ESTELA L. CRISOSTOMO, petitioner, vs.

the Court of Appeals and

CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., respondents.
G.R. No. 138334 | 2003-08-25

In May 1991, petitioner Estela L. Crisostomo contracted the services of

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

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

Without checking her travel documents, petitioner went to NAIA on Saturday,

June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioner's dismay, she discovered that the flight she was
supposed to take had already departed the previous day. She learned that her
plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.

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

Upon petitioner's return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she
paid for "Jewels of Europe" and the amount she owed respondent for the "British
Pageant" tour. Despite several demands, respondent company refused to
reimburse the amount, contending that the same was non-refundable.[1]
Petitioner was thus constrained to file a complaint against respondent for breach
of contract of carriage and damages, which was docketed as Civil Case No. 92-
133 and raffled to Branch 59 of the Regional Trial Court of Makati City.

In her complaint,[2] petitioner alleged that her failure to join "Jewels of Europe"
was due to respondent's fault since it did not clearly indicate the departure date
on the plane ticket. Respondent was also negligent in informing her of the wrong
flight schedule through its employee Menor. She insisted that the "British
Pageant" was merely a substitute for the "Jewels of Europe" tour, such that the
cost of the former should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioner's failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was
clearly and legibly printed on the plane ticket. The travel documents were given
to petitioner two days ahead of the scheduled trip. Petitioner had only herself to
blame for missing the flight, as she did not bother to read or confirm her flight
schedule as printed on the ticket.

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

Lastly, respondent maintained that the "British Pageant" was not a substitute for
the package tour that petitioner missed. This tour was independently procured
by petitioner after realizing that she made a mistake in missing her flight for
"Jewels of Europe". Petitioner was allowed to make a partial payment of only
US$300.00 for the second tour because her niece was then an employee of the
travel agency. Consequently, respondent prayed that petitioner be ordered to
pay the balance of P12,901.00 for the "British Pageant" package tour.
After due proceedings, the trial court rendered a decision,[4] the dispositive part
of which reads:

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

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

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

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

4. With costs against the defendant.

SO ORDERED.[5]

The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioner's testimony. However, petitioner should
have verified the exact date and time of departure by looking at her ticket and
should have simply not relied on Menor's verbal representation. The trial court
thus declared that petitioner was guilty of contributory negligence and
accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent
than respondent because as a lawyer and well-traveled person, she should have
known better than to simply rely on what was told to her. This being so, she is
not entitled to any form of damages. Petitioner also forfeited her right to the
"Jewels of Europe" tour and must therefore pay respondent the balance of the
price for the "British Pageant" tour. The dispositive portion of the judgment
appealed from reads as follows:

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

SO ORDERED.[6]

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

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,
petitioner's negligence is only contributory while the private respondent [is
guilty] of gross negligence making the principle of pari delicto inapplicable in the
case;

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

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

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

Petitioner's contention has no merit.

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

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

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

While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondent's
obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained directly to the airline.

The object of petitioner's contractual relation with respondent is the latter's

service of arranging and facilitating petitioner's booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and
not one of carriage. Petitioner's submission is premised on a wrong assumption.

The nature of the contractual relation between petitioner and respondent is

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

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

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

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

We agree with respondent.

Respondent's failure to present Menor as witness to rebut petitioner's testimony

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

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

Contrary to petitioner's claim, the evidence on record shows that respondent

exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket[19] issued to petitioner clearly
reflected the departure date and time, contrary to petitioner's contention. The
travel documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioner's hotel accommodation as well
as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking.

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

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

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

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

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

SO ORDERED.
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and
ERNESTO CENDA?A, respondents.
G.R. No. L-47822 | 1988-12-22

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

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

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

On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P22,150.00, the claimed value of the lost merchandise,
plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier,
and having failed to exercise the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not
be held responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision' finding private respondent to be a common
carrier and holding him liable for the value of the undelivered goods (P22,150.00) as well as for
P4,000.00 as damages and P2,000.00 as attorney's fees.

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

The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged in transporting return loads of freight "as a casual occupation ---- a sideline to his scrap iron
business" and not as a common carrier.

Petitioner came to this Court by way of a Petition for Review assigning as errors the following
conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

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

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

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

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

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

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

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

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

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 respondent's principal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently
fell below commercial freight rates is not relevant here.

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

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

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

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

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

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

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

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

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

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

"In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733."

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

Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should
have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled
milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence
required private respondent to retain a security guard to ride with the truck and to engage brigands in a
fire fight at the risk of his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.

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

"Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy:

xxx xxx xxx

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

(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished; and

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

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

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

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

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

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

SO ORDERED.
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her official
capacity as City Treasurer of Batangas, respondents.
G.R. No. 125948 | 1998-12-29

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

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

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

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

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

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

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

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot
be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j)
of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] for
tax refund with prayer for a writ of preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia,
that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of
the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross
receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not include the
authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax paid.[7]

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

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

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

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

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

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

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

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

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

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14]
of January 20, 1997. Thus, the petition was reinstated.

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

There is merit in the petition.

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

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

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

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

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

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

4. The transportation must be for hire.[15]

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

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

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

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

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

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

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

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

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

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

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling
No. 069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum
products, it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, it
is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended."

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

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

xxxxxxxxx

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation
of passengers or freight by hire and common carriers by air, land or water, except as provided in this
Code."

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

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

Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131].
Common Limitations on the Taxing Powers of Local Government Units." x x x

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

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

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

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

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

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

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

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

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

SO ORDERED.
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.

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 attorney's 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 SMC's warehouse at the Tabacalera
Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General
Insurance Co., Inc.

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

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

The trial court held:

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

" . . . we opine that damages sustained by shipment is attributable to improper handling in transit
presumably whilst in the custody of the broker . . . ."

is a finding which cannot be traversed and overturned.

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

". . . .

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

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

Accordingly, the trial court ordered petitioner to pay the following amounts ¾

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyer's fee;

3. Costs of suit.[4]

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

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]

DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.

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

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

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

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

The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similar
contention and held the party to be a common carrier, thus ¾

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

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

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

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

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

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

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

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

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

vigilance over goods" was explained thus:

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

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

MAXU-2062880 - rain gutter deformed/cracked

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

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

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

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

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

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

Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates
that when the shipper transferred the cargo in question to the arrastre operator, these were covered by
clean Equipment Interchange Report (EIR) and, when petitioner's employees withdrew the cargo from
the arrastre operator, they did so without exception or protest either with regard to the condition of
container vans or their contents. The Survey Report pertinently reads ¾

Details of Discharge:

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

....

Transfer/Delivery:

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

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

As found by the Court of Appeals:

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

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

Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides ¾

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

....

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

....

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

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

SO ORDERED.
NATIONAL STEEL CORPORATION, petitioner vs. COURT OF APPEALS
AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112287 | 1997-12-12

The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's
responsibility for damage to the cargo and its liability for demurrage and attorney's fees. The Court
also reiterates the well-known rule that findings of facts of trial courts, when affirmed by the Court of
Appeals, are binding on this Court.

The Case

Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons
Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. 1
The Court of Appeals modified the decision of the Regional Trial Court of Pasig, Metro Manila,
Branch 163 in Civil Case No. 23317. The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing
the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the
counterclaim as follows:

1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate
on both amounts from April 7, 1976 until the same shall have been fully paid;

2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and

3. Costs of suit.

SO ORDERED. 2

On the other hand, the Court of Appeals ruled:

WHEREFORE, premises considered, the decision appealed from is modified by reducing the award
for demurrage to P44,000.00 and deleting the award for attorney's fees and expenses of litigation.
Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.

SO ORDERED. 3

The Facts

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a
special contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it
is in the capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or
contract of voyage charter hire with National Steel Corporation.

The facts as found by Respondent Court of Appeals are as follows:

(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit "B"; also
Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load
steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms
and conditions, viz:

1. . . .

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.

3. . . .

4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading
within fifteen (15) days.

5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.

6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive
hours, Sundays and Holidays Included).

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

8. . . .

9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not responsible
for losses/damages except on proven willful negligence of the officers of the vessel.

10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized
Charter Party Agreement shall form part of this Contract.

Xxx xxx xxx

The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the
NANYOZAI Charter Party which stands for "Freight In and Out including Stevedoring and Trading",
which means that the handling, loading and unloading of the cargoes are the responsibility of the
Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow
and discharge the cargo free of risk and expenses to owners. . . .

Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the
voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and
supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe
for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the
cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of
the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped
and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and
safe for its reception, carriage and preservation; . . . ; perils, dangers and accidents of the sea or other
navigable waters; . . . ; wastage in bulk or weight or any other loss or damage arising from inherent
defect, quality or vice of the cargo; insufficiency of packing; . . . ; latent defects not discoverable by
due diligence; any other cause arising without the actual fault or privity of Owners or without the fault
of the agents or servants of owners."

Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible
for split, chafing and/or any damage unless caused by the negligence or default of the master and
crew."

(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
"VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates
and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19
metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief
Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo on board
and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.

(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The
following day, August 13, 1974, when the vessel's three (3) hatches containing the shipment were
opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found
to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer.
Unloading was completed only on August 24, 1974 after incurring a delay of eleven (11) days due to
the heavy rain which interrupted the unloading operations. (Exhibit "E")

(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the
shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated
March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular inspection conducted on the cargo,
both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa,
Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of
the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were
noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO
ventured the opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained
while still on board the vessel as a consequence of the heavy weather and rough seas encountered
while en route to destination (Exhibit "F"). It was also reported that MASCO's surveyors drew at
random samples of bad order packing materials of the tinplates and delivered the same to the M.I.T.
Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report
No. 1770 (Exhibit "I") which in part, states, "The analysis of bad order samples of packing materials .
. . shows that wetting was caused by contact with SEA WATER".

(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the
defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim
but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April
21, 1976 which was docketed as Civil Case No. 23317, CFI, Rizal.

(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as
a result of the act, neglect and default of the master and crew in the management of the vessel as well
as the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the
holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception,
carriage and preservation all in violation of defendant's undertaking under their Contract of Voyage
Charter Hire.

