.[24] 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.[25] In the case at bar, the petitioner admitted that it is engaged in the business of shipping and
lighterage,[26] offering its barges to the public, despite its limited clientele for carrying or transporting goods by water
for compensation.[27]
On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise extraordinary
diligence in its care and custody of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by
them.[28] They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated.[29] 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. There are, however, exceptions to this
rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:
Art. 1734. 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:
(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.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its
cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the
cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods,
and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize
the loss.[30] The evidence show that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly,
this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched
with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail
safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further
 7

damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., a - It is already in an inner portion of Pasig River. The typhoon would be coming and it would be
states: dangerous if we are in the vicinity of Manila Bay.

CROSS-EXAMINATION BY ATTY. DONN LEE:[31] q - But the fact is, the typhoon was incoming? Yes or no?

xxxxxxxxx a - Yes.

q - Can you tell us what else transpired after that incident?

q - And yet as a standard operating procedure of your Company, you have to secure a sort of Certification
a - After the first accident, through the initiative of the barge owners, they tried to pull out the barge from to determine the weather condition, am I correct?
the place of the accident, and bring it to the anchor terminal for safety, then after deciding if the
vessel is stabilized, they tried to pull it to the consignees warehouse, now while on route another
a - Yes, sir.
accident occurred, now this time the barge totally hitting something in the course.

q - You said there was another accident, can you tell the court the nature of the second accident? q - So, more or less, you had the knowledge of the incoming typhoon, right?
a - The sinking, sir.
a - Yes, sir.
q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?

a - Mostly it was related to the first accident because there was already a whole (sic) on the bottom part of q - And yet you proceeded to the premises of the GMC?
the barge.

xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite knowledge of an incoming typhoon. During
the time that the barge was heading towards the consignee's wharf on September 5, 1990, typhoon Loleng has
already entered the Philippine area of responsibility.[32] A part of the testimony of Robert Boyd, Cargo Operations
Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:[33]
xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie where she was
instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the consignee) as I
have said was in a hurry for their goods to be delivered at their Wharf since they needed badly the
wheat that was loaded in PSTSI-3. It was needed badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are already inside
the vicinity or inside Pasig entrance, it is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for
the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence required
from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that when the
towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it
was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human
factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 49195
dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 138334. August 25, 2003]

a - Yes, sir.

xxxxxxxxx
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and CARAVAN TRAVEL &
[34]
TOURS INTERNATIONAL, INC., respondents.
CROSS-EXAMINATION BY ATTY. IGNACIO:

xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.
q - Despite of the threats of an incoming typhoon as you testified a while ago?
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland
and France at a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare,

and the booking fee was also waived because petitioners niece, Meriam Menor, was respondent companys ticketing
manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to deliver
petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the package
tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the flight
for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she discovered that the flight she was
supposed to take had already departed the previous day. She learned that her plane ticket was for the flight
scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which included England,
Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay US$785.00 or P20,881.00
(at the then prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as partial payment and
commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for Jewels of Europe and the amount she owed respondent for
the British Pageant tour. Despite several demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable.[1] Petitioner was thus constrained to file a complaint against respondent
for breach of contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch
59 of the Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was due to respondents fault since
it did not clearly indicate the departure date on the plane ticket.Respondent was also negligent in informing her of the
wrong flight schedule through its employee Menor. She insisted that the British Pageant was merely a substitute for
the Jewels of Europe tour, such that the cost of the former should be properly set-off against the sum paid for the
latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied responsibility
for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed of the correct departure date,
which was clearly and legibly printed on the plane ticket. The travel documents were given to petitioner two days
ahead of the scheduled trip.Petitioner had only herself to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels of Europe, considering that
the same had already been remitted to its principal in Singapore, Lotus Travel Ltd., which had already billed the same
even if petitioner did not join the tour. Lotus European tour organizer, Insight International Tours Ltd., determines the
cost of a package tour based on a minimum number of projected participants. For this reason, it is accepted industry
practice to disallow refund for individuals who failed to take a booked tour. [3]
Lastly, respondent maintained that the British Pageant was not a substitute for the package tour that petitioner
missed. This tour was independently procured by petitioner after realizing that she made a mistake in missing her
flight for Jewels of Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the second tour
because her niece was then an employee of the travel agency. Consequently, respondent prayed that petitioner be
ordered to pay the balance of P12,901.00 for the British Pageant package tour.
After due proceedings, the trial court rendered a decision,[4] the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three Thousand Nine
Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with legal interest thereon at
the rate of twelve percent (12%) per annum starting January 16, 1992, the date when the
complaint was filed;
8
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00) Pesos as and for
reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.[5]
The trial court held that respondent was negligent in erroneously advising petitioner of her departure date
through its employee, Menor, who was not presented as witness to rebut petitioners testimony. However, petitioner
should have verified the exact date and time of departure by looking at her ticket and should have simply not relied on
Menors verbal representation. The trial court thus declared that petitioner was guilty of contributory negligence and
accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault. However, the
appellate court held that petitioner is more negligent than respondent because as a lawyer and well-traveled person,
she should have known better than to simply rely on what was told to her. This being so, she is not entitled to any
form of damages. Petitioner also forfeited her right to the Jewels of Europe tour and must therefore pay respondent
the balance of the price for the British Pageant tour. The dispositive portion of the judgment appealed from reads as
follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is hereby
REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00, representing the balance of the price of the British Pageant Package
Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the time the
counterclaim was filed until the finality of this decision. After this decision becomes final and executory, the rate of
TWELVE PERCENT (12%) interest per annum shall be additionally imposed on the total obligation until payment
thereof is satisfied. The award of attorneys fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for reconsideration,[7] petitioner filed the instant petition under Rule 45 on the
following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in reversing and setting
aside the decision of the trial court by ruling that the petitioner is not entitled to a refund of the cost of unavailed
Jewels of Europe tour she being equally, if not more, negligent than the private respondent, for in the contract of
carriage the common carrier is obliged to observe utmost care and extra-ordinary diligence which is higher in degree
than the ordinary diligence required of the passenger. Thus, even if the petitioner and private respondent were both
negligent, the petitioner cannot be considered to be equally, or worse, more guilty than the private respondent. At
best, petitioners negligence is only contributory while the private respondent [is guilty] of gross negligence making the
principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was not indivisible and the
amount paid therefor refundable;
III

The Honorable Court erred in not granting to the petitioner the consequential damages due her as a result of breach
of contract of carriage.[8]
Petitioner contends that respondent did not observe the standard of care required of a common carrier when it
informed her wrongly of the flight schedule. She could not be deemed more negligent than respondent since the latter
is required by law to exercise extraordinary diligence in the fulfillment of its obligation. If she were negligent at all, the
same is merely contributory and not the proximate cause of the damage she suffered. Her loss could only be
attributed to respondent as it was the direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or association of persons
obligate themselves to transport persons, things, or news from one place to another for a fixed price. [9] Such person or
association of persons are regarded as carriers and are classified as private or special carriers and common or public
carriers.[10] A common carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air,
for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business of transporting
either passengers or goods and is therefore, neither a private nor a common carrier. Respondent did not undertake to
transport petitioner from one place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Respondents services as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company, this does not
mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an agent of the airline, with
whom petitioner ultimately contracted for her carriage to Europe. Respondents obligation to petitioner in this regard
was simply to see to it that petitioner was properly booked with the airline for the appointed date and time. Her
transport to the place of destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast, the object of a contract
of carriage is the transportation of passengers or goods. It is in this sense that the contract between the parties in this
case was an ordinary one for services and not one of carriage. Petitioners submission is premised on a wrong
assumption.
The nature of the contractual relation between petitioner and respondent is determinative of the degree of care
required in the performance of the latters obligation under the contract. For reasons of public policy, a common carrier
in a contract of carriage is bound by law to carry passengers as far as human care and foresight can provide using the
utmost diligence of very cautious persons and with due regard for all the circumstances. [11] As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound under the law to observe extraordinary
diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of care required of
respondent is that of a good father of a family under Article 1173 of the Civil Code. [12] This connotes reasonable care
consistent with that which an ordinarily prudent person would have observed when confronted with a similar situation.
The test to determine whether negligence attended the performance of an obligation is: did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the
same situation? If not, then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the wrong
day of departure. Petitioners testimony was accepted as indubitable evidence of Menors alleged negligent act since
respondent did not call Menor to the witness stand to refute the allegation. The lower court applied the presumption
under Rule 131, Section 3 (e)[14] of the Rules of Court that evidence willfully suppressed would be adverse if produced
and thus considered petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and maintains that petitioners
assertion is belied by the evidence on record. The date and time of departure was legibly written on the plane ticket
and the travel papers were delivered two days in advance precisely so that petitioner could prepare for the trip. It
9
performed all its obligations to enable petitioner to join the tour and exercised due diligence in its dealings with the
latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise to an
inference unfavorable to the former. Menor was already working in France at the time of the filing of the
complaint,[15] thereby making it physically impossible for respondent to present her as a witness. Then too, even if it
were possible for respondent to secure Menors testimony, the presumption under Rule 131, Section 3(e) would still
not apply. The opportunity and possibility for obtaining Menors testimony belonged to both parties, considering that
Menor was not just respondents employee, but also petitioners niece. It was thus error for the lower court to invoke
the presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would
logically be inoperative if the evidence is not intentionally omitted but is simply unavailable, or when the same could
have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors negligence concurred with the
negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioners uncorroborated narration of the events. It is
well-settled that the party alleging a fact has the burden of proving it and a mere allegation cannot take the place of
evidence.[17] If the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the defendant is under no obligation to prove his exception or
defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard procedure in rendering its services to petitioner.
As correctly observed by the lower court, the plane ticket [19] issued to petitioner clearly reflected the departure date
and time, contrary to petitioners contention. The travel documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked petitioner
for the tour, prepared the necessary documents and procured the plane tickets. It arranged petitioners hotel
accommodation as well as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as everything else that
was essential to book petitioner for the tour. Had petitioner exercised due diligence in the conduct of her affairs, there
would have been no reason for her to miss the flight. Needless to say, after the travel papers were delivered to
petitioner, it became incumbent upon her to take ordinary care of her concerns. This undoubtedly would require that
she at least read the documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation so demands. [20] There is no fixed
standard of diligence applicable to each and every contractual obligation and each case must be determined upon its
particular facts. The degree of diligence required depends on the circumstances of the specific obligation and whether
one has been negligent is a question of fact that is to be determined after taking into account the particulars of each
case.[21]
The lower court declared that respondents employee was negligent. This factual finding, however, is not
supported by the evidence on record. While factual findings below are generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial court overlooked, misunderstood, or misapplied some facts or
circumstances of weight and substance which will affect the result of the case.[22]
In the case at bar, the evidence on record shows that respondent company performed its duty diligently and did
not commit any contractual breach. Hence, petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R.
CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British Pageant Package Tour, with legal interest thereon at the rate of 6%
per annum, to be computed from the time the counterclaim was filed until the finality of this Decision. After this
Decision becomes final and executory, the rate of 12% per annum shall be imposed until the obligation is fully settled,
this interim period being deemed to be by then an equivalent to a forbearance of credit. [23]

SO ORDERED.
[G.R. No. 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 Decision[1] 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.[2] The
Femenal tablets were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were packed
together in one (1) LD3 aluminum container, while the Trinordial tablets were packed in two pallets, each of which
contained 30 cartons.[3]
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No.
4995 pursuant to Marine Open Policy No. 138.[4]
[5]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA), 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]
[13]
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes which were
thereupon stripped from the aluminum containers[14] 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]
10
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 report [21] 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 Report [26] 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 letter[29] 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 Receipt[30] 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 letter[31] 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 Decision[34] 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.
11
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 1733 [45] 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 goods[53]; 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 1734[55] 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.
 12

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 DECISION
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] CARPIO MORALES, J.:

The 4-page weather data furnished by PAGASA[61] 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.
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.

