The above article makes no distinction between one whose principal business
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.
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local Idiom as "a sideline"). Article
1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
general business purposes, any common
carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. ... (Emphasis
supplied)
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such back-hauling was done
on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent's principal occupation was not the carriage of goods
for others. There is no dispute that private respondent charged his customers a
fee for hauling their goods; that fee frequently fell below commercial freight
rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for
the incurring of liability under the Civil Code provisions governing common
carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations
and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he
has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements. The
business of a common carrier impinges directly and intimately upon the safety
and well being and property of those members of the general community who
happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services
and the law cannot allow a common carrier to render such duties and liabilities
merely facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public
policy" 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 the goods carried are reached where the goods are lost as a result of a robbery
war, whether international or which is attended by "grave or irresistible threat, violence or force."
civil;
In the instant case, armed men held up the second truck owned by private
(3) Act or omission of the shipper
respondent which carried petitioner's cargo. The record shows that an
or owner of the goods;
information for robbery in band was filed in the Court of First Instance of
(4) The character-of the goods or
Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines
defects in the packing or-in the
v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one
containers; and
John Doe." There, the accused were charged with willfully and unlawfully
(5) Order or act of competent
taking and carrying away with them the second truck, driven by Manuel Estrada
public authority.
and loaded with the 600 cartons of Liberty filled milk destined for delivery at
It is important to point out that the above list of causes of loss, destruction or petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows
deterioration which exempt the common carrier for responsibility therefor, is a that the accused acted with grave, if not irresistible, threat, violence or
closed list. Causes falling outside the foregoing list, even if they appear to force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The
constitute a species of force majeure fall within the scope of Article 1735, which robbers not only took away the truck and its cargo but also kidnapped the driver
provides as follows: and his helper, detaining them for several days and later releasing them in
another province (in Zambales). The hijacked truck was subsequently found by
In all cases other than those mentioned in numbers 1, 2,
the police in Quezon City. The Court of First Instance convicted all the accused
3, 4 and 5 of the preceding article, if the goods are lost,
of robbery, though not of robbery in band. 4
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted In these circumstances, we hold that the occurrence of the loss must reasonably
negligently, unless they prove that they observed be regarded as quite beyond the control of the common carrier and properly
extraordinary diligence as required in Article 1733. regarded as a fortuitous event. It is necessary to recall that even common
(Emphasis supplied) 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
Applying the above-quoted Articles 1734 and 1735, we note firstly that the
are inevitable, provided that they shall have complied with the rigorous standard
specific cause alleged in the instant case — the hijacking of the carrier's truck
of extraordinary diligence.
— 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 We, therefore, agree with the result reached by the Court of Appeals that private
vehicle must be dealt with under the provisions of Article 1735, in other words, respondent Cendana is not liable for the value of the undelivered merchandise
that the private respondent as common carrier is presumed to have been at fault which was lost because of an event entirely beyond private respondent's control.
or to have acted negligently. This presumption, however, may be overthrown
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and
by proof of extraordinary diligence on the part of private respondent.
the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
Petitioner insists that private respondent had not observed extraordinary pronouncement as to costs.
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
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 plaintiff-appellee, vs. ESTRELLITA
M. BASCOS, doing business under the name of BASCOS TRUCKING,
defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of
which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed
from, which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for
short) entered into a hauling contract 2 with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of
soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of
Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of
P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount
of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to
theft, hijacking and non-delivery or damages to the cargo during transport at
market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay.
Eventually, Cipriano filed a complaint for a sum of money and damages with
writ of preliminary attachment 4 for breach of a contract of carriage. The prayer
for a Writ of Preliminary Attachment was supported by an affidavit 5 which
contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the
Rules of Court, whereby a writ of preliminary attachment may lawfully issue,
namely:
"(e) in an action against a party who has removed or disposed of his property,
or is about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the
present action;
6. That the amount due to the plaintiff in the above-entitled case is above all
legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no
contract of carriage since CIPTRADE leased her cargo truck to load the cargo
from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in
the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo
was hijacked along Canonigo St., Paco, Manila on the night of October 21,
1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties; that
after preliminary investigation, an information for robbery and carnapping were
filed against Jose Opriano, et al.; and that hijacking, being a force majeure,
exculpated petitioner from any liability to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of
which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR
HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages with
legal interest of 12% per cent per annum to be counted from December 4, 1986
until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's
fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March
10, 1987 filed by defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the
trial court's judgment.
Consequently, petitioner filed this petition where she makes the following
assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT
LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE
RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN
FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS
OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING
OF THE TRIAL COURT THAT PETITIONER'S MOTION TO
DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS
BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE
MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a
common carrier?; and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found
that she admitted in her answer that she did business under the name A.M.
Bascos Trucking and that said admission dispensed with the presentation by
private respondent, Rodolfo Cipriano, of proofs that petitioner was a common
carrier. The respondent Court also adopted in toto the trial court's decision that
petitioner was a common carrier, Moreover, both courts appreciated the
following pieces of evidence as indicators that petitioner was a common carrier:
the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo
consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed
by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an
employee of petitioner; and the fact that control of the cargo was placed in
petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was
a common carrier, she alleged in this petition that the contract between her and
Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited
as evidence certain affidavits which referred to the contract as "lease". These
affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She further
averred that Jesus Bascos confirmed in his testimony his statement that the
contract was a lease contract. 10 She also stated that: she was not catering to the
general public. Thus, in her answer to the amended complaint, she said that she
does business under the same style of A.M. Bascos Trucking, offering her
trucks for lease to those who have cargo to move, not to the general public but
to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common
carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 12 In
this case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions
are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer
their services only to a select group of people and because the private
respondents, plaintiffs in the lower court, did not object to the presentation of
affidavits by petitioner where the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court
of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it
held thus:
"The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a "sideline"). Article
1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such
distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and
appellate courts have dismissed them as self-serving and petitioner contests the
conclusion. We are bound by the appellate court's factual conclusions. Yet,
granting that the said evidence were not self-serving, the same were not
sufficient to prove that the contract was one of lease. It must be understood that
a contract is what the law defines it to be and not what it is called by the
contracting parties. 15 Furthermore, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of
proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the
goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance
over the goods transported by them. 17 Accordingly, they are presumed to have
been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. 18 There are very few instances when the presumption of
negligence does not attach and these instances are enumerated in Article 1734.
19 In those cases where the presumption is applied, the common carrier must
prove that it exercised extraordinary diligence in order to overcome the
presumption.
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs. Court
of Appeals, 20 the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat,
violence, or force. This is in accordance with Article 1745 of the Civil Code
which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force, is
dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and
will not be allowed to divest or to diminish such responsibility — even for acts
of strangers like thieves or robbers except where such thieves or robbers in fact
acted with grave or irresistible threat, violence or force. We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery which
is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory
affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay".
However, both the trial court and the Court of Appeals have concluded that
these affidavits were not enough to overcome the presumption. Petitioner's
affidavit about the hijacking was based on what had been told her by Juanito
Morden. It was not a first-hand account. While it had been admitted in court for
lack of objection on the part of private respondent, the respondent Court had
discretion in assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review on certiorari, We are
not to determine the probative value of evidence but to resolve questions of law.
Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took
place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the
hijacked truck, was presented as evidence in court, he himself was a witness as
could be gleaned from the contents of the petition. Affidavits are not considered
the best evidence if the affiants are available as witnesses. 25 The subsequent
filing of the information for carnapping and robbery against the accused named
in said affidavits did not necessarily mean that the contents of the affidavits
were true because they were yet to be determined in the trial of the criminal
cases.
The presumption of negligence was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her assertion, private respondent need
not introduce any evidence to prove her negligence. Her own failure to adduce
sufficient proof of extraordinary diligence made the presumption conclusive
against her.
Having affirmed the findings of the respondent Court on the substantial issues
involved, We find no reason to disturb the conclusion that the motion to
lift/dissolve the writ of preliminary attachment has been rendered moot and
academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim
cannot be sustained. The petition is DISMISSED and the decision of the Court
of Appeals is hereby AFFIRMED.
.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness
of private carrier, its owner's responsibility for damage to the cargo and its
liability for demurrage and attorney's fees. The Court also reiterates the well-
known rule that findings of facts of trial courts, when affirmed by the Court of
Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel
Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which assail the
August 12, 1993 Decision of the Court of Appeals. 1 The Court of Appeals
modified the decision of the Regional Trial Court of Pasig, Metro Manila,
Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant
and against the plaintiff dismissing the complaint with cost against
plaintiff, and ordering plaintiff to pay the defendant on the
counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as
demurrage with interest at the legal rate on both amounts from April
7, 1976 until the same shall have been fully paid;
2. Attorney's fees and expenses of litigation in the sum of
P100,000.00; and
3. Costs of suit.
SO ORDERED.2
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is
modified by reducing the award for demurrage to P44,000.00 and
deleting the award for attorney's fees and expenses of litigation.
Except as thus modified, the decision is AFFIRMED. There is no
pronouncement as to costs.
SO ORDERED.3
The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does
not transport cargo or shipment for the general public. Its services are available
only to specific persons who enter into a special contract of charter party with
its owner. It is undisputed that the ship is a private carrier. And it is in the
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of
affreightment or contract of voyage charter hire with National Steel
Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as
Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner,
entered into a Contract of Voyage Charter Hire (Exhibit "B"; also
Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS
I" to make one (1) voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila, under the following terms
and conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500 MT,
10% more or less at Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon
presentation of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather
Working Day of 24 consecutive hours, Sundays and Holidays
Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must insure the
cargoes. Shipowners not responsible for losses/damages except on
proven willful negligence of the officers of the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or
other internationally recognized Charter Party Agreement shall form
part of this Contract.
xxx xxx xxx
The terms "F.I.O.S.T." which is used in the shipping business is a
standard provision in the NANYOZAI Charter Party which stands
for "Freight In and Out including Stevedoring and Trading", which
means that the handling, loading and unloading of the cargoes are
the responsibility of the Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states, "Charterers to load, stow and
discharge the cargo free of risk and expenses to owners. . . .
(Emphasis supplied).
Under paragraph 10 thereof, it is provided that "(o)wners shall,
before and at the beginning of the voyage, exercise due diligence to
make the vessel seaworthy and properly manned, equipped and
supplied and to make the holds and all other parts of the vessel in
which cargo is carried, fit and safe for its reception, carriage and
preservation. Owners shall not be liable for loss of or damage of the
cargo arising or resulting from: unseaworthiness unless caused by
want of due diligence on the part of the owners to make the vessel
seaworthy, and to secure that the vessel is properly manned,
equipped and supplied and to make the holds and all other parts of
the vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation; . . . ; perils, dangers and accidents of the
sea or other navigable waters; . . . ; wastage in bulk or weight or any
other loss or damage arising from inherent defect, quality or vice of
the cargo; insufficiency of packing; . . . ; latent defects not
discoverable by due diligence; any other cause arising without the
actual fault or privity of Owners or without the fault of the agents or
servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides that
"(o)wners shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of the master and
crew."
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of
Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs
pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates
and 92 packages of hot rolled sheets or a total of 1,769 packages
with a total weight of about 2,481.19 metric tons for carriage to
Manila. The shipment was placed in the three (3) hatches of the ship.
Chief Mate Gonzalo Sabando, acting as agent of the vessel[,]
acknowledged receipt of the cargo on board and signed the
corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on
August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor,
Manila, on August 12, 1974. The following day, August 13, 1974,
when the vessel's three (3) hatches containing the shipment were
opened by plaintiff's agents, nearly all the skids of tinplates and hot
rolled sheets were allegedly found to be wet and rusty. The cargo
was discharged and unloaded by stevedores hired by the Charterer.
Unloading was completed only on August 24, 1974 after incurring
a delay of eleven (11) days due to the heavy rain which interrupted
the unloading operations. (Exhibit "E")
(4) To determine the nature and extent of the wetting and rusting,
NSC called for a survey of the shipment by the Manila Adjusters
and Surveyors Company (MASCO). In a letter to the NSC dated
March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular
inspection conducted on the cargo, both while it was still on board
the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa,
Manila where the cargo was taken and stored. MASCO reported that
it found wetting and rusting of the packages of hot rolled sheets and
metal covers of the tinplates; that tarpaulin hatch covers were noted
torn at various extents; that container/metal casings of the skids were
rusting all over. MASCO ventured the opinion that "rusting of the
tinplates was caused by contact with SEA WATER sustained while
still on board the vessel as a consequence of the heavy weather and
rough seas encountered while en route to destination (Exhibit "F").
It was also reported that MASCO's surveyors drew at random
samples of bad order packing materials of the tinplates and delivered
the same to the M.I.T. Testing Laboratories for analysis. On August
31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770
(Exhibit "I") which in part, states, "The analysis of bad order
samples of packing materials . . . shows that wetting was caused by
contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid Report No.
1770, plaintiff filed with the defendant its claim for damages
suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18. Then on October 3, 1974, plaintiff formally
demanded payment of said claim but defendant VSI refused and
failed to pay. Plaintiff filed its complaint against defendant on April
21, 1976 which was docketed as Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the
aforesaid amount of P941,145.18 as a result of the act, neglect and
default of the master and crew in the management of the vessel as
well as the want of due diligence on the part of the defendant to make
the vessel seaworthy and to make the holds and all other parts of the
vessel in which the cargo was carried, fit and safe for its reception,
carriage and preservation — all in violation of defendant's
undertaking under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage
claiming that the MV "VLASONS I" was seaworthy in all respects
for the carriage of plaintiff's cargo; that said vessel was not a
"common carrier" inasmuch as she was under voyage charter
contract with the plaintiff as charterer under the charter party; that
in the course of the voyage from Iligan City to Manila, the MV
"VLASONS I" encountered very rough seas, strong winds and
adverse weather condition, causing strong winds and big waves to
continuously pound against the vessel and seawater to overflow on
its deck and hatch covers, that under the Contract of Voyage Charter
Hire, defendant shall not be responsible for losses/damages except
on proven willful negligence of the officers of the vessel, that the
officers of said MV "VLASONS I" exercised due diligence and
proper seamanship and were not willfully negligent; that
furthermore the Voyage Charter Party provides that loading and
discharging of the cargo was on FIOST terms which means that the
vessel was free of risk and expense in connection with the loading
and discharging of the cargo; that the damage, if any, was due to the
inherent defect, quality or vice of the cargo or to the insufficient
packing thereof or to latent defect of the cargo not discoverable by
due diligence or to any other cause arising without the actual fault
or privity of defendant and without the fault of the agents or servants
of defendant; consequently, defendant is not liable; that the
stevedores of plaintiff who discharged the cargo in Manila were
negligent and did not exercise due care in the discharge of the cargo;
land that the cargo was exposed to rain and seawater spray while on
the pier or in transit from the pier to plaintiff's warehouse after
discharge from the vessel; and that plaintiff's claim was highly
speculative and grossly exaggerated and that the small stain marks
or sweat marks on the edges of the tinplates were magnified and
considered total loss of the cargo. Finally, defendant claimed that it
had complied with all its duties and obligations under the Voyage
Charter Hire Contract and had no responsibility whatsoever to
plaintiff. In turn, it alleged the following counterclaim:
(a) That despite the full and proper
performance by defendant of its obligations
under the Voyage Charter Hire Contract,
plaintiff failed and refused to pay the agreed
charter hire of P75,000.00 despite demands
made by defendant;
(b) That under their Voyage Charter Hire
Contract, plaintiff had agreed to pay
defendant the sum of P8,000.00 per day for
demurrage. The vessel was on demurrage for
eleven (11) days in Manila waiting for
plaintiff to discharge its cargo from the
vessel. Thus, plaintiff was liable to pay
defendant demurrage in the total amount of
P88,000.00.
(c) For filing a clearly unfounded civil action
against defendant, plaintiff should be ordered
to pay defendant attorney's fees and all
expenses of litigation in the amount of not
less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came
out with the following findings which were set forth in its decision:
(a) The MV "VLASONS I" is a vessel of
Philippine registry engaged in the tramping
service and is available for hire only under
special contracts of charter party as in this
particular case.
(b) That for purposes of the voyage covered
by the Contract of Voyage Charter Hire (Exh.
"1"), the MV VLASONS I" was covered by
the required seaworthiness certificates
including the Certification of Classification
issued by an international classification
society, the NIPPON KAIJI KYOKAI (Exh.
"4"); Coastwise License from the Board of
Transportation (Exh. "5"); International
Loadline Certificate from the Philippine
Coast Guard (Exh. "6"); Cargo Ship Safety
Equipment Certificate also from the
Philippine Coast Guard (Exh. "7"); Ship
Radio Station License (Exh. "8"); Certificate
of Inspection by the Philippine Coast Guard
(Exh. "12"); and Certificate of Approval for
Conversion issued by the Bureau of Customs
(Exh. "9"). That being a vessel engaged in
both overseas and coastwise trade, the MV
"VLASONS I" has a higher degree of
seaworthiness and safety.
(c) Before it proceeded to Iligan City to
perform the voyage called for by the Contract
of Voyage Charter Hire, the MV "VLASONS
I" underwent drydocking in Cebu and was
thoroughly inspected by the Philippine Coast
Guard. In fact, subject voyage was the
vessel's first voyage after the drydocking.
The evidence shows that the MV
"VLASONS I" was seaworthy and properly
manned, equipped and supplied when it
undertook the voyage. It has all the required
certificates of seaworthiness.
(d) The cargo/shipment was securely stowed
in three (3) hatches of the ship. The hatch
openings were covered by hatchboards which
were in turn covered by two or double
tarpaulins. The hatch covers were water tight.
Furthermore, under the hatchboards were
steel beams to give support.
(e) The claim of the plaintiff that defendant
violated the contract of carriage is not
supported by evidence. The provisions of the
Civil Code on common carriers pursuant to
which there exists a presumption of
negligence in case of loss or damage to the
cargo are not applicable. As to the damage to
the tinplates which was allegedly due to the
wetting and rusting thereof, there is
unrebutted testimony of witness Vicente
Angliongto that tinplates "sweat" by
themselves when packed even without being
in contract (sic) with water from outside
especially when the weather is bad or raining.
The trust caused by sweat or moisture on the
tinplates may be considered as a loss or
damage but then, defendant cannot be held
liable for it pursuant to Article 1734 of the
Civil Case which exempts the carrier from
responsibility for loss or damage arising from
the "character of the goods . . ." All the 1,769
skids of the tinplates could not have been
damaged by water as claimed by plaintiff. It
was shown as claimed by plaintiff that the
tinplates themselves were wrapped in kraft
paper lining and corrugated cardboards could
not be affected by water from outside.
(f) The stevedores hired by the plaintiff to
discharge the cargo of tinplates were
negligent in not closing the hatch openings of
the MV "VLASONS I" when rains occurred
during the discharging of the cargo thus
allowing rainwater to enter the hatches. It was
proven that the stevedores merely set up
temporary tents to cover the hatch openings
in case of rain so that it would be easy for
them to resume work when the rains stopped
by just removing the tent or canvas. Because
of this improper covering of the hatches by
the stevedores during the discharging and
unloading operations which were interrupted
by rains, rainwater drifted into the cargo
through the hatch openings. Pursuant to
paragraph 5 of the NANYOSAI [sic] Charter
Party which was expressly made part of the
Contract of Voyage Charter Hire, the loading,
stowing and discharging of the cargo is the
sole responsibility of the plaintiff charterer
and defendant carrier has no liability for
whatever damage may occur or maybe [sic]
caused to the cargo in the process.
(g) It was also established that the vessel
encountered rough seas and bad weather
while en route from Iligan City to Manila
causing sea water to splash on the ship's deck
on account of which the master of the vessel
(Mr. Antonio C. Dumlao) filed a "Marine
Protest" on August 13, 1974 (Exh. "15");
which can be invoked by defendant as a force
majeure that would exempt the defendant
from liability.
(h) Plaintiff did not comply with the
requirement prescribed in paragraph 9 of the
Voyage Charter Hire contract that it was to
insure the cargo because it did not. Had
plaintiff complied with the requirement, then
it could have recovered its loss or damage
from the insurer. Plaintiff also violated the
charter party contract when it loaded not only
"steel products", i.e. steel bars, angular bars
and the like but also tinplates and hot rolled
sheets which are high grade cargo
commanding a higher freight. Thus plaintiff
was able to ship grade cargo at a lower freight
rate.
(i) As regards defendant's counterclaim, the
contract of voyage charter hire under
Paragraph 4 thereof, fixed the freight at
P30.00 per metric ton payable to defendant
carrier upon presentation of the bill of lading
within fifteen (15) days. Plaintiff has not paid
the total freight due of P75,000.00 despite
demands. The evidence also showed that the
plaintiff was required and bound under
paragraph 7 of the same Voyage Charter Hire
contract to pay demurrage of P8,000.00 per
day of delay in the unloading of the cargoes.
The delay amounted to eleven (11) days
thereby making plaintiff liable to pay
defendant for demurrage in the amount of
P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV "VLASONS I" was
seaworthy, properly manned, equipped and supplied, and that there
is no proof of willful negligence of the vessel's officers.