(7) In its answer, defendant denied liability for the alleged damage claiming that the MV "VLASONS
I" was seaworthy in all respects for the carriage of plaintiff's cargo; that said vessel was not a
"common carrier" inasmuch as she was under voyage charter contract with the plaintiff as charterer
under the charter party; that in the course of the voyage from Iligan City to Manila, the MV
"VLASONS I" encountered very rough seas, strong winds and adverse weather condition, causing
strong winds and big waves to continuously pound against the vessel and seawater to overflow on its
deck and hatch covers, that under the Contract of Voyage Charter Hire, defendant shall not be
responsible for losses/damages except on proven willful negligence of the officers of the vessel, that
the officers of said MV "VLASONS I" exercised due diligence and proper seamanship and were not
willfully negligent; that furthermore the Voyage Charter Party provides that loading and discharging
of the cargo was on FIOST terms which means that the vessel was free of risk and expense in
connection with the loading and discharging of the cargo; that the damage, if any, was due to the
inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent defect of
the cargo not discoverable by due diligence or to any other cause arising without the actual fault or
privity of defendant and without the fault of the agents or servants of defendant; consequently,
defendant is not liable; that the stevedores of plaintiff who discharged the cargo in Manila were
negligent and did not exercise due care in the discharge of the cargo; land that the cargo was exposed
to rain and seawater spray while on the pier or in transit from the pier to plaintiff's warehouse after
discharge from the vessel; and that plaintiff's claim was highly speculative and grossly exaggerated
and that the small stain marks or sweat marks on the edges of the tinplates were magnified and
considered total loss of the cargo.

Finally, defendant claimed that it had complied with all its duties and obligations under the Voyage
Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the
following counterclaim:

(a) That despite the full and proper performance by defendant of its obligations under the Voyage
Charter Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite
demands made by defendant;

(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum of
P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila
waiting for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant
demurrage in the total amount of P88,000.00.

(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay
defendant attorney's fees and all expenses of litigation in the amount of not less than P100,000.00.

(8) From the evidence presented by both parties, the trial court came out with the following findings
which were set forth in its decision:

(a) The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping service and is
available for hire only under special contracts of charter party as in this particular case.

(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. "1"), the
MV VLASONS I" was covered by the required seaworthiness certificates including the Certification
of Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh.
"4"); Coastwise License from the Board of Transportation (Exh. "5"); International Loadline
Certificate from the Philippine Coast Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also
from the Philippine Coast Guard (Exh. "7"); Ship Radio Station License (Exh. "8"); Certificate of
Inspection by the Philippine Coast Guard (Exh. "12"); and Certificate of Approval for Conversion
issued by the Bureau of Customs (Exh. "9"). That being a vessel engaged in both overseas and
coastwise trade, the MV "VLASONS I" has a higher degree of seaworthiness and safety.

(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage
Charter Hire, the MV "VLASONS I" underwent drydocking in Cebu and was thoroughly inspected by
the Philippine Coast Guard. In fact, subject voyage was the vessel's first voyage after the drydocking.
The evidence shows that the MV "VLASONS I" was seaworthy and properly manned, equipped and
supplied when it undertook the voyage. It has all the required certificates of seaworthiness.

(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were
covered by hatchboards which were in turn covered by two or double tarpaulins.

The hatch covers were water tight. Furthermore, under the hatchboards were steel beams to give
support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by
evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a
presumption of negligence in case of loss or damage to the cargo are not applicable. As to the damage
to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted
testimony of witness Vicente Angliongto that tinplates "sweat" by themselves when packed even
without being in contract (sic) with water from outside especially when the weather is bad or raining.
The trust caused by sweat or moisture on the tinplates may be considered as a loss or damage but then,
defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the
carrier from responsibility for loss or damage arising from the "character of the goods . . ." All the
1,769 skids of the tinplates could not have been damaged by water as claimed by plaintiff. It was
shown as claimed by plaintiff that the tinplates themselves were wrapped in kraft paper lining and
corrugated cardboards could not be affected by water from outside.

(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not
closing the hatch openings of the MV "VLASONS I" when rains occurred during the discharging of
the cargo thus allowing rainwater to enter the hatches. It was proven that the stevedores merely set up
temporary tents to cover the hatch openings in case of rain so that it would be easy for them to resume
work when the rains stopped by just removing the tent or canvas. Because of this improper covering
of the hatches by the stevedores during the discharging and unloading operations which were
interrupted by rains, rainwater drifted into the cargo through the hatch openings. Pursuant to
paragraph 5 of the NANYOSAI [sic] Charter Party which was expressly made part of the Contract of
Voyage Charter Hire, the loading, stowing and discharging of the cargo is the sole responsibility of
the plaintiff charterer and defendant carrier has no liability for whatever damage may occur or maybe
[sic] caused to the cargo in the process.

(g) It was also established that the vessel encountered rough seas and bad weather while en route from
Iligan City to Manila causing sea water to splash on the ship's deck on account of which the master of
the vessel (Mr. Antonio C. Dumlao) filed a "Marine Protest" on August 13, 1974 (Exh. "15"); which
can be invoked by defendant as a force majeure that would exempt the defendant from liability.

(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter
Hire contract that it was to insure the cargo because it did not. Had plaintiff complied with the
requirement, then it could have recovered its loss or damage from the insurer. Plaintiff also violated
the charter party contract when it loaded not only "steel products", i.e. steel bars, angular bars and the
like but also tinplates and hot rolled sheets which are high grade cargo commanding a higher freight.
Thus plaintiff was able to ship grade cargo at a lower freight rate.

(i) As regards defendant's counterclaim, the contract of voyage charter hire under Paragraph 4 thereof,
fixed the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of
lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite
demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of
the same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the
unloading of the cargoes. The delay amounted to eleven (11) days thereby making plaintiff liable to
pay defendant for demurrage in the amount of P88,000.00.

Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:

I
The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned,
equipped and supplied, and that there is no proof of willful negligence of the vessel's officers.

II
The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or
character of the goods and not due to contact with seawater.

III
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of
NSC's shipment.

IV
The trial court erred in exempting VSI from liability on the ground of force majeure.

V
The trial court erred in finding that NSC violated the contract of voyage charter hire.

VI
The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI. 4

As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of
litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution 5 dated October
20, 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective
petitions for review before this Court. On motion of VSI, the Court ordered on February 14, 1994 the
consolidation of these petitions. 6

The Issues

In its petition 7 and memorandum, 8 NSC raises the following questions of law and fact:

Questions of Law

1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused
by weather interruption;

2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9",
"11" and "12") were admissible in evidence and constituted evidence of the vessel's seaworthiness at
the beginning of the voyages; and

3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for
cargo damage.

Questions of Fact

1. Whether or not the vessel was seaworthy and cargo-worthy;

2. Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo;

3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their
own; and

4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's
tinplates.

In its separate petition, 9 VSI submits for the consideration of this Court the following alleged errors
of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage
from P88,000.00 to P44,000.00.

B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for
attorney's fees and expenses of litigation.

Amplifying the foregoing, VSI raises the following issues in its memorandum: 10

I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to
which there exist[s] a presumption of negligence against the common carrier in case of loss or damage
to the cargo are applicable to a private carrier.

II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the
Nanyozai Charter, are valid and binding on both contracting parties.

The foregoing issues raised by the parties will be discussed under the following headings:

1. Questions of Fact

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

3. Admissibility of Certificates Proving Seaworthiness

4. Demurrage and Attorney's Fees.

The Court's Ruling

The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.

Preliminary Matter: Common Carrier or Private Carrier?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a
private carrier. The resolution of this preliminary question determines the law, standard of diligence
and burden of proof applicable to the present case.

Article 1732 of the Civil Code defines a common carrier 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 has been held that the true test
of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to
avail themselves of its transportation service for a fee. 11 A carrier which does not qualify under the
above test is deemed a private carrier. "Generally, private carriage is undertaken by special agreement
and the carrier does not hold himself out to carry goods for the general public. The most typical,
although not the only form of private carriage, is the charter party, a maritime contract by which the
charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for
a period of time or a voyage or voyages." 12

In the instant case, it is undisputed that VSI did not offer its services to the general public. As found
by the Regional Trial Court, it carried passengers or goods only for those it chose under a "special
contract of charter party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons I "was
not a common but a private carrier." 14 Consequently, the rights and obligations of VSI and NSC,
including their respective liability for damage to the cargo, are determined primarily by stipulations in
their contract of private carriage or charter party. 15 Recently, in Valenzuela Hardwood and Industrial
Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, 16 the Court ruled:
. . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage
does not involve the general public. Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in contracts involving
common carriers. 17

Extent of VSI's Responsibility andLiability Over NSC's Cargo

It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not
be responsible for losses except on proven willful negligence of the officers of the vessel." The
NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation further
provided that the shipowner shall not be liable for loss of or a damage to the cargo arising or resulting
from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel
seaworthy or to ensure that the same was "properly manned, equipped and supplied," and to "make the
holds and all other parts of the vessel in which cargo [was] carried, fit and safe for its reception,
carriage and preservation." 18 The NANYOZAI Charter Party also provided that "[o]wners shall not
be responsible for split, chafing and/or any damage unless caused by the negligence or default of the
master or crew." 19

Burden of Proof

In view of the aforementioned contractual stipulations, NSC must prove that the damage to its
shipment was caused by VSI's willful negligence or failure to exercise due diligence in making MV
Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of
proof was placed on NSC by the parties' agreement.

This view finds further support in the Code of Commerce which pertinently provides:

Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has
not been expressly stipulated.

Therefore, the damage and impairment suffered by the goods during the transportation, due to
fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the account
and risk of the shipper.

The burden of proof of these accidents is on the carrier.

Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the
preceding article if proofs against him show that they occurred on account of his negligence or his
omission to take the precautions usually adopted by careful persons, unless the shipper committed
fraud in the bill of lading, making him to believe that the goods were of a class or quality different
from what they really were.

Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule,
places the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to
prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged
while in the carrier's custody does not put the burden of proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection
of the goods committed to its care, the burden of proving negligence or a breach of that duty rests on
plaintiff and proof of loss of, or damage to, cargo while in the carrier's possession does not cast on it
the burden of proving proper care and diligence on its part or that the loss occurred from an excepted
cause in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled
to the benefit of the presumptions and inferences by which the law aids the bailor in an action against
a bailee, and since the carrier is in a better position to know the cause of the loss and that it was not
one involving its liability, the law requires that it come forward with the information available to it,
and its failure to do so warrants an inference or presumption of its liability. However, such inferences
and presumptions, while they may affect the burden of coming forward with evidence, do not alter the
burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence
explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff.

Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a
breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and
proof that the goods were lost or damaged while in the carrier's possession does not cast on it the
burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability
for unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of
proving the exercise of due diligence to make the vessel seaworthy. 20

In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position in
relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing
Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's]
interpretation of Clause 12 is not even correct), it argues that 'a careful examination of the evidence
will show that VSI miserably failed to comply with any of these obligation's as if defendant-appellee
[VSI] had the burden of proof." 21

First Issue: Questions of Fact

Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1)
whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose
under the charter party; (2) whether the damage to the cargo should be attributed to the willful
negligence of the officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether
the rusting of the tinplates was caused by its own "sweat" or by contact with seawater.

These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties' conflicting claims and to carefully weigh their respective evidence. The
findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual
findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court.
22 We stress that, subject to some exceptional instances, 23 only questions of law not questions of fact
may be raised before this Court in a petition for review under Rule 45 of the Rules of Court. After a
thorough review of the case at bar, we find no reason to disturb the lower court's factual findings, as
indeed NSC has not successfully proven the application of any of the aforecited exceptions.

Was MV Vlasons I Seaworthy?

In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit
for the carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drylocked
and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to
Manila under the contract of voyage charter hire. 24 The vessel's voyage from Iligan to Manila was
the vessel's first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as
seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel. 25 The Court of
Appeals itself sustained the conclusion of the trial court that MV Vlasons I was seaworthy. We find no
reason to modify or reverse this finding of both the trial and the appellate courts.

Who Were Negligent:Seamen or Stevedores?

As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the
negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for
the carriage of tinplates. NSC failed to discharge this burden.

Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or
canvas to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It
faults the Court of Appeals for failing to consider such claim as an "uncontroverted fact" 26 and
denies that MV Vlasons I "was equipped with new canvas covers in tandem with the old ones as
indicated in the Marine Protest . . ." 27 We disagree.

The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition
to the new one used primarily to make the ship's hatches watertight. The foregoing are clear from the
marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship's
boatswain, Jose Pascua. The salient portions of said marine protest read:

. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8, 1974, loaded
with approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation;
that before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or
about August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered
very rough seas and strong winds and Manila office was advised by telegram of the adverse weather
conditions encountered; that in the morning of August 10, 1974, the weather condition changed to
worse and strong winds and big waves continued pounding the vessel at her port side causing sea
water to overflow on deck andhatch (sic) covers and which caused the first layer of the canvass
covering to give way while the new canvass covering still holding on;

That the weather condition improved when we reached Dumali Point protected by Mindoro; that we
re-secured the canvass covering back to position; that in the afternoon of August 10, 1974, while
entering Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while
approaching Fortune Island, we encountered again rough seas, strong winds and big waves which
caused the same canvass to give way and leaving the new canvass holding on;

xxx xxx xxx 28

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

Q What is the purpose of the canvas cover?

A So that the cargo would not be soaked with water.

Q And will you describe how the canvas cover was secured on the hatch opening?

WITNESS
A It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we
place[d] a flat bar over the canvas on the side of the hatches and then we place[d] a stopper so that the
canvas could not be removed.

ATTY DEL ROSARIO

Q And will you tell us the size of the hatch opening? The length and the width of the hatch opening.
A Forty-five feet by thirty-five feet, sir.
Xxx xxx xxx

Q How was the canvas supported in the middle of the hatch opening?
A There is a hatch board.

ATTY DEL ROSARIO

Q What is the hatch board made of?
A It is made of wood, with a handle.

Q And aside from the hatch board, is there any other material there to cover the hatch?
A There is a beam supporting the hatch board.

Q What is this beam made of?

A It is made of steel, sir.

Q Is the beam that was placed in the hatch opening covering the whole hatch opening?
A No, sir.

Q How many hatch beams were there placed across the opening?
A There are five beams in one hatch opening.

ATTY DEL ROSARIO

Q And on top of the beams you said there is a hatch board. How many pieces of wood are put on top?
A Plenty, sir, because there are several pieces on top of the hatch beam.

Q And is there a space between the hatch boards?

A There is none, sir.

Q They are tight together?

A Yes, sir.

Q How tight?
A Very tight, sir.

Q Now, on top of the hatch boards, according to you, is the canvass cover. How many canvas covers?
A Two, sir. 29

That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not
give way and the ship's hatches and cargo holds remained waterproof. As aptly stated by the Court of
Appeals, ". . . we find no reason not to sustain the conclusion of the lower court based on
overwhelming evidence, that the MV 'VLASONS I' was seaworthy when it undertook the voyage on
August 8, 1974 carrying on board thereof plaintiff-appellant's shipment of 1,677 skids of tinplates and
92 packages of hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan City arriving
safely at North Harbor, Port Area, Manila, on August 12, 1974; . . . 30

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew
of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were
negligent in unloading the cargo from the ship.

The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned
by a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was
clearly inadequate for keeping rain and seawater away from the hatches of the ship. Vicente
Angliongto, an officer of VSI, testified thus:

ATTY ZAMORA:
Q Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the
vessel upon notice from the National Steel Corporation in order to conduct the inspection of the cargo.
During the course of the investigation, did you chance to see the discharging operation?

WITNESS:
A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but
majority of the tinplates were inside the hall, all the hatches were opened.

Q In connection with these cargoes which were unloaded, where is the place.
A At the Pier.

Q What was used to protect the same from weather?

ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the transcript of
stenographic notes shows the same was covered in the direct examination.

ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.

COURT:
All right, witness may answer.

ATTY LOPEZ:
Q What was used in order to protect the cargo from the weather?
A A base of canvas was used as cover on top of the tin plates, and tents were built at the opening of
the hatches.

Q You also stated that the hatches were already opened and that there were tents constructed at the
opening of the hatches to protect the cargo from the rain. Now, will you describe [to] the Court the
tents constructed.
A The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the
middle with the whole side separated down to the hatch, the size of the hatch and it is soaks [sic] at the
middle because of those weather and this can be used only to temporarily protect the cargo from
getting wet by rains.

Q Now, is this procedure adopted by the stevedores of covering tents proper?

A No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the hatch
tent was not good enough to hold all of it to prevent the water soaking through the canvass and enter
the cargo.

Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak
into the canvass and tinplates.
A Yes, sir, the second time I went there, I saw it.

Q As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure
adopted by its stevedores in discharging the cargo particularly in this tent covering of the hatches?
A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did
not mind at all, so, called the attention of the representative of the National Steel but nothing was
done, just the same. Finally, I wrote a letter to them. 31

NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain
immediately about the stevedores' negligence on the first day of unloading, pointing out that he wrote
his letter to petitioner only seven days later. 32 The Court is not persuaded. Angliongto's candid
answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he
first called the attention of the stevedores, then the NSC's representative, about the negligent and
defective procedure adopted in unloading the cargo. This series of actions constitutes a reasonable
response in accord with common sense and ordinary human experience. Vicente Angliongto could not
be blamed for calling the stevedores' attention first and then the NSC's representative on location
before formally informing NSC of the negligence he had observed, because he was not responsible for
the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which
was ultimately responsible for the stevedores it had hired and the performance of their task to unload
the cargo.

We see no reason to reverse the trial and the appellate courts' findings and conclusions on this point,
viz:

In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores
hired by NSC were negligent in the unloading of NSC's shipment. We do not think so. Such
negligence according to the trial court is evident in the stevedores hired by [NSC], not closing the
hatch of MV 'VLASONS I' when rains occurred during the discharging of the cargo thus allowing rain
water and seawater spray to enter the hatches and to drift to and fall on the cargo. It was proven that
the stevedores merely set up temporary tents or canvas to cover the hatch openings when it rained
during the unloading operations so that it would be easier for them to resume work after the rains
stopped by just removing said tents or canvass. It has also been shown that on August 20, 1974, VSI
President Vicente Angliongto wrote [NSC] calling attention to the manner the stevedores hired by
[NSC] were discharging the cargo on rainy days and the improper closing of the hatches which
allowed continuous heavy rain water to leak through and drip to the tinplates' covers and [Vicente
Angliongto] also suggesting that due to four (4) days continuos rains with strong winds that the
hatches be totally closed down and covered with canvas and the hatch tents lowered. (Exh. "13"). This
letter was received by [NSC] on 22 August 1974 while discharging operations were still going on
(Exhibit "13-A"). 33

The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be
noted that the NSC may seek indemnification, subject to the laws on prescription, from the
stevedoring company at fault in the discharge operations. "A stevedore company engaged in
discharging cargo . . . has the duty to load the cargo . . . in a prudent manner, and it is liable for injury
to, or loss of, cargo caused by its negligence . . . and where the officers and members and crew of the
vessel do nothing and have no responsibility in the discharge of cargo by stevedores . . . the vessel is
not liable for loss of, or damage to, the cargo caused by the negligence of the stevedores . . ." 34 as in
the instant case.

Do Tinplates "Sweat"?

The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat' by
themselves when packed even without being in contact with water from outside especially when the
weather is bad or raining . . ." 35 The Court of Appeals affirmed the trial court's finding.

A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the
damage to the tinplates was occasioned not by airborne moisture but by contact with rain and seawater
which the stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSC's Failure toInsure the Cargo

The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally
separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for
damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I.
Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused by the latter's willful negligence. We do not
find anything in the charter party that would make the liability of VSI for damage to the cargo
contingent on or affected in any manner by NSC's obtaining an insurance over the cargo.

Third Issue: Admissibility of CertificatesProving Seaworthiness

NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of
the certificates of seaworthiness offered in evidence by VSI. The said certificates include the
following:

1. Certificate of Inspection of the Philippines Coast Guard at Cebu

2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs 36

NSC argues that the certificates are hearsay for not having been presented in accordance with the
Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records or acts of
public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or
certified true copies" as required by Sections 25 and 26, Rule 132, of the Rules of Court. 37

After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates
issued by private parties, but they have not been proven by one who saw the writing executed, or by
evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits, 5,
6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence rule have not been
demonstrated.

We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per
Section 44 of Rule 130 of the Rules of Court, which provides that "(e)ntries in official records made in
the performance of a duty by a public officer of the Philippines, or by a person in the performance of a
duty specially enjoined by law, are prima facie evidence of the facts therein stated." 38 Exhibit 11 is
an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli
C. Flores to the effect that "the vessel 'VLASONS I' was drydocked . . . and PCG Inspectors were sent
on board for inspection . . . After completion of drydocking and duly inspected by PCG Inspectors, the
vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all requirements, fitted and
equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu
Port on July 10, 1974." (sic) NSC's claim, therefore, is obviously misleading and erroneous.

