G.R. No.
L-47822 December 22, 1988 The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner. Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material
to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila.
On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants
wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates
which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750
cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in
Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and
employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway
in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages
and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to
exercise the extraordinary diligence required of him by the law, should be held liable for the value of the
undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could not be held
responsible for the value of the lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision   finding private respondent to be a common carrier
1
and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as
damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a
common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him
from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.
transporting return loads of freight "as a casual occupation — a sideline to his scrap iron business" and not as
a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier
set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a
sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733 deliberaom making
such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications systems,
 wire or wireless broadcasting stations and other similar public services. ... (Emphasis
supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even though he
merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was
done on a periodic or occasional rather than regular or scheduled manner, and even though private
respondent's principal  occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial
freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and
concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and implementing regulations and
has been granted a certificate of public convenience or other franchise. To exempt private respondent from
the liabilities of a common carrier because he has not secured the necessary certificate of public convenience,
would be offensive to sound public policy; that would be to reward private respondent precisely for failing to
comply with applicable statutory requirements. The business of a common carrier impinges directly and
intimately upon the safety and well being and property of those members of the general community who
happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety
and protection of those who utilize their services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy"   are held to a very high
2
degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The
specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to
Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they
appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article,
if the goods are lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant
case — the hijacking of the carrier's truck — does not fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt
with under the provisions of Article 1735, in other words, that the private respondent as common carrier is
presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown
by proof of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's
goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a
security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not
believe, however, that in the instant case, the standard of extraordinary diligence required private respondent
to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life
and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6,
Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of
robbers who 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.
(Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are
lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

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

away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and
later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the
police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery
in band. 4

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

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

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

SO ORDERED.

G.R. No. 186312               June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 1 against Sun
Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the
death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the
boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the
couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a
tour package-contract with respondent that included transportation to and from the Resort and the point of
departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of the incident
that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in
the afternoon of September 10, 2000, but was advised to stay for another night because of strong winds and
heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners’ son
and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where
they boarded M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open
seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward
to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco
Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain,
Matute and the other passengers who reached the surface asked him what they could do to save the people
who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save
yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by
the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers
and four crew members, who were brought to Pisa Island. Eight passengers, including petitioners’ son and his
wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death of their
son in the amount of at least ₱4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident which it
considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of
₱10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail
notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to the
general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it exercised
the utmost diligence in ensuring the safety of its passengers; contrary to petitioners’ allegation, there was no
storm on September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not
filled to capacity and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged
that it is entitled to an award for attorney’s fees and litigation expenses amounting to not less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to
be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard,
(3) there is clearance from the captain and (4) there is clearance from the Resort’s assistant manager. 8 He
added that M/B Coco Beach III met all four conditions on September 11, 2000, 9 but a subasco or squall,
characterized by strong winds and big waves, suddenly occurred, causing the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’ Complaint and
respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by Order dated September 2, 2005, 12 they
appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding, among other things,
that the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B
Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16, 2009, 14 they filed
the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier
since by its tour package, the transporting of its guests is an integral part of its resort business. They inform
that another division of the appellate court in fact held respondent liable for damages to the other survivors of
the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a
common carrier; that the Resort’s ferry services for guests cannot be considered as ancillary to its business as
no income is derived therefrom; that it exercised extraordinary diligence as shown by the conditions it had
imposed before allowing M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without
any contributory negligence on its part; and that the other case wherein the appellate court held it liable for
damages involved different plaintiffs, issues and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals 17 in characterizing respondent as a common
carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their
services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a
sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733 deliberately
refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar public services . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondent’s ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry
services, may be availed of by anyone who can afford to pay the same. These services are thus available to
the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be
imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach
resort operators offering tour packages to factor the transportation fee in arriving at the tour package price.
That guests who opt not to avail of respondent’s ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained
from making distinctions on whether the carrying of persons or goods is the carrier’s principal business,
whether it is offered on a regular basis, or whether it is offered to the general public. The intent of the law is
thus to not consider such distinctions. Otherwise, there is no telling how many other distinctions may be
concocted by unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the
legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence for the safety of the passengers transported by them, according to
all the circumstances of each case.19 They are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common
carrier is at fault or negligent. In fact, there is even no need for the court to make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence.21
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage before
it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent’s position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for
shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also
affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising weather specialist of
PAGASA, squalls are to be expected under such weather condition.23
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put
other people’s lives at risk. The extraordinary diligence required of common carriers demands that they take
care of the goods or lives entrusted to their hands as if they were their own. This respondent failed to do.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the
failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event
that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid;
(c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor.24
The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the
total earnings less expenses necessary in the creation of such earnings or income and less living and other
incidental expenses.32 The loss is not equivalent to the entire earnings of the deceased, but only such portion
as he would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are
the necessary expenses supposed to be used by the deceased for his own needs.33
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v.
Borja34 teaches that when, as in this case, there is no showing that the living expenses constituted the smaller
percentage of the gross income, the living expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]

To fully free a common carrier from any liability, the fortuitous event must have been the  proximate and only Life expectancy = 35
cause of the loss. And it should have exercised due diligence to prevent or minimize the loss before, during
and after the occurrence of the fortuitous event.25
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 35 which, when
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco converted to Philippine peso applying the annual average exchange rate of $1 = ₱44 in 2000, 36 amounts to
Beach III. As reflected above, however, the occurrence of squalls was expected under the weather condition ₱39,600. Ruelito’s net earning capacity is thus computed as follows:
of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it
capsized and sank.26 The incident was, therefore, not completely free from human intervention. Net Earning = life expectancy x (gross annual income - reasonable and necessary living
Capacity expenses).
The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it exercised due = 35 x (₱475,200 - ₱237,600)
diligence to prevent or minimize the loss before, during and after the occurrence of the squall. = 35 x (₱237,600)

Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach of its contract of Net Earning
= ₱8,316,000
carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) Capacity
indemnity for loss of earning capacity and (3) moral damages.
Respecting the award of moral damages, since respondent common carrier’s breach of contract of carriage
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000.29 resulted in the death of petitioners’ son, following Article 1764 vis-à-vis Article 2206 of the Civil Code,
petitioners are entitled to moral damages.
As for damages representing unearned income, the formula for its computation is:
Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses). presumed to have acted recklessly, thus warranting the award too of exemplary damages, which are granted
in contractual obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.37
Life expectancy is determined in accordance with the formula:

Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as moral damages and
2 / 3 x [80 — age of deceased at the time of death]30
₱100,000 as exemplary damages.38 1avvphi1

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at death]) adopted
in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality.31
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary damages SO ORDERED.
are awarded. The Court finds that 10% of the total amount adjudged against respondent is reasonable for the
purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory damages, subject to the following
rules, to wit —

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

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

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

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

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

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

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed
from the finality of this decision until full payment.

G.R. No. 125948 December 29,
1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, HONORABLE
PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City
Treasurer of Batangas, respondents.
MARTINEZ, J.:
This petition for review on  certiorari  assails the Decision of the Court of Appeals dated November 29, 1995, in
CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil
Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by the City of
Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install
and operate oil pipelines. The original pipeline concession was granted in 1967  and renewed by the Energy
1
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 . . . .
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  for tax refund
6
with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in
her capacity as City Treasurer. In its complaint, petitioner alleged,  inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the
authority of cities to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and,
(3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the
immediate refund of the tax paid. 7
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section
133 (j) of the Local Government Code as said exemption applies only to "transportation contractors and
persons engaged in the transportation by hire and common carriers by air, land and water." Respondents
assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such
as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said
code pertains to the mode or manner by which a product is delivered to its destination. 8
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax
exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the
government. Exemption may therefore be granted only by clear and unequivocal provisions
of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit
A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet
neither said law nor the deed of concession grant any tax exemption upon the plaintiff.
 Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the 1. He must be engaged in the business of carrying
Local Tax Code. Such being the situation obtained in this case (exemption being unclear goods for others as a public employment, and must
and equivocal) resort to distinctions or other considerations may be of help: hold himself out as ready to engage in the
transportation of goods for person generally as a
1. That the exemption granted under Sec. 133 (j) business and not as a casual occupation;
encompasses only common carriers so as not to
overburden the riding public or commuters with 2. He must undertake to carry goods of the kind to
taxes. Plaintiff  is not a common carrier, but a special which his business is confined;
carrier extending its services and facilities to a single
specific or "special customer" under a "special 3. He must undertake to carry by the method by which
contract." his business is conducted and over his established
roads; and
2. The Local Tax Code of 1992 was basically enacted
to give more and effective local autonomy to local 4. The transportation must be for hire.  15

governments than the previous enactments, to make

them economically and financially viable to serve the
people and discharge their functions with a concomitant Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is
obligation to accept certain devolution of powers, . . . engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public
So, consistent with this policy even franchise grantees employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its
are taxed (Sec. 137) and contractors are also taxed services, and transports the goods by land and for compensation. The fact that petitioner has a limited
under Sec. 143 (e) and 151 of the Code. 9 clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals   we 16

ruled that:
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.   On November 29,
10 The above article (Art. 1732, Civil Code) makes no distinction between
1995, the respondent court rendered a decision   affirming the trial court's dismissal of petitioner's complaint.
11 one whose principal business activity is the carrying of persons or goods
Petitioner's motion for reconsideration was denied on July 18, 1996.  12 or both, and one who does such carrying only as an ancillary activity (in
local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction
between a person or enterprise offering transportation service on
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, a  regular  or scheduled basis and one offering such service on
1996.   Petitioner moved for a reconsideration which was granted by this Court in a Resolution   of January
13 14
an  occasional, episodic or unscheduled basis. Neither does Article 1732
22, 1997. Thus, the petition was reinstated. distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common services or solicits business only from a narrow segment of the general
carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law. population. We think that Article 1877 deliberately refrained from making
such distinctions.
There is merit in the petition.
So understood, the concept of "common carrier" under Article 1732 may
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the be seen to coincide neatly with the notion of "public service," under the
business of transporting persons or property from place to place, for compensation, offering his services to the Public Service Act (Commonwealth Act No. 1416, as amended) which at
public generally. 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:
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public." 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
The test for determining whether a party is a common carrier of goods is: permanent, occasional or accidental, and done for
 general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system gas,
electric light heat and power, water supply and  power
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. (Emphasis
Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe
line operators are considered common carriers.  17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier."
Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall
have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to charge
without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof
provides:
that everything relating to the exploration for and exploitation of petroleum
. . . and everything relating to the manufacture, refining, storage,
or transportation by special methods of petroleum, is hereby declared to
be a  public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-
83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 . . . . Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as
amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt
from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following:
x x x           x x x          x x x
(j) Taxes on the gross receipts of
transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common carriers
by air, land or water, except as
provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are
illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing
Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed to be
exempted from the taxing powers of the local government units. May we
know the reason why the transportation business is being excluded from
the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section
121 (now Sec. 131), line 16, paragraph 5. It states that local government
 units may not impose taxes on the business of transportation, except as
otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book

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

What we want to guard against here, Mr. Speaker, is the imposition of

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

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

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

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

petroleum business would defeat the purpose of the Local Government Code.

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

SO ORDERED.

G.R. No. 148496      March 19, 2002
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL
SERVICES, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
MENDOZA, J.:
This is a petition for review of the decision, 1 dated May 31, 2001, of the Court of Appeals, affirming the
decision2 of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as
subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by
petitioner, 25% thereof as attorney's fees, and the cost of the suit.
1âwphi1.nêt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft
liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St.,
Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V
Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC,
withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. On July
25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical
fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was
placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount.
In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch
148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for
the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh. "F")
with entries appearing therein, classified as "TED" and "TSN", which the claims processor, Ms.
Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the subject
damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A")
confirms the fact of the damaged condition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-
A") in particular, which provides among others that:
" . . . we opine that damages sustained by shipment is attributable to improper handling in
transit presumably whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not
liable. Defendant by reason of the nature of [her] business should have devised ways and means in
order to prevent the damage to the cargoes which it is under obligation to take custody of and to
forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the presumption is that the moment the defendant
accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the
cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the extraordinary diligence required by law.
The burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has
exercised the extraordinary diligence required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad
order, makes out a prima facie case against the carrier, so that if no explanation is given as to how
the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove
that the loss was due to accident or some other circumstances inconsistent with its liability." (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common carrier is
supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary
responsibility lasts from the time the goods are unconditionally placed in the possession of and
received by the carrier for transportation until the same are delivered actually or constructively by the
carrier to the consignee or to the person who has the right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following amounts --
 1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING
THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS
AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC. 5
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common
carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable
beyond what ordinary diligence in the vigilance over the goods transported by her, would
require.6 Consequently, any damage to the cargo she agrees to transport cannot be presumed to have been
due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a
common carrier but a private carrier because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the same to select parties with whom she
may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a similar contention and
held the party to be a common carrier, thus -
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public."
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article
1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general population. We
think that Article 1732 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common
carrier,  railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire or wireless broadcasting stations
and other similar public services. x x x" 8
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is
an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she
contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods
for her customers, as already noted, is part and parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,9  the meaning of "extraordinary diligence in the vigilance over
goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or destruction
of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature
and characteristic of goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or
wettage" took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru,"
which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who
allegedly kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some
of the containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh.
H), to wit:
MAXU-2062880      -       rain gutter deformed/cracked
ICSU-363461-3      -       left side rubber gasket on door distorted/partly loose
PERU-204209-4    -       with pinholes on roof panel right portion
TOLU-213674-3     -       wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0     -       with dent/crack on roof panel
ICSU-412105-0      -       rubber gasket on left side/door panel partly detached loosened.10
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal
knowledge on whether the container vans were first stored in petitioner's warehouse prior to their delivery to
the consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her
driver, Ricardo Nazarro, immediately delivered the cargo to SMC's warehouse in Ermita, Manila, which is a
mere thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the cargo could
not have taken place while these were in her custody.11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that
when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean
Equipment Interchange Report (EIR) and, when petitioner's employees withdrew the cargo from the arrastre
operator, they did so without exception or protest either with regard to the condition of container vans or their
contents. The Survey Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier
#13 South Harbor, Manila on 14 July 1990, containerized onto 30' x 20' secure metal vans, covered
by clean EIRs. Except for slight dents and paint scratches on side and roof panels, these containers
were deemed to have [been] received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn] by Transorient
Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignee's storage warehouse located at Tabacalera
Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the
arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any damage to the shipment, there would have been a
report to that effect made by the arrastre operator. The cargoes were withdrawn by the defendant-
appellant from the arrastre still in good order and condition as the same were received by the
former without exception, that is, without any report of damage or loss. Surely, if the container vans
were deformed, cracked, distorted or dented, the defendant-appellant would report it immediately to
the consignee or make an exception on the delivery receipt or note the same in the Warehouse Entry
Slip (WES). None of these took place. To put it simply, the defendant-appellant received the
shipment in good order and condition and delivered the same to the consignee damaged. We can
only conclude that the damages to the cargo occurred while it was in the possession of the
defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or
obligor), it shall be presumed that the loss (or damage) was due to his fault, unless there is proof to
the contrary. No proof was proffered to rebut this legal presumption and the presumption of
negligence attached to a common carrier in case of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she
immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than merely show the possibility that some other party could
be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and
characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]."
Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides --
Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container,
is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom.14 In this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised
extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.
1âwphi1.nêt
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 I was 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.1 The 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.2 Applying 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 voyages 4 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.
 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.
G.R. No. 112287 December 12,
1997 SO ORDERED. 3

NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS SHIPPING, The Facts
INC., respondents.
The MV Vlasons I  is a vessel which renders tramping service and, as such, does not transport cargo or
G.R. No. 112350 December 12, 1997 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
VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL charter hire with National Steel Corporation.
CORPORATION, respondents.
The facts as found by Respondent Court of Appeals are as follows:
PANGANIBAN, J.:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons
The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's responsibility Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit "B"; also
for damage to the cargo and its liability for demurrage and attorney's fees. The Court also reiterates the well- Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load
known rule that findings of facts of trial courts, when affirmed by the Court of Appeals, are binding on this steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms
Court. and conditions, viz:

The Case 1. . . .

Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons 2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.
Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals.  The Court of
1

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: 3. . . .

WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing 4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading
the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the within fifteen (15) days.
counterclaim as follows:
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. . . . (Emphasis supplied).
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 and "12") were admissible in evidence and constituted evidence of the vessel's seaworthiness at the
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  dated October 20, 1993, the appellate court denied
5
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  and memorandum,  NSC raises the following questions of law and fact:
7 8
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"
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,  VSI submits for the consideration of this Court the following alleged errors of the CA:
9
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.  A carrier which does not qualify under the above test is deemed a private
11
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."   As correctly concluded by the Court of Appeals, the MV Vlasons I "was not a common but a private
13
carrier."  Consequently, the rights and obligations of VSI and NSC, including their respective liability for
14
damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter
party.  Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs.  Court of Appeals and Seven
15
Brothers Shipping Corporation,  the Court ruled:
16
. . . 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 and Liability 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."  The NANYOZAI
18
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.  We stress that, subject to some
22
exceptional instances,  only questions of law — not questions of fact — may be raised before this Court in a
23
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.  The vessel's voyage from Iligan to Manila was the vessel's  first voyage after drydocking.
24
The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel.  The Court of Appeals itself sustained the conclusion of the trial
25
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"  and denies that MV Vlasons I  "was
26
equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest . . ."  We 27
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 q And aside from the hatch board, is there any other material there to cover the
re-secured the canvass covering back to position; that in the afternoon of August 10, 1974, while hatch?
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 a There is a beam supporting the hatch board.
caused the same canvass to give way and leaving the new canvass holding on;
q What is this beam made of?
xxx xxx xxx  28

a It is made of steel, sir.