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.
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).

Costs against petitioner. 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
SO ORDERED. 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 &
SPOUSES DANTE CRUZ and G.R. No. 186312
Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.[3]
LEONORA CRUZ,
Petitioners, by letter of October 26, 2000,[4] demanded indemnification from respondent for the death of their son in the
Petitioners, Present:
amount of at least P4,000,000.
CARPIO MORALES, J.,
Replying, respondent, by letter dated November 7, 2000,[5] denied any responsibility for the incident which it
Chairperson,
considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of P10,000 to
BRION,
petitioners upon their signing of a waiver.
- versus - BERSAMIN,
ABAD,* and
As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging that respondent, as a
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning
Respondent.
bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as
Promulgated:
early as 5:00 a.m. of September 11, 2000.[6]
June 29, 2010
In its Answer,[7] respondent denied being a common carrier, alleging that its boats are not available to the general
x-------------------------------------------------x
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 Resorts assistant manager.[8] He added that M/B Coco
Beach III met all four conditions on September 11, 2000,[9] but a subasco or squall, characterized by strong winds and
big waves, suddenly occurred, causing the boat to capsize. [10]
By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed petitioners Complaint and respondents
Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated September 2, 2005,[12] they appealed to
the Court of Appeals.
By Decision of August 19, 2008,[13] the appellate court denied petitioners appeal, holding, among other
things, that the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco Beach
III; and that the proximate cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution dated January 16, 2009,[14] they filed the
present Petition for Review.[15]
Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier
since by its tour package, the transporting of its guests is an integral part of its resort business. They inform that
another division of the appellate court in fact held respondent liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a common
carrier; that the 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 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:
13
. . . every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services . . .[18] (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondents ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry services,
may be availed of by anyone who can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be
imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort
operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who
opt not to avail of respondents ferry services pay the same amount is likewise inconsequential. These guests may
only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has deliberately refrained from
making distinctions on whether the carrying of persons or goods is the carriers principal business, whether it is offered
on a regular basis, or whether it is offered to the general public. The intent of the law is thus to not consider such
distinctions. Otherwise, there is no telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities of
common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence for the safety of the passengers transported by them, according to all the
circumstances of each case.[19] They are bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. [20]
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the
common carrier is at fault or negligent. In fact, there is even no need for the court to make an express finding of fault
or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that
the carrier exercised extraordinary diligence.[21]
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage before it
allowed M/B Coco Beach III to sail on September 11, 2000.Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping
on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also affect
the province of Mindoro.[22] By the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are
to be expected under such weather condition.[23]
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other
peoples lives at risk. The extraordinary diligence required of common carriers demands that they take care of the
goods or lives entrusted to their hands as if they were their own. This respondent failed to do.

Respondents insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of
the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted
the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must
have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the
obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.[24]
To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only cause of
the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the fortuitous event.[25]
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach
III. As reflected above, however, the occurrence of squalls was expected under the weather condition of September
11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and
sank.[26]The incident was, therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to demonstrate that it exercised due diligence to
prevent or minimize the loss before, during and after the occurrence of the squall.
Article 1764[27] vis--vis Article 2206[28] of the Civil Code holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for
loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.[29]
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living
expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death][30]
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death]) adopted
in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. [31]
The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e.,
the total earnings less expenses necessary in the creation of such earnings or income and less living and other
incidental expenses.[32] The loss is not equivalent to the entire earnings of the deceased, but only such portion as he
would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are the
necessary expenses supposed to be used by the deceased for his own needs. [33]
In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v.
Borja[34] teaches that when, as in this case, there is no showing that the living expenses constituted the smaller
percentage of the gross income, the living expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
14
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 [35] which, when
converted to Philippine peso applying the annual average exchange rate of $1 = P44 in 2000,[36] amounts
to P39,600. Ruelitos net earning capacity is thus computed as follows:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent common carriers breach of contract of carriage
resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206 of the Civil Code, petitioners are
entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it
is presumed to have acted recklessly, thus warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.[37]
Under the circumstances, it is reasonable to award petitioners the amount of 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).
 15

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

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed from the Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the copper cathodes. Because
finality of this decision until full payment. of this incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount
of P1,903,335.39. After the requisite investigation and adjustment, R&B Insurance paid Columbia the amount
SO ORDERED. of P1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the
LOADMASTERS CUSTOMS SERVICES, INC., G.R. No. 179446 Regional Trial Court, Branch 14, Manila (RTC), docketed as Civil Case No. 02-103040. It sought reimbursement of the
Petitioner, amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated to the right of
Present: the consignee to recover from the party/parties who may be held legally liable for the loss. [2]

CARPIO, J., Chairperson, On November 19, 2003, the RTC rendered a decision[3] holding Glodel liable for damages for the loss of the subject
NACHURA, cargo and dismissing Loadmasters counterclaim for damages and attorneys fees against R&B Insurance. The
- versus - PERALTA, dispositive portion of the decision reads:
ABAD, and
MENDOZA, JJ. WHEREFORE, all premises considered, the plaintiff having established by
preponderance of evidence its claims against defendant Glodel Brokerage Corporation, judgment
GLODEL BROKERAGE CORPORATION and is hereby rendered ordering the latter:
R&B INSURANCE CORPORATION,
Respondents.
Promulgated: 1. To pay plaintiff R&B Insurance Corporation the sum of P1,896,789.62 as
actual and compensatory damages, with interest from the date of
January 10, 2011 complaint until fully paid;

X -------------------------------------------------------------------------------------- X 2. To pay plaintiff R&B Insurance Corporation the amount equivalent to 10%
of the principal amount recovered as and for attorneys fees plus P1,500.00
DECISION per appearance in Court;

3. To pay plaintiff R&B Insurance Corporation the sum of P22,427.18 as

MENDOZA, J.: litigation expenses.

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

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the August 24, 2007 damages and attorneys fees against plaintiff are hereby dismissed.
Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 82822, entitled R&B Insurance Corporation v. Glodel
Brokerage Corporation and Loadmasters Customs Services, Inc., which held petitioner Loadmasters Customs
Services, Inc. (Loadmasters) liable to respondent Glodel Brokerage Corporation (Glodel) in the amount
of P1,896,789.62 representing the insurance indemnity which R&B Insurance Corporation (R&B Insurance) paid to the
insured-consignee, Columbia Wire and Cable Corporation (Columbia).

With costs against defendant Glodel Brokerage Corporation.

THE FACTS: SO ORDERED.[4]
Both R&B Insurance and Glodel appealed the RTC decision to the CA.

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to insure the On August 24, 2007, the CA rendered the assailed decision which reads in part:
shipment of 132 bundles of electric copper cathodes against All Risks. On August 28, 2001, the cargoes were shipped
on board the vessel Richard Rey from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same
date.