II
The trial court erred in finding that the rusting of NSC's tinplates
was due to the inherent nature or character of the goods and not due
to contact with seawater.
III
The trial court erred in finding that the stevedores hired by NSC
were negligent in the unloading of NSC's shipment.
IV
The trial court erred in exempting VSI from liability on the ground
of force majeure.
V
The trial court erred in finding that NSC violated the contract of
voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and
attorney's fees, to VSI.4
As earlier stated, the Court of Appeals modified the decision of the trial court
by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the
award of attorneys fees and expenses of litigation. NSC and VSI filed separate
motions for reconsideration. In a Resolution5 dated October 20, 1993, the
appellate court denied both motions. Undaunted, NSC and VSI filed their
respective petitions for review before this Court. On motion of VSI, the Court
ordered on February 14, 1994 the consolidation of these petitions. 6
The Issues
In its petition7 and memorandum,8 NSC raises the following questions of law
and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due
to cargo unloading delays caused by weather interruption;
2. Whether or not the alleged "seaworthiness certificates" (Exhibits
"3", "4", "5", "6", "7", "8", "9", "11" and "12") were admissible in
evidence and constituted evidence of the vessel's seaworthiness at
the beginning of the voyages; and
3. Whether or not a charterer's failure to insure its cargo exempts the
shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessel's officers and crew were negligent in
handling and caring for NSC's cargo;
3. Whether or not NSC's cargo of tinplates did sweat during the
voyage and, hence, rusted on their own; and
4. Whether or not NSC's stevedores were negligent and caused the
wetting[/]rusting of NSC's tinplates.
In its separate petition,9 VSI submits for the consideration of this Court the
following alleged errors of the CA:
A. The respondent Court of Appeals committed an error of law in
reducing the award of demurrage from P88,000.00 to P44,000.00.
 B. The respondent Court of Appeals committed an error of law in
deleting the award of P100,000 for attorney's fees and expenses of
litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum:10
I. Whether or not the provisions of the Civil Code of the Philippines
on common carriers pursuant to which there exist[s] a presumption
of negligence against the common carrier in case of loss or damage
to the cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of
Voyage Charter Hire, including the Nanyozai Charter, are valid and
binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following
headings:
1. Questions of Fact
2. Effect of NSC's Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorney's Fees.
The Court's Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in
respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted with NSC as a
common carrier or as a private carrier. The resolution of this preliminary
question determines the law, standard of diligence and burden of proof
applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as "persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public." It has been held that the
true test of a common carrier is the carriage of passengers or goods, provided it
has space, for all who opt to avail themselves of its transportation service for a
fee.11 A carrier which does not qualify under the above test is deemed a private
carrier. "Generally, private carriage is undertaken by special agreement and the
carrier does not hold himself out to carry goods for the general public. The most
typical, although not the only form of private carriage, is the charter party, a
maritime contract by which the charterer, a party other than the shipowner,
obtains the use and service of all or some part of a ship for a period of time or
a voyage or voyages."12
In the instant case, it is undisputed that VSI did not offer its services to the
general public. As found by the Regional Trial Court, it carried passengers or
goods only for those it chose under a "special contract of charter party." 13 As
correctly concluded by the Court of Appeals, the MV Vlasons I "was not a
common but a private carrier."14Consequently, the rights and obligations of VSI
and NSC, including their respective liability for damage to the cargo, are
determined primarily by stipulations in their contract of private carriage or
charter party.15 Recently, in Valenzuela Hardwood and Industrial Supply,
Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation,16 the
Court ruled:
. . . in a contract of private carriage, the parties may freely stipulate
their duties and obligations which perforce would be binding on
them. Unlike in a contract involving a common carrier, private
carriage does not involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers protecting the
general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public
policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in
contracts involving common carriers.17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17,
1974, that VSI "shall not be responsible for losses except on proven willful
negligence of the officers of the vessel." The NANYOZAI Charter Party, which
was incorporated in the parties' contract of transportation further provided that
the shipowner shall not be liable for loss of or a damage to the cargo arising or
resulting from unseaworthiness, unless the same was caused by its lack of due
diligence to make the vessel seaworthy or to ensure that the same was "properly
manned, equipped and supplied," and to "make the holds and all other parts of
the vessel in which cargo [was] carried, fit and safe for its reception, carriage
and preservation."18 The NANYOZAI Charter Party also provided that
"[o]wners shall not be responsible for split, chafing and/or any damage unless
caused by the negligence or default of the master or crew."19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the
damage to its shipment was caused by VSI's willful negligence or failure to
exercise due diligence in making MV Vlasons I seaworthy and fit for holding,
carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed
on NSC by the parties' agreement.
This view finds further support in the Code of Commerce which pertinently
provides:
Art. 361. Merchandise shall be transported at the risk and venture
of the shipper, if the contrary has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during
the transportation, due to fortuitous event, force majeure, or the
nature and inherent defect of the things, shall be for the account and
risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising
from the cause mentioned in the preceding article if proofs against
him show that they occurred on account of his negligence or his
omission to take the precautions usually adopted by careful persons,
unless the shipper committed fraud in the bill of lading, making him
to believe that the goods were of a class or quality different from
what they really were.
Because the MV Vlasons I was a private carrier, the shipowner's obligations are
governed by the foregoing provisions of the Code of Commerce and not by the
Civil Code which, as a general rule, places the prima faciepresumption of
negligence on a common carrier. It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo,
the burden is on the plaintiff to prove that the carrier was negligent
or unseaworthy, and the fact that the goods were lost or damaged
while in the carrier's custody does not put the burden of proof on the
carrier.
Since . . . a private carrier is not an insurer but undertakes only to
exercise due care in the protection of the goods committed to its
care, the burden of proving negligence or a breach of that duty rests
on plaintiff and proof of loss of, or damage to, cargo while in the
carrier's possession does not cast on it the burden of proving proper
care and diligence on its part or that the loss occurred from an
excepted cause in the contract or bill of lading. However, in
discharging the burden of proof, plaintiff is entitled to the benefit of
the presumptions and inferences by which the law aids the bailor in
an action against a bailee, and since the carrier is in a better position
to know the cause of the loss and that it was not one involving its
liability, the law requires that it come forward with the information
available to it, and its failure to do so warrants an inference or
presumption of its liability. However, such inferences and
presumptions, while they may affect the burden of coming forward
with evidence, do not alter the burden of proof which remains on
plaintiff, and, where the carrier comes forward with evidence
explaining the loss or damage, the burden of going forward with the
evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of
seaworthiness, the burden of proving a breach thereof and that such
breach was the proximate cause of the damage rests on plaintiff, and
proof that the goods were lost or damaged while in the carrier's
possession does not cast on it the burden of proving seaworthiness.
. . . Where the contract of carriage exempts the carrier from liability
for unseaworthiness not discoverable by due diligence, the carrier
has the preliminary burden of proving the exercise of due diligence
to make the vessel seaworthy.20
In the instant case, the Court of Appeals correctly found the NSC "has not taken
the correct position in relation to the question of who has the burden of proof.
Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the
NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's]
interpretation of Clause 12 is not even correct), it argues that 'a careful
examination of the evidence will show that VSI miserably failed to comply with
any of these obligation's as if defendant-appellee [VSI] had the burden of
proof."21
First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is a So that the cargo would not be soaked with
manifestly relevant: (1) whether VSI exercised due diligence in making MV water.
Vlasons I seaworthy for the intended purpose under the charter party; (2)
q And will you describe how the canvas cover
whether the damage to the cargo should be attributed to the willful negligence
was secured on the hatch opening?
of the officers and crew of the vessel or of the stevedores hired by NSC; and (3)
whether the rusting of the tinplates was caused by its own "sweat" or by contact WITNESS
with seawater.
a It was placed flat on top of the hatch cover,
These questions of fact were threshed out and decided by the trial court, which with a little canvas flowing over the sides and
had the firsthand opportunity to hear the parties' conflicting claims and to we place[d] a flat bar over the canvas on the
carefully weigh their respective evidence. The findings of the trial court were side of the hatches and then we place[d] a
subsequently affirmed by the Court of Appeals. Where the factual findings of stopper so that the canvas could not be
both the trial court and the Court of Appeals coincide, the same are binding on removed.
this Court.22 We stress that, subject to some exceptional instances,23only
ATTY DEL ROSARIO
questions of law — not questions of fact — may be raised before this Court in
a petition for review under Rule 45 of the Rules of Court. After a thorough q And will you tell us the size of the hatch
review of the case at bar, we find no reason to disturb the lower court's factual opening? The length and the width of the
findings, as indeed NSC has not successfully proven the application of any of hatch opening.
the aforecited exceptions.
a Forty-five feet by thirty-five feet, sir.
Was MV Vlasons I Seaworthy?
xxx xxx xxx
In any event, the records reveal that VSI exercised due diligence to make the
ship seaworthy and fit for the carriage of NSC's cargo of steel and tinplates. q How was the canvas supported in the
This is shown by the fact that it was drylocked and inspected by the Philippine middle of the hatch opening?
Coast Guard before it proceeded to Iligan City for its voyage to Manila under a There is a hatch board.
the contract of voyage charter hire.24The vessel's voyage from Iligan to Manila
was the vessel's first voyage after drydocking. The Philippine Coast Guard ATTY DEL ROSARIO
Station in Cebu cleared it as seaworthy, fitted and equipped; it met all q What is the hatch board made of?
requirements for trading as cargo vessel.25 The Court of Appeals itself
sustained the conclusion of the trial court that MV Vlasons I was seaworthy. We a It is made of wood, with a handle.
find no reason to modify or reverse this finding of both the trial and the appellate q And aside from the hatch board, is there any
courts. other material there to cover the hatch?
Who Were Negligent: a There is a beam supporting the hatch board.
Seamen or Stevedores?
q What is this beam made of?
As noted earlier, the NSC had the burden of proving that the damage to the
cargo was caused by the negligence of the officers and the crew of MV Vlasons a It is made of steel, sir.
I in making their vessel seaworthy and fit for the carriage of tinplates. NSC q Is the beam that was placed in the hatch
failed to discharge this burden. opening covering the whole hatch opening?
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old a No, sir.
and torn tarpaulin or canvas to cover the hatches through which the cargo was
loaded into the cargo hold of the ship. It faults the Court of Appeals for failing q How many hatch beams were there placed
to consider such claim as an "uncontroverted fact"26 and denies that MV Vlasons across the opening?
I "was equipped with new canvas covers in tandem with the old ones as a There are five beams in one hatch opening.
indicated in the Marine Protest . . ."27 We disagree.
ATTY DEL ROSARIO
The records sufficiently support VSI's contention that the ship used the old
tarpaulin, only in addition to the new one used primarily to make the ship's q And on top of the beams you said there is a
hatches watertight. The foregoing are clear from the marine protest of the hatch board. How many pieces of wood are
master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship's put on top?
boatswain, Jose Pascua. The salient portions of said marine protest read: a Plenty, sir, because there are several pieces
. . . That the M/V "VLASONS I" departed Iligan City or about 0730 on top of the hatch beam.
hours of August 8, 1974, loaded with approximately 2,487.9 tons of q And is there a space between the hatch
steel plates and tin plates consigned to National Steel Corporation; boards?
that before departure, the vessel was rigged, fully equipped and
cleared by the authorities; that on or about August 9, 1974, while in a There is none, sir.
the vicinity of the western part of Negros and Panay, we encountered q They are tight together?
very rough seas and strong winds and Manila office was advised by
telegram of the adverse weather conditions encountered; that in the a Yes, sir.
morning of August 10, 1974, the weather condition changed to
q How tight?
worse and strong winds and big waves continued pounding the
vessel at her port side causing sea water to overflow on deck a Very tight, sir.
andhatch (sic) covers and which caused the first layer of the canvass
q Now, on top of the hatch boards, according
covering to give way while the new canvass covering still holding
to you, is the canvass cover. How many
on;
canvas covers?
That the weather condition improved when we reached Dumali
a Two, sir.29
Point protected by Mindoro; that we re-secured the canvass covering
back to position; that in the afternoon of August 10, 1974, while That due diligence was exercised by the officers and the crew of the MV Vlasons
entering Maricaban Passage, we were again exposed to moderate I was further demonstrated by the fact that, despite encountering rough weather
seas and heavy rains; that while approaching Fortune Island, we twice, the new tarpaulin did not give way and the ship's hatches and cargo holds
encountered again rough seas, strong winds and big waves which remained waterproof. As aptly stated by the Court of Appeals, ". . . we find no
caused the same canvass to give way and leaving the new canvass reason not to sustain the conclusion of the lower court based on overwhelming
holding on; evidence, that the MV 'VLASONS I' was seaworthy when it undertook the
voyage on August 8, 1974 carrying on board thereof plaintiff-appellant's
xxx xxx xxx 28
shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a
And the relevant portions of Jose Pascua's deposition are as follows: total of 1,769 packages from NSC's pier in Iligan City arriving safely at North
Harbor, Port Area, Manila, on August 12, 1974; . . .30
q What is the purpose of the canvas cover?
Indeed, NSC failed to discharge its burden to show negligence on the part of
the officers and the crew of MV Vlasons I. On the contrary, the records reveal
that it was the stevedores of NSC who were negligent in unloading the cargo
from the ship.
The stevedores employed only a tent-like material to cover the hatches when
strong rains occasioned by a passing typhoon disrupted the unloading of the
cargo. This tent-like covering, however, was clearly inadequate for keeping rain
and seawater away from the hatches of the ship. Vicente Angliongto, an officer
of VSI, testified thus:
ATTY ZAMORA:
Q Now, during your testimony on November
5, 1979, you stated on August 14 you went on
board the vessel upon notice from the
National Steel Corporation in order to
conduct the inspection of the cargo. During
the course of the investigation, did you
chance to see the discharging operation?
WITNESS:
A Yes, sir, upon my arrival at the vessel, I
saw some of the tinplates already discharged
on the pier but majority of the tinplates were
inside the hall, all the hatches were opened.
Q In connection with these cargoes which
were unloaded, where is the place.
A At the Pier.
Q What was used to protect the same from
weather?
ATTY LOPEZ:
We object, your Honor, this question was
already asked. This particular matter . . . the
transcript of stenographic notes shows the
same was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go
on detail, this is the serious part of the
testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q What was used in order to protect the cargo
from the weather?
A A base of canvas was used as cover on top
of the tin plates, and tents were built at the
opening of the hatches.
Q You also stated that the hatches were
already opened and that there were tents
constructed at the opening of the hatches to
protect the cargo from the rain. Now, will you
describe [to] the Court the tents constructed.
A The tents are just a base of canvas which
look like a tent of an Indian camp raise[d]
high at the middle with the whole side
separated down to the hatch, the size of the
hatch and it is soaks [sic] at the middle
because of those weather and this can be used
only to temporarily protect the cargo from
getting wet by rains.
Q Now, is this procedure adopted by the
stevedores of covering tents proper?
A No, sir, at the time they were discharging
the cargo, there was a typhoon passing by
and the hatch tent was not good enough to
hold all of it to prevent the water soaking
through the canvass and enter the cargo.
Q In the course of your inspection,
Mr. Anglingto [sic], did you see in fact the
water enter and soak into the canvass and
tinplates.
A Yes, sir, the second time I went there, I saw
it.
Q As owner of the vessel, did you not advise
the National Steel Corporation [of] the
procedure adopted by its stevedores in
discharging the cargo particularly in this tent
covering of the hatches?
A Yes, sir, I did the first time I saw it, I called
the attention of the stevedores but the
stevedores did not mind at all, so, called the
attention of the representative of the National
Steel but nothing was done, just the same.
Finally, I wrote a letter to them.31
NSC attempts to discredit the testimony of Angliongto by questioning his
failure to complain immediately about the stevedores' negligence on the first
day of unloading, pointing out that he wrote his letter to petitioner only seven
days later.32 The Court is not persuaded. Angliongto's candid answer in his
aforequoted testimony satisfactorily explained the delay. Seven days lapsed
because he first called the attention of the stevedores, then the NSC's
representative, about the negligent and defective procedure adopted in
unloading the cargo. This series of actions constitutes a reasonable response in
accord with common sense and ordinary human experience. Vicente
Angliongto could not be blamed for calling the stevedores' attention first and
then the NSC's representative on location before formally informing NSC of the
negligence he had observed, because he was not responsible for the stevedores
or the unloading operations. In fact, he was merely expressing concern for NSC
which was ultimately responsible for the stevedores it had hired and the
performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts' findings and
conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred
in finding that the stevedores hired by NSC were negligent in the
unloading of NSC's shipment. We do not think so. Such negligence
according to the trial court is evident in the stevedores hired by
[NSC], not closing the hatch of MV 'VLASONS I' when rains
occurred during the discharging of the cargo thus allowing rain
water and seawater spray to enter the hatches and to drift to and fall
on the cargo. It was proven that the stevedores merely set up
temporary tents or canvas to cover the hatch openings when it rained
during the unloading operations so that it would be easier for them
to resume work after the rains stopped by just removing said tents
or canvass. It has also been shown that on August 20, 1974, VSI
President Vicente Angliongto wrote [NSC] calling attention to the
manner the stevedores hired by [NSC] were discharging the cargo
on rainy days and the improper closing of the hatches which allowed
continuous heavy rain water to leak through and drip to the tinplates'
covers and [Vicente Angliongto] also suggesting that due to four (4)
days continuos rains with strong winds that the hatches be totally
closed down and covered with canvas and the hatch tents lowered.
(Exh. "13"). This letter was received by [NSC] on 22 August 1974
while discharging operations were still going on (Exhibit "13-A").33
The fact that NSC actually accepted and proceeded to remove the cargo from
the ship during unfavorable weather will not make VSI liable for any damage
caused thereby. In passing, it may be noted that the NSC may seek
indemnification, subject to the laws on prescription, from the stevedoring
company at fault in the discharge operations. "A stevedore company engaged
in discharging cargo . . . has the duty to load the cargo . . . in a prudent manner,
and it is liable for injury to, or loss of, cargo caused by its negligence . . . and
where the officers and members and crew of the vessel do nothing and have no
responsibility in the discharge of cargo by stevedores . . . the vessel is not liable
for loss of, or damage to, the cargo caused by the negligence of the
stevedores . . ."34 as in the instant case.
Do Tinplates "Sweat"?
The trial court relied on the testimony of Vicente Angliongto in finding that ".
. . tinplates 'sweat' by themselves when packed even without being in contact
with water from outside especially when the weather is bad or
raining . . ."35 The Court of Appeals affirmed the trial court's finding.
A discussion of this issue appears inconsequential and unnecessary. As
previously discussed, the damage to the tinplates was occasioned not by
airborne moisture but by contact with rain and seawater which the stevedores
negligently allowed to seep in during the unloading.
Second Issue: Effect of NSC's Failure to
Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage
Charter Hire is totally separate and distinct from the contractual or statutory
responsibility that may be incurred by VSI for damage to the cargo caused by
the willful negligence of the officers and the crew of MV Vlasons I. Clearly,
therefore, NSC's failure to insure the cargo will not affect its right, as owner and
real party in interest, to file an action against VSI for damages caused by the
latter's willful negligence. We do not find anything in the charter party that
would make the liability of VSI for damage to the cargo contingent on or
affected in any manner by NSC's obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates
Proving Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is anchored on the
alleged inadmissibility of the certificates of seaworthiness offered in evidence
by VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippines Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs36
NSC argues that the certificates are hearsay for not having been presented in
accordance with the Rules of Court. It points out that Exhibits 3, 4 and 11
allegedly are "not written records or acts of public officers"; while Exhibits 5,
6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or certified true
copies" as required by Sections 25 and 26, Rule 132, of the Rules of Court.37
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4,
5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been properly offered as
evidence. Exhibits 3 and 4 are certificates issued by private parties, but they
have not been proven by one who saw the writing executed, or by evidence of
the genuineness of the handwriting of the maker, or by a subscribing witness.
Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best
evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception
to the hearsay rule per Section 44 of Rule 130 of the Rules of Court, which
provides that "(e)ntries in official records made in the performance of a duty by
a public officer of the Philippines, or by a person in the performance of a duty
specially enjoined by law, are prima facie evidence of the facts therein
stated."38 Exhibit 11 is an original certificate of the Philippine Coast Guard in
Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the
vessel 'VLASONS I' was drydocked . . . and PCG Inspectors were sent on board
for inspection . . . After completion of drydocking and duly inspected by PCG
Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition,
meets all requirements, fitted and equipped for trading as a cargo vessel was
cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10,
1974." (sic) NSC's claim, therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that NSC has the burden of proving that MV
Vlasons I was not seaworthy. As observed earlier, the vessel was a private
carrier and, as such, it did not have the obligation of a common carrier to show
that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of
proving the willful negligence of VSI in making the ship seaworthy resulting in
damage to its cargo. Assailing the genuineness of the certificate of
seaworthiness is not sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT,
10% more or less at Master's option.
xxx xxx xxx
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.39
The Court defined demurrage in its strict sense as the compensation provided
for in the contract of affreightment for the detention of the vessel beyond the
laytime or that period of time agreed on for loading and unloading of cargo. 40It
is given to compensate the shipowner for the nonuse of the vessel. On the other
hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party.
