C.

DILIGENCE REQUIRED OF COMMON CARRIERS

SECOND DIVISION

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.
1âw phi1.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.

Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Footnote

1Per Justice Presbitero J. Velasco, Jr., and concurred in by Justices Bienvenido L. Reyes and Juan Q.
Enriquez, Jr.

2 Per Judge Oscar Pimentel.

3 RTC Decision, pp. 3-5; Rollo, pp. 31-33.

4 Id., p. 6; id., p. 34.

5 Petition, p. 5, Rollo, p. 13.

6 Planters Products, Inc. v. Court of Appeals, 226 SCRA 476 (1993).

7 168 SCRA 612 (1988).

8 Id., pp. 617-618 (italics in the original).

9 164 SCRA 685, 692 (1988).

10 CA Decision, p. 5; Rollo, p. 25.

11 Petition, pp. 6-9; Rollo, pp. 14-17.

12 CA Decision, p. 6; Rollo, p. 26 (emphasis in the original).

13 Id., pp. 6-7; id., pp. 26-27 (emphasis in the original).

See 5-A Ambrosio Padilla, Civil Code Annotated 472 (6th ed., 1990) citing Southern Lines, Inc. v. Court of
14

Appeals and City of Iloilo, 114 Phil. 198 (1962).

15Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of [Art. 1734], 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.
 THIRD DIVISION

[G.R. NO. 160219 : July 21, 2008]

VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO, Petitioners, v. ADELFO B.

MACASA, EMELIA B. MACASA, TIMOTEO B. MACASA, CORNELIO B. MACASA, JR., and
ROSARIO C. MACASA, SULPICIO LINES, INC., GO GUIOC SO, ENRIQUE S. GO, EUSEBIO S.
GO, RICARDO S. GO, VICTORIANO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO and
EDMUNDO S. GO, Respondents.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure
seeking the reversal of the Court of Appeals (CA) Decision2 dated September 24, 2003, which affirmed
with modification the Decision3 of the Regional Trial Court (RTC), Branch 17 of Davao City, dated May
5, 1995.

The Facts

On December 19, 1987, spouses Cornelio (Cornelio) and Anacleta Macasa (Anacleta), together with
their eight-year-old grandson, Ritchie Macasa, (Ritchie) boarded the MV Doña Paz, owned and operated
by respondent Sulpicio Lines, Inc. (Sulpicio Lines), at Tacloban, Leyte bound for Manila. On the fateful
evening of December 20, 1987, MV Doña Paz collided with the MT Vector, an oil tanker owned and
operated by petitioners Vector Shipping Corporation (Vector Shipping) and Francisco Soriano (Soriano),
which at the time was loaded with 860,000 gallons of gasoline and other petroleum products, in the
vicinity of Dumali Point, Tablas Strait, between Marinduque and Oriental Mindoro. Only twenty-six
persons survived: 24 passengers of MV Doña Paz and 2 crew members of MT Vector. Both vessels were
never retrieved. Worse, only a few of the victims' bodies, who either drowned or were burned alive,
were recovered. Cornelio, Anacleta and Ritchie were among the victims whose bodies have yet to be
recovered up to this day.

Respondents Adelfo, Emilia, Timoteo, and Cornelio, Jr., all surnamed Macasa, are the children of
Cornelio and Anacleta. On the other hand, Timoteo and his wife, respondent Rosario Macasa, are the
parents of Ritchie (the Macasas). Some of the Macasas went to the North Harbor in Manila to await the
arrival of Cornelio, Anacleta and Ritchie. When they heard the news that MV Doña Paz was rammed at
sea by another vessel, bewildered, the Macasas went to the office of Sulpicio Lines to check on the
veracity of the news, but the latter denied that such an incident occurred. According to the Macasas,
Sulpicio Lines was uncooperative and was reluctant to entertain their inquiries. Later, they were forced
to rely on their own efforts to search for the bodies of their loved ones, but to no avail.

The Macasas manifested that before they filed a case in court, Sulpicio Lines, through counsel,
intimated its intention to settle, and offered the amount of P250,000.00 for the death of Cornelio,
Anacleta and Ritchie. The Macasas rejected the said offer. Thus, on October 2, 1991, the Macasas filed
a Complaint for Damages arising out of breach of contract of carriage against Sulpicio Lines before the
RTC. The complaint imputed negligence to Sulpicio Lines because it was remiss in its obligations as a
common carrier. The Macasas prayed for civil indemnity in the amount of P800,000.00 for the death
of Cornelio, Anacleta and Ritchie, as well as for Cornelio's and Anacleta's alleged unearned income
since they were both working as vocational instructors before their demise. The Macasas also
claimed P100,000.00 as actual and compensatory damages for the lost cash, checks, jewelries and
other personal belongings of the latter, P600,000.00 in moral damages, P100,000.00 by way of
exemplary damages, and P100,000.00 as costs and attorney's fees.
Sulpicio Lines traversed the complaint, alleging, among others that (1) MV Doña Paz was seaworthy in
all aspects; (2) it exercised extraordinary diligence in transporting their passengers and goods; (3) it
acted in good faith as it gave immediate assistance to the survivors and kin of the victims; (4) the
sinking of MV Doña Paz was without contributory negligence on its part; and (5) the collision was MT
Vector's fault since it was allowed to sail with an expired coastwise license, expired certificate of
inspection and it was manned by unqualified and incompetent crew members per findings of the Board
of Marine Inquiry (BMI) in BMI Case No. 653-87 which had exonerated Sulpicio Lines from liability.
Thus, Sulpicio Lines filed a Third-Party Complaint against Vector Shipping, Soriano and Caltex
Philippines Inc. (Caltex), the charterer of MT Vector.

Trial on the merits ensued.

The RTC's Ruling

In its Decision4 dated May 5, 1995, the RTC awarded P200,000.00 as civil indemnity for the death of
Cornelio, Anacleta and Ritchie; P100,000.00 as actual damages; P500,000.00 as moral
damages; P100,000.00 as exemplary damages; and P50,000.00 as attorney's fees. The case was
disposed of in this wise:

Accordingly, as a result of this decision, on plaintiffs' complaint against third-party (sic) defendant
Sulpicio Lines Inc., third-party defendant Caltex Philippines, Inc. and third-party defendant MT Vector
Shipping Corporation and/or Francisco Soriano, are liable against defendant third-party plaintiff,
Sulpicio Lines, for reimbursement, subrogation and indemnity on all amounts, defendant Sulpicio Lines
was ordered liable against plaintiffs, by way of actual, moral, exemplary damages and attorney's fee,
MT Vector Shipping Lines and/or Francisco Soriano, third-party defendants, are ordered jointly and
severally, liable to pay third-party plaintiff, Sulpicio Lines, by way of reimbursement, subrogation and
indemnity, of all the above amounts, ordered against defendant Sulpicio Lines, Inc., to pay in favor of
plaintiff, with interest and cost of suit.

SO ORDERED.5

Aggrieved, Sulpicio Lines, Caltex, Vector Shipping and Soriano appealed to the CA.

The CA's Ruling

In the assailed Decision6 dated September 24, 2003, the CA held:

WHEREFORE, all premises considered, the assailed decision is hereby modified in that third-party
defendant-appellant Caltex Phils., Inc. is hereby exonerated from liability. The P100,000 actual
damages is deleted while the indemnity for (sic) is reduced to P150,000. All other aspects of the
appealed judgment are perforce affirmed.

SO ORDERED.7

The Issues

Hence, this Petition raising the following issues:

1) May the decision of the Board Marine Inquiry (BMI) which, to date, is still pending with the
Department of National Defense (DND) and, therefore, deemed vacated as it is not yet final and
executory, be binding upon the court? cralawred

2) In the absence of clear, convincing, solid, and concrete proof of including, but not limited to, absence
of eyewitnesses on that tragic maritime incident on 20 December 1987, will it be in consonance with
law, logic, principles of physics, and/or allied science, to hold that MT VECTOR is the vessel solely at
fault and responsible for the collision? How about MV DOÑA PAZ, a bigger ship of 2,324.08 gross
tonnage (5-deck cargo passenger vessel, then cruising at 16.5 knots)? As compared to MT VECTOR of
629.82 gross tonner tanker, then cruising at 4.5 knots? May it be considered that, as between the two
vessels, MV DOÑA PAZ could ha[ve] avoid[ed] such collision had there been an official on the bridge,
and that MV DOÑA PAZ could had been earlier alarmed by its radar for an approaching vessel? cralawred

3) May VECTOR and SORIANO be held liable to indemnify/reimburse SULPICIO the amounts it is
ordered to pay the MACASA's because SULPICIO's liability arises from breach of contract of carriage,
inasmuch as in "culpa contractual" it is sufficient to prove the existence of the contract, because carrier
is presumed to be at fault or to have acted negligently it being its duty to exercise extraordinary
diligence, and cannot make the [safety] of its passengers dependent upon the diligence of VECTOR
and SORIANO? cralawred

4) Will it be in accord with existing law and/or jurisprudence that both vessels (MV DOÑA PAZ and MT
VECTOR) be declared mutually at fault and, therefore, each must [bear] its own loss? In the absence
of CLEAR and CONVINCING proof[,] who is solely at fault?8

Petitioners posit that the factual findings of the BMI are not binding on the Court as such is limited to
administrative liabilities and does not absolve the common carrier from its failure to observe
extraordinary diligence; that this Court's ruling in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc. 9 is
not res adjudicata to this case, since there were several other cases which did not reach this Court but,
however, attained finality, previously holding that petitioners and Sulpicio Lines are jointly and
severally liable to the victims;10 that the collision was solely due to the fault of MV Doña Paz as it was
guilty of navigational fault and negligence; that due to the absence of the ship captain and other
competent officers who were not at the bridge at the time of collision, and running at a speed of 16.5
knots, it was the MV Doña Paz which rammed MT Vector; and that it was improbable for a slower vessel
like MT Vector which, at the time, was running at a speed of merely 4.5 knots to ram a much faster
vessel like the MV Doña Paz.11

On the other hand, Sulpicio Lines claims that this Court's ruling in Caltex (Philippines), Inc. v. Sulpicio
Lines, Inc.12 is res adjudicata to this case being of similar factual milieu and that the same is the law
of the case on the matter; that the BMI proceedings are administrative in nature and can proceed
independently of any civil action filed with the regular courts; that the BMI findings, as affirmed by the
Philippine Coast Guard, holding that MT Vector was solely at fault at the time of collision, were based
on substantial evidence and by reason of its special knowledge and technical expertise, the BMI's
findings of facts are generally accorded respect by the courts; and that, as such, said BMI factual
findings cannot be the subject of the instant Petition for Review asking this Court to look again into the
pieces of evidence already presented. Thus, Sulpicio Lines prays that the instant Petition be denied for
lack of merit.13

In their memorandum, the Macasas manifest that they are basically concerned with their claims against
Sulpicio Lines for breach of contract of carriage. The Macasas opine that the arguments raised by
Sulpicio Lines in its attempt to avoid liability to the Macasas are without basis in fact and in law because
the RTC's Decision is supported by applicable provisions of law and settled jurisprudence on contract
of carriage. However, they disagree with the CA on the deletion of the RTC's award of P100,000.00
actual damages. The CA's simple justification that if indeed the victims had such huge amount of
money, they could have traveled by plane instead of taking the MV Doña Paz, according to the Macasas,
is unjust, misplaced and adds insult to injury. They insist that the claim for actual damages was duly
established in the hearings before the RTC by ample proof that Cornelio and Anacleta were both
professionals; that they were in possession of personal effects and jewelries; and that since it was the
Christmas season, the spouses intended a vacation in Manila and buy things to bring home as gifts.
The Macasas also appeal that the reduction of the civil indemnity for the death of Cornelio, Anacleta
and Ritchie from P200,000.00 to P150,000.00 be reconsidered. Thus, the Macasas pray that the RTC
Decision be affirmed in toto and/or the CA Decision be modified with respect to the deleted award of
actual damages and the reduced civil indemnity for the death of the victims.14
 This Court's Ruling

The instant Petition lacks merit.

It is a well-established doctrine that in Petitions for Review on Certiorari under Rule 45 of the Rules of
Civil Procedure, only questions of law may be raised by the parties and passed upon by this Court. This
Court defined a question of law, as distinguished from a question of fact, to wit:

A question of law arises when there is doubt as to what the law is on a certain state of facts, while
there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a
question to be one of law, the same must not involve an examination of the probative value of the
evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what
the law provides on the given set of circumstances. Once it is clear that the issue invites a review
of the evidence presented, the question posed is one of fact. Thus, the test of whether a
question is one of law or of fact is not the appellation given to such question by the party
raising the same; rather, it is whether the appellate court can determine the issue raised
without reviewing or evaluating the evidence, in which case, it is a question of law;
otherwise it is a question of fact.15

Petitioners' insistence that MV Doña Paz was at fault at the time of the collision will entail this Court's
review and determination of the weight, credence, and probative value of the evidence presented. This
Court is being asked to evaluate the pieces of evidence which were adequately passed upon by both
the RTC and the CA. Without doubt, this matter is essentially factual in character and, therefore, outside
the ambit of a Petition for Review on Certiorariunder Rule 45 of the Rules of Civil Procedure. Petitioners
ought to remember that this Court is not a trier of facts. It is not for this Court to weigh these pieces
of evidence all over again.16

Likewise, we take judicial notice17 of our decision in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.18 In
that case, while Caltex was exonerated from any third-party liability, this Court sustained the CA ruling
that Vector Shipping and Soriano are liable to reimburse and indemnify Sulpicio Lines for whatever
damages, attorney's fees and costs the latter is adjudged to pay the victims therein.

Petitioners' invocation of the pendency before this Court of Francisco Soriano v. Sulpicio Lines,
Inc.19 along with Vector Shipping Corporation and Francisco Soriano v. American Home Assurance Co.
and Sulpicio Lines, Inc.20 is unavailing. It may be noted that in a Resolution dated February 13, 2006,
this Court denied the petition in Francisco Soriano v. Sulpicio Lines, Inc. for its failure to sufficiently
show that the CA committed any reversible error in the challenged decision as to warrant the exercise
of this Court's discretionary appellate jurisdiction. As a result, the CA decision21 dated November 17,
2003 holding that Sulpicio Lines has a right to reimbursement and indemnification from the third-party
defendants Soriano and Vector Shipping, who are the same petitioners in this case, was sustained by
this Court. Considering that in the cases which have reached this Court, we have consistently upheld
the third-party liability of petitioners, we see no cogent reason to deviate from this ruling. chanrobles vi rtu al law lib rary

Moreover, in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.,22 we held that MT Vector fits the definition
of a common carrier under Article 173223 of the New Civil Code. Our ruling in that case is instructive:

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code.

The provisions owed their conception to the nature of the business of common carriers. This business
is impressed with a special public duty. The public must of necessity rely on the care and skill of
common carriers in the vigilance over the goods and safety of the passengers, especially because with
the modern development of science and invention, transportation has become more rapid, more
complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is
under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law
to impliedly warrant its seaworthiness.

Thus, we are disposed to agree with the findings of the CA when it aptly held:

We are not swayed by the lengthy disquisition of MT Vector and Francisco Soriano urging this Court to
absolve them from liability. All evidence points to the fact that it was MT Vector's negligent officers and
crew which caused it to ram into MV Doña Paz. More so, MT Vector was found to be carrying expired
coastwise license and permits and was not properly manned. As the records would also disclose, there
is a defect in the ignition system of the vessel, and it was not convincingly shown whether the
necessitated repairs were in fact undertaken before the said ship had set to sea. In short, MT Vector
was unseaworthy at the time of the mishap. That the said vessel was allowed to set sail when it was,
to everyone in the group's knowledge, not fit to do so translates into rashness and imprudence.24

We reiterate, anew, the rule that findings of fact of the CA are generally binding and conclusive on this
Court.25 While this Court has recognized several exceptions26 to this rule, none of these exceptions
finds application in this case. It bears emphasis also that this Court accords respect to the factual
findings of the trial court, especially if affirmed by the CA on appeal. Unless the trial court overlooked
substantial matters that would alter the outcome of the case, this Court will not disturb such findings.
In any event, we have meticulously reviewed the records of the case and found no reason to depart
from the rule.27

Lastly, we cannot turn a blind eye to this gruesome maritime tragedy which is now a dark page in our
nation's history. We commiserate with all the victims, particularly with the Macasas who were denied
justice for almost two decades in this case. To accept petitioners' submission that this Court, along
with the RTC and the CA, should await the review by the Department of National Defense of the BMI
findings, would, in effect, limit the courts' jurisdiction to expeditiously try, hear and decide cases filed
before them. It would not only prolong the Macasas' agony but would result in yet another tragedy at
the expense of speedy justice. This, we cannot allow.

WHEREFORE, the instant Petition is DENIED. The assailed Court of Appeals Decision dated September
24, 2003 is hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Endnotes:

* In lieu of Associate Justice Minita V. Chico-Nazario per Special Order No. 508, dated June 25, 2008.

** In lieu of Associate Justice Alicia Austria-Martinez per raffle dated June 23, 2008.

1 Rollo, pp. 9-30.

2Penned by Associate Justice Bienvenido L. Reyes, with Associate Justices Condrado M. Vasquez, Jr. (now CA Presiding Justice) and Arsenio J.
Magpale, concurring; id. at 34-48.

3 Rollo, pp. 233-254.

4 Id. at 253-254.
5 Id. at 253-254.

6 Id. at 34-48.

7 Id. at 48.

8
Id. at 274-290.

9 374 Phil. 325 (1999).

10
Consolidated Reply of Petitioners dated June 29, 2005; rollo, pp. 146-157.

11 Petitioners' Memorandum dated November 12, 2005; id. at 274-290.

12
Supra note 9.

13 Sulpicio Lines' Memorandum dated November 4, 2005; rollo, pp. 180-202.

14 Macasas' Memorandum dated November 4, 2005; id. at 204-232.

15Binay v. Odeña, G.R. No. 163683, June 8, 2007, 524 SCRA 248, 255-256, citing Velayo-Fong v. Velayo, 510 SCRA 320, 329-330 (2006)
(Emphasis supplied).

16
Basmayor v. Atencio, G.R. No. 160573, October 19, 2005, 473 SCRA 382, 389, citing Omandam v. Court of Cppeals, 349 SCRA 483, 488
(2001).

17
In Asian Transmission Corporation v. Canlubang Sugar Estates, 457 Phil. 260, 283 (2003), citing Republic v. Court of Appeals, 277 SCRA 633
(1997), we ruled that:

Mr. Justice Edgardo L. Paras opined:

"A court will take judicial notice of its own acts and records in the same case, of facts established in prior proceedings in the same case, of the
authenticity of its own records of another case between the same parties, of the files of related cases in the same court, and of public records
on file in the same court. In addition, judicial notice will be taken of the record, pleadings or judgment of a case in another court between the
same parties or involving one of the same parties, as well as of the record of another case between different parties in the same court. Judicial
notice will also be taken of court personnel."

18 Supra note 9, at 725.

19 Particularly docketed as G.R. No. 160839.

20
Particularly docketed as G.R. No. 159213.

21 Particularly docketed as CA-G.R. CV No. 58014.

22
Supra note 9, at 718-720.

23ARTICLE 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers for passengers or goods or both, by land, water, or air for compensation, offering their services to the public.

24 Rollo, p. 41.

25Republic v. Bautista, G.R. No. 169801, September 11, 2007, 532 SCRA 598, 606, citing Baricuatro v. Court of Appeals, 382 Phil. 15, 24
(2000).

26 The exceptions are: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension
of facts; (5) when the findings of facts are conflicting; (6) when in making its findings, the CA went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, will justify a different conclusion.

27Solidbank Corporation/Metropolitan Bank and Trust Company v. Tan, G.R. No. 167346, April 2, 2007, 520 SCRA 123, 128, citing Bordalba v.
Court of Appeals, 425 Phil. 407 (2002).
36 378 Phil. 991 (1999).

37 Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in article 309;

(10) Acts of actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

Art. 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.

38 361 Phil. 338 (1999).

39 Prudencio v. Alliance Transport System, G.R. No. L-33836, March 16, 1987, 148 SCRA 440.

40 SCC Chemicals Corporation v. Court of Appeals, 405 Phil. 514 (2001).

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 156330 November 19, 2014

NEDLLOYD LIJNEN B.V. ROTTERDAM and THE EAST ASIATIC CO., LTD., Petitioners,
vs.
GLOW LAKS ENTERPRISES, LTD., Respondent.

DECISION

PEREZ, J.:

This is a Petition for Review on Certiorari1 filed pursuant to Ruic 45 of the Revised Rules of Comi, primarily assailing
the 11 December 2002 Resolution rendered by the Special Former Sixteenth Division of the Court of Appeals in CA-
G.R. CV No. 48277,2 the decretal portion of which states:

WHEREFORE, the appeal is GRANTED and the April 29. 1994 Decision of the Regional Trial Court of Manila,
Branch 52 thereof' in Civil Case No. 88-45595, SET ASIDE. Nedlloyd Lijncn B.V. Rotterdam and The East Asiatic
Co., Ltd arc ordered to pay Glow l ,aks Enterprises, I ,td. the following:

1. The invoice value of the goodslost worth $53,640.00, or its equivalent in Philippine currency;

2. Attorney’s fees of ₱50,000.00; and

3. Costs.3

The Facts

Petitioner Nedlloyd Lijnen B.V. Rotterdam (Nedlloyd) is a foreign corporation engaged in the business of carrying
goods by sea, whose vessels regularly call at the port of Manila. It is doing business in the Philippines thru its local
ship agent, co-petitioner East Asiatic Co., Ltd. (East Asiatic).

Respondent Glow Laks Enterprises,Ltd., is likewise a foreign corporation organized and existing under the laws of
Hong Kong. It is not licensed to do, and it is not doing business in, the Philippines.

On or about 14 September 1987, respondent loaded on board M/S Scandutch at the Port of Manila a total 343
cartoons of garments, complete and in good order for pre-carriage tothe Port of Hong Kong. The goods covered by
Bills of Lading Nos. MHONX-2 and MHONX-34 arrived in good condition in Hong Kong and were transferred to M/S
Amethyst for final carriage to Colon, Free Zone, Panama. Both vessels, M/S Scandutch and M/S Amethyst, are
owned by Nedlloyd represented in the Phlippines by its agent, East Asiatic. The goods which were valued at
US$53,640.00 was agreed to be released to the consignee, Pierre Kasem, International, S.A., upon presentation of
the original copies of the covering bills of lading.5 Upon arrival of the vessel at the Port of Colon on 23 October 1987,
petitioners purportedly notified the consignee of the arrival of the shipments, and its custody was turned over tothe
National Ports Authority in accordance with the laws, customs regulations and practice of trade in Panama. By an
unfortunate turn ofevents, however, unauthorized persons managed to forge the covering bills of lading and on the
basis of the falsified documents, the ports authority released the goods.

On 16 July 1988, respondent filed a formal claim with Nedlloyd for the recovery of the amount of US$53,640.00
representing the invoice value of the shipment but to no avail.6 Claiming that petitioners are liable for the misdelivery
of the goods, respondent initiated Civil Case No. 88-45595 before the Regional Trial Court (RTC) of Manila, Branch
52, seeking for the recovery of the amount of US$53,640.00, including the legal interest from the date of the first
demand.7
In disclaiming liability for the misdelivery of the shipments, petitioners asserted in their Answer8 that they were never
remiss in their obligation as a common carrier and the goods were discharged in good order and condition into the
custody of the National Ports Authority of Panama in accordance with the Panamanian law. They averred that they
cannot be faulted for the release of the goods to unauthorized persons, their extraordinary responsibility as a
common carrier having ceased at the time the possession of the goods were turned over to the possession of the
port authorities.

After the Pre-Trial Conference, trial on the merits ensued. Both parties offered testimonial and documentary
evidence to support their respective causes. On 29 April 2004, the RTC rendered a Decision9 ordering the dismissal
of the complaint but granted petitioners’ counterclaims. In effect, respondent was directed to pay petitioners the
amount of ₱120,000.00 as indemnification for the litigation expenses incurred by the latter. In releasing the common
carrier from liability for the misdelivery of the goods, the RTC ruled that Panama law was duly proven during the trial
and pursuant to the said statute, carriers of goods destined to any Panama port of entry have to discharge their
loads into the custody of Panama Ports Authority to make effective government collection of port dues, customs
duties and taxes. The subsequent withdrawal effected by unauthorized persons on the strength of falsified bills of
lading does not constitute misdelivery arising from the fault of the common carrier. The decretal part of the RTC
Decision reads: WHEREFORE, judgment is renderedfor [petitioners] and against [Respondent], ordering the
dismissal of the complaint and ordering the latter to pay [petitioners] the amount of ONE HUNDRED TWENTY
THOUSAND PESOS (₱120,000.00) on their counterclaims.