Considering that appellee is an agent of appellant Glodel, whatever liability the latter
owes to appellant R&B Insurance Corporation as insurance indemnity must likewise be the
amount it shall be paid by appellee Loadmasters.
WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED in that the
appellee Loadmasters is likewise held liable to appellant Glodel in the amount of P1,896,789.62
representing the insurance indemnity appellant Glodel has been held liable to appellant R&B
Insurance Corporation.
Appellant Glodels appeal to absolve it from any liability is herein DISMISSED.
SO ORDERED.[5]
Hence, Loadmasters filed the present petition for review on certiorari before this Court presenting the
following
ISSUES
1. Can Petitioner Loadmasters be held liable to Respondent Glodel in spite of the fact that the
latter respondent Glodel did not file a cross-claim against it (Loadmasters)?
2. Under the set of facts established and undisputed in the case, can petitioner Loadmasters be
legally considered as an Agent of respondent Glodel?[6]
To totally exculpate itself from responsibility for the lost goods, Loadmasters argues that it cannot be
considered an agent of Glodel because it never represented the latter in its dealings with the consignee. At any rate, it
further contends that Glodel has no recourse against it for its (Glodels) failure to file a cross-claim pursuant to Section
2, Rule 9 of the 1997 Rules of Civil Procedure.
Glodel, in its Comment,[7] counters that Loadmasters is liable to it under its cross-claim because the latter was grossly
negligent in the transportation of the subject cargo. With respect to Loadmasters claim that it is already estopped from
filing a cross-claim, Glodel insists that it can still do so even for the first time on appeal because there is no rule that
provides otherwise. Finally, Glodel argues that its relationship with Loadmasters is that of Charter wherein the
transporter (Loadmasters) is only hired for the specific job of delivering the merchandise. Thus, the diligence required
in this case is merely ordinary diligence or that of a good father of the family, not the extraordinary diligence required
of common carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have interposed a cross-claim against Loadmasters
because it was not prevented from presenting evidence to prove its position even without amending its Answer. As to
the relationship between Loadmasters and Glodel, it contends that a contract of agency existed between the two
corporations.[8]
Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right,
so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or
securities.[9] Doubtless, R&B Insurance is subrogated to the rights of the insured to the extent of the amount it paid the
consignee under the marine insurance, as provided under Article 2207 of the Civil Code, which reads:
ART. 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against the
wrong-doer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
16
As subrogee of the rights and interest of the consignee, R&B Insurance has the right to seek reimbursement
from either Loadmasters or Glodel or both for breach of contract and/or tort.
The issue now is who, between Glodel and Loadmasters, is liable to pay R&B Insurance for the amount of the
indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common carriers to determine their
liability for the loss of the subject cargo. Under Article 1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the business of carrying or transporting passenger or goods, or both
by land, water or air for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier because it is engaged in the business
of transporting goods by land, through its trucking service. It is a common carrier as distinguished from a private
carrier wherein the carriage is generally undertaken by special agreement and it does not hold itself out to carry goods
for the general public.[10] The distinction is significant in the sense that the rights and obligations of the parties to a
contract of private carriage are governed principally by their stipulations, not by the law on common carriers.[11]
In the present case, there is no indication that the undertaking in the contract between Loadmasters and
Glodel was private in character. There is no showing that Loadmasters solely and exclusively rendered services to
Glodel.
In fact, Loadmasters admitted that it is a common carrier.[12]
In the same vein, Glodel is also considered a common carrier within the context of Article 1732. In its
Memorandum,[13] it states that it is a corporation duly organized and existing under the laws of the Republic of
the Philippines and is engaged in the business of customs brokering. It cannot be considered otherwise because as
held by this Court in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., [14] a customs broker is
also regarded as a common carrier, the transportation of goods being an integral part of its business.
Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and
for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by them
according to all the circumstances of such case, as required by Article 1733 of the Civil Code. When the Court speaks
of extraordinary diligence, it is that extreme measure of care and caution which persons of unusual prudence and
circumspection observe for securing and preserving their own property or rights. [15] This exacting standard imposed on
common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the
mercy of the common carrier once the goods have been lodged for shipment.[16] Thus, in case of loss of the goods,
the common carrier is presumed to have been at fault or to have acted negligently. [17] This presumption of fault or
negligence, however, may be rebutted by proof that the common carrier has observed extraordinary diligence over the
goods.
With respect to the time frame of this extraordinary responsibility, the Civil Code provides that the exercise
of extraordinary diligence lasts from the time the goods are unconditionally placed in the possession of, and received
by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee,
or to the person who has a right to receive them.[18]
Premises considered, the Court is of the view that both Loadmasters and Glodel are jointly and severally
liable to R & B Insurance for the loss of the subject cargo. Under Article 2194 of the New Civil Code, the responsibility
of two or more persons who are liable for a quasi-delict is solidary.
Loadmasters claim that it was never privy to the contract entered into by Glodel with the
consignee Columbia or R&B Insurance as subrogee, is not a valid defense. It may not have a direct contractual
relation with Columbia, but it is liable for tort under the provisions of Article 2176 of the Civil Code on quasi-delicts
which expressly provide:
ART. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage Service, Inc. v. Phoenix
Assurance Company of New York,/McGee & Co., Inc.[19] where this Court held that a tort may arise despite the
absence of a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against
Mindanao Terminal, from which the present case has arisen, states a cause of action. The
present action is based on quasi-delict, arising from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte Produce. Even assuming that both Phoenix and
McGee have only been subrogated in the rights of Del Monte Produce, who is not a party to the
contract of service between Mindanao Terminal and Del Monte, still the insurance carriers may
have a cause of action in light of the Courts consistent ruling that the act that breaks the
contract may be also a tort. In fine, a liability for tort may arise even under a contract, where tort is
that which breaches the contract. In the present case, Phoenix and McGee are not suing for
damages for injuries arising from the breach of the contract of service but from the alleged
negligent manner by which Mindanao Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the part of the defendant should be sufficient
to establish a cause of action arising from quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged
in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees
(truck driver and helper) were instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters
should be made answerable for the damages caused by its employees who acted within the scope of their assigned
task of delivering the goods safely to the warehouse.
Whenever an employees negligence causes damage or injury to another, there instantly arises a
presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa in
eligiendo) or supervision (culpa in vigilando) of its employees.[20] To avoid liability for a quasi-delict committed by its
employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care
and diligence of a good father of a family in the selection and supervision of his employee. [21] In this regard,
Loadmasters failed.
Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated
destination. It should have been more prudent in entrusting the goods to Loadmasters by taking precautionary
measures, such as providing escorts to accompany the trucks in delivering the cargoes. Glodel should, therefore, be
held liable with Loadmasters. Its defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no principal-agent relationship between Glodel and
Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code provides: By the contract of agency a
person binds himself to render some service or to do something in representation or on behalf of another, with the
consent or authority of the latter. The elements of a contract of agency are: (1) consent, express or implied, of the
parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. [22]
17
Accordingly, there can be no contract of agency between the parties. Loadmasters never represented
Glodel. Neither was it ever authorized to make such representation. It is a settled rule that the basis for agency is
representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and
said acts have the same legal effect as if they were personally executed by the principal. On the part of the principal,
there must be an actual intention to appoint or an intention naturally inferable from his words or actions, while on the
part of the agent, there must be an intention to accept the appointment and act on it. [23] Such mutual intent is not
obtaining in this case.
What then is the extent of the respective liabilities of Loadmasters and Glodel? Each wrongdoer is liable for
the total damage suffered by R&B Insurance. Where there are several causes for the resulting damages, a party is not
relieved from liability, even partially. It is sufficient that the negligence of a party is an efficient cause without which the
damage would not have resulted. It is no defense to one of the concurrent tortfeasors that the damage would not have
resulted from his negligence alone, without the negligence or wrongful acts of the other concurrent tortfeasor. As
stated in the case of Far Eastern Shipping v. Court of Appeals,[24]
X x x. Where several causes producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened, the injury may be attributed to all or any
of the causes and recovery may be had against any or all of the responsible persons although
under the circumstances of the case, it may appear that one of them was more culpable, and that
the duty owed by them to the injured person was not the same. No actor's negligence ceases to
be a proximate cause merely because it does not exceed the negligence of other actors. Each
wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause
of the injury.
There is no contribution between joint tortfeasors whose liability is solidary since both of
them are liable for the total damage. Where the concurrent or successive negligent acts or
omissions of two or more persons, although acting independently, are in combination the direct
and proximate cause of a single injury to a third person, it is impossible to determine in what
proportion each contributed to the injury and either of them is responsible for the whole
injury. Where their concurring negligence resulted in injury or damage to a third party, they
become joint tortfeasors and are solidarily liable for the resulting damage under Article 2194 of
the Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can collect from Loadmasters, it having failed to file a
cross-claim against the latter.
Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach of contract of service as
the latter is primarily liable for the loss of the subject cargo. In this case, however, it cannot succeed in seeking judicial
sanction against Loadmasters because the records disclose that it did not properly interpose a cross-claim against the
latter. Glodel did not even pray that Loadmasters be liable for any and all claims that it may be adjudged liable in favor
of R&B Insurance. Under the Rules, a compulsory counterclaim, or a cross-claim, not set up shall be barred.[25] Thus,
a cross-claim cannot be set up for the first time on appeal.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable
grounds. Equity, which has been aptly described as a justice outside legality, is applied only in the absence of, and
never against, statutory law or judicial rules of procedure. [26] The Court cannot be a lawyer and take the cudgels for a
party who has been at fault or negligent.
WHEREFORE, the petition is PARTIALLY GRANTED. The August 24, 2007 Decision of the Court of
Appeals is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs
Services, Inc. and respondent Glodel Brokerage Corporation jointly and severally liable to
respondent R&B Insurance Corporation for the insurance indemnity it paid to consignee Columbia

Wire & Cable Corporation and ordering both parties to pay, jointly and severally, R&B Insurance
Corporation a] the amount of P1,896,789.62 representing the insurance indemnity; b] the amount
equivalent to ten (10%) percent thereof for attorneys fees; and c] the amount of P22,427.18 for
litigation expenses.
The cross-claim belatedly prayed for by respondent Glodel Brokerage Corporation
against petitioner Loadmasters Customs Services, Inc. is DENIED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary
diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His
liability may include indemnity for loss of earning capacity even if the deceased passenger may only be an
unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision
promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed
them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque
City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van)
with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in
the front beside the driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro
(Alfaro) as driver of the van.
18
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, as
on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place
on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing
loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due
at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path
underneath the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into
Makati. At the time, the narrow path was marked by piles of construction materials and parked passenger jeepneys,
and the railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons
manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny
Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view of
the oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its horn to
warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train
hit the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van.
Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously killing him. Alano
fled the scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against
Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective answers, with cross-claims against
each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
That spouses Zarate were the legitimate parents of Aaron John L. Zarate;(1)
Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation carriage
of the former spouses' son from their residence in Parañaque to his school at the Don Bosco Technical
Institute in Makati City;(2)
During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son of
spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was riding the
contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M.
of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila,
Philippines;(3)
At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad
crossing used by motorists for crossing the railroad tracks;(4)
During the said time of the vehicular/train collision, there were no appropriate and safety warning signs and
railings at the site commonly used for railroad crossing;(5)
At the material time, countless number of Makati bound public utility and private vehicles used on a daily
basis the site of the collision as an alternative route and short-cut to Makati;(6)
 19

The train driver or operator left the scene of the incident on board the commuter train involved without (10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the
waiting for the police investigator;(7) latter in their Complaint by reason of its gross negligence;

The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator (11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary
for railroad crossing at the time of the vehicular collision;(8) damages and attorney's fees.2

PNR received the demand letter of the spouses Zarate;(9) The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport of Aaron;
but that against PNR was based on quasi-delict under Article 2176, Civil Code.

PNR refused to acknowledge any liability for the vehicular/train collision;(10)

In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had
The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that
former and its project contractor; and(11) Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school.

The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van
station of PNR.(12) whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been
intended to be a railroad crossing for motorists.
B. ISSUES
Ruling of the RTC
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence
constituting the proximate cause of the vehicular collision, which resulted in the death of plaintiff spouses' On December 3, 1999, the RTC rendered its decision,3 disposing:
son;
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants
(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for any ordering them to jointly and severally pay the plaintiffs as follows:
negligence which may be attributed to defendant Alfaro;
(1) (for) the death of Aaron- Php50,000.00;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable
for negligence in failing to provide adequate safety warning signs and railings in the area commonly used by
motorists for railroad crossings, constituting the proximate cause of the vehicular collision which resulted in (2) Actual damages in the amount of Php100,000.00;
the death of the plaintiff spouses' son;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with plaintiff-
spouses in failing to provide adequate and safe transportation for the latter's son; (4) Moral damages in the amount of Php4,000,000.00;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and (5) Exemplary damages in the amount of Php1,000,000.00;
attorney's fees;
(6) Attorney’s fees in the amount of Php200,000.00; and
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers
and school bus operators;
(7) Cost of suit.

(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
SO ORDERED.

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the
accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration, 4 reiterating that the cooperative gross
equipment at the site of the accident for the protection of the public; negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages
awarded to the Zarates were not excessive, but based on the established circumstances.

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever
amount the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by The CA’s Ruling
reason of the action;
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
 20

PNR assigned the following errors, to wit:5 On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8

The Court a quo erred in: Issues

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to
pay plaintiffs-appellees for the death of Aaron Zarate and damages.
I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to
pay damages with Philippine National Railways and dismissing their cross-claim against the latter.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming
documentary evidence on record, supporting the case of defendants-appellants Philippine National
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a minor
Railways.
who was only a high school student at the time of his death in the absence of sufficient basis for such an award.

The Pereñas ascribed the following errors to the RTC, namely:

III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at
all.
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary
damages and attorney’s fees with the other defendants.
Ruling

The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways
The petition has no merit.
and in not holding the latter and its train driver primarily responsible for the incident.

1.
The trial court erred in awarding excessive damages and attorney’s fees.
Were the Pereñas and PNR jointly
and severally liable for damages?
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of
sufficient basis for such an award.
The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim
against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral
damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the factual and legal
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
bases, to wit:6

We concur with the CA.