. . . If laytime is expressed in "running days," this means days when
the ship would be run continuously, and holidays are not excepted.
A qualification of "weather permitting" excepts only those days
when bad weather reasonably prevents the work contemplated. 41
In this case, the contract of voyage charter hire provided for a four-day laytime;
it also qualified laytime as WWDSHINC or weather working days Sundays and
holidays included.42 The running of laytime was thus made subject to the
weather, and would cease to run in the event unfavorable weather interfered
with the unloading of cargo.43 Consequently, NSC may not be held liable for
demurrage as the four-day laytime allowed it did not lapse, having been tolled
by unfavorable weather condition in view of the WWDSHINC qualification
agreed upon by the parties. Clearly, it was error for the trial court and the Court
of Appeals to have found and affirmed respectively that NSC incurred eleven
days of delay in unloading the cargo. The trial court arrived at this erroneous
finding by subtracting from the twelve days, specifically August 13, 1974 to
August 24, 1974, the only day of unloading unhampered by unfavorable
weather or rain, which was August 22, 1974. Based on our previous discussion,
such finding is a reversible error. As mentioned, the respondent appellate court
also erred in ruling that NSC was liable to VSI for demurrage, even if it reduced
the amount by half.
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of the award of
attorney's fees. We disagree. While VSI was compelled to litigate to protect its
rights, such fact by itself will not justify an award of attorney's fees under
Article 2208 of the Civil Code when ". . . no sufficient showing of bad faith
would be reflected in a party's persistence in a case other than an erroneous
conviction of the righteousness of his cause . . ."44 Moreover, attorney's fees
may not be awarded to a party for the reason alone that the judgment rendered
was favorable to the latter, as this is tantamount to imposing a premium on one's
right to litigate or seek judicial redress of legitimate grievances.45
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who
caused the damage to the cargo? Ranged against NSC are two formidable truths.
First, both lower courts found that such damage was brought about during the
unloading process when rain and seawater seeped through the cargo due to the
fault or negligence of the stevedores employed by it. Basic is the rule that factual
findings of the trial court, when affirmed by the Court of Appeals, are binding
on the Supreme Court. Although there are settled exceptions, NSC has not
satisfactorily shown that this case is one of them. Second, the agreement
between the parties — the Contract of Voyage Charter Hire — placed the
burden of proof for such loss or damage upon the shipper, not upon the
shipowner. Such stipulation, while disadvantageous to NSC, is valid because
the parties entered into a contract of private charter, not one of common
carriage. Basic too is the doctrine that courts cannot relieve a parry from the
effects of a private contract freely entered into, on the ground that it is allegedly
one-sided or unfair to the plaintiff. The charter party is a normal commercial
contract and its stipulations are agreed upon in consideration of many factors,
not the least of which is the transport price which is determined not only by the
actual costs but also by the risks and burdens assumed by the shipper in regard
to possible loss or damage to the cargo. In recognition of such factors, the
parties even stipulated that the shipper should insure the cargo to protect itself
from the risks it undertook under the charter party. That NSC failed or neglected
to protect itself with such insurance should not adversely affect VSI, which had
nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are
hereby DENIED. The questioned Decision of the Court of Appeals is
AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is
deleted. No pronouncement as to costs.
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her official
capacity as City Treasurer of Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of
Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the
decision of the Regional Trial Court of Batangas City, Branch 84, in Civil
Case No. 4293, which dismissed petitioners' complaint for a business tax
refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387,
as amended, to contract, install and operate oil pipelines. The original
pipeline concession was granted in 19671 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 Code3. The respondent City Treasurer
assessed a business tax on the petitioner amounting to P956,076.04 payable
in four installments based on the gross receipts for products pumped at
GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In
order not to hamper its operations, petitioner paid the tax under protest in
the amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the
respondent City Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is engaged in
the business of transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such,
our Company is exempt from paying tax on gross receipts under Section
133 of the Local Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration
of contractors under Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax "on contractors and other
independent contractors" under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy on transportation
contractors.
The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said
section limits the imposition of fees and charges on business to such
amounts as may be commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for the license fee,
the imposition thereof based on gross receipts is violative of the aforecited
provision. The amount of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere regulatory imposition. 4
On March 8, 1994, the respondent City Treasurer denied the protest
contending that petitioner cannot be considered engaged in transportation
business, thus it cannot claim exemption under Section 133 (j) of the Local
Government Code.5
On June 15, 1994, petitioner filed with the Regional Trial Court of
Batangas City a complaint6 for tax refund with prayer for writ of
preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of the
business tax on its gross receipts violates Section 133 of the Local
Government Code; (2) the authority of cities to impose and collect a tax on
the gross receipts of "contractors and independent contractors" under Sec.
141 (e) and 151 does not include the authority to collect such taxes on
transportation contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; and, (3) the City
Treasurer illegally and erroneously imposed and collected the said tax,
thus meriting the immediate refund of the tax paid.7
Traversing the complaint, the respondents argued that petitioner cannot
be exempt from taxes under Section 133 (j) of the Local Government Code
as said exemption applies only to "transportation contractors and persons
engaged in the transportation by hire and common carriers by air, land
and water." Respondents assert that pipelines are not included in the term
"common carrier" which refers solely to ordinary carriers such as trucks,
trains, ships and the like. Respondents further posit that the term
"common carrier" under the said code pertains to the mode or manner by
which a product is delivered to its destination.8
On October 3, 1994, the trial court rendered a decision dismissing the
complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is
a rule that tax exemptions are to be strictly construed against the taxpayer,
taxes being the lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic
Act 387. (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of
concession grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the 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, . . . 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. 13Petitioner moved for a
reconsideration which was granted by this Court in a Resolution 14 of
January 22, 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.
Art. 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
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 16we 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 . . . 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 andpower
petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services.
(Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in
Section 133 (j) of the Local Government Code refers only to common
carriers transporting goods and passengers through moving vehicles or
vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers"
in the Civil Code makes no distinction as to the means of transporting, as
long as it is by land, water or air. It does not provide that the transportation
of the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner
is considered a "common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall
have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to charge without
discrimination such rates as may have been approved by the Secretary of
Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility.
Pertinent portion of Article 7 thereof provides:
that everything relating to the exploration for and exploitation of
petroleum . . . and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is hereby
declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a
"common carrier." In BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 . . . . Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as
amended.
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local Government
Units. — Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall not extend
to the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code.
The deliberations conducted in the House of Representatives on the Local
Government Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing
Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed to be
exempted from the taxing powers of the local government units. May we
know the reason why the transportation business is being excluded from
the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section
121 (now Sec. 131), line 16, paragraph 5. It states that local government
units may not impose taxes on the business of transportation, except as
otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book
II, one can see there that provinces have the power to impose a tax on
business enjoying a franchise at the rate of not more than one-half of 1
percent of the gross annual receipts. So, transportation contractors who
are enjoying a franchise would be subject to tax by the province. That is
the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of
taxes by local government units on the carrier business. Local government
units may impose taxes on top of what is already being imposed by the
National Internal Revenue Code which is the so-called "common carriers
tax." We do not want a duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a province may impose
this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of
the local government unit the imposition of business tax against common
carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on
its gross sales/earnings under the National Internal Revenue Code. 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.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style
TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee
Ins. Co., Inc.) respondent.
MENDOZA, J.:
This is a petition for review of the decision,1 dated May 31, 2001, of the Court
of Appeals, affirming the decision2 of the Regional Trial Court, Makati City,
Branch 148, which ordered petitioner to pay respondent, as subrogee, the
amount of P93,112.00 with legal interest, representing the value of damaged
cargo handled by petitioner, 25% thereof as attorney's fees, and the cost of the
suit.1âwphi1.nêt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal
Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time
material to this case, petitioner entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper
and 124 reels of kraft liner board from the Port Area in Manila to SMC's
warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The
cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived
in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded
from the vessel to the custody of the arrastre operator, Manila Port Services,
Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with
SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's
warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by
Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting
paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn.
The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract
for the aforementioned amount. In turn, respondent, as subrogee of SMC,
brought suit against petitioner in the Regional Trial Court, Branch 148, Makati
City, which, on December 20, 1995, rendered judgment finding petitioner liable
to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage
while in the custody of defendants. Evidence such as the Warehouse
Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries
appearing therein, classified as "TED" and "TSN", which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end
and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh.
"H" - "H-4-A") confirms the fact of the damaged condition of the
subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in
particular, which provides among others that:
" . . . we opine that damages sustained by shipment is
attributable to improper handling in transit presumably
whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain
[her] defense that [she is] are not liable. Defendant by reason of the
nature of [her] business should have devised ways and means in
order to prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to the
consignee. Defendant did not present any evidence on what
precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo
[she] shall perform such extraordinary diligence because of the
nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the
goods are proved to have been lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is shifted to
the carrier to prove that he has exercised the extraordinary diligence
required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at
the place of destination in bad order, makes out a prima facie case
against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is incumbent
upon the carrier to prove that the loss was due to accident or some
other circumstances inconsistent with its liability." (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV,
1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same
time a common carrier is supposed [to] exercise [the] extraordinary
diligence required by law, hence the extraordinary responsibility
lasts from the time the goods are unconditionally placed in the
possession of and received by the carrier for transportation until the
same are delivered actually or constructively by the carrier to the
consignee or to the person who has the right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this
petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON
THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN
INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER
AS A COMMON CARRIER AND NOT AS PRIVATE OR
SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO
THE PUBLIC.5
It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court
of Appeals held otherwise, then she is indeed not liable beyond what ordinary
diligence in the vigilance over the goods transported by her, would
require.6 Consequently, any damage to the cargo she agrees to transport cannot
be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court
of Appeals, she is not a common carrier but a private carrier because, as a
customs broker and warehouseman, she does not indiscriminately hold her
services out to the public but only offers the same to select parties with whom
she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court
dismissed a similar contention and held the party to be a common carrier, thus
-
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public."
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
. . . Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one
who offers services or solicits business only from a
narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
 carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
general business purposes, any common
carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar public
services. x x x" 8
There is greater reason for holding petitioner to be a common carrier because
the transportation of goods is an integral part of her business. To uphold
petitioner's contention would be to deprive those with whom she contracts the
protection which the law affords them notwithstanding the fact that the
obligation to carry goods for her customers, as already noted, is part and parcel
of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
...
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary
diligence in the vigilance over goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She
claims that the "spoilage or wettage" took place while the goods were in the
custody of either the carrying vessel "M/V Hayakawa Maru," which transported
the cargo to Manila, or the arrastre operator, to whom the goods were unloaded
and who allegedly kept them in open air for nine days from July 14 to July 23,
1998 notwithstanding the fact that some of the containers were deformed,
cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H),
to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on
distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of
water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly
detached loosened.10
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino
testified that he has no personal knowledge on whether the container vans were
first stored in petitioner's warehouse prior to their delivery to the consignee. She
likewise claims that after withdrawing the container vans from the arrastre
operator, her driver, Ricardo Nazarro, immediately delivered the cargo to
SMC's warehouse in Ermita, Manila, which is a mere thirty-minute drive from
the Port Area where the cargo came from. Thus, the damage to the cargo could
not have taken place while these were in her custody. 11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine
Cargo Surveyors indicates that when the shipper transferred the cargo in
question to the arrastre operator, these were covered by clean Equipment
Interchange Report (EIR) and, when petitioner's employees withdrew the cargo
from the arrastre operator, they did so without exception or protest either with
regard to the condition of container vans or their contents. The Survey Report
pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted
discharged ex vessel to dock of Pier #13 South Harbor, Manila on
14 July 1990, containerized onto 30' x 20' secure metal vans, covered
by clean EIRs. Except for slight dents and paint scratches on side
and roof panels, these containers were deemed to have [been]
received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo containers
was [withdrawn] by Transorient Container Services, Inc. . .
. without exception.
[The cargo] was finally delivered to the consignee's storage
warehouse located at Tabacalera Compound, Romualdez Street,
Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port Services Inc.,
in good order and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-
appellant from the arrastre still in good order and condition as the
same were received by the former without exception, that is, without
any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant
would report it immediately to the consignee or make an exception
on the delivery receipt or note the same in the Warehouse Entry Slip
(WES). None of these took place. To put it simply, the defendant-
appellant received the shipment in good order and condition and
delivered the same to the consignee damaged. We can only conclude
that the damages to the cargo occurred while it was in the possession
of the defendant-appellant. Whenever the thing is lost (or damaged)
in the possession of the debtor (or obligor), it shall be presumed that
the loss (or damage) was due to his fault, unless there is proof to the
contrary. No proof was proffered to rebut this legal presumption and
the presumption of negligence attached to a common carrier in case
of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not have been damaged while
in her custody as she immediately delivered the containers to SMC's compound,
suffice it to say that to prove the exercise of extraordinary diligence, petitioner
must do more than merely show the possibility that some other party could be
responsible for the damage. It must prove that it used "all reasonable means to
ascertain the nature and characteristic of goods tendered for [transport] and that
[it] exercise[d] due care in the handling [thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which
provides --
door
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
....
(4) The character of the goods or defects in the packing or in the
containers.
....
For this provision to apply, the rule is that if the improper packing or, in this
case, the defect/s in the container, is/are known to the carrier or his employees
or apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved
of liability for damage resulting therefrom.14 In this case, petitioner accepted
the cargo without exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove that she exercised
extraordinary diligence in the carriage of goods in this case or that she is exempt
from liability, the presumption of negligence as provided under Art.
173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1âwphi1.nêt
SO ORDERED.
G.R. No. 141910 August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M.
EROLES, respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June
1994 thirty (30) units of Condura S.D. white refrigerators aboard one of its
Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion
Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the
Central Luzon Appliances in Dagupan City. While the truck was traversing the
north diversion road along McArthur highway in Barangay Anupol, Bamban,
Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal,
resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to
Concepcion Industries, Inc., the value of the covered cargoes in the sum of
P204,450.00. FGU, in turn, being the subrogee of the rights and interests of
Concepcion Industries, Inc., sought reimbursement of the amount it had paid to
the latter from GPS. Since the trucking company failed to heed the claim, FGU
filed a complaint for damages and breach of contract of carriage against GPS
and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of
Makati City. In its answer, respondents asserted that GPS was the exclusive
hauler only of Concepcion Industries, Inc., since 1988, and it was not so
engaged in business as a common carrier. Respondents further claimed that the
cause of damage was purely accidental.1âwphi1.nêt
The issues having thus been joined, FGU presented its evidence, establishing
the extent of damage to the cargoes and the amount it had paid to the assured.
GPS, instead of submitting its evidence, filed with leave of court a motion to
dismiss the complaint by way of demurrer to evidence on the ground that
petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996, 1 granted the motion to dismiss,
explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is provided
that ‘Each party must prove his own affirmative allegation, xxx.’
"In the instant case, plaintiff did not present any single evidence that
would prove that defendant is a common carrier.
"x x x xxx xxx
"Accordingly, the application of the law on common carriers is not
warranted and the presumption of fault or negligence on the part of
a common carrier in case of loss, damage or deterioration of goods
during transport under 1735 of the Civil Code is not availing.
"Thus, the laws governing the contract between the owner of the
cargo to whom the plaintiff was subrogated and the owner of the
vehicle which transports the cargo are the laws on obligation and
contract of the Civil Code as well as the law on quasi delicts.
"Under the law on obligation and contract, negligence or fault is not
presumed. The law on quasi delict provides for some presumption
of negligence but only upon the attendance of some circumstances.
Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating
any traffic regulation.’
"Evidence for the plaintiff shows no proof that defendant was
violating any traffic regulation. Hence, the presumption of
negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant
is a common carrier and defendant’s driver was the one negligent,
defendant cannot be made liable for the damages of the subject
cargoes."2
The subsequent motion for reconsideration having been denied, 3 plaintiff
interposed an appeal to the Court of Appeals, contending that the trial court had
erred (a) in holding that the appellee corporation was not a common carrier
defined under the law and existing jurisprudence; and (b) in dismissing the
complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of
GPS. The appellate court, in its decision of 10 June 1999,4 discoursed, among
other things, that -
"x x x in order for the presumption of negligence provided for under
the law governing common carrier (Article 1735, Civil Code) to
arise, the appellant must first prove that the appellee is a common
carrier. Should the appellant fail to prove that the appellee is a
common carrier, the presumption would not arise; consequently, the
appellant would have to prove that the carrier was negligent.
"x x x xxx xxx
"Because it is the appellant who insists that the appellees can still be
considered as a common carrier, despite its `limited clientele,’
(assuming it was really a common carrier), it follows that it
(appellant) has the burden of proving the same. It (plaintiff-
appellant) `must establish his case by a preponderance of evidence,
which means that the evidence as a whole adduced by one side is
superior to that of the other.’ (Summa Insurance Corporation vs.
Court of Appeals, 243 SCRA 175). This, unfortunately, the
appellant failed to do -- hence, the dismissal of the plaintiff’s
complaint by the trial court is justified.
"x x x xxx xxx
"Based on the foregoing disquisitions and considering the
circumstances that the appellee trucking corporation has been `its
exclusive contractor, hauler since 1970, defendant has no choice but
to comply with the directive of its principal,’ the inevitable
conclusion is that the appellee is a private carrier.
"x x x xxx xxx
"x x x the lower court correctly ruled that 'the application of the law
on common carriers is not warranted and the presumption of fault or
negligence on the part of a common carrier in case of loss, damage
or deterioration of good[s] during transport under [article] 1735 of
the Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and
findings of fact of a trial court are entitled to great weight on appeal
and should not be disturbed unless for strong and valid reasons."5
Petitioner's motion for reconsideration was likewise denied; 6 hence, the instant
petition,7 raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A
COMMON CARRIER AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON
CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO
HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE
SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE
CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS
APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court
of Appeals to be amply justified. GPS, being an exclusive contractor and hauler
of Concepcion Industries, Inc., rendering or offering its services to no other
individual or entity, cannot be considered a common carrier. Common carriers
are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for
hire or compensation, offering their services to the public,8 whether to the
public in general or to a limited clientele in particular, but never on an exclusive
basis.9 The true test of a common carrier is the carriage of passengers or goods,
providing space for those who opt to avail themselves of its transportation
service for a fee.10Given accepted standards, GPS scarcely falls within the term
"common carrier."
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the
subrogee of Concepcion Industries, Inc., the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a corresponding that it has exercised due care in transporting the cargoes of the assured so as to
right of relief.11 The law, recognizing the obligatory force of contracts, 12 will still warrant a remand of the case to the trial court.1âwphi1.nêt
not permit a party to be set free from liability for any kind of misperformance
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court,
of the contractual undertaking or a contravention of the tenor thereof. 13 A
Branch 66, of Makati City, and the decision, dated 10 June 1999, of the Court
breach upon the contract confers upon the injured party a valid cause for
of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is
recovering that which may have been lost or suffered. The remedy serves to
concerned, but said assailed order of the trial court and decision of the appellate
preserve the interests of the promisee that may include his "expectation
court are REVERSED as regards G.P. Sarmiento Trucking Corporation which,
interest," which is his interest in having the benefit of his bargain by being put
instead, is hereby ordered to pay FGU Insurance Corporation the value of the
in as good a position as he would have been in had the contract been performed,
damaged and lost cargoes in the amount of P204,450.00. No costs.
or his "reliance interest," which is his interest in being reimbursed for loss
caused by reliance on the contract by being put in as good a position as he would
have been in had the contract not been made; or his "restitution interest," which
is his interest in having restored to him any benefit that he has conferred on the
other party.14 Indeed, agreements can accomplish little, either for their makers
or for society, unless they are made the basis for action.15 The effect of every
infraction is to create a new duty, that is, to make recompense to the one who
has been injured by the failure of another to observe his contractual
obligation16 unless he can show extenuating circumstances, like proof of his
exercise of due diligence (normally that of the diligence of a good father of a
family or, exceptionally by stipulation or by law such as in the case of common
carriers, that of extraordinary diligence) or of the attendance of fortuitous event,
to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of
carriage between it and petitioner’s assured, and admits that the cargoes it has
assumed to deliver have been lost or damaged while in its custody. In such a
situation, a default on, or failure of compliance with, the obligation – in this
case, the delivery of the goods in its custody to the place of destination - gives
rise to a presumption of lack of care and corresponding liability on the part of
the contractual obligor the burden being on him to establish otherwise. GPS has
failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence
or fault, may not himself be ordered to pay petitioner. The driver, not being a
party to the contract of carriage between petitioner’s principal and defendant,
may not be held liable under the agreement. A contract can only bind the parties
who have entered into it or their successors who have assumed their personality
or their juridical position.17 Consonantly with the axiom res inter alios acta aliis
neque nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioner’s civil action against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require the claimant for
damages to prove negligence or fault on the part of the defendant.18
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner,
holds a defendant liable where the thing which caused the injury complained of
is shown to be under the latter’s management and the accident is such that, in
the ordinary course of things, cannot be expected to happen if those who have
its management or control use proper care. It affords reasonable evidence, in
the absence of explanation by the defendant, that the accident arose from want
of care.19 It is not a rule of substantive law and, as such, it does not create an
independent ground of liability. Instead, it is regarded as a mode of proof, or a
mere procedural convenience since it furnishes a substitute for, and relieves the
plaintiff of, the burden of producing specific proof of negligence. The maxim
simply places on the defendant the burden of going forward with the
proof.20 Resort to the doctrine, however, may be allowed only when (a) the
event is of a kind which does not ordinarily occur in the absence of negligence;
(b) other responsible causes, including the conduct of the plaintiff and third
persons, are sufficiently eliminated by the evidence; and (c) the indicated
negligence is within the scope of the defendant's duty to the plaintiff. 21 Thus, it
is not applicable when an unexplained accident may be attributable to one of
several causes, for some of which the defendant could not be responsible.22
Res ipsa loquitur generally finds relevance whether or not a contractual
relationship exists between the plaintiff and the defendant, for the inference of
negligence arises from the circumstances and nature of the occurrence and not
from the nature of the relation of the parties.23 Nevertheless, the requirement
that responsible causes other than those due to defendant’s conduct must first
be eliminated, for the doctrine to apply, should be understood as being confined
only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately
attaches by a failure of the covenant or its tenor. In the case of the truck driver,
whose liability in a civil action is predicated on culpa acquiliana, while he
admittedly can be said to have been in control and management of the vehicle
which figured in the accident, it is not equally shown, however, that the accident
could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is
reversed, the movant shall be deemed to have waived the right to present
evidence.24 Thus, respondent corporation may no longer offer proof to establish
G.R. No. 149038 April 9, 2003
PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, petitioner,
vs.