At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the
obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to
discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in
damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient
proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees

The contract of voyage charter hire provides inter alia:

xxx xxx xxx

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.

Xxx xxx xxx

6. Loading/Discharging Rate: 750 tons per WWDSHINC.

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

The Court defined demurrage in its strict sense as the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for
loading and unloading of cargo. 40 It is given to compensate the shipowner for the nonuse of the
vessel. On the other hand, the following is well-settled:

Laytime runs according to the particular clause of the charter party. . . . If laytime is expressed in
"running days," this means days when the ship would be run continuously, and holidays are not
excepted. A qualification of "weather permitting" excepts only those days when bad weather
reasonably prevents the work contemplated. 41

In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified
laytime as WWDSHINC or weather working days Sundays and holidays included. 42 The running of
laytime was thus made subject to the weather, and would cease to run in the event unfavorable
weather interfered with the unloading of cargo. 43 Consequently, NSC may not be held liable for
demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather
condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error
for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred
eleven days of delay in unloading the cargo. The trial court arrived at this erroneous finding by
subtracting from the twelve days, specifically August 13, 1974 to August 24, 1974, the only day of
unloading unhampered by unfavorable weather or rain, which was August 22, 1974. Based on our
previous discussion, such finding is a reversible error. As mentioned, the respondent appellate court
also erred in ruling that NSC was liable to VSI for demurrage, even if it reduced the amount by half.

Attorney's Fees

VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree.
While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of
attorney's fees under Article 2208 of the Civil Code when ". . . no sufficient showing of bad faith
would be reflected in a party's persistence in a case other than an erroneous conviction of the
righteousness of his cause . . ." 44 Moreover, attorney's fees may not be awarded to a party for the
reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a
premium on one's right to litigate or seek judicial redress of legitimate grievances. 45

Epilogue

At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the
cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such
damage was brought about during the unloading process when rain and seawater seeped through the
cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that factual
findings of the trial court, when affirmed by the Court of Appeals, are binding on the Supreme Court.
Although there are settled exceptions, NSC has not satisfactorily shown that this case is one of them.
Second, the agreement between the parties the Contract of Voyage Charter Hire placed the burden of
proof for such loss or damage upon the shipper, not upon the shipowner. Such stipulation, while
disadvantageous to NSC, is valid because the parties entered into a contract of private charter, not one
of common carriage. Basic too is the doctrine that courts cannot relieve a parry from the effects of a
private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the
plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in
consideration of many factors, not the least of which is the transport price which is determined not
only by the actual costs but also by the risks and burdens assumed by the shipper in regard to possible
loss or damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper
should insure the cargo to protect itself from the risks it undertook under the charter party. That NSC
failed or neglected to protect itself with such insurance should not adversely affect VSI, which had
nothing to do with such failure or neglect.

WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED.

The questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the
demurrage awarded to VSI is deleted. No pronouncement as to costs.

SO ORDERED.
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS
and THE MANILA INSURANCE CO., INC., respondents.
G.R. No. 131621 | 1999-09-28

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 decision1 [Rollo,
58.] of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed the
decision of 4 October 19912 [Ibid., 58-59.] of the Regional Trial Court of Manila,
Branch 16, in CivilCase 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
attorney's fees, and the costs of the suit; and (b) its resolution of 19 November
1997,3 [Id., 72.] denying LOADSTAR's 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 MIC's claim from LOADSTAR.

In its answer, LOADSTAR denied any liability for the loss of the shipper's 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 LOADSTAR's appeal, the appellate court made the following

observations:

1) LOADSTAR cannot be considered a private carrier on the sole ground that

there was a single shipper 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 [Citing Planter's Products, Inc. v. Court of Appeals, 226 SCRA
476 [1993].]

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. LOADSTAR'S allegation that the sinking was probably due
to the "convergence of the winds," as stated by a PAG-ASA 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 [Citing Aboitiz Shipping Corp. v. General Accident Fire and
Life Assurance Corp., Ltd., 217 SCRA 359 [1993].]

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 latter's
rights as against the carrier, LOADSTAR.6 [Citing Fireman's Fund Insurance Co.
v. Jamila & Co., Inc., 70 SCRA 323 [1976].]

5) There was a clear breach of the contract of carriage when the shipper's goods
never reached their destination. LOADSTAR's 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 [Rollo, 18.]
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 [Citing National Steel Corporation v. Court of
Appeals, 283 SCRA 45 [1997].]

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 vessel's 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. MIC's witness, Graceli
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 "owner's 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 Court's
ruling in the case of St. Paul Fire & Marine Insurance Co. v. Macondray & Co.,
Inc.,9 [70 SCRA 122 [1976].] and National Union Fire Insurance Company of
Pittsburg v. Stolt-Nielsen Phils., Inc.10 [184 SCRA 682 [1990].]

Finally, LOADSTAR avers that MIC's 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 LOADSTAR's 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 [23 SCRA 24 [1968].] 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 Appeals12 [274 SCRA 642
[1997].] and National Steel Corp. v. Court of Appeals,13 [Supra note 8.] 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
["A general ship carrying goods for hire, whether employed in internal, in
coasting, or in foreign commerce is a common carrier." (Baer, Senior & Co.'s
Successors v. La Compania Maritima, 6 Phil. 215, 217-218, quoting Liverpool
Steamship Co. v. Phoenix Ins. Co., 129 U.S. 397, 437), cited in 3 TEODORICO C.
MARTIN, PHILIPPINE COMMERCIAL LAWS 118 (Rev. Ed. 1989).] 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 [168 SCRA 612, 617-619 [1988].] 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:

"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
respondent's principal occupation was not the carriage of goods for others. There
is no dispute that private respondent charged his customers a fee for hauling
their goods; that 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 [Trans-Asia Shipping Lines, Inc. v. Court of Appeals, 254 SCRA 260,
272-273 [1996], citing Chan Keep v. Chan Gioco, 14 Phil. 5.]

Neither do we agree with LOADSTAR's 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 [See
JOSE C. VITUG, PANDECT OF COMMERCIAL LAW AND JURISPRUDENCE 311-313
(3rd ed. 1997) (hereinafter VITUG). Also, Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance Corporation, Ltd., 217 SCRA 359
[1993]; American Home Assurance, Co. v. CA, 208 SCRA 343 [1992], citing
National Development Co. v. Court of Appeals, 164 SCRA 593 [1988]; Heirs of
Amparo de los Santos v. Court of Appeals, 186 SCRA 649 [1990].] 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 Court's pronouncements in St. Paul
Fire & Marine Ins. Co. v. Macondray & Co., Inc.,18 [70 SCRA 122 [1976].] and
National Union Fire Insurance v. Stolt-Nielsen Phils., Inc.19 [184 SCRA 682
[1990].] 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 carrier's 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 carrier's 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 "owner's risk." Such stipulation is obviously null and void for
being contrary to public policy.20 [The stipulations on the limitations on the
common carrier's liability, subject matter of Articles 1749-1750 and Articles
1744-1745 of the New Civil Code are not to be confused with each other. (See
VITUG 244)] 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 [3 MARTIN, 96-97,
citing H.E. Heacock Co. v. Macondray & Co., Inc., 42 Phil. 205. See Arts. 1744
and 1745 of the New Civil Code.]

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. MIC's 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 goods.22 [VITUG, 220-222, 224, 256 and 334, citing Filipino Merchants
Insurance Co., Inc. v. Alejandro, 145 SCRA 42 (1986); see also 3 MARTIN 302,
307 and Sec. 3. (6) of the Carriage of Goods by Sea Act, which provides, inter
alia.

Sec. 3. (6) xxx.

In any event the carrier and the ship shall be discharged from all liability in
respect of the loss or damage unless suit is brought within one year after
delivery of the goods or the date when the goods should have been delivered...]
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 [VITUG,
334, citing Elser, Inc. v. Court of Appeals, 96 Phil. 264.] 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.
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF
APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,
respondents.
G.R. No. 147246 | 2003-08-19

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.

Petitioner's 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
CONSIGNEE'S 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 consignee's 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.

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
Cendaña 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 consignee's 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
damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue
Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

xxxxxxxxx

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

A - After the first accident, through the initiative of the barge owners, they tried to pull out the barge
from 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 consignee's warehouse, now while on route another
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?
A - The sinking, 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 the barge.

xxxxxxxxx

This is not all. Petitioner still headed to the consignee's 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 - Yes, sir.

xxxxxxxxx

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

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?

A - It is already in an inner portion of Pasig River. The typhoon would be coming and it would be
dangerous if we are in the vicinity of Manila Bay.

Q - But the fact is, the typhoon was incoming? Yes or no?
A - Yes.

Q - And yet as a standard operating procedure of your Company, you have to secure a sort of
Certification to determine the weather condition, am I correct?
A - Yes, sir.

Q - So, more or less, you had the knowledge of the incoming typhoon, right?
A - Yes, sir.

Q - And yet you proceeded to the premises of the GMC?

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. 149038 April 9, 2003

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner,

vs.
PKS SHIPPING COMPANY, respondent.

VITUG, J.:

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

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

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

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

Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision
of the trial court. The appellate court ruled that evidence to establish that PKS Shipping was
a common carrier at the time it undertook to transport the bags of cement was wanting
because the peculiar method of the shipping company’s carrying goods for others was not
generally held out as a business but as a casual occupation. It then concluded that PKS
Shipping, not being a common carrier, was not expected to observe the stringent
extraordinary diligence required of common carriers in the care of goods. The appellate
court, moreover, found that the loss of the goods was sufficiently established as having been
due to fortuitous event, negating any liability on the part of PKS Shipping to the shipper.

In the instant appeal, Philamgen contends that the appellate court has committed a patent
error in ruling that PKS Shipping is not a common carrier and that it is not liable for the loss
of the subject cargo. The fact that respondent has a limited clientele, petitioner argues, does
not militate against respondent’s being a common carrier and that the only way by which
such carrier can be held exempt for the loss of the cargo would be if the loss were caused by
natural disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the
Philippine area of responsibility and that, even if it did, respondent would not be exempt from
liability because its employees, particularly the tugmaster, have failed to exercise due
diligence to prevent or minimize the loss.