Cost against [Respondent].10

On appeal, the Court of Appeals reversed the findings of the RTC and held that foreign laws were not proven in the
manner provided by Section 24, Rule 132 of the Revised Rules of Court, and therefore, it cannot be given full faith
and credit.11 For failure to prove the foreign law and custom, it is presumed that foreign laws are the sameas our
local or domestic or internal law under the doctrine of processual presumption. Under the New Civil Code, the
discharge of the goods intothe custody of the ports authority therefore does not relieve the commoncarrier from
liability because the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of
the cargoes tothe consignee or to the person who has the right to receive them. Absent any proof that the notify
party or the consignee was informed of the arrival of the goods, the appellate court held that the extraordinary
responsibility of common carriers remains. Accordingly, the Court of Appeals directed petitioners to pay respondent
the value of the misdelivered goods in the amount of US$53,640.00.

The Issues

Dissatisfied with the foregoing disquisition, petitioners impugned the adverse Court of Appeals Decision before the
Court on the following grounds:

I.

THERE IS ABSOLUTELY NO NEED TO PROVE PANAMANIAN LAWS BECAUSE THEYHAD BEEN

JUDICIALLY ADMITTED. AN ADMISSION BY A PARTY IN THE COURSE OF THE PROCEEDINGS DOES
NOT REQUIRE PROOF.

II.

BY PRESENTING AS EVIDENCE THE [GACETA] OFFICIAL OF REPUBLICA DE PANAMA NO. 17.596

WHERE THE APPLICABLE PANAMANIAN LAWS WERE OFFICIALLY PUBLISHED, AND THE
TESTIMONY OF EXPERT WITNESSES, PETITIONERS WERE ABLE TO PROVE THE LAWS OF
PANAMA.

III.

IF WE HAVE TO CONCEDE TO THE COURT OF APPEALS’ FINDING THAT THERE WAS FAILURE OF
PROOF, THE LEGAL QUESTION PRESENTED TO THE HONORABLE COURT SHOULD BE RESOLVED
FAVORABLY BECAUSE THE CARRIER DISCHARGED ITS DUTY WHETHER UNDER THE
PANAMANIAN LAW OR UNDER PHILIPPINE LAW.12
 The Court’s Ruling

We find the petition bereft of merit.

It is well settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to
take judicial notice of them. Like any other fact, they must be alleged and proved.13 To prove a foreign law, the party
invoking it must present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of
Court14 which read: SEC. 24. Proof of official record. — The record of public documents referred to in paragraph (a)
of Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy
attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the record is not
kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in
a foreigncountry, the certificate may be made by a secretary of the embassy or legation, consul general, consul,
vice- consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign
country in which the record is kept, and authenticated by the seal of his office.

SEC. 25. What attestation of copy must state. — Whenever a copy of a document or record is attested for the
purpose of the evidence, the attestation must state,in substance, that the copy is a correct copy of the original, or a
specific part thereof, as the case may be. The attestation must be under the official seal of the attesting officer, if
there be any, or if he be the clerk of a court having a seal, under the seal of such court.

For a copy of a foreign public document to be admissible, the following requisites are mandatory: (1) itmust be
attested by the officer having legal custody of the records or by his deputy; and (2) it must be accompanied by a
certificate by a secretary of the embassy or legation, consul general, consul, vice-consular or consular agent or
foreign service officer, and with the seal of his office.15 Such official publication or copy must be accompanied, if the
record is not kept in the Philippines, with a certificate that the attesting officer has the legal custody thereof.16 The
certificate may be issued by any of the authorized Philippine embassy or consular officials stationed in the foreign
country in which the record is kept, and authenticated by the seal of his office.17 The attestation must state, in
substance, that the copy is a correct copy of the original, or a specific part thereof, as the case may be, and mustbe
under the official seal of the attesting officer.18

Contrary to the contention of the petitioners, the Panamanian laws, particularly Law 42 and its Implementing Order
No. 7, were not duly proven in accordance with Rules of Evidence and as such, it cannot govern the rights and
obligations of the parties in the case at bar. While a photocopy of the Gaceta Official of the Republica de Panama
No. 17.596, the Spanish text of Law 42 which is theforeign statute relied upon by the court a quoto relieve the
common carrier from liability, was presented as evidence during the trial of the case below, the same however was
not accompanied by the required attestation and certification.

It is explicitly required by Section 24, Rule 132 of the Revised Rules of Court that a copy of the statute must be
accompanied by a certificate of the officer who has legal custody of the records and a certificate made by the
secretary of the embassy or legation, consul general, consul, vice-consular or by any officer in the foreign service of
the Philippines stationed in the foreign country, and authenticated by the seal of his office. The latter requirement is
not merely a technicality but is intended to justify the giving of full faith and credit to the genuineness of the
document in a foreign country.19 Certainly, the deposition of Mr. Enrique Cajigas, a maritime law practitioner in the
Republic of Panama, before the Philippine Consulate in Panama, is not the certificate contemplated by law. At best,
the deposition can be considered as an opinion of an expert witness who possess the required special knowledge
on the Panamanian laws but could not be recognized as proof of a foreign law, the deponent not being the
custodian of the statute who can guarantee the genuineness of the document from a foreign country. To admit the
deposition as proof of a foreign law is, likewise, a disavowal of the rationaleof Section 24, Rule 132 of the Revised
Rules of Court, which isto ensure authenticity of a foreign law and its existence so as to justify its import and legal
consequence on the event or transaction in issue. The above rule, however, admits exceptions, and the Court in
certain cases recognized that Section 25, Rule132 of the Revised Rules of Court does not exclude the presentation
of other competent evidence to prove the existence of foreign law. In Willamete Iron and Steel Works v. Muzzal20
for instance, we allowed the foreign law tobe established on the basis of the testimony in open court during the trial
in the Philippines of an attorney-atlaw in San Francisco, California, who quoted the particular foreign law sought to
be established.21 The ruling is peculiar to the facts. Petitioners cannot invoke the Willamete ruling to secure
affirmative relief since their so called expert witness never appeared during the trial below and his deposition, that
was supposed to establish the existence of the foreign law, was obtained ex-parte.
It is worth reiterating at this point that under the rules of private international law, a foreign law must be properly
pleaded and proved as a fact. In the absence of pleading and proof, the laws of the foreign country or state will be
presumed to be the same as our local or domestic law. This is known as processual presumption.22 While the foreign
law was properly pleaded in the case at bar, it was,however, proven not in the manner provided by Section 24, Rule
132 of the Revised Rules of Court. The decision of the RTC, which proceeds from a disregard of specific rules
cannot be recognized.

Having settled the issue on the applicable Rule, we now resolve the issue of whether or not petitioners are liable for
the misdelivery of goods under Philippine laws.

Under the New Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligencein the vigilance over goods, according to the circumstances of each
case.23 Common carriers are responsible for loss, destruction or deterioration of the goods unless the same is due to
flood, storm, earthquake or other natural disaster or calamity.24 Extraordinary diligence is that extreme care and
caution which persons of unusual prudence and circumspection use for securing or preserving their own property or
rights.25 This expecting standardimposed on common carriers in contract of carrier of goods is intended to tilt the
scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for the
shipment.26 Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been in
fault or negligent.27

While petitioners concede that, as a common carrier, they are bound to observe extraordinary diligence in the care
and custody of the goods in their possession, they insist that they cannot be held liable for the loss of the shipments,
their extraordinary responsibility having ceased at the time the goods were discharged into the custody of the
customs arrastreoperator, who in turn took complete responsibility over the care, storage and delivery of the
cargoes.28

In contrast, respondent, submits that the fact that the shipments were not delivered to the consignee as statedin the
bill of lading or to the party designated or named by the consignee, constitutes misdelivery thereof, and under the
law it is presumed that the common carrier is at fault or negligent if the goods they transported, as in this case, fell
into the hands of persons who have no right to receive them.

We sustain the position of the respondent.

Article 1736 and Article 1738 are the provisions in the New Civil Code which define the period when the common
carrier is required to exercise diligence lasts, viz:

Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goodsare unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to
the provisions of article 1738.

Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of
the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of
them.

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier
begins from the time the goods are delivered to the carrier.29 This responsibility remains in full force and effect even
when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stop page
in transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them.30

It was further provided in the samestatute that the carrier may be relieved from the responsibility for loss or damage
to the goods upon actual or constructive delivery of the same by the carrier to the consignee or to the person who
has the right to receive them.31 In sales, actual delivery has been defined as the ceding of the corporeal possession
by the seller, and the actual apprehension of the corporeal possession by the buyer or by some person authorized
by him to receive the goods as his representative for the purpose of custody or disposal.32 By the same token, there
is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or
to his duly authorized agent and a reasonable time is given him to remove the goods.33

In this case, there is no dispute that the custody of the goods was never turned over to the consignee or his agents
but was lost into the hands of unauthorized persons who secured possession thereof on the strength of falsified
documents. The loss or the misdelivery of the goods in the instant case gave rise to the presumption that the
common carrier is at fault or negligent.

A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over
the goods it transported.34 When the goods shipped are either lost or arrived in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence, and there need not be an express finding of
negligence to hold it liable.35 To overcome the presumption of negligence, the common carrier must establish by
adequateproof that it exercised extraordinary diligence over the goods.36 It must do more than merely show that
some other party could be responsible for the damage.37

In the present case, petitioners failed to prove that they did exercise the degree of diligence required by law over the
goods they transported. Indeed, aside from their persistent disavowal of liability by conveniently posing an excuse
that their extraordinary responsibility isterminated upon release of the goods to the Panamanian Ports Authority,
petitioners failed to adduce sufficient evidence they exercised extraordinary care to prevent unauthorized withdrawal
of the shipments. Nothing in the New Civil Code, however, suggests, even remotely, that the common carriers’
responsibility over the goods ceased upon delivery thereof to the custom authorities. To the mind of this Court, the
contract of carriage remains in full force and effect even after the delivery of the goods to the port authorities; the
only delivery that releases it from their obligation to observe extraordinary care is the delivery to the consignee or his
agents. Even more telling of petitioners’ continuing liability for the goods transported to the fact that the original bills
of lading up to this time, remains in the possession of the notify party or consignee. Explicit on this point is the
provision of Article 353 of the Code of Commerce which provides:

Article 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the
contents of which the disputes which may arise regarding their execution and performance shall be decided, no
exceptions being admissible other than those of falsity and material error in the drafting.

After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him,
and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim which the parties may wish to reserve be reduced to writing,
with the exception of that provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because
of its loss or of any other cause, he must give the latter a receiptfor the goods delivered, this receipt producing the
same effects as the return of the bill of lading.

While surrender of the original bill of lading is not a condition precedent for the common carrier to bedischarged from
its contractual obligation, there must be, at the very least, an acknowledgement of the delivery by signing the
delivery receipt, if surrender of the original of the bill of lading is not possible.38 There was neither surrender of the
original copies of the bills of lading nor was there acknowledgment of the delivery in the present case. This leads to
the conclusion that the contract of carriage still subsists and petitioners could be held liable for the breach thereof.

Petitioners could have offered evidence before the trial court to show that they exercised the highest degree of care
and caution even after the goods was turned over to the custom authorities, by promptly notifying the consignee of
its arrival at the P01i of Cristobal in order to afford them ample opportunity to remove the cargoes from the port of
discharge. We have scoured the records and found that neither the consignee nor the notify paiiy was informed by
the petitioners of the arrival of the goods, a crucial fact indicative of petitioners' failure to observe extraordinary
diligence in handling the goods entrusted to their custody for transport. They could have presented proof to show
that they exercised extraordinary care but they chose in vain, full reliance to their cause on applicability of
Panamanian law to local jurisdiction. It is for this reason that we find petitioners liable for the misdelivery of the
goods. It is evident from the review of the records and by the evidence adduced by the respondent that petitioners
failed to rebut the prima facie presumption of negligence. We find no compelling reason to depa1i from the ruling of
the Court of Appeals that under the contract of carriage, petitioners are liable for the value of the misdelivcred
goods.
WHEREFORE, premises considered, the petition is hereby DENIED. The assailed Resolution of the Court of
Appeals is hereby AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

PRESBITERO J. VELASCO, JR.* TERSITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's
Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Footnotes

* Per Special Order No. 1870 dated 4 November 2014.

1
Rollo, pp. 23-58.

2
Penned by Associate .Justice Mariano C. Del Castillo (now a member of this Court) with Associate Justices
Oswaldo D. Agcaoili and Bernardo P. Abesamis, concurring. Id. at 1 18-119.

3
Id. at 119.

4
Folder of Exhibits, pp. 104-105.

5
Id. at 108.

6
Id. at 119-121.

7
Complaint. Records, Vol. I, pp. 1-4.

8
Answer. Id. at 10-15.

9
RTC Decision. Records, Vol. II, pp. 528-536.
10
Id. at 536.

11
CA Decision. Rollo, pp. 10-17.

12
Id. at 32-46.

13
Wildvalley Shipping Co., Ltd. v. Court of Appeals, 396 Phil. 383, 392 (2000).

14
ATCI Overseas Corporation v. Echin, G.R. No. 178551, 11 October 2010, 632 SCRA 528, 535.

15
Wildvalley Shipping Co., Ltd., v. Court of Appeals, supra note 13 at 395.

16
Manufacturers Hanover Trust Co. v. Guerrero, 445 Phil. 770, 778 (2003).

17
Id.

18
Id.

19
Wildvalley Shipping Co., Ltd., v. Court of Appeals, supra note 13 at 395.

20
61 Phil. 471 (1935).

21
Manufacturer Hanover Trust Co. v. Guerrero, supra note 16 at 779 citing Willamete Iron and Steel Works
v. Muzzal, id.

22
Wildvalley Shipping Co., Ltd., v. Court of Appeals, supra note 13 at 396.

23
New Civil Code, Article 1733.

24
New Civil Code, Article 1734.

25
National Trucking and Forwarding Corp. v. Lorenzo Shipping Corporation, 491 Phil. 151, 156 (2005).

26
Id.

27
Id.

28
Petition for Review on Certiorari. Rollo, pp. 54-56.

29
Saludo, Jr., v. Court of Appeals, G.R. No, 95536, 23 March 1992, 207 SCRA 498, 511.

30
Id.

Samar Mining Company, Inc. v. Nordeutscher Lloyd and C.F. Sharp and Company, Inc., 217 Phil. 497,
31

506 (1984).

32
Id.

33
Id.

Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co., (Philippines), Inc., G. R.
34

No. 168151, 4 September 2009, 598 SCRA 304, 313.

35
Id.
36
Id.

37
Id.

38
National Trucking and Forwarding Corp. v. Lorenzo Shipping Corporation, supra note 25 at 157.
 FIRST DIVISION

G.R. No. 182864, January 12, 2015

EASTERN SHIPPING LINES, INC., Petitioner, v. BPI/MS INSURANCE CORP., & MITSUI
SUMITOMO INSURANCE CO., LTD., Respondents.

DECISION

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari1 of the Decision2 of the Second Division of the
Court of Appeals in CA-G.R. CV No. 88744 dated 31 January 2008, modifying the Decision of the
Regional Trial Court (RTC) by upholding the liability of Eastern Shipping Lines, Inc. (ESLI) but
absolving Asian Terminals, Inc. (ATI) from liability and deleting the award of attorney�s fees.

The facts gathered from the records follow:

On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS) and Mitsui Sumitomo Insurance
Company Limited (Mitsui) filed a Complaint3 before the RTC of Makati City against ESLI and ATI to
recover actual damages amounting to US$17,560.48 with legal interest, attorney�s fees and costs
of suit.

In their complaint, BPI/MS and Mitsui alleged that on 2 February 2004 at Yokohama, Japan,
Sumitomo Corporation shipped on board ESLI�s vessel M/V �Eastern Venus 22� 22 coils of
various Steel Sheet weighing 159,534 kilograms in good order and condition for transportation to and
delivery at the port of Manila, Philippines in favor of consignee Calamba Steel Center, Inc. (Calamba
Steel) located in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading with Nos. ESLIYMA001.
The declared value of the shipment was US$83,857.59 as shown by an Invoice with Nos. KJGE-03-
1228-NT/KE3. The shipment was insured with the respondents BPI/MS and Mitsui against all risks
under Marine Policy No. 103-GG03448834.

On 11 February 2004, the complaint alleged that the shipment arrived at the port of Manila in an
unknown condition and was turned over to ATI for safekeeping. Upon withdrawal of the shipment by
the Calamba Steel�s representative, it was found out that part of the shipment was damaged and
was in bad order condition such that there was a Request for Bad Order Survey. It was found out
that the damage amounted to US$4,598.85 prompting Calamba Steel to reject the damaged
shipment for being unfit for the intended purpose.

On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again shipped on board ESLI�s vessel
M/V �Eastern Venus 25� 50 coils in various Steel Sheet weighing 383,532 kilograms in good
order and condition for transportation to and delivery at the port of Manila, Philippines in favor of the
same consignee Calamba Steel as evidenced by a Bill of Lading with Nos. ESLIKSMA002. The
declared value of the shipment was US$221,455.58 as evidenced by Invoice Nos. KJGE-04-1327-
NT/KE2. The shipment was insured with the respondents BPI/MS and Mitsui against all risks under
Marine Policy No. 104-GG04457785.

On 21 May 2004, ESLI�s vessel with the second shipment arrived at the port of Manila partly
damaged and in bad order. The coils sustained further damage during the discharge from vessel to
shore until its turnover to ATI�s custody for safekeeping.
Upon withdrawal from ATI and delivery to Calamba Steel, it was found out that the damage
amounted to US$12,961.63. As it did before, Calamba Steel rejected the damaged shipment for
being unfit for the intended purpose.

Calamba Steel attributed the damages on both shipments to ESLI as the carrier and ATI as
the arrastre operator in charge of the handling and discharge of the coils and filed a claim against
them. When ESLI and ATI refused to pay, Calamba Steel filed an insurance claim for the total
amount of the cargo against BPI/MS and Mitsui as cargo insurers. As a result, BPI/MS and Mitsui
became subrogated in place of and with all the rights and defenses accorded by law in favor of
Calamba Steel.

Opposing the complaint, ATI, in its Answer, denied the allegations and insisted that the coils in two
shipments were already damaged upon receipt from ESLI�s vessels. It likewise insisted that it
exercised due diligence in the handling of the shipments and invoked that in case of adverse
decision, its liability should not exceed P5,000.00 pursuant to Section 7.01, Article VII4 of the
Contract for Cargo Handling Services between Philippine Ports Authority (PPA) and ATI.5 A cross-
claim was also filed against ESLI.

On its part, ESLI denied the allegations of the complainants and averred that the damage to both
shipments was incurred while the same were in the possession and custody of ATI and/or of the
consignee or its representatives. It also filed a cross-claim against ATI for indemnification in case of
liability.6
chanRoblesvi rtual Lawl ibra ry

To expedite settlement, the case was referred to mediation but it was returned to the trial court for
further proceedings due to the parties� failure to resolve the legal issues as noted in the
Mediator�s Report dated 28 June 2005.7 chanRoblesvi rtua lLawl ibra ry

On 10 January 2006, the court issued a Pre-Trial Order wherein the following stipulations were
agreed upon by the parties: chanroble svirtual lawlib rary

1. Parties admitted the capacity of the parties to sue and be sued;

2. Parties likewise admitted the existence and due execution of the Bill of Lading covering
various steel sheets in coil attached to the Complaint as Annex A;

3. Parties admitted the existence of the Invoice issued by Sumitomo Corporation, a true
and faithful copy of which was attached to the Complaint as Annex B;

4. Parties likewise admitted the existence of the Marine Cargo Policy issued by the Mitsui
Sumitomo Insurance Company, Limited, copy of which was attached to the Complaint
as Annex C;

5. [ATI] admitted the existence and due execution of the Request for Bad Order Survey
dated February 13, 2004, attached to the Complaint as Annex D;

6. Insofar as the second cause of action, [ESLI] admitted the existence and due execution
of the document [Bill of Lading Nos. ESLIKSMA002, Invoice with Nos. KJGE-04-1327-
NT/KE2 and Marine Cargo Policy against all risks on the second shipment] attached to
the Complaint as Annexes E, F and G;

7. [ATI] admitted the existence of the Bill of Lading together with the Invoices and Marine
Cargo Policy. [It] likewise admitted by [ATI] are the Turn Over Survey of Bad Order
Cargoes attached to the Complaint as Annexes H, H-1 and J.8
The parties agreed that the procedural issue was whether there was a valid subrogation in favor of
BPI/MS and Mitsui; and that the substantive issues were, whether the shipments suffered damages,
the cause of damage, and the entity liable for reparation of the damages caused.9 chanRoblesvi rtua lLawl ibra ry

Due to the limited factual matters of the case, the parties were required to present their evidence
through affidavits and documents. Upon submission of these evidence, the case was submitted for
resolution.10 chanRoblesvi rtua lLawl ibrary

BPI/MS and Mitsui, to substantiate their claims, submitted the Affidavits of (1) Mario A. Manuel
(Manuel),11 the Cargo Surveyor of Philippine Japan Marine Surveyors and Sworn Measurers
Corporation who personally examined and conducted the surveys on the two shipments; (2) Richatto
P. Almeda,12 the General Manager of Calamba Steel who oversaw and examined the condition,
quantity, and quality of the shipped steel coils, and who thereafter filed formal notices and claims
against ESLI and ATI; and (3) Virgilio G. Tiangco, Jr.,13 the Marine Claims Supervisor of BPI/MS who
processed the insurance claims of Calamba Steel. Along with the Affidavits were the Bills of
Lading14 covering the two shipments, Invoices,15 Notices of Loss of Calamba Steel,16 Subrogation
Form,17 Insurance Claims,18 Survey Reports,19 Turn Over Survey of Bad Order Cargoes20 and Request
for Bad Order Survey.21 chanRoble svirtual Lawlib ra ry

ESLI, in turn, submitted the Affidavits of Captain Hermelo M. Eduarte,22 Manager of the Operations
Department of ESLI, who monitored in coordination with ATI the discharge of the two shipments, and
Rodrigo Victoria (Rodrigo),23 the Cargo Surveyor of R & R Industrial and Marine Services, Inc., who
personally surveyed the subject cargoes on board the vessel as well as the manner the ATI
employees discharged the coils. The documents presented were the Bills of Lading, Secretary�s
Certificate24 of PPA, granting ATI the duty and privilege to provide arrastre and stevedoring services
at South Harbor, Port of Manila, Contract for Cargo Handling Services,25 Damage Report26 and Turn
Over Report made by Rodrigo.27 ESLI also adopted the Survey Reports submitted by BPI/MS and
Mitsui.28
chanRoblesvi rtual Lawli bra ry

Lastly, ATI submitted the Affidavits of its Bad Order Inspector Ramon Garcia (Garcia)29 and Claims
Officer Ramiro De Vera.30 The documents attached to the submissions were the Turn Over Surveys of
Bad Cargo Order,31 Requests for Bad Order Survey,32 Cargo Gatepasses issued by ATI,33 Notices of
Loss/Claims of Calamba Steel34 and Contract for Cargo Handling Services.35 chanRoblesvirtual Lawli bra ry

On 17 September 2006, RTC Makati City rendered a decision finding both the ESLI and ATI liable for
the damages sustained by the two shipments. The dispositive portion reads: chanroblesv irt uallawl ibra ry

WHEREFORE, judgment is hereby rendered in favor of [BPI/MS and Mitsui] and against [ESLI Inc.]
and [ATI], jointly and severally ordering the latter to pay [BPI/MS and Mitsui] the following:

1. Actual damages amounting to US$17,560.48 plus 6% legal interest per annum

commencing from the filing of this complaint, until the same is fully paid;

2. Attorney�s fees in a sum equivalent to 20% of the amount claimed;

3. Costs of suit.36

Aggrieved, ESLI and ATI filed their respective appeals before the Court of Appeals on both questions
of fact and law.37 chanRoblesvi rtual Lawli bra ry

Before the appellate court, ESLI argued that the trial court erred when it found BPI/MS has the
capacity to sue and when it assumed jurisdiction over the case. It also questioned the ruling on its
liability since the Survey Reports indicated that the cause of loss and damage was due to the
�rough handling of ATI�s stevedores during discharge from vessel to shore and during loading
operation onto the trucks.� It invoked the limitation of liability of US$500.00 per package as
provided in Commonwealth Act No. 65 or the Carriage of Goods by Sea Act (COGSA).38 chanRoblesvirt ual Lawlib rary

On the other hand, ATI questioned the capacity to sue of BPI/MS and Mitsui and the award of
attorney�s fees despite its lack of justification in the body of the decision. ATI also imputed error
on the part of the trial court when it ruled that ATI�s employees were negligent in the ruling of the
shipments. It also insisted on the applicability of the provision of COGSA on limitation of liability. 39 chanRoblesvirt ual Lawlib rary

In its Decision,40 the Court of Appeals absolved ATI from liability thereby modifying the decision of
the trial court. The dispositive portions reads:chanrob lesvi rtua llawli bra ry

WHEREFORE, the appeal of ESLI is DENIED, while that of ATI is GRANTED. The assailed Judgment
dated September 17, 2006 of Branch 138, RTC of Makati City in Civil Case No. 05-108 is hereby
MODIFIED absolving ATI from liability and deleting the award of attorney�s fees. The rest of the
decision is affirmed.41

Before this Court, ESLI seeks the reversal of the ruling on its liability.

