COMMON CARRIERS

CONCEPT, PARTIES, AND PERFECTION

1.

EVERETTE STEAMSHIP CORP VS CA ET AL GR NO 122494 10/8/1998

SECOND DIVISION

[G.R. No. 122494. October 8, 1998]

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT

HERNANDEZ TRADING CO. INC., respondents.

OF

APPEALS

and

DECISION
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal
of the decision[1] of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which
affirmed the decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No.
C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value
of the lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No.
12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were
shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by
petitioners principal, Everett Orient Lines. The said crates were covered by Bill of Lading No.
NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14
was missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992
addressed to private respondent, which thereafter made a formal claim upon petitioner for the
value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred
(Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14,
1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the
maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability
of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed
as Civil Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City,
Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to
offer and agreed instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment[2] in favor of private respondent, ordering
petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual
value of the lost cargo and the material and packaging cost; (c) 10% of the total amount as an
award for and as contingent attorneys fees; and (d) to pay the cost of the suit. The trial court ruled:

Considering defendants categorical admission of loss and its failure to overcome the
presumption of negligence and fault, the Court conclusively finds defendant liable to the
plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability
of the defendant. As stated earlier, plaintiff contends that defendant should be held
liable for the whole value for the loss of the goods in the amount of Y1,552,500.00
because the terms appearing at the back of the bill of lading was so written in fine prints
and that the same was not signed by plaintiff or shipper thus, they are not bound by the
clause stated in paragraph 18 of the bill of lading. On the other hand, defendant merely
admitted that it lost the shipment but shall be liable only up to the amount of
Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code Art. 1750. 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.
It is required, however, that the contract must be reasonable and just under the
circumstances and has been fairly and freely agreed upon. The requirements provided
in Art. 1750 of the New Civil Code must be complied with before a common carrier can
claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of
the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not
been met. The fact that those conditions are printed at the back of the bill of lading in
letters so small that they are hard to read would not warrant the presumption that the
plaintiff or its supplier was aware of these conditions such that he had fairly and freely
agreed to these conditions. It can not be said that the plaintiff had actually entered into
a contract with the defendant, embodying the conditions as printed at the back of the
bill of lading that was issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial
courts findings with the additional observation that private respondent can not be bound by the
terms and conditions of the bill of lading because it was not privy to the contract of carriage. It
said:
As to the amount of liability, no evidence appears on record to show that the appellee
(Hernandez Trading Co.) consented to the terms of the Bill of Lading. The shipper
named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett
Steamship Corp.) contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the
terms of the bill of lading when it delivered the cargo to the appellant, still it does not
necessarily follow that appellee Hernandez Trading Company as consignee is bound
thereby considering that the latter was never privy to the shipping contract.
xxxxxxxxx
Never having entered into a contract with the appellant, appellee should therefore not
be bound by any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the
basis of which is not the breach of contract as appellee was never a privy to the any
contract with the appellant, but is based on Article 1735 of the New Civil Code, there

being no evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the
consent of the consignee to the terms and conditions of the bill of lading is necessary to make
such stipulations binding upon it; (2) in holding that the carriers limited package liability as
stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private
respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of
a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by
law, particularly Articles 1749 and 1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
ART. 1750. 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 freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of
cases.[3] Thus, in Sea Land Service, Inc. vs Intermediate Appellate Court[4], we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist,
the validity and binding effect of the liability limitation clause in the bill of lading here are
nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justness and fairness of the law
itself, and this the private respondent does not pretend to do. But over and above that
consideration, the just and reasonable character of such stipulation is implicit in it giving the
shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far
from onerous expedient of declaring the nature and value of the shipment in the bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the
common carriers liability for loss must be reasonable and just under the circumstances, and has
been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the
basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and
in no event shall the carrier be liable for any loss of possible profits or any
consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection
with, goods in an amount exceeding One Hundred Thousand Yen in Japanese
Currency (Y100,000.00) or its equivalent in any other currency per package or
customary freight unit (whichever is least) unless the value of the goods higher than
this amount is declared in writing by the shipper before receipt of the goods by the

carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis
supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier
made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00)
Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if
the value of its cargo was higher than the limited liability of the carrier. Considering that
the shipper did not declare a higher valuation, it had itself to blame for not complying with
the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely agreed
to the limited liability clause in the bill of lading because the said conditions were printed in small
letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals [5] that the jurisprudence on the matter reveals
the consistent holding of the court that contracts of adhesion are not invalid per se and that it has
on numerous occasions upheld the binding effect thereof. Also, in Philippine American General
Insurance Co., Inc. vs. Sweet Lines , Inc.[6] this Court , speaking through the learned Justice
Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of
adhesion wherein one party imposes a ready-made form of contract on the other x x x
are contracts not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres he gives his consent. In the present case, not
even an allegation of ignorance of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full comprehension of the provisions of
a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals [7] that stipulations in contracts of
adhesion are valid and binding.
While it may be true that petitioner had not signed the plane ticket x x, he is
nevertheless bound by the provisions thereof. Such provisions have been held to be a
part of the contract of carriage, and valid and binding upon the passenger regardless of
the latters lack of knowledge or assent to the regulation. It is what is known as a
contract of adhesion, in regards which it has been said that contracts of adhesion
wherein one party imposes a ready-made form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres, he gives his consent.
x x x , a contract limiting liability upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against his own negligence. (Emphasis
supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion
in that the said contracts must be carefully scrutinized in order to shield the unwary (or weaker
party) from deceptive schemes contained in ready-made covenants,[8] such as the bill of lading in
question. The stringent requirement which the courts are enjoined to observe is in recognition of
Article 24 of the Civil Code which mandates that (i)n all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection.

The shipper, Maruman Trading, we assume, has been extensively engaged in the trading
business. It can not be said to be ignorant of the business transactions it entered into involving
the shipment of its goods to its customers. The shipper could not have known, or should know
the stipulations in the bill of lading and there it should have declared a higher valuation of the
goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been
deceived or rushed into agreeing to ship the cargo in petitioners vessel. In fact, it was not even
impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not
a signatory to the bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that
even if the consignee was not a signatory to the contract of carriage between the shipper and the
carrier, the consignee can still be bound by the contract. Speaking through Mr. Chief Justice
Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of
lading to recover from the carrier or shipper for loss of, or damage to goods being
transported under said bill,although that document may have been- as in practice it
oftentimes is-drawn up only by the consignor and the carrier without the
intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover for
loss of a shipment consigned to him under a bill of lading drawn up only by and
between the shipper and the carrier, springs from either a relation of agency that
may exist between him and the shipper or consignor, or his status as stranger in
whose favor some stipulation is made in said contract, and who becomes a party
thereto when he demands fulfillment of that stipulation, in this case the delivery
of the goods or cargo shipped. In neither capacity can he assert personally, in
bar to any provision of the bill of lading, the alleged circumstance that fair and
free agreement to such provision was vitiated by its being in such fine print as to
be hardly readable. Parenthetically, it may be observed that in one comparatively
recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15)
where this Court found that a similar package limitation clause was printed in the
smallest type on the back of the bill of lading, it nonetheless ruled that the
consignee was bound thereby on the strength of authority holding that such
provisions on liability limitation are as much a part of a bill of lading as though
physically in it and as though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability
of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the
liability of the carrier to an agreed valuation unless the shipper declares a higher
value and inserts it into said contract or bill. This proposition, moreover, rests upon
an almost uniform weight of authority. (Underscoring supplied)
When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of lading,
it (private respondent) accepted the provisions of the contract and thereby made itself a party
thereto, or at least has come to court to enforce it.[9] Thus, private respondent cannot now reject
or disregard the carriers limited liability stipulation in the bill of lading. In other words, private
respondent is bound by the whole stipulations in the bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the
lost cargo in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had

"fully declared the shipment x x x, the contents of each crate, the dimensions, weight and value of
the contents,"[10] as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity
and value of "the shipment which consisted of three pre-packed crates described in Bill of Lading
No. NGO-53MN merely as 3 CASES SPARE PARTS.[11]
The bill of lading in question confirms petitioners contention. To defeat the carriers limited
liability, the aforecited Clause 18 of the bill of lading requires that the shipper should
have declared in writing a higher valuation of its goods before receipt thereof by the carrier
and insert the said declaration in the bill of lading, with the extra freight paid. These
requirements in the bill of lading were never complied with by the shipper, hence, the liability of
the carrier under the limited liability clause stands. The commercial Invoice No. MTM-941 does
not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the
cargo as contended by private respondent. No other evidence was proffered by private
respondent to support is contention. Thus, we are convinced that petitioner should be liable for
the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand
(Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV
No. 42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.
Regalado, (Acting Chief Justice), Melo, Puno, and Mendoza, JJ., concur.

[1]

Penned by Justice Pacita Canizares-Nye and concurred in by Justices Conchita CarpioMorales and Antonio P. Solano; Rollo, pp. 33-40.
[2]
Penned by Judge Oscar M. Payawal, Rollo, pp. 43-50 .
[3]
St. Paul Fire and Marine Insurance Co. vs Macondray & Co., 70 SCRA 122 [1976]; Sea Land
Services, Inc. vs Intermediate Appellate Court, 153 SCRA 552 [1987]; Pan American World
Airways, Inc. vs Intermediate Appellate Court, 164 SCRA 268 [1988]; Phil. Airlines, Inc. vs Court
of Appeals, 255 SCRA 63 [1996].
[4]
153 SCRA 552 [1987]
[5]
255 SCRA 48, 58 [1996].
[6]
212 SCRA 194, 212-213 [1992].
[7]
91 SCRA 223 [1979]; Philippine Airlines, Inc. vs Court of Appeals, 255 SCRA 63 [1996].
[8]
Ayala Corporation vs. Ray Burton Development Corporation, G.R. No. 126699, August 7,
1998. See also Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd., 98 Phil. 95 [1955].
[9]
See Mendoza vs. Philippine Air Lines, Inc. 90 Phil. 836, 845-846.
[10]
Rollo, p. 116.
[11]
Rollo, p. 13.

2.
MOF CO OINC VS SHIN YANG BROKERAGE CORPORATION GR NO 1728822
12/18/2009

SECOND DIVISION

MOF COMPANY, INC.,

Petitioner,

G.R. No. 172822

Present:
CARPIO,* J., Chairperson,
LEONARDO-DE CASTRO,*
BRION,
DEL CASTILLO, and
ABAD, JJ.

- versus -

SHIN YANG BROKERAGE

CORPORATION,
Promulgated:
Respondent.
December 18, 2009
x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

The necessity of proving lies with the person who sues.
The refusal of the consignee named in the bill of lading to pay the freightage on the claim that it is
not privy to the contract of affreightment propelled the shipper to sue for collection of money, stressing that
its sole evidence, the bill of lading, suffices to prove that the consignee is bound to pay. Petitioner now
comes to us by way of Petition for Review on Certiorari[1] under Rule 45 praying for the reversal of the
Court of Appeals' (CA) judgment that dismissed its action for sum of money for insufficiency of evidence.