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

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

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

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

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

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

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

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

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

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

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

Much of the distinction between a "common or public carrier" and a "private or special
carrier" lies in the character of the business, such that if the undertaking is an isolated
transaction, not a part of the business or occupation, and the carrier does not hold itself out
to carry the goods for the general public or to a limited clientele, although involving the
carriage of goods for a fee,3 the person or corporation providing such service could very well
be just a private carrier. A typical case is that of a charter party which includes both the
vessel and its crew, such as in a bareboat or demise, where the charterer obtains the use
and service of all or some part of a ship for a period of time or a voyage or voyages4 and
gets the control of the vessel and its crew.5 Contrary to the conclusion made by the appellate
court, its factual findings indicate that PKS Shipping has engaged itself in the business of
carrying goods for others, although for a limited clientele, undertaking to carry such goods for
a fee. The regularity of its activities in this area indicates more than just a casual activity on
its part.6 Neither can the concept of a common carrier change merely because individual
contracts are executed or entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to escape liability by the simple
expedient of entering into those distinct agreements with clients.

Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence
demanded of common carriers, Article 1733 of the Civil Code requires common carriers to
observe extraordinary diligence in the vigilance over the goods they carry. In case of loss,
destruction or deterioration of goods, common carriers are presumed to have been at fault or
to have acted negligently, and the burden of proving otherwise rests on them.7 The
provisions of Article 1733, notwithstanding, common carriers are exempt from liability for
loss, destruction, or deterioration of the goods due to any of the following causes:

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

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

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

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

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

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

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

All given then, the appellate court did not err in its judgment absolving PKS Shipping from
liability for the loss of the DUMC cargo.

WHEREFORE, the petition is DENIED. No costs.

SO ORDERED.
CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC., GO
SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO,
VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD
S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO
SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G.
CA?EZAL AND SOTERA E. CA?EZAL, respondents.
G.R. No. 131166 | 1999-09-30

Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered
vessel and a passenger ship?

When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products
of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would collide with
MV Doña Paz, killing almost all the passengers and crew members of both ships, and thus resulting in
one of the country's worst maritime disasters.

The petition before us seeks to reverse the Court of Appeals decision1 [In CA-G.R CV No. 29526
promulgated on April 15, 1997, Justice Jorge S. Imperial, ponente, Justices Mabutas and
Hormachuelos, concurring.] holding petitioner jointly liable with the operator of MT Vector for
damages when the latter collided with Sulpicio Lines, Inc.'s passenger ship MV Doña Paz.

The facts are as follows:

On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to
Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex.2 [Findings
and Recommendation of the Board of Marine Inquiry dated March 22, 1988, Rollo, p. 358.] MT
Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in
the business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that
particular voyage, the MT Vector carried on board gasoline and other oil products owned by Caltex by
virtue of a charter contract between them.3 [Ibid., Rollo, p. 350.]

On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doña Paz left the port of Tacloban
headed for Manila with a complement of 59 crew members including the master and his officers, and
passengers totaling 1,493 as indicated in the Coast Guard Clearance.4 [Ibid., Rollo, p. 357. Actually,
there were more than 4,000 passengers.] The MV Doña Paz is a passenger and cargo vessel owned
and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/
Catbalogan/ Tacloban/ Manila, making trips twice a week.

At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity
of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doña Paz
died, while the two survivors from MT Vector claimed that they were sleeping at the time of the
incident.

The MV Doña Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger
manifest. Only 24 survived the tragedy after having been rescued from the burning waters by vessels
that responded to distress calls.5 [Decision, Court of Appeals, dated April 15, 1997, Rollo, pp. 54-75.]
Among those who perished were public school teacher Sebastian Cañezal (47 years old) and his
daughter Corazon Cañezal (11 years old), both unmanifested passengers but proved to be on board the
vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation found
that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator
Vector Shipping Corporation, were at fault and responsible for its collision with MV Doña Paz.6
[Finding and Recommendations of the Board of Marine Inquiry dated March 22, 1988, Rollo, pp. 347-
402.]

On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's wife and mother
respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for "Damages Arising
from Breach of Contract of Carriage" against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in
turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex
(Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith
knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard
to safe navigation; as a result, it rammed against MV Doña Paz in the open sea setting MT Vector's
highly flammable cargo ablaze.

On September 15, 1992, the trial court rendered decision dismissing the third party complaint against
petitioner. The dispositive portion reads:

"WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-3rd party
plaintiff Sulpicio Lines, Inc., to wit:

"1. For the death of Sebastian E. Cañezal and his 11-year old daughter Corazon G. Cañezal, including
loss of future earnings of said Sebastian, moral and exemplary damages, attorney's fees, in the total
amount of P 1,241,287.44 and finally;

"2. The statutory costs of the proceedings.

"Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs
against the 3rd party plaintiff.

"IT IS SO ORDERED.

"DONE IN MANILA, this 15th day of September 1992.

"ARSENIO M. GONONG

"Judge"7 [Rollo, pp. 156-225.]

On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of
Appeal modified the trial court's ruling and included petitioner Caltex as one of the those liable for
damages. Thus:

"WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is
hereby MODIFIED as follows:

"WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Cañezal
and Corazon Cañezal:

"1. Compensatory damages for the death of Sebastian E.Cañezal and Corazon Cañezal the total
amount of ONE HUNDRED THOUSAND PESOS (P100,000);

"2. Compensatory damages representing the unearned income of Sebastian E. Cañezal, in the total
amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00)
PESOS;

"3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00);

"4. Attorney's fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P
50,000.00);

"5. Costs of the suit.

"Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the
third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned
damages, attorney's fees and costs which the latter is adjudged to pay plaintiffs, the same to be shared
half by Vector Shipping Co. (being the vessel at fault for the collision) and the other half by Caltex
(Phils.), Inc. (being the charterer that negligently caused the shipping of combustible cargo aboard an
unseaworthy vessel).

"SO ORDERED.

"JORGE S. IMPERIAL

"Associate Justice

"WE CONCUR:

"RAMON U. MABUTAS. JR. PORTIA ALIá'O HERMACHUELOS

"Associate Justice Associate Justice"8 [Court of Appeals decision in CA-G. R. CV No. 39526, dated
April 15, 1997, Rollo, pp. 54-75.]

Hence, this petition.

We find the petition meritorious.

First: The charterer has no liability for damages under Philippine Maritime laws.

The respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping
documents on the one hand, or a charter party or similar contract on the other.9 [Philippine Admiralty
and Maritime Law, by Attys. Eduardo Hernandez and Antero Peñasales, 1987, p. 237, citing
Schoenbaum & Yiannopoulos, Admiralty and Maritime Law, at p. 364.]

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.10
[Ibid., p.495, citing Healy & Sharp, Admiralty, p. 405.]

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner
to another person for a specified time or use; a contract of affreightment is one by which the owner of
a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight.11 [Tabacalera Insurance Co.
vs. North Front Shipping Services, 272 SCRA 527 (1997), citing Planters Products, Inc. vs. Court of
Appeals, 226 SCRA 476 (1993).]

A contract of affreightment may be either time charter, wherein the leased vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage.
In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period
of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the
wages of the master of the crew, and defray the expenses for the maintenance of the ship.12 [Ibid.,
citing Planters Products, Inc. vs. Court of Appeals, 226 SCRA 476 (1993).]

Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for
damages caused by negligence.

If the charter is a contract of affreightment, which leaves the general owner in possession of the ship
as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The
charterer is free from liability to third persons in respect of the ship.13 [Puromines vs. Court of
Appeals, 220 SCRA 281 (1993).]

Second : MT Vector is a common carrier

Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the common carrier into a private one? We need to
answer this question in order to shed light on the responsibilities of the parties.

In this case, the charter party agreement did not convert the common carrier into a private carrier. The
parties entered into a voyage charter, which retains the character of the vessel as a common carrier.

In Planters Products, Inc. vs. Court of Appeals,14 [226 SCRA 476 (1993).] we said:

"It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as
in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and
its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or
voyage charter retains possession and control of the ship, although her holds may, for the moment, be
the property of the charterer."

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:15 [245 SCRA 797
(1995).]

"Although a charter party may transform a common carrier into a private one, the same however is not
true in a contract of affreightment xxx"

A common carrier is a person or corporation whose regular business is to carry passengers or property
for all persons who may choose to employ and to remunerate him.16 [United States vs. Quinajon, 31
Phil. 189, (1915); United States. vs. Tan Piaoco, 40 Phil. 853 (1920).] MT Vector fits the definition of
a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of Appeals,17 [168
SCRA 612, 617-619 (1988).] we ruled:

"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 for 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
services on a 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.

"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, occasional rather than regular or scheduled manner, and even
though respondent's principal occupation was not the carriage of goods for others. There is no dispute
that private respondent charged his customers a fee for hauling their goods; that the fee frequently fell
below commercial freight rates is not relevant here."

Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due
diligence to -

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

xxx xxx xxx

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. 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 the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code.18 [Trans-Asia Shipping Lines vs. Court of Appeals, 254 SCRA 260 (1996), citing Chan
Keep vs. Chan Gioco, 14 Phil. 5 (1909).]

The provisions owed their conception to the nature of the business of common carriers. This business
is impressed with a special public duty. The public must of necessity rely on the care and skill of
common carriers in the vigilance over the goods and safety of the passengers, especially because with
the modern development of science and invention, transportation has become more rapid, more
complicated and somehow more hazardous.19 [Arturo M. Tolentino, Commentaries and Jurisprudence
on the Civil Code of the Philippines, Volume V, 1992, p. 298, citing Commission Report, pp. 66-67.]
For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of
the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.

This aside, we now rule on whether Caltex is liable for damages under the Civil Code.

Third: Is Caltex liable for damages under the Civil Code?

We rule that it is not.

Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an
unseaworthy vessel such as the MT Vector when Caltex:

1. Did not take steps to have M/T Vector's certificate of inspection and coastwise license renewed;

2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery
Corporation;

3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.

Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these deficiencies:

1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate
the vessel;

2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in
bays and rivers when the subject collision occurred in the open sea;

3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;

4. The vessel did not have a Third Mate, a radio operator and a lookout; and

5. The vessel had a defective main engine.20 [Memorandum of Sulpicio Lines, Inc., Rollo, pp. 493-
520.]

As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil
Code, which provide:

"Article 20. - Every person who contrary to law, willfully or negligently causes damage to another,
shall indemnify the latter for the same.

"Article 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."

And what is negligence?