PKS SHIPPING COMPANY, respondent.
VITUG, J.:
The petition before the Court seeks a review of the decision of the Court of
Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has
affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of
Makati, dismissing the complaint for damages filed by petitioner insurance
corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of
respondent PKS Shipping Company (PKS Shipping) for the shipment to
Tacloban City of seventy-five thousand (75,000) bags of cement worth Three
Million Three Hundred Seventy-Five Thousand Pesos (P3,375,000.00). DUMC
insured the goods for its full value with petitioner Philippine American General
Insurance Company (Philamgen). The goods were loaded aboard the dumb
barge Limar I belonging to PKS Shipping. On the evening of 22 December
1988, about nine o’clock, while Limar Iwas being towed by respondent’s
tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of
Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo
of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought reimbursement
from PKS Shipping of the sum paid to DUMC but the shipping company
refused to pay, prompting Philamgen to file suit against PKS Shipping with the
Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo
could have been caused either by a fortuitous event, in which case the ship
owner was not liable, or through the negligence of the captain and crew of the
vessel and that, under Article 587 of the Code of Commerce adopting the
"Limited Liability Rule," the ship owner could free itself of liability by
abandoning, as it apparently so did, the vessel with all her equipment and earned
freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in
toto the decision of the trial court. The appellate court ruled that evidence to
establish that PKS Shipping was a common carrier at the time it undertook to
transport the bags of cement was wanting because the peculiar method of the
shipping company’s carrying goods for others was not generally held out as a
business but as a casual occupation. It then concluded that PKS Shipping, not
being a common carrier, was not expected to observe the stringent extraordinary
diligence required of common carriers in the care of goods. The appellate court,
moreover, found that the loss of the goods was sufficiently established as having
been due to fortuitous event, negating any liability on the part of PKS Shipping
to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed
a patent error in ruling that PKS Shipping is not a common carrier and that it is
not liable for the loss of the subject cargo. The fact that respondent has a limited
clientele, petitioner argues, does not militate against respondent’s being a
common carrier and that the only way by which such carrier can be held exempt
for the loss of the cargo would be if the loss were caused by natural disaster or
calamity. Petitioner avers that typhoon "APIANG" has not entered the
Philippine area of responsibility and that, even if it did, respondent would not
be exempt from liability because its employees, particularly the tugmaster, have
failed to exercise due diligence to prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because
what Philamgen seeks is not a review on points or errors of law but a review of
the undisputed factual findings of the RTC and the appellate court. In any event,
PKS Shipping points out, the findings and conclusions of both courts find
support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down
to the question of whether it is a private carrier or a common carrier and, in
either case, to the other question of whether or not it has observed the proper
diligence (ordinary, if a private carrier, or extraordinary, if a common carrier)
required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly when such
findings are consistent with those of the trial court, may not at liberty be
reviewed by this Court in a petition for review under Rule 45 of the Rules of
Court.1The conclusions derived from those factual findings, however, are not
necessarily just matters of fact as when they are so linked to, or inextricably
intertwined with, a requisite appreciation of the applicable law. In such
instances, the conclusions made could well be raised as being appropriate issues
in a petition for review before this Court. Thus, an issue whether a carrier is
private or common on the basis of the facts found by a trial court or the appellate
court can be a valid and reviewable question of law.
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public."
Complementary to the codal definition is Section 13, paragraph (b), of the
Public Service Act; it defines "public service" to be –
"x x x every person that now or hereafter may own, operate, manage,
or control in the Philippines, for hire or compensation, with general
or limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier,
railroad, street railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be
its classification, freight or carrier service of any class, express
service, steamboat, or steamship, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice
plant, ice refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum, sewerage
system, wire or wireless communication systems, wire or wireless
broadcasting stations and other similar public services. x x x.
(Underscoring supplied)."
The prevailing doctrine on the question is that enunciated in the leading case
of De Guzman vs. Court of Appeals.2Applying Article 1732 of the Code, in
conjunction with Section 13(b) of the Public Service Act, this Court has held:
"The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
(in local idiom, as `a sideline’). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier
offering its services to the `general public,’ i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We
think that Article 1732 deliberately refrained from making such
distinctions.
"So understood, the concept of `common carrier’ under Article 1732
may be seen to coincide neatly with the notion of `public service,’
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code."
Much of the distinction between a "common or public carrier" and a "private or
special carrier" lies in the character of the business, such that if the undertaking
is an isolated transaction, not a part of the business or occupation, and the carrier
does not hold itself out to carry the goods for the general public or to a limited
clientele, although involving the carriage of goods for a fee,3 the person or
corporation providing such service could very well be just a private carrier. A
typical case is that of a charter party which includes both the vessel and its crew,
such as in a bareboat or demise, where the charterer obtains the use and service
of all or some part of a ship for a period of time or a voyage or voyages 4 and
gets the control of the vessel and its crew.5 Contrary to the conclusion made by
the appellate court, its factual findings indicate that PKS Shipping has engaged
itself in the business of carrying goods for others, although for a limited
clientele, undertaking to carry such goods for a fee. The regularity of its
activities in this area indicates more than just a casual activity on its
part.6 Neither can the concept of a common carrier change merely because
individual contracts are executed or entered into with patrons of the carrier.
Such restrictive interpretation would make it easy for a common carrier to
escape liability by the simple expedient of entering into those distinct
agreements with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the
proper diligence demanded of common carriers, Article 1733 of the Civil Code
requires common carriers to observe extraordinary diligence in the vigilance
over the goods they carry. In case of loss, destruction or deterioration of goods,
common carriers are presumed to have been at fault or to have acted negligently,
and the burden of proving otherwise rests on them.7 The provisions of Article
1733, notwithstanding, common carriers are exempt from liability for loss,
destruction, or deterioration of the goods due to any of the following causes:
 (1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers; and
(5) Order or act of competent public authority.8
The appellate court ruled, gathered from the testimonies and sworn marine
protests of the respective vessel masters of Limar I and MT Iron Eagle, that
there was no way by which the barge’s or the tugboat’s crew could have
prevented the sinking of Limar I. The vessel was suddenly tossed by waves of
extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of
1.5 knots resulting in the entry of water into the barge’s hatches. The official
Certificate of Inspection of the barge issued by the Philippine Coastguard and
the Coastwise Load Line Certificate would attest to the seaworthiness of Limar
I and should strengthen the factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of
the recognized exceptions from the rule - (1) when the factual findings of the
Court of Appeals and the trial court are contradictory; (2) when the conclusion
is a finding grounded entirely on speculation, surmises, or conjectures; (3) when
the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd, or impossible; (4) when there is a grave abuse of
discretion in the appreciation of facts; (5) when the appellate court, in making
its findings, went beyond the issues of the case and such findings are contrary
to the admissions of both appellant and appellee; (6) when the judgment of the
Court of Appeals is premised on a misapprehension of facts; (7) when the Court
of Appeals failed to notice certain relevant facts which, if properly considered,
would justify a different conclusion; (8) when the findings of fact are
themselves conflicting; (9) when the findings of fact are conclusions without
citation of the specific evidence on which they are based; and (10) when the
findings of fact of the Court of Appeals are premised on the absence of evidence
but such findings are contradicted by the evidence on record – would appear to
be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS
Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.

THIRD DIVISION
G.R. No. 147246 August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents.
PUNO, J.:
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No.
49195 and February 21, 2001 Resolution2 affirming with modification the April
6, 1994 Decision3 of the Regional Trial Court of Manila which found petitioner
liable to pay private respondent the amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk,
valued at US$423,192.354 was shipped by Marubeni American Corporation of
Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for
delivery to the consignee, General Milling Corporation in Manila, evidenced by
Bill of Lading No. PTD/Man-4.5The shipment was insured by the private
respondent Prudential Guarantee and Assurance, Inc. against loss or damage
for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.6
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was
transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc.
The petitioner was contracted by the consignee as carrier to deliver the cargo to
consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge
PSTSI III, evidenced by Lighterage Receipt No. 03647 for delivery to
consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended
due to a warning of an incoming typhoon. On August 22, 1990, the petitioner
proceeded to pull the barge to Engineering Island off Baseco to seek shelter
from the approaching typhoon. PSTSI III was tied down to other barges which
arrived ahead of it while weathering out the storm that night. A few days after,
the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. The petitioner filed a Marine Protest on
August 28, 1990.8 It likewise secured the services of Gaspar Salvaging
Corporation which refloated the barge.9 The hole was then patched with clay
and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards
the consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa
spillways, the barge again ran aground due to strong current. To avoid the
complete sinking of the barge, a portion of the goods was transferred to three
other barges.10
The next day, September 6, 1990, the towing bits of the barge broke. It sank
completely, resulting in the total loss of the remaining cargo.11 A second Marine
Protest was filed on September 7, 1990.12
On September 14, 1990, a bidding was conducted to dispose of the damaged
wheat retrieved and loaded on the three other barges.13 The total proceeds from
the sale of the salvaged cargo was P201,379.75.14
On the same date, September 14, 1990, consignee sent a claim letter to the
petitioner, and another letter dated September 18, 1990 to the private respondent
for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the
amount of P4,104,654.22.15Thereafter, as subrogee, it sought recovery of said
amount from the petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner
for recovery of the amount of indemnity, attorney's fees and cost of
suit.16 Petitioner filed its answer with counterclaim.17
The Regional Trial Court ruled in favor of the private respondent. The
dispositive portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered
ordering defendant Asia Lighterage & Shipping, Inc. liable to pay
plaintiff Prudential Guarantee & Assurance Co., Inc. the sum
of P4,104,654.22 with interest from the date complaint was filed on
July 3, 1991 until fully satisfied plus 10% of the amount awarded as
and for attorney's fees. Defendant's counterclaim is hereby
DISMISSED. With costs against defendant.18
Petitioner appealed to the Court of Appeals insisting that it is not a common
carrier. The appellate court affirmed the decision of the trial court with
modification. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED
with modification in the sense that the salvage value of P201,379.75
shall be deducted from the amount of P4,104,654.22. Costs against
appellant.
SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied
by the appellate court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly
committed by the appellate court, viz:19
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN
A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN
A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO
THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL
CODE APPLICABLE TO COMMON CARRIERS, "THE LOSS
OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN
ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED."
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN
A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED
TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT
IN ITS CARE AND CUSTODY OF THE CONSIGNEE'S CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it
exercised extraordinary diligence in its care and custody of the
consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier.
Allegedly, it has no fixed and publicly known route, maintains no terminals,
and issues no tickets. It points out that it is not obliged to carry indiscriminately
for any person. It is not bound to carry goods unless it consents. In short, it does
not hold out its services to the general public.20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the definition of common
carriers in Article 1732 of the Civil Code makes no distinction between one
whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity. We also did not
distinguish between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Further, we ruled that Article 1732 does not
distinguish between a carrier offering its services to the general public, and one
who offers services or solicits business only from a narrow segment of the
general population.
In the case at bar, the principal business of the petitioner is that of lighterage
and drayage22 and it offers its barges to the public for carrying or transporting
goods by water for compensation. Petitioner is clearly a common carrier. In De
Guzman, supra,23 we considered private respondent Ernesto Cendaña to be a
common carrier even if his principal occupation was not the carriage of goods
for others, but that of buying used bottles and scrap metal in Pangasinan and
selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of
goods is done on an irregular rather than scheduled manner, and with an only
limited clientele. A common carrier need not have fixed and publicly known
routes. Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos DIRECT-EXAMINATION BY ATTY. LEE:33
vs. Court of Appeals.24 The test to determine a common carrier is "whether the
xxx xxx xxx
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 q - Now, Mr. Witness, did it not occur to you it might be safer
extent of the business transacted."25 In the case at bar, the petitioner admitted to just allow the Barge to lie where she was instead of towing it?
that it is engaged in the business of shipping and lighterage,26 offering its barges
to the public, despite its limited clientele for carrying or transporting goods by a - Since that time that the Barge was refloated, GMC (General
Milling Corporation, the consignee) as I have said was in a hurry for
water for compensation.27
their goods to be delivered at their Wharf since they needed badly
On the second issue, we uphold the findings of the lower courts that petitioner the wheat that was loaded in PSTSI-3. It was needed badly by the
failed to exercise extraordinary diligence in its care and custody of the consignee.
consignee's goods.
q - And this is the reason why you towed the Barge as you did?
Common carriers are bound to observe extraordinary diligence in the vigilance
over the goods transported by them.28 They are presumed to have been at fault a - Yes, sir.
or to have acted negligently if the goods are lost, destroyed or deteriorated.29 To xxx xxx xxx
overcome the presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised CROSS-EXAMINATION BY ATTY. IGNACIO:34
extraordinary diligence. There are, however, exceptions to this rule. Article xxx xxx xxx
1734 of the Civil Code enumerates the instances when the presumption of
negligence does not attach: q - And then from ISLOFF Terminal you proceeded to the
premises of the GMC? Am I correct?
Art. 1734. Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the a - The next day, in the morning, we hired for additional two
following causes only: (2) tugboats as I have stated.

(1) Flood, storm, earthquake, lightning, or other natural q - Despite of the threats of an incoming typhoon as you testified
disaster or calamity; a while ago?

(2) Act of the public enemy in war, whether international a - It is already in an inner portion of Pasig River. The typhoon
or civil; would be coming and it would be dangerous if we are in the vicinity
of Manila Bay.
(3) Act or omission of the shipper or owner of the goods;
q - But the fact is, the typhoon was incoming? Yes or no?
(4) The character of the goods or defects in the packing
or in the containers; a - Yes.

(5) Order or act of competent public authority. q - And yet as a standard operating procedure of your Company,
you have to secure a sort of Certification to determine the weather
In the case at bar, the barge completely sank after its towing bits broke, resulting condition, am I correct?
in the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner a - Yes, sir.
failed to prove that the typhoon is the proximate and only cause of the loss of q - So, more or less, you had the knowledge of the incoming
the goods, and that it has exercised due diligence before, during and after the typhoon, right?
occurrence of the typhoon to prevent or minimize the loss.30 The evidence show
that, even before the towing bits of the barge broke, it had already previously a - Yes, sir.
sustained damage when it hit a sunken object while docked at the Engineering q - And yet you proceeded to the premises of the GMC?
Island. It even suffered a hole. Clearly, this could not be solely attributed to the
typhoon. The partly-submerged vessel was refloated but its hole was patched a - ISLOFF Terminal is far from Manila Bay and anytime even
with only clay and cement. The patch work was merely a provisional remedy, with the typhoon if you are already inside the vicinity or inside Pasig
not enough for the barge to sail safely. Thus, when petitioner persisted to entrance, it is a safe place to tow upstream.
proceed with the voyage, it recklessly exposed the cargo to further damage. A Accordingly, the petitioner cannot invoke the occurrence of the typhoon as
portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan- force majeure to escape liability for the loss sustained by the private respondent.
Gatue Adjustment Co., Inc., states: Surely, meeting a typhoon head-on falls short of due diligence required from a
CROSS-EXAMINATION BY ATTY. DONN LEE:31 common carrier. More importantly, the officers/employees themselves of
petitioner admitted that when the towing bits of the vessel broke that caused its
xxx xxx xxx sinking and the total loss of the cargo upon reaching the Pasig River, it was no
q - Can you tell us what else transpired after that incident? longer affected by the typhoon. The typhoon then is not the proximate cause of
the loss of the cargo; a human factor, i.e., negligence had intervened.
a - After the first accident, through the initiative of the barge
owners, they tried to pull out the barge from the place of the IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of
accident, and bring it to the anchor terminal for safety, then after Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution
deciding if the vessel is stabilized, they tried to pull it to the dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.
consignee's warehouse, now while on route another accident SO ORDERED.
occurred, now this time the barge totally hitting something in the
course.
q - You said there was another accident, can you tell the court
the nature of the second accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you
know what caused the sinking?
a - Mostly it was related to the first accident because there was
already a whole (sic) on the bottom part of the barge.
xxx xxx xxx
This is not all. Petitioner still headed to the consignee's wharf despite
knowledge of an incoming typhoon. During the time that the barge was heading
towards the consignee's wharf on September 5, 1990, typhoon "Loleng" has
already entered the Philippine area of responsibility.32 A part of the testimony
of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:
FIRST DIVISION
G.R. No. 138334 August 25, 2003
ESTELA L. CRISOSTOMO, Petitioner,
vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS
INTERNATIONAL, INC., Respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed "Jewels
of Europe". The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included
airfare, and the booking fee was also waived because petitioner’s niece, Meriam
Menor, was respondent company’s ticketing manager.
Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991
– a Wednesday – to deliver petitioner’s travel documents and plane tickets.
Petitioner, in turn, gave Menor the full payment for the package tour. Menor
then told her to be at the Ninoy Aquino International Airport (NAIA) on
Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioner’s dismay, she discovered that the flight she was
supposed to take had already departed the previous day. She learned that her
plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour – the
"British Pageant" – which included England, Scotland and Wales in its
itinerary. For this tour package, petitioner was asked anew to pay US$785.00
or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and commenced the trip in
July 1991.
Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she
paid for "Jewels of Europe" and the amount she owed respondent for the
"British Pageant" tour. Despite several demands, respondent company refused
to reimburse the amount, contending that the same was non-
refundable.1 Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages, which was docketed
as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court
of Makati City.
2 petition under Rule 45 on the following grounds:
In her complaint, petitioner alleged that her failure to join "Jewels of Europe"
was due to respondent’s fault since it did not clearly indicate the departure date
on the plane ticket. Respondent was also negligent in informing her of the
wrong flight schedule through its employee Menor. She insisted that the
"British Pageant" was merely a substitute for the "Jewels of Europe" tour, such
that the cost of the former should be properly set-off against the sum paid for
the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioner’s failure to join the first tour.
Chipeco insisted that petitioner was informed of the correct departure date,
which was clearly and legibly printed on the plane ticket. The travel documents
were given to petitioner two days ahead of the scheduled trip. Petitioner had
only herself to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for
"Jewels of Europe", considering that the same had already been remitted to its
principal in Singapore, Lotus Travel Ltd., which had already billed the same
even if petitioner did not join the tour. Lotus’ European tour organizer, Insight
International Tours Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this reason, it is accepted
industry practice to disallow refund for individuals who failed to take a booked
tour.3
Lastly, respondent maintained that the "British Pageant" was not a substitute for
the package tour that petitioner missed. This tour was independently procured
by petitioner after realizing that she made a mistake in missing her flight for
"Jewels of Europe". Petitioner was allowed to make a partial payment of only
US$300.00 for the second tour because her niece was then an employee of the
travel agency. Consequently, respondent prayed that petitioner be ordered to
pay the balance of P12,901.00 for the "British Pageant" package tour.
After due proceedings, the trial court rendered a decision, 4 the dispositive part
of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the
amount of Fifty Three Thousand Nine Hundred Eighty Nine Pesos
and Forty Three Centavos (P53,989.43) with legal interest thereon
at the rate of twelve percent (12%) per annum starting January 16,
1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five
Thousand (P5,000.00) Pesos as and for reasonable attorney’s fees;
3. Dismissing the defendant’s counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.5
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioner’s testimony. However, petitioner should
have verified the exact date and time of departure by looking at her ticket and
should have simply not relied on Menor’s verbal representation. The trial court
thus declared that petitioner was guilty of contributory negligence and
accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent
than respondent because as a lawyer and well-traveled person, she should have
known better than to simply rely on what was told to her. This being so, she is
not entitled to any form of damages. Petitioner also forfeited her right to the
"Jewels of Europe" tour and must therefore pay respondent the balance of the
price for the "British Pageant" tour. The dispositive portion of the judgment
appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court
dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new
judgment is hereby ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00, representing the balance of the
price of the British Pageant Package Tour, the same to earn legal interest at the
rate of SIX PERCENT (6%) per annum, to be computed from the time the
counterclaim was filed until the finality of this decision. After this decision
becomes final and executory, the rate of TWELVE PERCENT (12%) interest
per annum shall be additionally imposed on the total obligation until payment
thereof is satisfied. The award of attorney’s fees is DELETED. Costs against
the plaintiff-appellee.