Factual Antecedents
On October 25, 2001, Halla Trading

Co., a company based in Korea, shipped

to Manila secondhand cars and other articles on board the vessel Hanjin Busan 0238W. The bill of lading
covering the shipment, i.e., Bill of Lading No. HJSCPUSI14168303,[2] which was prepared by the carrier
Hanjin Shipping Co., Ltd. (Hanjin), named respondent Shin Yang Brokerage Corp. (Shin Yang) as the

consignee and indicated that payment was on a Freight Collect basis, i.e., that the consignee/receiver of
the goods would be the one to pay for the freight and other charges in the total amount of P57,646.00.[3]
The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc.
(MOF), Hanjins exclusive general agent in the Philippines, repeatedly demanded the payment of ocean
freight, documentation fee and terminal handling charges from Shin Yang. The latter, however, failed and
refused to pay contending that it did not cause the importation of the goods, that it is only the Consolidator
of the said shipment, that the ultimate consignee did not endorse in its favor the original bill of lading and
that the bill of lading was prepared without its consent.
Thus,

on March

19,

2003,

MOF

filed

case

for

sum

of

money

before

the Metropolitan Trial Court of Pasay City (MeTC Pasay) which was docketed as Civil Case No. 206-03
and raffled to Branch 48. MOF alleged that Shin Yang, a regular client, caused the importation and
shipment of the goods and assured it that ocean freight and other charges would be paid upon arrival of
the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly breached its obligation to
pay. MOF argued that Shin Yang, as the named consignee in the bill of lading, entered itself as a party to
the contract and bound itself to the Freight Collect arrangement. MOF thus prayed for the payment
of P57,646.00 representing ocean freight, documentation fee and terminal handling charges as well as
damages and attorneys fees.
Claiming that it is merely a consolidator/forwarder and that Bill of Lading No. HJSCPUSI14168303 was
not endorsed to it by the ultimate consignee, Shin Yang denied any involvement in shipping the goods or
in promising to shoulder the freightage. It asserted that it never authorized Halla Trading Co. to ship the
articles or to have its name included in the bill of lading. Shin Yang also alleged that MOF failed to present
supporting documents to prove that it was Shin Yang that caused the importation or the one that assured
payment of the shipping charges upon arrival of the goods in Manila.
Ruling of the Metropolitan Trial Court
On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision[4] in favor of MOF. It ruled
that Shin Yang cannot disclaim being a party to the contract of affreightment because:
x x x it would appear that defendant has business transactions with plaintiff. This is evident
from defendants letters dated 09 May 2002 and 13 May 2002 (Exhibits 1 and 2,
defendants Position Paper) where it requested for the release of refund of container
deposits x x x. [In] the mind of the Court, by analogy, a written contract need not be
necessary; a mutual understanding [would suffice]. Further, plaintiff would have not

included the name of the defendant in the bill of lading, had there been no prior agreement
to that effect.
In sum, plaintiff has sufficiently proved its cause of action against the defendant
and the latter is obliged to honor its agreement with plaintiff despite the absence of a
written contract.[5]
The dispositive portion of the MeTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and
against the defendant, ordering the latter to pay plaintiff as follows:
1. P57,646.00 plus legal interest from the date of demand until fully paid,
2. P10,000.00 as and for attorneys fees and
3. the cost of suit.
SO ORDERED.[6]

Ruling of the Regional Trial Court

The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the Decision of the MeTC. It
held that:
MOF and Shin Yang entered into a contract of affreightment which Blacks Law Dictionary
defined as a contract with the ship owner to hire his ship or part of it, for the carriage of
goods and generally take the form either of a charter party or a bill of lading.
The bill of lading contain[s] the information embodied in the contract.
Article 652 of the Code of Commerce provides that the charter party must be in writing;
however, Article 653 says: If the cargo should be received without charter party having
been signed, the contract shall be understood as executed in accordance with what
appears in the bill of lading, the sole evidence of title with regard to the cargo for
determining the rights and obligations of the ship agent, of the captain and of the
charterer. Thus, the Supreme Court opined in the Market Developers, Inc. (MADE) vs.
Honorable Intermediate Appellate Court and Gaudioso Uy, G.R. No. 74978, September
8, 1989, this kind of contract may be oral. In another case, Compania Maritima vs.
Insurance Company of North America, 12 SCRA 213 the contract of affreightment by
telephone was recognized where the oral agreement was later confirmed by a formal
booking.
xxxx
Defendant is liable to pay the sum of P57,646.00, with interest until fully paid, attorneys
fees of P10,000.00 [and] cost of suit.
Considering all the foregoing, this Court affirms in toto the decision of the Court a quo.

SO ORDERED.[7]

Ruling of the Court of Appeals

Seeing the matter in a different light, the CA dismissed MOFs complaint and refused to award any form of
damages or attorneys fees. It opined that MOF failed to substantiate its claim that Shin Yang had a hand
in the importation of the articles to the Philippines or that it gave its consent to be a consignee of the subject
goods. In its March 22, 2006 Decision,[8] the CA said:
This Court is persuaded [that except] for the Bill of Lading, respondent has not presented
any other evidence to bolster its claim that petitioner has entered [into] an agreement of
affreightment with respondent, be it verbal or written. It is noted that the Bill of Lading was
prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal while respondent is
the formers agent. (p. 43, rollo)
The conclusion of the court a quo, which was upheld by the RTC Pasay City, Branch 108
xxx is purely speculative and conjectural. A court cannot rely on speculations, conjectures
or guesswork, but must depend upon competent proof and on the basis of the best
evidence obtainable under the circumstances. Litigation cannot be properly resolved by
suppositions, deductions or even presumptions, with no basis in evidence, for the truth
must have to be determined by the hard rules of admissibility and proof (Lagon vs. Hooven
Comalco Industries, Inc. 349 SCRA 363).
While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods
shipped; second, it is a contract by which three parties, namely, the shipper, the carrier
and the consignee who undertake specific responsibilities and assume stipulated
obligations (Belgian Overseas Chartering and Shipping N.V. vs. Phil. First Insurance Co.,
Inc., 383 SCRA 23), x x x if the same is not accepted, it is as if one party does not accept
the contract. Said the Supreme Court:
A bill of lading delivered and accepted constitutes the contract of
carriage[,] even though not signed, because the acceptance of a paper
containing the terms of a proposed contract generally constitutes an
acceptance of the contract and of all its terms and conditions of which the
acceptor has actual or constructive notice (Keng Hua Paper Products
Co., Inc. vs. CA, 286 SCRA 257).
In the present case, petitioner did not only [refuse to] accept the bill of lading, but it likewise
disown[ed] the shipment x x x. [Neither did it] authorize Halla Trading Company or anyone
to ship or export the same on its behalf.
It is settled that a contract is upheld as long as there is proof of consent, subject matter
and cause (Sta. Clara Homeowners Association vs. Gaston, 374 SCRA 396). In the case
at bar, there is not even any iota of evidence to show that petitioner had given its consent.

He who alleges a fact has the burden of proving it and a mere allegation
is not evidence (Luxuria Homes Inc. vs. CA, 302 SCRA 315).
The 40-footer van contains goods of substantial value. It is highly improbable for petitioner
not to pay the charges, which is very minimal compared with the value of the goods, in
order that it could work on the release thereof.
For failure to substantiate its claim by preponderance of evidence, respondent has not
established its case against petitioner.[9]

Petitioners filed a motion for reconsideration but it was denied in a Resolution[10] dated May 25,
2006. Hence, this petition for review on certiorari.
Petitioners Arguments
In assailing the CAs Decision, MOF argues that the factual findings of both the MeTC and RTC are entitled
to great weight and respect and should have bound the CA. It stresses that the appellate court has no
justifiable reason to disturb the lower courts judgments because their conclusions are well-supported by
the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower courts as purely speculative and
conjectural. According to MOF, the bill of lading, which expressly stated Shin Yang as the consignee, is
the best evidence of the latters actual participation in the transportation of the goods. Such document,
validly entered, stands as the law among the shipper, carrier and the consignee, who are all bound by the
terms stated therein. Besides, a carriers valid claim after it fulfilled its obligation cannot just be rejected by
the named consignee upon a simple denial that it ever consented to be a party in a contract of
affreightment, or that it ever participated in the preparation of the bill of lading. As against Shin Yangs bare
denials, the bill of lading is the sufficient preponderance of evidence required to prove MOFs claim. MOF
maintains that Shin Yang was the one that supplied all the details in the bill of lading and acquiesced to be
named consignee of the shipment on a Freight Collect basis.
Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid its obligation to
pay, because it never objected to being named as the consignee in the bill of lading and that it only
protested when the shipment arrived in the Philippines, presumably due to a botched transaction between
it and Halla Trading Co. Furthermore, Shin Yangs letters asking for the refund of container deposits
highlight the fact that it was aware of the shipment and that it undertook preparations for the intended
release of the shipment.

Respondents Arguments
Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it consented to take
part in the contract of affreightment. Shin Yang argues that MOF miserably failed to present any evidence
to prove that it was the one that made preparations for the subject shipment, or that it is an actual shipping
practice that forwarders/consolidators as consignees are the ones that provide carriers details and
information on the bills of lading.
Shin Yang contends that a bill of lading is essentially a contract between the shipper and the carrier
and ordinarily, the shipper is the one liable for the freight charges. A consignee, on the other hand, is
initially a stranger to the bill of lading and can be liable only when the bill of lading specifies that the charges
are to be paid by the consignee. This liability arises from either a) the contract of agency between the
shipper/consignor and the consignee; or b) the consignees availment of the stipulation pour autrui drawn
up by and between the shipper/ consignor and carrier upon the consignees demand that the goods be
delivered to it. Shin Yang contends that the fact that its name was mentioned as the consignee of the
cargoes did not make it automatically liable for the freightage because it never benefited from the
shipment. It never claimed or accepted the goods, it was not the shippers agent, it was not aware of its
designation as consignee and the original bill of lading was never endorsed to it.
Issue
The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is bound by the
stipulations thereof. Corollarily, whether respondent who was not an agent of the shipper and who did not
make any demand for the fulfillment of the stipulations of the bill of lading drawn in its favor is liable to pay
the corresponding freight and handling charges.
Our Ruling
Since the CA and the trial courts arrived at different conclusions, we are constrained to depart from the
general rule that only errors of law may be raised in a Petition for Review on Certiorariunder Rule 45 of the
Rules of Court and will review the evidence presented.[11]
The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the intervention
of the consignee. However, the latter can be bound by the stipulations of the bill of lading when a) there is

a relation of agency between the shipper or consignor and the consignee or b) when the consignee
demands fulfillment of the stipulation of the bill of lading which was drawn up in its favor.[12]
In Keng Hua Paper Products Co., Inc. v. Court of Appeals,[13] we held that once the bill of lading is
received by the consignee who does not object to any terms or stipulations contained therein, it constitutes
as an acceptance of the contract and of all of its terms and conditions, of which the acceptor has actual or
constructive notice.
In Mendoza v. Philippine Air Lines, Inc.,[14] the consignee sued the carrier for damages but
nevertheless claimed that he was never a party to the contract of transportation and was a complete
stranger thereto. In debunking Mendozas contention, we held that:
x x x First, he insists that the articles of the Code of Commerce should be applied; that he
invokes the provisions of said Code governing the obligations of a common carrier to
make prompt delivery of goods given to it under a contract of transportation. Later, as
already said, he says that he was never a party to the contract of transportation and was
a complete stranger to it, and that he is now suing on a tort or a violation of his rights as a
stranger (culpa aquiliana). If he does not invoke the contract of carriage entered into with
the defendant company, then he would hardly have any leg to stand on. His right to prompt
delivery of the can of film at the Pili Air Port stems and is derived from the contract of
carriage under which contract, the PAL undertook to carry the can of film safely and to
deliver it to him promptly. Take away or ignore that contract and the obligation to carry and
to deliver and right to prompt delivery disappear. Common carriers are not obligated by
law to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation. Said
rights and obligations are created by a specific contract entered into by the parties. In the
present case, the findings of the trial court which as already stated, are accepted
by the parties and which we must accept are to the effect that the LVN Pictures Inc.
and Jose Mendoza on one side, and the defendant company on the other, entered
into a contract of transportation (p. 29, Rec. on Appeal). One interpretation of said
finding is that the LVN Pictures Inc. through previous agreement
withMendoza acted as the latter's agent. When he negotiated with the LVN Pictures
Inc. to rent the film 'Himala ng Birhen' and show it during the Naga town fiesta, he
most probably authorized and enjoined the Picture Company to ship the film for
him on the PAL on September 17th. Another interpretation is that even if the LVN
Pictures Inc. as consignor of its own initiative, and acting independently
of Mendoza for the time being, made Mendoza a consignee. [Mendoza made
himself a party to the contract of transportaion when he appeared at the Pili Air
Port armed with the copy of the Air Way Bill (Exh. 1) demanding the delivery of the
shipment to him.] The very citation made by appellant in his memorandum supports this
view. Speaking of the possibility of a conflict between the order of the shipper on the one
hand and the order of the consignee on the other, as when the shipper orders the shipping
company to return or retain the goods shipped while the consignee demands their
delivery, Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a
decision of the Argentina Court of Appeals on commercial matters, cited by Tolentino in
Vol. II of his book entitled 'Commentaries and Jurisprudence on the Commercial Laws of