The Civil Code provides:

"Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of the
time and of the place. When negligence shows bad faith, the provisions of Article 1171 and 2201
paragraph 2, shall apply.

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

In Southeastern College, Inc. vs. Court of Appeals,21 [292 SCRA 422 (1998), citing Valenzuela vs.
Court of Appeals, 253 SCRA 303 (1996); Cf. Quibal vs. Sandiganbayan, 244 SCRA 224 (1995);
Citibank, NA vs. Gatchalian, 240 SCRA 212 (1995).] we said that negligence, as commonly
understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be
the failure to observe that degree of care, precaution, and vigilance, which the circumstances justly
demand, or the omission to do something which ordinarily regulate the conduct of human affairs,
would do.

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for
being engaged in "public service."22 [De Guzman vs. Court of Appeals, 168 SCRA 612 (1988).] The
Civil Code demands diligence which is required by the nature of the obligation and that which
corresponds with the circumstances of the persons, the time and the place. Hence, considering the
nature of the obligation between Caltex and MT Vector, the liability as found by the Court of Appeals
is without basis.

The relationship between the parties in this case is governed by special laws. Because of the implied
warranty of seaworthiness,23 [Under Section 3 (1) of the Carriage of Goods by Sea Act.] shippers of
goods, when transacting with common carriers, are not expected to inquire into the vessel's
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more
from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime
laws insofar as the protection of the public in general is concerned. By the same token, we cannot
expect passengers to inquire every time they board a common carrier, whether the carrier possesses
the necessary papers or that all the carrier's employees are qualified. Such a practice would be an
absurdity in a business where time is always of the essence. Considering the nature of transportation
business, passengers and shippers alike customarily presume that common carriers possess all the
legal requisites in its operation.

Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes.

A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could
legally transport cargo that time of the year.

"Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here
under "VESSEL'S DOCUMENTS

1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987",
Mr. Witness, what steps did you take regarding the impending expiry of the C.I. or the Certificate of
Inspection No. 1290-85 during the hiring of MT Vector

"Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid
C.I. which will expire on December 7, 1987 but on the last week of November, I called the attention
of Mr. Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn, assured me they will renew
the same.

"Q: What happened after that?

"A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were
going to send me a copy as soon as possible, sir.24 [TSN, May 7, 1991, pp. 18-19.]

xxx xxx xxx

"Q: What did you do with the C.I.?

"A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our
long business relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates that
the documents are in order. xxx"25 [TSN, Direct Examination of Apolinario Ng, dated May 7, 1991,
pp. 21-22.]

On cross examination -

"Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection
has expired on December 7. Did it occur to you not to let the vessel sail on that day because of the
very approaching date of expiration?

"Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able
to secure a renewal of the Certificate of Inspection and that they will in time submit us a copy."26
[TSN, Cross-Examination of Apolinario Ng, dated May 13, 1991, p. 7.]

Finally, on Mr. Ng's redirect examination:

"Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in
the coastwise license on December 7, 1987. What was your assurance for the record that this
document was renewed by the MT Vector?

"Atty. Sarenas: xxx

"Atty. Poblador: The certificate of Inspection?

"A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those
three years, they were allowed to sail by the Coast Guard. That are some that make me believe that
they in fact were able to secure the necessary renewal.

"Q: If the Coast Guard clears a vessel to sail, what would that mean?

"Atty. Sarenas: Objection.

"Court: He already answered that in the cross examination to the effect that if it was allowed, referring
to MV Vector, to sail, where it is loaded and that it was scheduled for a destination by the Coast
Guard, it means that it has Certificate of Inspection extended as assured to this witness by Restituto
Abalos. That in no case MV Vector will be allowed to sail if the Certificate of Inspection is, indeed,
not to be extended. That was his repeated explanation to the cross-examination. So, there is no need to
clarify the same in the re-direct examination."27 [TSN, Re-direct Examination of Apolinario Ng,
dated May 13, 1991, p. 51.]

Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years
before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to
observe a higher degree of diligence.

Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as
even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we
find no legal basis to hold petitioner liable for damages.

As Vector Shipping Corporation did not appeal from the Court of Appeals' decision, we limit our
ruling to the liability of Caltex alone. However, we maintain the Court of Appeals' ruling insofar as
Vector is concerned .

WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of
Appeals in CA-G. R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable
under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the
latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the Court of
Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Cañezal and Corazon
Cañezal damages as set forth therein. Third-party defendant-appellee Vector Shipping Corporation
and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever
damages, attorneys' fees and costs the latter is adjudged to pay plaintiffs-appellees in the case.
No costs in this instance.

SO ORDERED.
COASTWISE LIGHTERAGE CORPORATION, petitioner, vs. COURT OF
APPEALS and the PHILIPPINE GENERAL INSURANCE COMPANY,
respondents.
G.R. No. 114167 | 1995-07-12

This is a petition for review of a Decision rendered by the Court of Appeals, dated December 17,
1993, affirming Branch 35 of the Regional Trial Court Manila in holding that herein petitioner is
liable to pay herein private respondent the amount of P700,000.00 plus legal interest thereon, another
sum of P100,000.00 as attorney's fees and the cost of the suit.

The factual background of this case is as follows:

Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila
with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The
barges were towed in tanderm by the tugboat MT Marica, which is likewise owned by Coastwise.

Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an
unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in
through a hole "two inches wide and twenty-two inches long". 1 As a consequence, the molasses at the
cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the
consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa
Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private respondent, Philippine
General Insurance Company (PhilGen, for short) and against the carrier, herein petitioner, Coastwise
Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which. paid the consignee,
Pag-asa Sales, Inc., the amount of P700,000.00 representing the value of the damaged cargo of
molasses.

In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional Trial Court of
Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales, Inc. for the
latter's lost cargo PhilGen now claims to be subrogated to all the contractual rights and claims which
the consignee may have against the carrier, which is presumed to have violated the contract of
carriage.

The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to the Court
of Appeals, the award was affirmed.

Hence, this petition.

There are two main issues to be resolved herein. First, whether or not petitioner Coastwise Lighterage
was transformed into a private carrier, by virtue of the contract of affreightment which it entered into
with the consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact transformed into a private carrier,
did it exercise the ordinary diligence to which a private carrier is in turn bound? Second, whether or
not the insurer was subrogated into the rights of the consignee against the carrier, upon payment by
the insurer of the value of the consignee's goods lost while on board one of the Oriental to Manila and
refers to this contract as a carrier's vessels.

On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding that it
was a common carrier. It stresses the fact it contracted with Pag-asa Sales, Inc. to transport the
shipment of molasses from Negros Oriental to Manila and refers to this contract as a "charter
agreement". It then proceeds to cite the case of Home Insurance and the Court of Appeals erred in
finding that it was a common carrier. Steamship Agencies, Inc. 2 wherein this Court held: . . . a
common carrier undertaking to carry a special cargo or chartered to a person only becomes a private
carrier.

Petitioner's reliance on the aforementiod case is misplaced. In its entirety, the conclusions of the court
are as follows:

"According, the charter party contract is one of affreightment over the whole vessels, rather than a
demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would
remain in the absence of stipulation." 3

The distinction between the two kinds of charter parties (i. e. bareboat or demise and contract of
affreightment) is more clearly set out in the case of Puromines, Inc vs. Court of Appeals, 4 wherein we
ruled:

"Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the
owner for the voyage or service stipulated. The charterer mans the vessel with his own people and
becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To
create a demise, the owner of a vessel must completely and exclusively relinquish possession,
command and navigation thereof to the charterer anything short of such a complete transfer is a
contract of affreightment (time or voyage charter party) or not a charter party all.

On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all
of its space to haul goods for others. It is a contract for special service to be rendered by the owner of
the vessel and under such cutud the general owner retains the possession, command and navigation of
the ship, the charterer or freighter merely having use of the space in the vessel in return for his
payment or the charter hire . . .

. . . An owner who retains possession of the ship though the hold is the property of the charterer,
remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading
of the cargo . . ."

Although a charter party may transform a common carrier into a private one, the same however is not
true in a contract of affreightment on account of the aforementioned distinctions between the two.

Petitioner admits that the contract it entered into with the consignee was one of affreightment. 5 We
agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one
point to another, but the possession, command mid navigation of the vessels remained with petitioner
Coastwise Lighterage.

Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by the
contract of affreightment, was not converted into a private carrier, but remained a common carrier and
was still liable as such.

The law and jurisprudence on common carriers both hold that the mere proof of delivery of goods in
good order to a carrier and the subsequent arrival of the same goods at the place of destination in bad
order makes for a prima facie case against the carrier.

It follows then that the presumption of negligence that attaches to common carriers, once the goods it
is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which is
overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this case.

The records show that time damage to the barge which carried the cargo of molasses was caused by its
hitting an unknown sunken object as it was heading for Pier 18. The object turned out to be a
submerged derelict vessel. Petitioner contends that this navigational hazard was the efficient cause of
the accident. Further, it asserts that the fact that the Philippine Coastguard "has not exerted any effort
to prepare a chart to indicate the location of sunken derelicts within Manila North Harbor to avoid
navigational accidents" 6 effectively contributed to the happening of this mishap. Thus, being unaware
of the hidden danger that lies in its path, it became impossible for the petitioner to avoid the same.
Nothing could have prevented the event, making it beyond the pale of even the exercise of
extraordinary diligence.

However, petitioner's assertion is belied by the evidence on record where it appeared that far from
having rendered service with the greatest skill and outmost foresight, and being free from fault, the
carrier was culpably remiss in the observance of its duties.

Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. The
Code of Commerce, which subsidiarily governs common carriers (which are primarily governed by
the provisions of the Civil Code) provides:

"Article 609. - Captains, masters, or patrons of vessels must be Filipinos, have legal capacity to
contract in accordance with this code, and prove the skill capacity and qualifications necessary to
command and direct the vessel, as established by marine and navigation laws, ordinances or
regulations, and must not be disqualified according to the same for the discharge of the duties of the
position . . ."

Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates
this rule. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill
to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally
authorized ones. Had the patron been licensed he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their way
to Pier 18.

As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to
overcome the presumption of negligence with the loss and destruction of goods it transported, by
proof of its exercise of extraordinary diligence.

On the issue of subrogation, which petitioner contends as inapplicable in this case, we once more rule
against the petitioner. We have already found petitioner liable for breach of the contract of carriage it
entered into with Pag-asa Sales, Inc. However, for the damage sustained by the loss of the cargo
which petitioner-carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa
Sales, Inc. but the latter's insurer, herein private respondent PhilGen.