And the relevant portions of Jose Pascua's deposition are as follows:
q Is the beam that was placed in the hatch opening covering the whole hatch
q What is the purpose of the canvas cover? opening?

a So that the cargo would not be soaked with water. a No, sir.

q And will you describe how the canvas cover was secured on the hatch opening? q How many hatch beams were there placed across the opening?

WITNESS a There are five beams in one hatch opening.

a It was placed flat on top of the hatch cover, with a little canvas flowing over the ATTY DEL ROSARIO
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.
q And on top of the beams you said there is a hatch board. How many pieces of
wood are put on top?
ATTY DEL ROSARIO
a Plenty, sir, because there are several pieces on top of the hatch beam.
q And will you tell us the size of the hatch opening? The length and the width of the
hatch opening.
q And is there a space between the hatch boards?
a Forty-five feet by thirty-five feet, sir.
a There is none, sir.
x x x           x x x          x x x
q They are tight together?
q How was the canvas supported in the middle of the hatch opening?
a Yes, sir.
a There is a hatch board.
q How tight?
ATTY DEL ROSARIO
a Very tight, sir.
q What is the hatch board made of?
q Now, on top of the hatch boards, according to you, is the canvass cover. How
many canvas covers?
a It is made of wood, with a handle.
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.  The Court is not persuaded. Angliongto's candid answer in his aforequoted testimony
32
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 . . ."  as in the instant case.
34
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 . . ."  The Court of Appeals affirmed the trial court's finding.
35
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 to Insure 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 Certificates
Proving 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
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."  Exhibit 11 is an original certificate of the
38
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.  It is given to compensate the shipowner for the nonuse of the vessel. On the other
40
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.  The running of laytime was thus made
42
subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading
of cargo.  Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not
43
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 . . ."  Moreover,
44
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.
 of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since
the trucking company failed to heed the claim, FGU filed a complaint for damages and breach of contract of
carriage against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In
its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since
1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the
cause of damage was purely accidental. 1âwphi1.nêt

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

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

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

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

"x x x           x x x           x x x

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

"Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which transports the cargo are the laws on obligation and
G.R. No. 141910             August 6, 2002 contract of the Civil Code as well as the law on quasi delicts.

FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING CORPORATION and
LAMBERT M. EROLES, respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura
S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of
Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the Central Luzon
Appliances in Dagupan City. While the truck was traversing the north diversion road along McArthur highway
in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal,
resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value
of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests
"Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi
delict provides for some presumption of negligence but only upon the attendance of some
circumstances. Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic
regulation.’
"Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence,
the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendant’s driver was the one negligent, defendant cannot be made liable for the damages of the
subject cargoes."2
The subsequent motion for reconsideration having been denied,3 plaintiff interposed an appeal to the Court of
Appeals, contending that the trial court had erred (a) in holding that the appellee corporation was not a
common carrier defined under the law and existing jurisprudence; and (b) in dismissing the complaint on a
demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its
decision of 10 June 1999,4 discoursed, among other things, that -
"x x x in order for the presumption of negligence provided for under the law governing common
carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a common
carrier. Should the appellant fail to prove that the appellee is a common carrier, the presumption
would not arise; consequently, the appellant would have to prove that the carrier was negligent.
"x x x           x x x           x x x
"Because it is the appellant who insists that the appellees can still be considered as a common
carrier, despite its `limited clientele,’ (assuming it was really a common carrier), it follows that it
(appellant) has the burden of proving the same. It (plaintiff-appellant) `must establish his case by a
preponderance of evidence, which means that the evidence as a whole adduced by one side is
superior to that of the other.’ (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA 175).
This, unfortunately, the appellant failed to do -- hence, the dismissal of the plaintiff’s complaint by the
trial court is justified.
"x x x           x x x           x x x
"Based on the foregoing disquisitions and considering the circumstances that the appellee trucking
corporation has been `its exclusive contractor, hauler since 1970, defendant has no choice but to
comply with the directive of its principal,’ the inevitable conclusion is that the appellee is a private
carrier.
"x x x           x x x           x x x
"x x x the lower court correctly ruled that 'the application of the law on common carriers is not
warranted and the presumption of fault or negligence on the part of a common carrier in case of loss,
damage or deterioration of good[s] during transport under [article] 1735 of the Civil Code is not
availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and valid reasons."5
Petitioner's motion for reconsideration was likewise denied;6 hence, the instant petition,7 raising the following
issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED
UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER,
MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO
TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE
CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply
justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering
its services to no other individual or entity, cannot be considered a common carrier. Common carriers are
persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for hire or compensation, offering their services to the  public,8 whether to
the public in general or to a limited clientele in particular, but never on an exclusive basis. 9 The true test of a
common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves
of its transportation service for a fee.10 Given accepted standards, GPS scarcely falls within the term "common
carrier."
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries,
Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a
corresponding right of relief.11 The law, recognizing the obligatory force of contracts, 12 will not permit a party to
be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of
the tenor thereof.13 A breach upon the contract confers upon the injured party a valid cause for recovering that
which may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may
include his "expectation interest," which is his interest in having the benefit of his bargain by being put in as
good a position as he would have been in had the contract been performed, or his "reliance interest," which is
his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position
as he would have been in had the contract not been made; or his "restitution interest," which is his interest in
having restored to him any benefit that he has conferred on the other party. 14 Indeed, agreements can
accomplish little, either for their makers or for society, unless they are made the basis for action. 15 The effect of
every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the
failure of another to observe his contractual obligation 16 unless he can show extenuating circumstances, like
proof of his exercise of due diligence (normally that of the diligence of a good father of a family or,
exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence)
or of the attendance of fortuitous event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioner’s
assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its
custody. In such a situation, a default on, or failure of compliance with, the obligation – in this case, the
delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care and
corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise.
GPS has failed to do so.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the
decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M.
Eroles is concerned, but said assailed order of the trial court and decision of the appellate court
are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is hereby ordered to pay
FGU Insurance Corporation the value of the damaged and lost cargoes in the amount of P204,450.00. No
costs.

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

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

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

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be
deemed to have waived the right to present evidence. 24 Thus, respondent corporation may no longer offer
proof to establish that it has exercised due care in transporting the cargoes of the assured so as to still
warrant a remand of the case to the trial court.1âwphi1.nêt

G.R. No. 147246             August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., respondents.
PUNO, J.:
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No. 49195 and February 21, 2001
Resolution2 affirming with modification the April 6, 1994 Decision3 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. 03647 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
x x x           x x x           x x x
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.
x x x           x x x           x x x
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
x x x           x x x           x x x
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.
x x x           x x x           x x x
CROSS-EXAMINATION BY ATTY. IGNACIO:34
x x x           x x x           x x x
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. 111127 July 26,
1996
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS, THE
WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS,
GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS
CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD
TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS CAESAR,
GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA,
TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC,
DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS
RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.
MENDOZA, J.:p
This is a petition for review on certiorari  of the decision of the Court of Appeals 1 in CA-GR No. 28245, dated
September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati,
Branch 58, ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio,
and its resolution which denied petitioners' motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school children which they operated in Manila. The couple had
a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks, His job was to take
school children to and from the St. Scholastica's College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with
petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back
in consideration of which private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, as
several members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue
and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was
under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was
forced to take a detour through the town of Baay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil
came upon a sharp curve on the highway, running on a south to east direction, which he described as "siete."
The road was slippery because it was raining, causing the bus, which was running at the speed of 50
kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the
road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full
stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it
and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and
pinned down by a wooden seat which came down by a wooden seat which came off after being unscrewed. It
took three persons to safely remove her from this portion. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar
with the area and he could not have seen the curve despite the care he took in driving the bus, because it was
dark and there was no sign on the road. He said that he saw the curve when he was already within 15 to 30
meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding
they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen
Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latter's fence. On
the basis of Escano's affidavit of desistance the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it
of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. with respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of
During the trial she described the operations she underwent and adduced evidence regarding the cost of her Appeals modified the award of damages as follows:
treatment and therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Baay,
Lingayen. As this hospital was not adequately equipped, she was transferred to the Sto. Niño Hospital, also in 1) P93,657.11 as actual damages;
the town of Ba-ay, where she was given sedatives. An x-ray was taken and the damage to her spine was
determined to be too severe to be treated there. She was therefore brought to Manila, first to the Philippine
General Hospital and later to the Makati Medical Center where she underwent an operation to correct the 2) P600,000.00 as compensatory damages;
dislocation of her spine.
3) P50,000.00 as moral damages;
In its decision dated April 17, 1989, the trial court found that:
4) P20,000.00 as exemplary damages;
No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip
and that the driver was properly screened and tested before being admitted for employment. Indeed, all the 5) P10,000.00 as attorney's fees; and
evidence presented have shown the negligent act of the defendants which ultimately resulted to the accident
subject of this case. 6) Costs of suit.

Accordingly, it gave judgment for private respondents holding: The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due care and
precaution in the operation of his vehicle considering the time and the place of the accident. The Court of
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the Appeals held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise
only ones who adduced evidence in support of their claim for damages, the Court is therefore not in a position the following issues:
to award damages to the other plaintiffs.
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs.
Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE
Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs the following amount: INJURIES SUFFERED BY PRIVATE RESPONDENTS.

1) P93,657.11 as compensatory and actual damages; III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE
POSITIVE, UP TO WHAT EXTENT.
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio; Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is
insisted that, on the assumption that petitioners are liable an award of P600,000.00 is unconscionable and
3) P20,000.00 as moral damages; highly speculative. Amyline Antonio testified that she was a casual employee of a company called "Suaco,"
earning P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00 monthly.
4) P20,000.00 as exemplary damages; and Petitioners contend that as casual employees do not have security of tenure, the award of P600,000.00,
considering Amyline Antonio's earnings, is without factual basis as there is no assurance that she would be
regularly earning these amounts.
5) 25% of the recoverable amount as attorney's fees;
With the exception of the award of damages, the petition is devoid of merit.
6) Costs of suit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners
SO ORDERED. are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa
aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the relation of
passenger and carrier is "contractual both in origin and nature," nevertheless "the act that breaks the contract
may be also a tort."   In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was
2
negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to
exercise the diligence of a good father of the family in the selection and supervision of their employee is fully
supported by the evidence on record. These factual findings of the two courts we regard as final and
conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in
question, it was raining, and as a consequence, the road was slippery, and it was dark. He averred these facts
to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his
bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead.   By then it was too late for him to avoid falling off the road. Given the conditions of the road
3
and considering that the trip was Cabil's first one outside of Manila, Cabil should have driven his vehicle at a
moderate speed. There is testimony   that the vehicles passing on that portion of the road should only be
4 The above article makes no distinction between one whose principal business activity is the
running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing — the fact that it was raining and the road was slippery, that it was dark, that he
drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an
hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the
injuries suffered by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his
employers, the Fabres, were themselves negligent in the selection and supervisions of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional
driver's license. The employer should also examine the applicant for his qualifications, experience and record
of service.   Due diligence in supervision, on the other hand, requires the formulation of rules and regulations
5
for the guidance of employees and issuance of proper instructions as well as actual implementation and
monitoring of consistent compliance with the rules.6
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the
fact that Cabil had been driving for school children only, from their homes to the St. Scholastica's College in
Metro Manila.   They had hired him only after a two-week apprenticeship. They had hired him only after a two-
7
week apprenticeship. They had tested him for certain matters, such as whether he could remember the names
of the children he would be taking to school, which were irrelevant to his qualification to drive on a long
distance travel, especially considering that the trip to La Union was his first. The existence of hiring
procedures and supervisory policies cannot be casually invoked to overturn the presumption of negligence on
the part of an employer.  8
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregation's delayed meeting) could have a averted the mishap and (2) under the contract, the WWCF was
directly responsible for the conduct of the trip. Neither of these contentions hold water. The hour of departure
had not been fixed. Even if it had been, the delay did not bear directly on the cause of the accident. With
respect to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to
be conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of
negligence of the latter or prevented from recovering for injuries suffered from a collision between the
automobile and a train, caused by the negligence or the automobile driver.  9
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be
engaged in the business of public transportation for the provisions of the Civil Code on common carriers to
apply to them. As this Court has held:  10
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions.
As common carriers, the Fabres were found to exercise "extraordinary diligence" for the
safe transportation of the passengers to their destination. This duty of care is not excused
by proof that they exercise the diligence of a good father of the family in the selection and
supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence
or willful acts of the former's employees although such employees may have acted beyond
the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them guilty of breach of
contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of
Appeals erred in increasing the amount of compensatory damages because private respondents did not
question this award as inadequate.   To the contrary, the award of P500,000.00 for compensatory damages
11
which the Regional Trial Court made is reasonable considering the contingent nature of her income as a
casual employee of a company and as distributor of beauty products and the fact that the possibility that she
might be able to work again has not been foreclosed. In fact she testified that one of her previous employers
had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not
sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported by
evidence in the records of this case. Viewed as an action for quasi delict, this case falls squarely within the
purview of Art. 2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory
that petitioners are liable for breach of contract of carriage, the award of moral damages is authorized by Art.
severally liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with carrier in
case of breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract
of carriage is between the carrier is exclusively responsible therefore to the passenger, even if such breach be
due to the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29,
1966, 16 SCRA 742).  22

1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad faith.  Amyline Antonio's
12

testimony, as well as the testimonies of her father and copassengers, fully establish the physical suffering and
mental anguish she endured as a result of the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made. However, for the same reason
As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out their claim
against the carrier and the driver exclusively on one theory, much less on that of breach of contract alone.
After all, it was permitted for them to allege alternative causes of action and join as many parties as may be
liable on such causes of action   so long as private respondent and her coplaintiffs do not recover twice for the
23

that it was error for the appellate court to increase the award of compensatory damages, we hold that it was same injury. What is clear from the cases is the intent of the plaintiff there to recover from both the carrier and
also error for it to increase the award of moral damages and reduce the award of attorney's fees, inasmuch as the driver, thus, justifying the holding that the carrier and the driver were jointly and severally liable because
private respondents, in whose favor the awards were made, have not appealed.  13
their separate and distinct acts concurred to produce the same injury.

As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or
on that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the
owners and driver of the bus, may be made to respond jointly and severally to private respondent. We hold
that they may be. In Dangwa Trans.  Co. Inc.  v. Court of Appeals,   on facts similar to those in this case, this
14
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award of
damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the
following amounts:

Court held the bus company and the driver jointly and severally liable for damages for injuries suffered by a 1) P93,657.11 as actual damages;
passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals   a driver found negligent in failing to stop the bus in order to let off passengers when a fellow
15

passenger ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered 2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
injuries, was held also jointly and severally liable with the bus company to the injured passengers.
3) P20,000.00 as moral damages;
The same rule of liability was applied in situations where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus 4) P20,000.00 as exemplary damages;
causing an accident. In  Anuran v. Buño,   Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
16

Court,  7 and Metro Manila Transit Corporation v.  Court of Appeals,   the bus company, its driver, the operator
1 18

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

of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger
or the latters' heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals,   thus:
19

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

It is true that in Philippine Rabbit Bus Lines, Inc.  v. Court of Appeals   this Court exonerated the jeepney driver
21

from liability to the injured passengers and their families while holding the owners of the jeepney jointly and
severally liable, but that is because that case was expressly tried and decided exclusively on the theory
of culpa contractual. As this Court there explained:

The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and Carreon (the
jeepney owners) were negligent. However, its ruling that spouses Mangune and Carreon are jointly and
 Modesto S. Bascos for petitioner. Pelaez, Adriano & Gregorio for private respondent.

SYLLABUS

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

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION
OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
ABSOLUTE. — Common carriers are obliged to observe extraordinary diligence in the vigilance over the
goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently
if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of
negligence does not attach and these instances are enumerated in Article 1734. In those cases where the
presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption . . . The presumption of negligence was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to
prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.