SO ORDERED.6
Upon denial of her motion for reconsideration,7 petitioner filed the instant
I
It is respectfully submitted that the Honorable Court of Appeals
committed a reversible error in reversing and setting aside the
decision of the trial court by ruling that the petitioner is not entitled
to a refund of the cost of unavailed "Jewels of Europe" tour she being
equally, if not more, negligent than the private respondent, for in the
contract of carriage the common carrier is obliged to observe utmost
care and extra-ordinary diligence which is higher in degree than the
ordinary diligence required of the passenger. Thus, even if the
petitioner and private respondent were both negligent, the petitioner
cannot be considered to be equally, or worse, more guilty than the
private respondent. At best, petitioner’s negligence is only
contributory while the private respondent [is guilty] of gross
negligence making the principle of pari delicto inapplicable in the
case;
II
The Honorable Court of Appeals also erred in not ruling that the
"Jewels of Europe" tour was not indivisible and the amount paid
therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the
consequential damages due her as a result of breach of contract of
carriage.8
Petitioner contends that respondent did not observe the standard of care required
of a common carrier when it informed her wrongly of the flight schedule. She
could not be deemed more negligent than respondent since the latter is required
by law to exercise extraordinary diligence in the fulfillment of its obligation. If
she were negligent at all, the same is merely contributory and not the proximate
cause of the damage she suffered. Her loss could only be attributed to
respondent as it was the direct consequence of its employee’s gross negligence.
Petitioner’s contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons,
things, or news from one place to another for a fixed price. 9 Such person or
association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.10 A common carrier is defined
under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to
the public.
It is obvious from the above definition that respondent is not an entity engaged
in the business of transporting either passengers or goods and is therefore,
neither a private nor a common carrier. Respondent did not undertake to
transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondent’s
services as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondent’s
obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained directly to the airline.
The object of petitioner’s contractual relation with respondent is the latter’s
service of arranging and facilitating petitioner’s booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and
not one of carriage. Petitioner’s submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latter’s
obligation under the contract. For reasons of public policy, a common carrier in
a contract of carriage is bound by law to carry passengers as far as human care
and foresight can provide using the utmost diligence of very cautious persons
and with due regard for all the circumstances.11 As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound
under the law to observe extraordinary diligence in the performance of its
obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family under
Article 1173 of the Civil Code.12 This connotes reasonable care consistent with
that which an ordinarily prudent person would have observed when confronted
with a similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent
act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence.13
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioner’s testimony was
accepted as indubitable evidence of Menor’s alleged negligent act since
respondent did not call Menor to the witness stand to refute the allegation. The
lower court applied the presumption under Rule 131, Section 3 (e)14 of the Rules
of Court that evidence willfully suppressed would be adverse if produced and
thus considered petitioner’s uncontradicted testimony to be sufficient proof of
her claim.
On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioner’s assertion is belied by the evidence on record.
The date and time of departure was legibly written on the plane ticket and the
travel papers were delivered two days in advance precisely so that petitioner
could prepare for the trip. It performed all its obligations to enable petitioner to
join the tour and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondent’s failure to present Menor as witness to rebut petitioner’s testimony
could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint,15 thereby making it
physically impossible for respondent to present her as a witness. Then too, even
if it were possible for respondent to secure Menor’s testimony, the presumption
under Rule 131, Section 3(e) would still not apply. The opportunity and
possibility for obtaining Menor’s testimony belonged to both parties,
considering that Menor was not just respondent’s employee, but also
petitioner’s niece. It was thus error for the lower court to invoke the
presumption that respondent willfully suppressed evidence under Rule 131,
Section 3(e). Said presumption would logically be inoperative if the evidence
is not intentionally omitted but is simply unavailable, or when the same could
have been obtained by both parties.16
In sum, we do not agree with the finding of the lower court that Menor’s
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menor’s negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioner’s
uncorroborated narration of the events. It is well-settled that the party alleging
a fact has the burden of proving it and a mere allegation cannot take the place
of evidence.17 If the plaintiff, upon whom rests the burden of proving his cause
of action, fails to show in a satisfactory manner facts upon which he bases his
claim, the defendant is under no obligation to prove his exception or defense. 18
Contrary to petitioner’s claim, the evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket19 issued to petitioner clearly
reflected the departure date and time, contrary to petitioner’s contention. The
travel documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioner’s hotel accommodation as well
as food, land transfers and sightseeing excursions, in accordance with its
avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care
of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation so
demands.20 There is no fixed standard of diligence applicable to each and every
contractual obligation and each case must be determined upon its particular
facts. The degree of diligence required depends on the circumstances of the
specific obligation and whether one has been negligent is a question of fact that
is to be determined after taking into account the particulars of each
case.21 1âwphi1
The lower court declared that respondent’s employee was negligent. This
factual finding, however, is not supported by the evidence on record. While
factual findings below are generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial court overlooked, misunderstood,
or misapplied some facts or circumstances of weight and substance which will
affect the result of the case.22
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision
of the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED.
Accordingly, petitioner is ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British Pageant Package Tour, with
legal interest thereon at the rate of 6% per annum, to be computed from the time
the counterclaim was filed until the finality of this Decision. After this Decision
becomes final and executory, the rate of 12% per annum shall be imposed until
the obligation is fully settled, this interim period being deemed to be by then an
equivalent to a forbearance of credit.23
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, Respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision 1 of the Court of Appeals,
as well as its Resolution2 dated September 28, 2001 denying the motion for
reconsideration, which affirmed that of Branch 21 of the Regional Trial Court
(RTC) of Manila in Civil Case No. 92-631323 holding petitioner Schmitz
Transport Brokerage Corporation (Schmitz Transport), together with Black Sea
Shipping Corporation (Black Sea), represented by its ship agent Inchcape
Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the
loss of 37 hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of
Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a vessel of Russian
registry and owned by Black Sea) 545 hot rolled steel sheets in coil weighing
6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the
consignee, Little Giant Steel Pipe Corporation (Little Giant), 4 were insured
against all risks with Industrial Insurance Company Ltd. (Industrial Insurance)
under Marine Policy No. M-91-3747-TIS.5
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine
Ports Authority (PPA) assigned it a place of berth at the outside breakwater at
the Manila South Harbor.6
Schmitz Transport, whose services the consignee engaged to secure the
requisite clearances, to receive the cargoes from the shipside, and to deliver
them to its (the consignee’s) warehouse at Cainta, Rizal, 7 in turn engaged the
services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the
barge "Erika V" to shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge
alongside the vessel, left and returned to the port terminal. 9 At 9:00 p.m.,
arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the
545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had
become inclement due to an approaching storm, the unloading unto the barge
of the 37 coils was accomplished.10 No tugboat pulled the barge back to the pier,
however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the crew of the
barge abandoned it and transferred to the vessel. The barge pitched and rolled
with the waves and eventually capsized, washing the 37 coils into the sea. 12 At
7:00 a.m., a tugboat finally arrived to pull the already empty and damaged barge
back to the pier.13
Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.14
Little Giant thus filed a formal claim against Industrial Insurance which paid it
the amount of ₱5,246,113.11. Little Giant thereupon executed a subrogation
receipt15 in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and
Black Sea through its representative Inchcape (the defendants) before the RTC
of Manila, for the recovery of the amount it paid to Little Giant plus adjustment
fees, attorney’s fees, and litigation expenses.16
Industrial Insurance faulted the defendants for undertaking the unloading of the
cargoes while typhoon signal No. 1 was raised in Metro Manila. 17
By Decision of November 24, 1997, Branch 21 of the RTC held all the
defendants negligent for unloading the cargoes outside of the breakwater
notwithstanding the storm signal.18 The dispositive portion of the decision
reads:
WHEREFORE, premises considered, the Court renders judgment in favor of
the plaintiff, ordering the defendants to pay plaintiff jointly and severally the
sum of ₱5,246,113.11 with interest from the date the complaint was filed until
fully satisfied, as well as the sum of ₱5,000.00 representing the adjustment fee
plus the sum of 20% of the amount recoverable from the defendants as
attorney’s fees plus the costs of suit. The counterclaims and cross claims of
defendants are hereby DISMISSED for lack of [m]erit. 19
To the trial court’s decision, the defendants Schmitz Transport and TVI filed a
joint motion for reconsideration assailing the finding that they are common
carriers and the award of excessive attorney’s fees of more than ₱1,000,000.
And they argued that they were not motivated by gross or evident bad faith and
that the incident was caused by a fortuitous event. 20
By resolution of February 4, 1998, the trial court denied the motion for
reconsideration. 21
All the defendants appealed to the Court of Appeals which, by decision of June
27, 2001, affirmed in toto the decision of the trial court, 22 it finding that all the
defendants were common carriers — Black Sea and TVI for engaging in the
transport of goods and cargoes over the seas as a regular business and not as an
isolated transaction,23 and Schmitz Transport for entering into a contract with
Little Giant to transport the cargoes from ship to port for a fee.24
In holding all the defendants solidarily liable, the appellate court ruled that
"each one was essential such that without each other’s contributory negligence
the incident would not have happened and so much so that the person
principally liable cannot be distinguished with sufficient accuracy."25
In discrediting the defense of fortuitous event, the appellate court held that
"although defendants obviously had nothing to do with the force of nature, they
however had control of where to anchor the vessel, where discharge will take
place and even when the discharging will commence."26
The defendants’ respective motions for reconsideration having been denied by
Resolution27 of September 28, 2001, Schmitz Transport (hereinafter referred to
as petitioner) filed the present petition against TVI, Industrial Insurance and
Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting
for its principal, consignee Little Giant, hence, the transportation contract was
by and between Little Giant and TVI.28
By Resolution of January 23, 2002, herein respondents Industrial Insurance,
Black Sea, and TVI were required to file their respective Comments.29
By its Comment, Black Sea argued that the cargoes were received by the
consignee through petitioner in good order, hence, it cannot be faulted, it having
had no control and supervision thereover.30
For its part, TVI maintained that it acted as a passive party as it merely received
the cargoes and transferred them unto the barge upon the instruction of
petitioner.31
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent
of any act of negligence on the part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black
Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any
party from any and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation requires
the assumption of risk, no person shall be responsible for those events which
could not be foreseen, or which though foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to comply
with his obligation, must be independent of human will; (2) it must be
impossible to foresee the event which constitute the caso fortuito, or if it can be
foreseen it must be impossible to avoid; (3) the occurrence must be such as to
render it impossible for the debtor to fulfill his obligation in any manner; and
(4) the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor.32
[T]he principle embodied in the act of God doctrine strictly requires that the act
must be occasioned solely by the violence of nature. Human intervention is to
be excluded from creating or entering into the cause of the mischief. When the
effect is found to be in part the result of the participation of man, whether due
to his active intervention or neglect or failure to act, the whole occurrence is
then humanized and removed from the rules applicable to the acts of God. 33
The appellate court, in affirming the finding of the trial court that human
intervention in the form of contributory negligence by all the defendants
resulted to the loss of the cargoes,34 held that unloading outside the breakwater,
instead of inside the breakwater, while a storm signal was up constitutes
negligence.35 It thus concluded that the proximate cause of the loss was Black
Sea’s negligence in deciding to unload the cargoes at an unsafe place and while
a typhoon was approaching.36
From a review of the records of the case, there is no indication that there was
greater risk in loading the cargoes outside the breakwater. As the defendants
proffered, the weather on October 26, 1991 remained normal with moderate sea
condition such that port operations continued and proceeded normally. 37
The weather data report,38 furnished and verified by the Chief of the Climate
Data Section of PAG-ASA and marked as a common exhibit of the parties,
states that while typhoon signal No. 1 was hoisted over Metro Manila on
October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00
p.m. of October 26, 1991 was moderate. It cannot, therefore, be said that the
defendants were negligent in not unloading the cargoes upon the barge on
October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were
completely loaded by 12:30 in the morning39 is, however, a material fact which
the appellate court failed to properly consider and appreciate40 — the proximate
cause of the loss of the cargoes. Had the barge been towed back promptly to the
pier, the deteriorating sea conditions notwithstanding, the loss could have been
avoided. But the barge was left floating in open sea until big waves set in at
5:30 a.m., causing it to sink along with the cargoes.41 The loss thus falls outside
the "act of God doctrine."
The proximate cause of the loss having been determined, who among the parties
is/are responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the appellate court, finds
that petitioner is a common carrier. For it undertook to transport the cargoes
from the shipside of "M/V Alexander Saveliev" to the consignee’s warehouse
at Cainta, Rizal. As the appellate court put it, "as long as a person or corporation
holds [itself] to the public for the purpose of transporting goods as [a] business,
[it] is already considered a common carrier regardless if [it] owns the vehicle to
be used or has to hire one."42 That petitioner is a common carrier, the testimony
of its own Vice-President and General Manager Noel Aro that part of the
services it offers to its clients as a brokerage firm includes the transportation of
cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive
Vice-President and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport
business of the company. I also handle the various division heads of the
company for operation matters, and all other related functions that the President
may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will
you please tell the Honorable Court if you came to know the company by the
name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you
can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work
or duty did you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of
Customs. We [are] also in-charged of the delivery of the goods to their
warehouses. We also handled the clearances of their shipment at the Bureau of
Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe
Corporation with regards to this shipment? What work did you do with this
shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then
the delivery of [the] cargo[es] from lighter to BASECO then to the truck and to
the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you
are supposed to perform, what equipment do (sic) you require or did you use in
order to effect this unloading, transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading
[from] vessel to lighter, and on this we hired or we sub-contracted with
[T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also, in
BASECO compound we are leasing cranes to have the cargo unloaded from the
barge to trucks, [and] then we used trucks to deliver [the cargoes] to the
consignee’s warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignee’s
warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted
trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is
it you have to contract for the barges of Transport Ventures Incorporated in this
particular operation?
A: Firstly, we don’t own any barges. That is why we hired the services of
another firm whom we know [al]ready for quite sometime, which is Transport
Ventures, Inc. (Emphasis supplied)43
It is settled that under a given set of facts, a customs broker may be regarded as
a common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The
Honorable Court of Appeals,44 held:
The appellate court did not err in finding petitioner, a customs broker, to be also
a common carrier, as defined under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal business activity
is the carrying of goods and one who does such carrying only as an ancillary
activity. The contention, therefore, of petitioner that it is not a common carrier
but a customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is bereft of merit.
It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held that as the
transportation of goods is an integral part of a customs broker, the customs
broker is also a common carrier. For to declare otherwise "would be to deprive
those with whom [it] contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for [its] customers,
is part and parcel of petitioner’s business."47
As for petitioner’s argument that being the agent of Little Giant, any negligence
it committed was deemed the negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of
the cargoes. In effecting the transportation of the cargoes from the shipside and
into Little Giant’s warehouse, however, petitioner was discharging its own
personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of
TVI as handler48 to provide the barge and the tugboat. In their Service
Contract,49 while Little Giant was named as the consignee, petitioner did not
disclose that it was acting on commission and was chartering the vessel for
Little Giant.50 Little Giant did not thus automatically become a party to the
Service Contract and was not, therefore, bound by the terms and conditions
therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI
based thereon but it can maintain a cause of action for negligence.51
In the case of TVI, while it acted as a private carrier for which it was under no
duty to observe extraordinary diligence, it was still required to observe ordinary
diligence to ensure the proper and careful handling, care and discharge of the
carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and corresponds
with the circumstances of the persons, of the time and of the place. When
negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph
2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be
required.
Was the reasonable care and caution which an ordinarily prudent person would
have used in the same situation exercised by TVI?52
This Court holds not.
TVI’s failure to promptly provide a tugboat did not only increase the risk that is made (at which the time the quantification of damages may be deemed to
might have been reasonably anticipated during the shipside operation, but was have been reasonably ascertained).65
the proximate cause of the loss. A man of ordinary prudence would not leave
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz
a heavily loaded barge floating for a considerable number of hours, at such a
Transport & Brokerage Corporation, and Transport Venture Incorporation
precarious time, and in the open sea, knowing that the barge does not have any
jointly and severally liable for the amount of ₱5,246,113.11 with the
power of its own and is totally defenseless from the ravages of the sea. That it
MODIFICATION that interest at SIX PERCENT per annum of the amount due
was nighttime and, therefore, the members of the crew of a tugboat would be
should be computed from the promulgation on November 24, 1997 of the
charging overtime pay did not excuse TVI from calling for one such tugboat.
decision of the trial court.
As for petitioner, for it to be relieved of liability, it should, following Article
Costs against petitioner.
173953 of the Civil Code, prove that it exercised due diligence to prevent or
minimize the loss, before, during and after the occurrence of the storm in order SO ORDERED.
that it may be exempted from liability for the loss of the goods.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.
While petitioner sent checkers54 and a supervisor55 on board the vessel to
counter-check the operations of TVI, it failed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to arrange
for the prompt towage of the barge despite the deteriorating sea conditions, it
should have summoned the same or another tugboat to extend help, but it did
not.
This Court holds then that petitioner and TVI are solidarily liable56 for the loss
of the cargoes. The following pronouncement of the Supreme Court is
instructive:
The foundation of LRTA’s liability is the contract of carriage and its obligation
to indemnify the victim arises from the breach of that contract by reason of its
failure to exercise the high diligence required of the common carrier. In the
discharge of its commitment to ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself of the services of an outsider or
an independent firm to undertake the task. In either case, the common carrier is
not relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for
tort under the provisions of Article 2176 and related provisions, in conjunction
with Article 2180 of the Civil Code. x x x [O]ne might ask further, how then
must the liability of the common carrier, on one hand, and an independent
contractor, on the other hand, be described? It would be solidary. A contractual
obligation can be breached by tort and when the same act or omission causes
the injury, one resulting in culpa contractual and the other in culpa aquiliana,
Article 2194 of the Civil Code can well apply. In fine, a liability for tort may
arise even under a contract, where tort is that which breaches the contract. Stated
differently, when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed
between the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.57
As for Black Sea, its duty as a common carrier extended only from the time the
goods were surrendered or unconditionally placed in its possession and received
for transportation until they were delivered actually or constructively to
consignee Little Giant.58
Parties to a contract of carriage may, however, agree upon a definition of
delivery that extends the services rendered by the carrier. In the case at bar, Bill
of Lading No. 2 covering the shipment provides that delivery be made "to the
port of discharge or so near thereto as she may safely get, always afloat."59 The
delivery of the goods to the consignee was not from "pier to pier" but from the
shipside of "M/V Alexander Saveliev" and into barges, for which reason the
consignee contracted the services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant, through petitioner, it had
discharged its duty.60
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorney’s fees in an amount over ₱1,000,000.00 to
Industrial Insurance, for lack of factual and legal basis, this Court sets it aside.
While Industrial Insurance was compelled to litigate its rights, such fact by itself
does not justify the award of attorney’s fees under Article 2208 of the Civil
Code. For no sufficient showing of bad faith would be reflected in a party’s
persistence in a case other than an erroneous conviction of the righteousness of
his cause.61 To award attorney’s fees to a party just because the judgment is
rendered in its favor would be tantamount to imposing a premium on one’s right
to litigate or seek judicial redress of legitimate grievances.62
On the award of adjustment fees: The adjustment fees and expense of divers
were incurred by Industrial Insurance in its voluntary but unsuccessful efforts
to locate and retrieve the lost cargo. They do not constitute actual damages. 63
As for the court a quo’s award of interest on the amount claimed, the same calls
for modification following the ruling in Eastern Shipping Lines, Inc. v. Court
of Appeals64 that when the demand cannot be reasonably established at the time
the demand is made, the interest shall begin to run not from the time the claim
is made judicially or extrajudicially but from the date the judgment of the court
G.R. No. 165647 March 26, 2009
PHILIPPINES FIRST INSURANCE CO., INC., Petitioner,
vs.
WALLEM PHILS. SHIPPING, INC., UNKNOWN OWNER AND/OR
UNKNOWN CHARTERER OF THE VESSEL M/S "OFFSHORE
MASTER" AND "SHANGHAI FAREAST SHIP BUSINESS
COMPANY," Respondents.
DECISION
TINGA, J.:
Before us is a Rule 45 petition1 which seeks the reversal of the Decision2 and
Resolution3 of the Court of Appeals in CA-G.R. No. 61885. The Court of
Appeals reversed the Decision4 of the Regional Trial Court (RTC) of Manila,
Branch 55 in Civil Case No. 96-80298, dismissing the complaint for sum of
money.