the Philippines' p. 209, says that the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of the bill of lading appears
with such bill of lading before the carrier and makes himself a party to the contract.
Prior to that time he is a stranger to the contract.
Still another view of this phase of the case is that contemplated in Art. 1257,
paragraph 2, of the old Civil Code (now Art. 1311, second paragraph) which reads
thus:
Should the contract contain any stipulation in favor of a third
person, he may demand its fulfillment provided he has given notice
of his acceptance to the person bound before the stipulation has
been revoked.'
Here, the contract of carriage between the LVN Pictures Inc. and the
defendant carrier contains the stipulations of delivery to Mendoza as consignee.
His demand for the delivery of the can of film to him at the Pili Air Port may be
regarded as a notice of his acceptance of the stipulation of the delivery in his favor
contained in the contract of carriage and delivery. In this case he also made himself
a party to the contract, or at least has come to court to enforce it. His cause of
action must necessarily be founded on its breach.[15] (Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the shipper and the
carrier, becomes a party to the contract by reason of either a) the relationship of agency between the
consignee and the shipper/ consignor; b) the unequivocal acceptance of the bill of lading delivered to the
consignee, with full knowledge of its contents or c) availment of the stipulation pour autrui, i.e., when the
consignee, a third person, demands before the carrier the fulfillment of the stipulation made by the
consignor/shipper in the consignees favor, specifically the delivery of the goods/cargoes shipped.[16]
In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla
Trading, Co. to ship the goods on its behalf; or that it got hold of the bill of lading covering the shipment or
that it demanded the release of the cargo. Basic is the rule in evidence that the burden of proof lies upon
him who asserts it, not upon him who denies, since, by the nature of things, he who denies a fact cannot
produce any proof of it.[17] Thus, MOF has the burden to controvert all these denials, it being insistent that
Shin Yang asserted itself as the consignee and the one that caused the shipment of the goods to
the Philippines.
In civil cases, the party having the burden of proof must establish his case by preponderance of
evidence,[18] which means evidence which is of greater weight, or more convincing than that which is
offered in opposition to it.[19] Here, MOF failed to meet the required quantum of proof. Other than presenting
the bill of lading, which, at most, proves that the carrier acknowledged receipt of the subject cargo from

the shipper and that the consignee named is to shoulder the freightage, MOF has not adduced any other
credible evidence to strengthen its cause of action. It did not even present any witness in support of its
allegation that it was Shin Yang which furnished all the details indicated in the bill of lading and that Shin
Yang consented to shoulder the shipment costs. There is also nothing in the records which would indicate
that Shin Yang was an agent of Halla Trading Co. or that it exercised any act that would bind it as a named
consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish its cause against
respondent.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated March 22,
2006 dismissing petitioners complaint and the Resolution dated May 25, 2006denying the motion for
reconsideration are AFFIRMED.
SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

ROBERTO A. ABAD
Associate Justice

ATTESTATION

I attest 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 Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERT IF IC AT ION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons attestation, it is
hereby certified 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 Courts Division.

REYNATO S. PUNO
Chief Justice

Per Special Order No. 775 dated November 3, 2009.

Additional member per Special Order No. 776 dated November 3, 2009.
[1]
Rollo, pp. 9-38.
[2]
Id. at 79.
[3]
Id. at 80.
[4]
Id. at 90-94; penned by Judge Estrellita M. Paas.
[5]
Id. at 93.
[6]
Id. at 94.
[7]
Id. at 103-104; penned by Judge Priscilla C. Mijares.
[8]
Id. at 40-45; penned by Associate Justice Eliezer R. De Los Santos and concurred in by Associate
Justices Jose C. Reyes, Jr. and Arturo G. Tayag.
[9]
Id. at 43-44.
[10]
Id. at 48.
[11]
Wallem Phils. Shipping Inc. v. Prudential Guarantee & Assurance Inc., 445 Phil. 136, 149
(2003).
[12]
See Sea-Land Service v. Intermediate Appellate Court, 237 Phil. 531, 535-536 (1987).
[13]
349 Phil. 925, 933 (1998).
[14]
90 Phil. 836, 846 (1952).
[15]
Id. at 845-847.
[16]
CIVIL CODE OF THE PHILIPPINES, Article 1311, 2nd paragraph: If a contract should contain some
stipulation in favor of a third person, he may demand its fulfillment provided he communicated his
acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third
person.
[17]
Acabal v. Acabal, 494 Phil. 528, 541 (2005).
[18]
New Testament Church of God v. Court of Appeals, 316 Phil. 330, 333 (1995).
[19]
Condes v. Court of Appeals, G.R. No. 161304, July 27, 2007, 528 SCRA 339, 352.
*

3.

DANGWA TRANSPORTATION CO VS CA 202 SCRA 574 (1991)

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 95582 October 7, 1991

DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y
MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO
CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by
Inocencia Cudiamat, respondents.
Francisco S. Reyes Law Office for petitioners.
Antonio C. de Guzman for private respondents.

REGALADO, J.:p
On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for
the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25,
1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date,
while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner
corporation in a reckless and imprudent manner and without due regard to traffic rules and
regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat.
However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter
bad faith and without regard to the welfare of the victim, first brought his other passengers and
cargo to their respective destinations before banging said victim to the Lepanto Hospital where
he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the
supervision of the employees, even as they add that they are not absolute insurers of the safety
of the public at large. Further, it was alleged that it was the victim's own carelessness and
negligence which gave rise to the subject incident, hence they prayed for the dismissal of the
complaint plus an award of damages in their favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this
decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that
Pedrito Cudiamat was negligent, which negligence was the proximate cause of

his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs
of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount
defendants initially offered said heirs for the amicable settlement of the case. No
costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a
decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of
the lower court, and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for
death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as
actual and compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution
dated October 4, 1990,5 hence this petition with the central issue herein being whether
respondent court erred in reversing the decision of the trial court and in finding petitioners
negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final
and may not be reviewed by this Court on appeal. However, this is subject to settled exceptions,
one of which is when the findings of the appellate court are contrary to those of the trial court, in
which case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who
between the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct
an evaluation of the evidence in this case for the prope calibration of their conflicting factual
findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a
moving vehicle, especially with one of his hands holding an umbrella. And,
without having given the driver or the conductor any indication that he wishes to
board the bus. But defendants can also be found wanting of the necessary
diligence. In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door was open
instead of being closed. This should be so, for it is hard to believe that one would
even attempt to board a vehicle (i)n motion if the door of said vehicle is closed.
Here lies the defendant's lack of diligence. Under such circumstances, equity
demands that there must be something given to the heirs of the victim to
assuage their feelings. This, also considering that initially, defendant common

carrier had made overtures to amicably settle the case. It did offer a certain
monetary consideration to the victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it
is evident that the subject bus was at full stop when the victim Pedrito Cudiamat
boarded the same as it was precisely on this instance where a certain Miss
Abenoja alighted from the bus. Moreover, contrary to the assertion of the
appellees, the victim did indicate his intention to board the bus as can be seen
from the testimony of the said witness when he declared that Pedrito Cudiamat
was no longer walking and made a sign to board the bus when the latter was still
at a distance from him. It was at the instance when Pedrito Cudiamat was closing
his umbrella at the platform of the bus when the latter made a sudden jerk
movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appelleedriver in prematurely stepping on the accelerator and in not waiting for the
passenger to first secure his seat especially so when we take into account that
the platform of the bus was at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their duty and obligation as
common carrier to the end that they should observe extra-ordinary diligence in
the vigilance over the goods and for the safety of the passengers transported by
them according to the circumstances of each case (Article 1733, New Civil
Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above holding
of the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own
witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is
before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the
bus.
Q And the incident happened before bunkhouse 56, is that not
correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you
please inform this Honorable Court if there was anv unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person
alighted there between Bunkhouse 53 and 54.

Q What happened when you delivered this passenger at this

particular place in Lepanto?
A When we reached the place, a passenger alighted and I
signalled my driver. When we stopped we went out because I saw
an umbrella about a split second and I signalled again the driver,
so the driver stopped and we went down and we saw Pedrito
Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when
you saw him lying down from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters
from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the
passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court
of Appeals that the bus was at full stop when the victim boarded the same is correct. They
further confirm the conclusion that the victim fell from the platform of the bus when it suddenly
accelerated forward and was run over by the rear right tires of the vehicle, as shown by the
physical evidence on where he was thereafter found in relation to the bus when it stopped.
Under such circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim
would ride on the bus, since the latter had supposedly not manifested his intention to board the
same, does not merit consideration. When the bus is not in motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the
driver and the conductor, every time the bus stops, to do no act that would have the effect of
increasing the peril to a passenger while he was attempting to board the same. The premature
acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by
boarding passengers resulting from the sudden starting up or jerking of their conveyances while
they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same
cannot be considered negligent under the circumstances. As clearly explained in the testimony
of the aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still
in slow motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar
which is moving slowly. 14 An ordinarily prudent person would have made the attempt board the
moving conveyance under the same or similar circumstances. The fact that passengers board

and alight from slowly moving vehicle is a matter of common experience both the driver and
conductor in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier passengers owes to its patrons extends
to persons boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to
observe extraordina diligence for the safety of the passengers transported by the according to
all the circumstances of each case. 16 A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost diligence very cautious
persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need
not make an express finding of fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By contract of carriage, the carrier
assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the carrier. This
is an exception to the general rule that negligence must be proved, and it is therefore incumbent
upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles
1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the
gravely injured victim immediately to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding and can even be stigmatized
as callous indifference. The evidence shows that after the accident the bus could have forthwith
turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk
70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of
the victim. The vacuous reason given by petitioners that it was the wife of the deceased who
caused the delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they
had to wait for about twenty minutes for Inocencia Cudiamat to get dressed
deserves scant consideration. It is rather scandalous and deplorable for a wife
whose husband is at the verge of dying to have the luxury of dressing herself up
for about twenty minutes before attending to help her distressed and helpless
husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was
to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but
the companion of the victim who informed his family thereof. 20 In fact, it was only after the
refrigerator was unloaded that one of the passengers thought of sending somebody to the
house of the victim, as shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place
to our house and when I went down and asked somebody to bring

down the refrigerator, I also asked somebody to call the family of

Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to
call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent
Court of Appeals in computing the actual damages based on the gross income of the victim.
The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the
entire earnings, but rather the loss of that portion of the earnings which the beneficiary would
have received. In other words, only net earnings, not gross earnings, are to be considered, that
is, the total of the earnings less expenses necessary in the creation of such earnings or income
and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly
and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or
compensatory damages, respondent court found that the deceased was 48 years old, in good
health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a
year. Using the gross annual income as the basis, and multiplying the same by 12 years, it
accordingly awarded P288,000. Applying the aforestated rule on computation based on the net
earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However,
in accordance with prevailing jurisprudence, the death indemnity is hereby increased to
P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of
respondent Court of Appeals are hereby AFFIRMED in all other respects.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

# Footnotes
1 Civil Case No. 584-R, Regional Trial Court, Branch 7, Baguio City.
2 Rollo, 51.
3 Penned by Justice Bonifacio A. Cacdac, Jr., with Justices Gloria C. Paras and
Serafin V.C. Guingona concurring.