3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED
FROM LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in
the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following
or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the
common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held
G.R. No. 101089. April 7, 1993. that: "Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest
or to diminish such responsibility — even for acts of strangers like thieves or robbers, except where such
ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and RODOLFO A. CIPRIANO, thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold that
respondents. the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner herself
has made the admission that she was in the trucking business, offering her trucks to those with cargo to
move. Judicial admissions are conclusive and no evidence is required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner presented no
other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES.
— While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in
court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. —
Granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract
was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called
by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A.
CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs.
ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING, defendant-appellant,"
C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in
toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling
contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000
m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation
in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with
Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from
the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the
said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost
goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery
or damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a
complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of
carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the
following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ
of preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent
to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage since
CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was
liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was
hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was
immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked
properties; that after preliminary investigation, an information for robbery and carnapping were filed against
Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to
pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00)
as an (sic) for actual damages with legal interest of 12% per cent per annum to be counted from December 4,
1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is
DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE
OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN
RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the
hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer
that she did business under the name A.M. Bascos Trucking and that said admission dispensed with the
presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The
respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier,
Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a
common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of
400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged
in this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of
the truck. She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits
were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in
his testimony his statement that the contract was a lease contract. 10 She also stated that: she was not
catering to the general public. Thus, in her answer to the amended complaint, she said that she does business
under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move,
not to the general public but to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a common carrier is "whether the
given undertaking is a part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business transacted." 12 In this case,
petitioner herself has made the admission that she was in the trucking business, offering her trucks to those
with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services only to a select
group of people and because the private respondents, plaintiffs in the lower court, did not object to the
presentation of affidavits by petitioner where the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In
referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed
them as self-serving and petitioner contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the same were not sufficient to prove
that the contract was one of lease. It must be understood that a contract is what the law defines it to be and
not what it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force
majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by
them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does not
attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for
the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included
in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like thieves or robbers except where such thieves or
robbers in fact acted with grave or irresistible threat, violence or force. We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are
lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos'
affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have
concluded that these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the
hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it
had been admitted in court for lack of objection on the part of private respondent, the respondent Court had
discretion in assigning weight to such evidence. We are bound by the conclusion of the appellate court. In a
petition for review on certiorari, We are not to determine the probative value of evidence but to resolve
questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place.
Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence
in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the
information for carnapping and robbery against the accused named in said affidavits did not necessarily mean
that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal
cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to
disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered
moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The
petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
G.R. No. 162467               May 8,
2009
MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner, vs. PHOENIX ASSURANCE
COMPANY OF NEW YORK/MCGEE & CO., INC., Respondent.
DECISION
TINGA, J.:
Before us is a petition for review on certiorari 1 under Rule 45 of the 1997 Rules of Civil Procedure of the 29
October 20032 Decision of the Court of Appeals and the 26 February 2004 Resolution 3 of the same court
denying petitioner’s motion for reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and Brokerage Service, Inc.
(Mindanao Terminal), a stevedoring company, to load and stow a shipment of 146,288 cartons of fresh green
Philippine bananas and 15,202 cartons of fresh pineapples belonging to Del Monte Fresh Produce
International, Inc. (Del Monte Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked
at the port of Davao City and the goods were to be transported by it to the port of Inchon, Korea in favor of
consignee Taegu Industries, Inc. Del Monte Produce insured the shipment under an "open cargo policy" with
private respondent Phoenix Assurance Company of New York (Phoenix), a non-life insurance company, and
private respondent McGee & Co. Inc. (McGee), the underwriting manager/agent of Phoenix.4
Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel set sail from the port
of Davao City and arrived at the port of Inchon, Korea. It was then discovered upon discharge that some of the
cargo was in bad condition. The Marine Cargo Damage Surveyor of Incok Loss and Average Adjuster of
Korea, through its representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the
shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment and 2,185 cartons of
the pineapple shipment were so damaged that they no longer had commercial value.5
Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment. McGee’s
Marine Claims Insurance Adjuster evaluated the claim and recommended that payment in the amount of
$210,266.43 be made. A check for the recommended amount was sent to Del Monte Produce; the latter then
issued a subrogation receipt6 to Phoenix and McGee.
Phoenix and McGee instituted an action for damages7 against Mindanao Terminal in the Regional Trial Court
(RTC) of Davao City, Branch 12. After trial, the RTC, 8 in a decision dated 20 October 1999, held that the only
participation of Mindanao Terminal was to load the cargoes on board the M/V Mistrau under the direction and
supervision of the ship’s officers, who would not have accepted the cargoes on board the vessel and signed
the foreman’s report unless they were properly arranged and tightly secured to withstand voyage across the
open seas. Accordingly, Mindanao Terminal cannot be held liable for whatever happened to the cargoes after
it had loaded and stowed them. Moreover, citing the survey report, it was found by the RTC that the cargoes
were damaged on account of a typhoon which M/V Mistrau had encountered during the voyage. It was further
held that Phoenix and McGee had no cause of action against Mindanao Terminal because the latter, whose
services were contracted by Del Monte, a distinct corporation from Del Monte Produce, had no contract with
the assured Del Monte Produce. The RTC dismissed the complaint and awarded the counterclaim of
Mindanao Terminal in the amount of ₱83,945.80 as actual damages and ₱100,000.00 as attorney’s fees.9 The
actual damages were awarded as reimbursement for the expenses incurred by Mindanao Terminal’s lawyer in
attending the hearings in the case wherein he had to travel all the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set aside 10 the
decision of the RTC in its 29 October 2003 decision. The same court ordered Mindanao Terminal to pay
Phoenix and McGee "the total amount of $210,265.45 plus legal interest from the filing of the complaint until
fully paid and attorney’s fees of 20% of the claim." 11 It sustained Phoenix’s and McGee’s argument that the
damage in the cargoes was the result of improper stowage by Mindanao Terminal. It imposed on Mindanao
Terminal, as the stevedore of the cargo, the duty to exercise extraordinary diligence in loading and stowing
the cargoes. It further held that even with the absence of a contractual relationship between Mindanao
Terminal and Del Monte Produce, the cause of action of Phoenix and McGee could be based on quasi-delict
under Article 2176 of the Civil Code.12
Mindanao Terminal filed a motion for reconsideration, 13 which the Court of Appeals denied in its 26 February
200414 resolution. Hence, the present petition for review.
Mindanao Terminal raises two issues in the case at bar, namely: whether it was careless and negligent in the
loading and stowage of the cargoes onboard M/V Mistrau making it liable for damages; and, whether Phoenix
and McGee has a cause of action against Mindanao Terminal under Article 2176 of the Civil Code on quasi-
delict. To resolve the petition, three questions have to be answered: first, whether Phoenix and McGee have a
cause of action against Mindanao Terminal; second, whether Mindanao Terminal, as a stevedoring company,
is under obligation to observe the same extraordinary degree of diligence in the conduct of its business as
required by law for common carriers15 and warehousemen;16 and third, whether Mindanao Terminal observed
the degree of diligence required by law of a stevedoring company.
We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against Mindanao
Terminal, from which the present case has arisen, states a cause of action. The present action is based on
quasi-delict, arising from the negligent and careless loading and stowing of the cargoes belonging to Del
Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the rights of Del
Monte Produce, who is not a party to the contract of service between Mindanao Terminal and Del Monte, still
the insurance carriers may have a cause of action in light of the Court’s consistent ruling that the act that
breaks the contract may be also a tort.17 In fine, a liability for tort may arise even under a contract, where tort is
that which breaches the contract18 . In the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the alleged negligent manner by which
Mindanao Terminal handled the cargoes belonging to Del Monte Produce. Despite the absence of contractual
relationship between Del Monte Produce and Mindanao Terminal, the allegation of negligence on the part of
the defendant should be sufficient to establish a cause of action arising from quasi-delict.19
The resolution of the two remaining issues is determinative of the ultimate result of this case.
Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree of diligence
which is to be observed in the performance of an obligation then that which is expected of a good father of a
family or ordinary diligence shall be required. Mindanao Terminal, a stevedoring company which was charged
with the loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely as a
labor provider in the case at bar. There is no specific provision of law that imposes a higher degree of
diligence than ordinary diligence for a stevedoring company or one who is charged only with the loading and
stowing of cargoes. It was neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was
bound by contractual stipulation to observe a higher degree of diligence than that required of a good father of
a family. We therefore conclude that following Article 1173, Mindanao Terminal was required to observe
ordinary diligence only in loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau.
imposing a higher degree of diligence,21 on Mindanao Terminal in loading and stowing the cargoes. The case
of Summa Insurance Corporation v. CA, which involved the issue of whether an arrastre operator is legally
liable for the loss of a shipment in its custody and the extent of its liability, is inapplicable to the factual
circumstances of the case at bar. Therein, a vessel owned by the National Galleon Shipping Corporation
(NGSC) arrived at Pier 3, South Harbor, Manila, carrying a shipment consigned to the order of Caterpillar Far
East Ltd. with Semirara Coal Corporation (Semirara) as "notify party." The shipment, including a bundle of PC
8 U blades, was discharged from the vessel to the custody of the private respondent, the exclusive arrastre
operator at the South Harbor. Accordingly, three good-order cargo receipts were issued by NGSC, duly signed
by the ship's checker and a representative of private respondent. When Semirara inspected the shipment at
house, it discovered that the bundle of PC8U blades was missing. From those facts, the Court observed:
x x x The relationship therefore between the consignee and the arrastre operator must be examined. This
relationship is much akin to that existing between the consignee or owner of shipped goods and the common
carrier, or that between a depositor and a warehouseman[22 ]. In the performance of its obligations, an arrastre
operator should observe the same degree of diligence as that required of a common carrier and a
warehouseman as enunciated under Article 1733 of the Civil Code and Section 3(b) of the Warehouse
Receipts Law, respectively. Being the custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them over to the party entitled to their
possession. (Emphasis supplied)23
There is a distinction between an arrastre and a stevedore.24 Arrastre, a Spanish word which refers to hauling
of cargo, comprehends the handling of cargo on the wharf or between the establishment of the consignee or
shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of the cargo to
the consignee. The service is usually performed by longshoremen. On the other hand, stevedoring refers to
the handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel.
The responsibility of the stevedore ends upon the loading and stowing of the cargo in the vessel. 1avvphi1
It is not disputed that Mindanao Terminal was performing purely stevedoring function while the private
respondent in the Summa case was performing arrastre function. In the present case, Mindanao Terminal, as
a stevedore, was only charged with the loading and stowing of the cargoes from the pier to the ship’s cargo
hold; it was never the custodian of the shipment of Del Monte Produce. A stevedore is not a common carrier
for it does not transport goods or passengers; it is not akin to a warehouseman for it does not store goods for
profit. The loading and stowing of cargoes would not have a far reaching public ramification as that of a
common carrier and a warehouseman; the public is adequately protected by our laws on contract and on
quasi-delict. The public policy considerations in legally imposing upon a common carrier or a warehouseman a
higher degree of diligence is not present in a stevedoring outfit which mainly provides labor in loading and
stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by preponderance of evidence 25 that Mindanao Terminal
had acted negligently. Where the evidence on an issue of fact is in equipoise or there is any doubt on which
side the evidence preponderates the party having the burden of proof fails upon that issue. That is to say, if
the evidence touching a disputed fact is equally balanced, or if it does not produce a just, rational belief of its
existence, or if it leaves the mind in a state of perplexity, the party holding the affirmative as to such fact must
fail.26
1avvphi1
From the above facts and our survey results, we are of the opinion that damage occurred aboard the carrying
vessel during sea transit, being caused by ship’s heavy rolling and pitching under boisterous weather while
proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October, 1994 as described in the sea protest.40
As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in loading and
stowing the cargoes, which is the ordinary diligence of a good father of a family, the grant of the petition is in
order.

However, the Court finds no basis for the award of attorney’s fees in favor of petitioner.  None of the
lawphil.net

We adopt the findings27 of the RTC,28 which are not disputed by Phoenix and McGee. The Court of Appeals did
not make any new findings of fact when it reversed the decision of the trial court. The only participation of
Mindanao Terminal was to load the cargoes on board M/V Mistrau.29 It was not disputed by Phoenix and
McGee that the materials, such as ropes, pallets, and cardboards, used in lashing and rigging the cargoes
were all provided by M/V Mistrau and these materials meets industry standard.30
It was further established that Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce
aboard the M/V Mistrau in accordance with the stowage plan, a guide for the area assignments of the goods in
the vessel’s hold, prepared by Del Monte Produce and the officers of M/V Mistrau.31 The loading and stowing
was done under the direction and supervision of the ship officers. The vessel’s officer would order the closing
of the hatches only if the loading was done correctly after a final inspection. 32 The said ship officers would not
have accepted the cargoes on board the vessel if they were not properly arranged and tightly secured to
withstand the voyage in open seas. They would order the stevedore to rectify any error in its loading and
stowing. A foreman’s report, as proof of work done on board the vessel, was prepared by the checkers of
Mindanao Terminal and concurred in by the Chief Officer of M/V Mistrau after they were satisfied that the
cargoes were properly loaded.33
circumstances enumerated in Article 2208 of the Civil Code exists. The present case is clearly not an
unfounded civil action against the plaintiff as there is no showing that it was instituted for the mere purpose of
vexation or injury. It is not sound public policy to set a premium to the right to litigate where such right is
exercised in good faith, even if erroneously. 41 Likewise, the RTC erred in awarding ₱83,945.80 actual
damages to Mindanao Terminal. Although actual expenses were incurred by Mindanao Terminal in relation to
the trial of this case in Davao City, the lawyer of Mindanao Terminal incurred expenses for plane fare, hotel
accommodations and food, as well as other miscellaneous expenses, as he attended the trials coming all the
way from Manila. But there is no showing that Phoenix and McGee made a false claim against Mindanao
Terminal resulting in the protracted trial of the case necessitating the incurrence of expenditures.42
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 66121 is
SET ASIDE and the decision of the Regional Trial Court of Davao City, Branch 12 in Civil Case No. 25,311.97
is hereby REINSTATED MINUS the awards of ₱100,000.00 as attorney’s fees and ₱83,945.80 as actual
damages.
SO ORDERED.

Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn 34 and on the survey report35 of the
damage to the cargoes. Byeong, whose testimony was refreshed by the survey report, 36 found that the cause
of the damage was improper stowage37 due to the manner the cargoes were arranged such that there were no
spaces between cartons, the use of cardboards as support system, and the use of small rope to tie the
cartons together but not by the negligent conduct of Mindanao Terminal in loading and stowing the cargoes.
As admitted by Phoenix and McGee in their Comment38 before us, the latter is merely a stevedoring company
which was tasked by Del Monte to load and stow the shipments of fresh banana and pineapple of Del Monte
Produce aboard the M/V Mistrau. How and where it should load and stow a shipment in a vessel is wholly
dependent on the shipper and the officers of the vessel. In other words, the work of the stevedore was under
the supervision of the shipper and officers of the vessel. Even the materials used for stowage, such as ropes,
pallets, and cardboards, are provided for by the vessel. Even the survey report found that it was because of
the boisterous stormy weather due to the typhoon Seth, as encountered by M/V Mistrau during its voyage,
which caused the shipments in the cargo hold to collapse, shift and bruise in extensive extent. 39 Even the
deposition of Byeong was not supported by the conclusion in the survey report that:

CAUSE OF DAMAGE

xxx
G.R. No. 194121

TORRES-MADRID BROKERAGE, INC., Petitioner vs. FEB MITSUI MARINE INSURANCE CO., INC. and
BENJAMIN P. MANALAST AS, doing business under the name of BMT TRUCKING SERVICES,
Respondents

DECISION

BRION, J.:

We resolve the petition for review on certiorari challenging the Court of Appeals' (CA) October 14, 2010
decision in CA-G.R. CV No. 91829. 1

The CA affirmed the Regional Trial Court's (RTC)  decision in Civil Case No. 01-1596, and found petitioner
Torres-Madrid Brokerage, Inc. (TMBI) and respondent Benjamin P. Manalastas jointly and solidarily liable to
respondent FEB Mitsui Marine Insurance Co., Inc. (Mitsui) for damages from the loss of transported cargo.

Antecedents

On October 7, 2000, a shipment of various electronic goods from Thailand and Malaysia arrived at the Port of
Manila for Sony Philippines, Inc. (Sony).  Previous to the arrival, Sony had engaged the services of TMBI
to facilitate, process, withdraw, and deliver the shipment from the port to its warehouse in Biñan, Laguna.
2

TMBI – who did not own any delivery trucks – subcontracted the services of Benjamin Manalastas’ company,
BMT Trucking Services (BMT), to transport the shipment from the port to the Biñan warehouse.  Incidentally,
3

TMBI notified Sony who had no objections to the arrangement. 4

Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of October 7, 2000. However, BMT
could not immediately undertake the delivery because of the truck ban and because the following day was a
Sunday. Thus, BMT scheduled the delivery on October 9, 2000.

In the early morning of October 9, 2000, the four trucks left BMT’s garage for Laguna.  However, only three
5

trucks arrived at Sony’s Biñan warehouse.