At the outset, and notably, ESLI included among its arguments the attribution of liability to ATI but it
failed to implead the latter as a party to the present petition. This non-inclusion was raised by
BPI/MS and Mitsui as an issue42 in its Comment/Opposition43 and Memorandum:44 chanRoblesvi rtua lLawl ibra ry

For reasons known only to [ESLI], it did not implead ATI as a party respondent in this case when it
could have easily done so. Considering the nature of the arguments raised by petitioner pointing to
ATI as solely responsible for the damages sustained by the subject shipments, it is respectfully
submitted that ATI is an indispensable party in this case. Without ATI being impleaded, the issue of
whether ATI is solely responsible for the damages could not be determined with finality by this
Honorable Court. ATI certainly deserves to be heard on the issue but it could not defend itself
because it was not impleaded before this Court. Perhaps, this is the reason why [ESLI] left out ATI in
this case so that it could not rebut while petitioner puts it at fault.45

ESLI in its Reply46 put the blame for the non-exclusion of ATI to BPI/MS and Mitsui: chanroble svirtuallaw lib rary

[BPI/MS and Mitsui] claim that herein [ESLI] did not implead [ATI] as a party respondent in the
Petition for Review on Certiorari it had filed. Herein Petitioner submits that it is not the obligation of
[ESLI] to implead ATI as the same is already the look out of [BPI/MS and Mitsui]. If [BPI/MS and
Mitsui] believe that ATI should be made liable, they should have filed a Motion for Reconsideration
with the Honorable Court of Appeals. The fact that [BPI/MS and Mitsui] did not even lift a finger to
question the decision of the Honorable Court of Appeals goes to show that [BPI/MS and Mitsui] are
not interested as to whether or not ATI is indeed liable.47

It is clear from the exchange that both [ESLI] and [BPI/MS and Mitsui] are aware of the non-
inclusion of ATI, the arrastre operator, as a party to this review of the Decision of the Court of
Appeals. By blaming each other for the exclusion of ATI, [ESLI] and [BPI/MS and Mitsui] impliedly
agree that the absolution of ATI from liability is final and beyond review. Clearly, [ESLI] is the
consequential loser. It alone must bear the proven liability for the loss of the shipment. It cannot
shift the blame to ATI, the arrastre operator, which has been cleared by the Court of Appeals. Neither
can it argue that the consignee should bear the loss.

Thus confined, we go to the merits of the arguments of ESLI.

First Issue: Liability of ESLI

ESLI bases of its non-liability on the survey reports prepared by BPI/MS and Mitsui�s witness
Manuel which found that the cause of damage was the rough handling on the shipment by the
stevedores of ATI during the discharging operations.48 However, Manuel does not absolve ESLI of
liability. The witness in fact includes ESLI in the findings of negligence. Paragraphs 3 and 11 of the
affidavit of witness Manuel attribute fault to both ESLI and ATI.

3. The vessel M.V. �EASTERN VENUS� V 22-S carrying the said shipment of 22 coils of various
steel sheets arrived at the port of Manila and discharged the said shipment on or about 11 February
2004 to the arrastre operator [ATI]. I personally noticed that the 22 coils were roughly handled
during their discharging from the vessel to the pier of [ATI] and even during the loading operations
of these coils from the pier to the trucks that will transport the coils to the consignees�s
warehouse. During the aforesaid operations, the employees and forklift operators of [ESLI]
and [ATI] were very negligent in the handling of the subject cargoes.

xxxx

11. The vessel M.V. �EASTERN VENUS� V 25-S carrying the said shipment of 50 coils of various
steel sheets arrived at the port of Manila and discharged the said shipment on or about 21 May 2004
to the arrastre operator [ATI]. I personally noticed that the 50 coils were roughly handled during
their discharging from the vessel to the pier of [ATI] and even during the loading operations of these
coils from the pier to the trucks that will transport the coils to the consignees�s
warehouse. During the aforesaid operations, the employees and forklift operators of [ESLI]
and [ATI] were very negligent in the handling of the subject cargoes.49 (Emphasis supplied).

ESLI cannot rely only on parts it chooses. The entire body of evidence should determine the liability
of the parties. From the statements of Manuel, [ESLI] was negligent, whether solely or together with
ATI.

To further press its cause, ESLI cites the affidavit of its witness Rodrigo who stated that the cause of
the damage was the rough mishandling by ATI�s stevedores.

The affidavit of Rodrigo states that his functions as a cargo surveyor are, (1) getting hold of a copy of
the bill of lading and cargo manifest; (2) inspection and monitoring of the cargo on-board, during
discharging and after unloading from the vessel; and (3) making a necessary report of his findings.
Thus, upon arrival at the South Harbor of Manila of the two vessels of ESLI on 11 February 2004 and
on 21 May 2004, Rodrigo immediately boarded the vessels to inspect and monitor the unloading of
the cargoes. In both instances, it was his finding that there was mishandling on the part of ATI�s
stevedores which he reported as the cause of the damage.50 chanRoblesvirtual Lawli bra ry

Easily seen, however, is the absence of a crucial point in determining liability of either or both ESLI
and ATI � lack of determination whether the cargo was in a good order condition as described in
the bills of lading at the time of his boarding. As Rodrigo admits, it was also his duty to inspect and
monitor the cargo on-board upon arrival of the vessel. ESLI cannot invoke its non-liability solely on
the manner the cargo was discharged and unloaded. The actual condition of the cargoes upon arrival
prior to discharge is equally important and cannot be disregarded. Proof is needed that the cargo
arrived at the port of Manila in good order condition and remained as such prior to its handling by
ATI.

Common carriers, from the nature of their business and on public policy considerations, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 173451 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the possession of,
and received by the carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them.52 chanRoblesvi rt ualLaw lib rary

In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and
symbol of the goods covered by it. If it has no notation of any defect or damage in the goods, it is
considered as a �clean bill of lading.� A clean bill of lading constitutes prima facie evidence of
the receipt by the carrier of the goods as therein described.53 chanRoblesvi rt ualLaw lib rary

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments of coils from
shipper Sumitomo Corporation in good condition at the ports of Yokohama and Kashima, Japan.
However, upon arrival at the port of Manila, some coils from the two shipments were partly dented
and crumpled as evidenced by the Turn Over Survey of Bad Order Cargoes No. 67982 dated 13
February 200454 and Turn Over Survey of Bad Order Cargoes Nos. 6836355 and 6836556 both dated
24 May 2004 signed by ESLI�s representatives, a certain Tabanao and Rodrigo together with
ATI�s representative Garcia. According to Turn Over Survey of Bad Order Cargoes No. 67982, four
coils and one skid were partly dented and crumpled prior to turnover by ESLI to ATI�s possession
while a total of eleven coils were partly dented and crumpled prior to turnover based on Turn Over
Survey Bad Order Cargoes Nos. 68363 and 68365.

Calamba Steel requested for a re-examination of the damages sustained by the two shipments.
Based on the Requests for Bad Order Survey Nos. 5826757 and 5825458 covering the first shipment
dated 13 and 17 February 2004, four coils were damaged prior to turnover. The second Request for
Bad Order Survey No. 5865859 dated 25 May 2004 also affirmed the earlier findings that eleven coils
on the second shipment were damaged prior to turnover.

In Asian Terminals, Inc., v. Philam Insurance Co., Inc.,60 the Court based its ruling on liability on the
Bad Order Cargo and Turn Over of Bad Order. The Receipt bore a notation �B.O. not yet t/over to
ATI,� while the Survey stated that the said steel case was not opened at the time of survey and
was accepted by the arrastre in good order. Based on these documents, packages in the Asian
Terminals, Inc. case were found damaged while in the custody of the carrier Westwind Shipping
Corporation.

Mere proof of delivery of the goods in good order to a common carrier and of their 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, loss, or destruction of the goods
happened, the transporter shall be held responsible.61 From the foregoing, the fault is attributable to
ESLI. While no longer an issue, it may be nonetheless state that ATI was correctly absolved of
liability for the damage.

Second Issue: Limitation of Liability

ESLI assigns as error the appellate court�s finding and reasoning that the package limitation under
the COGSA62 is inapplicable even if the bills of lading covering the shipments only made reference to
the corresponding invoices. Noticeably, the invoices specified among others the weight, quantity,
description and value of the cargoes, and bore the notation �Freight Prepaid� and �As
Arranged.�63 ESLI argues that the value of the cargoes was not incorporated in the bills of
lading64 and that there was no evidence that the shipper had presented to the carrier in writing prior
to the loading of the actual value of the cargo, and, that there was a no payment of corresponding
freight.65 Finally, despite the fact that ESLI admits the existence of the invoices, it denies any
knowledge either of the value declared or of any information contained therein.66 chanRoblesvi rt ualLaw lib rary

According to the New Civil Code, the law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction or deterioration.67 The Code
takes precedence as the primary law over the rights and obligations of common carriers with the
Code of Commerce and COGSA applying suppletorily.68 chanRoblesvi rtua lLawl ibra ry

The New Civil Code provides that a stipulation limiting a common carrier�s liability to the value of
the goods appearing in the bill of lading is binding, unless the shipper or owner declares a greater
value.69 In addition, a contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.70 chanRoblesvirtual Lawli bra ry
COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount recoverable in
case of loss or damage shall not exceed US$500.00 per package or per customary freight unless the
nature and value of such goods have been declared by the shipper before shipment and
inserted in the bill of lading.

In line with these maritime law provisions, paragraph 13 of bills of lading issued by ESLI to the
shipper specifically provides a similar restriction:
chanroble svirtuallaw lib rary

The value of the goods, in calculating and adjusting any claims for which the Carrier may be liable
shall, to avoid uncertainties and difficulties in fixing value, be deemed to the invoice value of the
goods plus ocean freight and insurance, if paid, Irrespective of whether any other value is greater or
less, and any partial loss or damage shall be adjusted pro rata on the basis of such value; provided,
however, that neither the Carrier nor the ship shall in any event be or become liable for any loss,
non-delivery or misdelivery of or damage or delay to, or in connection with the custody or
transportation of the goods in an amount exceeding $500.00 per package lawful money of the United
States, or in case of goods not shipped in packages, per customary freight unit, unless the nature of
the goods and a valuation higher than $500.00 is declared in writing by the shipper on delivery to the
Carrier and inserted in the bill of lading and extra freight is paid therein as required by applicable
tariffs to obtain the benefit of such higher valuation. In which case even if the actual value of the
goods per package or unit exceeds such declared value, the value shall nevertheless be deemed to
be the declared value and any Carrier�s liability shall not exceed such declared value and any
partial loss or damage shall be adjusted pro-rata on the basis thereof. The Carrier shall not be liable
for any loss or profit or any consequential or special damage and shall have the option of replacing
any lost goods and replacing o reconditioning any damage goods. No oral declaration or agreement
shall be evidence of a value different from that provided therein.71 chanRoblesvi rtua l Lawlib rary

xxxx

Accordingly, the issue whether or not ESLI has limited liability as a carrier is determined by either
absence or presence of proof that the nature and value of the goods have been declared by
Sumitomo Corporation and inserted in the bills of lading.

ESLI contends that the invoices specifying the weight, quantity, description and value of the cargo in
reference to the bills of lading do not prove the fact that the shipper complied with the requirements
mandated by the COGSA. It contends that there must be an insertion of this declaration in the bill of
lading itself to fall outside the statutory limitation of liability.

ESLI asserts that the appellate court erred when it ruled that there was compliance with the
declaration requirement even if the value of the shipment and fact of payment were indicated on the
invoice and not on the bill of lading itself.

There is no question about the declaration of the nature, weight and description of the goods on the
first bill of lading.

The bills of lading represent the formal expression of the parties� rights, duties and obligations. It
is the best evidence of the intention of the parties which is to be deciphered from the language used
in the contract, not from the unilateral post facto assertions of one of the parties, or of third parties
who are strangers to the contract.72 Thus, when the terms of an agreement have been reduced to
writing, it is deemed to contain all the terms agreed upon and there can be, between the parties and
their successors in interest, no evidence of such terms other than the contents of the written
agreement.73 chanRoblesvirt ual Lawlib rary

As to the non-declaration of the value of the goods on the second bill of lading, we see no error on
the part of the appellate court when it ruled that there was a compliance of the requirement provided
by COGSA. The declaration requirement does not require that all the details must be written down on
the very bill of lading itself. It must be emphasized that all the needed details are in the invoice,
which �contains the itemized list of goods shipped to a buyer, stating quantities, prices, shipping
charges,� and other details which may contain numerous sheets.74 Compliance can be attained by
incorporating the invoice, by way of reference, to the bill of lading provided that the former
containing the description of the nature, value and/or payment of freight charges is as in this case
duly admitted as evidence.

In Unsworth Transport International (Phils.), Inc. v. Court of Appeals,75 the Court held that the
insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had
knowledge of the value of the cargo. However, the same interpretation does not squarely apply if the
carrier had been advised of the value of the goods as evidenced by the invoice and payment of
corresponding freight charges. It would be unfair for ESLI to invoke the limitation under COGSA when
the shipper in fact paid the freight charges based on the value of the goods. In Adams Express
Company v. Croninger,76 it was said: �Neither is it conformable to plain principles of justice that a
shipper may understate the value of his property for the purpose of reducing the rate, and then
recover a larger value in case of loss. Nor does a limitation based upon an agreed value for the
purpose of adjusting the rate conflict with any sound principle of public policy.� Conversely, but for
the same reason, it is unjust for ESLI to invoke the limitation when it is informed that the shipper
paid the freight charges corresponding to the value of the goods.

Also, ESLI admitted the existence and due execution of the Bills of Lading and the Invoice containing
the nature and value of the goods on the second shipment. As written in the Pre-Trial Order,77 the
parties, including ESLI, admitted the existence and due execution of the two Bills of
Lading78 together with the Invoice on the second shipment with Nos. KJGE-04-1327-
NT/KE279 dated 12 May 2004. On the first shipment, ESLI admitted the existence of the
Invoice with Nos. KJGE-031228-NT/KE380 dated 2 February 2004.

The effect of admission of the genuineness and due execution of a document means that the party
whose signature it bears admits that he voluntarily signed the document or it was signed by another
for him and with his authority.81
chanRoblesvi rtua lLaw lib rary

A review of the bill of ladings and invoice on the second shipment indicates that the shipper declared
the nature and value of the goods with the corresponding payment of the freight on the bills of
lading. Further, under the caption �description of packages and goods,� it states that the
description of the goods to be transported as �various steel sheet in coil� with a gross weight of
383,532 kilograms (89.510 M3). On the other hand, the amount of the goods is referred in the
invoice, the due execution and genuineness of which has already been admitted by ESLI, is
US$186,906.35 as freight on board with payment of ocean freight of US$32,736.06 and insurance
premium of US$1,813.17. From the foregoing, we rule that the non- limitation of liability applies in
the present case.

We likewise accord the same binding effect on the contents of the invoice on the first shipment.

ESLI contends that what was admitted and written on the pre-trial order was only the existence of
the first shipment� invoice but not its contents and due execution. It invokes admission of
existence but renounces any knowledge of the contents written on it.82 chanRoblesvi rtua lLawl ibra ry

Judicial admissions are legally binding on the party making the admissions. Pre-trial admission in civil
cases is one of the instances of judicial admissions explicitly provided for under Section 7, Rule 18 of
the Rules of Court, which mandates that the contents of the pre-trial order shall control the
subsequent course of the action, thereby, defining and limiting the issues to be tried. In Bayas v.
Sandiganbayan,83 this Court emphasized that: chanrob lesvi rtua llawli bra ry

Once the stipulations are reduced into writing and signed by the parties and their counsels, they
become binding on the parties who made them. They become judicial admissions of the fact or facts
stipulated. Even if placed at a disadvantageous position, a party may not be allowed to rescind them
unilaterally, it must assume the consequences of the disadvantage.84
Moreover, in Alfelor v. Halasan,85 this Court declared that: chanroblesvi rtua llawlib ra ry

A party who judicially admits a fact cannot later challenge that fact as judicial admissions are a
waiver of proof; production of evidence is dispensed with. A judicial admission also removes an
admitted fact from the field of controversy. Consequently, an admission made in the pleadings
cannot be controverted by the party making such admission and are conclusive as to such party, and
all proofs to the contrary or inconsistent therewith should be ignored, whether objection is interposed
by the party or not. The allegations, statements or admissions contained in a pleading are conclusive
as against the pleader. A party cannot subsequently take a position contrary of or inconsistent with
what was pleaded.86 (Citations omitted)

The admission having been made in a stipulation of facts at pre-trial by the parties, it must be
treated as a judicial admission. Under Section 4, of Rule 129 of the Rules of Court, a judicial
admission requires no proof.87 chanRoblesvirt ual Lawlib rary

It is inconceivable that a shipping company with maritime experience and resource like the ESLI will
admit the existence of a maritime document like an invoice even if it has no knowledge of its
contents or without having any copy thereof.

ESLI also asserts that the notation �Freight Prepaid� and �As Arranged,� does not prove
that there was an actual declaration made in writing of the payment of freight as required by COGSA.
ESLI did not as it could not deny payment of freight in the amount indicated in the documents.
Indeed, the earlier discussions on ESLI�s admission of the existence and due execution of the
invoices, cover and disprove the argument regarding actual declaration of payment. The bills of
lading bore a notation on the manner of payment which was �Freight Prepaid� and �As
Arranged� while the invoices indicated the amount exactly paid by the shipper to ESLI. chanroble slaw

WHEREFORE, we DENY the Petition for Review on Certiorari. The Decision dated 31 January 2008
and Resolution dated 5 May 2008 of the Second Division of the Court of Appeals in CA-G.R. CV. No.
88744 are hereby AFFIRMED.

SO ORDERED. cralawlawlib rary

Sereno, C.J., (Chairman), Leonardo-De Castro, Peralta,*and Reyes,** JJ., concur.

Endnotes:

*
Per Raffle dated 21 April 2014.

**
Per Raffle dated 1 December 2014.

1
Rule on Civil Procedure, Rule 45.

2
Penned by Associate Justice Estela M. Perlas-Bernabe (now a member of this Court) with Associate
Justices Portia Ali�o-Homachuelos and Lucas P. Bersamin (also a member of this Court)
concurring. Rollo, pp. 43-50.

3
Complaint. Records, pp. 1-5.

4Rollo,
pp. 170-171.

5
Answer of ATI. Records, pp. 23-27.

6
Answer of ESLI. Id. at 38-47.
7
Mediator�s Report. Id. at 91.

8
As embodied in the Pre-Trial Order. Id. at 98-99.

9 Id. at 99.

10
Id.

11 Id. at 145-147.

12
Id. at 102-104.

13
Id. at 129-131.

14
Id. at 105 and 116.

15
Id. at 106-110 and 117-123.

16
Id. at 124-127.

17
Id. at 128.

18
Id. at 133-136 and 140-143.

19
Id. at 149-154.

20 Id. at 157-159.

21
Id. at 148.

22
Compliance/Manifestation. Id. at 169-171.

23
Id. at 173-176.

24
Id. at 178-179.

25 Id. at 180-205.

26
Id. at 207 and 210-210-A.

27
Id. at 208 and 210-212.

28 Id. at 149-154.

29
Id. at 215-217.

30
Id. at 224-227.

31
Id. at 218 and 221.

32
Id. at 219-220 and 223.

33
Id. at 228-232.

34 Id. at 233 and 273.

35
Id. at 235-261.

36
Rollo, pp. 131-137.

37 Records, pp. 284-285 and 287.

38
Appellant�s Brief of ESLI. Rollo, pp. 71-106.

39 Appellant�s Brief of ATI. Id. at 107-130.

40
Id. at 43-50.

41
Id. at 49-50.

42
Id. at 302.

43
Id. at 300-307.

44
Id. at 401-414.

45
Id. at 302.

46
Id. at 308-326.

47
Id. at 312.

48 Petition for Review on Certiorari. Id. at 15.

49
Records, pp. 145-146.

50
Id. at 173-176.

51
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:ChanRoblesVi rtua lawlib rary

(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.
52Asian
Terminals, Inc. v. Philam Insurance Co., Inc. (Now Chartis Philippines Insurance, Inc.), G.R.
No. 181163, 181262 and 181319, 24 July 2013 citing Philippines First Insurance Co., Inc. v. Wallem
Phils. Shipping, Inc., G.R. No. 165647, 26 March 2009, 582 SCRA 457, 466-467.

53Lorenzo Shipping Corp. v. Chubb and Sons, Inc., G.R. No. 147724, 8 June 2004, 431 SCRA 266,
279-280 citing Aguedo F. Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the
Philippines, Vol. IV, 1987 ed., p. 119 citing further Government of the Philippine Island v. Ynchausti
& Co., 40 Phil. 219, 213 (1919); 28 Am Jur 2d 264 and Westway Coffee Corp. v. M/V Netuno, 675
F.2d 30, 32 (1982).

54
Records, pp. 218.

55
Id. at 221.

56
Id. at 222.
57
Id. at 219.

58
Id. at 220.

59
Id. at 223.

60
Supra note 52.

Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance Co., Inc., 432 Phil. 567,
61

579 (2002); Tabacalera Insurance Co. v. North Front Shipping Services, Inc., 338 Phil. 1024, 1029-
1030 (1997).

62
On 16 April 1936, the Philippine Government adopted the U.S. COGSA by virtue of Commonwealth
Act No. 65 and was made applicable to all contracts for the carriage of goods by sea to and from
Philippine ports in foreign trade provided that it would but be construed as a repealing law of the
Code of Commerce.

63
Petition for Review on Certiorari. Rollo, pp. 30-31.

64
Id. at 31.

65
Id. at 33.

66
Id. at 34.

67
New Civil Code, Article 1753.

68Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers
shall be governed by the Code of Commerce and by special laws.

69
New Civil Code, Article 1749.

70 New Civil Code, Art. 1750.

71 Bill of Lading. Records, p. 105.

72Chua
Gaw v. Chua, 574 Phil. 640, 657 (2008) citing Arwood Induestries, Inc. v. D.M. Consunji,
Inc., 442 Phil. 203, 212 (2002); Herbon v. Palad, 528 Phil. 130, 142 (2006).

73
Rules of Court, Rule 130, Sec. 9.

74
Glossary of Shipping Terms, United States of America, Department of Transportation, Maritime
Administration, http://www.marad.dot.gov/documents/Glossary-final.pdf (visited 3 April 2014)

75
G.R. No. 166250, 26 July 2010, 625 SCRA 357, 368.

76
226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314 (1913); as reiterated in H. E. Heacock Company v.
Macondray & Co. Inc., 42 Phil. 205, 210 (1921) which ruled that, �A limitation of liability based
upon an agreed value to obtain a lower rate does not conflict with any sound principle of public
policy; and it is not conformable to plain principles of justice that a shipper may understate value in
order to reduce the rate and then recover a larger value in case of loss.� [Adams Express Co. v.
Croninger 226 U.S. 491, 492; Reid v. Fargo (130 C.C.A., 285); Jennings v. Smith (45 C.C.A.,
249); George N. Pierce Co. v. Wells, Fargo and Co. (236 U.S., 278); Wells, Fargo & Co. v. Neiman-
Marcus Co. 227 U.S., 469]

77 Records, pp. 98-99.

78
Id. at 9 and 13.

79
Id. at 14.

80 Id. at 10.

81
Permanent Savings and Loan Bank v. Velarde, 482 Phil. 193, 202 (2004).

82Rollo, p. 34.

83
440 Phil. 54 (2002).

84
Id. at 69.

85
520 Phil. 982 (2006).