Article 2207 of the Civil Code is explicit on this point:

"Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the
insurance company for the injury or loses 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 wrongdoer or the
person who violated the contract . . ."

This legal provision containing the equitable principle of subrogation has been applied in a long line
of cases including Compania Maritina v. Insurance Company of North America; 7 Firesman's Fund
Insurance Company v. Jamilla & Company, Inc., 8 and Pan Malayan Insurance Corporation v. Court
of Appeals, 9 wherein this Court explained:
"Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured,
then the insurer, upon payment to the assured will be subrogated to the rights of the assired to recover
from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to
the assured operated as an equitable assignment to the former of all remedies which the latter may
have against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any private of contract or upon written
assignment of, claim. It accrues simply upon payment of the insurance claim by the insurer."

Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to Pag-asa
Sales, Inc., the consignee of the cargo of molasses totally damaged while being transported by
petitioner Coastwise Lighterage, the former was, subrogated into all the rights which Pag-asa Sales,
Inc. may have had against the carrier, herein petitioner Coastwise Lighterage.

WHEREFORE, premises considered, this petition is DENIED and the appealed decision affirming the
order of Branch 35 of the Regional Trial Court of Manila for petitioner Coastwise Lighterage to pay
respondent Philippine General Insurance Company the "principal amount of P700,000.00 plus interest
thereon at the legal rate computed from March 29, 1989, the date the complaint was filed until fully
paid' and another sum of P100,000.00 as attorney's fees and costs" 10 is likewise hereby.
AFFIRMED.

SO ORDERED.
PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS,
SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.
G.R. No. 101503 | 1993-09-15

Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private
one as to negate the civil law presumption of negligence in case of loss or damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of
New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in
bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei
Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La
Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and
issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant
to the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charter-party starting from par. 16 to
40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were
also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected
by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the
charter-party which reads:

"16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo
Bureau inspector or substitute appointed by charterers for his account certifying the vessel's readiness
to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's
expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before
daytime commences" (italics supplied).

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin,
then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire
voyage. 5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened
with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steel-bodied
dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant
to the terms and conditions of the charter-party (which provided for an F.I.O.S. clause). 6 The hatches
remained open throughout the duration of the discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to
the warehouse, the trucks were made to pass through a weighing scale where they were individually
weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain
portions of the route to the warehouse were sandy and the weather was variable, raining occasionally
while the discharge was in progress. 8 The petitioner's warehouse was made of corrugated galvanized
iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the
fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the
trucks to contain spillages of the fertilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th,
14th and 18th). 10 A private marine and cargo surveyor, Cargo Superintendents Company Inc.
(CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of
the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI)
dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea
fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a
Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the
cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce,
having been polluted with sand, rust and dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged
shortage in the goods shipped and the diminution in value of that portion said to have been
contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for payment
because, according to them, what they received was just a request for shortlanded certificate and not a
formal claim, and that this "request" was denied by them because they "had nothing to do with the
discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court
of First Instance of Manila. The defendant carrier argued that the strict public policy governing
common carriers does not apply to them because they have become private carriers by reason of the
provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the
defendant carrier for the value of the goods lost or damaged when it ruled thus: 15

". . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of
loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for
loss or damage is to show receipt by the carrier of the goods and delivery by it of less than what it
received. After that, the burden of proving that the loss or damage was due to any of the causes which
exempt him from liability is shifted to the carrier, common or private he may be. Even if the
provisions of the charter-party aforequoted are deemed valid, and the defendants considered private
carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the
cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading,
stowing, trimming and discharge of the cargo. This they failed to do. By this omission, coupled with
their failure to destroy the presumption of negligence against them, the defendants are liable" (italics
supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel
M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier
by reason of the time charter-party. Accordingly, the Civil Code provisions on common carriers which
set forth a presumption of negligence do not find application in the case at bar. Thus --

". . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce
sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an
old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is
under no obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court,
Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).

"But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of
action, i.e., the alleged negligence of defendant carrier. It appears that the plaintiff was under the
impression that it did not have to establish defendant's negligence. Be that as it may, contrary to the
trial court's finding, the record of the instant case discloses ample evidence showing that defendant
carrier was not negligent in performing its obligations . . ." 18 (italics supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy
because the issue raised therein is the validity of a stipulation in the charter-party delimiting the
liability of the shipowner for loss or damage to goods caused by want of due diligence on its part or
that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of
negligence provided under the Civil Code applies only to common carriers and not to private carriers.
19 Petitioner further argues that since the possession and control of the vessel remain with the
shipowner, absent any stipulation to the contrary, such shipowner should be made liable for the
negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the
presumption of negligence against respondent carrier, and instead shifting the onus probandi on the
shipper to show want of due deligence on the part of the carrier, when he was not even at hand to
witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by
reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove
that he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so,
we find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use; 20 a contract of affreightment by which the
owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter
parties are of two types: (a) contract of affreightment which involves the use of shipping space on
vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise
or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him
of its entire command and possession and consequent control over its navigation, including the master
and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the
vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased
for a single voyage. 22 In both cases, the charter-party provides for the hire of the vessel only, either
for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the
ship's stores, pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code.
23 The definition extends to carriers either by land, air or water which hold themselves out as ready to
engage in carrying goods or transporting passengers or both for compensation as a public employment
and not as a casual occupation. The distinction between a "common or public carrier" and a "private or
special carrier" lies in the character of the business, such that if the undertaking is a single transaction,
not a part of the general business or occupation, although involving the carriage of goods for a fee, the
person or corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the
case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in case of loss, destruction or deterioration of the goods, common carriers are
presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests
on them. 26 On the contrary, no such presumption applies to private carriers, for whosoever alleges
damage to or deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a common
carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V
"Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the
charterer did not have any control of the means in doing so. This is evident in the present case
considering that the steering of the ship, the manning of the decks, the determination of the course of
the voyage and other technical incidents of maritime navigation were all consigned to the officers and
crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as
in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and
its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or
voyage charter retains possession and control of the ship, although her holds may, for the moment, be
the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity
of a stipulation in the charter-party exempting the shipowner from liability for loss due to the
negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the
rule in the United States that a ship chartered by a single shipper to carry special cargo is not a
common carrier, 29 does not find application in our jurisdiction, for we have observed that the
growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires
a more exacting interpretation of admiralty laws, more particularly, the rules governing common
carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 --

"As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used
to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that
he takes over the charge and control of her, the case is different; the shipowner is not then a carrier.
But where her services only are let, the same grounds for imposing a strict responsibility exist,
whether he is employed by one or many. The master and the crew are in each case his servants, the
freighter in each case is usually without any representative on board the ship; the same opportunities
for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken
place arises . . ."

In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same
was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to
respondent to prove that he has exercised extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other circumstances
inconsistent with its liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977
before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified
that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and
fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon
hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable
tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the
ship was in transit as the weight of the steel covers made it impossible for a person to open without the
use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33
When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in
the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor
representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the
whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the
cargo. This was confirmed by respondent appellate court thus --

". . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses
ample evidence showing that defendant carrier was not negligent in performing its obligations.
Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show absence of
negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo
was sealed and nobody could open the same except in the presence of the owner of the cargo and the
representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of
steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would
have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16)" (italics
supplied).

The period during which private respondent was to observe the degree of diligence required of it as a
public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's
holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its
destination and its hull was re-examined by the consignee, but prior to unloading. This is clear from
the limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time
charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and
discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. 35
Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when
the stowing is done by stevedores employed by him, and therefore under his control and supervision,
not when the same is done by the consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the character of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations
which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or
the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of
these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss
and damage resulting from the preceding causes if it is proved, as against him, that they arose through
his negligence or by reason of his having failed to take the precautions which usage has established
among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and
the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with
Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon
monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly
soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on
a long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees
centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped
shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of
lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped shell
which does not seal very tightly. Also, the wind tends to blow away some of the materials during the
unloading process.

The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely
high temperature in its place of storage, or when it comes in contact with water. When Urea is
drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which
is in liquid form still remains potent and usable although no longer saleable in its original market
value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles
was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the
inimical effects of the elements and the grimy condition of the various pieces of equipment used in
transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep
into the vessel's holds during the voyage since the hull of the vessel was in good condition and her
hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy
to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more
likely to have occurred while the same was being transported from the ship to the dump trucks and
finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo
surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bad order
cargo" as contained in their report to PPI was just an approximation or estimate made by them after
the fertilizer was discharged from the vessel and segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo.
It rained from time to time at the harbor area while the cargo was being discharged according to the
supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline
where the dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer
carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during
its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face.
Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it
highly vulnerable to deterioration; as well as the inadequacy of its packaging which further
contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the
carrier was remiss in the exercise of due diligence in order to minimize the loss or damage to the
goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the
First Instance, now Regional Trial Court, of Manila should be, as it is hereby, DISMISSED.

Costs against petitioner.

SO ORDERED.
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioner,
versus TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, Respondents.
G.R. No. 150255 | 2005-04-22

On petition for review is the June 27, 2001 Decision[1] of the Court of Appeals, as
well as its Resolution[2] dated September 28, 2001 denying the motion for
reconsideration, which affirmed that of Branch 21 of the Regional Trial Court (RTC)
of Manila in Civil Case No. 92-63132[3] holding petitioner Schmitz Transport
Brokerage Corporation (Schmitz Transport), together with Black Sea Shipping
Corporation (Black Sea), represented by its ship agent Inchcape Shipping Inc.
(Inchcape), and Transport Venture Inc. (TVI), solidarily liable for the loss of 37 hot
rolled steel sheets in coil that were washed overboard a barge.

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

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

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

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

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

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

By 12:30 a.m. of October 27, 1991 during which the weather condition had become
inclement due to an approaching storm, the unloading unto the barge of the 37 coils
was accomplished.[10] No tugboat pulled the barge back to the pier, however.

At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the
barge abandoned it and transferred to the vessel. The barge pitched and rolled with
the waves and eventually capsized, washing the 37 coils into the sea.[12] At 7:00
a.m., a tugboat finally arrived to pull the already empty and damaged barge back to
the pier.[13]

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

Little Giant thus filed a formal claim against Industrial Insurance which paid it the
amount of P5,246,113.11. Little Giant thereupon executed a subrogation receipt[15]
in favor of Industrial Insurance.