At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura (NSF-391) was found abandoned along
the Diversion Road in Filinvest, Alabang, Muntinlupa City.  Both the driver and the shipment were missing.
6
Later that evening, BMT’s Operations Manager Melchor Manalastas informed Victor Torres, TMBI’s General
Manager, of the development.  They went to Muntinlupa together to inspect the truck and to report the matter
7
to the police. 8
Victor Torres also filed a complaint with the National Bureau of Investigation (NBI) against Lapesura for
"hijacking."  The complaint resulted in a recommendation by the NBI to the Manila City Prosecutor’s Office to
9 shipment, TMBI still breached its contractual obligation to Sony when it failed to deliver the shipment.
prosecute Lapesura for qualified theft.
10
TMBI notified Sony of the loss through a letter dated October 10, 2000.  It also sent BMT a letter dated March
11
29, 2001, demanding payment for the lost shipment. BMT refused to pay, insisting that the goods were
"hijacked."
In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the goods. After evaluating the
merits of the claim, Mitsui paid Sony PHP7,293,386.23 corresponding to the value of the lost goods.12
After being subrogated to Sony’s rights, Mitsui sent TMBI a demand letter dated August 30, 2001 for payment
of the lost goods. TMBI refused to pay Mitsui’s claim. As a result, Mitsui filed a complaint against TMBI on
November 6, 2001,
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party defendant. TMBI
alleged that BMT’s driver, Lapesura, was responsible for the theft/hijacking of the lost cargo and claimed
BMT’s negligence as the proximate cause of the loss. TMBI prayed that in the event it is held liable to Mitsui
for the loss, it should be reimbursed by BMT.
At the trial, it was revealed that BMT and TMBI have been doing business with each other since the early 80’s.
It also came out that there had been a previous hijacking incident involving Sony’s cargo in 1997, but neither
Sony nor its insurer filed a complaint against BMT or TMBI.
13
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly and solidarily liable to pay Mitsui
PHP 7,293,386.23 as actual damages, attorney’s fees equivalent to 25% of the amount claimed, and the costs
of the suit.  The RTC held that TMBI and Manalastas were common carriers and had acted negligently.
14
Both TMBI and BMT appealed the RTC’s verdict.
TMBI denied that it was a common carrier required to exercise extraordinary  diligence. It maintains that it
exercised the diligence of a good father of a family and should be absolved of liability because the truck
was "hijacked" and this was a fortuitous event.
BMT claimed that it had exercised extraordinary diligence over the lost shipment, and argued as well that the
loss resulted from a fortuitous event.
On October 14, 2010, the CA affirmed the RTC’s decision but reduced the award of attorney’s fees to PHP
200,000.
The CA held: (1) that "hijacking" is not necessarily a fortuitous event because the term refers to the general
stealing of cargo during transit;  (2) that TMBI is a common carrier engaged in the business of transporting
15
goods for the general public for a fee;  (3) even if the "hijacking" were a fortuitous event, TMBI’s failure to
16
observe extraordinary diligence in overseeing the cargo and adopting security measures rendered it liable for
the loss;  and (4) even if TMBI had not been negligent in the handling, transport and the delivery of the
17
18
TMBI disagreed with the CA’s ruling and filed the present petition on December 3, 2010.
The Arguments
TMBI’s Petition
TMBI insists that the hijacking  of the truck was a fortuitous event. It contests the CA’s finding that neither force
nor intimidation was used in the taking of the cargo. Considering Lapesura was never found, the Court should
not discount the possibility that he was a victim rather than a perpetrator. 19
TMBI denies being a common carrier because it does not own a single truck to transport its shipment and it
does not offer transport services to the public for compensation.  It emphasizes that Sony knew TMBI did not
20
have its own vehicles and would subcontract the delivery to a third-party.
Further, TMBI now insists that the service it offered was limited to the processing of paperwork attendant to
the entry of Sony’s goods. It denies that delivery of the shipment was a part of its obligation. 21
TMBI solely blames BMT as it had full control and custody of the cargo when it was lost.  BMT, as a common
22
carrier, is presumed negligent and should be responsible for the loss.
BMT’s Comment
BMT insists that it observed the required standard of care.  Like the petitioner, BMT maintains that the
23
hijacking was a fortuitous event – a force majeure – that exonerates it from liability.  It points out that
24
Lapesura has never been seen again and his fate remains a mystery. BMT likewise argues that the loss of the
cargo necessarily showed that the taking was with the use of force or intimidation. 25
If there was any attendant negligence, BMT points the finger on TMBI who failed to send a representative to
accompany the shipment.  BMT further blamed TMBI for the latter’s failure to adopt security measures to
26
protect Sony’s cargo. 27
Mitsui’s Comment
Mitsui counters that neither TMBI nor BMT alleged or proved during the trial that the taking of the cargo was
accompanied with grave or irresistible threat, violence, or force.  Hence, the incident cannot be considered
28
"force majeure" and TMBI remains liable for breach of contract.
Mitsui emphasizes that TMBI’s theory – that force or intimidation must have been used because Lapesura
was never found – was only raised for the first time before this Court.  It also discredits the theory as a mere
29
conjecture for lack of supporting evidence.
Witness MR. Victor Torres of Torres Madrid: We are engaged in customs brokerage business. We acquire
the release documents from the Bureau of Customs and eventually deliver the cargoes to the consignee’s
warehouse and we are engaged in that kind of business, sir. 40

Mitsui adopts the CA’s reasons to conclude that TMBI is a common carrier. It also points out Victor Torres’ That TMBI does not own trucks and has to subcontract the delivery of its clients’ goods, is immaterial. As long
admission during the trial that TMBI’s brokerage service includes the eventual delivery of the cargo to the as an entity holds itself to the public for the transport of goods as a business, it is considered a common
consignee. 30
carrier regardless of whether it owns the vehicle used or has to actually hire one. 41

Mitsui invokes as well the legal presumption of negligence against TMBI, pointing out that TMBI simply Lastly, TMBI’s customs brokerage services – including the transport/delivery of the cargo – are available to
entrusted the cargo to BMT without adopting any security measures despite: (1) a previous hijacking incident anyone willing to pay its fees. Given these circumstances, we find it undeniable that TMBI is a common
when TMBI lost Sony’s cargo; and (2) TMBI’s knowledge that the cargo was worth more than 10 million carrier.
pesos. 31

Consequently, TMBI should be held responsible for the loss, destruction, or deterioration of the goods it
Mitsui affirms that TMBI breached the contract of carriage through its negligent handling of the cargo, resulting transports unless it results from:
in its loss.
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
The Court’s Ruling
(2) Act of the public enemy in war, whether international or civil;
A brokerage may be considered a
common carrier if it also undertakes to (3) Act of omission of the shipper or owner of the goods;
deliver the goods for its customers
(4) The character of the goods or defects in the packing or in the containers;
Common carriers are persons, corporations, firms or associations engaged in the business of transporting
passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.  By
32

the nature of their business and for reasons of public policy, they are bound to observe extraordinary diligence (5) Order or act of competent public authority. 42

in the vigilance over the goods and in the safety of their passengers. 33

For all other cases - such as theft or robbery – a common carrier is presumed to have been at fault or to
In A.F. Sanchez Brokerage Inc. v. Court of Appeals, we held that a customs broker – whose principal
34 have acted negligently, unless it can prove that it observed extraordinary diligence. 43

business is the preparation of the correct customs declaration and the proper shipping documents – is still
considered a common carrier if it also undertakes to deliver the goods for its customers. The law does not Simply put, the theft or the robbery of the goods is not considered a fortuitous event or a force majeure.
distinguish between one whose principal business activity is the carrying of goods and one who undertakes Nevertheless, a common carrier may absolve itself of liability for a resulting loss: (1) if it proves that it
this task only as an ancillary activity.  This ruling has been reiterated in Schmitz Transport & Brokerage Corp.
35
exercised extraordinary  diligence in transporting and safekeeping the goods;  or (2) if it stipulated with the
44

v. Transport Venture, Inc.,   Loadmasters Customs Services, Inc. v. Glodel Brokerage

36
shipper/owner of the goods to limit its liability for the loss, destruction, or deterioration of the goods to a
Corporation, and Westwind Shipping Corporation v. UCPB General Insurance Co., Inc.
37 38
degree less than extraordinary diligence. 45

Despite TMBI’s present denials, we find that the delivery of the goods is an integral, albeit ancillary, part of its However, a stipulation diminishing or dispensing with the common carrier’s liability for acts committed by
brokerage services. TMBI admitted that it was contracted to facilitate, process, and clear the shipments from thieves or robbers who do not act with grave or irresistible threat, violence, or force is void under Article 1745
the customs authorities, withdraw them from the pier, then transport and deliver them to Sony’s warehouse in of the Civil Code for being contrary to public policy.  Jurisprudence, too, has expanded Article 1734’s five
46

Laguna. 39
exemptions. De Guzman v. Court of Appeals  interpreted Article 1745 to mean that a robbery attended by
47

"grave or irresistible threat, violence or force" is a fortuitous event that absolves the common carrier from
Further, TMBI’s General Manager Victor Torres described the nature of its services as follows: liability.

ATTY. VIRTUDAZO: Could you please tell the court what is the nature of the business of [TMBI]? In the present case, the shipper, Sony, engaged the services of TMBI, a common carrier, to facilitate the
release of its shipment and deliver the goods to its warehouse. In turn, TMBI subcontracted a portion of its
obligation – the delivery of the cargo – to another common carrier, BMT.
Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a common carrier’s
extraordinary responsibility over the shipper’s goods lasts from the time these goods are unconditionally
placed in the possession of, and received by, the carrier for transportation, until they are delivered, actually
or constructively, by the carrier to the consignee. 48
That the cargo disappeared during transit while under the custody of BMT – TMBI’s subcontractor – did not
diminish nor terminate TMBI’s responsibility over the cargo. Article 1735 of the Civil Code presumes that it
was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI simply argued that it was not a
common carrier bound to observe extraordinary diligence. Its failure to successfully establish this premise
carries with it the presumption of fault or negligence, thus rendering it liable to Sony/Mitsui for breach of
contract.
Specifically, TMBI’s current theory – that the hijacking was attended by force or intimidation – is untenable.
First, TMBI alleged in its Third Party Complaint against BMT that Lapesura was responsible for hijacking the
shipment.  Further, Victor Torres filed a criminal complaint against Lapesura with the NBI.  These actions
49 50
constitute direct and binding admissions that Lapesura stole the cargo. Justice and fair play dictate that TMBI
should not be allowed to change its legal theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this theory through evidence. Thus, the theory
remained an unsupported allegation no better than speculations and conjectures. The CA therefore correctly
disregarded the defense of force majeure.
TMBI and BMT are not solidarily liable to Mitsui
We disagree with the lower courts’ ruling that TMBI and BMT are solidarily liable to Mitsui for the loss as joint
tortfeasors. The ruling was based on Article 2194 of the Civil Code:
Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary.
Notably, TMBI’s liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but from its breach of
contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual, albeit one that passed on to
Mitsui as a result of TMBI’s contract of carriage with Sony to which Mitsui had been subrogated as an insurer
who had paid Sony’s insurance claim. The legal reality that results from this contractual tie precludes the
application of quasi-delict based Article 2194.
A third party may recover from a common carrier for quasi-delict but must prove actual negligence
We likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss of the cargo. While
it is undisputed that the cargo was lost under the actual custody of BMT (whose employee is the primary
suspect in the hijacking or robbery of the shipment), no direct contractual relationship existed between
Sony/Mitsui and BMT. If at all, Sony/Mitsui’s cause of action against BMT could only arise from quasi-delict, as
a third party suffering damage from the action of another due to the latter’s fault or negligence, pursuant to
Article 2176 of the Civil Code.51
We have repeatedly distinguished between an action for breach of contract (culpa contractual) and an action
for quasi-delict (culpa aquiliana).
In culpa contractual,  the plaintiff only needs to establish the existence of the contract and the obligor’s failure
to perform his obligation. It is not necessary for the plaintiff to prove or even allege that the obligor’s non-
compliance was due to fault or negligence because Article 1735 already presumes that the common carrier is
negligent. The common carrier can only free itself from liability by proving that it observed extraordinary
diligence. It cannot discharge this liability by shifting the blame on its agents or servants.
52
On the other hand, the plaintiff in culpa aquiliana  must clearly establish the defendant’s fault or negligence
because this is the very basis of the action.  Moreover, if the injury to the plaintiff resulted from the act or
53
omission of the defendant’s employee or servant, the defendant may absolve himself by proving that he
observed the diligence of a good father of a family to prevent the damage. 54
In the present case, Mitsui’s action is solely premised on TMBI’s breach of contract. Mitsui did not even sue
BMT, much less prove any negligence on its part. If BMT has entered the picture at all, it is because TMBI
sued it for reimbursement for the liability that TMBI might incur from its contract of carriage with Sony/Mitsui.
Accordingly, there is no basis to directly hold BMT liable to Mitsui for quasi-delict.
BMT is liable to TMBI for breach of their contract of carriage
We do not hereby say that TMBI must absorb the loss. By subcontracting the cargo delivery to BMT, TMBI
entered into its own contract of carriage with a fellow common carrier.
The cargo was lost after its transfer to BMT' s custody based on its contract of carriage with TMBI. Following
Article 1735, BMT is presumed to be at fault. Since BMT failed to prove that it observed extraordinary
diligence in the performance of its obligation to TMBI, it is liable to TMBI for breach of their contract of
carriage.
In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching the contract of carriage. In tum,
TMBI is entitled to reimbursement from BMT due to the latter's own breach of its contract of carriage with
TMBI. The proverbial buck stops with BMT who may either: (a) absorb the loss, or (b) proceed after its missing
driver, the suspected culprit, pursuant to Article 2181.55
WHEREFORE, the Court hereby ORDERS petitioner TorresMadrid Brokerage, Inc. to pay the respondent
FEB Mitsui Marine Insurance Co", Inc. the following:
a. Actual damages in the amount of PHP 7,293,386.23 plus legal interest from the time the complaint was filed
until it is fully paid;
b. Attorney's foes in the amount of PHP 200,000.00; and
c. Costs of suit.

Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-Madrid Brokerage, Inc. of

the above-mentioned amounts.

SO ORDERED.

G.R. No. 161745 September 30,

2005

LEA MER INDUSTRIES, INC., Petitioners, vs. MALAYAN INSURANCE CO., INC.,* Respondent.

DECISION

PANGANIBAN, J.:

ommon carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted to
them, as required by the nature of their business and for reasons of public policy. Consequently, the law
presumes that common carriers are at fault or negligent for any loss or damage to the goods that they
transport. In the present case, the evidence submitted by petitioner to overcome this presumption was sorely
insufficient.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the October 9, 2002
Decision2 and the December 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 66028. The
challenged Decision disposed as follows:

"WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court of
Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner] is ordered
to pay the [herein respondent] the value of the lost cargo in the amount of ₱565,000.00. Costs against the
[herein petitioner]."4

The assailed Resolution denied reconsideration.

The Facts

Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900
metric tons of silica sand valued at ₱565,000.5 Consigned to Vulcan Industrial and Mining Corporation, the
cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on
board Judy VII, a barge leased by Lea Mer.6 During the voyage, the vessel sank, resulting in the loss of the
cargo.7
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. 8 To recover the amount paid
and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which
refused to comply. Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC) of
Manila on September 4, 1992, for the collection of ₱565,000 representing the amount that respondent had
paid Vulcan.9
On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the loss was a
fortuitous event.10 The RTC noted that the vessel had sunk because of the bad weather condition brought
about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming typhoon,
and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.11
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the
loss of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.12
Hence, this recourse.13
The Issues
Petitioner states the issues in this wise:
"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a
witness of the said report during the trial of this case before the lower court can be admitted in evidence to
prove the alleged facts cited in the said report.
"B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of the
Regional Trial Court which clearly and unequivocally held that the loss of the cargo subject of this case was
caused by fortuitous event for which herein petitioner could not be held liable.
"C. Whether or not the respondent, Court of Appeals, had committed serious error and grave abuse of
discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the
effect that the vessel ‘Judy VII’ was seaworthy at the time of incident and further in disregarding the testimony
of the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon ‘Trining’ did not hit
Metro Manila or Palawan."14
In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and (2) whether
the survey report of Jesus Cortez is admissible in evidence.
The Court’s Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event. This
issue involves primarily a question of fact, notwithstanding petitioner’s claim that it pertains only to a question
of law. As a general rule, questions of fact may not be raised in a petition for review. 15 The present case
serves as an exception to this rule, because the factual findings of the appellate and the trial courts
vary.16 This Court meticulously reviewed the records, but found no reason to reverse the CA.
Rule on Common Carriers
Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods, or both -- by land, water, or air -- when this service is offered to the public
for compensation.17 Petitioner is clearly a common carrier, because it offers to the public its business of
transporting goods through its vessels.18
Thus, the Court corrects the trial court’s finding that petitioner became a private carrier when Vulcan chartered
it.19 Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are
distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for
the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect,
the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise,
the owner of a vessel must completely and exclusively relinquish possession, command and navigation
thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all."20
The distinction is significant, because a demise or bareboat charter indicates a business undertaking that
is private in character. 21 Consequently, the rights and obligations of the parties to a contract of private carriage
are governed principally by their stipulations, not by the law on common carriers.22
The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner’s crew
that manned the tugboat M/V Ayalit and controlled the barge Judy VII.23 Necessarily, petitioner was a common
carrier, and the pertinent law governs the present factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety
of the passengers they transport, as required by the nature of their business and for reasons of public
policy.24 Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid
damage and destruction to the goods entrusted for carriage and delivery.25
Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the
goods that they have transported.26 This presumption can be rebutted only by proof that they observed
extraordinary diligence, or that the loss or damage was occasioned by any of the following causes:27
"(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."28
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that "no person shall be responsible for a fortuitous event which could
not be foreseen, or which, though foreseen, was inevitable." Thus, if the loss or damage was due to such an
event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a "fortuitous event" as follows: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been impossible to
foresee  or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it
impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free
from any participation in the aggravation of the resulting injury to the creditor.29
To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only
cause of the loss.30 Moreover, it should have exercised due diligence to prevent or minimize the loss before,
during and after the occurrence of the fortuitous event.31
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present case. As the common carrier, petitioner
bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had
been occasioned by a fortuitous event -- an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of the
cargo was due to the bad weather condition brought about by Typhoon Trining. 32 Evidence was presented to
show that petitioner had not been informed of the incoming typhoon, and that the Philippine Coast Guard had
given it clearance to begin the voyage.33 On October 25, 1991, the date on which the voyage commenced and
the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only "Signal
No. 1."34
The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. As
required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen
or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or
after the alleged fortuitous event. 35 Its witness, Joey A. Draper, testified that he could no longer remember
whether anything had been done to minimize loss when water started entering the barge. 36 This fact was
confirmed during his cross-examination, as shown by the following brief exchange:
"Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised by you and
the crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat Ayalit and barge
Judy VII x x x to prevent the sinking of barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time ago."37
Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a
preponderance of evidence that the barge was not seaworthy when it sailed for Manila. 38 Respondent was
able to prove that, in the hull of the barge, there were holes that might have caused or aggravated the
sinking.39 Because the presumption of negligence or fault applied to petitioner, it was incumbent upon it to
show that there were no holes; or, if there were, that they did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna, testified that
the barge was in "tip-top" or excellent condition, 40 but that he had not personally inspected it when it left
Palawan.41
The submission of the Philippine Coast Guard’s Certificate of Inspection of Judy VII, dated July 31, 1991, did
not conclusively prove that the barge was seaworthy.42 The regularity of the issuance of the Certificate is
disputably presumed.43 It could be contradicted by competent evidence, which respondent offered. Moreover,
this evidence did not necessarily take into account the actual condition of the vessel at the time of the
commencement of the voyage.44
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report 45 prepared by Jesus Cortez, the cargo surveyor, should not have
been admitted in evidence. The Court partly agrees. Because he did not testify during the trial, 46 then the
Report that he had prepared was hearsay and therefore inadmissible for the purpose of proving the truth of its
contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortez’s Survey Report was used in the testimonies of respondent’s witnesses -- Charlie
M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and Harding
Company.47 Soriano testified that the Survey Report had been used in preparing the final Adjustment Report
conducted by their company.48 The final Report showed that the barge was not seaworthy because of the
existence of the holes. Manlapig testified that he had prepared that Report after taking into account the
findings of the surveyor, as well as the pictures and the sketches of the place where the sinking
occurred.49 Evidently, the existence of the holes was proved by the testimonies of the witnesses, not merely by
Cortez’ Survey Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial, 50 and that their testimonies must be confined
to personal knowledge is required by the rules on evidence, from which we quote:
"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness can testify
only to those facts which he knows of his personal knowledge; that is, which are derived from his own
perception, except as otherwise provided in these rules."51
On this basis, the trial court correctly refused to admit Jesus Cortez’s Affidavit, which respondent had offered
as evidence.52 Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is
considered hearsay.53
An exception to the foregoing rule is that on "independently relevant statements."  A report made by a person
is admissible if it is intended to prove the tenor, not the truth, of the statements. 54 Independent of the truth or
the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the hearsay
rule does not apply.55
In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of the
testimonies of respondent’s witnesses. The referral to Cortez’s Report was in relation to Manlapig’s final
Adjustment Report. Evidently, it was the existence of the Survey Report that was testified to. The admissibility
of that Report as part of the testimonies of the witnesses was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed to overcome the presumption of fault
that applies to common carriers.
WHEREFORE, the Petition is DENIED  and the assailed Decision and Resolution are AFFIRMED. Costs
against petitioner.
SO ORDERED.
G.R. No. 159636             November 25,
2004
VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO
P. GAMMAD and DIANA FRANCES P. GAMMAD, respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review on certiorari is the April 11, 2003 decision of the Court of Appeals in CA-
1 
G.R. CV No. 63290 which affirmed with modification the November 6, 1998 decision of the Regional Trial
2 
Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of
carriage in Civil Case No. 5023.
The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace
Pagulayan-Gammad, was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from
3 
Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay
Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries to other
passengers. 4
On May 14, 1996, respondent heirs of the deceased filed a complaint for damages arising from culpa
5 
contractual against petitioner. In its answer, the petitioner claimed that the incident was purely accidental and
6 
that it has always exercised extraordinary diligence in its 50 years of operation.
After several re-settings, pre-trial was set on April 10, 1997. For failure to appear on the said date, petitioner
7  8 
[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are hereby
was declared as in default. However, on petitioner’s motion to lift the order of default, the same was granted
9  10 
adjudged in favor of plaintiffs-appellees:
by the trial court.
11