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque City
is AFFIRMED with the modification that the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages is
reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted. To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the selection
and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license and that he had not been
involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to
SO ORDERED.
and from school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v. inappropriate in an action for breach of contract of carriage.
Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum
representing the loss of the deceased’s earning capacity despite Cariaga being only a medical student at the time of
We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common
the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:–
carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a
family.
2/3 x (80 - age at the time of death) = life expectancy
Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 carrier,9primarily because he only caters to some specific or privileged individuals, and his operation is neither open to
(the age when he would have graduated from college and started working for his own livelihood) instead of 15 years the indefinite public nor for public use, the exact nature of the operation of a school bus service has not been finally
(his age when he died). Considering that the nature of his work and his salary at the time of Aaron’s death were settled. This is the occasion to lay the matter to rest.
unknown, it used the prevailing minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be ₱
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to
years, his gross income would aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱
another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public
2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income
carrier.10 A private carrier is one who, without making the activity a vocation, or without holding himself or itself out to
turning out to be higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed
the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular
for by them, was granted.

instance only, to transport goods or persons from one place to another either gratuitously or for hire. 11 The provisions
on ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a private
carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering such services to the public. 12 Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code, the Public Service Act, 13 and other special laws
relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14
In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must look not only to the character of the business to be done,
but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must
be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to
judge the character of the use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction
between a person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished
a carrier offering his services to the general public, that is, the general community or population, from one offering his
services only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the
notion of public service under the Public Service Act, which supplements the law on common carriers found in the
Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientèle, whether permanent or occasional, and done for the general business
purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation
of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services. x x x. 17
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited
clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part
of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the
undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and
held out to the general public, the individual or the entity rendering such service is a private, not a common, carrier.
The question must be determined by the character of the business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert when charged with the duties and obligations that the law
imposes.21
Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a
school bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual
21
occupation; (b) undertaking to carry passengers over established roads by the method by which the business was
conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a
common carrier because they held themselves out as a ready transportation indiscriminately to the students of a
particular school living within or near where they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the
nature of the business and for reasons of public policy, the common carrier is bound "to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the
circumstances of each case."22 Article 1755 of the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise,
the legal presumption that he or it was at fault or acted negligently would stand. 23 No device, whether by stipulation,
posting of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common
carrier as defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now
reverse the CA’s findings on their liability. On the contrary, an examination of the records shows that the evidence fully
supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the
accident because death had occurred to their passenger. 25 The presumption of negligence, being a presumption of
law, laid the burden of evidence on their shoulders to establish that they had not been negligent. 26 It was the law no
less that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage
of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible
for the death of Aaron and thus to be held liable for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence. Their
defense of having observed the diligence of a good father of a family in the selection and supervision of their driver
was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not cease
upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their
employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this action for
breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope of
his authority or even in violation of the orders of the common carrier.27 In this connection, the records showed their
driver’s actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at a point
at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that point
had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking
that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside
the air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the warning
horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he
sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost
his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate his
chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with
the train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop
before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and regulations. 28He thereby violated a
specific traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent. 29
The omissions of care on the part of the van driver constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection

of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.’"33
The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading
case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of course be always
determined in the light of human experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct
by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient
of the future. Hence they can be expected to take care only when there is something before them to suggest or warn
of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the
railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the
bus on the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite
side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the Court held the PNR
solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus
that was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In
Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced
against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence
by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the
Pereñas and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate
Appellate Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school
van traversed the railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages
arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the
accident, and questions of fact and of law were common as to the Zarates. 36 Although the basis of the right to relief of
the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right to
relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the
RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the railroad
tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did
not ensure the safety of others through the placing of crossbars, signal lights, warning signs, and other permanent
safety barriers to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing
guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the
22
risks to others as well as the need to control the vehicular and other traffic there. Verily, the Pereñas and the PNR
were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the
CA modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had
been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child
prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would have become or
what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his death.
Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the
time of his death, but on 21 years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded.1âwphi1 They
cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of earning
capacity as a pilot for being speculative due to his having graduated from high school at the International School in
Manila only two years before the shooting, and was at the time of the shooting only enrolled in the first semester at the
Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that he
was for all intents and purposes only a high school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to
that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like
a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aaron’s earning capacity
was premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious high school
like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and
in favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but
also deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of the
earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall
in every case be assessed and awarded by the court "unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his death."38 Accordingly, we
emphatically hold in favor of the indemnification for Aaron’s loss of earning capacity despite him having been
unemployed, because compensation of this nature is awarded not for loss of time or earnings but for loss of the
deceased’s power or ability to earn money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning capacity, although he survived
the accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that he
dreamed to become. The Court considered his scholastic record sufficient to justify the assumption that he could have
finished the medical course and would have passed the medical board examinations in due time, and that he could
have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez, 41 the Court opined that
murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs
had they graduated in due time, and that their jobs would probably pay them high monthly salaries from ₱ 10,000.00
to ₱ 15,000.00 upon their graduation. Their earning capacities were computed at rates higher than the minimum wage
at the time of their deaths due to their being already senior agriculture students of the University of the Philippines in
Los Baños, the country’s leading educational institution in agriculture.
 23

3. These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the 1997 Rules of Civil
Were the amounts of damages excessive? Procedure, September 13, 2011 Decision1 and January 19, 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R.
CV No. 86752, which reversed and set aside the January 27, 2006 Decision3 of the Manila City Regional Trial Court
Branch (RTC) 30. The facts, as established by the records, are as follows:
The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective
amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts were excessive.
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal containers/skids
of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The shipment, covered by Bill of Lading
The plea is unwarranted.
No. KBMA-1074,4 was loaded and received clean on board M/V Golden Harvest Voyage No. 66, a vessel owned and
operated by Westwind Shipping Corporation (Westwind).
The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established circumstances of this
case because they were intended by the law to assuage the Zarates’ deep mental anguish over their son’s
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for US Dollars: One
unexpected and violent death, and their moral shock over the senseless accident. That amount would not be too
Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven Centavos (US$184,798.97), which, at
much, considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate
the time, was equivalent to Philippine Pesos: Six Million Two Hundred Nine Thousand Two Hundred Forty-Five and
their suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice,
Twenty-Eight Centavos (₱6,209,245.28).
given the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.

The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the custody of the arrastre
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective
operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc. 5 During the unloading operation, however,
the desired example for the public good. As a common carrier, the Pereñas needed to be vigorously reminded to
six containers/skids worth Philippine Pesos: One Hundred Seventeen Thousand Ninety-Three and Twelve Centavos
observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again.
(₱117,093.12) sustained dents and punctures from the forklift used by the stevedores of Ocean Terminal Services,
Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated
Inc. (OTSI) in centering and shuttling the containers/skids. As a consequence, the local ship agent of the vessel,
like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public
Baliwag Shipping Agency, Inc., issued two Bad Order Cargo Receipt dated September 1, 1993.
interest.

On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew from ATI the
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13,
197 containers/skids, including the six in damaged condition, and delivered the same at SMC’s warehouse in
2002; and ORDER the petitioners to pay the costs of suit.
Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was discovered upon discharge that additional nine
containers/skids valued at Philippine Pesos: One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-
SO ORDERED. Eight Centavos (₱175,639.68) were also damaged due to the forklift operations; thus, making the total number of 15
containers/skids in bad order.
Republic of the Philippines
SUPREME COURT Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and OFII to recover the
Manila amount corresponding to the damaged 15 containers/skids. When UCPB paid the total sum of Philippine Pesos: Two
Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and Eighty Centavos (₱292,732.80), SMC signed the
subrogation receipt. Thereafter, in the exercise of its right of subrogation, UCPB instituted on August 30, 1994 a
THIRD DIVISION
complaint for damages against Westwind, ATI, and OFII.6

G.R. No. 200289 November 25, 2013

After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and OFII. It ruled that the
right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo Gate Passes issued, as well as
WESTWIND SHIPPING CORPORATION, Petitioner, the doctrine laid down in International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co.
vs. Inc.7 that a claim for reimbursement for damaged goods must be filed within 15 days from the date of consignee’s
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents. knowledge. With respect to Westwind, even if the action against it is not yet barred by prescription, conformably with
Section 3 (6) of the Carriage of Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of
Appeals, et al.8 and Belgian Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc.,9 the court a quo
x-----------------------x still opined that Westwind is not liable, since the discharging of the cargoes were done by ATI personnel using forklifts
and that there was no allegation that it (Westwind) had a hand in the conduct of the stevedoring operations. Finally,
G.R. No. 200314 the trial court likewise absolved OFII from any liability, reasoning that it never undertook the operation of the forklifts
which caused the dents and punctures, and that it merely facilitated the release and delivery of the shipment as the
customs broker and representative of SMC.
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents. On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13, 2011 Decision
directed:
DECISION
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated January 27, 2006
rendered by the court a quo is REVERSED AND SET ASIDE. Appellee Westwind Shipping Corporation is hereby
PERALTA, J.: ordered to pay to the appellant UCPB General Insurance Co., Inc., the amount of One Hundred Seventeen Thousand

and Ninety-Three Pesos and Twelve Centavos (Php117,093.12), while Orient Freight International, Inc. is hereby
ordered to pay to UCPB the sum of One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-
Eight Centavos (Php175,639.68). Both sums shall bear interest at the rate of six (6%) percent per annum, from the
filing of the complaint on August 30, 1994 until the judgment becomes final and executory. Thereafter, an interest rate
of twelve (12%) percent per annum shall be imposed from the time this decision becomes final and executory until full
payment of said amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it rendered a contrary view
as regards the liability of Westwind and OFII. For the appellate court, Westwind, not ATI, is responsible for the six
damaged containers/skids at the time of its unloading. In its rationale, which substantially followed Philippines First
Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it concluded that the common carrier, not the arrastre operator, is
responsible during the unloading of the cargoes from the vessel and that it is not relieved from liability and is still
bound to exercise extraordinary diligence at the time in order to see to it that the cargoes under its possession remain
in good order and condition. The CA also considered that OFII is liable for the additional nine damaged
containers/skids, agreeing with UCPB’s contention that OFII is a common carrier bound to observe extraordinary
diligence and is presumed to be at fault or have acted negligently for such damage. Noting the testimony of OFII’s
own witness that the delivery of the shipment to the consignee is part of OFII’s job as a cargo forwarder, the appellate
court ruled that Article 1732 of the New Civil Code (NCC) does not distinguish between one whose principal business
activity is the carrying of persons or goods or both and one who does so as an ancillary activity. The appellate court
further ruled that OFII cannot excuse itself from liability by insisting that JBL undertook the delivery of the cargoes to
SMC’s warehouse. It opined that the delivery receipts signed by the inspector of SMC showed that the
containers/skids were received from OFII, not JBL. At the most, the CA said, JBL was engaged by OFII to supply the
trucks necessary to deliver the shipment, under its supervision, to SMC.
Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied; hence, they elevated
the case before Us via petitions docketed as G.R. Nos. 200289 and 200314, respectively.
Westwind argues that it no longer had actual or constructive custody of the containers/skids at the time they were
damaged by ATI’s forklift operator during the unloading operations. In accordance with the stipulation of the bill of
lading, which allegedly conforms to Article 1736 of the NCC, it contends that its responsibility already ceased from the
moment the cargoes were delivered to ATI, which is reckoned from the moment the goods were taken into the latter’s
custody. Westwind adds that ATI, which is a completely independent entity that had the right to receive the goods as
exclusive operator of stevedoring and arrastre functions in South Harbor, Manila, had full control over its employees
and stevedores as well as the manner and procedure of the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose participation is limited to
facilitating withdrawal of the shipment in the custody of ATI by overseeing and documenting the turnover and
counterchecking if the quantity of the shipments were in tally with the shipping documents at hand, but without
participating in the physical withdrawal and loading of the shipments into the delivery trucks of JBL. Assuming that it is
a common carrier, OFII insists that there is no need to rely on the presumption of the law – that, as a common carrier,
it is presumed to have been at fault or have acted negligently in case of damaged goods – considering the undisputed
fact that the damages to the containers/skids were caused by the forklift blades, and that there is no evidence
presented to show that OFII and Westwind were the owners/operators of the forklifts. It asserts that the loading to the
trucks were made by way of forklifts owned and operated by ATI and the unloading from the trucks at the SMC
warehouse was done by way of forklifts owned and operated by SMC employees. Lastly, OFII avers that neither the
undertaking to deliver nor the acknowledgment by the consignee of the fact of delivery makes a person or entity a
common carrier, since delivery alone is not the controlling factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc. 12 applies, as it settled the query on
which between a common carrier and an arrastre operator should be responsible for damage or loss incurred by the
shipment during its unloading. We elucidated at length:
24
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 transported by them. Subject to certain exceptions enumerated
under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the
goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the
time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading, unless agreed otherwise. In Standard Oil Co. of New York
v. Lopez Castelo, the Court interpreted the ship captain’s liability as ultimately that of the shipowner by regarding the
captain as the representative of the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier in relation
to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the
responsibilities and liabilities and entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof then
states that among the carriers’ responsibilities are to properly and carefully load, handle, stow, carry, keep, care for,
and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ship's tackle. Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to the
party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees should observe
the standards and measures necessary to prevent losses and damage to shipments under its custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship and responsibility of
an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee
and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody
and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in good condition to the
consignee. (Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals with the
clarification that the arrastre operator and the carrier are not always and necessarily solidarily liable as the facts of a
case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a carrier may not be
held solidarily liable at all times. But the precise question is which entity had custody of the shipment during its
unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers’ responsibilities are to properly and
carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment likewise
stipulates that the carrier’s liability for loss or damage to the goods ceases after its discharge from the vessel. Article
619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned over to him until its
delivery at the port of unloading.