86
Id. at 991; Constantino v. Heirs of Constantino, Jr., G.R. No. 181508, 2 October 2013.

87SCC
Chemicals Corporation v. Court of Appeals, 405 Phil. 514, 522-523 (2001).
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 177116 February 27, 2013

ASIAN TERMINALS, INC., Petitioner,

vs.
SIMON ENTERPRISES, INC., Respondent.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
assailing the Decision1 dated November 27, 2006 and Resolution2 dated March 23, 2007 of the Court of Appeals
(CA) in CA-G.R. CV No. 71210.

The facts are as follows:

On October 25, 1995, Contiquincybunge Export Company loaded 6,843.700 metric tons of U.S. Soybean Meal in
Bulk on board the vessel MN "Sea Dream" at the Port of Darrow, Louisiana, U.S.A., for delivery to the Port of Manila
to respondent Simon Enterprises, Inc., as consignee. When the vessel arrived at the South Harbor in Manila, the
shipment was discharged to the receiving barges of petitioner Asian Terminals, Inc. (ATI), the arrastre operator.
Respondent later received the shipment but claimed having received only 6,825.144 metric tons of U.S. Soybean
Meal, or short by 18.556 metric tons, which is estimated to be worth US$7,100.16 or ₱186,743.20.3

On November 25, 1995, Contiquincybunge Export Company made another shipment to respondent and allegedly
loaded on board the vessel M/V "Tern" at the Port of Darrow, Louisiana, U.S.A. 3,300.000 metric tons of U.S.
Soybean Meal in Bulk for delivery to respondent at the Port of Manila. The carrier issued its clean Berth Term Grain
Bill of Lading.4

On January 25, 1996, the carrier docked at the inner Anchorage, South Harbor, Manila. The subject shipment was
discharged to the receiving barges of petitioner ATI and received by respondent which, however, reported receiving
only 3,100.137 metric tons instead of the manifested 3,300.000 metric tons of shipment. Respondent filed against
petitioner ATI and the carrier a claim for the shortage of 199.863 metric tons, estimated to be worth US$79,848.86
or ₱2,100,025.00, but its claim was denied.

Thus, on December 3, 1996, respondent filed with the Regional Trial Court (RTC) of Manila an action for
damages5 against the unknown owner of the vessels M/V "Sea Dream" and M/V "Tern," its local agent Inter-Asia
Marine Transport, Inc., and petitioner ATI alleging that it suffered the losses through the fault or negligence of the
said defendants. Respondent sought to claim damages plus attorney’s fees and costs of suit. Its claim against the
unknown owner of the vessel M/V "Sea Dream," however, was later settled in a Release and Quitclaim6 dated June
9, 1998, and only the claims against the unknown owner of the M/V "Tern," Inter-Asia Marine Transport, Inc., and
petitioner ATI remained.

In their Answer,7 the unknown owner of the vessel M/V "Tern" and its local agent Inter-Asia Marine Transport, Inc.,
prayed for the dismissal of the complaint essentially alleging lack of cause of action and prescription. They alleged
as affirmative defenses the following: that the complaint does not state a cause of action; that plaintiff and/or
defendants are not the real parties-in-interest; that the cause of action had already prescribed or laches had set in;
that the claim should have been filed within three days from receipt of the cargo pursuant to the provisions of the
Code of Commerce; that the defendant could no longer check the veracity of plaintiff’s claim considering that the
claim was filed eight months after the cargo was discharged from the vessel; that plaintiff hired its own barges to
receive the cargo and hence, any damages or losses during the discharging operations were for plaintiff’s account
and responsibility; that the statement of facts bears no remarks on any short-landed cargo; that the draft survey
report indicates that the cargo discharged was more than the figures appearing in the bill of lading; that because the
bill of lading states that the goods are carried on a "shipper’s weight, quantity and quality unknown" terms and on
"all terms, conditions and exceptions as per charter party dated October 15, 1995," the vessel had no way of
knowing the actual weight, quantity, and quality of the bulk cargo when loaded at the port of origin and the vessel
had to rely on the shipper for such information; that the subject shipment was discharged in Manila in the same
condition and quantity as when loaded at the port of loading; that defendants’ responsibility ceased upon discharge
from the ship’s tackle; that the damage or loss was due to the inherent vice or defect of the goods or to the
insufficiency of packing thereof or perils or dangers or accidents of the sea, pre-shipment damage or to improper
handling of the goods by plaintiff or its representatives after discharge from the vessel, for which defendants cannot
be made liable; that damage/loss occurred while the cargo was in the possession, custody or control of plaintiff or its
representative, or due to plaintiff’s own negligence and careless actuations in the handling of the cargo; that the loss
is less than 0.75% of the entire cargo and assuming arguendo that the shortage exists, the figure is well within the
accepted parameters when loading this type of bulk cargo; that defendants exercised the required diligence under
the law in the performance of their duties; that the vessel was seaworthy in all respects; that the vessel went straight
from the port of loading to Manila, without passing through any intermediate ports so there was no chance for any
loss of the cargo; the plaintiff’s claim is excessive, grossly overstated, unreasonable and a mere paper loss and is
certainly unsubstantiated and without any basis; the terms and conditions of the relevant bill of lading and the
charter party, as well as the provisions of the Carriage of Goods by Sea Act and existing laws, absolve the
defendants from any liability; that the subject shipment was received in bulk and thus defendant carrier has no
knowledge of the condition, quality and quantity of the cargo at the time of loading; that the complaint was not
referred to the arbitrators pursuant to the bill of lading; that liability, if any, should not exceed the CIF value of the
lost cargo, or the limits of liability set forth in the bill of lading and the charter party. As counterclaim, defendants
prayed for the payment of attorney’s fees in the amount of ₱220,000. By way of cross-claim, they ask for
reimbursement from their co-defendant, petitioner ATI, in the event that they are held liable to plaintiff.

Petitioner ATI meanwhile alleged in its Answer8 that it exercised the required diligence in handling the subject
shipment. It moved for the dismissal of the complaint, and alleged by way of special and affirmative defense that
plaintiff has no valid cause of action against petitioner ATI; that the cargo was completely discharged from the
vessel M/V "Tern" to the receiving barges owned or hired by the plaintiff; and that petitioner ATI exercised the
required diligence in handling the shipment. By way of counterclaim, petitioner ATI argued that plaintiff should
shoulder its expenses for attorney’s fees in the amount of ₱20,000 as petitioner ATI was constrained to engage the
services of counsel to protect its interest.

On May 10, 2001, the RTC of Manila rendered a Decision9 holding petitioner ATI and its co-defendants solidarily
liable to respondent for damages arising from the shortage. The RTC held:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendants M/V "Tern" Inter-Asia
Marine Transport, Inc. and Asian Terminal Inc. jointly and severally liable to pay plaintiff Simon Enterprises the sum
of ₱2,286,259.20 with legal interest from the date the complaint was filed until fully satisfied, 10% of the amount due
plaintiff as and for attorney’s fees plus the costs of suit.

Defendants’ counterclaim and cross claim are hereby DISMISSED for lack of merit.

SO ORDERED.10

The trial court found that respondent has established that the losses/shortages were incurred prior to its receipt of
the goods. As such, the burden shifted to the carrier to prove that it exercised extraordinary diligence as required by
law to prevent the loss, destruction or deterioration.

However, the trial court held that the defendants failed to prove that they did so. The trial court gave credence to the
testimony of Eduardo Ragudo, a super cargo of defendant Inter-Asia Marine Transport, Inc., who admitted that there
were spillages or overflow down to the spillage saver. The trial court also noted that said witness also declared that
respondent’s representative was not allowed to sign the Master’s Certificate. Such declaration, said the trial court,
placed petitioner ATI in a bad light and weakened its stand.

Not satisfied, the unknown owner of the vessel M/V "Tern," Inter-Asia Marine Transport, Inc. and petitioner ATI
respectively filed appeals to the CA. In their petition, the unknown owner of the vessel M/V "Tern" and Inter-Asia
Marine Transport, Inc. raised the question of whether the trial court erred in finding that they did not exercise
extraordinary diligence in the handling of the goods.11

On the other hand, petitioner ATI alleged that:

THE COURT-A-QUO COMMITTED SERIOUS AND REVERSIBLE ERROR IN HOLDING DEFENDANT[-

]APPELLANT ATI SOLIDARILY LIABLE WITH CO-DEFENDANT APPELLANT INTERASIA MARINE TRANSPORT,
INC. CONTRARY TO THE EVIDENCE PRESENTED.12

On November 27, 2006, the CA promulgated the assailed Decision, the decretal portion of which reads:

WHEREFORE, the appealed Decision dated May 10, 2001 is affirmed, except the award of attorney’s fees which is
hereby deleted.

SO ORDERED.13

In affirming the RTC Decision, the CA held that there is no justification to disturb the factual findings of the trial court
which are entitled to respect on appeal as they were supported by substantial evidence. It agreed with the findings
of the trial court that the unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc. failed to
establish that they exercised extraordinary diligence in transporting the goods or exercised due diligence to forestall
or lessen the loss as provided in Article 174214 of the Civil Code. The CA also ruled that petitioner ATI, as the
arrastre operator, should be held jointly and severally liable with the carrier considering that petitioner ATI’s
stevedores were under the direct supervision of the unknown owner of M/V "Tern" and that the spillages occurred
when the cargoes were being unloaded by petitioner ATI’s stevedores.

Petitioner ATI filed a motion for reconsideration,15 but the CA denied its motion in a Resolution16dated March 23,
2007. The unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc. for their part, appealed to
this Court via a petition for review on certiorari, which was docketed as G.R. No. 177170. Its appeal, however, was
denied by this Court on July 16, 2007 for failure to sufficiently show any reversible error committed by the CA in the
challenged Decision and Resolution as to warrant the exercise of this Court’s discretionary appellate jurisdiction.
The unknown owner of M/V "Tern" and Inter-Asia Marine Transport, Inc. sought reconsideration of the denial but
their motion was denied by the Court in a Resolution dated October 17, 2007.17

Meanwhile, on April 20, 2007, petitioner ATI filed the present petition raising the sole issue of whether the appellate
court erred in affirming the decision of the trial court holding petitioner ATI solidarily liable with its codefendants for
the shortage incurred in the shipment of the goods to respondent.

Petitioner ATI argues that:

1. Respondent failed to prove that the subject shipment suffered actual loss/shortage as there was no
competent evidence to prove that it actually weighed 3,300 metric tons at the port of origin.

2. Stipulations in the bill of lading that the cargo was carried on a "shipper’s weight, quantity and quality
unknown" is not contrary to public policy. Thus, herein petitioner cannot be bound by the quantity or weight
of the cargo stated in the bill of lading.

3. Shortage/loss, if any, may have been due to the inherent nature of the shipment and its insufficient
packing considering that the subject cargo was shipped in bulk and had a moisture content of 12.5%.

4. Respondent failed to substantiate its claim for damages as no competent evidence was presented to
prove the same. 1âwphi 1

5. Respondent has not presented any scintilla of evidence showing any fault/negligence on the part of herein
petitioner.

6. Petitioner ATI should be entitled to its counterclaim.18

Respondent, on the other hand, quotes extensively the CA decision and maintains its correctness.

We grant the petition.

The CA erred in affirming the decision of the trial court holding petitioner ATI solidarily liable with its co-defendants
for the shortage incurred in the shipment of the goods to respondent.

We note that the matters raised by petitioner ATI involve questions of fact which are generally not reviewable in a
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, as the Court is not
a trier of facts. Section 1 thereof provides that "the petition x x x shall raise only questions of law, which must be
distinctly set forth."

A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a
certain set of facts; or when the issue does not call for an examination of the probative value of the evidence
presented, the truth or falsehood of facts being admitted. A question of fact exists when the doubt or difference
arises as to the truth or falsehood of facts or when the query invites calibration of the whole evidence considering
mainly the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances as well as
their relation to each other and to the whole, and the probability of the situation.19

The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this Court in a petition
for review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when (1) the
conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or
impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7)
the findings of absence of facts are contradicted by the presence of evidence on record; (8) the findings of the Court
of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly overlooked certain relevant
and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the Court of
Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.20

After a careful review of the records, we find justification to warrant the application of the fourth exception. The CA
misapprehended the following facts.

First, petitioner ATI is correct in arguing that the respondent failed to prove that the subject shipment suffered actual
shortage, as there was no competent evidence to prove that it actually weighed 3,300 metric tons at the port of
origin.

Though it is true that common carriers are presumed to have been at fault or to have acted negligently if the goods
transported by them are lost, destroyed, or deteriorated, and that the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption,21 the plaintiff must still, before the burden is shifted to
the defendant, prove that the subject shipment suffered actual shortage. This can only be done if the weight of the
shipment at the port of origin and its subsequent weight at the port of arrival have been proven by a preponderance
of evidence, and it can be seen that the former weight is considerably greater than the latter weight, taking into
consideration the exceptions provided in Article 173422 of the Civil Code.

In this case, respondent failed to prove that the subject shipment suffered shortage, for it was not able to establish
that the subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and that the actual weight
of the said shipment was 3,300 metric tons.

The Berth Term Grain Bill of Lading23 (Exhibit "A"), the Proforma Invoice24 (Exhibit "B"), and the Packing
List25 (Exhibit "C"), being used by respondent to prove that the subject shipment weighed 3,300 metric tons, do not,
in fact, help its cause. The Berth Term Grain Bill of Lading states that the subject shipment was carried with the
qualification "Shipper’s weight, quantity and quality unknown," meaning that it was transported with the carrier
having been oblivious of the weight, quantity, and quality of the cargo. This interpretation of the quoted qualification
is supported by Wallem Philippines Shipping, Inc. v. Prudential Guarantee & Assurance, Inc.,26 a case involving an
analogous stipulation in a bill of lading, wherein the Supreme Court held that:
Indeed, as the bill of lading indicated that the contract of carriage was under a "said to weigh" clause, the shipper is
solely responsible for the loading while the carrier is oblivious of the contents of the shipment. (Emphasis
supplied)

Similarly, International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co., Inc.,27 explains
the meaning of clauses analogous to "Shipper’s weight, quantity and quality unknown" in this manner:

This means that the shipper was solely responsible for the loading of the container, while the carrier was
oblivious to the contents of the shipment x x x. The arrastre operator was, like any ordinary depositary, duty-
bound to take good care of the goods received from the vessel and to turn the same over to the party entitled to
their possession, subject to such qualifications as may have validly been imposed in the contract between
the parties. The arrastre operator was not required to verify the contents of the container received and to
compare them with those declared by the shipper because, as earlier stated, the cargo was at the shipper’s
load and count x x x. (Italics in the original; emphasis supplied)

Also, Bankers & Manufacturers Assurance Corporation v. Court of Appeals28 elucidates thus:

The recital of the bill of lading for goods thus transported [i.e., transported in sealed containers or "containerized"]
ordinarily would declare "Said to Contain", "Shipper’s Load and Count", "Full Container Load", and the amount or
quantity of goods in the container in a particular package is only prima facie evidence of the amount or
quantity x x x.

A shipment under this arrangement is not inspected or inventoried by the carrier whose duty is only to
transport and deliver the containers in the same condition as when the carrier received and accepted the
containers for transport x x x. (Emphasis supplied)

Hence, as can be culled from the above-mentioned cases, the weight of the shipment as indicated in the bill of
lading is not conclusive as to the actual weight of the goods. Consequently, the respondent must still prove the
actual weight of the subject shipment at the time it was loaded at the port of origin so that a conclusion may be
made as to whether there was indeed a shortage for which petitioner must be liable. This, the respondent failed to
do.

The Proforma Invoice militates against respondent’s claim that the subject shipment weighed 3,300 metric tons. The
pertinent portion of the testimony of Mr. Jose Sarmiento, respondent’s Claims Manager, is narrated below:

Atty. Rebano: You also identified a while ago, Mr. Witness Exhibit B, the invoice. Why does it state as description
of the cargo three thousand metric tons and not three thousand three hundred?

A: Usually there is a contract between the supplier and our company that embodied [sic] in the letter credit [sic]
that they have the option to ship the cargo plus or minus ten percent of the quantity.

xxxx

Q: So, it is possible for the shipper to ship less than ten percent in [sic] the quantity stated in the invoice
and it will still be a valid shipment. Is it [sic] correct?

A: It [sic] is correct but we must be properly advised and the commercial invoice should indicate how much they
sent to us.29 (Emphasis supplied)

The quoted part of Mr. Sarmiento’s testimony not only shows uncertainty as to the actual weight of the shipment, it
also shows that assuming respondent did order 3,300 metric tons of U.S. Soybean Meal from Contiquincybunge
Export Company, and also assuming that it only received 3,100.137 metric tons, such volume would still be a valid
shipment because it is well within the 10% allowable shortage. Note that Mr. Sarmiento himself mentioned that the
supplier has the option to "ship the cargo plus or minus ten percent of the quantity."30

Notably also, the genuineness and the due execution of the Packing List, the Berth Term Grain Bill of Lading, and
the Proforma Invoice, were not established.
Wallem Philippines Shipping, Inc.,31 is instructive on this matter:

We find that the Court of Appeals erred in finding that a shortage had taken place. Josephine Suarez, Prudential’s
claims processor, merely identified the papers submitted to her in connection with GMC’s claim (Bill of Lading
BEDI/1 (Exh. "B"), Commercial Invoice No. 1401 issued by Toepfer International Asia Pte, Ltd. (Exh. "C"), SGS
Certificate of Quality (Exh. "F-1"), and SGS Certificate of Weight (Exh. "F-3")). Ms. Suarez had no personal
knowledge of the contents of the said documents and could only surmise as to the actual weight of the
cargo loaded on M/V Gao Yang x x x.

xxxx

Ms. Suarez’s testimony regarding the contents of the documents is thus hearsay, based as it is on the
knowledge of another person not presented on the witness stand.

Nor has the genuineness and due execution of these documents been established. In the absence of clear,
convincing, and competent evidence to prove that the shipment indeed weighed 4,415.35 metric tons at the
port of origin when it was loaded on the M/V Gao Yang, it cannot be determined whether there was a
shortage of the shipment upon its arrival in Batangas. (Emphasis supplied)

As in the present case, Mr. Sarmiento merely identified the three above-mentioned exhibits, but he had no personal
knowledge of the weight of the subject shipment when it was loaded onto the M/V "Tern" at the port of origin. His
testimony as regards the weight of the subject shipment as described in Exhibits "A," "B," and "C" must then be
considered as hearsay,32 for it was based on the knowledge of a person who was not presented during the trial in
the RTC.

The presumption that the Berth Term Grain Bill of Lading serves as prima facie evidence of the weight of the cargo
has been rebutted, there being doubt as to the weight of the cargo at the time it was loaded at the port of origin.
Further, the fact that the cargo was shipped with the arrangement "Shipper’s weight, quantity and quality unknown,"
indeed means that the weight of the cargo could not be determined using as basis the figures written on the Berth
Term Grain Bill of Lading. This is in line with Malayan Insurance Co., Inc. v. Jardine Davies Transport Services,
Inc.,33 where we said:

The presumption that the bill of lading, which petitioner relies upon to support its claim for
restitution, constitutes prima facie evidence of the goods therein described was correctly deemed by the
appellate court to have been rebutted in light of abundant evidence casting doubts on its veracity.

That MV Hoegh undertook, under the bill of lading, to transport 6,599.23 MT of yellow crude sulphur on a "said to
weigh" basis is not disputed. Under such clause, the shipper is solely responsible for the loading of the cargo while
the carrier is oblivious of the contents of the shipment. Nobody really knows the actual weight of the cargo inasmuch
as what is written on the bill of lading, as well as on the manifest, is based solely on the shipper’s declaration.

The bill of lading carried an added clause – the shipment’s weight, measure, quantity, quality, condition,
contents and value unknown. Evidently, the weight of the cargo could not be gauged from the bill of
lading. (Italics in the original; emphasis supplied)

The respondent having failed to present evidence to prove the actual weight of the subject shipment when it was
loaded onto the M/V "Tern," its cause of action must then fail because it cannot prove the shortage that it was
alleging. Indeed, if the claimant cannot definitively establish the weight of the subject shipment at the point of origin,
the fact of shortage or loss cannot be ascertained. The claimant then has no basis for claiming damages resulting
from an alleged shortage. Again, Malayan Insurance Co., Inc.,34 provides jurisprudential basis:

In the absence of clear, convincing and competent evidence to prove that the cargo indeed weighed, albeit
the Bill of Lading qualified it by the phrase "said to weigh," 6,599.23 MT at the port of origin when it was
loaded onto the MV Hoegh, the fact of loss or shortage in the cargo upon its arrival in Manila cannot be
definitively established. The legal basis for attributing liability to either of the respondents is thus sorely
wanting. (Emphasis supplied)
Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been due to the inherent nature of
the subject shipment or its packaging since the subject cargo was shipped in bulk and had a moisture content of
12.5%.

It should be noted that the shortage being claimed by the respondent is minimal, and is an indication that it could be
due to consolidation or settlement of the subject shipment, as accurately observed by the petitioner. A Kansas State
University study on the handling and storage of soybeans and soybean meal35 is instructive on this matter. Pertinent
portions of the study reads:

Soybean meal is difficult to handle because of poor flow ability and bridging characteristics. Soybean meal tends to
settle or consolidate over time. This phenomenon occurs in most granular materials and becomes more severe
with increased moisture, time and small particle size x x x.

xxxx

Moisture is perhaps the most important single factor affecting storage of soybeans and soybean meal. Soybeans
contain moisture ranging from 12% to 15% (wet basis) at harvest time x x x.

xxxx

Soybeans and soybean meal are hygroscopic materials and will either lose (desorb) or gain (adsorb)
moisture from the surrounding air. The moisture level reached by a product at a given constant temperature and
equilibrium relative humidity (ERH) is its equilibrium moisture content (EMC) x x x. (Emphasis supplied)

As indicated in the Proforma Invoice mentioned above, the moisture content of the subject shipment was 12.5%.
Taking into consideration the phenomena of desorption, the change in temperature surrounding the Soybean Meal
from the time it left wintertime Darrow, Louisiana, U.S.A. and the time it arrived in Manila, and the fact that the
voyage of the subject cargo from the point of loading to the point of unloading was 36 days, the shipment could have
definitely lost weight, corresponding to the amount of moisture it lost during transit.

The conclusion that the subject shipment lost weight in transit is bolstered by the testimony of Mr. Fernando Perez,
a Cargo Surveyor of L.J. Del Pan. The services of Mr. Perez were requested by respondent.36 Mr. Perez testified
that it was possible for the subject shipment to have lost weight during the 36-day voyage, as it was wintertime when
M/V "Tern" left the United States and the climate was warmer when it reached the Philippines; hence the moisture
level of the Soybean Meal could have changed.37 Moreover, Mr. Perez himself confirmed, by answering a question
propounded by the RTC, that loss of weight of the subject cargo cannot be avoided because of the shift in
temperature from the colder United States weather to the warmer Philippine climate.38

More importantly, the 199.863 metric-ton shortage that respondent alleges is a minimal 6.05% of the weight of the
entire Soy Bean Meal shipment. Taking into consideration the previously mentioned option of the shipper to ship
10% more or less than the contracted shipment, and the fact that the alleged shortage is only 6.05% of the total
quantity of 3,300 metric tons, the alleged percentage loss clearly does not exceed the allowable 10% allowance for
loss, as correctly argued by petitioner. The alleged loss, if any, not having exceeded the allowable percentage of
shortage, the respondent then has no cause of action to claim for shortages.

Third, we agree with the petitioner ATI that respondent has not proven any negligence on the part of the former.

As petitioner ATI pointed out, a reading of the Survey Report of Del Pan Surveyors39 (Exhibits "D" to "D-4" of
respondent) would not show any untoward incident or negligence on the part of petitioner ATI during the discharging
operations.

Also, a reading of Exhibits "D", "D-1", and "D-2" would show that the methods used in determining whether there
was a shortage are not accurate.

Respondent relied on the Survey Reports of Del Pan Surveyors to prove that the subject shipment suffered loss.
The conclusion that there was a shortage arose from an evaluation of the weight of the cargo using the barge
displacement method. This is a type of draught survey, which is a method of cargo weight determination by ship’s
displacement calculations.40 The basic principle upon which the draught survey methodology is based is the
Principle of Archimedes, i.e., a vessel when floating in water, will displace a weight of water equal to its own
weight.41 It then follows that if a weight of cargo is loaded on (or unloaded from) a vessel freely floating in water,
then the vessel will sink (or float) into the water until the total weight of water displaced is equal to the original weight
of the vessel, plus (or minus) the cargo which has been loaded (or unloaded) and plus (or minus) density variation of
the water between the starting survey (first measurement) and the finishing survey (second measurement).42 It can
be seen that this method does not entail the weighing of the cargo itself, but as correctly stated by the petitioner, the
weight of the shipment is being measured by mere estimation of the water displaced by the barges before and after
the cargo is unloaded from the said barges.