1. Actual Damages in the amount of P88,270.00;

At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased
was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket 2. Compensatory Damages in the amount of P1,135,536,10;
No. 977785. Respondents, for their part, did not accept petitioner’s proposal to pay P50,000.00. 12

3. Moral and Exemplary Damages in the amount of P400,000.00; and

After respondent Rosalito Gammad completed his direct testimony, cross-examination was scheduled for
November 17, 1997 but moved to December 8, 1997, because the parties and the counsel failed to appear.
13  14 

On December 8, 1997, counsel of petitioner was absent despite due notice and was deemed to have waived 4. Attorney’s fees equivalent to 10% of the sum of the actual, compensatory, moral, and
right to cross-examine respondent Rosalito. 15 exemplary damages herein adjudged.

Petitioner’s motion to reset the presentation of its evidence to March 25, 1998 was granted. However, on
16  The court a quo’s judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED.
March 24, 1998, the counsel of petitioner sent the court a telegram requesting postponement but the telegram
17 

was received by the trial court on March 25, 1998, after it had issued an order considering the case submitted SO ORDERED. 20

for decision for failure of petitioner and counsel to appear. 18

Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration praying that the
On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of case be remanded to the trial court for cross- examination of respondents’ witness and for the presentation of
which reads: its evidence; or in the alternative, dismiss the respondents’ complaint. Invoking APEX Mining, Inc. v. Court of
21 

Appeals, petitioner argues, inter alia, that the decision of the trial court should be set aside because the
22 

WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in negligence of its former counsel, Atty. Antonio B. Paguirigan, in failing to appear at the scheduled hearings
favor of the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter to pay and move for reconsideration of the orders declaring petitioner to have waived the right to cross-examine
the following: respondents’ witness and right to present evidence, deprived petitioner of its day in court.

1. Actual Damages -------------------- P 122,000.00 On August 21, 2003, the Court of Appeals denied petitioner’s motion for reconsideration. 23

2. Death Indemnity --------------------- 50,000.00 Hence, this petition for review principally based on the fact that the mistake or gross negligence of its counsel
deprived petitioner of due process of law. Petitioner also argues that the trial court’s award of damages were
without basis and should be deleted.
3. Exemplary and Moral Damages----- 400,000.00
The issues for resolution are: (1) whether petitioner’s counsel was guilty of gross negligence; (2) whether
4. Compensatory Damages ---------- 1,500,000.00 petitioner should be held liable for breach of contract of carriage; and (3) whether the award of damages was
proper.
5. Attorney’s Fees --------------------- 10% of the total amount granted
It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed by
6. Cost of the Suit. a counsel within the scope of his general or implied authority is regarded as an act of his client. Consequently,
the mistake or negligence of counsel may result in the rendition of an unfavorable judgment against the client.
SO ORDERED. 19 However, the application of the general rule to a given case should be looked into and adopted according to
the surrounding circumstances obtaining. Thus, exceptions to the foregoing have been recognized by the
court in cases where reckless or gross negligence of counsel deprives the client of due process of law, or
On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as when its application will result in outright deprivation of the client’s liberty or property or where the interests of
follows: justice so require, and accord relief to the client who suffered by reason of the lawyer’s gross or palpable
mistake or negligence. 24
The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed an Answer
and Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan successfully moved
for the setting aside of the order of default. In fact, petitioner was represented by Atty. Paguirigan at the pre-
trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to file motions for
reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents’
witness and to present evidence, he nevertheless, filed a timely appeal with the Court of Appeals assailing the
decision of the trial court. Hence, petitioner’s claim that it was denied due process lacks basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default for not
appearing at the pre-trial, three notices (dated October 23, 1996, January 30, 1997, and March 26, 1997, )
25  26  27 
requiring attendance at the pre-trial were sent and duly received by petitioner. However, it was only on April
27, 1997, after the issuance of the April 10, 1997 order of default for failure to appear at the pre-trial when
petitioner, through its finance and administrative manager, executed a special power of attorney authorizing
28 
Atty. Paguirigan or any member of his law firm to represent petitioner at the pre-trial. Petitioner is guilty, at the
least, of contributory negligence and fault cannot be imputed solely on previous counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar. In APEX, the
negligent counsel not only allowed the adverse decision against his client to become final and executory, but
deliberately misrepresented in the progress report that the case was still pending with the Court of Appeals
when the same was dismissed 16 months ago. These circumstances are absent in this case because Atty.
29 
Paguirigan timely filed an appeal from the decision of the trial court with the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos, the Court was similarly confronted with the issue of whether or not the
30  is guaranteed, but there must be a limit to it.
client should bear the adverse consequences of its counsel’s negligence. In that case, Gold Line Transit, Inc.
(Gold Line) and its lawyer failed to appear at the pre-trial despite notice and was declared as in default. After
the plaintiff’s presentation of evidence ex parte, the trial court rendered decision ordering Gold Line to pay
damages to the heirs of its deceased passenger. The decision became final and executory because counsel
of Gold Line did not file any appeal. Finding that Goldline was not denied due process of law and is thus
bound by the negligence of its lawyer, the Court held as follows –
This leads us to the question of whether the negligence of counsel was so gross and reckless that
petitioner was deprived of its right to due process of law. We do not believe so. It cannot be denied
that the requirements of due process were observed in the instant case. Petitioner was never
deprived of its day in court, as in fact it was afforded every opportunity to be heard. Thus, it is of
record that notices were sent to petitioner and that its counsel was able to file a motion to dismiss the
complaint, an answer to the complaint, and even a pre-trial brief. What was irretrievably lost by
petitioner was its opportunity to participate in the trial of the case and to adduce evidence in its behalf
because of negligence.
In the application of the principle of due process, what is sought to be safeguarded against is not the
lack of previous notice but the denial of the opportunity to be heard. The question is not whether
petitioner succeeded in defending its rights and interests, but simply, whether it had the opportunity
to present its side of the controversy. Verily, as petitioner retained the services of counsel of its
choice, it should, as far as this suit is concerned, bear the consequences of its choice of a faulty
option. Its plea that it was deprived of due process echoes on hollow ground and certainly cannot
elicit approval nor sympathy.
To cater to petitioner’s arguments and reinstate its petition for relief from judgment would put a
premium on the negligence of its former counsel and encourage the non-termination of this case by
reason thereof. This is one case where petitioner has to bear the adverse consequences of its
counsel’s act, for a client is bound by the action of his counsel in the conduct of a case and he
cannot thereafter be heard to complain that the result might have been different had his counsel
proceeded differently. The rationale for the rule is easily discernible. If the negligence of counsel be
admitted as a reason for opening cases, there would never be an end to a suit so long as a new
counsel could be hired every time it is shown that the prior counsel had not been sufficiently diligent,
experienced or learned. 31
Similarly, in Macalalag v. Ombudsman, a Philippine Postal Corporation employee charged with dishonesty
32 
was not able to file an answer and position paper. He was found guilty solely on the basis of complainant’s
evidence and was dismissed with forfeiture of all benefits and disqualification from government service.
Challenging the decision of the Ombudsman, the employee contended that the gross negligence of his
counsel deprived him of due process of law. In debunking his contention, the Court said –
Neither can he claim that he is not bound by his lawyer’s actions; it is only in case of gross or
palpable negligence of counsel when the courts can step in and accord relief to a client who would
have suffered thereby. If every perceived mistake, failure of diligence, lack of experience or
insufficient legal knowledge of the lawyer would be admitted as a reason for the reopening of a case,
there would be no end to controversy. Fundamental to our judicial system is the principle that every
litigation must come to an end. It would be a clear mockery if it were otherwise. Access to the courts
Viewed vis-à-vis the foregoing jurisprudence, to sustain petitioner’s argument that it was denied due process
of law due to negligence of its counsel would set a dangerous precedent. It would enable every party to render
inutile any adverse order or decision through the simple expedient of alleging gross negligence on the part of
its counsel. The Court will not countenance such a farce which contradicts long-settled doctrines of trial and
procedure. 33
Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A common
carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with due regard to all the circumstances. In a contract of carriage, it
is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured.
Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on
the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence. 34
In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie
Grace’s death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner was
guilty of breach of contract of carriage.
Nevertheless, the award of damages should be modified.
Article 1764 in relation to Article 2206 of the Civil Code, holds the common carrier in breach of its contract of
35  36 
carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2)
indemnity for loss of earning capacity, and (3) moral damages.
In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace
which under current jurisprudence is fixed at P50,000.00. 37
The award of compensatory damages for the loss of the deceased’s earning capacity should be deleted for
lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for
loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite
the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum
wage under current labor laws, and judicial notice may be taken of the fact that in the deceased’s line of work
no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less
than the minimum wage under current labor laws. 38
In People v. Oco, the evidence presented by the prosecution to recover damages for loss of earning capacity
39 
was the bare testimony of the deceased’s wife that her husband was earning P8,000.00 monthly as a legal
researcher of a private corporation. Finding that the deceased was neither self-employed nor employed as a
daily-wage worker earning less than the minimum wage under the labor laws existing at the time of his death,
the Court held that testimonial evidence alone is insufficient to justify an award for loss of earning capacity.
Likewise, in People v. Caraig, damages for loss of earning capacity was not awarded because the
40 
circumstances of the 3 deceased did not fall within the recognized exceptions, and except for the testimony of
their wives, no documentary proof about their income was presented by the prosecution. Thus –
The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr. were
not self-employed or employed as daily-wage workers earning less than the minimum wage under
the labor laws existing at the time of their death. Placido Agustin was a Social Security System
employee who received a monthly salary of P5,000. Roberto Raagas was the President of Sinclair
Security and Allied Services, a family owned corporation, with a monthly compensation of P30,000.
Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning of P500 or a
monthly earning of P7,500. Clearly, these cases do not fall under the exceptions where indemnity for
loss of earning capacity can be given despite lack of documentary evidence. Therefore, for lack of
documentary proof, no indemnity for loss of earning capacity can be given in these cases. (Emphasis
supplied)
Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss of
earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years of
age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of
P83,088.00 per annum when she died. No other evidence was presented. The award is clearly erroneous
41 
because the deceased’s earnings does not fall within the exceptions.
However, the fact of loss having been established, temperate damages in the amount of P500,000.00 should
be awarded to respondents. Under Article 2224 of the Civil Code, temperate or moderate damages, which are
more than nominal but less than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.
In Pleno v. Court of Appeals, the Court sustained the trial court’s award of P200,000.00 as temperate
42 
damages in lieu of actual damages for loss of earning capacity because the income of the victim was not
sufficiently proven, thus –
The trial court based the amounts of damages awarded to the petitioner on the following circumstances:
...
"As to the loss or impairment of earning capacity, there is no doubt that Pleno is an ent[re]preneur
and the founder of his own corporation, the Mayon Ceramics Corporation. It appears also that he is
an industrious and resourceful person with several projects in line, and were it not for the incident,
might have pushed them through. On the day of the incident, Pleno was driving homeward with
geologist Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His
actual income however has not been sufficiently established so that this Court cannot award actual
damages, but, an award of temperate or moderate damages may still be made on loss or impairment
of earning capacity. That Pleno sustained a permanent deformity due to a shortened left leg and that
he also suffers from double vision in his left eye is also established. Because of this, he suffers from
some inferiority complex and is no longer active in business as well as in social life. In similar cases
as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-
11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper
award of damages were given."
...
We rule that the lower court’s awards of damages are more consonant with the factual circumstances
of the instant case. The trial court’s findings of facts are clear and well-developed. Each item of
damages is adequately supported by evidence on record.
Article 2224 of the Civil Code was likewise applied in the recent cases of People v. Singh and People v.
43 
Almedilla, to justify the award of temperate damages in lieu of damages for loss of earning capacity which
44 
was not substantiated by the required documentary proof.
Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are
based on different jural foundations. These damages are different in nature and require separate
45 
determination. In culpa contractual or breach of contract, moral damages may be recovered when the
46 
defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard
of contractual obligations and, as in this case, when the act of breach of contract itself constitutes the tort that
results in physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral
damages may also be awarded in case the death of a passenger results from a breach of carriage. On the 47 
other hand, exemplary damages, which are awarded by way of example or correction for the public good may
be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner. 48
Respondents in the instant case should be awarded moral damages to compensate for the grief caused by
the death of the deceased resulting from the petitioner’s breach of contract of carriage. Furthermore, the
petitioner failed to prove that it exercised the extraordinary diligence required for common carriers, it is
presumed to have acted recklessly. Thus, the award of exemplary damages is proper. Under the
49 
circumstances, we find it reasonable to award respondents the amount of P100,000.00 as moral damages
and P100,000.00 as exemplary damages. These amounts are not excessive. 50
In the instant case, petitioner should be held liable for payment of interest as damages for breach of contract
of carriage. Considering that the amounts payable by petitioner has been determined with certainty only in the
instant petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per
annum until satisfaction, per paragraph 3 of the aforecited rule.
57

The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced. In WHEREFORE, in view of all the foregoing, the petition is partially granted. The April 11, 2003 decision of the
People v. Duban, it was held that only substantiated and proven expenses or those that appear to have been
51 
Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional Trial Court of
genuinely incurred in connection with the death, wake or burial of the victim will be recognized. A list of Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner
expenses (Exhibit "J"), and the contract/receipt for the construction of the tomb (Exhibit "F") in this case,
52  53 
Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of
cannot be considered competent proof and cannot replace the official receipts necessary to justify the award. Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary
Hence, actual damages should be further reduced to P78,160.00, which was the amount supported by official
54 
damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of the total
receipts. amount as attorneys fees; and the costs of suit.