In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that like the duty of
seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is accordingly responsible for the acts of
the master, the crew, the stevedore, and his other agents. It has also been held that it is ordinarily the duty of the
master of a vessel to unload the cargo and place it in readiness for delivery to the consignee, and there is an implied
obligation that this shall be accomplished with sound machinery, competent hands, and in such manner that no
unnecessary injury shall be done thereto. And the fact that a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty as to such unloading.x x x x
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the
carrier x x x.13
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines), Inc. 14 and Asian
Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court echoed the doctrine that cargoes, while being unloaded,
generally remain under the custody of the carrier. We cannot agree with Westwind’s disputation that "the carrier in
Wallem clearly exercised supervision during the discharge of the shipment and that is why it was faulted and held
liable for the damage incurred by the shipment during such time." What Westwind failed to realize is that the
extraordinary responsibility of the common carrier lasts until the time the goods are actually or constructively delivered
by the carrier to the consignee or to the person who has a right to receive them. There is actual delivery in contracts
for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and
a reasonable time is given him to remove the goods.16 In this case, since the discharging of the containers/skids,
which were covered by only one bill of lading, had not yet been completed at the time the damage occurred, there is
no reason to imply that there was already delivery, actual or constructive, of the cargoes to ATI. Indeed, the earlier
case of Delsan Transport Lines, Inc. v. American Home Assurance Corp. 17 serves as a useful guide, thus:
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had
already been actually and legally delivered to Caltex at the time it entered the shore tank holds no water. It had been
settled that the subject cargo was still in the custody of Delsan because the discharging thereof has not yet been
finished when the backflow occurred. Since the discharging of the cargo into the depot has not yet been completed at
the time of the spillage when the backflow occurred, there is no reason to imply that there was actual delivery of the
cargo to the consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of
Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the
extraordinary responsibility of common carrier 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 a person who has the right to receive them. The discharging of oil products to Caltex
Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has
in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case. The mere proof of delivery of goods in good order to the carrier, and
their arrival in the place of destination in bad order, make 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. 18
The contention of OFII is likewise untenable. A customs broker has been regarded as a common carrier because
transportation of goods is an integral part of its business.19 In Schmitz Transport & Brokerage Corporation v. Transport
Venture, Inc.,20 the Court already reiterated: It is settled that under a given set of facts, a customs broker may be
regarded as a common carrier.1âwphi1 Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of
Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under
Article 1732 of the Civil Code, to wit, Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.x x x x
25
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who
does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier
but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping
documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods is an integral
part of a customs broker, the customs broker is also a common carrier. For to declare otherwise "would be to deprive
those with whom [it] contracts the protection which the law affords them notwithstanding the fact that the obligation to
carry goods for [its] customers, is part and parcel of petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric Panganiban Cueto, that
part of the services it offers to clients is cargo forwarding, which includes the delivery of the shipment to the
consignee.22 Thus, for undertaking the transport of cargoes from ATI to SMC’s warehouse in Calamba, Laguna, OFII
is considered a common carrier. As long as a person or corporation holds itself to the public for the purpose of
transporting goods as a business, it is already considered a common carrier regardless of whether it owns the vehicle
to be used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil Code, 23 extraordinary diligence in
the vigilance over the goods24 it transports according to the peculiar 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.25 In the case at bar it was established that except for the six
containers/skids already damaged OFII received the cargoes from ATI in good order and condition; and that upon its
delivery to SMC additional nine containers/skids were found to be in bad order as noted in the Delivery Receipts
issued by OFII and as indicated in the Report of Cares Marine Cargo Surveyors. Instead of merely excusing itself from
liability by putting the blame to ATI and SMC it is incumbent upon OFII to prove that it actively took care of the goods
by exercising extraordinary diligence in the carriage thereof. It failed to do so. Hence its presumed negligence under
Article 1735 of the Civil Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and 200314
respectively are DENIED. The September 13 2011 Decision and January 19 2012 Resolution of the Court of Appeals
in CA-G.R. CV No. 86752 which reversed and set aside the January 27 2006 Decision of the Manila City Regional
Trial Court Branch 30 are AFFIRMED.
SO ORDERED.
G.R. No. 212038
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Petitioners
vs.
NORTHWEST AIRLINES, INC., Respondent
x-----------------------x
G.R. No. 212043
NORTHWEST AIRLINES, INC., Petitioner,
vs.
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Respondents.
DECISION

PERALTA, J.:
Before us are consolidated petitions for review on certiorari under Rule 45 of the Rules of Court assailing the
Decision1 dated August 30, 2013, and Resolution2 dated March 31, 2014 of the Court of Appeals (CA) in CA-G.R. CV
No. 93496 which affirmed the Decision3 dated September 9, 2008 of the Regional Trial Court (RTC), Branch 97,
Quezon City in Civil Case No. Q-N-02-46727 finding Northwest Airlines, Inc. (Northwest) liable for breach of contract
of carriage.
The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest Airlines, Inc. and are
holders of Elite Platinum World Perks Card, the highest category given to frequent flyers of the carrier. 4 They are
known in the musical instruments and sports equipments industry in the Philippines being the owners of JB Music and
JB Sports with outlets all over the country. They likewise own the five (5) star Hotel Elizabeth in Baguio City and Cebu
City, and the chain of Fersal Hotels and Apartelles in the country. 5
The Fernandos initiated the filing of the instant case which arose from two (2) separate incidents: first, when Jesus
Fernando arrived at Los Angeles (LA) Airport on December 20, 2001; second, when the Fernandos were to depart
from the LA Airport on January 29, 2002. The factual antecedents are as follows:
Version of Spouses Jesus and Elizabeth S. Fernando:
a.) The arrival at Los Angeles Airport on December 20, 2001
Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via Northwest Airlines Flight No. NW02 to
join his family who flew earlier to the said place for a reunion for the Christmas holidays. 6
When Jesus Fernando presented his documents at the immigration counter, he was asked by the Immigration Officer
to have his return ticket verified and validated since the date reflected thereon is August 2001. So he approached a
Northwest personnel who was later identified as Linda Puntawongdaycha, but the latter merely glanced at his ticket
without checking its status with the computer and peremptorily said that the ticket has been used and could not be
considered as valid. He then explained to the personnel that he was about to use the said ticket on August 20 or 21,
2001 on his way back to Manila from LA but he could not book any seat because of some ticket restrictions so he,
instead, purchased new business class ticket on the said date.7 Hence, the ticket remains unused and perfectly valid.
To avoid further arguments, Jesus Fernando gave the personnel the number of his Elite Platinum World Perks Card
for the latter to access the ticket control record with the airline's computer and for her to see that the ticket is still valid.
But Linda Puntawongdaycha refused to check the validity of the ticket in the computer but, instead, looked at Jesus
Fernando with contempt, then informed the Immigration Officer that the ticket is not valid because it had been used. 8
The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration and Naturalization
Services (INS) where he was asked humiliating questions for more than two (2) hours. When he was finally cleared by
the Immigration Officer, he was granted only a twelve (12)-day stay in the United States (US), instead of the usual six
(6) months.9
When Jesus Fernando was finally able to get out of the airport, to the relief of his family, Elizabeth Fernando
proceeded to a Northwest Ticket counter to verify the status of the ticket. The personnel manning the counter
courteously assisted her and confirmed that the ticket remained unused and perfectly valid. To avoid any future
problems that may be encountered on the validity of the ticket, a new ticket was issued to Jesus Fernando. 10
Since Jesus Fernando was granted only a twelve (12)-day stay in the US, his scheduled plans with his family as well
as his business commitments were disrupted. He was supposed to stay with his family for the entire duration of the
Christmas season because his son and daughter were then studying at Pepperton University in California. But he was
forced to fly back to Manila before the twelve (12)-day stay expired and flew back to the US on January 15, 2002. The
26
Fernandos were, likewise, scheduled to attend the Musical Instrument Trade Show in LA on January 1 7, 2002 and
the Sports Equipment Trade Show in Las Vegas on January 21 to 23, 2002 which were both previously scheduled.
Hence, Jesus Fernando had to spend additional expenses for plane fares and other related expenses, and missed the
chance to be with his family for the whole duration of the Christmas holidays.11
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos were on their way back to the Philippines. They have confirmed bookings on
Northwest Airlines NW Flight No. 001 for Narita, Japan and NW 029 for Manila. They checked in with their luggage at
the LA Airport and were given their respective boarding passes for business class seats and claim stubs for six (6)
pieces of luggage. With boarding passes, tickets and other proper travel documents, they were allowed entry to the
departure area and joined their business associates from Japan and the Philippines who attended the Musical
Instrument Trade Show in LA on January 17, 2002 and the Sports Equipment Trade Show in Las Vegas on January
21 to 23, 2002. When it was announced that the plane was ready for boarding, the Fernandos joined the long queue
of business class passengers along with their business associates.12
When the Fernandos reached the gate area where boarding passes need to be presented, Northwest supervisor
Linda Tang stopped them and demanded for the presentation of their paper tickets (coupon type). They failed to
present the same since, according to them, Northwest issued electronic tickets (attached to the boarding passes)
which they showed to the supervisor.13 In the presence of the other passengers, Linda Tang rudely pulled them out of
the queue. Elizabeth Fernando explained to Linda Tang that the matter could be sorted out by simply verifying their
electronic tickets in her computer and all she had to do was click and punch in their Elite Platinum World Perks Card
number. But Linda Tang arrogantly told them that if they wanted to board the plane, they should produce their credit
cards and pay for their new tickets, otherwise Northwest would order their luggage off-loaded from the plane.
Exasperated and pressed for time, the Fernandos rushed to the Northwest Airline Ticket counter to clarify the matter.
They were assisted by Northwest personnel Jeanne Meyer who retrieved their control number from her computer and
was able to ascertain that the Fernandos' electronic tickets were valid and they were confirmed passengers on both
NW Flight No. 001 for Narita Japan and NW 029 for Manila on that day. To ensure that the Fernandos would no
longer encounter any problem with Linda Tang, Jeanne Meyer printed coupon tickets for them who were then advised
to rush back to the boarding gates since the plane was about to depart. But when the Fernandos reached the
boarding gate, the plane had already departed. They were able to depart, instead, the day after, or on January 30,
2002, and arrived in the Philippines on January 31,2002.14
Version of Northwest Airlines, Inc.:
a.) The arrival at the Los Angeles Airport on December 20, 2001.
Northwest claimed that Jesus Fernando travelled from Manila to LA on Northwest Airlines on December 20, 2001. At
the LA Airport, it was revealed that Jesus Fernando's return ticket was dated August 20 or 21, 2001 so he
encountered a problem in the Immigration Service. About an hour after the aircraft had arrived, Linda
Puntawongdaycha, Northwest Customer Service Agent, was called by a US Immigration Officer named "Nicholas" to
help verify the ticket of Jesus Fernando. Linda Puntawongdaycha then asked Jesus Fernando to "show" her "all the
papers." Jesus Fernando only showed her the passenger receipt of his ticket without any ticket coupon attached to it.
The passenger receipt which was labelled "Passenger Receipt" or "Customer Receipt" was dated August 2001. Linda
Puntawongdaycha asked Jesus Fernando several times whether he had any other ticket, but Jesus Fernando insisted
that the "receipt" was "all he has", and the passenger receipt was his ticket. He failed to show her any other
document, and was not able to give any other relevant information about his return ticket. Linda Puntawongdaycha
then proceeded to the Interline Department and checked Jesus Fernando's Passenger Name Record (PNR) and his
itinerary. The itinerary only showed his coming from Manila to Tokyo and Los Angeles; nothing would indicate about
his flight back to Manila. She then looked into his record and checked whether he might have had an electronic ticket
but she could not find any. For failure to find any other relevant information regarding Fernando's return ticket, she
then printed out Jesus Fernando's PNR and gave the document to the US Immigration Officer. Linda
Puntawongdaycha insisted that she did her best to help Jesus Fernando get through the US Immigration. 15
b.) The departure from the Los Angeles Airport on January 29, 2002.
 27