4 Rollo, 26-27.
5 Ibid., 48.
6 Sabinosa vs. Court of Appeals, et al., 175 SCRA 552 (1989).
7 Original Record, 169; Judge Rodolfo D. Rodrigo, presiding.
8 Rollo, 25.
9 TSN, January 20, 1987, 26-27.
10 TSN, November 18, 1986, 3-4.
11 See Del Prado vs. Manila Electric Co., 52 Phil. 900 (1929).
12 14 Am. Jur. 2d 436.
13 TSN, January 20, 1987, 11.
14 Am. Jur. 2d 414.
15 Del Prado vs. Manila Electric Co., supra.
16 Art. 1733, Civil Code.
17 Art. 1755, Civil Code.
18 Sy vs. Malate Tajdcab & Garage, Inc., 102 Phil. 482 (1957); Batangas
Transportation Co. vs. Caguimbal, et al., 22 SCRA 171 (1968).
19 Rollo, 25.
20 TSN, June 20, 1986, 3-4.
21 TSN, January 20, 1987, 16.
22 Villa Rey Transit, Inc. vs. Court of Appeals, et al., 31 SCRA 511 (1970);
Davila, et al. vs. Philippine Airlines, Inc., 49 SCRA 497 (1973).
23 People vs. Sazon, 189 SCRA 700 (1990).

4.

KOREAN AIRLINES CO VS CA 234 SCRA 717 (1994)

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 114061 August 3, 1994

KOREAN AIRLINES CO., LTD., petitioner,
vs.
COURT OF APPEALS and JUANITO C. LAPUZ, respondents.
G.R. No. 113842 August 3, 1994
JUANITO C. LAPUZ, petitioner,
vs.
COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents.
M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd.
Camacho and Associates for Juanito Lapuz.

CRUZ, J.:
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment
in Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting
Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially,
he was "wait-listed," which meant that he could only be accommodated if any of the confirmed
passengers failed to show up at the airport before departure. When two of such passengers did
not appear, Lapuz and another person by the name of Perico were given the two unclaimed
seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the
check-in counter of KAL. He passed through the customs and immigration sections for routine
check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903.
Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of
the KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs, a
KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the
flight. When he later asked for another booking, his ticket was canceled by KAL. Consequently,
he was unable to report for his work in Saudi Arabia within the stipulated 2-week period and so
lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc.
coordinated with KAL for the departure of 30 contract workers, of whom only 21 were confirmed
and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being
informed that there was a possibility of having one or two seats becoming available, gave
priority to Perico, who was one of the supervisors of the hiring company in Saudi Arabia. The
other seat was won through lottery by Lapuz. However, only one seat became available and so,
pursuant to the earlier agreement that Perico was to be given priority, he alone was allowed to
board.
After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages,
disposing as follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby
rendered sentencing the defendant Korean Air Lines to pay plaintiff Juanito C.
Lapuz the following:
1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE
HUNDRED SIXTY (P272,160.00) PESOS as actual/compensatory damages,
with legal interest thereon from the date of the filing of the complaint until fully
paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for
attorney's fees; and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas
Recruiting Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are
likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:
WHEREFORE, in view of all the foregoing, the appealed judgment is
hereby AFFIRMED with the following modifications: the amount of actual
damages and compensatory damages is reduced to P60,000.00 and
defendant-appellant is hereby ordered to pay plaintiff-appellant the sum of
One Hundred Thousand Pesos (P100,000.00) by way of moral and
exemplary damages, at 6% interest per annum from the date of the filing
of the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration, which were both denied for
lack of merit. Hence, the present petitions for review which have been consolidated because of
the identity of the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds:

1. That the Court of Appeals erred in concluding that petitioner committed

a breach of contract of carriage notwithstanding lack of proper, competent
and sufficient evidence of the existence of such contract.
2. That the Court of Appeals erred in not according the proper evidentiary
weight to some evidence presented and the fact that private respondent
did not have any boarding pass to prove that he was allowed to board
and to prove that his airline ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby
passenger status of private respondent Lapuz was changed to a
confirmed status when his name was entered into the passenger
manifest.
4. That the Court of Appeals abused its discretion in awarding moral and
exemplary damages in the amount of P100,000.00 in favor of private
respondent notwithstanding its lack of basis and private respondent did
not state such amount in his complaint nor had private respondent proven
the said damages.
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of
petitioner against Pan Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal
interest on the judgment shall be computed from the filing of the
complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals
insofar as it modifies the award of damages; b) actual and compensatory damages in the sum
equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600 Saudi
rials at the current conversion rate plus the cost of baggage and personal belongings worth
P2,000 and the service fee of P3,000 paid to the recruiting agency, all with legal interest from
the filing of the complaint until fully paid; c) moral damages of not less than P1 million and
exemplary damages of not less than P500,000.00, both with interest at 6% per annum from the
filing of the complaint; and d) attorney's fees in the sum equivalent to 30% of the award of
damages.
It is evident that the issues raised in these petitions relate mainly to the correctness of the
factual findings of the Court of Appeals and the award of damages. The Court has consistently
affirmed that the findings of fact of the Court of Appeals and the other lower courts are as a rule
binding upon it, subject to certain exceptions. As nothing in the record indicates any of such
exceptions, the factual conclusions of the appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when
his name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance
through immigration and customs clearly shows that he had indeed been confirmed as a
passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage
between them when it failed to bring Lapuz to his destination.

This Court has held that a contract to transport passengers is different in kind and degree from
any other contractual relation. 3 The business of the carrier is mainly with the traveling public. It
invites people to avail themselves of the comforts and advantages it offers. The contract of air
carriage generates a relation attended with a public duty. Passengers have the right to be
treated by the carrier's employees with kindness, respect, courtesy and due consideration. They
are entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. 4 So it is that any discourteous conduct on the part of these
employees toward a passenger gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously informing
Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while
pointing at him, thus causing him embarrassment and public humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is not through the
entry of the name of a chance passenger in the passenger manifest nor the clearance from the
Commission on Immigration and Deportation, because they are merely means of facilitating the
boarding of a chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the departure
counter, passed through customs and immigration, boarded the shuttle bus and proceeded to
the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be
flown with him to Jeddah. The contract of carriage between him and KAL had already been
perfected when he was summarily and insolently prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding moral and
exemplary damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the defendant-appellant has
committed breach of contract of carriage in bad faith and in wanton,
disregard of plaintiff-appellant's rights as passenger laid the basis and
justification of an award for moral damages.
xxxx
In the instant case, we find that defendant-appellant Korean Air Lines
acted in a wanton, fraudulent, reckless, oppressive or malevolent manner
when it "bumped off" plaintiff-appellant on November 8, 1980, and in
addition treated him rudely and arrogantly as a "patay gutom na contract
worker fighting Korean Air Lines," which clearly shows malice and bad
faith, thus entitling plaintiff-appellant to moral damages.
xxxx
Considering that the plaintiff-appellant's entitlement to moral damages
has been fully established by oral and documentary evidence, exemplary
damages may be awarded. In fact, exemplary damages may be awarded,
even though not so expressly pleaded in the complaint (Kapoe vs. Masa,
134 SCRA 231). By the same token, to provide an example for the public

good, an award of exemplary damages is also proper (Armovit vs. Court

of Appeals, supra).
On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary
damages is inadequate is not acceptable either. His prayer for moral damages of not less than
P1 million and exemplary damages of not less than P500,000.00 is overblown.
The well-entrenched principle is that moral damages depend upon the discretion of the court
based on the circumstances of each case. 5 This discretion is limited by the principle that the
"amount awarded should not be palpably and scandalously excessive" as to indicate that it was
the result of prejudice or corruption on the part of the trial court. 6Damages are not intended to
enrich the complainant at the expense of the defendant. They are awarded only to alleviate the
moral suffering that the injured party had undergone by reason of the defendant's culpable
action. 7 There is no hard-and-fast rule in the determination of what would be a fair amount of
moral damages since each case must be governed by its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is not so serious or
extensive as to warrant an award of P1.5 million. The assessment of P100,000 as moral and
exemplary damages in his favor is, in our view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of
actual damages because it had not been assigned as an error by KAL. Not so. The rule is that
only errors specifically assigned and properly argued in the brief will be considered except
errors affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this
is not without qualification for, as the Court held in Vda. de Javellana vs. Court of Appeals: 9
. . . [T]he Court is clothed with ample authority to review matters, even if
they are not assigned as errors in their appeal, if it finds that their
consideration is necessary in arriving at a just decision of the case.
A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:
Issues, though not specifically raised in the pleading in the appellate
court, may, in the interest of justice, be properly considered by said court
in deciding a case, if they are questions raised in the trial court and are
matters of record having some bearing on the issue submitted which the
parties failed to raise or the lower court ignored.
The Court of Appeals was therefore justified in decreasing the award of actual damages even if
the issue was not assigned as an error by KAL. Consideration of this question was necessary
for the just and complete resolution of the present case. Furthermore, there was enough
evidence to warrant the reduction of the original award, as the challenged decision correctly
observed:
A perusal of the plaintiff-appellant's contract of employment shows that
the effectivity of the contract is for only one year, renewable every year
for five years. Although plaintiff-appellant intends to renew his contract,
such renewal will still be subject to his foreign employer. Plaintiffappellant had not yet started working with his foreign employer, hence,
there can be no basis as to whether his contract will be renewed by his

foreign employer or not. Thus, the damages representing the loss of

earnings of plaintiff-appellant in the renewal of the contract of
employment is at most speculative. Damages may not be awarded on the
basis of speculation or conjecture (Gachalian vs. Delim, 203 SCRA 126).
Hence, defendant-appellant's liability is limited to the one year contract
only. Plaintiff-appellant is, therefore, entitled only to his lost earnings for
one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount
of actual damages, representing lost earnings for five years prayed for in
the Complaint.
Plaintiff-appellant's contention that in computing his lost earnings, the
current rate of the Saudi Rial to the Philippine Peso at the time of
payment should be used, is untenable, considering that in his Complaint,
plaintiff-appellant has quantified in Philippine Peso his lost earnings for
five years.
We disagree with the respondent court, however, on the date when the legal interest should
commence to run. The rule is that the legal interest of six percent (6%) on the amounts
adjudged in favor of Lapuz should resume from the time of the rendition of the trial court's
decision instead of November 28, 1980, the date of the filing of the complaint.
On this matter, the Court has held:
If suit were for payment of a definite sum of money, the contention might
be tenable. However, if it is for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof,
interest should be from the date of the decision. 11
xxxx
The obligation to pay interest on a sum filed in a judgment exists from the
date of the sentence, when so declared; for until the net amount of the
debtor's liability has been determined, he cannot he considered
delinquent in the fulfillment of his obligation to pay the debt with interest
thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of
KAL's counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose responsibility
ended with the confirmation by KAL of Lapuz as its passenger in its Flight No. 903.
This is still another case of the maltreatment of our overseas contract workers, this time by the
airline supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice much in
seeking employment abroad, where they are deprived of the company of their loved ones, the
direct protection of our laws, and the comfort of our own native culture and way of life. This
Court shall exert every effort to vindicate their rights when they are abused and shall accord
them the commensurate reparation of their injuries consistent with their dignity and worth as
members of the working class.

WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal
interest on the damages awarded to private respondent should commence from the date of the
decision of the trial court on November 14, 1990. The parties shall bear their own costs.
SO ORDERED.
Davide, Jr., Quiason and Kapunan, JJ., concur.
Bellosillo, J., is on official leave.

#Footnotes

1 Penned by Judge Jesus O. Ibay; Rollo, pp. 32-46 (G. R. No. 114061).
2 Ynares-Santiago, J., ponente with Herrera and Ibay-Somera, JJ., concurring.
3 Zulueta vs. Pan American World Airways Inc., 43 SCRA 397; Pan American
orld Airways vs. IAC, 153 SCRA 521; Air France vs. Carrascoso, 18 SCRA 155.
4 Air France vs. Carrascoso, supra.
5 Prudenciado vs. Alliance Transport System, 148 SCRA 440; Pleno vs. CA, 161
SCRA 208; Mayo vs. People, 204 SCRA 642.
6 Siguenza vs. CA, 137 SCRA 570; Prudenciado vs. Alliance Transport
System, supra; Gellada vs. Warner Barnes & Co., 57 O. G. [4], 7358.
7 R & B Surety & Insurance Co., Inc. vs. IAC, 129 SCRA 736; Grand Union
Supermarket, Inc. vs. Espino, Jr., 94 SCRA 953.
8 Sec. 7, Rule 51 of the Rules of Court; Hernandez vs. Andal, 78 SCRA 196.
9 123 SCRA 799.
10 2 SCRA 873.
11 Rivera vs. Matute, 98 Phil. 516.
12 Montilla vs. Augustinian Corp., 25 Phil. 447.

5.

LRTA VS NAVIDAD GR NO 145804 2/6/2003

FIRST DIVISION

[G.R. No. 145804. February 6, 2003]

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE
NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and resolution of the Court of
Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No.
60720, entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et.
al., which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266,
Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a token (representing payment of the
fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced
to indicate how the fight started or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was
killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along
with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the
LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her
husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due
diligence in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of
presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin
was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the
plaintiffs the following:
a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
b) Moral damages of P50,000.00;
c) Attorneys fees of P20,000;
d) Costs of suit.
The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
The compulsory counterclaim of LRTA and Roman are likewise dismissed. [1]
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court
promulgated its now assailed decision exonerating Prudent from any liability for the death of
Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly:
WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from
any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the
Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay
jointly and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.[2]
The appellate court ratiocinated that while the deceased might not have then as yet boarded
the train, a contract of carriage theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted
fist blows upon the victim and the evidence merely established the fact of death of Navidad by
reason of his having been hit by the train owned and managed by the LRTA and operated at the
time by Roman. The appellate court faulted petitioners for their failure to present expert evidence
to establish the fact that the application of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration in its resolution of 10
October 2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate
court; viz:
I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE

FINDINGS OF FACTS BY THE TRIAL COURT
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO
ROMAN IS AN EMPLOYEE OF LRTA.[3]
Petitioners would contend that the appellate court ignored the evidence and the factual
findings of the trial court by holding them liable on the basis of a sweeping conclusion that the
presumption of negligence on the part of a common carrier was not overcome. Petitioners would
insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an
act of a stranger that could not have been foreseen or prevented. The LRTA would add that the
appellate courts conclusion on the existence of an employer-employee relationship between
Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro
Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of
carriage was deemed created from the moment Navidad paid the fare at the LRT station and
entered the premises of the latter, entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had correctly held LRTA and Roman liable for
the death of Navidad in failing to exercise extraordinary diligence imposed upon a common
carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business
and for reasons of public policy, is burdened with the duty of exercising utmost diligence in
ensuring the safety of passengers.[4] The Civil Code, governing the liability of a common carrier
for death of or injury to its passengers, provides:
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.
Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or of strangers, if the common carriers

employees through the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost diligence of
very cautious persons with due regard for all circumstances. [5] Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage.[6] The statutory provisions render a common carrier liable for death of or injury
to passengers (a) through the negligence or wilful acts of its employees or b) on account of
wilful acts or negligence of other passengers or of strangers if the common carriers
employees through the exercise of due diligence could have prevented or stopped the act
or omission.[7] In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and[8] by simple proof of injury, the passenger is relieved of the duty to still establish
the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to
prove that the injury is due to an unforeseen event or to force majeure. [9] In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners, according
to the appellate court, have failed to show, the presumption would be that it has been at fault, [10] an
exception from the general rule that negligence must be proved.[11]
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176[12] and related provisions, in conjunction with Article 2180,[13] of the Civil
Code. The premise, however, for the employers liability is negligence or fault on the part of the
employee. Once such fault is established, the employer can then be made liable on the basis of
the presumption juris tantum that the employer failed to exercise diligentissimi patris families in
the selection and supervision of its employees. The liability is primary and can only be negated
by showing due diligence in the selection and supervision of the employee, a factual matter that
has not been shown. Absent such a showing, one might ask further, how then must the liability of
the common carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194[14] of the Civil Code can well apply.[15]In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. [16] Stated differently, when
an act which constitutes a breach of contract would have itself constituted the source of a quasidelictual liability had no contract existed between the parties, the contract can be said to have
been breached by tort, thereby allowing the rules on tort to apply.[17]
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that there is nothing
to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its
employee, Escartin, has not been duly proven x x x. This finding of the appellate court is not
without substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the contractual

tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman;
thus, Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal
damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.[18] It is an established rule that nominal damages cannot coexist with compensatory damages.[19]
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b) petitioner
Rodolfo Roman is absolved from liability. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.

[1]

Rollo, p. 16.

[2]

Rollo, pp. 46-47.

[3]

Rollo, pp. 18-19.

[4]

Arada vs. Court of Appeals, 210 SCRA 624.

[5]

Philippine Airlines, Inc. vs. Court of Appeals, 226 SCRA 423.

[6]

Dangwa Transportation Co., Inc. vs. Court of Appeals, 202 SCRA 575.

[7]

Article 1763, Civil Code.

[8]

Gatchalian vs. Delim, 203 SCRA 126; Yobido vs. Court of Appeals, 281 SCRA 1; Landingin vs.
Pangasinan Transportation Co., 33 SCRA 284.
[9]

Mercado vs. Lira, 3 SCRA 124.

[10]

Article 1756, Civil Code.

[11]

Vda. De Abeto vs. Phil. Air Lines, Inc., 30 July 1982.

[12]

Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
[13]

Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts
or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
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.
The State is responsible in like manner when it acts through a special agent, but not when the
damage has been caused by the official to whom the task done properly pertains, in which case
what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused
by their pupils and students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
[14]

Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.

[15]

Air France vs. Carrascoso, 124 Phil. 722.

[16]

PSBA vs. CA, 205 SCRA 729.

[17]

Cangco vs. Manila Railroad, 38 Phil. 768; Manila Railroad vs. Compania Transatlantica, 38
Phil. 875.
[18]

Article 2221, Civil Code.

[19]

Medina, et al. vs. Cresencia, 99 Phil. 506.

COMMON CARRIERS (art 1731 1766 NCC)

DEFINITIONS OF DOMESTIC SHIPPING UNDER RA NO 9295 AND OF
SEC 3: (a) "Domestic shipping" shall mean the transport of passenger or cargo, or both, by
ships duly registered and licensed under Philippine law to engage in trade and commerce
between Philippine ports and within Philippine territorial or internal waters, for hire or
compensation, with general or limited clientele, whether permanent occasional or incidental,
with or without fixed routes, and done for contractual or commercial purposes;
PUBLIC SERVICE UNDER COMMONWEALTH ACT 146
<TO LAZY TO LOOK FOR IT>

COMMON CARRIAGE
1.

DE GUZMAN VS CA NO L-47822 12/22/19

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.

FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would
load his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent
for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati,
Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on
1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons
were loaded on a truck driven by respondent himself, while 600 cartons were placed on board
the other truck which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere along
the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of
First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent,
being a common carrier, and having failed to exercise the extraordinary diligence required of
him by the law, should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he
could not be held responsible for the value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services to
the public; in not exempting him from liability on the ground of force majeure; and in ordering
him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner
came to this Court by way of a Petition for Review assigning as errors the following conclusions
of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under
the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733
deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:

... every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent'sprincipal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged his customers
a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate
of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers. That liability arises the moment a person or firm acts as
a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary certificate of
public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business
of a common carrier impinges directly and intimately upon the safety and well being and
property of those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of those
who utilize their services and the law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to
a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as
well as of passengers. The specific import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article 1733, "further expressed in Articles
1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:

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

calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
alleged in the instant case the hijacking of the carrier's truck does not fall within any of the
five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the
hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other
words, that the private respondent as common carrier is presumed to have been at fault or to
have acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to ride with the
truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver
and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking
or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;

(6) that the common carrier's liability for acts committed by

thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment
used in the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to
divest or to diminish such responsibility even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and carrying away
with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers
not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers against all risks
of travel and of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of
an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Footnotes
1 Rollo, p. 14.
2 Article 1733, Civil Code.
3 Rollo, p. 22.
4 The evidence of the prosecution did not show that more than three (3) of the
five (5) hold-uppers were armed. Thus, the existence of a "band" within the
technical meaning of Article 306 of the Revised Penal Code, was not affirmatively
proved by the prosecution.

2.