The facts of the case follow.5
On or about 2 October 1995, Anhui Chemicals Import & Export Corporation
loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of
sodium sulphate anhydrous 99 PCT Min. (shipment), complete and in good
order for transportation to and delivery at the port of Manila for consignee, L.G.
Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill of Lading.
The Bill of Lading reflects the gross weight of the total cargo at 500,200
kilograms.6 The Owner and/or Charterer of M/V Offshore Master is unknown
while the shipper of the shipment is Shanghai Fareast Ship Business Company.
Both are foreign firms doing business in the Philippines, thru its local ship
agent, respondent Wallem Philippines Shipping, Inc. (Wallem). 7
On or about 16 October 1995, the shipment arrived at the port of Manila on
board the vessel M/S Offshore Master from which it was subsequently
discharged. It was disclosed during the discharge of the shipment from the
carrier that 2,426 poly bags (bags) were in bad order and condition, having
sustained various degrees of spillages and losses. This is evidenced by the Turn
Over Survey of Bad Order Cargoes (turn-over survey) of the arrastre operator,
Asian Terminals, Inc. (arrastre operator).8 The bad state of the bags is also
evinced by the arrastre operator’s Request for Bad Order Survey. 9
Asia Star Freight Services, Inc. undertook the delivery of the subject shipment
from the pier to the consignee’s warehouse in Quezon City, 10 while the final
inspection was conducted jointly by the consignee’s representative and the
cargo surveyor. During the unloading, it was found and noted that the bags had
been discharged in damaged and bad order condition. Upon inspection, it was
discovered that 63,065.00 kilograms of the shipment had sustained unrecovered
spillages, while 58,235.00 kilograms had been exposed and contaminated,
resulting in losses due to depreciation and downgrading.11
On 29 April 1996, the consignee filed a formal claim with Wallem for the value
of the damaged shipment, to no avail. Since the shipment was insured with
petitioner Philippines First Insurance Co., Inc. against all risks in the amount of
₱2,470,213.50,12 the consignee filed a formal claim13 with petitioner for the
damage and losses sustained by the shipment. After evaluating the invoices, the
turn-over survey, the bad order certificate and other documents, 14petitioner
found the claim to be in order and compensable under the marine insurance
policy. Consequently, petitioner paid the consignee the sum of ₱397,879.69 and
the latter signed a subrogation receipt.
Petitioner, in the exercise of its right of subrogation, sent a demand letter to
Wallem for the recovery of the amount paid by petitioner to the consignee.
However, despite receipt of the letter, Wallem did not settle nor even send a
response to petitioner’s claim.15
Consequently, petitioner instituted an action before the RTC for damages
against respondents for the recovery of ₱397,879.69 representing the actual
damages suffered by petitioner plus legal interest thereon computed from the
time of the filing of the complaint until fully paid and attorney’s fees equivalent
to 25% of the principal claim plus costs of suit.
In a decision16 dated 3 November 1998, the RTC ordered respondents to pay
petitioner ₱397,879.69 with 6% interest plus attorney’s fees and costs of the
suit. It attributed the damage and losses sustained by the shipment to the arrastre
operator’s mishandling in the discharge of the shipment. Citing Eastern
Shipping Lines, Inc. v. Court of Appeals,17 the RTC held the shipping company
and the arrastre operator solidarily liable since both the arrastre operator and the
carrier are charged with and obligated to deliver the goods in good order
condition to the consignee. It also ruled that the ship functioned as a common
carrier and was obliged to observe the degree of care required of a common
carrier in handling cargoes. Further, it held that a notice of loss or damage in
writing is not required in this case because said goods already underwent a joint
inspection or survey at the time of receipt thereof by the consignee, which
dispensed with the notice requirement.
The Court of Appeals reversed and set aside the RTC’s decision. 18 According
to the appellate court, there is no solidary liability between the carrier and the
arrastre operator because it was clearly established by the court a quo that the
damage and losses of the shipment were attributed to the mishandling by the
arrastre operator in the discharge of the shipment. The appellate court ruled that
the instant case falls under an exception recognized in Eastern
Shipping Lines.19 Hence, the arrastre operator was held solely liable to the
consignee.
Petitioner raises the following issues:
1. Whether or not the Court of Appeals erred in not holding that as
a common carrier, the carrier’s duties extend to the obligation to
safely discharge the cargo from the vessel;
2. Whether or not the carrier should be held liable for the cost of the
damaged shipment;
3. Whether or not Wallem’s failure to answer the extra judicial
demand by petitioner for the cost of the lost/damaged shipment is an
implied admission of the former’s liability for said goods;
4. Whether or not the courts below erred in giving credence to the
testimony of Mr. Talens.
It is beyond question that respondent’s vessel is a common carrier. 20 Thus, the
standards for determining the existence or absence of the respondent’s liability
will be gauged on the degree of diligence required of a common carrier.
Moreover, as the shipment was an exercise of international trade, the provisions
of the Carriage of Goods
by Sea Act21 (COGSA), together with the Civil Code and the Code of
Commerce, shall apply.22
The first and second issues raised in the petition will be resolved concurrently
since they are interrelated.
It is undisputed that the shipment was damaged prior to its receipt by the insured
consignee. The damage to the shipment was documented by the turn-over
survey23 and Request for Bad Order Survey.24 The turn-over survey, in
particular, expressly stipulates that 2,426 bags of the shipment were received
by the arrastre operator in damaged condition. With these documents, petitioner
insists that the shipment incurred damage or losses while still in the care and
responsibility of Wallem and before it was turned over and delivered to the
arrastre operator.
The trial court, however, found through the testimony of Mr. Maximino
Velasquez Talens, a cargo surveyor of Oceanica Cargo Marine Surveyors
Corporation, that the losses and damage to the cargo were caused by the
mishandling of the arrastre operator. Specifically, that the torn cargo bags
resulted from the use of steel hooks/spikes in piling the cargo bags to the pallet
board and in pushing the bags by the stevedores of the arrastre operator to the
tug boats then to the ports.25 The appellate court affirmed the finding of
mishandling in the discharge of cargo and it served as its basis for exculpating
respondents from liability, rationalizing that with the fault of the arrastre
operator in the unloading of the cargo established it should bear sole liability
for the cost of the damaged/lost cargo.
While it is established that damage or losses were incurred by the
shipment during the unloading, it is disputed who should be liable for the
damage incurred at that point of transport. To address this issue, the pertinent
laws and jurisprudence are examined.
Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the
goods transported by them.26 Subject to certain exceptions enumerated under
Article 173427 of the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in
the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to
the person who has a right to receive them.28
For marine vessels, Article 619 of the Code of Commerce provides that the ship
captain is liable for the cargo from the time it is turned over to him at the dock
or afloat alongside the vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading, unless agreed
otherwise. In Standard Oil Co. of New York v. Lopez Castelo,29 the Court
interpreted the ship captain’s liability as ultimately that of the shipowner by
regarding the captain as the representative of the ship owner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage
of goods by sea, the carrier in relation to the loading, handling, stowage,
carriage, custody, care, and discharge of such goods, shall be subject to the
responsibilities and liabilities and entitled to the rights and immunities set forth
in the Act.30 Section 3 (2) thereof then states that among the carriers’
responsibilities are to properly and carefully load, handle, stow, carry, keep,
care for, and discharge the goods carried.
The above doctrines are in fact expressly incorporated in the bill of lading
between the shipper Shanghai Fareast Business Co., and the consignee, to wit:
4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier shall
commence from the time when the goods are loaded on board the vessel and
shall cease when they are discharged from the vessel.
The Carrier shall not be liable of loss of or damage to the goods before loading
and after discharging from the vessel, howsoever such loss or damage arises.31
On the other hand, the functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of the consignee or
shipper and the ship's tackle.32 Being the custodian of the goods discharged
from a vessel, an arrastre operator's duty is to take good care of the goods and
to turn them over to the party entitled to their possession.33
Handling cargo is mainly the arrastre operator's principal work so its
drivers/operators or employees should observe the standards and measures
necessary to prevent losses and damage to shipments under its custody. 34
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc.35 the Court
explained the relationship and responsibility of an arrastre operator to a
consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin
to that of a depositor and warehouseman. The relationship between the
consignee and the common carrier is similar to that of the consignee and the
arrastre operator. Since it is the duty of the ARRASTRE to take good care of
the goods that are in its custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with and obligated to
deliver the goods in good condition to the consignee.(Emphasis supplied)
(Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines,
Inc. v. Court of Appeals36 with the clarification that the arrastre operator and the
carrier are not always and necessarily solidarily liable as the facts of a case may
vary the rule.
Thus, in this case the appellate court is correct insofar as it ruled that an arrastre
operator and a carrier may not be held solidarily liable at all times. But the
precise question is which entity had custody of the shipment during its
unloading from the vessel?
The aforementioned Section 3(2) of the COGSA states that among the carriers’
responsibilities are to properly and carefully load, care for and discharge the
goods carried. The bill of lading covering the subject shipment likewise
stipulates that the carrier’s liability for loss or damage to the goods ceases after
its discharge from the vessel. Article 619 of the Code of Commerce holds a ship
captain liable for the cargo from the time it is turned over to him until its
delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M./V.
Farland,37 it was ruled that like the duty of seaworthiness, the duty of care of
the cargo is non-delegable,38 and the carrier is accordingly responsible for the
acts of the master, the crew, the stevedore, and his other agents. It has also been
held that it is ordinarily the duty of the master of a vessel to unload the cargo
and place it in readiness for delivery to the consignee, and there is an implied
obligation that this shall be accomplished with sound machinery, competent
hands, and in such manner that no unnecessary injury shall be done
thereto.39 And the fact that a consignee is required to furnish persons to assist
in unloading a shipment may not relieve the carrier of its duty as to such
unloading.40
The exercise of the carrier’s custody and responsibility over the subject
shipment during the unloading actually transpired in the instant case during the
unloading of the shipment as testified by Mr. Talens, the cargo surveyor, to
quote:
Atty. Repol:
- Do you agree with me that Wallem Philippines is a shipping
[company]?
A Yes, sir.
Q And, who hired the services of the stevedores?
A The checker of the vessel of Wallem, sir.41
xxx
Q Mr. Witness, during the discharging operation of this cargo, where
was the master of the vessel?
A On board the vessel, supervising, sir.
Q And, observed the discharging operation?
A Yes, sir.
Q And, what did the master of the vessel do when the cargo was
being unloaded from the vessel?
A He would report to the head checker, sir.
Q He did not send the stevedores to what manner in the discharging
of the cargo from the vessel?
A And head checker po and siyang nagpapatakbo ng trabaho sa loob
ng barko, sir.42
xxx
Q Is he [the head checker] an employee of the company?
A He is a contractor/checker of Wallem Philippines, sir.43
Moreover, the liability of Wallem is highlighted by Mr. Talen’s notes in the Bad
Order Inspection, to wit:
"The bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes
in piling the cargo to [the] pallet board at the vessel’s cargo holds and at the pier
designated area before and after discharged that cause the bags to torn
[sic]."44 (Emphasis supplied)
The records are replete with evidence which show that the damage to the bags
happened before and after their discharge45 and it was caused by the stevedores
of the arrastre operator who were then under the supervision of
Wallem.1awphi1.net
It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. In the instant case, the damage
or losses were incurred during the discharge of the shipment while under the
supervision of the carrier. Consequently, the carrier is liable for the damage or
losses caused to the shipment. As the cost of the actual damage to the subject
shipment has long been settled, the trial court’s finding of actual damages in the
amount of ₱397,879.69 has to be sustained.
On the credibility of Mr. Talens which is the fourth issue, the general rule in
assessing credibility of witnesses is well-settled:
x x x the trial court's evaluation as to the credibility of witnesses is viewed as
correct and entitled to the highest respect because it is more competent to so
conclude, having had the opportunity to observe the witnesses' demeanor and
deportment on the stand, and the manner in which they gave their testimonies.
The trial judge therefore can better determine if such witnesses were telling the
truth, being in the ideal position to weigh conflicting testimonies. Therefore,
unless the trial judge plainly overlooked certain facts of substance and value
which, if considered, might affect the result of the case, his assessment on
credibility must be respected.46
Contrary to petitioner’s stance on the third issue, Wallem’s failure to respond
to its demand letter does not constitute an implied admission of liability. To
borrow the words of Mr. Justice Oliver Wendell Holmes, thus:
A man cannot make evidence for himself by writing a letter containing the
statements that he wishes to prove. He does not make the letter evidence by
sending it to the party against whom he wishes to prove the facts [stated therein].
He no more can impose a duty to answer a charge than he can impose a duty to
pay by sending goods. Therefore a failure to answer such adverse assertions in
the absence of further circumstances making an answer requisite or natural has
no effect as an admission.47
With respect to the attorney’s fees, it is evident that petitioner was compelled
to litigate this matter to protect its interest. The RTC’s award of ₱20,000.00 as
attorney’s fees is reasonable.
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals dated 22 June 2004 and its Resolution dated 11 October 2004 are
REVERSED and SET ASIDE. Wallem is ordered to pay petitioner the sum of
₱397,879.69, with interest thereon at 6% per annum from the filing of the
complaint on 7 October 1996 until the judgment becomes final and executory.
Thereafter, an interest rate of 12% per annum shall be imposed.48Respondents
are also ordered to pay petitioner the amount of ₱20,000.00 for and as attorney’s
fees, together with the costs of the suit.
SO ORDERED.
G.R. No. 166250 July 26, 2010
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.),
INC., Petitioner,
vs.
COURT OF APPEALS and PIONEER INSURANCE AND SURETY
CORPORATION, Respondents.
DECISION
NACHURA, J.:
For review is the Court of Appeals (CA) Decision 1 dated April 29, 2004 and
Resolution2 dated November 26, 2004. The assailed Decision affirmed the
Regional Trial Court (RTC) decision3 dated February 22, 2001; while the
assailed Resolution denied petitioner Unsworth Transport International
(Philippines), Inc., American President Lines, Ltd. (APL), and Unsworth
Transport International, Inc.’s (UTI’s) motion for reconsideration.
The facts of the case are:
On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to
UTI a shipment of 27 drums of various raw materials for pharmaceutical
manufacturing, consisting of: "1) 3 drums (of) extracts, flavoring liquid,
flammable liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x
x turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of)
Vitabs: Vitamin B Complex Extract."4 UTI issued Bill of Lading No.
C320/C15991-2,5covering the aforesaid shipment. The subject shipment was
insured with private respondent Pioneer Insurance and Surety Corporation in
favor of Unilab against all risks in the amount of ₱1,779,664.77 under and by
virtue of Marine Risk Note Number MC RM UL 0627 92 6 and Open Cargo
Policy No. HO-022-RIU.7
On the same day that the bill of lading was issued, the shipment was loaded in
a sealed 1x40 container van, with no. APLU-982012, boarded on APL’s vessel
M/V "Pres. Jackson," Voyage 42, and transshipped to APL’s M/V "Pres.
Taft"8 for delivery to petitioner in favor of the consignee United Laboratories,
Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of Manila. On October
6, 1992, petitioner received the said shipment in its warehouse after it stamped
the Permit to Deliver Imported Goods9 procured by the Champs Customs
Brokerage.10 Three days thereafter, or on October 9, 1992, Oceanica Cargo
Marine Surveyors Corporation (OCMSC) conducted a stripping survey of the
shipment located in petitioner’s warehouse. The survey results stated:
2-pallets STC 40 bags Dried Yeast, both in good order condition and
properly sealed
19- steel drums STC Vitamin B Complex Extract, all in good order
condition and properly sealed
1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on
side, with approx. spilling of 1%11
On October 15, 1992, the arrastre Jardine Davies Transport
Services, Inc. (Jardine) issued Gate Pass No. 761412 which stated
that "22 drums13 Raw Materials for Pharmaceutical Mfg." were
loaded on a truck with Plate No. PCK-434 facilitated by Champs for
delivery to Unilab’s warehouse. The materials were noted to be
complete and in good order in the gate pass.14 On the same day, the
shipment arrived in Unilab’s warehouse and was immediately
surveyed by an independent surveyor, J.G. Bernas Adjusters &
Surveyors, Inc. (J.G. Bernas). The Report stated:
1-p/bag torn on side contents partly spilled
1-s/drum #7 punctured and retaped on bottom side content lacking
5-drums shortship/short delivery15
On October 23 and 28, 1992, the same independent surveyor conducted final
inspection surveys which yielded the same results. Consequently, Unilab’s
quality control representative rejected one paper bag containing dried yeast and
one steel drum containing Vitamin B Complex as unfit for the intended
purpose.16
On November 7, 1992, Unilab filed a formal claim17 for the damage against
private respondent and UTI. On November 20, 1992, UTI denied liability on
the basis of the gate pass issued by Jardine that the goods were in complete and
good condition; while private respondent paid the claimed amount on March
23, 1993. By virtue of the Loss and Subrogation Receipt 18 issued by Unilab in
favor of private respondent, the latter filed a complaint for Damages against
APL, UTI and petitioner with the RTC of Makati. 19 The case was docketed as
Civil Case No. 93-3473 and was raffled to Branch 134.
After the termination of the pre-trial conference, trial on the merits ensued. On
February 22, 2001, the RTC decided in favor of private respondent and against
APL, UTI and petitioner, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintif PIONEER
INSURANCE & SURETY CORPORATION and against the defendants
AMERICAN PRESIDENT LINES and UNSWORTH TRANSPORT
INTERNATIONAL (PHILS.), INC. (now known as JUGRO TRANSPORT
INT’L., PHILS.), ordering the latter to pay, jointly and severally, the former the
following amounts:
1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED
THIRTY ONE and 27/100 (Php76,231.27) with interest at the legal
rate of 6% per annum to be computed starting from September 30,
1993 until fully paid, for and as actual damages;
2. The amount equivalent to 25% of the total sum as attorney’s fees;
3. Cost of this litigation.
SO ORDERED.20
On appeal, the CA affirmed the RTC decision on April 29, 2004. The CA
rejected UTI’s defense that it was merely a forwarder, declaring instead that it
was a common carrier. The appellate court added that by issuing the Bill of
Lading, UTI acknowledged receipt of the goods and agreed to transport and
deliver them at a specific place to a person named or his order. The court further
concluded that upon the delivery of the subject shipment to petitioner’s
warehouse, its liability became similar to that of a depositary. As such, it ought
to have exercised ordinary diligence in the care of the goods. And as found by
the RTC, the CA agreed that petitioner failed to exercise the required diligence.
The CA also rejected petitioner’s claim that its liability should be limited to
$500 per package pursuant to the Carriage of Goods by Sea Act (COGSA)
considering that the value of the shipment was declared pursuant to the letter of
credit and the pro forma invoice. As to APL, the court considered it as a
common carrier notwithstanding the non-issuance of a bill of lading inasmuch
as a bill of lading is not indispensable for the execution of a contract of
carriage.21
Unsatisfied, petitioner comes to us in this petition for review on certiorari,
raising the following issues:
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN UPHOLDING THE DECISION OF
THE REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001,
AWARDING THE SUM OF SEVENTY SIX THOUSAND TWO HUNDRED
THIRTY ONE AND 27/100 PESOS (PHP76,231.27) WITH LEGAL
INTEREST AT 6% PER ANNUM AS ACTUAL DAMAGES AND 25% AS
ATTORNEY’S FEES.
2. WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.
3. WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED
ORDINARY DILIGENCE.
4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY
ESTABLISHED THE ALLEGED DAMAGE TO ITS CARGO.22
Petitioner admits that it is a forwarder but disagrees with the CA’s conclusion
that it is a common carrier. It also questions the appellate court’s findings that
it failed to establish that it exercised extraordinary or ordinary diligence in the
vigilance over the subject shipment. As to the damages allegedly suffered by
private respondent, petitioner counters that they were not sufficiently proven.
Lastly, it insists that its liability, in any event, should be limited to $500
pursuant to the package limitation rule. Indeed, petitioner wants us to review
the factual findings of the RTC and the CA and to evaluate anew the evidence
presented by the parties.
The petition is partly meritorious.
Well established is the rule that factual questions may not be raised in a petition
for review on certiorari as clearly stated in Section 1, Rule 45 of the Rules of
Court, viz.:
Section 1. Filing of petition with Supreme Court. – A party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition shall raise only questions of law which must
be distinctly set forth.