On January 29, 2002, the Fernandos took Northwest for their flight back to Manila. In the trip, the Fernandos used Both parties filed their respective appeals which were dismissed by the CA in a Decision dated August 30, 2013, and
electronic tickets but the tickets were dated January 26, 2002 and August 21, 2001. They reached the boarding gate affirmed the RTC Decision.
few minutes before departure. Northwest personnel Linda Tang was then the one assigned at the departure area. As
a standard procedure, Linda Tang scanned the boarding passes and collected tickets while the passengers went
The Fernandos and Northwest separately filed motions for a reconsideration of the Decision, both of which were
through the gate. When the Fernandos presented their boarding passes, Linda Tang asked for their tickets because
denied by the CA on March 31, 2014.
there were no tickets stapled on their boarding passes. She explained that even though the Fernandos had electronic
tickets, they had made "several changes on their ticket over and over". And when they made the booking/reservation
at Northwest, they never had any ticket number or information on the reservation. 16 The Fernandos filed a petition for review on certiorari23before this court docketed as G.R. No. 212038. Northwest
followed suit and its petition24 was docketed as G.R. No. 212043. Considering that both petitions involved similar
parties, emanated from the same Civil Case No. Q-N-02-46727 and assailed the same CA judgment, they were
When the Fernandos failed to show their tickets, Linda Tang called Yong who was a supervisor at the ticket counter to
ordered consolidated in a Resolution25 dated June 18, 2014.
verify whether the Fernandos had checked in, and whether there were any tickets found at the ticket counter. Upon
verification, no ticket was found at the ticket counter, so apparently when the Fernandos checked in, there were no
tickets presented. Linda Tang also checked with the computer the reservation of the Fernandos, but again, she failed In G.R. No. 212038, the Fernandos raised the following issues:
to see any electronic ticket number of any kind, and/or any ticket record. So as the Fernandos would be able to get on
with the flight considering the amount of time left, she told them that they could purchase tickets with their credit cards
WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF DEFENDANT NORTHWEST ARE WANTON,
and deal with the refund later when they are able to locate the tickets and when they reach Manila. Linda Tang
believed that she did the best she could under the circumstances. 17 MALICIOUS, RECKLESS, DELIBERATE AND OPPRESSIVE IN CHARACTER, AMOUNTING TO FRAUD AND BAD
FAITH;

However, the Fernandos did not agree with the solution offered by Linda Tang. Instead, they went back to the
Northwest ticket counter and were attended to by Jeanne Meyer who was "courteous" and "was very kind enough" to WHETHER OR NOT PETITIONER SPOUSES ARE ENTITLED TO MORAL DAMAGES IN AN AMOUNT MORE
assist them. Jeanne Meyer verified their bookings and "printed paper tickets" for them. Unfortunately, when they went THAN THAT AWARDED BY THE TRIAL COURT;
back to the boarding gate, the plane had departed. Northwest offered alternative arrangements for them to be
transported to Manila on the same day on another airline, either through Philippine Airlines or Cathay Pacific Airways, WHETHER OR NOT DEFENDANT NORTHWEST IS LIABLE TO PETITIONER SPOUSES FOR EXEMPLARY
but they refused. Northwest also offered them free hotel accommodations but they, again, rejected the DAMAGES; [AND]
offer18 Northwest then made arrangements for the transportation of the Fernandos from the airport to their house in
LA, and booked the Fernandos on a Northwest flight that would leave the next day, January 30, 2002. On January 30,
2002, the Fernandos flew to Manila on business class seats.19 WHETHER OR NOT THE PETITIONER SPOUSES ARE ENTITLED TO ATTORNEY'S FEES IN AN AMOUNT
MORE THAN THAT AWARDED BY THE TRIAL COURT.26

On April 30, 2002, a complaint for damages20 was instituted by the Fernandos against Northwest before the RTC,
Branch 97, Quezon City. During the trial of the case, the Fernandos testified to prove their claim. On the part of In G.R. No. 212043, Northwest anchored its petition on the following assigned errors:
Northwest, Linda Tang-Mochizuki and Linda Puntawongdaycha testified through oral depositions taken at the Office of
the Consulate General, Los Angeles City. The Northwest Manager for HR-Legal Atty. Cesar Veneracion was also I
presented and testified on the investigation conducted by Northwest as a result of the letters sent by Elizabeth
Fernando and her counsel prior to the filing of the complaint before the RTC.21
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST COMMITTED A
BREACH OF CONTRACT OF CARRIAGE;
On September 9, 2008, the RTC issued a Decision, the dispositive portion of which states, thus:
II
WHEREFORE, in view of the foregoing, this Court rendered judgment in favor of the plaintiffs and against defendant
ordering defendant to pay the plaintiffs, the following:
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS LIABLE FOR
DAMAGES AND THE AWARDS FOR MORAL DAMAGES AND ATTORNEY'S FEES ARE APPROPRIATE;
1. Moral damages in the amount of Two Hundred Thousand Pesos (₱200,000.00);
III
2. Actual or compensatory damages in the amount of Two Thousand US Dollars ($2,000.00) or its
corresponding Peso equivalent at the time the airline ticket was purchased;
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS NOT
ENTITLED TO RECOVER ON ITS COUNTERCLAIMS.27
3. Attorney's fees in the amount of Fifty Thousand pesos (₱50,000.00); and,
The Issues
4. Cost of suit.
The arguments proffered by the parties can be summed up into the following issues: (1) whether or not there was
SO ORDERED.22 breach of contract of carriage and whether it was done in a wanton, malevolent or reckless manner amounting to bad
faith; (2) whether or not Northwest is liable for the payment of moral damages and attorney's fees and whether it is
liable to pay more than that awarded by the RTC; (3) whether or not Northwest is liable for the payment of exemplary
damages; and (4) whether or not Northwest Airlines is entitled to recover on its counterclaim.
 28

In their petition, the Fernandos contended that it was the personal misconduct, gross negligence and the rude and The personnel manning the counter courteously assisted her and confirmed that the ticket remained unused and
abusive attitude of Northwest employees Linda Puntawongdaycha and Linda Tang which subjected them to perfectly valid. The personnel merely punched the Elite Platinum World Perks Card number of Jesus Fernando and
indignities, humiliation and embarrassment. The attitude of the aforesaid employees was wanton and malevolent was able to verify the status of the ticket. The Fernandos further argued that if there was a discrepancy with the tickets
allegedly amounting to fraud and bad faith. According to the Fernandos, if only Linda Puntawongdaycha had taken the or reservations, they would not have been allowed to check in, and since they were allowed to check in then they
time to verify the validity of the ticket in the computer, she would have not given the wrong information to the were properly booked and were confirmed passengers of Northwest.
Immigration Officer because the August 2001 return ticket remained unused and valid for a period of one (1) year, or
until August 2002. The wrong information given by Linda Puntawongdaycha aroused doubts and suspicions on Jesus
Our Ruling
Fernando's travel plans. The latter was then subjected to two (2) hours of questioning which allegedly humiliated him.
He was even suspected of being an "illegal alien". The negligence of Linda Puntawongdaycha was allegedly so gross
and reckless amounting to malice or bad faith. We find merit in the petition of the Spouses Jesus and Elizabeth Fernando. The Fernandos' cause of action against
Northwest stemmed from a breach of contract of carriage. A contract is a meeting of minds between two persons
whereby one agrees to give something or render some service to another for a consideration. There is no contract
As to the second incident, the Fernandos belied the accusation of Northwest that they did not present any tickets.
unless the following requisites concur: (1) consent of the contracting parties; (2) an object certain which is the subject
They presented their electronic tickets which were attached to their boarding passes. If they had no tickets, the
of the contract; and (3) the cause of the obligation which is established. 30
personnel at the check-in counter would have not issued them their boarding passes and baggage claim stubs. That's
why they could not understand why the coupon-type ticket was still demanded by Northwest.
A contract of carriage is defined as one whereby a certain person or association of persons obligate themselves to
transport persons, things, or goods from one place to another for a fixed price. Under Article 1732 of the Civil Code,
On the award of moral damages, the Fernandos referred to the testimony of Elizabeth Fernando that she could not
this "persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or
sleep and had a fever the night after the second incident. Thus, the Fernandos demanded that they should be given
goods or both, by land, water, or air, for compensation, offering their services to the public" is called a common
more than the "token amount" granted by the RTC which was affirmed by the CA. They stated that their status in the
carrier.31 Undoubtedly, a contract of carriage existed between Northwest and the Fernandos. They voluntarily and
society and in the business circle should also be considered as a factor in awarding moral damages. They averred
freely gave their consent to an agreement whose object was the transportation of the Fernandos from LA to Manila,
that they are well-known in the musical instruments and sports equipment industry in the country being the owners of
and whose cause or consideration was the fare paid by the Fernandos to Northwest. 32
JB Music and JB Sports with outlets all over the country. They own hotels, a chain of apartelles and a parking garage
building in Indiana, USA. And since the breach of contract allegedly amounted to fraud and bad faith, they likewise
demanded for the payment of exemplary damages and attorney's fees more than the amount awarded by the RTC. In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a passenger confirmed for a particular
flight on a certain date, a contract of carriage arises. The passenger then has every right to expect that he would fly on
that flight and on that date. If he does not, then the carrier. opens itself to a suit for breach of contract of carriage.34
On the other hand, Northwest stated in its petition that Linda Puntawongdaycha tried her best to help Jesus Fernando
get through the US Immigration. Notwithstanding that Linda Puntawongdaycha was not able to find any relevant
information on Jesus Fernando's return ticket, she still went an extra mile by printing the PNR of Jesus Fernando and When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the Fernandos on their flight
handling the same personally to the Immigration Officer. It pointed out that the Immigration Officer "noticed in the on 29 January 2002.
ticket that it was dated sometime August 20 or 21, 2001, although it was already December 2001."
We note that the witness35 of Northwest admitted on cross-examination that based on the documents submitted by the
As to the incident with Linda Tang, Northwest explained that she was only following Northwest standard boarding Fernandos, they were confirmed
procedures when she asked the Fernandos for their tickets even if they had boarding passes. Thus, the conduct
cannot be construed as bad faith. The dates indicated on the tickets did not match the booking. Elizabeth Fernando
was using an electronic ticket dated August 21, 2001, while the electronic ticket of Jesus Fernando was dated January passengers on the January 29, 2002 flight.36
26, 2002. According to Northwest, even if the Fernandos had electronic tickets, the same did not discount the fact
that, on the face of the tickets, they were for travel on past dates. Also, the electronic tickets did not contain the ticket In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common
number or any information regarding the reservation. Hence, the alleged negligence of the Fernandos resulted in the carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-
confusion in the procedure in boarding the plane and the eventual failure to take their flight. performance by the carrier.37 As the aggrieved party, the Fernandos only had to prove the existence of the contract
and the fact of its non-performance by Northwest, as carrier, in order to be awarded compensatory and actual
Northwest averred that the award of moral damages and attorney's fees were exorbitant because such must be damages.38
proportionate to the suffering inflicted. It argued that it is not obliged to give any "special treatment" to the Fernandos
just because they are good clients of Northwest, because the supposed obligation does not appear in the contract of Therefore, having proven the existence of a contract of carriage between Northwest and the Fernandos, and the fact
carriage. It further averred that it is entitled to its counterclaim in the amount of ₱500,000.00 because the Fernandos of non-performance by Northwest of its obligation as a common carrier, it is clear that Northwest breached its contract
allegedly acted in bad faith in prosecuting the case which it believed are baseless and unfounded. of carriage with the Fernandos. Thus, Northwest opened itself to claims for compensatory, actual, moral and
exemplary damages, attorney's fees and costs of suit.39
In the Comment28 of Northwest, it insisted that assuming a mistake was committed by Linda Tang and Linda
Puntawongdaycha, such mistake alone, without malice or ill will, is not equivalent to fraud or bad faith that would Moreover, Article 1733 of the New Civil Code provides that common carriers, from the nature of their business and for
entitle the Fernandos to the payment of moral damages. 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. Also, Article 1755 of
In the Reply29 of the Fernandos, they asserted that it was a lie on the part of Linda Puntawongdaycha to claim that she the same Code states that a common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.
checked the passenger name or PNR of Jesus Fernando from the computer and, as a result, she was not allegedly
able to find any return ticket for him. According to Jesus Fernando, Linda Puntawongdaycha merely looked at his
ticket and declared the same to be invalid. The Fernandos reiterated that after Jesus Fernando was released by the
US Immigration Service, Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the status of the ticket.