PLANTERS PRODUCTS INC VS CA 226SCRA 476 (1993)

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA,respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a
private one as to negate the civil law presumption of negligence in case of loss or damage to its
cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which
the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by
private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by
the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charterparty starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1,
2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and
27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant
to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from
National Cargo Bureau inspector or substitute appointed by charterers for his

account certifying the vessel's readiness to receive cargo spaces. The vessel's
hold to be properly swept, cleaned and dried at the vessel's expense and the
vessel to be presented clean for use in bulk to the satisfaction of the inspector
before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout
the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its
steelbodied dump trucks which were parked alongside the berth, using metal scoops attached
to the ship, pursuant to the terms and conditions of the charter-partly (which provided for an
F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf.
Midway to the warehouse, the trucks were made to pass through a weighing scale where they
were individually weighed for the purpose of ascertaining the net weight of the cargo. The port
area was windy, certain portions of the route to the warehouse were sandy and the weather was
variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse
was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the
dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI
sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July
12th, 14th and 18th).10 A private marine and cargo surveyor, Cargo Superintendents Company
Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft
readings of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to
the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and
that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same
results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and
about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship
Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost
of the alleged shortage in the goods shipped and the diminution in value of that portion said to
have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was denied by them because they "had
nothing to do with the discharge of the shipment." 14Hence, on 18 July 1975, PPI filed an action
for damages with the Court of First Instance of Manila. The defendant carrier argued that the
strict public policy governing common carriers does not apply to them because they have
become private carriers by reason of the provisions of the charter-party. The court a

quo however sustained the claim of the plaintiff against the defendant carrier for the value of the
goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that
a shipper has to do in a suit to recover for loss or damage is to show receipt by
the carrier of the goods and to delivery by it of less than what it received. After
that, the burden of proving that the loss or damage was due to any of the causes
which exempt him from liability is shipted to the carrier, common or private he
may be. Even if the provisions of the charter-party aforequoted are deemed valid,
and the defendants considered private carriers, it was still incumbent upon them
to prove that the shortage or contamination sustained by the cargo is attributable
to the fault or negligence on the part of the shipper or consignee in the loading,
stowing, trimming and discharge of the cargo. This they failed to do. By this
omission, coupled with their failure to destroy the presumption of negligence
against them, the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case
of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that
the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and
not a common carrier by reason of the time charterer-party. Accordingly, the Civil Code
provisions on common carriers which set forth a presumption of negligence do not find
application in the case at bar. Thus
. . . In the absence of such presumption, it was incumbent upon the plaintiffappellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to show
in a satisfactory manner the facts upon which he bases his claim, the defendant
is under no obligation to prove his exception or defense (Moran, Commentaries
on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis
of its cause of action, i.e. the alleged negligence of defendant carrier. It appears
that the plaintiff was under the impression that it did not have to establish
defendant's negligence. Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing that defendant
carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not
whether the presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues that since the possession and
control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the
appellate court in not applying the presumption of negligence against respondent carrier, and

instead shifting the onus probandi on the shipper to show want of due deligence on the part of
the carrier, when he was not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case
was able to prove that he had exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This
being so, we find it fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; 20 a contract of affreightment by
which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration of the payment of
freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or as a whole, to carry goods for others;
and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to
the charterer with a transfer to him of its entire command and possession and consequent
control over its navigation, including the master and the crew, who are his servants. Contract of
affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed
period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both
cases, the charter-party provides for the hire of vessel only, either for a determinate period of
time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the
wages of the master and the crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves out
as ready to engage in carrying goods or transporting passengers or both for compensation as a
public employment and not as a casual occupation. The distinction between a "common or
public carrier" and a "private or special carrier" lies in the character of the business, such that if
the undertaking is a single transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of
their business, should observe extraordinary diligence in the vigilance over the goods they
carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the
goods, common carriers are presumed to have been at fault or to have acted negligently, and
the burden of proving otherwise rests on them. 26 On the contrary, no such presumption applies
to private carriers, for whosoever alleges damage to or deterioration of the goods carried has
the onus of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner chartered
the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ
of the shipowner and therefore continued to be under its direct supervision and control. Hardly
then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring
for his cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of the decks,

the determination of the course of the voyage and other technical incidents of maritime
navigation were all consigned to the officers and crew who were screened, chosen and hired by
the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited to the
ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes
both the vessel and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is concerned.
Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship,
although her holds may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the
validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to
the negligence of its agent, and not the effects of a special charter on common carriers. At any
rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo
is not a common carrier, 29 does not find application in our jurisdiction, for we have observed
that the growing concern for safety in the transportation of passengers and /or carriage of goods
by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules
governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30
As a matter of principle, it is difficult to find a valid distinction between cases in
which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and control
of her, the case is different; the shipowner is not then a carrier. But where her
services only are let, the same grounds for imposing a strict responsibility exist,
whether he is employed by one or many. The master and the crew are in each
case his servants, the freighter in each case is usually without any representative
on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or damage
while the same was in the possession, actual or constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to prove that he has exercised extraordinary diligence
required by law or that the loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977
before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned,
dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the
steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers
of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and

tightly sealed while the ship was in transit as the weight of the steel covers made it impossible
for a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing
the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores,
and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates
who were overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant carrier was not negligent
in performing its obligations. Particularly, the following testimonies of plaintiffappellee's own witnesses clearly show absence of negligence by the defendant
carrier; that the hull of the vessel at the time of the discharge of the cargo was
sealed and nobody could open the same except in the presence of the owner of
the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that
the cover of the hatches was made of steel and it was overlaid with tarpaulins,
three layers of tarpaulins and therefore their contents were protected from the
weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals
would have to be broken, all the seals were found to be intact (TSN, 20 July
1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of it
as a public carrier began from the time the cargo was unconditionally placed in its charge after
the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the
vessel reached its destination and its hull was reexamined by the consignee, but prior to
unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum
to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free
from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the
cargo resulting from improper stowage only when the stowing is done by stevedores employed
by him, and therefore under his control and supervision, not when the same is done by the
consignee or stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the
loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects
in the packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the
shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is
proved, as against him, that they arose through his negligence or by reason of his having failed
to take the precautions which usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical
engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting
mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also
contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and
ammonia do not normally evaporate even on a long voyage, provided that the temperature
inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added
that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during
such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or
"tolerable." The primary cause of these spillages is the clamped shell which does not seal very
tightly. Also, the wind tends to blow away some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an
extremely high temperature in its place of storage, or when it comes in contact with water. When
Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged
portion which is in liquid form still remains potent and usable although no longer saleable in its
original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various pieces
of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to
seep into the vessel's holds during the voyage since the hull of the vessel was in good condition
and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all
respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination
of the cargo, it was more likely to have occurred while the same was being transported from the
ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He
explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was
just an approximation or estimate made by them after the fertilizer was discharged from the
vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her
cargo. It rained from time to time at the harbor area while the cargo was being discharged
according to the supply officer of PPI, who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of
the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character
of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other hand, no proof was adduced by
the petitioner showing that the carrier was remise in the exercise of due diligence in order to
minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of
the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
Davide, Jr. and Quiason, JJ., concur.
Cruz, J., took no part.
Grio-Aquino, J., is on leave.

# Footnotes
1 A charter-party is a contract by which an entire ship or some principal part
thereof, is let by the owner to another person for a specified time or use (70 Am
Jur 2d,
p. 580, citing Ward v. Thompson, 63 US 330, 16 L Ed 249; a contract in which
the owner of a vessel lets for consideration the whole or part thereof for the
conveyance of goods and/or passengers on a particular voyage to one or more
places or until the expiration of a specified time and surrender unto the lessee or
charterer the control, by vesting upon the latter the right to appoint the captain,
officers and members of the crew, of the vessel leased or chartered during the
duration of the contract (R.A. 913).
2 The Baltic and International Maritime Uniform General Charter (As Revised
1922 and 1976), Including "F.I.O.S." Alternative, etc., Code Name: "GENCON"
Adopted by the Documentary Committee of the General Council of British
Shipping, London, and the Documentary Committee of the Japan Shipping
Exchange, Inc., Tokyo.
3 Rollo, pp. 105, 128.
4 Although par. 40 of the Rider (Description of "Sun Plum") states that the vessel
has 3 holds/3 hatches, Hatch No. 4 which usually was not used for cargo, was
converted for such purpose. The time sheet for 12 July 1974 shows that Hatch
No. 4 was first to be discharge of cargo. This was also testified by the master of
the vessel, Captain Lee Tae Bo.
5 Id., p. 129.
6 Under the terms and conditions of the charter-party, F.I.O.S. (Free In and Out
Shipping/Stevedoring) means that the shipper takes care of the loading, while the
unloading is the sole responsibility of the consignee (Rollo, pp. 128, 184).

7 TSN, 20 July 1977, p. 17.

8 TSN, 20 July 1977, p. 18.
9 Rollo, p. 130.
10 Id., p. 129; ADDENDUM No. 4 dated 17 May 1974 provides: "The cargo to be
discharged at the average rate of 1,000 metric tons per day of 24 hours weather
working days, Sundays, holidays excluded unless used, assuming four (4) sets of
vessel's gear simultaneously workable a vessel's bearthing side."
11 TSN, 5 April 1978, pp. 7-8. "Drop survey" is the drop of the vessel showing
certain meters or centimeters of the vessel. In the ship there is a draft from one
meter upward. When the vessel arrives, (CSCI) conducted initial draft survey
before discharging, together with the ship's representative by getting the draft
forward and aft. They divided it by 2 to get the mean draft and the average draft.
After getting the mean draft, they got the displacement scale of the vessel to
show certain tons of the ship, then deducted the non-cargo weight, like the fuel
oil, the freshwater. Finally, the total load of the ship is taken. After discharging,
CSCI went over same procedure to get the weight of the vessel. These figures
were then subtracted from the total load of the ships to get the weight of the
cargo.
12 Id., p. 106.
13 Id., pp. 49, 68.
14 TSN, 28 Aug. 1979, pp. 9-10.
15 Id., p. 68 "Planters Products, Inc. v. Soriamont Steamship Agencies, et al.,
"Civil Case No. 98623, CFI of Manila, Br. 27, decision penned by Judge E.L.
Peralta, 24 March 1980.
16 The Court of Appeals (Twelfth Division) rendered its decision on 13 August
1991 in CA-G.R. CV No. 02736 entitled "Planters Products, Inc. vs. Kyosei Kisen
Kabushiki Kaisha & Soriamont Steamship Agencies." Decision penned by Justice
Alfredo L. Benipayo, concurred in by Justices Manuel C. Herrera and Cancio C.
Garcia, Rollo, pp. 13-24.
17 No. L-25599, 4 April 1968, 23 SCRA 24.
18 Rollo, p. 109.
19 Rollo, pp. 8 & 9.
20 Charter Partis; Charters of Demise and Contracts of Affreightment; 70 Am Jur
2d, p. 580; citing Ward v. Thompson, 63 US 330, 16 L d 249; E.R. Harvey Ivamy,
Carriage of Goods by Sea, 13th Ed., Chap. 2, pp. 5, 8-10. The term is also
defined under R.A. No. 913, known as "An Act Defining 'Lease'or 'Charter' of

Vessels" as to mean a "contract in which the owner of a vessel lets for

consideration the whole or principal part thereof for the conveyance of goods
and/or passengers on a particular voyage to one or more places or until the
expiration of a specified time and surrenders unto the lessee or charterer the
control, by vesting upon the latter the right to appoint the captain, officers and
members of the crew, of the vessel leased or chartered during the duration of the
contract."
21 Bouvier's Law Dictionary, Third Rev., Vol. I, p. 470.
22 Id., pp. 581-582.
23 Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water or air, for compensation, offering their services to the public.
24 See De Guzman v. Court of Appeals, No. L-47822, 22 December 1988, 168
SCRA 612; U.S. v. Quinajon, No. 8686, 30 July 1915.
25 Art. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in Arts. 1734, 1735 and 1745, Nos. 5, 6 and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in Arts. 1755 and 1756.
26 Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of
the preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in article 1733.
27 E.R. Harvey Ivamy, pp. 8-10.
28 70 Am Jur 2nd, P, 608 S 238, citing Grace v. Palmer, 21 US 605, 5 L Ed 696,
and Kerry v. Pacific Marine Co., 12 CAL 564, 54, p. 89.
29 30 C.J.S., pp. 269-693.
30 British Shipping Laws, Vol. 2, "Carver's Carriage by Sea," By Raoul
Colinvaux, Vol. 1, 12th Ed., Published by Stevens & Sons Limited of London,
Printed in Great Britain, 1971.
31 See Ynchausti Steamship Co. v. Dexter, No. 15652, 41 Phil. 289, 14 Dec.
1920; Mirasol v. Robert Dollar, Co., No. 29721, 53 Phil. 124, 27 March 1929.
32 Deposition of Capt. Lee Tae Bo, Exh. "4", pp. 22-23.