In addition, the fact that the measurements were done by Del Pan Surveyors in prevailing slight to slightly rough sea
condition43 supports the conclusion that the resulting measurement may not be accurate. A United Nations study on
draught surveys44 in fact states that the accuracy of draught surveys will be dependent upon several factors, one of
which is the weather and seas condition in the harbor.

Also, it can be seen in respondent’s own Exhibit "D-1" that the actual weight of the cargo was established by
weighing 20% of the cargo. Though we recognize the practicality of establishing cargo weight through random
sampling, we note the discrepancy in the weights used in the determination of the alleged shortage.

Exhibit "D-1" of respondent states that the average weight of each bag is 52 kilos. A total of 63,391 bags45 were
discharged from the barges, and the tare weight46 was established at 0.0950 kilos.47 Therefore, if one were to
multiply 52 kilos per bag by 63,391 bags and deduct the tare weight of 0.0950 kilos multiplied by 63,391 bags, the
result would be 3,290,309.65 kilos, or 3,290.310 metric tons. This would mean that the shortage was only 9.69
metric tons, if we suppose that respondent was able to establish that the shipment actually weighed 3,300 metric
tons at the port of loading.

However, the computation in Exhibit "D-2" would show that Del Pan Surveyors inexplicably used 49 kilos as the
weight per bag, instead of 52 kilos, therefore resulting in the total net weight of 3,100,137 kilos or 3,100.137 metric
tons. This was the figure used as basis for respondent's conclusion that there is a shortage of 199.863 metric tons.48

These discrepancies only lend credence to petitioner ATI's assertion that the weighing methods respondent used as
bases are unreliable and should not be completely relied upon.

Considering that respondent was not able to establish conclusively that the subject shipment weighed 3,300 metric
tons at the port of loading, and that it cannot therefore be concluded that there was a shortage for which petitioner
should be responsible; bearing in mind that the subject shipment most likely lost weight in transit due to the inherent
nature of Soya Bean Meal; assuming that the shipment lost weight in transit due to desorption, the shortage of
199.863 metric tons that respondent alleges is a minimal 6.05% of the weight of the entire shipment, which is within
the allowable 10% allowance for loss; and noting that the respondent was not able to show negligence on the part of
the petitioner and that the weighing methods which respondent relied upon to establish the shortage it alleges is
inaccurate, respondent cannot fairly claim damages against petitioner for the subject shipment's alleged shortage.

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated November 27, 2006 and
Resolution dated March 23, 2007 of the Court of Appeals in CA-G.R. CV No. 71210 are REVERSED AND SET
ASIDE insofar as petitioner Asian Terminals, Inc. is concerned. Needless to add, the complaint against petitioner
docketed as RTC Manila Civil Case No. 96-81101 is ordered DISMISSED.

No pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:
 MARIA LOURDES P. A. SERENO
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

ROBERTO A. ABAD*
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

* Designated additional member per Raffle dated January 7, 2013 vice Associate Justice Bienvenido L.
Reyes who recused himself from the case due to prior action in the Court of Appeals.

1Rollo, pp. 35-52. Penned by Associate Justice Fernanda Lampas Peralta with Associate Justices
Bienvenido L. Reyes (now a member of this Court) and Myrna Dimaranan-Vidal concurring.

2 Id. at 59.

3 Records, pp. 2-3.

4 Id. at 7.

5 Id. at 1-5. Docketed as Civil Case No. 96-81101.

6 Rollo, pp. 74-75.

7 Records, pp. 28-35.

8 Id. at 23-26.

9 Rollo, pp. 53-57. Penned by Judge Amor A. Reyes.

10 Id. at 57.

11 Id. at 40.

12 Id. at 143.

13 Id. at 51.
14 Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of
the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due
diligence to forestall or lessen the loss.

15 Rollo, pp. 168-184.

16 Id. at 59.

17 Id. at 191, 243.

18 Id. at 222–237.

19 Santos v. Committee on Claims Settlement, G.R. No. 158071, April 2, 2009, 583 SCRA 152, 159-160.

See The Insular Life Assurance Company, Ltd. v. Court of Appeals, G.R. No. 126850, April 28, 2004, 428
20

SCRA 79, 86.

21 DSR-Senator Lines v. Federal Phoenix Assurance Co., Inc., 459 Phil. 322, 329 (2003).

22Art. 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.

23 Records, p. 173.

24 Id. at 174.

25 Id. at 175.

26 445 Phil. 136, 153 (2003).

27 377 Phil. 1082, 1093-1094 (1999).

28 G.R. No. 80256, October 2, 1992, 214 SCRA 433, 435.

29 TSN, June 8, 1999, pp. 16-17.

30 Id. at 16.

31 Supra note 26 at 150-151.

32 RULES OF COURT, Rule 130, Section 36.

SEC. 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.
33 G.R. No. 181300, September 18, 2009, 600 SCRA 706, 716-717.

34 Id. at 718.

35Acasio, Dr. Ulysses A., Handling and Storage of Soybeans and Soybean Meal, Department of Grain
Science and Industry, Kansas State University, U.S.A. Retrieved from <ftp://asaimeurope.
org/Backup/pdf/handlingsb.pdf.> (Visited December 27, 2012).

36 TSN, August 19, 1999, p. 3.

37 Id. at 12-13.

38 Id. at 13.

39 Records, pp. 176-179.

40United Nations Economic and Social Council, Code of Uniform Standards and Procedures for the
Performance of Draught Surveys of Coal Cargoes. Retrieved from
<http://www.unece.org/fileadmin/DAM/ie/se/pdfs/dce.pdf.> (Visited December 27, 2012).

41 Id.

42 Id.

43
Exhibit "D-1" of respondent, records, p. 177.

44 Supra note 40.

45 Supra note 43.

46The officially accepted weight of an empty car, vehicle, or container that when subtracted from gross
weight yields the net weight of cargo or shipment upon which charges can be calculated. Merriam- Webster
Dictionary Online, <http://www.merriam-webster.com/dictionary/tareweight> (Visited January 2, 2013).

47 Exhibit "D-2", records, p. 178.

48 Id.
 SECOND DIVISION

G.R. No. 210621, April 04, 2016

ALFREDO MANAY, JR., FIDELINO SAN LUIS, ADRIAN SAN LUIS, ANNALEE SAN LUIS, MARK
ANDREW JOSE, MELISSA JOSE, CHARLOTTE JOSE, DAN JOHN DE GUZMAN, PAUL MARK
BALUYOT, AND CARLOS S. JOSE, Petitioners, v. CEBU AIR,INC, Respondent.

DECISION

LEONEN, J.:

The Air Passenger Bill of Rights1 mandates that the airline must inform the passenger in writing of all
the conditions and restrictions in the contract of carriage.2 Purchase of the contract of carriage binds
the passenger and imposes reciprocal obligations on both the airline and the passenger. The airline
must exercise extraordinary diligence in the fulfillment of the terms and conditions of the contract of
carriage. The passenger, however, has the correlative obligation to exercise ordinary diligence in the
conduct of his or her affairs.

This resolves a Petition for Review on Certiorari3 assailing the Court of Appeals Decision4 dated
December 13, 2013 in CA-G.R. SP. No. 129817. In the assailed Decision, the Court of Appeals
reversed the Metropolitan Trial Court Decision5 dated December 15, 2011 and the Regional Trial
Court Decision6 dated November 6, 2012 and dismissed the Complaint for Damages filed by
petitioners Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew
Jose, Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose
against respondent Cebu Air, Incorporated (Cebu Pacific).7

On June 13, 2008, Carlos S. Jose (Jose) purchased 20 Cebu Pacific round-trip tickets from Manila to
Palawan for himself and on behalf of his relatives and friends.8 He made the purchase at Cebu
Pacific's branch office in Robinsons Galleria.9

Jose alleged that he specified to "Alou," the Cebu Pacific ticketing agent, that his preferred date and
time of departure from Manila to Palawan should be on July 20, 2008 at 0820 (or 8:20 a.m.) and that
his preferred date and time for their flight back to Manila should be on July 22, 2008 at 1615 (or
4:15 p.m.).10 He paid a total amount of P42,957.00 using his credit card.11 He alleged that after
paying for the tickets, Alou printed the tickets,12 which consisted of three (3) pages, and recapped
only the first page to him.13 Since the first page contained the details he specified to Alou, he no
longer read the other pages of the flight information.14

On July 20, 2008, Jose and his 19 companions boarded the 0820 Cebu Pacific flight to Palawan and
had an enjoyable stay.15

On the afternoon of July 22, 2008, the group proceeded to the airport for their flight back to
Manila.16 During the processing of their boarding passes, they were informed by Cebu Pacific
personnel that nine (9)17 of them could not be admitted because their tickets were for the 1005 (or
10:05 a.m.)18 flight earlier that day.19 Jose informed the ground personnel that he personally
purchased the tickets and specifically instructed the ticketing agent that all 20 of them should be on
the 4:15 p.m. flight to Manila.20

Upon checking the tickets, they learned that only the first two (2) pages had the schedule Jose
specified.21 They were left with no other option but to rebook their tickets.22 They then learned that
their return tickets had been purchased as part of the promo sales of the airline, and the cost to
rebook the flight would be P7,000.00 more expensive than the promo tickets.23 The sum of the new
tickets amounted to P65,000.00.24

They offered to pay the amount by credit card but were informed by the ground personnel that they
only accepted cash.25 They then offered to pay in dollars, since most of them were balikbayans and
had the amount on hand, but the airline personnel still refused. 26

Eventually, they pooled enough cash to be able to buy tickets for five (5) of their companions.27
 THIRD DIVISION

G.R. No. 203081, January 17, 2018

LINDA CACHO, MINORS SARAH JANE, JACQUELINE, FIRE RINA AND MARK LOUISE ALL
SURNAMED CACHO, ALL REPRESENTED BY THEIR MOTHER AND GUARDIAN AD LITEM
LINDA CACHO, Petitioners, v. GERARDO MANAHAN, DAGUPAN BUS CO., INC., AND RENATO
DE VERA DOING BUSINESS UNDER THE NAME R. M. DE VERA CONSTRUCTION, Respondent.

DECISION

MARTIRES, J.:

For resolution is the Petition for Review on Certiorari,1 docketed as G.R. No. 203081, assailing the 22
March 2012 Decision2 and the 3 August 2012 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV
No. 83499. The CA reversed the 26 January 2004 Decision4 of the Regional Trial Court, Branch 55 of
Alaminos, Pangasinan (RTC), and dismissed the complaint for damages docketed as Civil Case No. A-
2553.

THE FACTS

The present case arose from a complaint for damages filed by the petitioners, the wife and children
of Bismark Cacho (Cacho), against Gerardo Manahan (Manahan), Dagupan Bus Co., Inc. (Dagupan
Bus), and Renato de Vera (De Vera), the owner of R.M. De Vera Construction (De Vera Construction).

The records disclose that on 30 June 1999 a vehicular accident occurred along the national highway
at Pogo, Alaminos, Pangasinan, near the Embarcadero Bridge. At around 5:00 A.M. on the said date,
Cacho was driving a Nissan Sentra with Plate No. UAM 778 from Alaminos, Pangasinan to Bani,
Pangasinan, when it collided with a Dagupan Bus, with Plate No. AVD 548, traversing on the opposite
lane. The car had already crossed the bridge when it collided with the bus which was just about to
enter the bridge. The collision caused heavy damage to the front of the bus, the total wreckage of
the Nissan Sentra, Cacho's instant death, and multiple injuries to three (3) passengers inside the car.

The complaint alleged that Cacho's car was hit by the bus because the latter swerved to the left lane
as it tried to avoid a pile of boulders placed on the shoulder of the road. These boulders were
negligently placed by De Vera Construction contracted by the local government to do some work on
the Embarcadero Bridge.

Dagupan Bus, the owner and operator of the bus, and Manahan, the bus driver, jointly filed their
answer with counterclaim and cross-claims. They claimed that it was Cacho who drove fast coming
from the bridge and bumped into the bus that was on full stop; and that Cacho had to swerve to the
left because there were boulders of rocks scattered on his lane.

In their cross-claims, Dagupan Bus and Manahan argued that the proximate cause of the accident
was because of De Vera Construction's negligence for leaving the boulders of rocks on both shoulders
of the national highway. These rocks obstructed passage on the highway and posed an imminent
danger to vehicles passing by. At the time of the accident, the rocks were piled on both shoulders
and some rocks rolled down to both lanes of the highway.
In his answer with counterclaim, De Vera maintained that he ensured the safety of the road by piling
the boulders in a safe place to make sure they did not encroach upon the road. He presented the
municipality's local civil engineer to testify that he inspected the road and found that De Vera
Construction had complied with the safety measures. Like his co-defendants, De Vera blamed Cacho
for driving recklessly and causing the collision with the bus.

The Ruling of the Trial Court

After thoroughly evaluating the evidence adduced by all the parties, the RTC held Dagupan Bus,
Manahan, and De Vera jointly and severally liable to pay the petitioners:

1. Sixty Thousand (P60,000) Pesos as reduced amount for burial and funeral expenses
incurred by them as shown from the receipts;

2. Fifty Thousand (P50,000) Pesos for loss of life;

3. Two Million (P2,000,000) Pesos as the reduced amount for the loss of support of the
[petitioners] had not [Cacho] meet his untimely death;

4. Another amount of moral damages in the reduced sum of Three Hundred Thousand
(P300,000) Pesos;

5. Exemplary damages in the reduced sum of One Hundred Thousand (P100,000) Pesos;

6. Loss of earning capacity in the amount of One Million Six Hundred Eighty Thousand
(P1,680,000) Pesos; and

7. Attorney's fees in the sum of Two Hundred Thousand (P200,000) Pesos.

For the total amount of Four Million Three Hundred Ninety Thousand (P4,390,000)
Pesos.5

Initially, the RTC did not believe that the bus was on full stop and that Cacho caused the
collision, viz:

The Court cannot believe that the [bus] had stopped fully upon reaching the front portion of the
bridge because Exhibit K shows that in fact the [bus] has encroached the lane as shown in Exhibit K-
1 to mean therefore that the [bus] was not on full stop position when the incident happened but was
moving. Likewise, Exhibit K shows the left portion, left front wheel of the [bus] was steered to the
right which is clearly depicted in Exhibit J and also clearly shown in Exhibit I showing the front right
wheel of the bus turned to the left side.

xxxx

The Court cannot also believe that [Cacho] driving the Nissan Sentra was the one that bumped the
[bus], the reason being that, if it was [Cacho] driving the car bumped the [bus], in this position
shown in

Exhibit F-2, how will the [bus], the defendant in this case explain the damage that he suffered as
shown in Exhibit 3 which shows the front left portion of the bus having suffered damages at the line
of the bus driver's seat, so that if there were two (2) vehicles running on opposite direction in this
kind of impact the smaller vehicle, which is the Nissan Sentra could have been thrown to the left side
of the bus (along the driver's line of seat) as shown in Exhibit 2 because if the [bus] was stationary
and the Nissan Sentra was the one that bumped while running, the position of the Nissan Sentra car
should not have been on the left but on the opposite direction in line with the front of the bus or
slightly off the front of the bus and besides how can Dagupan Bus explain if indeed the bus was
stationary at the time of the incident since it is shown that it has occupied outside its lane shown in
Exhibit K-1.6

The RTC explained that Manahan was negligent in driving the bus because it was traversing at the
speed of 80-100 KM/H and was about to enter a very narrow bridge.7 In coming up with this finding,
the trial court gave much credence and importance to the testimony of one Alvin
Camba (Camba), who was a passenger of the bus in this incident, over the testimony of Dagupan
Bus' conductor.8 Furthermore, the RTC stressed the negligence on the part of Manahan as he had the
last clear chance to avoid the collision, to wit:

Another point. At 5:20 A.M., more or less, both vehicles should have still their lights on and since the
[bus] is higher than the Nissan Sentra, the [bus] could have noticed the incoming car and could have
the last clear chance to avoid the car, had [Manahan] exercised extraordinary diligence by running
the bus slowly since the width of the bridge is narrow and the car was already about to clear the
bridge by crossing the span of the entire bridge. This was not done and neither was the last
reasonable opportunity to avoid the impending harm exercise; such failure spells clearly the
negligence of [Manahan].9

To add, applying the doctrine of res ipsa loquitor, the RTC concluded that Cacho could not have
driven on Manahan's side of the road because the car he was driving was thrown to a position where
the car's front was facing the left side of the bus.10

In the end, the trial court held that the proximate cause of the incident was the negligence of
Manahan in driving the bus as well as the negligence on the part of De Vera for allowing his
employees to place boulders near the bridge.11 The RTC noted:

The Court can also take Judicial Notice of the Embarcadero Bridge which is a very narrow bridge but
the length is quite long that could hardly accommodate two (2) big vehicles crossing one another,
except, if these vehicles are running at a very low speed.

In Exhibit H and H-1 [De Vera] operating [De Vera Construction], had placed boulders/stones on the
edge of the road which to the mind of the Court additionally hampers the flow of traffic and likewise
shown in Exhibit I.12

The CA Ruling

In the assailed decision, the CA reversed the trial court's ruling, effectively dismissing the complaint
for damages against Manahan, Dagupan Bus, and De Vera. Contrary to the trial court's findings, the
CA did not believe that the bus was running very fast and that it suddenly swerved to the left to
avoid the boulders. It held:

Logic and the principles of force and momentum dictate that, if the [bus] was moving at a high speed
until it collided with the Nissan Sentra, said bus would have traveled a farther distance from the point
of collision especially considering its size and weight compared to the Nissan Sentra.

Moreover, if the [bus] swerved to its left while speeding until the time of collision, the bus would be
occupying a bigger, if not, the entire portion of the opposite lane. Certainly, the Nissan Sentra which
is a lighter and smaller vehicle could not have stopped the [bus'] force and momentum if [Manahan]
was driving the bus very fast. As the evidence (Exhibit "2") shows, the Nissan Sentra was in a
perpendicular position with its front portion rammed against the upper left portion of the bus.

Further, the evidence (Exhibit "K") shows that the [bus] was just situated at the approach of the
bridge and in parallel position to the road notwithstanding the fact that its front tires were swerved to
its left side. This is consistent with [Dagupan Bus and Manahan's] averment that the bus was at a full
stop and waiting for the Nissan Sentra to cross the bridge so that it could in turn proceed.

Regarding the position of the front tires of the bus, to the mind of this Court, considering that the
bridge is narrower than the road, the front tires had to be aimed to its left to compensate for the bus
length before entering the narrow bridge. Furthermore, the [bus] had to encroach a portion of the
opposite lane to avoid the boulders on its right side.

Notwithstanding the position of the bus, it cannot be said that the Dagupan Bus was the party liable
for the collision. It must be emphasized that the [bus] still left a significant space to enable the
vehicles coming from the opposite direction to safely pass the bridge and into the highway. As Exhibit
"K" shows, there is approximately a 24-inch space between a passing red car and the [bus] and the
red car had passed the bridge and traversed the highway and safely avoided the [bus] on its left with
ease. Moreover, the picture (Exhibit "K") shows that the red car is being followed by a jeepney, which
is evidently bigger than the red car and the subject Nissan Sentra, and presumably, the said jeepney
was able to pass through the same space without difficulty.

Definitely, [Cacho] had a significant space to maneuver his car safely from the bridge and into the
highway and pas[s] the [bus] on its left. Unfortunately, the Nissan Sentra still collided with the [bus].
Despite the fact that the bus was at a full stop at the approach of the bridge and with enough space
for other vehicles from the opposite lane to pass through, [Cacho] failed to avoid the [bus] and
collided with [it]. Clearly, it was [Cacho] who drove the Nissan Sentra negligently or with lack of due
care. [Cacho]'s negligence resulted in the collision which left his Nissan Sentra car lying
perpendicular to the left side of the [bus] and with considerable damage to both the bus and his car,
and, sadly, in his death.

xxxx

In the case at bench, the proximate cause of the accident was clearly the negligence of [Cacho] in
driving the Nissan Sentra. We are not ruling here on the liability of defendant [De Vera] who was
found by the RTC to be solidarity liable with [Dagupan Bus and Manahan] because of his negligence
in carelessly dumping the stone boulders on the road and which both the [bus] and the Nissan Sentra
tried to avoid on their respective side of the highway. Be it noted that [De Vera] did not appeal from
the RTC's decision.13

After their motion for reconsideration was denied, the petitioners filed the petition before this Court.

OUR RULING

The petition has merit.

At the onset, we must remember that a Rule 45 review is generally limited to questions of law. 14 This
limitation exists because we are not a trier of facts who undertakes the re-examination and re-
assessment of the evidence presented by the contending parties during the trial.15 The appreciation
and resolution of factual issues are the functions of the lower courts, whose resulting findings are
then received with respect and are generally binding on this Court.16 However, there are exceptions,
such as when the factual findings of the CA and the trial court are contradictory. 17

Although the present petition substantially raises factual matters, we review the contrasting
evaluation and conclusion by the RTC and the CA. An examination of the records shows that both the
RTC and the CA had carefully considered the facts behind the case. On one hand, the RTC found that
it was Manahan's negligence that was the proximate cause of the accident. The CA's position is that
Cacho was driving recklessly as it traversed the bridge, so he was found negligent. Taken that the
RTC and the CA have different positions on who was negligent, we now ascertain who between them
is correct.

After review of the conclusions of fact and the evidence on record, we are inclined to side with the
RTC's findings.

First, the assessment of the trial court on the credibility of witnesses is accorded great weight and
respect and even considered as conclusive and binding. Given that the trial judge has the unique
opportunity to observe the witness first hand, he can be expected to determine with reasonable
discretion which testimony is acceptable and which witness is worthy of belief.18 In the case at bar,
the RTC gave much credence to Camba's testimony as he was a passenger of the bus during the
accident. Camba testified that the bus was travelling at a high speed even if it was nearing the
Embarcadero Bridge:

Q: On June 30, 1999, at about 5:20 in the morning, will you tell us, Mr. Witness, where were you?

A: I was aboard the [bus] that was bound for Manila but I was going to Alaminos and it collided with a car,
sir.

Q: Mr. Witness, do you know the number of the [bus] that you were riding?

A: 272, sir.

Q: What happened at Pogo, Alaminos, Pangasinan, Mr. Witness?

A: I noticed that the driver of the bus that I was riding was driving fast and it suddenly swerved to the left
and then I heard a "bang" but I did not alight at once because I was bumped the seat in front and I was a
little dizzy.

xxxx

Q: You said, Mr. Witness, that the driver of the [bus] was driving very fast, is it not?

A: Yes, sir.

Q: Could you estimate the speed in terms of kilometers per hour?

A: Between 80 to 100 kilometers per hour, sir.

Q: And you sad that the bus suddenly swerved to the left, is it not?

A: Yes, sir.
 xxxx

Q: How far was the spot of the impact or the spot of the accident to the edge of the ridge?

A: From here... (witness demonstrating) a distance between 2 - 3 or 2 � meters.

Q: So we can safely say that the accident happened at the approach of the bridge coming from Bani?

A: Yes, madam.

xxxx

Q: What part of the bus did you ride?

A: Right side, madam.

Q: How many seats?

A: Third seat, madam.

Q: When you were approaching the bridge, did you also see the car of Mr. Cacho coming?

A: I did not see the car approaching, madam.

Q: Were you sleeping at that time?

A: No, madam.

Q: Considering that it was 5:00 in the morning, the lights of the vehicle were on, you did not see the light
of the car of Mr. Cacho?

A: When I saw it was immediately before the impact, it was followed by the sound of the impact.19

Although Dagupan Bus offered the testimony of one of its bus conductors to contradict Camba's
version, we agree with the trial court that his testimony duly established the fact that Manahan was
driving the bus at a high speed before they entered the bridge. This unbiased piece of evidence alone
supports the RTC's conclusion that there was negligence on the part of Manahan. Absent any showing
that the calibration of the credibility of the witness was flawed, we are bound by this assessment. As
much as possible, we will sustain the trial court's findings unless it could be shown that it ignored,
overlooked, misunderstood, misappreciated, or misapplied substantial facts and circumstances which,
if considered, would materially affect the result of the case.20 In this case, there is no such instance.
The RTC's meticulous analysis deserves more credit because it is supported by the evidence on
record.