Pursuant to Article 2208 of the Civil Code, attorney’s fees may also be recovered in the case at bar where
55 
Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum
exemplary damages are awarded. The Court finds the award of attorney’s fees equivalent to 10% of the total computed from the finality of this decision until fully paid.
amount adjudged against petitioner reasonable.
SO ORDERED.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that when an obligation, regardless of
56 

its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be
held liable for payment of interest in the concept of actual and compensatory damages, subject to the
following rules, to wit –

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.
G.R. No. L-56487 October 21, 1991
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per REYNALDA GATCHALIAN, petitioner, vs. ARSENIO DELIM and the HON. COURT OF
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or
APPEALS, respondents.
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably Pedro G. Peralta for petitioner. Florentino G. Libatique for private respondent.
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have FELICIANO, J.:
been reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a paying passenger, respondent's
"Thames" mini bus at a point in San Eugenio, Aringay, La Union, bound for Bauang, of the same province. On
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate the way, while the bus was running along the highway in Barrio Payocpoc, Bauang, Union, "a snapping
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per sound" was suddenly heard at one part of the bus and, shortly thereafter, the vehicle bumped a cement flower
annum from such finality until its satisfaction, this interim period being deemed to be by then an pot on the side of the road, went off the road, turned turtle and fell into a ditch. Several passengers, including
equivalent to a forbearance of credit. (Emphasis supplied). petitioner Gatchalian, were injured. They were promptly taken to Bethany Hospital at San Fernando, La Union,
for medical treatment. Upon medical examination, petitioner was found to have sustained physical injuries on
the leg, arm and forehead, specifically described as follows: lacerated wound, forehead; abrasion, elbow, left;
abrasion, knee, left; abrasion, lateral surface, leg, left. 1
On 14 July 1973, while injured. passengers were confined in the hospital, Mrs. Adela Delim, wife of
respondent, visited them and later paid for their hospitalization and medical expenses. She also gave
petitioner P12.00 with which to pay her transportation expense in going home from the hospital. However,
before Mrs. Delim left, she had the injured passengers, including petitioner, sign an already prepared Joint
Affidavit which stated, among other things:
That we were passengers of Thames with Plate No. 52-222 PUJ Phil. 73 and victims after the said Thames
met an accident at Barrio Payocpoc Norte, Bauang, La Union while passing through the National Highway No.
3;
That after a thorough investigation the said Thames met the accident due to mechanical defect and went off
the road and turned turtle to the east canal of the road into a creek causing physical injuries to us;
x x x           x x x          x x x
That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the
said Thames, because it was an accident and the said driver and owner of the said Thames have gone to the
extent of helping us to be treated upon our injuries.
xxx xxx xxx  The degree of explicitness which this Court has required in purported waivers is illustrated in Yepes and
(Emphasis supplied)
Notwithstanding this document, petitioner Gathalian filed with the then Court of First Instance of La Union an
action extra contractu to recover compensatory and moral damages. She alleged in the complaint that her
injuries sustained from the vehicular mishap had left her with a conspicuous white scar measuring 1 by 1/2
inches on the forehead, generating mental suffering and an inferiority complex on her part; and that as a
result, she had to retire in seclusion and stay away from her friends. She also alleged that the scar diminished
her facial beauty and deprived her of opportunities for employment. She prayed for an award of: P10,000.00
for loss of employment and other opportunities; P10,000.00 for the cost of plastic surgery for removal of the
scar on her forehead; P30,000.00 for moral damages; and P1,000.00 as attorney's fees.
In defense, respondent averred that the vehicular mishap was due to force majeure, and that petitioner had
already been paid and moreover had waived any right to institute any action against him (private respondent)
and his driver, when petitioner Gatchalian signed the Joint Affidavit on 14 July 1973.
After trial, the trial court dismissed the complaint upon the ground that when petitioner Gatchalian signed the
Joint Affidavit, she relinquished any right of action (whether criminal or civil) that she may have had against
respondent and the driver of the mini-bus.
On appeal by petitioner, the Court of Appeals reversed the trial court's conclusion that there had been a valid
waiver, but affirmed the dismissal of the case by denying petitioner's claim for damages:
We are not in accord, therefore, of (sic) the ground of the trial court's dismissal of the complaint, although we
conform to the trial court's disposition of the case — its dismissal.
IN VIEW OF THE FOREGOING considerations, there being no error committed by the lower court in
dismissing the plaintiff-appellant's complaint, the judgment of dismissal is hereby affirmed.
Without special pronouncement as to costs.
SO ORDERED. 
In the present Petition for Review filed in forma pauperis, petitioner assails the decision of the Court of
Appeals and ask this Court to award her actual or compensatory damages as well as moral damages.
We agree with the majority of the Court of Appeals who held that no valid waiver of her cause of action had
been made by petitioner. The relevant language of the Joint Affidavit may be quoted again:
That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the
said Thames, because it was an accident and the said driver and owner of the said Thames have gone to the
extent of helping us to be treated upon our injuries. (Emphasis supplied)
A waiver, to be valid and effective, must in the first place be couched in clear and unequivocal terms which
leave no doubt as to the intention of a person to give up a right or benefit which legally pertains to him.   A
waiver may not casually be attributed to a person when the terms thereof do not explicitly and clearly evidence
an intent to abandon a right vested in such person.
Susaya v. Samar Express Transit (supra), where the Court in reading and rejecting a purported waiver said:
. . . It appears that before their transfer to the Leyte Provincial Hospital, appellees were asked to sign
as, in fact, they signed the document Exhibit I wherein they stated that "in consideration of the
expenses which said operator has incurred in properly giving us the proper medical treatment, we
hereby manifest our desire to waive any and all claims against the operator of the Samar Express
Transit."
x x x           x x x          x x x
Even a cursory examination of the document mentioned above will readily show that appellees did
not actually waive their right to claim damages from appellant for the latter's failure to comply with
their contract of carriage. All that said document proves is that  they expressed a "desire" to make the
waiver — which obviously is not the same as making an actual waiver of their right. A waiver of the
kind invoked by appellant must be clear and unequivocal (Decision of the Supreme Court of Spain of
July 8, 1887) — which is not the case of the one relied upon in this appeal. (Emphasis supplied)
If we apply the standard used in Yepes and Susaya, we would have to conclude that the terms of the Joint
Affidavit in the instant case cannot be regarded as a waiver cast in "clear and unequivocal" terms. Moreover,
the circumstances under which the Joint Affidavit was signed by petitioner Gatchalian need to be considered.
Petitioner testified that she was still reeling from the effects of the vehicular accident, having been in the
hospital for only three days, when the purported waiver in the form of the Joint Affidavit was presented to her
for signing; that while reading the same, she experienced dizziness but that, seeing the other passengers who
had also suffered injuries sign the document, she too signed without bothering to read the Joint Affidavit in its
entirety. Considering these circumstances there appears substantial doubt whether petitioner understood fully
the import of the Joint Affidavit (prepared by or at the instance of private respondent) she signed and whether
she actually intended thereby to waive any right of action against private respondent.
Finally, because what is involved here is the liability of a common carrier for injuries sustained by passengers
in respect of whose safety a common carrier must exercise extraordinary diligence, we must construe any
such purported waiver most strictly against the common carrier. For a waiver to be valid and effective, it must
not be contrary to law, morals, public policy or good customs. 5 To uphold a supposed waiver of any right to
claim damages by an injured passenger, under circumstances like those exhibited in this case, would be to
dilute and weaken the standard of extraordinary diligence exacted by the law from common carriers and
hence to render that standard unenforceable. 6 We believe such a purported waiver is offensive to public
policy.
Petitioner Gatchalian also argues that the Court of Appeals, having by majority vote held that there was no
enforceable waiver of her right of action, should have awarded her actual or compensatory and moral
damages as a matter of course.
We have already noted that a duty to exercise extraordinary diligence in protecting the safety of its
passengers is imposed upon a common carrier. 7 In case of death or injuries to passengers, a statutory
presumption arises that the common carrier was at fault or had acted negligently "unless it proves that it [had]
observed extraordinary diligence as prescribed in Articles 1733 and 1755." 8 In fact, because of this statutory
presumption, it has been held that a court need not even make an express finding of fault or negligence on the
part of the common carrier in order to hold it liable. 9 To overcome this presumption, the common carrier must
slow to the court that it had exercised extraordinary diligence to prevent the injuries. 10 The standard of
extraordinary diligence imposed upon common carriers is considerably more demanding than the standard of
ordinary diligence, i.e., the diligence of a good paterfamilias established in respect of the ordinary relations
between members of society. A common carrier is bound to carry its passengers safely" as far as human care
and foresight can provide, using the utmost diligence of a very cautious person, with due regard to all the
circumstances". 11
Thus, the question which must be addressed is whether or not private respondent has successfully proved
that he had exercised extraordinary diligence to prevent the mishap involving his mini-bus. The records before
the Court are bereft of any evidence showing that respondent had exercised the extraordinary diligence
required by law. Curiously, respondent did not even attempt, during the trial before the court a quo, to prove
that he had indeed exercised the requisite extraordinary diligence. Respondent did try to exculpate himself
from liability by alleging that the mishap was the result of force majeure. But allegation is not proof and here
again, respondent utterly failed to substantiate his defense of force majeure. To exempt a common carrier
from liability for death or physical injuries to passengers upon the ground of force majeure, the carrier must
clearly show not only that the efficient cause of the casualty was entirely independent of the human will, but
also that it was impossible to avoid. Any participation by the common carrier in the occurrence of the injury will
defeat the defense of force majeure.  conjecture. 14
In Servando v. Philippine Steam Navigation Company,  the Court summed up the essential characteristics  of
force majeure by quoting with approval from the Enciclopedia Juridica Española:
Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the
obligor is exempt from liability non-performance. The Partidas, the antecedent of Article 1174 of the
Civil Code, defines "caso fortuito" as 'an event that takes place by accident and could not have been
foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robber.
In its dissertation on the phrase "caso fortuito" the Enciclopedia Juridica Española says: 'In legal
sense and, consequently, also in relation to contracts, a "caso fortuito" presents the following
essential characteristics: (1) the cause of the unforeseen and unexpected occurence, or of the failure
of the debtor to comply with his obligation, must be independent of the human will; (2) it must be
impossible to foresee the event which constitutes 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 a normal manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.
Upon the other hand, the record yields affirmative evidence of fault or negligence on the part of respondent
common carrier. In her direct examination, petitioner Gatchalian narrated that shortly before the vehicle went
off the road and into a ditch, a "snapping sound" was suddenly heard at one part of the bus. One of the
passengers, an old woman, cried out, "What happened?" ("Apay addan samet nadadaelen?"). The driver
replied, nonchalantly, "That is only normal" ("Ugali ti makina dayta"). The driver did not stop to check if
anything had gone wrong with the bus. Moreover, the driver's reply necessarily indicated that the same
"snapping sound" had been heard in the bus on previous occasions. This could only mean that the bus had
not been checked physically or mechanically to determine what was causing the "snapping sound" which had
occurred so frequently that the driver had gotten accustomed to it. Such a sound is obviously alien to a motor
vehicle in good operating condition, and even a modicum of concern for life and limb of passengers dictated
that the bus be checked and repaired. The obvious continued failure of respondent to look after the
roadworthiness and safety of the bus, coupled with the driver's refusal or neglect to stop the mini-bus after he
had heard once again the "snapping sound" and the cry of alarm from one of the passengers, constituted
wanton disregard of the physical safety of the passengers, and hence gross negligence on the part of
respondent and his driver.
We turn to petitioner's claim for damages. The first item in that claim relates to revenue which petitioner said
she failed to realize because of the effects of the vehicular mishap. Petitioner maintains that on the day that
the mini-bus went off the road, she was supposed to confer with the district supervisor of public schools for a
substitute teacher's job, a job which she had held off and on as a "casual employee." The Court of Appeals,
however, found that at the time of the accident, she was no longer employed in a public school since, being a
casual employee and not a Civil Service eligible, she had been laid off. Her employment as a substitute
teacher was occasional and episodic, contingent upon the availability of vacancies for substitute teachers. In
view of her employment status as such, the Court of Appeals held that she could not be said to have in fact
lost any employment after and by reason of the accident. 13 Such was the factual finding of the Court of
Appeals, a finding entitled to due respect from this Court. Petitioner Gatchalian has not submitted any basis
for overturning this finding of fact, and she may not be awarded damages on the basis of speculation or
Petitioner's claim for the cost of plastic surgery for removal of the scar on her forehead, is another matter. A
person is entitled to the physical integrity of his or her body; if that integrity is violated or diminished, actual
injury is suffered for which actual or compensatory damages are due and assessable. Petitioner Gatchalian is
entitled to be placed as nearly as possible in the condition that she was before the mishap. A scar, especially
one on the face of the woman, resulting from the infliction of injury upon her, is a violation of bodily integrity, WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as well as the decision of the
giving raise to a legitimate claim for restoration to her conditio ante. If the scar is relatively small and does not then Court of First Instance of La Union dated 4 December 1975 are hereby REVERSED and SET
grievously disfigure the victim, the cost of surgery may be expected to be correspondingly modest. In Araneta, ASIDE.Respondent is hereby ORDERED to pay petitioner Reynalda Gatchalian the following sums: 1)
et al. vs. Areglado, et al.,  this Court awarded actual or compensatory damages for, among other things, the P15,000.00 as actual or compensatory damages to cover the cost of plastic surgery for the removal of the
surgical removal of the scar on the face of a young boy who had been injured in a vehicular collision. The scar on petitioner's forehead; 2) P30,000.00 as moral damages; and 3) P1,000.00 as attorney's fees, the
Court there held: aggregate amount to bear interest at the legal rate of 6% per annum counting from the promulgation of this
We agree with the appellants that the damages awarded by the lower court for the injuries suffered by decision until full payment thereof. Costs against private respondent.
Benjamin Araneta are inadequate. In allowing not more than P1,000.00 as compensation for the "permanent
deformity and — something like an inferiority complex" as well as for the "pathological condition on the left SO ORDERED.
side of the jaw" caused to said plaintiff, the court below overlooked the clear evidence on record that to arrest
the degenerative process taking place in the mandible and restore the injured boy to a nearly normal
condition, surgical intervention was needed, for which the doctor's charges would amount to P3,000.00,
exclusive of hospitalization fees, expenses and medicines. Furthermore, the operation, according to Dr. Diño,
would probably have to be repeated in order to effectuate a complete cure, while removal of the scar on the
face obviously demanded plastic surgery.
x x x           x x x          x x x

The father's failure to submit his son to a plastic operation as soon as possible does not prove that such
treatment is not called for. The damage to the jaw and the existence of the scar in Benjamin Araneta's
face are physical facts that can not be reasoned out of existence. That the injury should be treated in order to
restore him as far as possible to his original condition is undeniable. The father's delay, or even his
negligence, should not be allowed to prejudice the son who has no control over the parent's action nor impair
his right to a full indemnity.

. . . Still, taking into account the necessity and cost of corrective measures to fully repair the damage; the pain
suffered by the injured party; his feelings of inferiority due to consciousness of his present deformity, as well
as the voluntary character of the injury inflicted; and further considering that a repair, however, skillfully
conducted, is never equivalent to the original state, we are of the opinion that the indemnity granted by the
trial court should be increased to a total of P18,000.00. (Emphasis supplied)

G.R. No. 152122             July 30,

Petitioner estimated that the cost of having her scar surgically removed was somewhere between P10,000.00 2003
to P15,000.00.  Upon the other hand, Dr. Fe Tayao Lasam, a witness presented as an expert by petitioner,
testified that the cost would probably be between P5,000.00 to P10,000.00. 17 In view of this testimony, and
CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent.
the fact that a considerable amount of time has lapsed since the mishap in 1973 which may be expected to
increase not only the cost but also very probably the difficulty of removing the scar, we consider that the
amount of P15,000.00 to cover the cost of such plastic surgery is not unreasonable. PANGANIBAN, J.:

Turning to petitioner's claim for moral damages, the long-established rule is that moral damages may be A common carrier has a peculiar relationship with and an exacting responsibility to its passengers. For
awarded where gross negligence on the part of the common carrier is shown. 18 Since we have earlier reasons of public interest and policy, the ticket-issuing airline acts as principal in a contract of carriage and is
concluded that respondent common carrier and his driver had been grossly negligent in connection with the thus liable for the acts and the omissions of any errant carrier to which it may have endorsed any sector of the
bus mishap which had injured petitioner and other passengers, and recalling the aggressive manuevers of entire, continuous trip.
respondent, through his wife, to get the victims to waive their right to recover damages even as they were still
hospitalized for their injuries, petitioner must be held entitled to such moral damages. Considering the extent The Case
of pain and anxiety which petitioner must have suffered as a result of her physical injuries including the
permanent scar on her forehead, we believe that the amount of P30,000.00 would be a reasonable award.
Petitioner's claim for P1,000.00 as atttorney's fees is in fact even more modest. 19
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to reverse
the August 7, 2001 Decision2 and the February 7, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV
No. 45832. The challenged Decision disposed as follows:
"WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of Branch 31,
Regional Trial Court, National Capital Judicial Region, Manila, in Civil Case No. 82-13690, is hereby
MODIFIED by deleting that portion regarding defendants-appellants’ liabilities for the payment of the
actual damages amounting to HK$14,128.80 and US$2,000.00 while all other respects are
AFFIRMED. Costs against defendants-appellants."4
The assailed Resolution denied Petitioner’s Motion for Partial Reconsideration.
The Facts
The facts are narrated by the CA5 as follows:
"On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased from China
Airlines, Ltd. (CAL for brevity) airline passenger ticket number 297:4402:004:278:5 for air
transportation covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively endorseable to
Philippine Airlines, Ltd. (PAL for brevity).
"Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei using [the] CAL
ticket. Before he left for said trip, the trips covered by the ticket were pre-scheduled and confirmed by
the former. When he arrived in Taipei, he went to the CAL office and confirmed his Hongkong to
Manila trip on board PAL Flight No. PR 311. The CAL office attached a yellow sticker appropriately
indicating that his flight status was OK.
"When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to
Manila. The PAL office confirmed his return trip on board Flight No. PR 311 and attached its own
sticker. On November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip
to Manila. However, upon reaching the PAL counter, Chiok saw a poster stating that PAL Flight No.
PR 311 was cancelled because of a typhoon in Manila. He was then informed that all the confirmed
ticket holders of PAL Flight No. PR 311 were automatically booked for its next flight, which was to
leave the next day. He then informed PAL personnel that, being the founding director of the
Philippine Polysterene Paper Corporation, he ha[d] to reach Manila on November 25, 1981 because
of a business option which he ha[d] to execute on said date.
The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to respondent. It did
not, however, rule on their respective cross-claims. It disposed as follows:
"On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok Chan (hereafter
referred to as Lok) ha[d] taken and received Chiok’s plane ticket and his luggage. Lok called the
attention of Carmen Chan (hereafter referred to as Carmen), PAL’s terminal supervisor, and informed
the latter that Chiok’s name was not in the computer list of passengers. Subsequently, Carmen
informed Chiok that his name did not appear in PAL’s computer list of passengers and therefore
could not be permitted to board PAL Flight No. PR 307.
"Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not allowed
to take his flight. The latter then wrote the following, to wit: ‘PAL STAFF CARMEN CHAN CHKD
WITH R/C KENNY AT 1005H NO SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25
NOV.’ The latter sought to recover his luggage but found only 2 which were placed at the end of the
passengers line. Realizing that his new Samsonite luggage was missing, which contained cosmetics
worth HK$14,128.80, he complained to Carmen.
"Thereafter, Chiok proceeded to PAL’s Hongkong office and confronted PAL’s reservation officer,
Carie Chao (hereafter referred to as Chao), who previously confirmed his flight back to Manila. Chao
told Chiok that his name was on the list and pointed to the latter his computer number listed on the
PAL confirmation sticker attached to his plane ticket, which number was ‘R/MN62’.
"Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5 and asked Chao if this
ticket could be used to book him for the said flight. The latter, once again, booked and confirmed the
former’s trip, this time on board PAL Flight No. PR 311 scheduled to depart that evening. Later,
Chiok went to the PAL check-in counter and it was Carmen who attended to him. As this juncture,
Chiok had already placed his travel documents, including his clutch bag, on top of the PAL check-in
counter.
"Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, Chiok
lost his clutch bag containing the following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei
$8,000.00; (d) P2,000.00; (e) a three-piece set of gold (18 carats) cross pens valued at P3,500; (f) a
Cartier watch worth about P7,500.00; (g) a tie clip with a garnet birthstone and diamond worth
P1,800.00; and (h) a [pair of] Christian Dior reading glasses. Subsequently, he was placed on stand-
by and at around 7:30 p.m., PAL personnel informed him that he could now check-in.
"Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for damages, against PAL
and CAL, as defendants, docketed as Civil Case No. 82-13690, with Branch 31, Regional Trial Court,
National Capital Judicial Region, Manila.
"He alleged therein that despite several confirmations of his flight, defendant PAL refused to
accommodate him in Flight No. 307, for which reason he lost the business option aforementioned.
He also alleged that PAL’s personnel, specifically Carmen, ridiculed and humiliated him in the
presence of so many people. Further, he alleged that defendants are solidarily liable for the damages
he suffered, since one is the agent of the other."6
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendants to jointly
and severally pay:
1. Actual damages in the amount of HK$14,128.80 or its equivalent in Philippine Currency at the time
of the loss of the luggage consisting of cosmetic products;
 2. US$2,000.00 or its equivalent at the time of the loss of the clutch bag containing the money;
3. P200,000.00 by way of moral damages;
4. P50,000.00 by way of exemplary damages or corrective damages;
5. Attorney[’]s fees equivalent to 10% of the amounts due and demandable and awarded in favor of
the plaintiff; and
6. The costs of this proceedings."7
The two carriers appealed the RTC Decision to the CA.
Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked petitioner’s claim that it had merely acted as an issuing
agent for the ticket covering the Hong Kong-Manila leg of respondent’s journey. In support of its Decision, the
CA quoted a purported ruling of this Court in KLM Royal Dutch Airlines v. Court of Appeals8 as follows:
"Article 30 of the Warsaw providing that in case of transportation to be performed by various
successive carriers, the passenger can take action only against the carrier who performed the
transportation during which the accident or the delay occurred presupposes the occurrence of either
an accident or delay in the course of the air trip, and does not apply if the damage is caused by the
willful misconduct on the part of the carrier’s employee or agent acting within the scope of his
employment.
"It would be unfair and inequitable to charge a passenger with automatic knowledge or notice of a
condition which purportedly would excuse the carrier from liability, where the notice is written at the
back of the ticket in letters so small that one has to use a magnifying glass to read the words. To
preclude any doubt that the contract was fairly and freely agreed upon when the passenger accepted
the passage ticket, the carrier who issued the ticket must inform the passenger of the conditions
prescribed in the ticket or, in the very least, ascertain that the passenger read them before he
accepted the passage ticket. Absent any showing that the carrier’s officials or employees discharged
this responsibility to the passenger, the latter cannot be bound by the conditions by which the carrier
assumed the role of a mere ticket-issuing agent for other airlines and limited its liability only to
untoward occurrences in its own lines.
"Where the passage tickets provide that the carriage to be performed thereunder by several
successive carriers ‘is to be regarded as a single operation,’ the carrier which issued the tickets for
the entire trip in effect guaranteed to the passenger that the latter shall have sure space in the
various carriers which would ferry him through the various segments of the trip, and the ticket-issuing
carrier assumes full responsibility for the entire trip and shall be held accountable for the breach of
that guaranty whether the breach occurred in its own lines or in those of the other carriers."9
On PAL’s appeal, the appellate court held that the carrier had reneged on its obligation to transport
respondent when, in spite of the confirmations he had secured for Flight PR 311, his name did not appear in
the computerized list of passengers. Ruling that the airline’s negligence was the proximate cause of his
excoriating experience, the appellate court sustained the award of moral and exemplary damages.
The CA, however, deleted the RTC’s award of actual damages amounting to HK$14,128.80 and
US$2,000.00, because the lost piece of luggage and clutch bag had not actually been "checked in" or
delivered to PAL for transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial Reconsideration, contending that the appellate court
had erroneously relied on a mere syllabus of KLM v. CA, not on the actual ruling therein. Moreover, it argued
that respondent was fully aware that the booking for the PAL sector had been made only upon his request;
and that only PAL, not CAL, was liable for the actual carriage of that segment. Petitioner likewise prayed for a
ruling on its cross-claim against PAL, inasmuch as the latter’s employees had acted negligently, as found by
the trial court.
Denying the Motion, the appellate court ruled that petitioner had failed to raise any new matter or issue that
would warrant a modification or a reversal of the Decision. As to the alleged misquotation, the CA held that
while the portion it had cited appeared to be different from the wording of the actual ruling, the variance was
"more apparent than real since the difference [was] only in form and not in substance."10
CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3, 2001 Resolution, this Court
denied PAL’s appeal, docketed as GR No. 149544, for failure to serve the CA a copy of the Petition as
required by Section 3, Rule 45, in relation to Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No.
1-88 of this Court. PAL’s Motion for Reconsideration was denied with finality on January 21, 2002.
Only the appeal of CAL11 remains in this Court.
Issues
In its Memorandum, petitioner raises the following issues for the Court’s consideration:
"1. The Court of Appeals committed judicial misconduct in finding liability against the petitioner on the
basis of a misquotation from KLM Royal Dutch Airlines vs. Court of Appeals, et al., 65 SCRA 237 and
in magnifying its misconduct by denying the petitioner’s Motion for Reconsideration on a mere
syllabus, unofficial at that.
"2. The Court of Appeals committed an error of law when it did not apply applicable precedents on
the case before it.
"3. The Court of Appeals committed a non sequitur when it did not rule on the cross-claim of the
petitioner."12
The Court’s Ruling
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting from and basing its ruling against the two
airlines on an unofficial syllabus of this Court’s ruling in KLM v. CA. Moreover, such misconduct was allegedly
aggravated when the CA, in an attempt to justify its action, held that the difference between the actual ruling
and the syllabus was "more apparent than real."13
We agree with petitioner that the CA committed a lapse when it relied merely on the unofficial syllabus of our
ruling in KLM v. CA. Indeed, lawyers and litigants are mandated to quote decisions of this Court
accurately.14 By the same token, judges should do no less by strictly abiding by this rule when they quote
cases that support their judgments and decisions. Canon 3 of the Code of Judicial Conduct enjoins them to
perform official duties diligently by being faithful to the law and maintaining their professional competence.
However, since this case is not administrative in nature, we cannot rule on the CA justices’ administrative
liability, if any, for this lapse. First, due process requires that in administrative proceedings, the respondents
must first be given an opportunity to be heard before sanctions can be imposed. Second, the present action is
an appeal from the CA’s Decision, not an administrative case against the magistrates concerned. These two
suits are independent of and separate from each other and cannot be mixed in the same proceedings.
By merely including the lapse as an assigned error here without any adequate and proper administrative case
therefor, petitioner cannot expect the imposition of an administrative sanction.
In the case at bar, we can only determine whether the error in quotation would be sufficient to reverse or
modify the CA Decision.
Applicability  of KLM v. CA
In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their world tour. The tour
included a Barcelona-Lourdes route, which was serviced by the Irish airline Aer Lingus. At the KLM office in
Frankfurt, Germany, they obtained a confirmation from Aer Lingus of their seat reservations on its Flight 861.
On the day of their departure, however, the airline rudely off-loaded them.
When sued for breach of contract, KLM sought to be excused for the wrongful conduct of Aer Lingus by
arguing that its liability for damages was limited only to occurrences on its own sectors. To support its
argument, it cited Article 30 of the Warsaw Convention, stating that when transportation was to be performed
by various successive carriers, the passenger could take action only against the carrier that had performed
the transportation when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:
"1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be
sustained. That article presupposes the occurrence of either an accident or a delay, neither of which
took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its
manager there, refused to transport the respondents to their planned and contracted destination.
"2. The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus
because of the provision printed on the respondents' tickets expressly limiting the KLM's liability for
damages only to occurrences on its own lines is unacceptable. As noted by the Court of Appeals that
condition was printed in letters so small that one would have to use a magnifying glass to read the
words. Under the circumstances, it would be unfair and inequitable to charge the respondents with
automatic knowledge or notice of the said condition so as to preclude any doubt that it was fairly and
freely agreed upon by the respondents when they accepted the passage tickets issued to them by
the KLM. As the airline which issued those tickets with the knowledge that the respondents would be
flown on the various legs of their journey by different air carriers, the KLM was chargeable with the
duty and responsibility of specifically informing the respondents of conditions prescribed in their
tickets or, in the very least, to ascertain that the respondents read them before they accepted their
passage tickets. A thorough search of the record, however, inexplicably fails to show that any effort
was exerted by the KLM officials or employees to discharge in a proper manner this responsibility to
the respondents. Consequently, we hold that the respondents cannot be bound by the provision in
question by which KLM unilaterally assumed the role of a mere ticket-issuing agent for other airlines
and limited its liability only to untoward occurrences on its own lines.
"3. Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the
respondents provide that the carriage to be performed thereunder by several successive carriers ‘is
to be regarded as a single operation,’ which is diametrically incompatible with the theory of the KLM
that the respondents entered into a series of independent contracts with the carriers which took them
on the various segments of their trip. This position of KLM we reject. The respondents dealt
exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed
to them that they would have sure space in Aer Lingus flight 861. The respondents, under that
assurance of the internationally prestigious KLM, naturally had the right to expect that their tickets
would be honored by Aer Lingus to which, in the legal sense, the KLM had indorsed and in effect
guaranteed the performance of its principal engagement to carry out the respondents' scheduled
itinerary previously and mutually agreed upon between the parties.
"4. The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of
an official of the Aer Lingus which the KLM had engaged to transport the respondents on the
Barcelona-Lourdes segment of their itinerary. It is but just and in full accord with the policy expressly
embodied in our civil law which enjoins courts to be more vigilant for the protection of a contracting
party who occupies an inferior position with respect to the other contracting party, that the KLM
should be held responsible for the abuse, injury and embarrassment suffered by the respondents at
the hands of a supercilious boor of the Aer Lingus."15
In the instant case, the CA ruled that under the contract of transportation, petitioner -- as the ticket-issuing
carrier (like KLM) -- was liable regardless of the fact that PAL was to perform or had performed the actual
carriage. It elucidated on this point as follows:
 "By the very nature of their contract, defendant-appellant CAL is clearly liable under the contract of
carriage with [respondent] and remains to be so, regardless of those instances when actual carriage
was to be performed by another carrier. The issuance of a confirmed CAL ticket in favor of
[respondent] covering his entire trip abroad concretely attests to this. This also serves as proof that
defendant-appellant CAL, in effect guaranteed that the carrier, such as defendant-appellant PAL
would honor his ticket, assure him of a space therein and transport him on a particular segment of his
trip."16
Notwithstanding the errant quotation, we have found after careful deliberation that the assailed Decision is
supported in substance by KLM v. CA. The misquotation by the CA cannot serve as basis for the reversal of
its ruling.
Nonetheless, to avert similar incidents in the future, this Court hereby exhorts members of the bar and the
bench to refer to and quote from the official repository of our decisions, the Philippine Reports, whenever
practicable.17 In the absence of this primary source, which is still being updated, they may resort to unofficial
sources like the SCRA.18 We remind them that the Court’s ponencia, when used to support a judgment or
ruling, should be quoted accurately.19
Second Issue:
Liability of the Ticket-Issuing Airline
We now come to the main issue of whether CAL is liable for damages. Petitioner posits that the CA Decision
must be annulled, not only because it was rooted on an erroneous quotation, but also because it disregarded
jurisprudence, notably China Airlines v. Intermediate Appellate Court 20 and China Airlines v. Court of
Appeals.21
Jurisprudence Supports CA Decision
It is significant to note that the contract of air transportation was between petitioner and respondent, with the
former endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has
always been treated in this jurisdiction as a single operation. This jurisprudential rule is supported by the
Warsaw Convention,22 to which the Philippines is a party, and by the existing practices of the International Air
Transport Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:
"Transportation to be performed by several successive air carriers shall be deemed, for the purposes
of this Convention, to be one undivided transportation, if it has been regarded by the parties as a
single operation, whether it has been agreed upon under the form of a single contract or of a series
of contracts, and it shall not lose its international character merely because one contract or a series
of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting Party."23
Article 15 of IATA-Recommended Practice similarly provides:
"Carriage to be performed by several successive carriers under one ticket, or under a ticket and any
conjunction ticket issued therewith, is regarded as a single operation."
In American Airlines v. Court of Appeals,24 we have noted that under a general pool partnership agreement,
the ticket-issuing airline is the principal in a contract of carriage, while the endorsee-airline is the agent.
"x x x Members of the IATA are under a general pool partnership agreement wherein they act as
agent of each other in the issuance of tickets to contracted passengers to boost ticket sales
worldwide and at the same time provide passengers easy access to airlines which are otherwise
inaccessible in some parts of the world. Booking and reservation among airline members are allowed
even by telephone and it has become an accepted practice among them. A member airline which
enters into a contract of carriage consisting of a series of trips to be performed by different carriers is
authorized to receive the fare for the whole trip and through the required process of interline
settlement of accounts by way of the IATA clearing house an airline is duly compensated for the
segment of the trip serviced. Thus, when the petitioner accepted the unused portion of the
conjunction tickets, entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva to
New York, the petitioner tacitly recognized its commitment under the IATA pool arrangement to act
as agent of the principal contracting airline, Singapore Airlines, as to the segment of the trip the
petitioner agreed to undertake. As such, the petitioner thereby assumed the obligation to take the
place of the carrier originally designated in the original conjunction ticket. The petitioner’s argument
that it is not a designated carrier in the original conjunction tickets and that it issued its own ticket is
not decisive of its liability. The new ticket was simply a replacement for the unused portion of the
conjunction ticket, both tickets being for the same amount of US$ 2,760 and having the same points
of departure and destination. By constituting itself as an agent of the principal carrier the petitioner’s
undertaking should be taken as part of a single operation under the contract of carriage executed by
the private respondent and Singapore Airlines in Manila."25
Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of Appeals 26 was
held liable, even when the breach of contract had occurred, not on its own flight, but on that of another airline.
The Decision followed our ruling in Lufthansa German Airlines v. Court of Appeals,27 in which we had held that
the obligation of the ticket-issuing airline remained and did not cease, regardless of the fact that another
airline had undertaken to carry the passengers to one of their destinations.
In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent of CAL. In the
same way that we ruled against British Airways and Lufthansa in the aforementioned cases, we also rule that
CAL cannot evade liability to respondent, even though it may have been only a ticket issuer for the Hong
Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that respondent had satisfactorily proven the existence of the
factual basis for the damages adjudged against petitioner and PAL. As a rule, the findings of fact of the CA
affirming those of the RTC will not be disturbed by this Court. 28 Indeed, the Supreme Court is not a trier of
facts. As a rule also, only questions of law -- as in the present recourse -- may be raised in petitions for review
under Rule 45.
Moral damages cannot be awarded in breaches of carriage contracts, except in the two instances
contemplated in Articles 1764 and 2220 of the Civil Code, which we quote:
"Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
xxx      xxx      xxx
"Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad faith." (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must therefore determine if CAL or its agent (PAL)
is guilty of bad faith that would entitle respondent to moral damages.
In Lopez v. Pan American World Airways,  we defined bad faith as a breach of a known duty through some
29
motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport herein respondent from Hong Kong to Manila. That
duty arose when its agent confirmed his reservation for Flight PR 311, 30 and it became demandable when he
presented himself for the trip on November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent on Flight PR 311 on November 24,
1981. This fact, however, did not terminate the carrier’s responsibility to its passengers. PAL voluntarily
obligated itself to automatically transfer all confirmed passengers of PR 311 to the next available flight, PR
307, on the following day.31 That responsibility was subsisting when respondent, holding a confirmed ticket for
the former flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of his PR 311 flight on November 24,
1981. Hence, he had every reason to expect that he would be put on the replacement flight as a confirmed
passenger. Instead, he was harangued and prevented from boarding the original and the replacement flights.
Thus, PAL breached its duty to transport him. After he had been directed to pay the terminal fee, his pieces of
luggage were removed from the weighing-in counter despite his protestations.32
It is relevant to point out that the employees of PAL were utterly insensitive to his need to be in Manila on
November 25, 1981, and to the likelihood that his business affairs in the city would be jeopardized because of
a mistake on their part. It was that mistake that had caused the omission of his name from the passenger list
despite his confirmed flight ticket. By merely looking at his ticket and validation sticker, it is evident that the
glitch was the airline’s fault. However, no serious attempt was made by PAL to secure the all-important
transportation of respondent to Manila on the following day. To make matters worse, PAL allowed a group of
non-revenue passengers, who had no confirmed tickets or reservations, to board Flight PR 307.33
Time and time again, this Court has stressed that the business of common carriers is imbued with public
interest and duty; therefore, the law governing them imposes an exacting standard. 34 In Singson v. Court of
Appeals,35 we said:
"x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers, clearly
constitutive of gross negligence, recklessness and wanton disregard of the rights of the latter, [are]
acts evidently indistinguishable or no different from fraud, malice and bad faith. As the rule now
stands, where in breaching the contract of carriage the defendant airline is shown to have acted
fraudulently, with malice or in bad faith, the award of moral and exemplary damages, in addition to
actual damages, is proper."36 (Italics supplied)
In Saludo v. Court of Appeals,37 the Court reminded airline companies that due to the nature of their business,
they must not merely give cursory instructions to their personnel to be more accommodating towards
customers, passengers and the general public; they must require them to be so.
The acts of PAL’s employees, particularly Chan, clearly fell short of the extraordinary standard of care that the
law requires of common carriers.38 As narrated in Chan’s oral deposition,39 the manner in which the airline
discharged its responsibility to respondent and its other passengers manifested a lack of the requisite
diligence and due regard for their welfare. The pertinent portions of the Oral Deposition are reproduced as
follows:
"Q         Now you said that flight PR 311 on 24th November was cancelled due to [a] typhoon and
naturally the passengers on said flight had to be accommodated on the first flight the following day or
the first flight subsequently. [W]ill you tell the Honorable Deposition Officer the procedure followed by
Philippine Airlines in the handling of passengers of cancelled flight[s] like that of PR 311 which was
cancelled due to [a] typhoon?
A         The procedure will be: all the confirmed passengers from [PR] 311 24th November [are]
automatically transfer[red] to [PR] 307, 25th November[,] as a protection for all disconfirmed
passengers.
Q         Aside from this procedure[,] what do you do with the passengers on the cancelled flight who
are expected to check-in on the flights if this flight is cancelled or not operating due to typhoon or
other reasons[?] In other words, are they not notified of the cancellation?
A         I think all these passengers were not notified because of a typhoon and Philippine Airlines
Reservation were [sic] not able to call every passenger by phone.
Atty. Fruto:
Q         Did you say ‘were not notified?’
A         I believe they were not, but believe me, I was on day-off.
Atty. Calica:
Q         Per procedure, what should have been done by Reservations Office when a flight is cancelled
for one reason or another?
A         If there is enough time, of course, Reservations Office x x x call[s] up all the passengers and
tell[s] them the reason. But if there [is] no time[,] then the Reservations Office will not be able to do
that."40
xxx      xxx      xxx
"Q         I see. Miss Chan, I [will] show you a ticket which has been marked as Exh. A and A-1. Will
you please go over this ticket and tell the court whether this is the ticket that was used precisely by
Mr. Chiok when he checked-in at [F]light 307, 25 November ‘81?
A         [Are you] now asking me whether he used this ticket with this sticker?
Q         No, no, no. That was the ticket he used.
A         Yes, [are you] asking me whether I saw this ticket?
Atty. Fruto: Yes.
A         I believe I saw it.
Q         You saw it, O.K. Now of course you will agree with me Miss Chan that this yellow stub here
which has been marked as Exh. A-1-A, show[s] that the status on flight 311, 24th November, is O.K.,
correct?
A         Yes.
Q         You agree with me. And you will also agree with me that in this ticket of flight 311, on this,
another sticker Exh. A-1-B for 24 November is O.K.?
A         May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation.
Q         O.K. Miss Chan what do you understand by these entries here R bar M N 6 V?41
A         This is what we call a computer reference.
Q         I see. This is a computer reference showing that the name of Mr. Chiok has been entered in
Philippine Airline’s computer, and this is his computer number.
A         Yes.
Q         Now you stated in your answer to the procedure taken, that all confirmed passengers on flight
311, 24 November[,] were automatically transferred to 307 as a protection for the passengers,
correct?
A         Correct.
Q         So that since following the O.K. status of Mr. Chiok’s reservation [on] flight 311, [he] was also
automatically transferred to flight 307 the following day?
A         Should be.
Q         Should be. O.K. Now do you remember how many passengers x x x were transferred from
flight 311, 24 November to flight 307, 25 November 81?
A         I can only give you a very brief idea because that was supposed to be air bus so it should be
able to accommodate 246 people; but how many [exactly], I don’t know."42
xxx      xxx      xxx
"Q         So, between six and eight o’clock in the evening of 25 November ‘81, Mr. Chiok already told
you that he just [came] from the Swire Building where Philippine Airlines had [its] offices and that he
told you that his space for 311 25 November 81 was confirmed?
A         Yes.
Q         That is what he told you. He insisted on that flight?
A         Yes.
Q         And did you not try to call up Swire Building-- Philippine Airlines and verify indeed if Mr. Chiok
was there?
A         Swire House building is not directly under Philippine Airlines. it is just an agency for selling
Philippine Airlines ticket. And besides around six o’ clock they’re close[d] in Central.
Q         So this Swire Building is an agency authorized by Philippine Airlines to issue tickets for and
on behalf of Philippine Airlines and also...
A         Yes.
Q         And also to confirm spaces for and on behalf of Philippine Airlines.
 A         Yes."43
Under the foregoing circumstances, we cannot apply our 1989 ruling in China Airlines v. Intermediate
Appellate Court,44 which petitioner urges us to adopt. In that case, the breach of contract and the negligence of
the carrier in effecting the immediate flight connection for therein private respondent was incurred in good
faith.45 Having found no gross negligence or recklessness, we thereby deleted the award of moral and
exemplary damages against it.46
This Court’s 1992 ruling in China Airlines v. Court of Appeals 47 is likewise inapplicable. In that case, we found
no bad faith or malice in the airline’s breach of its contractual obligation. 48 We held that, as shown by the flow
of telexes from one of the airline’s offices to the others, petitioner therein had exercised diligent efforts in
assisting the private respondent change his flight schedule. In the instant case, petitioner failed to exhibit the
same care and sensitivity to respondent’s needs.
In Singson v. Court of Appeals,49 we said:
"x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may
only be recoverable in instances where the mishap results in the death of a passenger, or where the
carrier is guilty of fraud or bad faith, there are situations where the negligence of the carrier is so
gross and reckless as to virtually amount to bad faith, in which case, the passenger likewise
becomes entitled to recover moral damages."
In the present case, we stress that respondent had repeatedly secured confirmations of his PR 311 flight on
November 24, 1981 -- initially from CAL and subsequently from the PAL office in Hong Kong. The status of
this flight was marked "OK" on a validating sticker placed on his ticket. That sticker also contained the entry
"RMN6V." Ms Chan explicitly acknowledged that such entry was a computer reference that meant that
respondent’s name had been entered in PAL’s computer.
Since the status of respondent on Flight PR 311 was "OK," as a matter of right testified to by PAL’s witness,
he should have been automatically transferred to and allowed to board Flight 307 the following day. Clearly
resulting from negligence on the part of PAL was its claim that his name was not included in its list of
passengers for the November 24, 1981 PR 311 flight and, consequently, in the list of the replacement flight
PR 307. Since he had secured confirmation of his flight -- not only once, but twice -- by personally going to the
carrier’s offices where he was consistently assured of a seat thereon -- PAL’s negligence was so gross and
reckless that it amounted to bad faith.
In view of the foregoing, we rule that moral and exemplary 50 damages were properly awarded by the lower
courts.51
Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CAL’s cross-claim against PAL. Petitioner submits that the CA
should have ruled on the cross-claim, considering that the RTC had found that it was PAL’s employees who
had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
"Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-party arising out of the
transaction or occurrence that is the subject matter either of the original action or of a counterclaim
therein. Such cross-claim may include a claim that the party against whom it is asserted is or may be
liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant."
For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA Finance Corporation v.
CA,52 the Court stated:
"x x x. An indispensable party is one whose interest will be affected by the court’s action in the
litigation, and without whom no final determination of the case can be had. The party’s interest in the
subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties
that his legal presence as a party to the proceeding is an absolute necessity. In his absence there
cannot be a resolution of the dispute of the parties before the court which is effective, complete, or
equitable.
xxx      xxx      xxx
"Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot
attain real finality."
PAL’s interest may be affected by any ruling of this Court on CAL’s cross-claim. Hence, it is imperative and in
accordance with due process and fair play that PAL should have been impleaded as a party in the present
proceedings, before this Court can make a final ruling on this matter.
Although PAL was petitioner’s co-party in the case before the RTC and the CA, petitioner failed to include the
airline in the present recourse. Hence, the Court has no jurisdiction over it. Consequently, to make any ruling
on the cross-claim in the present Petition would not be legally feasible because PAL, not being a party in the
present case, cannot be bound thereby.53
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
G.R. No. 143133            June 5, 2002
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT
SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondents.
PANGANIBAN, J.:
Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is
given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held
liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998
Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571. The
decretal portion of the Decision reads as follows:
"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby
REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally pay
plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as
actual damages, representing the value of the damaged cargo, plus interest at the legal rate
from the time of filing of the complaint on July 25, 1991, until fully paid;
'2) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had
disposed as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as
well as defendant's counterclaim."5
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg,
Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned
to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of
Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to
be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be
unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same
as total loss.
1âwphi1.nêt
"Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee's
claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six &
50/100 pesos (P506,086.50), and was subrogated to the latter's rights and causes of action against
defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the
amount paid by them, to the consignee as insured.
"Impugning the propriety of the suit against them, defendants-appellees imputed that the damage
and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or
to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or
omission of the shipper of the goods or their representatives. In addition thereto, defendants-
appellees argued that their liability, if there be any, should not exceed the limitations of liability
provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that,
in any event, they exercised due diligence and foresight required by law to prevent any damage/loss
to said shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of
proof required by law.7
It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly frivolous or
primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods
shipped, because they had failed to overcome the presumption of negligence imposed on common carriers.
The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the goods
was due to pre-shipment damage.9 It likewise opined that the notation "metal envelopes rust stained and
slightly dented" placed on the Bill of Lading had not been the proximate cause of the damage to the four (4)
coils.10
As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was not
applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been
declared by the shipper. The CA, however, affirmed the award of attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the following issues for the Court's consideration:
I
 "Whether or not plaintiff by presenting only one witness who has never seen the subject shipment possession of and received for transportation by the carrier until they are delivered, actually or constructively,
and whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article to the consignee or to the person who has a right to receive them.15
1735 of the Civil Code;
This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract,
II the riding public enters into a contract of transportation with common carriers. 16 Even if it wants to, it cannot
submit its own stipulations for their approval.17 Hence, it merely adheres to the agreement prepared by them.
"Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law;
Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to
III have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. 18 That is,
unless they prove that they exercised extraordinary diligence in transporting the goods. 19 In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that they observed such
"Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment diligence.20
damage and to exempt herein defendants from liability;
However, the presumption of fault or negligence will not arise21 if the loss is due to any of the following causes:
IV (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in
war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable character of the goods or defects in the packing or the container; or (5) an order or act of competent public
to the case at bar."12 authority.22 This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.23
In sum, the issues boil down to three:
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their
1. Whether petitioners have overcome the presumption of negligence of a common carrier arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier.
If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods
happened, the transporter shall be held responsible.24
2. Whether the notice of loss was timely filed
That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a
3. Whether the package limitation of liability is applicable review of the records and more so by the evidence adduced by respondent.25