33 TSN, 20 July 1977, p. 14.

34 TSN, 5 April 1978, pp. 24-25.
35 See Note 6.
36 70 Am Jur 2d, p. 603 S 230, citing Oxford Paper Co. v. The Nidarholm, 282
US 681, 75L ed 614, 51 S Ct 266.
37 Art. 361, par. 4, Code of Commerce.
38 Art. 362, par. 1, id.

3.

BASCOS VS CA GR NO 101089 4/7/1993

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON
CARRIER. Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their services to
the public." The test to determine a common carrier is "whether the given undertaking is a part
of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." . . . The holding of the
Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil
Code, it held thus: "The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its
services to the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think
that Article 1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed
to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to

overcome the presumption . . . The presumption of negligence was raised against petitioner. It
was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need
not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER
ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following
or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . .
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the
same case, the Supreme Court also held that: "Under Article 1745 (6) above, a common carrier
is held responsible and will not be allowed to divest or to diminish such responsibility even
for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted
"with grave of irresistible threat, violence of force," We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence
or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case,
petitioner herself has made the admission that she was in the trucking business, offering her
trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS
WITNESSES. While the affidavit of Juanito Morden, the truck helper in the hijacked truck,
was presented as evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are
available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT
TO BE. Granting that the said evidence were not self-serving, the same were not sufficient to
prove that the contract was one of lease. It must be understood that a contract is what the law
defines it to be and not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO
A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiffappellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS

TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is

quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is
hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into
a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to
haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the
warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to
transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port
Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the
said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount
of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking
and non-delivery or damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually,
Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment
4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was
supported by an affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court,
whereby a writ of preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do
so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the
cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability
to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering
the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to
be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's
judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors;
to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE
OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT
COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT
ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE
CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL
COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY
ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE
MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted
in her answer that she did business under the name A.M. Bascos Trucking and that said
admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs
that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's
decision that petitioner was a common carrier, Moreover, both courts appreciated the following
pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck
driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean

meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper,
Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier,
she alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the
contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9
She further averred that Jesus Bascos confirmed in his testimony his statement that the contract
was a lease contract. 10 She also stated that: she was not catering to the general public. Thus,
in her answer to the amended complaint, she said that she does business under the same style
of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to
the general public but to a few customers only in view of the fact that it is only a small business.
11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business transacted." 12 In this case, petitioner herself has made the admission
that she was in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services
only to a select group of people and because the private respondents, plaintiffs in the lower
court, did not object to the presentation of affidavits by petitioner where the transaction was
referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is
instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained from
making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts
have dismissed them as self-serving and petitioner contests the conclusion. We are bound by
the appellate court's factual conclusions. Yet, granting that the said evidence were not selfserving, the same were not sufficient to prove that the contract was one of lease. It must be
understood that a contract is what the law defines it to be and not what it is called by the

contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due
to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances
when the presumption of negligence does not attach and these instances are enumerated in
Article 1734. 19 In those cases where the presumption is applied, the common carrier must
prove that it exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed
to divest or to diminish such responsibility even for acts of strangers like thieves or robbers
except where such thieves or robbers in fact acted with grave or irresistible threat, violence or
force. We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus
Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the
Court of Appeals have concluded that these affidavits were not enough to overcome the
presumption. Petitioner's affidavit about the hijacking was based on what had been told her by
Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of
objection on the part of private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for
review on certiorari, We are not to determine the probative value of evidence but to resolve
questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took
place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a witness as could be gleaned from the contents
of the petition. Affidavits are not considered the best evidence if the affiants are available as

witnesses. 25 The subsequent filing of the information for carnapping and robbery against the
accused named in said affidavits did not necessarily mean that the contents of the affidavits
were true because they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion, private respondent need not introduce any
evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary
diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find
no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.
Footnotes
** July 17, 1991; penned by Associate Justice Nicolas P. Lapea, Jr., and concurred in by
Associate Justices Ricardo L. Pronove, Jr., and Consuelo V. Santiago.
1. Rollo, p. 59.
2. Annex "K" of Memorandum for Petitioner; Rollo, p. 229.
3. Ibid.
4. Civil Case No. 49965; Regional Trial Court, Quezon City, Branch 83.
5. Annex "L" of Memorandum for Petitioner; Rollo, p. 230.
*** Civil Case No. 49965, October 12, 1989. Penned by Judge Reynaldo Roura.
6. Rollo, p. 217.
7. Rollo, p. 16.
8. Petition, pp. 12-13; Rollo, pp. 20-21; Annex "G" of Memorandum for Petitioner; rollo, p. 225.
9. Petition, pp. 13-14; Rollo, pp. 21-22.
10. Ibid.; Rollo, p. 21; Annex "E" of Memorandum for Petitioner; Rollo, p. 222.
11. Court of Appeals Decision, p. 51; Rollo, p. 55.

12. 4 AGBAYANI, COMMENTARIES AND JURISPRUDENCE ON THE COMMERCIAL LAWS

OF THE PHILIPPINES, 5 (1987).
13. Solivio vs. Court of Appeals, 182 SCRA 119 (1990).
14. 168 SCRA 612 (1988).
15. Schmid and Oberly, Inc. vs. RJL Martinez Fishing Corp., 166 SCRA 493 (1988).
16. Imperial Victory Shipping Agency vs. NLRC, 200 SCRA 178 (1991).
17. "Art. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each case.
Such extraordinary diligence in 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."
18. "Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as required in article 1733."
19. "Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority."
20. Supra, note 14.
21. Ibid., p. 621.
22. Annex "G" of Memorandum for Petitioner; Rollo, p. 225; and Juanito Morden's affidavit
Annex "H" of Memorandum for Petitioner; Rollo, p. 226.
23. Annex "E" of Memorandum for Petitioner; Rollo, p. 222.
24. Annex "H" of Memorandum for Petitioner; Rollo, p. 226.
25. Ayco vs. Fernandez, 195 SCRA 328 (1991).

4.

FABRE JR VS CA 259 SCRA 426 (1996)

SECOND DIVISION

[G.R. No. 111127. July 26, 1996]

MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs. COURT OF
APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI
CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD
BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD
TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ,
JULIUS CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE
SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES,
MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS
PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO,
ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals [1] in CA-GR
No. 28245, dated September 30, 1992, which affirmed with modification the decision of the
Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay
damages to private respondent Amyline Antonio, and its resolution which denied petitioners
motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school children which
they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after
trying him out for two weeks. His job was to take school children to and from the St. Scholasticas
College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc.
(WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to La Union and back in consideration of which private respondent paid
petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did not leave the Tropical
Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in the evening. Petitioner Porfirio
Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge
at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being
his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as siete. The road was slippery because

it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid
to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a
full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it
had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the
floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It took
three persons to safely remove her from this position. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he
was not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road. He said that he saw the
curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers
per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis
of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later
filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for
the damage to the latters fence. On the basis of Escanos affidavit of desistance the case against
petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she underwent and
adduced evidence regarding the cost of her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay,
where she was given sedatives. An x-ray was taken and the damage to her spine was determined
to be too severe to be treated there. She was therefore brought to Manila, first to the Philippine
General Hospital and later to the Makati Medical Center where she underwent an operation to
correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the defendants
which ultimately resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for damages, the
Court is therefore not in a position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants
Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of
the Civil Code of the Philippines and said defendants are ordered to pay jointly and severally to
the plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline

Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio
but dismissed it with respect to the other plaintiffs on the ground that they failed to prove their
respective claims. The Court of Appeals modified the award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise
due care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively
negligent. Hence, this petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES
SUFFERED BY PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP
TO WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called Suaco, earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual
employees do not have security of tenure, the award of P600,000.00, considering Amyline
Antonios earnings, is without factual basis as there is no assurance that she would be regularly
earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory
that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory
of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held,
for although the relation of passenger and carrier is contractual both in origin and nature,

nevertheless the act that breaks the contract may be also a tort. [2] In either case, the question is
whether the bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned
the bus, failed to exercise the diligence of a good father of the family in the selection and
supervision of their employee is fully supported by the evidence on record. These factual findings
of the two courts we regard as final and conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark. He averred these facts to justify his failure
to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at
the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15
to 30 meters ahead.[3] By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabils first one outside of Manila, Cabil
should have driven his vehicle at a moderate speed. There is testimony[4] that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it was
dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed
was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly
negligent and should be held liable for the injuries suffered by private respondent Amyline
Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervision of
their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional drivers license. The employer should also examine the applicant for his
qualifications, experience and record of service.[5] Due diligence in supervision, on the other hand,
requires the formulation of rules and regulations for the guidance of employees and the issuance
of proper instructions as well as actual implementation and monitoring of consistent compliance
with the rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did
not consider the fact that Cabil had been driving for school children only, from their homes to the
St. Scholasticas College in Metro Manila.[7] They had hired him only after a two-week
apprenticeship. They had tested him for certain matters, such as whether he could remember the
names of the children he would be taking to school, which were irrelevant to his qualification to
drive on a long distance travel, especially considering that the trip to La Union was his first.The
existence of hiring procedures and supervisory policies cannot be casually invoked to overturn
the presumption of negligence on the part of an employer.[8]
Petitioners argue that they are not liable because (1) an earlier departure (made impossible
by the congregations delayed meeting) could have averted the mishap and (2) under the contract,
the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold
water. The hour of departure had not been fixed. Even if it had been, the delay did not bear directly
on the cause of the accident. With respect to the second contention, it was held in an early case
that:
[A] person who hires a public automobile and gives the driver directions as to the place to which
he wishes to be conveyed, but exercises no other control over the conduct of the driver, is not
responsible for acts of negligence of the latter or prevented from recovering for injuries suffered

from a collision between the automobile and a train, caused by the negligence either of the
locomotive engineer or the automobile driver.[9]
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres,
did not have to be engaged in the business of public transportation for the provisions of the Civil
Code on common carriers to apply to them. As this Court has held:[10]
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity
(in local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e., the general community
or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making such
distinctions.
As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof
that they exercised the diligence of a good father of the family in the selection and supervision of
their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence
or wilful acts of the formers employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify
finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil
Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think
the Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. [11] To the contrary, the award of
P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work again
has not been foreclosed. In fact she testified that one of her previous employers had expressed
willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court of
Appeals do not sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for quasi
delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral
damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract
of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since

Cabils gross negligence amounted to bad faith.[12] Amyline Antonios testimony, as well as the
testimonies of her father and co-passengers, fully establish the physical suffering and mental
anguish she endured as a result of the injuries caused by petitioners negligence.
The award of exemplary damages and attorneys fees was also properly made. However, for
the same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and reduce
the award of attorneys fees, inasmuch as private respondents, in whose favor the awards were
made, have not appealed.[13]
As above stated, the decision of the Court of Appeals can be sustained either on the theory
of quasi delict or on that of breach of contract. The question is whether, as the two courts below
held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and
severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals,[14] on facts similar to those in this case, this Court held the bus company and the driver
jointly and severally liable for damages for injuries suffered by a passenger.Again, in Bachelor
Express, Inc. v. Court of Appeals [15] a driver found negligent in failing to stop the bus in order to
let off passengers when a fellow passenger ran amuck, as a result of which the passengers
jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable
with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the
bus on which plaintiff was riding concurred with the negligence of a third party who was the driver
of another vehicle, thus causing an accident. In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court,[17] and Metro Manila Transit Corporation v. Court of
Appeals,[18] the bus company, its driver, the operator of the other vehicle and the driver of the
vehicle were jointly and severally held liable to the injured passenger or the latters heirs. The
basis of this allocation of liability was explained in Viluan v. Court of Appeals,[19] thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from contract
while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as
1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a
passenger due to the negligence of the driver of the bus on which he was riding and of the
driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and
severally liable for damages. Some members of the Court, though, are of the view that under
the circumstances they are liable on quasi-delict.[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this Court exonerated
the jeepney driver from liability to the injured passengers and their families while holding the
owners of the jeepney jointly and severally liable, but that is because that case was expressly
tried and decided exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and
Carreon [the jeepney owners] were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held
jointly and severally liable with the carrier in case of breach of the contract of carriage. The
rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier
and the passenger, and in the event of contractual liability, the carrier is exclusively responsible
therefore to the passenger, even if such breach be due to the negligence of his driver (see
Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . .
.[22]