We simply cannot adopt the CA's position that the bus was on full stop upon entering the bridge as
this is based on speculation and contrary to evidence. Borne by the record, the impact of the collision
resulted in the car being thrown about ninety (90) degrees counter-clockwise to the opposite lane
before resting perpendicular to the road. The resulting position of the vehicle after the collision is
incompatible with the conclusion that the bus was at full stop. Cacho's car would not be thrown off
and be turned counter-clockwise to the opposite direction of its motion if there was no heavier and
greater force that collided with it. This circumstance was duly established by the photographs of the
scene taken after the accident.

Second, negligence on the part of Manahan was also established by the photographs showing that he
occupied Cacho's lane. Exhibits "I-1" and "J-1" would show that the front wheels of the bus were
turned to the left. We can easily notice from Exhibits "K-1" and "L-1" that both the front and rear left
wheels of the bus already occupied a portion of the opposite lane; leaving a smaller space for Cacho
to safely exit the bridge. We also observe that there was enough space on the right side of the road
because a man extending his two hands, as depicted in Exhibit "M," could fit between the right side
of the bus and the shoulder of the road.

From these circumstances, therefore, we find that Manahan was clearly negligent because the bus he
was driving already occupied a portion of the opposite lane, and he was driving at a high speed while
approaching the bridge.

In Picart v. Smith,21 we laid down the test by which we determine the existence of negligence, viz:

The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinary prudent person would have used in the same situation? If not,
then he is guilty of negligence. The law here in effect adopts the standard supposed to be
supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The existence of
negligence in a given case is not determined by reference to the personal judgment of the actor in
the situation before him. The law considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculations cannot here be of much value but this
much can be profitably said: Reasonable men govern their conduct by the circumstances
which are before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only when there is
something before them to suggest or warn of danger. Could a prudent man, in the case under
consideration, foresee harm as a result of the course actually pursued? If so, it was the duty of the
actor to take precautions to guard against that harm. Reasonable foresight of harm, followed by
the ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper criterion for determining the
existence of negligence in a given case is this: Conduct is said to be negligent when a prudent
man in the position of the tortfeasor would have foreseen that an effect harmful to another
was sufficiently probable to warrant his foregoing conduct or guarding against its
consequences.22 (emphases ours)

Using this test, Manahan was clearly negligent when he was relatively driving fast on a narrow
highway and approaching a similarly narrow bridge. We must bear in mind that a bus is a
significantly large vehicle which would be difficult to maneuver and stop if it were travelling at a high
speed. On top of this, the time of the accident was on or about sunrise when visibility on the road
was compromised. Manahan should have been more prudent and careful in his driving the bus
especially considering that Dagupan Bus is a common carrier. Given the nature of the business and
for reasons of public policy, the common carrier is bound "to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them, according to all
the circumstances of each case."23

Moreover, we can also say that Manahan was legally presumed negligent under Article 2185 of the
Civil Code, which provides: "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 [in violation of] any traffic
regulation."[24 Based on the place and time of the accident, Manahan was actually violating a traffic
rule found in R.A. No. 4136, otherwise known as the Land Transportation and Traffic Code:

CHAPTER VI
TRAFFIC RULES

ARTICLE I
Speed Limit and Keeping to the Right

Section 35. Restriction as to speed. �

(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent
speed, not greater or less than is reasonable and proper, having due regard for the traffic,
the width of the highway, and of any other condition then and there existing; and no person
shall drive any motor vehicle upon a highway at such speed as to endanger the life, limb and
property of any person, nor at a speed greater than will permit him to bring the vehicle to a
stop within the assured clear distance ahead.� (emphasis and underlining ours)

(b) Subject to the provisions of the preceding paragraph, the rate of speed of any motor vehicle shall
not exceed the following:

� � �

MAXIMUM ALLOWABLE SPEEDS Passenger Cars Motor trucks

and Motorcycle and buses

1. On open country roads, with no "blind 80km. per hour � 50 km. per
corners" not closely bordered by hour
habitations.

2. On "through streets" or boulevards, clear 40 km. per hour � 30 km. per
of traffic, with no "blind corners," when so hour
designated.

3. On city and municipal streets, with light 30 km. per hour � 30 km. per
traffic, when not designated "through hour
streets."

4. Through crowded streets, approaching 20 km. per hour � 20 km. per
intersections at "blind corners," passing hour
school zones, passing other vehicles which
are stationary, or for similar dangerous
circumstances.
Considering that the bus was already approaching the Embarcadero Bridge, Manahan should have
already slowed down a few meters away from the bridge. Actually, he should have stopped farther
away from the bridge because he would have been able to see that Cacho's car was already crossing
the bridge. An experienced and competent bus driver would be able to know how to properly react
upon seeing another vehicle ahead that is about to exit a narrow bridge. Obviously, Manahan failed
to do so.

Having established Manahan's negligence, he is liable with Dagupan Bus to indemnify Cacho's heirs.
Article 2180, in relation to Article 2176, of the Civil Code provides that the employer of a negligent
employee is liable for the damages caused by the latter. When an injury is caused by the negligence
of an employee there instantly arises a presumption of the law that there was negligence on the part
of the employer either in the selection of his employee or in the supervision over him after such
selection. The presumption, however, may be rebutted by a clear showing on the part of the
employer that it had exercised the care and diligence of a good father of a family in the selection and
supervision of his employee. Hence, to escape solidary liability, for a quasi-delict committed by its
employees, an employer must overcome the presumption by presenting convincing proof that it
exercised the care and diligence of a good father of a family in the selection and supervision of its
employees.25

When an employee causes damage due to his own negligence while performing his own duties,
the juris tantum presumption arises that his employer is negligent, rebuttable only by proof of
observance of the diligence of a good father of a family. In the selection of prospective employees,
employers are required to examine them as to their qualifications, experience, and service records.
With respect to the supervision of employees, employers must formulate standard operating
procedures, monitor their implementation, and impose disciplinary measures for breaches thereof.
These facts must be shown by concrete proof, including documentary evidence.26

A closer scrutiny of the evidence presented to overcome this presumption would show that Dagupan
Bus failed in this regard. It would seem that Manahan applied with Dagupan Bus sometime in April
1999.27 In his application form, he stated that prior to his employment with Dagupan Bus, he was a
truck driver. Along with his application, Manahan was required to submit the following documents:
2x2 ID pictures, recommendation letter, NBI clearance, SSS E-1 form, TIN number, barangay
clearance, residence certificate, driver's license, and birth certificate.28

Finding his requirements to be complete, Manahan was cleared for actual driving and a written
examination. On 10 May 1999, Manahan passed his driving examination, but the examiner noted his
slow reaction in stopping.[29 Manahan's written examination also points out that he cannot recognize
traffic signs indicating a narrow road.30 After undergoing shop training, Manahan underwent a seven
(7)-day apprentice training which he completed on 7 June 1999.31 A few days after, or on 21 June
1999, Dagupan Bus gave Manahan clearance to report for duty as a bus driver.32

On this point, we are surprised at how prompt Dagupan Bus had allowed Manahan to drive one of its
buses considering he had no prior experience driving one. The only time he was actually able to drive
a bus was probably during his driving examination and a few more times while undergoing
apprenticeship. We cannot simply brush aside and ignore Dagupan Bus' haste to hire Manahan; to
our mind, this is negligence on its part.

In addition, we noted that Manahan's apprenticeship record indicate that he is not fit to drive aircon
buses nor to drive at night. That the accident happened early in the morning, when the visibility
conditions are the same as driving at night, Manahan should not have been driving in the first place.
Once more, Dagupan Bus' negligence is clear.

While the immediate beneficiaries of the standard of extraordinary diligence are the passengers, they
are not the only persons the law seeks to benefit. If we were to solely require this standard of
diligence for a common carrier's passengers, this would be incongruent to the State's responsibility to
curb accidents on the road. That common carriers should carefully observe the statutory standard of
extraordinary diligence in respect of their passengers, such diligence should similarly benefit
pedestrians and the owners and passengers of other vehicles who are equally entitled to the safe and
convenient use of our roads and highways.33

All said, finding both Manahan and Dagupan Bus negligent in meeting their responsibilities, the RTC
was correct in awarding damages in favor of Cacho's heirs. Clearly, the CA committed a reversible
error.

Further, we noticed that the RTC failed to provide for the interest required of the award. Since the
damages imposed were the result of a complaint for damages based on a quasi-delict, the interest on
these awards must be computed from the date when the RTC rendered its decision in the civil case,
or on 26 January 2004, as it was at this time that a quantification of the damages may be deemed to
have been reasonably ascertained.34 From the finality of a judgment awarding a sum of money until
it is satisfied, the award shall be considered a forbearance of credit, regardless of whether the award
in fact pertained to one.35 To be consistent with the foregoing, the interest on the monetary awards
shall then be fixed at six percent (6%) per annum, until the damages are fully paid.

WHEREFORE, the foregoing premises considered, the present petition is GRANTED. The 22 March
2012 Decision and the 3 August 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 83499
are REVERSED and SET ASIDE and the 26 January 2004 Decision of the Regional Trial Court,
Branch 55, Alaminos, Pangasinan in Civil Case No. A-2553 is REINSTATED with the
following MODIFICATION: Gerardo Manahan, Dagupan Bus Co., and Renato De Vera are solidarity
ordered to pay interest on the monetary awards in favor of the petitioners at the rate of six percent
(6%) per annum, to be computed from 26 January 2004.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Leonen, and Gesmundo, JJ., concur.

February 7, 2018

N O T I C E� O F� J U D G M E N T

Sirs / Mesdames:

Please take notice that on January 17, 2018 a Decision, copy attached hereto, was rendered by the
Supreme Court in the above-entitled case, the original of which was received by this Office on
February 7, 2018 at 11:17 a.m.

Very truly yours,����������

(SGD.) WILFREDO V. LAPITAN

Division Clerk of Court�������

Endnotes:
1
Rollo, pp. 9-38; Under Rule 45 of the Rules of Court.

2
Id. at 41-53.

3
Id. at 54-55.

4
Id. at 56-88, penned by Judge Jules A. Mejia.

5
Id. at 88.

6
Id. at 79-80.

7
Id. at 84.

8
Id. at 80-82.

9 Id. at 82.

10
Id.

11 Id. at 84.

12
Id. at 79.

13
Id. at 50-52.

14
RULES OF COURT, Rule 45, Section 1. Filing of petition with Supreme Court. x x x The petition may
include an application for a writ of preliminary injunction or other provisional remedies and shall
raise only questions of law, which must be distinctly set forth, x x x (emphasis supplied)

15Maglana
Rice and Corn Mill, Inc. v. Sps. Tan, 673 Phil. 532, 539 (2011).

16 Id. citing FNCB Finance v. Estavillo, 270 Phil. 630, 633 (1990).

17Macalinao v. Ong, 514 Phil. 127, 134 (2005); Vallacar Transit, Inc. v. Catubig, 664 Phil. 529, 542
(2011).

18Cang v. Cullen, 620 Phil. 403, 416 (2009).

19
TSN, 28 April 2000, pp. 3-15.

20Gomez
v. Gomez-Samson, 543 Phil. 436, 464 (2007); Ong v. Bog�albal, 533 Phil. 139, 154
(2006).

21
37 Phil. 809 (1918).

22
Id. at 813.

23
Civil Code, Article 1733.

24
See Mendoza v. Gomez, 736 Phil. 460, 475 (2014); Gulliang v. Bedania, 606 Phil. 57, 63
(2009); Mendoza v. Soriano, 551 Phil. 693, 701 (2007).

25Travel
& Tours Advisers, Inc. v. Cruz, G.R. No. 199282, 14 March 2016, 787 SCRA 297, 317
citing Baliwag Transit, Inc. v. CA, 330 Phil. 785, 789-790 (1996) further citing China Air Lines, Ltd. v.
v. CA, 264 Phil. 15, 26 (1990).
26
Davao Holiday Transport Services Corporation v. Spouses Emphasis, 748 Phil. 921, 925 (2014)
citing Cang v. Cullen, supra note 18 at 421.

27
Exhibit folder; Exhibits "6-S", "6-T", and "6-U."

28
Id.; Exhibit "6-K."

29
Id.; Exhibit "6-LL."

30
Id.; Exhibits "6-JJ" and "6-KK."

31
Id.; Exhibits "6-OO" and "6-PP."

32
Id.; Exhibit folder, Exhibit "6-F."

33 See Kapalaran Bus Line v. Coronado, 257 Phil. 797, 808 (1989).

34Philtranco
Service Enterprises, Inc. v. Paras, 686 Phil. 736, 753 (2012); Tan v. OMC Carriers,
Inc., 654 Phil. 443, 454 (2011).

35S.C.
Megaworld Construction and Development Corporation v. Parada, 717 Phil. 752, 773 (2013).
 THIRD DIVISION

G.R. No. 199455, June 27, 2018

FEDERAL EXPRESS CORPORATION, Petitioner, v. LUWALHATI R. ANTONINO AND ELIZA

BETTINA RICASA ANTONINO, Respondents.

DECISION

LEONEN, J.:

The duty of common carriers to observe extraordinary diligence in shipping goods does not terminate
until delivery to the consignee or to the specific person authorized to receive the shipped goods.
Failure to deliver to the person authorized to receive the goods is tantamount to loss of the goods,
thereby engendering the common carrier's liability for loss. Ambiguities in contracts of carriage,
which are contracts of adhesion, must be interpreted against the common carrier that prepared these
contracts.

This resolves a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure
praying that the assailed Court of Appeals August 31, 2011 Decision2 and November 21, 2011
Resolution3 in CA-G.R. CV No. 91216 be reversed and set aside and that Luwalhati R. Antonino
(Luwalhati) and Eliza Bettina Ricasa Antonino (Eliza) be held liable on Federal Express Corporation's
(FedEx) counterclaim.

The assailed Court of Appeals August 31, 2011 Decision denied the appeal filed by FedEx and
affirmed the May 8, 2008 Decision4 of Branch 217, Regional Trial Court, Quezon City, awarding moral
and exemplary damages, and attorney's fees to Luwalhati and Eliza.5 In its assailed November 21,
2011 Resolution, the Court of Appeals denied FedEx's Motion for Reconsideration.6

Eliza was the owner of Unit 22-A (the Unit) in Allegro Condominium, located at 62 West 62nd St., New
York, United States.7 In November 2003, monthly common charges on the Unit became due. These
charges were for the period of July 2003 to November 2003, and were for a total amount of
US$9,742.81.8

On December 15, 2003, Luwalhati and Eliza were in the Philippines. As the monthly common charges
on the Unit had become due, they decided to send several Citibank checks to Veronica Z. Sison
(Sison), who was based in New York. Citibank checks allegedly amounting to US$17,726.18 for the
payment of monthly charges and US$11,619.35 for the payment of real estate taxes were sent by
Luwalhati through FedEx with Account No. x2546-4948-1 and Tracking No. 8442 4588 4268. The
package was addressed to Sison who was tasked to deliver the checks payable to Maxwell-Kates, Inc.
and to the New York County Department of Finance. Sison allegedly did not receive the package,
resulting in the non-payment of Luwalhati and Eliza's obligations and the foreclosure of the Unit.9

Upon learning that the checks were sent on December 15, 2003, Sison contacted FedEx on February
9, 2004 to inquire about the non-delivery. She was informed that the package was delivered to her
neighbor but there was no signed receipt.10
On March 14, 2004, Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx for
payment of damages due to the non-delivery of the package, but FedEx refused to heed their
demand.11 Hence, on April 5, 2004, they filed their Complaint12 for damages.

FedEx claimed that Luwalhati and Eliza "ha[d] no cause of action against it because [they] failed to
comply with a condition precedent, that of filing a written notice of claim within the 45 calendar days
from the acceptance of the shipment."13 It added that it was absolved of liability as Luwalhati and
Eliza shipped prohibited items and misdeclared these items as "documents."14 It pointed to conditions
under its Air Waybill prohibiting the "transportation of money (including but not limited to coins or
negotiable instruments equivalent to cash such as endorsed stocks and bonds)."15

In its May 8, 2008 Decision,16 the Regional Trial Court ruled for Luwalhati and Eliza, awarding them
moral and exemplary damages, and attorney's fees.17

The Regional Trial Court found that Luwalhati failed to accurately declare the contents of the package
as "checks."18 However, it ruled that a check is not legal tender or a "negotiable instrument
equivalent to cash," as prohibited by the Air Waybill.19 It explained that common carriers are
presumed to be at fault whenever goods are lost.20 Luwalhati testified on the non-delivery of the
package. FedEx, on the other hand, claimed that the shipment was released without the signature of
the actual recipient, as authorized by the shipper or recipient. However, it failed to show that this
authorization was made; thus, it was still liable for the loss of the package.21

On non-compliance with a condition precedent, it ruled that under the Air Waybill, the prescriptive
period for filing an action was "within two (2) years from the date of delivery of the shipment or from
the date on which the shipment should have been delivered."22 Luwalhati and Eliza's demand letter
made on March 11, 2004 was within the two (2)-year period sanctioned by the Air Waybill.23 The trial
court also noted that they were given a "run-around" by FedEx employees, and thus, were deemed
to have complied with the filing of the formal claim.24

The dispositive portion of the Regional Trial Court May 8, 2008 Decision read:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs Luwalhati R. Antonino and Eliza
Bettina Ricasa Antonino ordering the following:

1) The amount of P200,000.00 by way of moral damages;

2) The amount of P100,000.00 by way of exemplary damages; and
[3]) The amount of P150,000.00 as and for attorney's fees. Costs against defendant.

The counterclaim is ordered dismissed.

SO ORDERED.25

In its assailed August 31, 2011 Decision,26 the Court of Appeals affirmed the ruling of the Regional
Trial Court.27 According to it, by accepting the package despite its supposed defect, FedEx was
deemed to have acquiesced to the transaction. Thus, it must deliver the package in good condition
and could not subsequently deny liability for loss.28 The Court of Appeals sustained the Regional Trial
Court's conclusion that checks are not legal tender, and thus, not covered by the Air Waybill's
prohibition.29 It further noted that an Air Waybill is a contract of adhesion and should be construed
against the party that drafted it.30

The dispositive portion of the Court of Appeals August 31, 2011 Decision read:

WHEREFORE, premises considered, the present appeal is hereby DENIED. The assailed May 08, 2008
Decision of the Regional Trial Court, Branch 217, Quezon City in Civil case No. Q-04-52325 is
AFFIRMED. Costs against the herein appellant.
SO ORDERED.31

Following the Court of Appeals' denial32 of its Motion for Reconsideration, FedEx filed the present
Petition.

For resolution of this Court is the sole issue of whether or not petitioner Federal Express Corporation
may be held liable for damages on account of its failure to deliver the checks shipped by respondents
Luwalhati R. Antonino and Eliza Bettina Ricasa Antonino to the consignee Veronica Sison.

Petitioner disclaims liability because of respondents' failure to comply with a condition precedent,
that is, the filing of a written notice of a claim for non-delivery or misdelivery within 45 days from
acceptance of the shipment.33 The Regional Trial Court found the condition precedent to have been
substantially complied with and attributed respondents' non�compliance to FedEx for giving them a
run-around.34 This Court affirms this finding.

A provision in a contract of carriage requiring the filing of a formal claim within a specified period is a
valid stipulation. Jurisprudence maintains that compliance with this provision is a legitimate condition
precedent to an action for damages arising from loss of the shipment:

More particularly, where the contract of shipment contains a reasonable requirement of giving notice
of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for
loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from
just liability, but reasonably to inform it that the shipment has been damaged and that it is charged
with liability therefor, and to give it an opportunity to examine the nature and extent of the injury.
This protects the carrier by affording it an opportunity to make an investigation of a claim while the
matter is fresh and easily investigated so as to safeguard itself from false and fraudulent
claims.35 (Citation omitted)

Petitioner's Air Waybill stipulates the following on filing of claims:

Claims for Loss, Damage, or Delay. All claims must be made in writing and within strict time limits.
See any applicable tariff, our service guide or our standard conditions for carriage for details.

The right to damages against us shall be extinguished unless an action is brought within two (2)
years from the date of delivery of the shipment or from the date on which the shipment should have
been delivered.

Within forty-five (45) days after notification of the claim, it must be documented by sending to us [all
the] relevant information about it.36

For their claim to prosper, respondents must, thus, surpass two (2) hurdles: first, the filing of their
formal claim within 45 days; and second, the subsequent filing of the action within two (2) years.

There is no dispute on respondents' compliance with the second period as their Complaint was filed
on April 5, 2004.37

In appraising respondents' compliance with the first condition, this Court is guided by settled
standards in jurisprudence.

In Philippine Airlines, Inc. v. Court of Appeals,38 Philippine Airlines alleged that shipper Gilda Mejia
(Mejia) failed to file a formal claim within the period stated in the Air Waybill.39 This Court ruled that
there was substantial compliance with the period because of the zealous efforts demonstrated by
Mejia in following up her claim.40 These efforts coupled with Philippine Airlines' "tossing around the
claim and leaving it unresolved for an indefinite period of time" led this Court to deem the requisite
period satisfied.41 This is pursuant to Article 1186 of the New Civil Code which provides that "[t]he
condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment":42

Considering the abovementioned incident and private respondent Mejia's own zealous efforts in
following up the claim, it was clearly not her fault that the letter of demand for damages could only
be filed, after months of exasperating follow-up of the claim, on August 13, 1990. If there was any
failure at all to file the formal claim within the prescriptive period contemplated in the air waybill, this
was largely because of PAL's own doing, the consequences of which cannot, in all fairness, be
attributed to private respondent.

Even if the claim for damages was conditioned on the timely filing of a formal claim, 'under Article
1186 of the Civil Code that condition was deemed fulfilled, considering that the collective action of
PAL's personnel in tossing around the claim and leaving it unresolved for an indefinite period of time
was tantamount to "voluntarily preventing its fulfillment." On grounds of equity, the filing of the
baggage freight claim, which sufficiently informed PAL of the damage sustained by private
respondent's cargo, constituted substantial compliance with the requirement in the contract for the
filing of a formal claim.43 (Citations omitted)

Here, the Court of Appeals detailed the efforts made by respondent Luwalhati and consignee Sison. It
also noted petitioner's ambiguous and evasive responses, nonchalant handling of respondents'
concerns, and how these bogged down respondents' actions and impaired their compliance with the
required 45-day period:

Anent the issues concerning lack of cause of action and their so-called "run-around" matter, We
uphold the lower court's finding that the herein appellees complied with the requirement for the
immediate filing of a formal claim for damages as required in the Air Waybill or, at least, We find that
there was substantial compliance therewith. Luwalhati testified that the addressee, Veronica Z. Sison
promptly traced the whereabouts of the said package, but to no avail. Her testimony narrated what
happened thereafter, thus:

". . .

"COURT: All right. She was informed that it was lost. What steps did you take to find out or to recover
back this package?

�

"ATTY. ALENTAJAN:

"Q What did you do to Fedex?

". . .

� �

WITNESS: First, I asked the secretary here to call Fedex Manila and they said, the record show that it was
sent to New York, Your Honor.

�

". . .

ATTY. ALENTAJAN:
 "Q After calling Fedex, what did Fedex do?

� �

"A None, sir. They washed their hands because according to them it is New York because they
have sent it. Their records show that New York received it, Sir.

� �

"Q New York Fedex?

� �

"A Yes, Sir.

� �

"Q Now what else did you do after that?

� �

"A And then I asked my friend Mrs. Veronica Sison to trace it, Sir.

� �

". . . �

� �

"Q What did she report to you?

� �

"A She reported to me that first, she checked with the Fedex and the first answer was they were
going to trace it. The second answer was that, it was delivered to the lady, her neighbor and the
neighbor completely denied it and as they show a signature that is not my signature, so the next
time she called again, another person answered. She called to say that the neighbor did not
receive and the person on the other line I think she got his name, said that, it is because it is
December and we usually do that just leave it and then they cut the line and so I asked my
friend to issue a sworn statement in the form of affidavit and have it notarized in the Philippine
Embassy or Consulate, Sir. That is what she did.

� �

"Q On your part here in the Philippines after doing that, after instructing Veronica Sison, what else
did you do because of this violation?

� �

"A I think the next step was to issue a demand letter because any way I do not want to go to Court,
it is so hard, Sir."

The foregoing event show Luwalhati's own ardent campaign in following up the claim. To the Court's
mind, it is beyond her control why the demand letter for damages was only sent subsequent to her
infuriating follow-ups regarding the whereabouts of the said package. We can surmise that if there
was any omission at all to file the said claim within the prescriptive period provided for under the Air
Waybill it was mostly due to herein appellant's own behavior, the outcome thereof cannot, by any
chance, be imputed to the herein appellees.44 (Grammatical errors in the original)

Petitioner has been unable to persuasively refute Luwalhati's recollection of the efforts that she and
Sison exerted, and of the responses it gave them. It instead insists that the 45-day period stated in
its Air Waybill is sacrosanct. This Court is unable to bring itself to sustaining petitioner's appeal to a
convenient reprieve. It is one with the Regional Trial Court and the Court of Appeals in stressing that
respondents' inability to expediently file a formal claim can only be attributed to petitioner hampering
its fulfillment. Thus, respondents must be deemed to have substantially complied with the requisite
45-day period for filing a formal claim.