We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of contract "in failing to
provide the spouses with the proper assistance to avoid any inconvenience" and that the actuations of Northwest in
both subject incidents "fall short of the utmost diligence of a very cautious person expected of it". Both ruled that
considering that the Fernandos are not just ordinary passengers but, in fact, frequent flyers of Northwest, the latter
should have been more courteous and accommodating to their needs so that the delay and inconveniences they
suffered could have been avoided. Northwest was remiss in its duty to provide the proper and adequate assistance to
them.
Nonetheless, We are not in accord with the common finding of the CA and the RTC when both ruled out bad faith on
the part of Northwest. While We agree that the discrepancy between the date of actual travel and the date appearing
on the tickets of the Fernandos called for some verification, however, the Northwest personnel failed to exercise the
utmost diligence in assisting the Fernandos. The actuations of Northwest personnel in both subject incidents are
constitutive of bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite Platinum World
Perks Card for the latter to access the ticket control record with the airline's computer for her to see that the ticket is
still valid. But Linda Puntawongdaycha refused to check the validity of the ticket in the computer. As a result, the
Immigration Officer brought Jesus Fernando to the interrogation room of the INS where he was interrogated for more
than two (2) hours. When he was finally cleared by the Immigration Officer, he was granted only a twelve (12)-day
stay in the United States (US), instead of the usual six (6) months.40
As in fact, the RTC awarded actual or compensatory damages because of the testimony of Jesus Fernando that he
had to go back to Manila and then return again to LA, USA, two (2) days after requiring him to purchase another round
trip ticket from Northwest in the amount of $2,000.00 which was not disputed by Northwest.41 In ignoring Jesus
Fernando's pleas to check the validity of the tickets in the computer, the Northwest personnel exhibited an indifferent
attitude without due regard for the inconvenience and anxiety Jesus Fernando might have experienced.
Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the
part of employees towards a passenger gives the latter an action for damages against the carrier.42
In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of the highest
possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law
seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate
care of human beings and their property.43
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to verify the status of the ticket
and they were assured that the ticked remained unused and perfectly valid. And, to avoid any future problems that
may be encountered on the validity of the ticket, a new ticket was issued to Jesus Fernando. The failure to promptly
verify the validity of the ticket connotes bad faith on the part of Northwest.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity
and conscious doing of a wrong. It means breach of a known duty through some motive, interest or ill will that
partakes of the nature of fraud. A finding of bad faith entitles the offended party to moral damages. 44
As to the second incident, there was likewise fraud or bad faith on the part of Northwest when it did not allow the
Fernandos to board their flight for Manila on January 29, 2002, in spite of confirmed tickets. We need to stress that
they have confirmed bookings on Northwest Airlines NW Flight No. 001 for Narita, Japan and NW 029 for Manila.
They checked in with their luggage at LA Airport and were given their respective boarding passes for business class
seats and claim stubs for six (6) pieces of luggage. With boarding passes and electronic tickets, apparently, they were
allowed entry to the departure area; and, they eventually joined the long queue of business class passengers along
with their business associates.
29
However, in the presence of the other passengers, Northwest personnel Linda Tang pulled the Fernandos out of the
queue and asked for paper tickets (coupon type). Elizabeth Fernando explained to Linda Tang that the matter could
be sorted out by simply verifying their electronic tickets in her computer and all she had to do was click and punch in
their Elite Platinum World Perks Card number. Again, the Northwest personnel refused to do so; she, instead, told
them to pay for new tickets so they could board the plane. Hence, the Fernandos rushed to the Northwest Airline
Ticket counter to clarify the matter. They were assisted by Northwest personnel Jeanne Meyer who retrieved their
control number from her computer and was able to ascertain that the Fernandos' electronic tickets were valid, and
they were confirmed passengers on both NW Flight No. 001 for Narita Japan and NW 029 for Manila on that day.
In Ortigas, Jr. v. Lufthansa German Airlines,45 this Court declared that "(i)n contracts of common carriage, in attention
and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class
contracted for amounts to bad faith or fraud which entitles the passengers to the award of moral damages in
accordance with Article 2220 of the Civil Code."
In Pan American World Airways, Inc. v. Intermediate Appellate Court,46 where a would-be passenger had the
necessary ticket, baggage claim and clearance from immigration, all clearly and unmistakably showing that she was,
in fact, included in the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court
did not hesitate to affirm the lower court's finding awarding her damages on the ground that the breach of contract of
carriage amounted to bad faith.47 For the indignity and inconvenience of being refused a confirmed seat on the last
minute, said passenger is entitled to an award of moral damages.48
In this case, We need to stress that the personnel who assisted the Fernandos even printed coupon tickets for them
and advised them to rush back to the boarding gates since the plane was about to depart. But when the Fernandos
reached the boarding gate, the plane had already departed. They were able to depart, instead, the day after, or on
January 30, 2002.
In Japan Airlines v. Jesus Simangan,49 this Court held that the acts committed by Japan Airlines against Jesus
Simangan amounted to bad faith, thus:
x x x JAL did not allow respondent to fly. It informed respondent that there was a need to first check the authenticity of
his travel documents with the U.S. Embassy. As admitted by JAL, "the flight could not wait for Mr. Simangan because
it was ready to depart."
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left
behind. The latter was unceremoniously bumped off despite his protestations and valid travel documents and
notwithstanding his contract of carriage with JAL. Damage had already been done when respondent was offered to fly
the next day on July 30, 1992. Said offer did not cure JAL's default.50
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals,51 where private respondent was not allowed to board the
plane because her seat had already been given to another passenger even before the allowable period for
passengers to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this
Court held that petitioner airline acted in bad faith in violating private respondent's rights under their contract of
carriage and is, therefore, liable for the injuries she has sustained as a result. 52
Under Article 222053 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in
order upon a showing that the defendant acted fraudulently or in bad faith.54 Clearly, in this case, the Fernandos are
entitled to an award of moral damages. The purpose of awarding moral damages is to enable the injured party to
obtain means, diversion or amusement that will serve to alleviate the moral suffering he has undergone by reason of
defendant's culpable action.55
We note that even if both the CA and the RTC ruled out bad faith on the part of Northwest, the award of "some moral
damages" was recognized. Both courts believed that considering that the Fernandos are good clients of Northwest for
almost ten (10) years being Elite Platinum World Perks Card holders, and are known in their business circle, they
should have been given by Northwest the corresponding special treatment. 56 They own hotels and a chain of
 30

apartelles in the country, and a parking garage building in Indiana, USA. From this perspective, We adopt the said
view. We, thus, increase the award of moral damages to the Fernandos in the amount of ₱3,000,000.00.
As held in Kierulf v. Court of Appeals,57 the social and financial standing of a claimant may be considered if he or she
was subjected to contemptuous conduct despite the offender's knowledge of his or her social and financial standing.
58
In Trans World Airlines v. Court of Appeals, this Court considered the social standing of the aggrieved passenger:
WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March 31, 2014 of the Court of
Appeals, in CA-G.R. CV No. 93496 are hereby AFFIRMED WITH MODIFICATION. The award of moral damages and
attorney's fees are hereby increased to ₱3,000,000.00 and ten percent (10%) of the damages awarded, respectively.
Exemplary damages in the amount of ₱2,000,000.00 is also awarded. Costs against Northwest Airlines.
The total amount adjudged shall earn legal interest at the rate of twelve percent (12%) per annum computed from
judicial demand or from April 30, 2002 to June 30 2013, and six percent (6%) per annum from July 1, 2013 until their
full satisfaction.

At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law
SO ORDERED.
firm in Manila. He was a director of several companies and was active in civic and social organizations in the
Philippines. Considering the circumstances of this case and the social standing of private respondent in the
community, he is entitled to the award of moral and exemplary damages. x x x This award should be reasonably
sufficient to indemnify private respondent for the humiliation and embarrassment that he suffered and to serve as an SO ORDERED.
example to discourage the repetition of similar oppressive and discriminatory acts. 59 REGIONAL CONTAINER LINES G.R. No. 168151
(RCL) OF SINGAPORE and
EDSA SHIPPING AGENCY, Present:
Exemplary damages, which are awarded by way of example or correction for the public good, may be recovered in
Petitioners,
contractual obligations, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.60 They
QUISUMBING, J., Chairperson,
are designed by our civil law to permit the courts to reshape behavior that is socially deleterious in its consequence by
CARPIO-MORALES,
creating negative incentives or deterrents against such behavior.61 Hence, given the facts and circumstances of this
BRION,
case, We hold Northwest liable for the payment of exemplary damages in the amount of ₱2,000,000.00.
- versus - DEL CASTILLO, and
ABAD, JJ.
In the case of Northwest Airlines, Inc. v. Chiong,62 Chiong was given the run-around at the Northwest check-in
counter, instructed to deal with a man in barong to obtain a boarding pass, and eventually barred from boarding a
Northwest flight to accommodate an American passenger whose name was merely inserted in the Flight Manifest, and THE NETHERLANDS INSURANCE CO. (PHILIPPINES), Promulgated:
did not even personally check-in at the counter. Under the foregoing circumstances, the award of moral and INC.,
exemplary damages was given by this Court. Respondent. September 4, 2009
x -------------------------------------------------------------------------------------- x
Time and again, We have declared that a contract of carriage, in this case, air transport, is primarily intended to serve DECISION
the traveling public and thus, imbued with public interest. The law governing common carriers consequently imposes
an exacting standard of conduct.63 A contract to transport passengers is quite different in kind and degree from any BRION, J.:
other contractual relation because of the relation which an air-carrier sustains with the public. Its business is mainly
with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage,
For our resolution is the petition for review on certiorari filed by petitioners Regional Container Lines of
therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, Singapore (RCL) and EDSA Shipping Agency (EDSA Shipping) to annul and set aside the decision[1] and
naturally, could give ground for an action or damages.64 resolution[2] of the Court of Appeals (CA) dated May 26, 2004 and May 10, 2005, respectively, in CA-G.R. CV No.
76690.
As to the payment of attorney's fees, We sustain the award thereof on the ground that the Fernandos were ultimately
compelled to litigate and incurred expenses to protect their rights and interests, and because the Fernandos are RCL is a foreign corporation based in Singapore. It does business in the Philippines through its agent, EDSA
entitled to an award for exemplary damages. Pursuant to Article 2208 of the Civil Code, attorney's fees may be Shipping, a domestic corporation organized and existing under Philippine laws. Respondent Netherlands Insurance
awarded when exemplary damages are awarded, or a party is compelled to litigate or incur expenses to protect his Company (Philippines), Inc. (Netherlands Insurance) is likewise a domestic corporation engaged in the marine
interest, or where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, underwriting business.
just and demandable claim.