Admittedly, petitioner is a freight forwarder. The term "freight forwarder"
refers to a firm holding itself out to the general public (other than as a pipeline,
rail, motor, or water carrier) to provide transportation of property for
compensation and, in the ordinary course of its business, (1) to assemble and equivalent of that sum in other currency, unless the nature and value of such
consolidate, or to provide for assembling and consolidating, shipments, and to goods have been declared by the shipper before shipment and inserted in the
perform or provide for break-bulk and distribution operations of the shipments; bill of lading. This declaration, if embodied in the bill of lading, shall be prima
(2) to assume responsibility for the transportation of goods from the place of facie evidence, but shall not be conclusive on the carrier.
receipt to the place of destination; and (3) to use for any part of the
In the present case, the shipper did not declare a higher valuation of the goods
transportation a carrier subject to the federal law pertaining to common
to be shipped. Contrary to the CA’s conclusion, the insertion of the words "L/C
carriers.231avvphi1
No. LC No. 1-187-008394/ NY 69867 covering shipment of raw materials for
A freight forwarder’s liability is limited to damages arising from its own pharmaceutical Mfg. x x x" cannot be the basis of petitioner’s
negligence, including negligence in choosing the carrier; however, where the liability.31 Furthermore, the insertion of an invoice number does not in itself
forwarder contracts to deliver goods to their destination instead of merely sufficiently and convincingly show that petitioner had knowledge of the value
arranging for their transportation, it becomes liable as a common carrier for loss of the cargo.32
or damage to goods. A freight forwarder assumes the responsibility of a carrier,
In light of the foregoing, petitioner’s liability should be limited to $500 per steel
which actually executes the transport, even though the forwarder does not carry
drum. In this case, as there was only one drum lost, private respondent is entitled
the merchandise itself.24
to receive only $500 as damages for the loss. In addition to said amount, as aptly
It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant held by the trial court, an interest rate of 6% per annum should also be imposed,
thereto, petitioner undertook to transport, ship, and deliver the 27 drums of raw plus 25% of the total sum as attorney’s fees.
materials for pharmaceutical manufacturing to the consignee.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED.
A bill of lading is a written acknowledgement of the receipt of goods and an The Court of Appeals Decision dated April 29, 2004 and Resolution dated
agreement to transport and to deliver them at a specified place to a person November 26, 2004 are AFFIRMED with MODIFICATION by reducing the
named or on his or her order.25 It operates both as a receipt and as a contract. It principal amount due private respondent Pioneer Insurance and Surety
is a receipt for the goods shipped and a contract to transport and Corporation from ₱76,231.27 to $500, with interest of 6% per annum from date
of demand, and 25% of the amount due as attorney’s fees.
deliver the same as therein stipulated. As a receipt, it recites the date and place
of shipment, describes the goods as to quantity, weight, dimensions, The other aspects of the assailed Decision and Resolution STAND.
identification marks, condition, quality, and value. As a contract, it names the
SO ORDERED.
contracting parties, which include the consignee; fixes the route, destination,
and freight rate or charges; and stipulates the rights and obligations assumed by
the parties.26
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general
rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that
they exercised extraordinary diligence in transporting the goods. In order to
avoid responsibility for any loss or damage, therefore, they have the burden of
proving that they observed such diligence.27 Mere proof of delivery of the goods
in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the
carrier. If no adequate explanation is given as to how the deterioration, loss, or
destruction of the goods happened, the transporter shall be held responsible. 28
Though it is not our function to evaluate anew the evidence presented, we refer
to the records of the case to show that, as correctly found by the RTC and the
CA, petitioner failed to rebut the prima facie presumption of negligence in the
carriage of the subject shipment.
First, as stated in the bill of lading, the subject shipment was received by UTI
in apparent good order and condition in New York, United States of America.
Second, the OCMSC Survey Report stated that one steel drum STC Vitamin B
Complex Extract was discovered to be with a cut/hole on the side, with
approximate spilling of 1%. Third, though Gate Pass No. 7614, issued by
Jardine, noted that the subject shipment was in good order and condition, it was
specifically stated that there were 22 (should be 27 drums per Bill of Lading
No. C320/C15991-2) drums of raw materials for pharmaceutical
manufacturing. Last, J.G. Bernas’ Survey Report stated that "1-s/drum was
punctured and retaped on the bottom side and the content was lacking, and there
was a short delivery of 5-drums."
All these conclusively prove the fact of shipment in good order and condition,
and the consequent damage to one steel drum of Vitamin B Complex Extract
while in the possession of petitioner which failed to explain the reason for the
damage. Further, petitioner failed to prove that it observed the extraordinary
diligence and precaution which the law requires a common carrier to exercise
and to follow in order to avoid damage to or destruction of the goods entrusted
to it for safe carriage and delivery.29
However, we affirm the applicability of the Package Limitation Rule under the
COGSA, contrary to the RTC and the CA’s findings.
It is to be noted that the Civil Code does not limit the liability of the common
carrier to a fixed amount per package. In all matters not regulated by the Civil
Code, the rights and obligations of common carriers are governed by the Code
of Commerce and special laws. Thus, the COGSA supplements the Civil Code
by establishing a provision limiting the carrier’s liability in the absence of a
shipper’s declaration of a higher value in the bill of lading.30 Section 4(5) of the
COGSA provides:
(5) Neither the carrier nor the ship shall in any event be or become liable for
any loss or damage to or in connection with the transportation of goods in an
amount exceeding $500 per package of lawful money of the United States, or
in case of goods not shipped in packages, per customary freight unit, or the
G.R. No. 179446 January 10, 2011
LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,
vs.
GLODEL BROKERAGE CORPORATION and R&B INSURANCE
CORPORATION, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court assailing the August 24, 2007 Decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 82822, entitled "R&B Insurance Corporation v. Glodel
Brokerage Corporation and Loadmasters Customs Services, Inc.," which held
petitioner Loadmasters Customs Services, Inc. (Loadmasters) liable to
respondent Glodel Brokerage Corporation (Glodel) in the amount of
₱1,896,789.62 representing the insurance indemnity which R&B Insurance
Corporation (R&B Insurance) paid to the insured-consignee, Columbia Wire
and Cable Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-
00105/2001 in favor of Columbia to insure the shipment of 132 bundles of
electric copper cathodes against All Risks. On August 28, 2001, the cargoes
were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10,
North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of its delivery
trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and
Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters,
driven by its employed drivers and accompanied by its employed truck helpers.
Six (6) truckloads of copper cathodes were to be delivered to Balagtas, Bulacan,
while the other six (6) truckloads were destined for Lawang Bato, Valenzuela
City. The cargoes in six truckloads for Lawang Bato were duly delivered in
Columbia’s warehouses there. Of the six (6) trucks en route to Balagtas,
Bulacan, however, only five (5) reached the destination. One (1) truck, loaded
with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but
without the copper cathodes. Because of this incident, Columbia filed with
R&B Insurance a claim for insurance indemnity in the amount of
₱1,903,335.39. After the requisite investigation and adjustment, R&B
Insurance paid Columbia the amount of ₱1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both
Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila
(RTC), docketed as Civil Case No. 02-103040. It sought reimbursement of the
amount it had paid to Columbia for the loss of the subject cargo. It claimed that
it had been subrogated "to the right of the consignee to recover from the
party/parties who may be held legally liable for the loss."2
On November 19, 2003, the RTC rendered a decision3 holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters’
counterclaim for damages and attorney’s fees against R&B Insurance. The
dispositive portion of the decision reads:
WHEREFORE, all premises considered, the plaintiff having established by
preponderance of evidence its claims against defendant Glodel Brokerage
Corporation, judgment is hereby rendered ordering the latter:
1. To pay plaintiff R&B Insurance Corporation the sum of
₱1,896,789.62 as actual and compensatory damages, with interest
from the date of complaint until fully paid;
2. To pay plaintiff R&B Insurance Corporation the amount
equivalent to 10% of the principal amount recovered as and for
attorney’s fees plus ₱1,500.00 per appearance in Court;
3. To pay plaintiff R&B Insurance Corporation the sum of
₱22,427.18 as litigation expenses.
WHEREAS, the defendant Loadmasters Customs Services, Inc.’s counterclaim
for damages and attorney’s fees against plaintiff are hereby dismissed.
With costs against defendant Glodel Brokerage Corporation.
SO ORDERED.4
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered the assailed decision which reads in part:
Considering that appellee is an agent of appellant Glodel, whatever liability the
latter owes to appellant R&B Insurance Corporation as insurance indemnity
must likewise be the amount it shall be paid by appellee Loadmasters.
WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED
in that the appellee Loadmasters is likewise held liable to appellant Glodel in
the amount of ₱1,896,789.62 representing the insurance indemnity appellant
Glodel has been held liable to appellant R&B Insurance Corporation.
Appellant Glodel’s appeal to absolve it from any liability is herein
DISMISSED.
SO ORDERED.5
Hence, Loadmasters filed the present petition for review on certiorari before
this Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to Respondent
Glodel in spite of the fact that the latter respondent Glodel did
not file a cross-claim against it (Loadmasters)?
2. Under the set of facts established and undisputed in the case,
can petitioner Loadmasters be legally considered as an Agent of
respondent Glodel?6
To totally exculpate itself from responsibility for the lost goods, Loadmasters
argues that it cannot be considered an agent of Glodel because it never
represented the latter in its dealings with the consignee. At any rate, it further
contends that Glodel has no recourse against it for its (Glodel’s) failure to file a
cross-claim pursuant to Section 2, Rule 9 of the 1997 Rules of Civil Procedure.
Glodel, in its Comment,7 counters that Loadmasters is liable to it under its cross-
claim because the latter was grossly negligent in the transportation of the subject
cargo. With respect to Loadmasters’ claim that it is already estopped from filing
a cross-claim, Glodel insists that it can still do so even for the first time on
appeal because there is no rule that provides otherwise. Finally, Glodel argues
that its relationship with Loadmasters is that of Charter wherein the transporter
(Loadmasters) is only hired for the specific job of delivering the merchandise.
Thus, the diligence required in this case is merely ordinary diligence or that of
a good father of the family, not the extraordinary diligence required of common
carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have interposed a
cross-claim against Loadmasters because it was not prevented from presenting
evidence to prove its position even without amending its Answer. As to the
relationship between Loadmasters and Glodel, it contends that a contract of
agency existed between the two corporations.8
Subrogation is the substitution of one person in the place of another with
reference to a lawful claim or right, so that he who is substituted succeeds to the
rights of the other in relation to a debt or claim, including its remedies or
securities.9 Doubtless, R&B Insurance is subrogated to the rights of the insured
to the extent of the amount it paid the consignee under the marine insurance, as
provided under Article 2207 of the Civil Code, which reads:
ART. 2207. If the plaintiff’s property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrong-doer or the person who
has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
As subrogee of the rights and interest of the consignee, R&B Insurance has the
right to seek reimbursement from either Loadmasters or Glodel or both for
breach of contract and/or tort.
The issue now is who, between Glodel and Loadmasters, is liable to pay R&B
Insurance for the amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters and Glodel
are common carriers to determine their liability for the loss of the subject cargo.
Under Article 1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the business of carrying or
transporting passenger or goods, or both by land, water or air for compensation,
offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier because it
is engaged in the business of transporting goods by land, through its trucking
service. It is a common carrier as distinguished from a private carrier wherein
the carriage is generally undertaken by special agreement and it does not hold
itself out to carry goods for the general public.10 The distinction is significant in
the sense that "the rights and obligations of the parties to a contract of private
carriage are governed principally by their stipulations, not by the law on
common carriers."11
In the present case, there is no indication that the undertaking in the contract
between Loadmasters and Glodel was private in character. There is no showing
that Loadmasters solely and exclusively rendered services to Glodel.
In fact, Loadmasters admitted that it is a common carrier.12
In the same vein, Glodel is also considered a common carrier within the context
of Article 1732. In its Memorandum,13 it states that it "is a corporation duly
organized and existing under the laws of the Republic of the Philippines and is
engaged in the business of customs brokering." It cannot be considered
otherwise because as held by this Court in Schmitz Transport & Brokerage
Corporation v. Transport Venture, Inc.,14 a customs broker is also regarded as
a common carrier, the transportation of goods being an integral part of its
business.
Loadmasters and Glodel, being both common carriers, are mandated from the
nature of their business and for reasons of public policy, to observe the
extraordinary diligence in the vigilance over the goods transported by them
according to all the circumstances of such case, as required by Article 1733 of
the Civil Code. When the Court speaks of extraordinary diligence, it is that
extreme measure of care and caution which persons of unusual prudence and
circumspection observe for securing and preserving their own property or
rights.15 This exacting standard imposed on common carriers in a contract of
carriage of goods is intended to tilt the scales in favor of the shipper who is at
the mercy of the common carrier once the goods have been lodged for
shipment.16 Thus, in case of loss of the goods, the common carrier is presumed
to have been at fault or to have acted negligently.17 This presumption of fault or
negligence, however, may be rebutted by proof that the common carrier has
observed extraordinary diligence over the goods.
With respect to the time frame of this extraordinary responsibility, the Civil
Code provides that the exercise of extraordinary diligence lasts from the time
the goods are unconditionally placed in the possession of, and received by, the
carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them. 18
Premises considered, the Court is of the view that both Loadmasters and Glodel
are jointly and severally liable to R & B Insurance for the loss of the subject
cargo. Under Article 2194 of the New Civil Code, "the responsibility of two or
more persons who are liable for a quasi-delict is solidary."
Loadmasters’ claim that it was never privy to the contract entered into by Glodel
with the consignee Columbia or R&B Insurance as subrogee, is not a valid
defense. It may not have a direct contractual relation with Columbia, but it is
liable for tort under the provisions of Article 2176 of the Civil Code on quasi-
delicts which expressly provide:
ART. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties,
is called a quasi-delict and is governed by the provisions of this Chapter.
Pertinent is the ruling enunciated in the case of Mindanao Terminal and
Brokerage Service, Inc. v. Phoenix Assurance Company of New York,/McGee
& Co., Inc.19 where this Court held that a tort may arise despite the absence of
a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed by Phoenix and
McGee against Mindanao Terminal, from which the present case has arisen,
states a cause of action. The present action is based on quasi-delict, arising
from the negligent and careless loading and stowing of the cargoes belonging
to Del Monte Produce. Even assuming that both Phoenix and McGee have only
been subrogated in the rights of Del Monte Produce, who is not a party to the
contract of service between Mindanao Terminal and Del Monte, still the
insurance carriers may have a cause of action in light of the Court’s consistent
ruling that the act that breaks the contract may be also a tort. In fine, a liability
for tort may arise even under a contract, where tort is that which breaches the
contract. In the present case, Phoenix and McGee are not suing for damages
for injuries arising from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal handled the cargoes
belonging to Del Monte Produce. Despite the absence of contractual
relationship between Del Monte Produce and Mindanao Terminal, the
allegation of negligence on the part of the defendant should be sufficient to
establish a cause of action arising from quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for
one’s own acts or omissions, but also for those of persons for whom one is
responsible.
xxxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of
Loadmasters whose employees (truck driver and helper) were instrumental in
the hijacking or robbery of the shipment. As employer, Loadmasters should be
made answerable for the damages caused by its employees who acted within
the scope of their assigned task of delivering the goods safely to the warehouse.
Whenever an employee’s negligence causes damage or injury to another, there
instantly arises a presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection (culpa in eligiendo) or supervision
(culpa in vigilando) of its employees.20 To avoid liability for a quasi-delict
committed by its employee, an employer must overcome the presumption by
presenting convincing proof that he exercised the care and diligence of a good
father of a family in the selection and supervision of his employee.21 In this
regard, Loadmasters failed.
Glodel is also liable because of its failure to exercise extraordinary diligence. It
failed to ensure that Loadmasters would fully comply with the undertaking to
safely transport the subject cargo to the designated destination. It should have
been more prudent in entrusting the goods to Loadmasters by taking
precautionary measures, such as providing escorts to accompany the trucks in
delivering the cargoes. Glodel should, therefore, be held liable with
Loadmasters. Its defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no principal-agent
relationship between Glodel and Loadmasters, as erroneously found by the CA.
Article 1868 of the Civil Code provides: "By the contract of agency a person
binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter." The elements of a
contract of agency are: (1) consent, express or implied, of the parties to establish
the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agent acts as a representative and not for himself; (4) the
agent acts within the scope of his authority.22
Accordingly, there can be no contract of agency between the parties.
Loadmasters never represented Glodel. Neither was it ever authorized to make
such representation. It is a settled rule that the basis for agency is representation,
that is, the agent acts for and on behalf of the principal on matters within the
scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal. On the part of the principal, there must be
an actual intention to appoint or an intention naturally inferable from his words
or actions, while on the part of the agent, there must be an intention to accept
the appointment and act on it.23 Such mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of Loadmasters and Glodel?
Each wrongdoer is liable for the total damage suffered by R&B Insurance.
Where there are several causes for the resulting damages, a party is not relieved
from liability, even partially. It is sufficient that the negligence of a party is an
efficient cause without which the damage would not have resulted. It is no
defense to one of the concurrent tortfeasors that the damage would not have
resulted from his negligence alone, without the negligence or wrongful acts of
the other concurrent tortfeasor. As stated in the case of Far Eastern Shipping v.
Court of Appeals,24
X x x. Where several causes producing an injury are concurrent and each is an
efficient cause without which the injury would not have happened, the injury
may be attributed to all or any of the causes and recovery may be had against
any or all of the responsible persons although under the circumstances of the
case, it may appear that one of them was more culpable, and that the duty owed
by them to the injured person was not the same. No actor's negligence ceases to
be a proximate cause merely because it does not exceed the negligence of other
actors. Each wrongdoer is responsible for the entire result and is liable as though
his acts were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is solidary
since both of them are liable for the total damage. Where the concurrent or
successive negligent acts or omissions of two or more persons, although acting
independently, are in combination the direct and proximate cause of a single
injury to a third person, it is impossible to determine in what proportion each
contributed to the injury and either of them is responsible for the whole
injury. Where their concurring negligence resulted in injury or damage to a
third party, they become joint tortfeasors and are solidarily liable for the
resulting damage under Article 2194 of the Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can collect from
Loadmasters, it having failed to file a cross-claim against the latter.1avvphi1
Undoubtedly, Glodel has a definite cause of action against Loadmasters for
breach of contract of service as the latter is primarily liable for the loss of the
subject cargo. In this case, however, it cannot succeed in seeking judicial
sanction against Loadmasters because the records disclose that it did not
properly interpose a cross-claim against the latter. Glodel did not even pray that
Loadmasters be liable for any and all claims that it may be adjudged liable in
favor of R&B Insurance. Under the Rules, a compulsory counterclaim, or a
cross-claim, not set up shall be barred.25Thus, a cross-claim cannot be set up
for the first time on appeal.
For the consequence, Glodel has no one to blame but itself. The Court cannot
come to its aid on equitable grounds. "Equity, which has been aptly described
as ‘a justice outside legality,’ is applied only in the absence of, and never
against, statutory law or judicial rules of procedure."26 The Court cannot be a
lawyer and take the cudgels for a party who has been at fault or negligent.
WHEREFORE, the petition is PARTIALLY GRANTED. The August 24,
2007 Decision of the Court of Appeals is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner Loadmasters
Customs Services, Inc. and respondent Glodel Brokerage Corporation jointly
and severally liable to respondent R&B Insurance Corporation for the insurance
indemnity it paid to consignee Columbia Wire & Cable Corporation and
ordering both parties to pay, jointly and severally, R&B Insurance Corporation
a] the amount of ₱1,896,789.62 representing the insurance indemnity; b] the
amount equivalent to ten (10%) percent thereof for attorney’s fees; and c] the
amount of ₱22,427.18 for litigation expenses.
The cross-claim belatedly prayed for by respondent Glodel Brokerage
Corporation against petitioner Loadmasters Customs Services, Inc. is DENIED.
SO ORDERED.
G.R. No. 184300 July 11, 2012
MALAYAN INSURANCE CO., INC., Petitioner,
vs.
PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE
FORWARDER SERVICES, INC., Respondents.
DECISION
REYES, J.:
Before the Court is a petitiOn for review on certiorari filed by petitioner
Malayan Insurance Co., lnc. (Malayan) assailing the Decision1 dated February
29, 2008 and Resolution2 dated August 28, 2008 of the Court of Appeals (CA)
in CA-G.R. CV No. 71204 which affirmed with modification the decision of
the Regional Trial Court (RTC), Branch 38 of Manila.
Antecedent Facts
Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable
Forwarder Services, Inc. (Reputable) had been annually executing a contract of
carriage, whereby the latter undertook to transport and deliver the former’s
products to its customers, dealers or salesmen.3
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797
(Marine Policy) from respondent Philippines First Insurance Co., Inc.
(Philippines First) to secure its interest over its own products. Philippines First
thereby insured Wyeth’s nutritional, pharmaceutical and other products usual
or incidental to the insured’s business while the same were being transported or
shipped in the Philippines. The policy covers all risks of direct physical loss or
damage from any external cause, if by land, and provides a limit of
P6,000,000.00 per any one land vehicle.
On December 1, 1993, Wyeth executed its annual contract of carriage with
Reputable. It turned out, however, that the contract was not signed by Wyeth’s
representative/s.4 Nevertheless, it was admittedly signed by Reputable’s
representatives, the terms thereof faithfully observed by the parties and, as
previously stated, the same contract of carriage had been annually executed by
the parties every year since 1989.5
Under the contract, Reputable undertook to answer for "all risks with respect to
the goods and shall be liable to the COMPANY (Wyeth), for the loss,
destruction, or damage of the goods/products due to any and all causes
whatsoever, including theft, robbery, flood, storm, earthquakes, lightning, and
other force majeure while the goods/products are in transit and until actual
delivery to the customers, salesmen, and dealers of the COMPANY". 6
The contract also required Reputable to secure an insurance policy on Wyeth’s
goods.7 Thus, on February 11, 1994, Reputable signed a Special Risk Insurance
Policy (SR Policy) with petitioner Malayan for the amount of P1,000,000.00.