This Court's Ruling First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in
Hamburg, Germany.26
The Petition is partly meritorious.
Second, prior to the unloading of the cargo, an Inspection Report 27 prepared and signed by representatives of
First Issue: both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the
contents thereof exposed and rusty.
Proof of Negligence
Third, Bad Order Tally Sheet No. 154979 28 issued by Jardine Davies Transport Services, Inc., stated that the
four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is
Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the
an apparent or a presumed loss or damage.29
basis of the lone testimony offered by private respondent. The contention is untenable.

Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested, the steel sheets
Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy,
found in bad order were wet with fresh water.
are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the
passengers they transport.13 Thus, common carriers are required to render service with the greatest skill and
foresight and "to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered Fifth, petitioners -- in a letter 31 addressed to the Philippine Steel Coating Corporation and dated October 12,
for shipment, and to exercise due care in the handling and stowage, including such methods as their nature 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.
requires."14 The extraordinary responsibility lasts from the time the goods are unconditionally placed in the
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent COURT:
portions of his testimony are reproduce hereunder:
Let the witness answer.
"Q.       Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable
Court with what company you are connected? A.       The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on
the sides."32
A.       BM Santos Checkers Agency, sir.
All these conclusively prove the fact of shipment in good order and condition and the consequent damage to
Q.       How is BM Santos checkers Agency related or connected with defendant Jardine Davies the four coils while in the possession of petitioner,33 who notably failed to explain why.34
Transport Services?
Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law
A.       It is the company who contracts the checkers, sir. requires a common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it
for safe carriage and delivery.35
Q.       You mentioned that you are a Head Checker, will you inform this Honorable Court your duties
and responsibilities? True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however,
there is no showing that petitioners exercised due diligence to forestall or lessen the loss. 36 Having been in the
A.       I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of service for several years, the master of the vessel should have known at the outset that metal envelopes in
cargoes. the said state would eventually deteriorate when not properly stored while in transit.37 Equipped with the proper
knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the
vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the
x x x           x x x           x x x cargo. But none of these measures was taken. 38 Having failed to discharge the burden of proving that they
have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage
Q.       On or about August 1, 1990, were you still connected or employed with BM Santos as a Head to the four coils.39
Checker?
In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article
A.       Yes, sir. 1734(4) of the Civil Code. They cite the notation "metal envelopes rust stained and slightly dented" printed on
the Bill of Lading as evidence that the character of the goods or defect in the packing or the containers was
Q.       And, on or about that date, do you recall having attended the discharging and inspection of the proximate cause of the damage. We are not convinced.
cold steel sheets in coil on board the MV/AN ANGEL SKY?
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to
A.       Yes, sir, I was there. the condition noted on the Bill of Lading. 40 The aforecited exception refers to cases when goods are lost or
damaged while in transit as a result of the natural decay of perishable goods or the fermentation or
evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in
x x x           x x x           x x x packages in which they are shipped, or the natural propensities of animals. 41 None of these is present in the
instant case.
Q.       Based on your inspection since you were also present at that time, will you inform this
Honorable Court the condition or the appearance of the bad order cargoes that were unloaded from Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon
the MV/ANANGEL SKY? ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the
goods notwithstanding such condition.42 Thus, petitioners have not successfully proven the application of any
ATTY. MACAMAY: of the aforecited exceptions in the present case.43

Objection, Your Honor, I think the document itself reflects the condition of the cold steel Second Issue:
sheets and the best evidence is the document itself, Your Honor that shows the condition of
the steel sheets. Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act 44 (COGSA),
respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was
discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.45
We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not
be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or
survey. As stated earlier, prior to unloading the cargo, an Inspection Report 46 as to the condition of the goods
was prepared and signed by representatives of both parties.47
Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar
recovery if it is nonetheless filed within one year. 48 This one-year prescriptive period also applies to the
shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.49
In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by prescription as long
as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:
"Inasmuch as the 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."
In the present case, the cargo was discharged on July 31, 1990, while the Complaint  was filed by respondent
51
on July 25, 1991, within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability should be
limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)52 of COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the
subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion
of the Letter of Credit or "L/C No. 90/02447" in the said Bill of Lading.54
A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a contract by
which three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities
and assume stipulated obligations.56 In a nutshell, the acceptance of the bill of lading by the shipper and the
consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and
binding contract.57
Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for loss or
destruction of a cargo -- unless the shipper or owner declares a greater value 58 -- is sanctioned by law.59 There
are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances,
and (2) it has been fairly and freely agreed upon by the parties.60 The rationale for this rule is to bind the
shippers by their agreement to the value (maximum valuation) of their goods.61
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed
amount per package.62 In all matters not regulated by the Civil Code, the right and the obligations of common
carriers shall be governed by the Code of Commerce and special laws. 63 Thus, the COGSA, which is
suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision
limiting the carrier's liability in the absence of a shipper's declaration of a higher value in the bill of lading. 64 The
provisions on limited liability are as much a part of the bill of lading as though physically in it and as though
placed there by agreement of the parties.65
In the case before us, there was no stipulation in the Bill of Lading 66 limiting the carrier's liability. Neither did
the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of
the words "L/C No. 90/02447 cannot be the basis for petitioners' liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper
for the importation of steel sheets did not effect a declaration of the value of the goods as required by the
bill.67 That notation was made only for the convenience of the shipper and the bank processing the Letter of
Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was separate from the
Other Letter of Credit arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated
independently of the contract of sale between the seller and the buyer, and the contract of issuance
of a letter of credit between the amount of goods described in the commercial invoice in the contract
of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of
the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look
beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the
carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify
their accuracy vis-à-vis the commercial invoice and the letter of credit. Thus, the discrepancy
between the amount of goods indicated in the invoice and the amount in the bill of lading cannot
negate petitioner's obligation to private respondent arising from the contract of transportation."70
In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not
on the per metric ton price declared in the Letter of Credit. 71 In Eastern Shipping Lines, Inc. v. Intermediate
Appellate Court,72 we explained the meaning of packages:
"When what would ordinarily be considered packages are shipped in a container supplied by the
carrier and the number of such units is disclosed in the shipping documents, each of those units and
not the container constitutes the 'package' referred to in the liability limitation provision of Carriage of
Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly
disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four
damaged coils should be considered as the shipping unit subject to the US$500 limitation. 1âwphi1.nêt

WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners' liability is
reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on
July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as
to costs.

SO ORDERED.