II

The Civil Code mandates common carriers to observe extraordinary diligence in caring for the goods
they are transporting:

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

"Extraordinary diligence is that extreme measure of care and caution which persons of unusual
prudence and circumspection use for securing and preserving their own property or
rights."45 Consistent with the mandate of extraordinary diligence, the Civil Code stipulates that in
case of loss or damage to goods, common carriers are presumed to be negligent or at fault,46 except
in the following instances:

(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 or competent public authority.47

In all other cases, common carriers must prove that they exercised extraordinary diligence in the
performance of their duties, if they are to be absolved of liability.48

The responsibility of common carriers to exercise extraordinary diligence lasts from the time the
goods are unconditionally placed in their possession until they are delivered "to the consignee, or to
the person who has a right to receive them."49 Thus, part of the extraordinary responsibility of
common carriers is the duty to ensure that shipments are received by none but "the person who has
a right to receive them."50 Common carriers must ascertain the identity of the recipient. Failing to
deliver shipment to the designated recipient amounts to a failure to deliver. The shipment shall then
be considered lost, and liability for this loss ensues.

Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery of the
package to its designated consignee. It claims to have made a delivery but it even admits that it was
not to the designated consignee. It asserts instead that it was authorized to release the package
without the signature of the designated recipient and that the neighbor of the consignee, one
identified only as "LGAA 385507," received it.51 This fails to impress.
The assertion that receipt was made by "LGAA 385507" amounts to little, if any, value in proving
petitioner's successful discharge of its duty. "LGAA 385507" is nothing but an alphanumeric code that
outside of petitioner's personnel and internal systems signifies nothing. This code does not represent
a definite, readily identifiable person, contrary to how commonly accepted identifiers, such as
numbers attached to official, public, or professional identifications like social security numbers and
professional license numbers, function. Reliance on this code is tantamount to reliance on nothing
more than petitioner's bare, self-serving allegations. Certainly, this cannot satisfy the requisite of
extraordinary diligence consummated through delivery to none but "the person who has a right to
receive"52 the package.

Given the circumstances in this case, the more reasonable conclusion is that the package was not
delivered. The package shipped by respondents should then be considered lost, thereby engendering
the liability of a common carrier for this loss.

Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to the
named consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed to
identify that neighbor.

III

Petitioner further asserts that respondents violated the terms of the Air Waybill by shipping checks. It
adds that this violation exempts it from liability.53

This is untenable.

Petitioner's International Air Waybill states:

Items Not Acceptable for Transportation. We do not accept transportation of money (including
but not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds). We exclude all liability for shipments of such items accepted by mistake. Other items may be
accepted for carriage only to limited destinations or under restricted conditions. We reserve the right
to reject packages based upon these limitations or for reasons of safety or security. You may consult
our Service Guide, Standard Conditions of Carriage, or any applicable tariff for specific
details.54 (Emphasis in the original)

The prohibition has a singular object: money. What follows the phrase "transportation of money" is a
phrase enclosed in parentheses, and commencing with the words "including but not limited to." The
additional phrase, enclosed as it is in parentheses, is not the object of the prohibition, but merely a
postscript to the word "money." Moreover, its introductory words "including but not limited to" signify
that the items that follow are illustrative examples; they are not qualifiers that are integral to or
inseverable from "money." Despite the utterance of the enclosed phrase, the singular prohibition
remains: money.

Money is "what is generally acceptable in exchange for goods."55 It can take many forms, most
commonly as coins and banknotes. Despite its myriad forms, its key element is its general
acceptability.56 Laws usually define what can be considered as a generally acceptable medium of
exchange.57 In the Philippines, Republic Act No. 7653, otherwise known as The New Central Bank
Act, defines "legal tender" as follows:

All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the
Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and
private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal
tender in amounts not exceeding Fifty pesos (P50.00) for denomination of Twenty-five centavos and
above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or
less.58
It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for
money and are not legal tender; more so when the check has a named payee and is not payable to
bearer. In Philippine Airlines, Inc. v. Court of Appeals,59 this Court ruled that the payment of a check
to the sheriff did not satisfy the judgment debt as checks are not considered legal tender. This has
been maintained in other cases decided by this Court. In Cebu International Finance Corporation v.
Court of Appeals,60 this Court held that the debts paid in a money market transaction through the
use of a check is not a valid tender of payment as a check is not legal tender in the Philippines.
Further, in Bank of the Philippine Islands v. Court of Appeals,61 this Court held that "a check, whether
a manager's check or ordinary check, is not legal tender."62

The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an
example. Thus, they are not prohibited items themselves. Moreover, the illustrative example does
not even pertain to negotiable instruments per se but to "negotiable instruments equivalent to
cash."63

The checks involved here are payable to specific payees, Maxwell�-Kates, Inc. and the New York
County Department of Finance.64 Thus, they are order instruments. They are not payable to their
bearer, i.e., bearer instruments. Order instruments differ from bearer instruments in their manner of
negotiation:

Under Section 30 of the [Negotiable Instruments Law], an order instrument requires an indorsement
from the payee or holder before it may be validly negotiated. A bearer instrument, on the other
hand, does not require an indorsement to be validly negotiated.65

There is no question that checks, whether payable to order or to bearer, so long as they comply with
the requirements under Section 1 of the Negotiable Instruments Law, are negotiable
instruments.66 The more relevant consideration is whether checks with a specified payee
are negotiable instruments equivalent to cash, as contemplated in the example added to the Air
Waybill's prohibition.

This Court thinks not. An order instrument, which has to be endorsed by the payee before it may be
negotiated,67 cannot be a negotiable instrument equivalent to cash. It is worth emphasizing that the
instruments given as further examples under the Air Waybill must be endorsed to be considered
equivalent to cash:68

Items Not Acceptable for Transportation. We do not accept transportation of money (including
but not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds). ... (Emphasis in the original)69

What this Court's protracted discussion reveals is that petitioner's Air Waybill lends itself to a great
deal of confusion. The clarity of its terms leaves much to be desired. This lack of clarity can only
militate against petitioner's cause.

The contract between petitioner and respondents is a contract of adhesion; it was prepared solely by
petitioner for respondents to conform to.70 Although not automatically void, any ambiguity in a
contract of adhesion is construed strictly against the party that prepared it.71 Accordingly, the
prohibition against transporting money must be restrictively construed against petitioner and liberally
for respondents. Viewed through this lens, with greater reason should respondents be exculpated
from liability for shipping documents or instruments, which are reasonably understood as not being
money, and for being unable to declare them as such.

Ultimately, in shipping checks, respondents were not violating petitioner's Air Waybill. From this, it
follows that they committed no breach of warranty that would absolve petitioner of liability.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed August 31, 2011
Decision and November 21, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 91216
are AFFIRMED.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

August 7, 2018

NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on June 27, 2018 a Decision, copy attached hereto, was rendered by the
Supreme Court in the above-entitled case, the original of which was received by this Office on August
7, 2018 at 1:28 p.m.

Very truly yours,

�
(SGD.) WILFREDO V. LAPITAN
Division Clerk of Court

Endnotes:

1Rollo,
pp. 10-54.

2Id. at 56-70. The Decision was penned by Associate Justice Franchito N. Diamante and concurred in
by Associate Justices Mariflor P. Punzalan Castillo and Ricardo R. Rosario of the Special Fourth
Division, Court of Appeals, Manila.

3
Id. at 72-73. The Resolution was penned by Associate Justice Franchito N. Diamante and concurred
in by Associate Justices Mariflor P. Punzalan Castillo and Ricardo R. Rosario of the Former Special
Fourth Division, Court of Appeals, Manila.

4
Id. at 203-209. The Decision, docketed as Civil Case No. Q-04-52325, was penned by Pair Judge
Hilario L. Laqui.

5
Id. at 69.

6
Id. at 73.

7
Id. at 118 and 203.

8
Id. at 256.

9
Id. at 203.
10
Id. at 256.

11
Id. at 203.

12
Id. at 74-81.

13
Id. at 58.

14 Id.

15
Id. at 282.

16
Id. at 203-209.

17 Id. at 209.

18
Id. at 204.

19 Id. at 205.

20
Id.

21
Id. at 206.

22 Id. at 207.

23
Id.

24
Id. at 207-208.

25
Id. at 209.

26
Id. at 56-70.

27
Id. at 69.

28
Id. at 60.

29
Id. at 61.

30
Id. at 61-62.

31
Id. at 69.

32
Id. at 73.

33
Id. at 289-290.

34 Id. at 207-208.

35Philippine
American General Insurance Co., Inc. v. Sweet Lines, Inc., 287 Phil. 212, 226-227
(1992) [Per J. Regalado, Second Division].
36
Rollo, pp. 206-207.

37
Id. at 74.

Philippine Airlines, Inc. v. Court of Appeals, 325 Phil. 303 (1996) [Per. J Regalado, Second
38

Division].

39
Id. at 310.

40
Id. at 328.

41
Id.

42
CIVIL CODE, art. 1186.

Philippine Airlines, Inc. v. Court of Appeals, 325 Phil. 303, 328 (1996) [Per. J Regalado, Second
43

Division].

44Rollo, pp. 62-64.

45Loadstar
Shipping Co., Inc. v. Malayan Insurance Co., Inc., G.R. No. 185565, April 26, 2017 <
http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2017/april2017/185565.pdf > 4
[Per J. Reyes, Special Third Division].

46
CIVIL CODE, art. 1735.

47 CIVIL CODE, art. 1734.

48 CIVIL CODE, art. 1735.

49
CIVIL CODE, art. 1736.

50
CIVIL CODE, art. 1736.

51Rollo, p. 66.

52
CIVIL CODE, art. 1736.

53Rollo,
p. 284.

54
Id. at 282.

55
IRVING FISHER, THE PURCHASING POWER OF MONEY: ITS DETERMINATION AND RELATION TO
CREDIT INTEREST AND CRISES 8 (2007).

56
Id.

57
Id.

58
Rep. Act No. 7653 (1993), sec. 52.

59
260 Phil. 606 (1990) [Per. J Gutierrez Jr., En Banc].

60
374 Phil. 844 (1999) [Per J. Quisumbing, Second Division].
61
383 Phil. 538 (2000) [Per J. Ynares-Santiago, First Division].

62
Id. at 553.

63
Rollo, p. 282.

64
Id. at 203.

65Philippine National Bank v. Spouses Rodriguez, 588 Phil. 196, 210 (2008) [Per J. Reyes, Third
Division).

66
Section I. Form of negotiable instruments. - An instrument to be negotiable must conform to the
following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein
with reasonable certainty.

67
See Philippine National Bank v. Spouses Rodriguez, 588 Phil. 196 (2008) [Per J. Reyes, Third
Division].

68Rollo,
p. 282.

69
Id.

70RadioCommunications of the Philippines, Inc. v. Verchez, 516 Phil. 725, 742 (2006) [Per J. Carpio
Morales, Third Division] citing Philippine Commercial International Bank v. Court of Appeals, 325 Phil.
588-600 (1996) [Per J. Francisco, Third Division].

"A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of
contract, which the other party may accept or reject, but which the latter cannot modify. One party
prepares the stipulation in the contract, while the other party merely affixes his signature or his
'adhesion' thereto, giving no room for negotiation and depriving the latter of the opportunity to
bargain on equal footing."

71
Id.
 SECOND DIVISION

January 28, 2019

G.R. No. 212107

KEIHIN-EVERETT FORWARDING CO., INC., Petitioner

vs.
TOKIO MARINE MALAYAN INSURANCE CO., INC.* AND SUNFREIGHT FORWARDERS & CUSTOMS
BROKERAGE, INC., Respondents

DECISION

REYES, J. JR., J.:

The Case

Keihin-Everett Forwarding Co., Inc. (Keihin-Everett) appealed from the April 8, 2014 Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 98672 which held it liable to pay Tokio Marine Malayan Insurance Co., Inc.'s
(Tokio Marine's) claim of ₱1,589,556.60 with right of reimbursement from Sunfreight Forwarders & Customs
Brokerage, Inc. (Sunfreight Forwarders).

The Facts

The facts, as summarized by the CA,2 are clear and undisputed.

In 2005, Honda Trading Phils. Ecozone Corporation (Honda Trading) ordered 80 bundles of Aluminum Alloy Ingots
from PT Molten Aluminum Producer Indonesia (PT Molten).3 PT Molten loaded the goods in two container vans with
Serial Nos. TEXU 389360-5 and GATU 040516-3 which were, in turn, received in Jakarta, Indonesia by Nippon
Express Co., Ltd. for shipment to Manila.4

Aside from insuring the entire shipment with Tokio Marine & Nichido Fire Insurance Co., Inc. (TMNFIC) under Policy
No. 83-00143689, Honda Trading also engaged the services of petitioner Keihin-Everett to clear and withdraw the
cargo from the pier and to transport and deliver the same to its warehouse at the Laguna Technopark in Biñan,
Laguna.5 Meanwhile, petitioner Keihin-Everett had an Accreditation Agreement with respondent Sunfreight
Forwarders whereby the latter undertook to render common carrier services for the former and to transport inland
goods within the Philippines.6

The shipment arrived in Manila on November 3, 2005 and was, accordingly, offloaded from the ocean liner and
temporarily stored at the CY Area of the Manila International Port pending release by the Customs Authority.7 On
November 8, 2005, the shipment was caused to be released from the pier by petitioner Keihin-Everett and turned
over to respondent Sunfreight Forwarders for delivery to Honda Trading.8 En route to the latter's warehouse, the
truck carrying the containers was hijacked and the container van with Serial No. TEXU 389360-5 was reportedly
taken away.9 Although said container van was subsequently found in the vicinity of the Manila North Cemetery and
later towed to the compound of the Metro Manila Development Authority (MMDA), it appears that the contents
thereof were no longer retrieved.10 Only the container van with Serial No. GATU 040516-3 reached the warehouse.
As a consequence, Honda Trading suffered losses in the total amount of ₱2,121,917.04, representing the value of
the lost 40 bundles of Aluminum Alloy Ingots.11
Claiming to have paid Honda Trading's insurance claim for the loss it suffered, respondent Tokio Marine
commenced the instant suit on October 10, 2006 with the filing of its complaint for damages against petitioner
Keihin-Everett. Respondent Tokio Marine maintained that it had been subrogated to all the rights and causes of
action pertaining to Honda Trading.

Served with summons, petitioner Keihin-Everett denied liability for the lost shipment on the ground that the loss
thereof occurred while the same was in the possession of respondent Sunfreight Forwarders.12 Hence, petitioner
Keihin-Everett filed a third-party complaint against the latter, who, in turn, denied liability on the ground that it was
not privy to the contract between Keihin-Everett and Honda Trading. If at all, respondent Sunfreight Forwarders
claimed that its liability cannot exceed the ₱500,000.00 fixed in its Accreditation Agreement with petitioner Keihin-
Everett.13

Ruling of the RTC

On October 27, 2011, the RTC rendered a Decision finding petitioner Keihin-Everett and respondent Sunfreight
Forwarders jointly and severally liable to pay respondent Tokio Marine's claim in the sum of ₱1,589,556.60, together
with the legal interest due thereon and attorney's fees amounting to ₱100,000.00. The RTC found the driver of
Sunfreight Forwarders as the cause of the evil caused. Under Article 2180 of the Civil Code, it provides: "Employers
shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry." Thus, Sunfreight Forwarders
is hereby held liable for the loss of the subject cargoes with Keihin-Everett, being a common carrier. In case, Keihin-
Everett pays for the amount, it has a right of reimbursement from Sunfreight Forwarders. It ruled:

In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible, unless they
can prove that the loss, destruction or deterioration was brought about by the causes specified in Article 1734 of the
Civil Code. In all other cases, they are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence (Aboitiz Shipping Corporation v. [New] India Assurance Company,
Ltd., G.R. No. 156978, August 24, 2007). And, hijacking of [a] carrier's truck is not one of those included as
exempting circumstance under Art. 1374 (De Guzman v. Court of Appeals, 168 SCRA 612). Thus, [Keihin-Everett]
and [Sunfreight Forwarders] are crystal clear liable for the loss of the subject cargo.14

Keihin-Everett moved for reconsideration of the foregoing RTC Decision. However, its motion was denied for lack of
merit by the RTC in its Order dated March 8, 2012. Hence, Keihin-Everett filed an appeal with the CA.

Ruling of the CA

In the now appealed Decision dated April 8, 2014, the CA modified the ruling of the RTC insofar as the solidary
liability of Keihin-Everett and Sunfreight Forwarders is concerned. The CA went to rule that solidarity is never
presumed. There is solidary liability when the obligation so states, or when the law or the nature of the obligation
requires the same. Thus, because of the lack of privity between Honda Trading and Sunfreight Forwarders, the
latter cannot simply be held jointly and severally liable with Keihin-Everett for Tokio Marine's claim as subrogee. In
view of the Accreditation Agreement between Keihin-Everett and Sunfreight Forwarders, the former possesses a
right of reimbursement against the latter for so much of what Keihin-Everett has paid to Tokio Marine. The
dispositive portion of the CA Decision reads as follows:

WHEREFORE, premises considered, the appealed October 27, 2011 Decision is MODIFIED to hold Keihin-Everett
liable for Tokio Marine's claim in the sum of ₱1,589,556.60, with right of reimbursement from Sunfreight Forwarders.
Keihin-Everett is likewise found solely liable for the attorney's fees the RTC awarded in favor of Tokio Marine. The
rest is AFFIRMED in toto.

SO ORDERED.15

Dissatisfied with the CA Decision, petitioner Keihin-Everett filed the instant petition with this Court.

The Issue
The main issue for consideration is whether or not the CA erred in affirming with modification the Decision of the
RTC dated October 27, 2011 holding petitioner Keihin-Everett liable to respondent Tokio Marine.

Petitioner Keihin-Everett ascribed errors on the part of the CA (a) in considering the documents presented at the trial
even if the same were not attached and made integral parts of the complaint in violation of Section 7, Rule 8 of the
Rules of Court; (b) in upholding the RTC's failure to dismiss the complaint albeit the plaintiff is not the real party in
interest and has no capacity to sue; (c) in ruling that there was legal subrogation; and (d) in affirming the petitioner's
liability despite overwhelming evidence showing that the damaged cargoes were in the custody of Sunfreight
Forwarders at the time they were lost.16

Ruling

Keihin-Everett's arguments will be resolved in seriatim.

First. Keihin-Everett argued that the case should have been dismissed for failure of Tokio Marine to attach or state
in the Complaint the actionable document or the insurance policy between the insurer and the insured, in clear
violation of Section 7, Rule 8 of the 1997 Rules of Court, which states:

SEC. 7. Action or defense based on document. — Whenever an action or defense is based upon a written
instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the
original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the pleading.

It bears to stress that failure of Tokio Marine to attach in the Complaint the contract of insurance between the insurer
(Tokio Marine) and the insured (Honda Trading) is not fatal to its cause of action.

True, in the case of Malayan Insurance Co., Inc. v. Regis Brokerage Corp.17 relied upon by Keihin-Everett, the Court
makes it imperative for the plaintiff (whose action is predicated upon his right as a subrogee) to attach the insurance
contract in the complaint in accordance with Section 7, Rule 8 of the 1997 Rules of Court, just so in order to
establish the legal basis of the right to subrogation. The Court ratiocinated:

Malayan's right of recovery as a subrogee of ABB Koppel cannot be predicated alone on the liability of the
respondent to ABB Koppel, even though such liability will necessarily have to be established at the trial for Malayan
to recover. Because Malayan's right to recovery derives from contractual subrogation as an incident to an insurance
relationship, and not from any proximate injury to it inflicted by the respondents, it is critical that Malayan establish
the legal basis of such right to subrogation by presenting the contract constitutive of the insurance relationship
between it and ABB Koppel. Without such legal basis, its cause of action cannot survive.

Our procedural rules make plain how easily Malayan could have adduced the Marine Insurance Policy. Ideally, this
should have been accomplished from the moment it filed the complaint. Since the Marine Insurance Policy was
constitutive of the insurer-insured relationship from which Malayan draws its right to subrogation, such document
should have been attached to the complaint itself, as provided for in Section 7, Rule 8 of the 1997 Rules of Civil
Procedure.18

However, in the aforesaid case, the Court did not suggest an outright dismissal of a complaint in case of failure to
attach the insurance contract in the complaint. Promoting a reasonable construction of the rules so as not to work
injustice, the Court makes it clear that failure to comply with the rules does not preclude the plaintiff to offer it as
evidence. Thus:

It may be that there is no specific provision in the Rules of Court which prohibits the admission in evidence of an
actionable document in the event a party fails to comply with the requirement of the rule on actionable documents
under Section 7, Rule 8.19

Unfortunately, in the Malayan case cited by Keihin-Everett, Malayan not only failed to attach or set forth in the
complaint the insurance policy, it likewise did not present the same as evidence before the trial court or even in the
CA. As the Court metaphorically described, the very insurance contract emerges as the white elephant in the room
— an obdurate presence which everybody reacts to, yet legally invisible as a matter of evidence since no attempt
had been made to prove its corporeal existence in the court of law.20 Hence, there was sufficient reason for the Court
to dismiss the case for it has no legal basis from which to consider the pre-existence of an insurance contract
between Malayan and ABB Koppel and the former's right of subrogation.

The instant case cannot be dismissed just like that. Unlike in the Malayan case, Tokio Marine presented as
evidence, not only the Honda Trading Insurance Policy, but also the Subrogation Receipt evidencing that it paid
Honda Trading the sum of US$38,855.83 in full settlement of the latter's claim under Policy No. 83-00143689.
During the trial, Keihin-Everett even had the opportunity to examine the said documents and conducted a cross-
examination of the said Contract of Insurance.21 By presenting the insurance policy constitutive of the insurance
relationship of the parties, Tokio Marine was able to confirm its legal right to recover as subrogee of Honda Trading.

Second. Keihin-Everett insisted that Tokio Marine is not the insurer but TMNFIC, hence, it argued that Tokio Marine
has no right to institute the present action. As it pointed out, the Insurance Policy shows in its face that Honda
Trading procured the insurance from TMNFIC and not from Tokio Marine.

While this assertion is true, Insurance Policy No. 83-00143689 itself expressly made Tokio Marine as the party liable
to pay the insurance claim of Honda Trading pursuant to the Agency Agreement entered into by and between Tokio
Marine and TMNFIC. As properly appreciated by both the RTC and the CA, the Agency Agreement shows that
TMNFIC had subsequently changed its name to that of Tokio Marine.22 By agreeing to this stipulation in the
Insurance Policy, Honda Trading binds itself to file its claim from Tokio Marine and thereafter to accept payment
from it.

At any rate, even if we consider Tokio Marine as a third person who voluntarily paid the insurance claims of Honda
Trading, it is still entitled to be reimbursed of what it had paid. As held by this Court in the case of Pan Malayan
Insurance Corp. v. Court of Appeals,23 the insurer who may have no rights of subrogation due to "voluntary" payment
may nevertheless recover from the third party responsible for the damage to the insured property under Article
123624 of the Civil Code. Under this circumstance, Tokio Marine's right to sue is based on the fact that it voluntarily
made payment in favor of Honda Trading and it could go after the third party responsible for the loss (Keihin-Everett)
in the exercise of its legal right of subrogation.

Setting aside this assumption, Tokio Marine nonetheless was able to prove by the following documentary evidence,
such as Insurance Policy, Agency Agreement and Subrogation Receipt, their right to institute this action as
subrogee of the insured. Keihin-Everett, on the other hand, did not present any evidence to contradict Tokio
Marine's case.

Third. Since the insurance claim for the loss sustained by the insured shipment was paid by Tokio Marine as proven
by the Subrogation Receipt – showing the amount paid and the acceptance made by Honda Trading, it is inevitable
that it is entitled, as a matter of course, to exercise its legal right to subrogation as provided under Article 2207 of the
Civil Code as follows:

Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for
the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to
recover the deficiency from the person causing the loss or injury.