FACTUAL ANTECEDENTS
Records show that the Fernandos demanded payment for damages from Northwest even before the filing of this case
in court.1âwphi1 Clearly, the Fernandos were forced to obtain the services of counsel to enforce a just claim, for
which they should be awarded attorney's fees.65 We deem it just and equitable to grant an award of attorney's fees The pertinent facts, based on the records are summarized below.
equivalent to 10% of the damages awarded.

Lastly, the counterclaim of Northwest in its Answer66 is a compulsory counterclaim for damages and attorney's fees
arising from the filing of the complaint. This compulsory counterclaim of Northwest arising from the filing of the
complaint may not be granted inasmuch as the complaint against it is obviously not malicious or unfounded. It was
filed by the Fernandos precisely to claim their right to damages against Northwest. Well-settled is the rule that the
commencement of an action does not per se make the action wrongful and subject the action to damages, for the law
could not have meant to impose a penalty on the right to litigate.67
On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be shipped
from Singapore to Manila for Temic Telefunken Microelectronics Philippines(Temic). U-Freight Singapore PTE
Ltd.[3] (U-Freight Singapore), a forwarding agent based in Singapore, contracted the services of Pacific Eagle Lines
PTE. Ltd. (Pacific Eagle) to transport the subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in
its Refrigerated Container No. 6105660 with Seal No. 13223. As the cargo was highly perishable, the inside of the
container had to be kept at a temperature of 0 Celsius. Pacific Eagle then loaded the refrigerated container on board

the M/V Piya Bhum, a vessel owned by RCL, with which Pacific Eagle had a slot charter agreement. RCL duly issued
its own Bill of Lading in favor of Pacific Eagle.
To insure the cargo against loss and damage, Netherlands Insurance issued a Marine Open Policy in favor
of Temic, as shown by MPO-21-05081-94 and Marine Risk Note MRN-21 14022, to cover all losses/damages to the
shipment.
On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the refrigerated container, it was plugged
to the power terminal of the pier to keep its temperature constant. Fidel Rocha (Rocha), Vice-President for Operations
of Marines Adjustment Corporation, accompanied by two surveyors, conducted a protective survey of the cargo. They
found that based on the temperature chart, the temperature reading was constant from October 18, 1995 to October
25, 1995 at 0 Celsius. However, at midnight of October 25, 1995 when the cargo had already been unloaded from the
ship the temperature fluctuated with a reading of 33 Celsius. Rocha believed the fluctuation was caused by the burnt
condenser fan motor of the refrigerated container.
On November 9, 1995, Temic received the shipment. It found the cargo completely damaged. Temic filed a
claim for cargo loss against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance
paid Temic the sum of P1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss and
subrogation receipt in favor of Netherlands Insurance.
Seven months from delivery of the cargo or on June 4, 1996, Netherlands Insurance filed a complaint for subrogation
of insurance settlement with the Regional Trial Court, Branch 5, Manila, against the unknown owner of M/V Piya
Bhum and TMS Ship Agencies (TMS), the latter thought to be the local agent of M/V Piya Bhums unknown
owner.[4]The complaint was docketed as Civil Case No. 96-78612.
Netherlands Insurance amended the complaint on January 17, 1997 to implead EDSA Shipping, RCL,
Eagle Liner Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean), as additional defendants.
A third amended complaint was later made, impleading Pacific Eagle in substitution of Eagle Liner Shipping Agencies.
TMS filed its answer to the original complaint. RCL and EDSA Shipping filed their answers with cross-claim and
compulsory counterclaim to the second amended complaint. U-Ocean likewise filed an answer with compulsory
counterclaim and cross-claim. During the pendency of the case, U-Ocean, jointly with U-Freight Singapore, filed
another answer with compulsory counterclaim. Only Pacific Eagle and TMS filed their answers to the third amended
complaint.
The defendants all disclaimed liability for the damage caused to the cargo, citing several reasons why Netherland
Insurances claims must be rejected. Specifically, RCL and EDSA Shipping denied negligence in the transport of the
cargo; they attributed any negligence that may have caused the loss of the shipment to their co-defendants. They
likewise asserted that no valid subrogation exists, as the payment made by Netherlands Insurance to the consignee
was invalid. By way of affirmative defenses, RCL and EDSA Shipping averred that the Netherlands Insurance has no
cause of action, and is not the real party-in-interest, and that the claim is barred by laches/prescription.
After Netherlands Insurance had made its formal offer of evidence, the defendants including RCL and
EDSA Shipping sought leave of court to file their respective motions to dismiss based on demurrer to evidence.
RCL and EDSA Shipping, in their motion, insisted that Netherlands Insurance had (1) failed to prove any valid
subrogation, and (2) failed to establish that any negligence on their part or that the loss was sustained while the cargo
was in their custody.
On May 22, 2002, the trial court handed down an Order dismissing Civil Case No. 96-78612 on demurrer to evidence.
The trial court ruled that while there was valid subrogation, the defendants could not be held liable for the loss or
damage, as their respective liabilities ended at the time of the discharge of the cargo from the ship at
the Port of Manila.
Netherlands Insurance seasonably appealed the order of dismissal to the CA.
On May 26, 2004, the CA disposed of the appeal as follows:
31
WHEREFORE, in view of the foregoing, the dismissal of the complaint against defendants Regional
Container Lines and Its local agent, EDSA Shipping Agency, is REVERSED and SET
ASIDE. The dismissal of the complaint against the other defendants is AFFIRMED. Pursuant to
Section 1, Rule 33 of the 1997 Rules of Civil Procedure, defendants Regional Container Lines
and EDSA Shipping Agency are deemed to have waived the right to present evidence.
As such, defendants Regional Container Lines and EDSA Shipping Agency are ordered to reimburse
plaintiff in the sum of P1,036,497.00 with interest from date hereof until fully paid.
No costs.
SO ORDERED. [Emphasis supplied.]
The CA dismissed Netherland Insurances complaint against the other defendants after finding that the claim had
already been barred by prescription.[5]
Having been found liable for the damage to the cargo, RCL and EDSA Shipping filed a motion for reconsideration, but
the CA maintained its original conclusions.
The sole issue for our resolution is whether the CA correctly held RCL and EDSA Shipping liable as common carriers
under the theory of presumption of negligence.
THE COURTS RULING
The present case is governed by the following provisions of the Civil Code:
ART. 1733. 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.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and
1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further
set forth in articles1755 and 1756.
ART. 1734. 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:
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 of 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.
ART. 1735. In all cases other that those mentioned in Nos. 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 by article 1733.
ART. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the
sane are delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the provisions of articles 1738.
ART. 1738. The extraordinary liability of the common carrier continues to be operative even during the time
the goods are stored in a warehouse of the carrier at the place of destination, until the consignee
 32

has been advised of the arrival of the goods and has had reasonable opportunity thereafter to
remove them or otherwise dispose of them.
ART. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of
the goods, or the faulty nature of the packing or of the containers, the common carrier must
exercise due diligence to forestall or lessen the loss.
It is for this reason as well that we find RCL and EDSA Shippings claim that the loss or damage to the cargo was
caused by a defect in the packing or in the containers. 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 causes in Article 1734 of the Civil
Code 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.[13] RCL and EDSA Shipping, however, failed to satisfy this standard of
evidence and in fact offered no evidence at all on this point; a reversal of a dismissal based on a demurrer to evidence
bars the defendant from presenting evidence supporting its allegations.

In Central Shipping Company, Inc. v. Insurance Company of North America, [6] we reiterated the rules for the liability of WHEREFORE, we DENY the petition for review on certiorari filed by the Regional Container Lines of Singapore and
a common carrier for lost or damaged cargo as follows: EDSA Shipping Agency. The decision of the Court of Appeals dated May 26, 2004 in CA-G.R. CV No. 76690
is AFFIRMED IN TOTO. Costs against the petitioners.
(1) Common carriers are bound to observe extraordinary diligence over the goods they transport, SO ORDERED.
according to all the circumstances of each case;
(2) In the event of loss, destruction, or deterioration of the insured goods, common carriers are
responsible, unless they can prove that such loss, destruction, or deterioration was brought about
by, among others, flood, storm, earthquake, lightning, or other natural disaster or calamity; and
(3) In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they observed extraordinary
diligence.[7]
In the present case, RCL and EDSA Shipping disclaim any responsibility for the loss or damage to the
goods in question. They contend that the cause of the damage to the cargo was the fluctuation of the temperature in
the reefer van, which fluctuation occurred after the cargo had already been discharged from the vessel; no fluctuation,
they point out, arose when the cargo was still on board M/V Piya Bhum. As the cause of the damage to the cargo
occurred after the same was already discharged from the vessel and was under the custody of the arrastre operator
(International Container Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the presumption of
negligence provided in Article 1735 of the Civil Code should not apply. What applies in this case is Article 1734,
particularly paragraphs 3 and 4 thereof, which exempts the carrier from liability for loss or damage to the cargo when it
is caused either by an act or omission of the shipper or by the character of the goods or defects in the packing or in
the containers. Thus, RCL and EDSA Shipping seek to lay the blame at the feet of other parties.

We do not find the arguments of RCL and EDSA Shipping meritorious.

A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary
vigilance over the goods it transported.[8] When the goods shipped are either lost or arrived 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.[9]

To overcome the presumption of negligence, the common carrier must establish by adequate proof that it
exercised extraordinary diligence over the goods. It must do more than merely show that some other party could be
responsible for the damage.[10]

In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence required
by law over the goods they transported. Indeed, there is sufficient evidence showing that the fluctuation of the
temperature in the refrigerated container van, as recorded in the temperature chart, occurred after the cargo had been
discharged from the vessel and was already under the custody of the arrastre operator, ICTSI. This evidence,
however, does not disprove that the condenser fan which caused the fluctuation of the temperature in the refrigerated
container was not damaged while the cargo was being unloaded from the ship. It is settled in maritime law
jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier;[11] RCL and EDSA
Shipping failed to dispute this.

RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the condenser
fan did not occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it from the vessel; or
(3) while they were delivering it actually or constructively to the consignee. They could have presented proof to show
that they exercised extraordinary care and diligence in the handling of the goods, but they opted to file a demurrer to
evidence. As the order granting their demurrer was reversed on appeal, the CA correctly ruled that they are deemed to
have waived their right to present evidence,[12] and the presumption of negligence must stand.