As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake
out their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them to allege alternative causes of action
and join as many parties as may be liable on such causes of action [23] so long as private
respondent and her co-plaintiffs do not recover twice for the same injury. What is clear from the
cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus
justifying the holding that the carrier and the driver were jointly and severally liable because their
separate and distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as
to the award of damages. Petitioners are ORDERED to PAY jointly and severally the private
respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

* *

The name of petitioner Engracio Fabre, Jr.s wife cannot be ascertained from the record. Hence
she is unnamed.*
[1]

Per Justice Jainal D. Rasul and concurred in by Justices Emeterio C. Cui and Segundino G.
Chua.
[2]

Air France v. Carrascoso, 18 SCRA 155, 168 (1966). Accord, Singson v. Bank of the Philippine
Islands, 23 SCRA 1117, 1119 (1968).
[3]

Testimony of Porfirio Cabil, TSN, p. 14, Oct. 26, 1987.

[4]

Testimony of Pat. Chito Esmenda, TSN, pp. 37-38, Sept. 12, 1985.

[5]

Metro Manila Transit Corp. v. Court of Appeals, 223 SCRA 521 (1993); Campo v. Camarote,
100 Phil. 459 (1956).
[6]

Filamer Christian Institute v. Intermediate Appellate Court, 212 SCRA 637 (1992).

[7]

Testimony of Porfirio Cabil, TSN, p. 7, Oct. 26, 1987.

[8]

Supra note 5.

[9]

Yamada v. Manila Railroad Co., 33 Phil. 8, 14 (1915).

[10]

De Guzman v. Court of Appeals, 168 SCRA 612, 618 (1988); Bascos v. Court of Appeals, 221
SCRA 318 (1993).

[11]

Philippine Airlines v. Court of Appeals, 226 SCRA 423 (1993).

[12]

Gatchalian v. Delim, 203 SCRA 126 (1991); Prudenciado v. Alliance Transport System, Inc.,
148 SCRA 440 (1987).
[13]

La Mallorca v. Court of Appeals, 175 SCRA 739 (1989).

[14]

202 SCRA 574 (1991).

[15]

188 SCRA 216 (1990).

[16]

17 SCRA 224 (1966).

[17]

167 SCRA 379 (1988).

[18]

223 SCRA 521 (1993).

[19]

16 SCRA 742 (1966).

[20]

Id., at 747.

[21]

189 SCRA 158 (1988).

[22]

Id., at 172-173.

[23]

La Mallorca v. Court of Appeals, 17 SCRA 739 (1966).

Rule 8, 2 provides: Alternative causes of action or defenses. A party may set forth two or more
statements of a claim or defense alternatively or hypothetically, either in one cause of action or
defense or in separate causes of action or defenses. When two or more statements are made in
the alternative and one of them if made independently would be sufficient, the pleading is not
made insufficient by the insufficiency of one or more of the alternative statements.
Rule 3, 6 provides: Permissive joinder of parties. - All persons in whom or against whom any right
to relief in respect to or arising out of the same transaction or series of transactions is alleged to
exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these
rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or
fact common to all such plaintiffs or to all such defendants may arise in the action; but the court
may make such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may have no
interest.

5.

FIRST PHIL INDUSTRIAL CORP VS CA 300 SCRA 661 (1998)

SECOND DIVISION

[G.R. No. 125948. December 29, 1998]

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS,

HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C.
ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court
of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a
business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
1967[1] and renewed by the Energy Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor
of Batangas City. However, before the mayor's permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993
pursuant to the Local Government Code.[3] The respondent City Treasurer assessed a business
tax on the petitioner amounting to P956,076.04 payable in four installments based on the gross
receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted
to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in
the amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government concession
granted under the Petroleum Act. It is engaged in the business of transporting petroleum
products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As
such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose
tax 'on contractors and other independent contractors' under Section 143, Paragraph (e) of the
Local Government Code does not include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee authorized under Section
147 of the Local Government Code. The said section limits the imposition of fees and charges

on business to such amounts as may be commensurate to the cost of regulation, inspection,

and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited provision. The amount
of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation,
inspection and licensing. The fee is already a revenue raising measure, and not a mere
regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint[6] for tax refund with prayer for a writ of preliminary injunction against respondents City
of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts
violates Section 133 of the Local Government Code; (2) the authority of cities to impose and
collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141
(e) and 151 does not include the authority to collect such taxes on transportation contractors for,
as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and,
(3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting
the immediate refund of the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies only to
"transportation contractors and persons engaged in the transportation by hire and common
carriers by air, land and water." Respondents assert that pipelines are not included in the term
"common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the
like. Respondents further posit that the term "common carrier" under the said code pertains to the
mode or manner by which a product is delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in
this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax
exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the
government. Exemption may therefore be granted only by clear and unequivocal provisions of
law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A)
whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither
said law nor the deed of concession grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the
Local Tax Code. Such being the situation obtained in this case (exemption being unclear and
equivocal) resort to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common
carriers so as not to overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a special carrier extending its

services and facilities to a single specific or "special customer" under a

"special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective
local autonomy to local governments than the previous enactments, to
make them economically and financially viable to serve the people and
discharge their functions with a concomitant obligation to accept certain
devolution of powers, x x x So, consistent with this policy even franchise
grantees are taxed (Sec. 137) and contractors are also taxed under Sec.
143 (e) and 151 of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition for review. On
February 27, 1995, we referred the case to the respondent Court of Appeals for consideration
and adjudication.[10]On November 29, 1995, the respondent court rendered a decision [11] affirming
the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was
denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996.[13] Petitioner moved for a reconsideration which was granted by this Court in
a Resolution[14]of January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner
is not a common carrier or a transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation
of goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and
over his established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry for all persons indifferently, that
is, to all persons who choose to employ its services, and transports the goods by land and for

compensation. The fact that petitioner has a limited clientele does not exclude it from the definition
of a common carrier. In De Guzman vs. Court of Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the 'general public,' i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained from making such
distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide
neatly with the notion of 'public service,' under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, 'public service'
includes:
'every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock,
ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services.' "(Underscoring
Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It does
not provide that the transportation of the passengers or goods should be by motor vehicle. In fact,
in the United States, oil pipe line operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by him, but is
obligated to utilize the remaining transportation capacity pro rata for the transportation of such
other petroleum as may be offered by others for transport, and to charge without discrimination
such rates as may have been approved by the Secretary of Agriculture and Natural Resources."

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x x and everything
relating to the manufacture, refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting
petroleum products, it is considered a common carrier under Republic Act No. 387 x x x. Such
being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 1378, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in
the transportation of passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local Government Code
of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131].
Common Limitations on the Taxing Powers of Local Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be
one of those being deemed to be exempted from the taxing powers of the local government
units. May we know the reason why the transportation business is being excluded from
the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131),
line 16, paragraph 5. It states that local government units may not impose taxes on the business
of transportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there
that provinces have the power to impose a tax on business enjoying a franchise at the rate of
not more than one-half of 1 percent of the gross annual receipts. So, transportation contractors
who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local
government units on the carrier business. Local government units may impose taxes on top
of what is already being imposed by the National Internal Revenue Code which is the so-called
"common carriers tax." We do not want a duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific
rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the taxing power of the local government
unit the imposition of business tax against common carriers is to prevent a duplication of the socalled "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. [19] To tax petitioner again on its gross
receipts in its transportation of petroleum business would defeat the purpose of the Local
Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
Bellosillo, (Chairman), Puno, and Mendoza, JJ., concur.

[1]

Rollo, pp. 90-94.

[2]

Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing the Pipeline
Concession of petitioner First Philippine Industrial Corporation, formerly known as Meralco
Securities Industrial Corporation , (Rollo, pp. 95-100).
[3]

Sec. 143. Tax on Business. The municipality may impose taxes on the following business:

xxx xxx xxx

(e) On contractors and other independent contractors, in accordance with the following schedule:
With gross receipts for the preceding Amount of Tax Per Annum
Calendar year in the amount:
xxxxxx
P2,000,000.00 or more at a rate not exceeding fifty
Percent (50%) of one (1%)
[4]

Letter Protest dated January 20, 1994, Rollo, pp. 110-111.

[5]

Letter of respondent City Treasurer, Rollo, p. 112.

[6]

Complaint, Annex "C", Rollo, pp. 51-56.

[7]

Rollo, pp. 51-57.

[8]

Answer, Annex "J", Rollo, pp. 122-127.

[9]

RTC Decision, Rollo, pp. 58-62.

[10]

Rollo, p. 84.

[11]

CA-G.R. SP No.36801; Penned by Justice Jose C. De la Rama and concurred in by Justice

Jaime M. Lantin and Justice Eduardo G. Montenegro; Rollo, pp. 33-47.
[12]

Rollo, p. 49.

[13]

Resolution dated November 11, 1996 excerpts of which are hereunder quoted:

"The petition is unmeritorious.

"As correctly ruled by respondent appellate court, petitioner is not a common carrier as it is not
offering its services to the public.
"Art. 1732 of the Civil Code defines Common Carriers as: persons, corporations, firms or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
"We sustain the view that petitioner is a special carrier. Based on the facts on hand, it appears
that petitioner is not offering its services to the public.
"We agree with the findings of the appellate court that the claim for exemption from taxation must
be strictly construed against the taxpayer. The present understanding of the concept of "common
carriers" does not include carriers of petroleum using pipelines. It is highly unconventional to say
that the business of transporting petroleum through pipelines involves "common carrier"
business. The Local Government Code intended to give exemptions from local taxation to
common carriers transporting goods and passengers through moving vehicles or vessels and not
through pipelines. The term common carrier under Section 133 (j) of the Local Government Code
must be given its simple and ordinary or generally accepted meaning which would definitely not
include operators of pipelines."
[14]

G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of Appeals, et. al.)Considering the grounds of the motion for reconsideration, dated December 23, 1996, filed by
counsel for petitioner, of the resolution of November 11, 1996 which denied the petition for review
on certiorari, the Court Resolved:
(a) to GRANT the motion for reconsideration and to REINSTATE the petition; and
(b) to require respondent to COMMENT on the petition, within ten (10) days from notice.
[15]

Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.

[16]

168 SCRA 617-618 [1998].

[17]

Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v. Railroad Commission,
241 US 228, 64 L ed 239, 40 S Ct 131.
[18]

Journal and Record of the House of Representatives, Fourth Regular Session, Volume 2, pp.
87-89, September 6, 1990; Underscoring Ours.
[19]

Annex "D" of Petition, Rollo, pp. 101-109.