It must be stressed that the Subrogation Receipt only proves the fact of payment. This fact of payment grants Tokio
Marine subrogatory right which enables it to exercise legal remedies that would otherwise be available to Honda
Trading as owner of the hijacked cargoes as against the common carrier (Keihin-Everett). In other words, the right of
subrogation accrues simply upon payment by the insurance company of the insurance claim.25 As the Court held:

The payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies
which the insured may have against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim.26

Indeed, the right of subrogation has its roots in equity.27 It is designed to promote and to accomplish justice and is
the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice and good conscience,
ought to pay.28 Consequently, the payment made by Tokio Marine to Honda Trading operates as an equitable
assignment to the former of all the remedies which the latter may have against Keihin-Everett.

Finally. Keihin-Everett maintained that at the time when the cargoes were lost, it was already in the custody of
Sunfreight Forwarders. Notwithstanding that the cargoes were in the possession of Sunfreight Forwarders when
they were hijacked, Keihin-Everett is not absolved from its liability as a common carrier. Keihin-Everett seems to
have overlooked that it was the one whose services were engaged by Honda Trading to clear and withdraw the
cargoes from the pier and to transport and deliver the same to its warehouse. In turn, Keihin-Everett accredited
Sunfreight Forwarders to render common carrier service for it by transporting inland goods. As correctly held by the
CA, there was no privity of contract between Honda Trading (to whose rights Tokio Marine was subrogated) and
Sunfreight Forwarders. Hence, Keihin-Everett, as the common carrier, remained responsible to Honda Trading for
the lost cargoes.

In this light, Keihin-Everett, as a common carrier, is mandated to observe, under Article 1733 of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each case.
In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted
negligently, unless it proves that it observed extraordinary diligence.29 To be sure, under Article 1736 of the Civil
Code, 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, or to the person who has a right to receive them. Hence,
at the time Keihin-Everett turned over the custody of the cargoes to Sunfreight Forwarders for inland transportation,
it is still required to observe extraordinary diligence in the vigilance of the goods. Failure to successfully establish
this carries with it the presumption of fault or negligence, thus, rendering Keihin-Everett liable to Honda Trading for
breach of contract.

It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force
majeure.30 Nevertheless, a common carrier may absolve itself of liability for a resulting loss caused by robbery or
hijacked if it is proven that the robbery or hijacking was attended by grave or irresistible threat, violence or force.31 In
this case, Keihin-Everett failed to prove the existence of the aforementioned instances.

We likewise agree with the CA that the liability of Keihin-Everett and Sunfreight Forwarders are not solidary. There
is solidary liability only when the obligation expressly so states, when the law so provides, or when the nature of the
obligation so requires.32 Thus, under Article 2194 of the Civil Code, liability of two or more persons is solidary
in quasi-delicts. But in this case, Keihin-Everett's liability to Honda Trading (to which Tokio Marine had been
subrogated as an insurer) stemmed not from quasi-delict, but from its breach of contract of carriage. Sunfreight
Forwarders was only impleaded in the case when Keihin-Everett filed a third-party complaint against it. As
mentioned earlier, there was no direct contractual relationship between Sunfreight Forwarders and Honda Trading.
Accordingly, there was no basis to directly hold Sunfreight Forwarders liable to Honda Trading for breach of
contract. If at all, Honda Trading can hold Sunfreight Forwarders for quasi-delict,33 which is not the action filed in the
instant case.

It is not expected however that Keihin-Everett must shoulder the entire loss. The case of Torres-Madrid Brokerage,
Inc. v. FEB Mitsui Marine Insurance Co., Inc.34 is instructive. The said case involves a similar set of facts as that of
the instant case such that the shipper (Sony) engaged the services of common carrier (TMBI), to facilitate the
release of its shipment and deliver the goods to its warehouse, who, in turn, subcontracted a portion of its obligation
to another common carrier (BMT). The Court ruled:

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 turn, TMBI is
entitled to reimbursement from BMT due to the latter's own breach of its contract of carriage with TMBI. x x x35
In the same manner, Keihin-Everett has a right to be reimbursed based on its Accreditation Agreement with
Sunfreight Forwarders. By accrediting Sunfreight Forwarders to render common carrier services to it, Keihin-Everett
in effect entered into a contract of carriage with a fellow common carrier, Sunfreight Forwarders.

It is undisputed that the cargoes were lost when they were in the custody of Sunfreight Forwarders. Hence, under
Article 173536 of the Civil Code, the presumption of fault on the part of Sunfreight Forwarders (as common carrier)
arose. Since Sunfreight Forwarders failed to prove that it observed extraordinary diligence in the performance of its
obligation to Keihin-Everett, it is liable to the latter for breach of contract. Consequently, Keihin-Everett is entitled to
be reimbursed by Sunfreight Forwarders due to the latter's own breach occasioned by the loss and damage to the
cargoes under its care and custody. As with the cited Torres-Madrid Brokerage case, Sunfreight Forwarders, too,
has the option to absorb the loss or to proceed after its missing driver, the suspect in the hijacking incident.37

As to the award of attorney's fees, the same is likewise in order as Tokio Marine was clearly compelled to litigate to
protect its interest.38 Attorney's fees are allowed in the discretion of the court after considering several factors which
are discernible from the facts brought out during the trial.39 In this case, Tokio Marine was compelled to litigate
brought about by Keihin-Everett's obstinate refusal to pay the former's valid claim.

WHEREFORE, the Decision dated April 8, 2014 of the Court of Appeals in CA-G.R. No. CV No. 98672
is AFFIRMED.

SO ORDERED.

Carpio, (Chairperson), Perlas-Bernabe, Caguioa, and Hernando,* JJ., concur.

Footnotes

**
Now known as "Malayan Insurance Company, Inc."

*
Additional Member per S.O. No. 2630 dated December 18, 2018.

1
Penned by Associate Justice Rebecca De Guia-Salvador, with Associate Justices Ramon R. Garcia and
Danton Q. Bueser, concurring; rollo, pp. 34-45.

2
Id. at 35-37.

3
Id. at 35.

4
Id.

5
Id.

6
Id.

7
Id.

8
Id.

9
Id.

10
Id.

11
Id. at 35-36.
12
Id. at 36.

13
Id.

14
Id. at 37.

15
Id. at 44.

16
Id. at 14.

17
563 Phil. 1003 (2007).

18
Id. at 1016.

19
Id. at 1017.

20
Id. at 1018.

21
Rollo, p. 36.

22
CA Decision; rollo, p. 40.

23
262 Phil. 919 (1990).

24
Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial
to the debtor.

25
Delsan Transport Lines, Inc. v. Court of Appeals, 420 Phil. 824, 832 (2001).

Equitable Insurance Corp v. Transmodal International, Inc., G.R. No. 223592, August 7, 2017, 834 SCRA
26

581, 592-593.

27
Delsan Transport Lines, Inc. v. Court of Appeals, supra note 25.

28
Id.

29
A.F. Sanchez Brokerage, Inc. v. Court of Appeals, 488 Phil. 430, 441 (2004).

30
Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., 789 Phil. 413, 424 (2016).

31
De Guzman v. Court of Appeals, 250 Phil. 613, 622 (1988).

32
Malayan Insurance Co., Inc. v. Philippines First Insurance Co., Inc., 690 Phil. 621, 638 (2012).

33
Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., supra note 30, at 427.

34
Id.

35
Id. at 428.
 Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
36

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.

37
Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., supra note 30, at 428.

38
CIVIL CODE, Article 2208 (2).

39
Philippine Rabbit Bus Lines, Inc. v. Esguerra, 203 Phil 107, 112 (1982).
 THIRD DIVISION

G.R. No. 220400, March 20, 2019

ANNIE TAN, PETITIONER, v. GREAT HARVEST ENTERPRISES, INC., RESPONDENT.

DECISION

LEONEN, J.:

Common carriers are obligated to exercise extraordinary diligence over the goods entrusted to their
care. This is due to the nature of their business, with the public policy behind it geared toward
achieving allocative efficiency and minimizing the inherently inequitable dynamics between the
parties to the transaction.

This resolves a Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Civil Procedure by
Annie Tan (Tan), assailing the Court of Appeals March 13, 2015 Decision2 and September 15, 2015
Resolution3 in CA-G.R. CV No. 100412. The assailed judgments upheld the Regional Trial Court
January 3, 2012 Decision4 in Civil Case No. Q-94-20745, which granted Great Harvest Enterprises,
Inc.'s (Great Harvest) Complaint for sum of money against Tan.

On February 3, 1994, Great Harvest hired Tan to transport 430 bags of soya beans worth
P230,000.00 from Tacoma Integrated Port Services, Inc. (Tacoma) in Port Area, Manila to Selecta
Feeds in Camarin, Novaliches, Quezon City.5

That same day, the bags of soya beans were loaded into Tan's hauling truck. Her employee, Rannie
Sultan Cabugatan (Cabugatan), then delivered the goods to Selecta Feeds.6

At Selecta Feeds, however, the shipment was rejected. Upon learning of the rejection, Great Harvest
instructed Cabugatan to deliver and unload the soya beans at its warehouse in Malabon. Yet, the
truck and its shipment never reached Great Harvest's warehouse.7

On February 7, 1994, Great Harvest asked Tan about the missing delivery. At first, Tan assured
Great Harvest that she would verify the whereabouts of its shipment, but after a series of follow-ups,
she eventually admitted that she could not locate both her truck and Great Harvest's goods.8 She
reported her missing truck to the Western Police District Anti-Carnapping Unit and the National
Bureau of Investigation.9

On February 19, 1994, the National Bureau of Investigation informed Tan that her missing truck had
been found in Cavite. However, the truck had been cannibalized and had no cargo in it.10 Tan spent
over P200,000.00 to have it fixed.11

Tan filed a Complaint against Cabugatan and Rody Karamihan (Karamihan), whom she accused of
conspiring with each other to steal the shipment entrusted to her.12 An Information13 for theft was
filed against Karamihan, while Cabugatan was charged with qualified theft.14

On March 2, 1994, Great Harvest, through counsel, sent Tan a letter demanding full payment for the
missing bags of soya beans. On April 26, 1994, it sent her another demand letter. Still, she refused
to pay for the missing shipment or settle the matter with Great Harvest.15 Thus, on June 2, 1994,
Great Harvest filed a Complaint for sum of money against Tan.16

In her Answer, Tan denied that she entered into a hauling contract with Great Harvest, insisting that
she merely accommodated it. Tan also pointed out that since Great Harvest instructed her driver to
change the point of delivery without her consent, it should bear the loss brought about by its
deviation from the original unloading point.17

In its August 4, 2000 Decision,18 the Regional Trial Court of Manila found Karamihan guilty as an
accessory after the fact of theft, and sentenced him to serve a prison sentence between six (6)
months of arresto mayor maximum to one (1) year of prision correccional minimum. He was also
ordered to indemnify Tan P75,000.00, the amount he had paid Cabugatan for the 430 bags of soya
beans.19

In its January 3, 2012 Decision,20 the Regional Trial Court of Quezon City granted Great Harvest's
Complaint for sum of money. It found that Tan entered into a verbal contract of hauling with Great
Harvest, and held her responsible for her driver's failure to deliver the soya beans to Great
Harvest.21 The dispositive portion of the Decision read:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter:

1. To pay the sum of P230,000.00 with interest thereon at the rate of 12% per annum
starting from June 2, 1994 (when the case was filed) and until paid;

2. To pay the sum of P50,000.00 as Attorney's fees; and

3. Costs against the defendant.

SO ORDERED.22

Tan moved for reconsideration of the January 3, 2012 Decision, but her Motion was denied by the
trial court in its November 21, 2012 Order.23

Tan filed an Appeal, but the Court of Appeals dismissed it in its March 13, 2015 Decision.24

In affirming the January 3, 2012 Decision, the Court of Appeals found that the parties' standard
business practice when the recipient would reject the cargo was to deliver it to Great Harvest's
warehouse. Thus, contrary to Tan's claim, there was no deviation from the original destination.25

The Court of Appeals also held that the cargo loss was due to Tan's failure to exercise the
extraordinary level of diligence required of her as a common carrier, as she did not provide security
for the cargo or take out insurance on it.26

The dispositive portion of the Court of Appeals Decision read:

WHEREFORE, the premises considered, the instant appeal is hereby DISMISSED and the assailed
Decision dated January 3, 2012 [is] AFFIRMED in toto.

IT IS SO ORDERED.27 (Emphasis in the original)

Tan moved for reconsideration, but her Motion was denied by the Court of Appeals in its September
15, 2015 Resolution.28
Thus, Tan filed her Petition for Review on Certiorari,29 maintaining that her Petition falls under the
exceptions to a Rule 45 petition since the assailed Court of Appeals Decision was based on a
misapprehension of facts.30

Petitioner contends that she is not liable for the loss of the soya beans and points out that the
agreement with respondent Great Harvest was to deliver them to Selecta Feeds, an obligation with
which she complied. She claims that what happened after that was beyond her control. When Selecta
Feeds rejected the soya beans and respondent directed Cabugatan to deliver the goods to its
warehouse, respondent superseded her previous instruction to Cabugatan to return the goods to
Tacoma, the loading point. Hence, she was no longer required to exercise the extraordinary diligence
demanded of her as a common carrier.31

Tan opines that she is not liable for the value of the lost soya beans since the truck hijacking was a
fortuitous event and because "the carrier is not an insurer against all risks of travel."32

She prayed for: (1) P500,000.00 in actual damages to compensate for the expenses she incurred in
looking for and fixing her truck; (2) P500,000.00 in moral damages for the stress and mental anguish
she experienced in searching for her truck and the missing soya beans; (3) P500,000.00 in
exemplary damages to deter respondent from filing a similar baseless complaint in the future; and
(4) P200,000.00 as attorney's fees. On the other hand, if she is found liable to respondent, petitioner
concedes that her liability should only be pegged at P75,000.00, the actual price Karamihan paid for
respondent's shipment.33

On January 25, 2016,34 respondent was directed to comment on the petition but it manifested35 that
it was waiving its right to file a comment.

The sole issue for this Court's resolution is whether or not petitioner Annie Tan should be held liable
for the value of the stolen soya beans.

The Petition must fail.

The Rules of Court is categorical that only questions of law may be raised in petitions filed under Rule
45, as this Court is not a trier of facts. Further, factual findings of appellate courts, when supported
by substantial evidence, are binding upon this Court.36

However, these rules do admit of exceptions.37 In particular, petitioner referred to the exception
"[w]hen the judgment is based on a misapprehension of facts"38 to justify the questions of fact in her
Petition for Review on Certiorari.

A careful review of the records of this case convinces us that the assailed judgments of the Court of
Appeals are supported by substantial evidence.

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." The Civil Code outlines the
degree of diligence required of common carriers in Articles 1733, 1755, and 1756:

ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

....
ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances.

ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.

Law and economics provide the policy justification of our existing jurisprudence. The extraordinary
diligence required by the law of common carriers is primarily due to the nature of their business, with
the public policy behind it geared toward achieving allocative efficiency between the parties to the
transaction.

Allocative efficiency is an economic term that describes an optimal market where customers are
willing to pay for the goods produced.39 Thus, both consumers and producers benefit and stability is
achieved.

The notion of common carriers is synonymous with public service under Commonwealth Act No. 146
or the Public Service Act.40 Due to the public nature of their business, common carriers are compelled
to exercise extraordinary diligence since they will be burdened with the externalities or the cost of
the consequences of their contract of carriage if they fail to take the precautions expected of them.

Common carriers are mandated to internalize or shoulder the costs under the contracts of carriage.
This is so because a contract of carriage is structured in such a way that passengers or shippers
surrender total control over their persons or goods to common carriers, fully trusting that the latter
will safely and timely deliver them to their destination. In light of this inherently inequitable
dynamics� and the potential harm that might befall passengers or shippers if common carriers
exercise less than extraordinary diligence� the law is constrained to intervene and impose
sanctions on common carriers for the parties to achieve allocative efficiency.41

Here, petitioner is a common carrier obligated to exercise extraordinary diligence42 over the goods
entrusted to her. Her responsibility began from the time she received the soya beans from
respondent's broker and would only cease after she has delivered them to the consignee or any
person with the right to receive them.43

Petitioner's argument is that her contract of carriage with respondent was limited to delivering the
soya beans to Selecta Feeds. Thus, when Selecta Feeds refused to accept the delivery, she directed
her driver to return the shipment to the loading point. Respondent refutes petitioner's claims and
asserts that their standing agreement was to deliver the shipment to respondent's nearest
warehouse in case the consignee refused the delivery.

After listening to the testimonies of both parties, the trial court found that respondent was able to
prove its contract of carriage with petitioner. It also found the testimony of respondent's witness,
Cynthia Chua (Chua), to be more believable over that of petitioner when it came to the details of
their contract of carriage:

Defendant's assertion that the diversion of the goods was done without her consent and knowledge is
self-serving and is effectively belied by the positive testimony of witness Cynthia Chua, Account
Officer of plaintiff corporation (page 23, TSN, March 26, 1996). Equally self-serving is defendant's
claim that she is not liable for the loss of the soyabeans (sic) considering that the plaintiff has no
existing contract with her. Such a sweeping submission is also belied by the testimony of plaintiff's
witness Cynthia Chua who categorically confirmed the existing business relationship of plaintiff and
defendant for hauling and delivery of goods as well as the arrangement to deliver the rejected goods
to the plaintiff's nearest warehouse in the event that goods are rejected by the consignee with prior
approval of the consignor (page 11, TSN, March 26, 1996).44
The trial court's appreciation of Chua's testimony was upheld by the Court of Appeals:

Verily, the testimony alone of appellee's Account Officer, Cynthia Chua, dispels the contrary
allegations made by appellant in so far as the nature of their business relationship is concerned.
Consistently and without qualms, said witness narrated the details respecting the company's
relations with the appellant and the events that transpired before, during and after the perfection of
the contract and the subsequent loss of the subject cargo. Said testimony and the documentary
exhibits, i.e., the Tacoma waybill and the appellee's waybill, prove the perfection and existence of the
disputed verbal contract.

Emphatically, from the aforesaid waybills, it was duly established that while verbal, the parties herein
has (sic) agreed for the hauling and delivery of the soya beans from the company's broker to the
intended recipient. It was further proven by evidence that appellant had agreed and consented to the
delivery of the soya beans to the company's nearest warehouse in case the cargo goods had been
rejected by the recipient as it had been the practice between the parties.45 (Citation omitted)

This Court accords the highest respect to the trial court's assessment of a witness' credibility, as it
was in a better position to observe the witness' demeanor while testifying. 46 We see no reason to
disturb the factual findings of the lower courts, especially since they were supported by substantial
evidence.

Furthermore, Article 1734 of the Civil Code holds a common carrier fully responsible for the goods
entrusted to him or her, unless there is enough evidence to show that the loss, destruction, or
deterioration of the goods falls under any of the enumerated exceptions:

ARTICLE 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.

Nothing in the records shows that any of these exceptions caused the loss of the soya beans.
Petitioner failed to deliver the soya beans to respondent because her driver absconded with them.
She cannot shift the blame for the loss to respondent's supposed diversion of the soya beans from
the loading point to respondent's warehouse, as the evidence has conclusively shown that she had
agreed beforehand to deliver the cargo to respondent's warehouse if the consignee refused to accept
it.47

Finally, petitioner's reliance on De Guzman v. Court of Appeals48 is misplaced. There, the common
carrier was absolved of liability because the goods were stolen by robbers who used "grave or
irresistible threat, violence[,] or force"49 to hijack the goods. De Guzman viewed the armed hijack as
a fortuitous event:

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."50

In contrast to De Guzman, the loss of the soya beans here was not attended by grave or irresistible
threat, violence, or force. Instead, it was brought about by petitioner's failure to exercise
extraordinary diligence when she neglected vetting her driver or providing security for the cargo and
failing to take out insurance on the shipment's value. As the Court of Appeals held:

Besides, as the records would show, appellant did not observe extra-ordinary (sic) diligence in the
conduct of her business as a common carrier. In breach of their agreement, appellant did not provide
security while the goods were in transit and she also did not pay for the insurance coverage of said
goods. These measures could have prevented the hijacking (sic) or could have ensured the payment
of the damages sustained by the appellee.51

WHEREFORE, the Petition is DENIED. Petitioner Annie Tan is directed to pay respondent Great
Harvest Enterprises, Inc. the sum of Two Hundred Thirty Thousand Pesos (P230,000.00) with interest
at the rate of twelve percent (12%) per annum from June 2, 1994 until June 30, 2013, and at the
rate of six percent (6%) per annum from July 1, 2013 until its full satisfaction. She is further directed
to pay Fifty Thousand Pesos (P50,000.00) as attorney's fees and the costs of suit.

SO ORDERED.

Peralta (Chairperson), A. Reyes, Jr., Hernando, and Carandang,* JJ., concur.

May 29, 2019

NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on March 20, 2019 a Decision, copy attached hereto, was rendered by the
Supreme Court in the above-entitled case, the original of which was received by this Office on May
29, 2019 at 2:32 p.m.

Very truly yours,

�
(SGD.) WILFREDO V. LAPITAN
Division Clerk of Court

Endnotes:

*
Designated additional Member per Special Order No. 2624 dated November 28, 2018.

1Rollo,
pp. 10-24.
2
Id. at 26-36. The Decision was penned by Associate Justice Danton Q. Bueser, and concurred in by
Associate Justices Apolinario D. Bruselas, Jr. and Victoria Isabel A. Paredes of the Special Sixteenth
Division, Court of Appeals, Manila.

3
Id. at 38-39. The Resolution was penned by Associate Justice Danton Q. Bueser, and concurred in
by Associate Justices Apolinario D. Bruselas, Jr. and Victoria Isabel A. Paredes of the Former Special
Sixteenth Division, Court of Appeals, Manila.

4
Id. at 40-46. The Decision was penned by Judge Santiago M. Arenas of Branch 217, Regional Trial
Court, Quezon City.

5
Id. at 27.

6
Id. In other parts of the rollo, Cabugatan is spelled "Carugatan "

7
Id.

8
Id. at 28.

9
Id. at 52.

10
Id. at 28.

11
Id. at 13. In another part of the rollo, Tan reportedly spent P300,000.00.

12
Id. at 52.

13
Id. at 48.

14
Id. at 54.

15 Id. at 28.

16
Id. at 40.

17 Id. at 42.

18Id. at 48-65. The Decision docketed as Criminal Case No. 94-136947 was penned by Presiding
Judge Ricardo G. Bernardo, Jr. of Branch 10, Regional Trial Court, Manila.

19
Id. at 65.

20
Id. at 40-46.

21
Id. at 44-45.

22
Id. at 45.

23
Id. at 47. The Order was penned by Judge Santiago M. Arenas of Branch 217, Regional Trial Court,
Quezon City.

24 Id. at 26-36.

25 Id. at 32.
26
Id. at 33-34.

27
Id. at 35.

28
Id. at 38-39.

29
Id. at 10-24.

30 Id. at 15-16.

31
Id. at 16-17.

32
Id. at 17.

33 Id. at 18-19.

34
Id. at 66.

35 Id. at 73-74.

36Siasat
v. Court of Appeals, 425 Phil. 139, 145 (2002) [Per J. Pardo, First Division] and Padilla v.
Court of Appeals, 241 Phil. 776, 781 (1988) [Per J. Paras, Second Division].

37
Medina v. Mayor Asistio, 269 Phil. 225, 232 (1990) [Per J. Bidin, Third Division].

38Rollo,
p. 15.

39
Robert D. Cooter, Economic Theories of Legal Liability, The Journal of Economic Perspectives, vol.
5, no. 3, 11, 16 (1991).

40De
Guzman v. Court of Appeals, 250 Phil. 613 (1988) [Per J. Feliciano, Third Division]. The Decision
erroneously wrote Commonwealth Act No. 1416.

41
1 ROBERT COOTER, LAW AND ECONOMICS 225 (4th ed., 2003).

42
CIVIL CODE, art. 1733 provides:

ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734,
1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers
is further set forth in articles 1755 and 1756.

43
CIVIL CODE, art. 1736 provides:

ARTICLE 1736. The extraordinary responsibility of the common carrier lasts from the time the goods
are unconditionally placed in the possession of, and received by the carrier for transportation until
the same are delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the provisions of article 1738.

44Rollo,
p. 44.
45
Id. at 32.

Spouses Bernales v. Heirs of Sambaan, 624 Phil. 88, 103 (2010) [Per J. Del Castillo, Second
46

Division].

47Rollo, p. 32.

48
250 Phil. 613 (1988) [Per J. Feliciano, Third Division].

49
CIVIL CODE, art. 1745 provides:

ARTICLE 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, violence or force, is dispensed with or diminished[.]

50De
Guzman v. Court of Appeals, 250 Phil. 613, 622 (1988) [Per J. Feliciano, Third Division].

51Rollo,
p. 34.