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

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

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

WHEREFORE, premises considered, the Court renders judgment in favor of the

plaintiff, ordering the defendants to pay plaintiff jointly and severally the sum of
P5,246,113.11 with interest from the date the complaint was filed until fully
satisfied, as well as the sum of P5,000.00 representing the adjustment fee plus the
sum of 20% of the amount recoverable from the defendants as attorney's fees plus
the costs of suit. The counterclaims and cross claims of defendants are hereby
DISMISSED for lack of [m]erit.[19]

To the trial court's decision, the defendants Schmitz Transport and TVI filed a joint
motion for reconsideration assailing the finding that they are common carriers and
the award of excessive attorney's fees of more than P1,000,000. And they argued
that they were not motivated by gross or evident bad faith and that the incident was
caused by a fortuitous event. [20]

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

All the defendants appealed to the Court of Appeals which, by decision of June 27,
2001, affirmed in toto the decision of the trial court, [22] it finding that all the
defendants were common carriers - Black Sea and TVI for engaging in the transport
of goods and cargoes over the seas as a regular business and not as an isolated
transaction,[23] and Schmitz Transport for entering into a contract with Little Giant
to transport the cargoes from ship to port for a fee.[24]

In holding all the defendants solidarily liable, the appellate court ruled that "each one
was essential such that without each other's contributory negligence the incident
would not have happened and so much so that the person principally liable cannot be
distinguished with sufficient accuracy."[25]

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

The defendants' respective motions for reconsideration having been denied by

Resolution[27] of September 28, 2001, Schmitz Transport (hereinafter referred to as
petitioner) filed the present petition against TVI, Industrial Insurance and Black Sea.

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

By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black

Sea, and TVI were required to file their respective Comments.[29]

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

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

In issue then are:

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

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

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

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the assumption
of risk, no person shall be responsible for those events which could not be foreseen,
or which though foreseen, were inevitable.

In order, to be considered a fortuitous event, however, (1) the cause of the

unforeseen and unexpected occurrence, or the failure of the debtor to comply with
his obligation, must be independent of human will; (2) it must be impossible to
foresee the event which constitute the caso fortuito, or if it can be foreseen it must
be impossible to avoid; (3) the occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in any manner; and (4) the obligor must be free
from any participation in the aggravation of the injury resulting to the creditor.[32]

[T]he principle embodied in the act of God doctrine strictly requires that the act must
be occasioned solely by the violence of nature. Human intervention is to be excluded
from creating or entering into the cause of the mischief. When the effect is found to
be in part the result of the participation of man, whether due to his active
intervention or neglect or failure to act, the whole occurrence is then humanized and
removed from the rules applicable to the acts of God.[33]
The appellate court, in affirming the finding of the trial court that human intervention
in the form of contributory negligence by all the defendants resulted to the loss of
the cargoes,[34] held that unloading outside the breakwater, instead of inside the
breakwater, while a storm signal was up constitutes negligence.[35] It thus
concluded that the proximate cause of the loss was Black Sea's negligence in
deciding to unload the cargoes at an unsafe place and while a typhoon was
approaching.[36]

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

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

That no tugboat towed back the barge to the pier after the cargoes were completely
loaded by 12:30 in the morning[39] is, however, a material fact which the appellate
court failed to properly consider and appreciate[40] - the proximate cause of the loss
of the cargoes. Had the barge been towed back promptly to the pier, the
deteriorating sea conditions notwithstanding, the loss could have been avoided. But
the barge was left floating in open sea until big waves set in at 5:30 a.m., causing it
to sink along with the cargoes.[41] The loss thus falls outside the "act of God
doctrine."

The proximate cause of the loss having been determined, who among the parties
is/are responsible therefor?

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

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

Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business
of the company. I also handle the various division heads of the company for
operation matters, and all other related functions that the President may assign to
me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you
please tell the Honorable Court if you came to know the company by the name Little
Giant Steel Pipe Corporation?

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

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

A: Since 1990, Sir.

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

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

xxx

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

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

Q: Now, in connection with this work which you are doing, Mr. Witness, you are
supposed to perform, what equipment do (sic) you require or did you use in order to
effect this unloading, transfer and delivery to the warehouse?

A: Actually, we used the barges for the ship side operations, this unloading [from]
vessel to lighter, and on this we hired or we sub-contracted with [T]ransport
Ventures, Inc. which [was] in-charged (sic) of the barges. Also, in BASECO
compound we are leasing cranes to have the cargo unloaded from the barge to
trucks, [and] then we used trucks to deliver [the cargoes] to the consignee's
warehouse, Sir.

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

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

xxx

ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you
have to contract for the barges of Transport Ventures Incorporated in this particular
operation?
A: Firstly, we don't own any barges. That is why we hired the services of another
firm whom we know [al]ready for quite sometime, which is Transport Ventures, Inc.
(Emphasis supplied)[43]

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

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

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

xxx

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

And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the
transportation of goods is an integral part of a customs broker, the customs broker is
also a common carrier. For to declare otherwise "would be to deprive those with
whom [it] contracts the protection which the law affords them notwithstanding the
fact that the obligation to carry goods for [its] customers, is part and parcel of
petitioner's business."[47]

As for petitioner's argument that being the agent of Little Giant, any negligence it
committed was deemed the negligence of its principal, it does not persuade.

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

Petitioner, which did not have any barge or tugboat, engaged the services of TVI as
handler[48] to provide the barge and the tugboat. In their Service Contract,[49]
while Little Giant was named as the consignee, petitioner did not disclose that it was
acting on commission and was chartering the vessel for Little Giant.[50] Little Giant
did not thus automatically become a party to the Service Contract and was not,
therefore, bound by the terms and conditions therein.

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

In the case of TVI, while it acted as a private carrier for which it was under no duty
to observe extraordinary diligence, it was still required to observe ordinary diligence
to ensure the proper and careful handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:

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

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

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

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

This Court holds not.

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

As for petitioner, for it to be relieved of liability, it should, following Article 1739[53]

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

While petitioner sent checkers[54] and a supervisor[55] on board the vessel to

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

This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of
the cargoes. The following pronouncement of the Supreme Court is instructive:

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

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

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

Parties to a contract of carriage may, however, agree upon a definition of delivery

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

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

Respecting the award of attorney's fees in an amount over P1,000,000.00 to

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

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

As for the court a quo's award of interest on the amount claimed, the same calls for
modification following the ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals[64] that when the demand cannot be reasonably established at the time the
demand is made, the interest shall begin to run not from the time the claim is made
judicially or extrajudicially but from the date the judgment of the court is made (at
which the time the quantification of damages may be deemed to have been
reasonably ascertained).[65]

WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport &

Brokerage Corporation, and Transport Venture Incorporation jointly and severally
liable for the amount of P5,246,113.11 with the MODIFICATION that interest at SIX
PERCENT per annum of the amount due should be computed from the promulgation
on November 24, 1997 of the decision of the trial court.

Costs against petitioner.

SO ORDERED.
A.F. SANCHEZ BROKERAGE INC., Petitioners, versus THE HON.
COURT OF APPEALS and FGU INSURANCE CORPORATION,
Respondents
G.R. No. 147079 | 2004-12-21

Before this Court on a petition for Certiorari is the appellate court's 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]

Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),[5] it
was discharged "without exception"[6] and delivered to the warehouse of the Philippine Skylanders,
Inc. (PSI) located also at the NAIA for safekeeping.[7]

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco
engaged the services of Sanchez Brokerage which had been its licensed broker since 1984.[8] As its
customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for
the cargo and thereafter delivers it to Wyeth-Suaco.[9]

On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid
PSI storage fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,[10] was
issued. On the receipt, another representative of Sanchez Brokerage, M. Sison,[11] acknowledged that
he received the cargoes consisting of three pieces in good condition.[12]

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes[13] 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]

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 broker's
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 Brokerage's) 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
attorney's fees; and

3. The counterclaims of the Appellee are DISMISSED.[38]

Sanchez Brokerage's Motion for Reconsideration having been denied by the appellate court's
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
court's 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 court's
decision had become final and executory. The filing by petitioner of a petition for certiorari on March
6, 2001 cannot serve as a substitute for the lost remedy of appeal.

In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not
merely reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction.

Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial
court based on its finding that petitioner is liable for the damage to the cargo as a common carrier.
What petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the subject
of an ordinary appeal.

Where the issue or question involves or affects the wisdom or legal soundness of the decision - not the
jurisdiction of the court to render said decision - the same is beyond the province of a petition for
certiorari.[41] The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in
order to review the judgment of lower courts as to its intrinsic correctness, either upon the law or the
facts of the case.[42]

Procedural technicalities aside, the petition still fails.

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

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified
that the services the firm offers include the delivery of goods to the warehouse of the consignee or
importer.

ATTY. FLORES:

Q: What are the functions of these license brokers, license customs broker?

WITNESS:

As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the
importer, we prepare the entry together for processing and claims from customs and finally deliver the
goods to the warehouse of the importer.[43]

Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity.[44] The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article 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 petitioner's employees only examined the
cargoes outside the PSI warehouse and found some to be wet, they would certainly have gone back to
PSI, showed to the warehouseman the damage, and demanded then and there for Bad Order
documents or a certification confirming the damage.[58] Or, petitioner would have presented, as
witness, the employees of the PSI from whom Morales and Domingo took delivery of the cargo to
prove that, indeed, part of the cargoes was already damaged when the container was allegedly opened
outside the warehouse.[59]

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead,
it asserts that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse but
such notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon Laboratories,
Inc.

While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he
failed to specifically declare what time he received the call. As to whether the call was made at the
PSI warehouse when the shipment was stripped from the airport containers, or when the cargoes were
already in transit to Antipolo, it is not determinable. Aside from that phone call, petitioner admitted
that it had no documentary evidence to prove that at the time it received the cargoes, a part of it was
wet, damaged or in bad condition.[60]
The 4-page weather data furnished by 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.

ATTY. FLORES:

Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA
were damaged and claimed by the Wyeth-Suaco without any question?

WITNESS:

A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not
claim anything against us.

ATTY. FLORES:

Q: HOW IS IT?

WITNESS:

A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic) up
to the bottom are wet specially during rainy season.[62]

Since petitioner received all the cargoes in good order and condition at the time they were turned over
by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was
found to be in bad order, it was incumbent on petitioner to prove that it exercised extraordinary
diligence in the carriage of the goods. It did not, however. Hence, its presumed negligence under
Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.