On October 6, 1994, during the effectivity of the Marine Policy and SR Policy,
Reputable received from Wyeth 1,000 boxes of Promil infant formula worth
P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation in
Libis, Quezon City. Unfortunately, on the same date, the truck carrying Wyeth’s
products was hijacked by about 10 armed men. They threatened to kill the truck
driver and two of his helpers should they refuse to turn over the truck and its
contents to the said highway robbers. The hijacked truck was recovered two
weeks later without its cargo.
On March 8, 1995, Philippines First, after due investigation and adjustment, and
pursuant to the Marine Policy, paid Wyeth P2,133,257.00 as indemnity.
Philippines First then demanded reimbursement from Reputable, having been
subrogated to the rights of Wyeth by virtue of the payment. The latter, however,
ignored the demand.
Consequently, Philippines First instituted an action for sum of money against
Reputable on August 12, 1996.8 In its complaint, Philippines First stated that
Reputable is a "private corporation engaged in the business of a common
carrier." In its answer,9 Reputable claimed that it is a private carrier. It also
claimed that it cannot be made liable under the contract of carriage with Wyeth
since the contract was not signed by Wyeth’s representative and that the cause
of the loss was force majeure, i.e., the hijacking incident.
Subsequently, Reputable impleaded Malayan as third-party defendant in an
effort to collect the amount covered in the SR Policy. According to Reputable,
"it was validly insured with Malayan for P1,000,000.00 with respect to the lost
products under the latter’s Insurance Policy No. SR-0001-02577 effective
February 1, 1994 to February 1, 1995" and that the SR Policy covered the risk
of robbery or hijacking.10
Disclaiming any liability, Malayan argued, among others, that under Section 5
of the SR Policy, the insurance does not cover any loss or damage to property
which at the time of the happening of such loss or damage is insured by any
marine policy and that the SR Policy expressly excluded third-party liability.
After trial, the RTC rendered its Decision 11 finding Reputable liable to
Philippines First for the amount of indemnity it paid to Wyeth, among others.
In turn, Malayan was found by the RTC to be liable to Reputable to the extent
of the policy coverage. The dispositive portion of the RTC decision provides:
WHEREFORE, on the main Complaint, judgment is hereby rendered finding
[Reputable] liable for the loss of the Wyeth products and orders it to pay
Philippines First the following:
1. the amount of P2,133,257.00 representing the amount paid by
Philippines First to Wyeth for the loss of the products in question;
2. the amount of P15,650.00 representing the adjustment fees paid
by Philippines First to hired adjusters/surveyors;
3. the amount of P50,000.00 as attorney’s fees; and
4. the costs of suit.
On the third-party Complaint, judgment is hereby rendered finding
Malayan liable to indemnify [Reputable] the following:
1. the amount of P1,000,000.00 representing the proceeds of the
insurance policy;
2. the amount of P50,000.00 as attorney’s fees; and
3. the costs of suit.
SO ORDERED.12
Dissatisfied, both Reputable and Malayan filed their respective appeals from
the RTC decision.
Reputable asserted that the RTC erred in holding that its contract of carriage
with Wyeth was binding despite Wyeth’s failure to sign the same. Reputable
further contended that the provisions of the contract are unreasonable, unjust,
and contrary to law and public policy.
For its part, Malayan invoked Section 5 of its SR Policy, which provides:
Section 5. INSURANCE WITH OTHER COMPANIES. The insurance does
not cover any loss or damage to property which at the time of the happening of
such loss or damage is insured by or would but for the existence of this policy,
be insured by any Fire or Marine policy or policies except in respect of any
excess beyond the amount which would have been payable under the Fire or
Marine policy or policies had this insurance not been effected.
Malayan argued that inasmuch as there was already a marine policy issued by
Philippines First securing the same subject matter against loss and that since the
monetary coverage/value of the Marine Policy is more than enough to
indemnify the hijacked cargo, Philippines First alone must bear the loss.
Malayan sought the dismissal of the third-party complaint against it. In the
alternative, it prayed that it be held liable for no more than P468,766.70, its
alleged pro-rata share of the loss based on the amount covered by the policy,
subject to the provision of Section 12 of the SR Policy, which states:
12. OTHER INSURANCE CLAUSE. If at the time of any loss or damage
happening to any property hereby insured, there be any other subsisting
insurance or insurances, whether effected by the insured or by any other person
or persons, covering the same property, the company shall not be liable to pay
or contribute more than its ratable proportion of such loss or damage.
On February 29, 2008, the CA rendered the assailed decision sustaining the
ruling of the RTC, the decretal portion of which reads:
WHEREFORE, in view of the foregoing, the assailed Decision dated 29
September 2000, as modified in the Order dated 21 July 2001, is AFFIRMED
with MODIFICATION in that the award of attorney’s fees in favor of Reputable
is DELETED.
SO ORDERED.13
The CA ruled, among others, that: (1) Reputable is estopped from assailing the
validity of the contract of carriage on the ground of lack of signature of Wyeth’s
representative/s; (2) Reputable is liable under the contract for the value of the
goods even if the same was lost due to fortuitous event; and (3) Section 12 of
the SR Policy prevails over Section 5, it being the latter provision; however,
since the ratable proportion provision of Section 12 applies only in case of
double insurance, which is not present, then it should not be applied and
Malayan should be held liable for the full amount of the policy coverage, that
is, P1,000,000.00.14
On March 14, 2008, Malayan moved for reconsideration of the assailed decision
but it was denied by the CA in its Resolution dated August 28, 2008.15
Hence, this petition.
Malayan insists that the CA failed to properly resolve the issue on the "statutory
limitations on the liability of common carriers" and the "difference between an
‘other insurance clause’ and an ‘over insurance clause’."
Malayan also contends that the CA erred when it held that Reputable is a private
carrier and should be bound by the contractual stipulations in the contract of
carriage. This argument is based on its assertion that Philippines First judicially
admitted in its complaint that Reputable is a common carrier and as such,
Reputable should not be held liable pursuant to Article 1745(6) of the Civil
Code.16 Necessarily, if Reputable is not liable for the loss, then there is no reason
to hold Malayan liable to Reputable.
Further, Malayan posits that there resulted in an impairment of contract when
the CA failed to apply the express provisions of Section 5 (referred to by
Malayan as over insurance clause) and Section 12 (referred to by Malayan as
other insurance clause) of its SR Policy as these provisions could have been
read together there being no actual conflict between them.
Reputable, meanwhile, contends that it is exempt from liability for acts
committed by thieves/robbers who act with grave or irresistible threat whether
it is a common carrier or a private/special carrier. It, however, maintains the
correctness of the CA ruling that Malayan is liable to Philippines First for the
full amount of its policy coverage and not merely a ratable portion thereof under
Section 12 of the SR Policy.
Finally, Philippines First contends that the factual finding that Reputable is a
private carrier should be accorded the highest degree of respect and must be
considered conclusive between the parties, and that a review of such finding by
the Court is not warranted under the circumstances. As to its alleged judicial
admission that Reputable is a common carrier, Philippines First proffered the
declaration made by Reputable that it is a private carrier. Said declaration was
allegedly reiterated by Reputable in its third party complaint, which in turn was
duly admitted by Malayan in its answer to the said third-party complaint. In
addition, Reputable even presented evidence to prove that it is a private carrier.
As to the applicability of Sections 5 and 12 in the SR Policy, Philippines First
reiterated the ruling of the CA. Philippines First, however, prayed for a slight
modification of the assailed decision, praying that Reputable and Malayan be
rendered solidarily liable to it in the amount of P998,000.00, which represents
the balance from the P1,000.000.00 coverage of the SR Policy after deducting
P2,000.00 under Section 10 of the said SR Policy.17
Issues
The liability of Malayan under the SR Policy hinges on the following issues for
resolution:
1) Whether Reputable is a private carrier;
2) Whether Reputable is strictly bound by the stipulations in its
contract of carriage with Wyeth, such that it should be liable for any
risk of loss or damage, for any cause whatsoever, including that due
to theft or robbery and other force majeure;
3) Whether the RTC and CA erred in rendering "nugatory" Sections
5 and Section 12 of the SR Policy; and
4) Whether Reputable should be held solidarily liable with Malayan
for the amount of P998,000.00 due to Philippines First.
The Court’s Ruling
On the first issue – Reputable is a private carrier.
The Court agrees with the RTC and CA that Reputable is a private carrier. Well-
entrenched in jurisprudence is the rule that factual findings of the trial court,
especially when affirmed by the appellate court, are accorded the highest degree
of respect and considered conclusive between the parties, save for certain
exceptional and meritorious circumstances, none of which are present in this
case.18
Malayan relies on the alleged judicial admission of Philippines First in its
complaint that Reputable is a common carrier.19 Invoking Section 4, Rule 129
of the Rules on Evidence that "an admission verbal or written, made by a party
in the course of the proceeding in the same case, does not require proof," it is
Malayan’s position that the RTC and CA should have ruled that
Reputable is a common carrier. Consequently, pursuant to Article 1745(6) of
the Civil Code, the liability of Reputable for the loss of Wyeth’s goods should
be dispensed with, or at least diminished.
It is true that judicial admissions, such as matters alleged in the pleadings do
not require proof, and need not be offered to be considered by the court. "The
court, for the proper decision of the case, may and should consider, without the
introduction of evidence, the facts admitted by the parties."20 The rule on
judicial admission, however, also states that such allegation, statement, or
admission is conclusive as against the pleader,21 and that the facts alleged in the
complaint are deemed admissions of the plaintiff and binding upon him.22 In
this case, the pleader or the plaintiff who alleged that Reputable is a common
carrier was Philippines First. It cannot, by any stretch of imagination, be made
conclusive as against Reputable whose nature of business is in question.
It should be stressed that Philippines First is not privy to the SR Policy between
Wyeth and Reputable; rather, it is a mere subrogee to the right of Wyeth to
collect from Reputable under the terms of the contract of carriage. Philippines
First is not in any position to make any admission, much more a definitive
pronouncement, as to the nature of Reputable’s business and there appears no
other connection between Philippines First and Reputable which suggests
mutual familiarity between them.
Moreover, records show that the alleged judicial admission of Philippines First
was essentially disputed by Reputable when it stated in paragraphs 2, 4, and 11
of its answer that it is actually a private or special carrier. 23 In addition,
Reputable stated in paragraph 2 of its third-party complaint that it is "a private
carrier engaged in the carriage of goods."24 Such allegation was, in turn,
admitted by Malayan in paragraph 2 of its answer to the third-party
complaint.25 There is also nothing in the records which show that Philippines
First persistently maintained its stance that Reputable is a common carrier or
that it even contested or proved otherwise Reputable’s position that it is a
private or special carrier.
Hence, in the face of Reputable’s contrary admission as to the nature of its own
business, what was stated by Philippines First in its complaint is reduced to
nothing more than mere allegation, which must be proved for it to be given any
weight or value. The settled rule is that mere allegation is not proof. 26
More importantly, the finding of the RTC and CA that Reputable is a special or
private carrier is warranted by the evidence on record, primarily, the unrebutted
testimony of Reputable’s Vice President and General Manager, Mr. William
Ang Lian Suan, who expressly stated in open court that Reputable serves only the total insurance or insurances in force at the time of the loss or damage is not
one customer, Wyeth.27 more than P200,000.00."
Under Article 1732 of the Civil Code, common carriers are persons, In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide
corporations, firms, or associations engaged in the business of carrying or for the nullity of the SR Policy but simply limits the liability of Malayan only
transporting passenger or goods, or both by land, water or air for compensation, up to the excess of the amount that was not covered by the other insurance
offering their services to the public. On the other hand, a private carrier is one policy. In interpreting the "other insurance clause" in Geagonia, the Court ruled
wherein the carriage is generally undertaken by special agreement and it does that the prohibition applies only in case of double insurance. The Court ruled
not hold itself out to carry goods for the general public. 28 A common carrier that in order to constitute a violation of the clause, the other insurance must be
becomes a private carrier when it undertakes to carry a special cargo or upon same subject matter, the same interest therein, and the same risk. Thus,
chartered to a special person only.29 For all intents and purposes, therefore, even though the multiple insurance policies involved were all issued in the name
Reputable operated as a private/special carrier with regard to its contract of of the same assured, over the same subject matter and covering the same risk,
carriage with Wyeth. it was ruled that there was no violation of the "other insurance clause" since
there was no double insurance.
On the second issue – Reputable is bound by the terms of the contract of
carriage. Section 12 of the SR Policy, on the other hand, is the over insurance clause.
More particularly, it covers the situation where there is over insurance due to
The extent of a private carrier’s obligation is dictated by the stipulations of a
double insurance. In such case, Section 15 provides that Malayan shall "not be
contract it entered into, provided its stipulations, clauses, terms and conditions
liable to pay or contribute more than its ratable proportion of such loss or
are not contrary to law, morals, good customs, public order, or public policy.
damage." This is in accord with the principle of contribution provided under
"The Civil Code provisions on common carriers should not be applied where
Section 94(e) of the Insurance Code,37 which states that "where the insured is
the carrier is not acting as such but as a private carrier. Public policy governing
over insured by double insurance, each insurer is bound, as between himself
common carriers has no force where the public at large is not involved."30
and the other insurers, to contribute ratably to the loss in proportion to the
Thus, being a private carrier, the extent of Reputable’s liability is fully governed amount for which he is liable under his contract."
by the stipulations of the contract of carriage, one of which is that it shall be
Clearly, both Sections 5 and 12 presuppose the existence of a double insurance.
liable to Wyeth for the loss of the goods/products due to any and all causes
The pivotal question that now arises is whether there is double insurance in this
whatsoever, including theft, robbery and other force majeure while the
case such that either Section 5 or Section 12 of the SR Policy may be applied.
goods/products are in transit and until actual delivery to Wyeth’s customers,
salesmen and dealers.31 By the express provision of Section 93 of the Insurance Code, double insurance
exists where the same person is insured by several insurers separately in respect
On the third issue – other insurance vis-à-vis over insurance.
to the same subject and interest. The requisites in order for double insurance to
Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and arise are as follows:38
to Section 12 as a "modified ‘other insurance’ clause". 32 In rendering
1. The person insured is the same;
inapplicable said provisions in the SR Policy, the CA ruled in this wise:
2. Two or more insurers insuring separately;
Since Sec. 5 calls for Malayan’s complete absolution in case the other insurance
would be sufficient to cover the entire amount of the loss, it is in direct conflict 3. There is identity of subject matter;
with Sec. 12 which provides only for a pro-rated contribution between the two
4. There is identity of interest insured; and
insurers. Being the later provision, and pursuant to the rules on interpretation of
contracts, Sec. 12 should therefore prevail. 5. There is identity of the risk or peril insured against.
xxxx In the present case, while it is true that the Marine Policy and the SR Policy
were both issued over the same subject matter, i.e. goods belonging to Wyeth,
x x x The intention of both Reputable and Malayan should be given effect as
and both covered the same peril insured against, it is, however, beyond cavil
against the wordings of Sec. 12 of their contract, as it was intended by the parties
that the said policies were issued to two different persons or entities. It is
to operate only in case of double insurance, or where the benefits of the policies
undisputed that Wyeth is the recognized insured of Philippines First under its
of both plaintiff-appellee and Malayan should pertain to Reputable alone. But
Marine Policy, while Reputable is the recognized insured of Malayan under the
since the court a quo correctly ruled that there is no double insurance in this
SR Policy. The fact that Reputable procured Malayan’s SR Policy over the
case inasmuch as Reputable was not privy thereto, and therefore did not stand
goods of Wyeth pursuant merely to the stipulated requirement under its contract
to benefit from the policy issued by plaintiff-appellee in favor of Wyeth, then
of carriage with the latter does not make Reputable a mere agent of Wyeth in
Malayan’s stand should be rejected.
obtaining the said SR Policy.
To rule that Sec. 12 operates even in the absence of double insurance would
The interest of Wyeth over the property subject matter of both insurance
work injustice to Reputable which, despite paying premiums for a
contracts is also different and distinct from that of Reputable’s. The policy
P1,000,000.00 insurance coverage, would not be entitled to recover said amount
issued by Philippines First was in consideration of the legal and/or equitable
for the simple reason that the same property is covered by another insurance
interest of Wyeth over its own goods. On the other hand, what was issued by
policy, a policy to which it was not a party to and much less, from which it did
Malayan to Reputable was over the latter’s insurable interest over the safety of
not stand to benefit. Plainly, this unfair situation could not have been the
the goods, which may become the basis of the latter’s liability in case of loss or
intention of both Reputable and Malayan in signing the insurance contract in
damage to the property and falls within the contemplation of Section 15 of the
question.33
Insurance Code.39
In questioning said ruling, Malayan posits that Sections 5 and 12 are separate
Therefore, even though the two concerned insurance policies were issued over
provisions applicable under distinct circumstances. Malayan argues that "it will
the same goods and cover the same risk, there arises no double insurance since
not be completely absolved under Section 5 of its policy if it were the assured
they were issued to two different persons/entities having distinct insurable
itself who obtained additional insurance coverage on the same property and the
interests. Necessarily, over insurance by double insurance cannot likewise exist.
loss incurred by Wyeth’s cargo was more than that insured by Philippines
Hence, as correctly ruled by the RTC and CA, neither Section 5 nor Section 12
First’s marine policy. On the other hand, Section 12 will not completely absolve
of the SR Policy can be applied.
Malayan if additional insurance coverage on the same cargo were obtained by
someone besides Reputable, in which case Malayan’s SR policy will contribute Apart from the foregoing, the Court is also wont to strictly construe the
or share ratable proportion of a covered cargo loss."34 controversial provisions of the SR Policy against Malayan.1âwphi1 This is in
keeping with the rule that:
Malayan’s position cannot be countenanced.
"Indemnity and liability insurance policies are construed in accordance with the
Section 5 is actually the other insurance clause (also called "additional
general rule of resolving any ambiguity therein in favor of the insured, where
insurance" and "double insurance"), one akin to Condition No. 3 in issue in
the contract or policy is prepared by the insurer. A contract of insurance, being
Geagonia v. CA,35 which validity was upheld by the Court as a warranty that no
a contract of adhesion, par excellence, any ambiguity therein should be resolved
other insurance exists. The Court ruled that Condition No. 3 36 is a condition
against the insurer; in other words, it should be construed liberally in favor of
which is not proscribed by law as its incorporation in the policy is allowed by
the insured and strictly against the insurer. Limitations of liability should be
Section 75 of the Insurance Code. It was also the Court’s finding that unlike the
regarded with extreme jealousy and must be construed in such a way as to
other insurance clauses, Condition No. 3 does not absolutely declare void any
preclude the insurer from noncompliance with its obligations."40
violation thereof but expressly provides that the condition "shall not apply when
Moreover, the CA correctly ruled that:
To rule that Sec. 12 operates even in the absence of double insurance would
work injustice to Reputable which, despite paying premiums for a
P1,000,000.00 insurance coverage, would not be entitled to recover said amount
for the simple reason that the same property is covered by another insurance
policy, a policy to which it was not a party to and much less, from which it did
not stand to benefit. x x x41
On the fourth issue – Reputable is not solidarily liable with Malayan.
There is solidary liability only when the obligation expressly so states, when
the law so provides or when the nature of the obligation so requires.
In Heirs of George Y. Poe v. Malayan lnsurance Company., lnc., 42 the Court
ruled that:
Where the insurance contract provides for indemnity against liability to third
persons, the liability of the insurer is direct and such third persons can directly
sue the insurer. The direct liability of the insurer under indemnity contracts
against third party[- ]liability does not mean, however, that the insurer can be
held solidarily liable with the insured and/or the other parties found at fault,
since they are being held liable under different obligations. The liability of the
insured carrier or vehicle owner is based on tort, in accordance with the
provisions of the Civil Code; while that of the insurer arises from contract,
particularly, the insurance policy:43 (Citation omitted and emphasis supplied)
Suffice it to say that Malayan's and Reputable's respective liabilities arose from
different obligations- Malayan's is based on the SR Policy while Reputable's is
based on the contract of carriage.
All told, the Court finds no reversible error in the judgment sought to be
reviewed.
WHEREFORE, premises considered, the petition is DENIED. The Decision
dated February 29, 2008 and Resolution dated August 28, 2008 of the Court of
Appeals in CA-G.R. CV No. 71204 are hereby AFFIRMED.
Cost against petitioner Malayan Insurance Co., Inc.
SO ORDERED.
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE,
NATIONAL RAILWAYS, and the COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law.
He is bound to observe extraordinary diligence in the conduct of his business.
He is presumed to be negligent when death occurs to a passenger. His liability
may include indemnity for loss of earning capacity even if the deceased
passenger may only be an unemployed high school student at the time of the
accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia
(Perefias) appeal the adverse decision promulgated on November 13, 2002, by
which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260,
in Parañaque City that had decreed them jointly and severally liable with
Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas
and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John
L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute
(Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their
respective residences in Parañaque City to Don Bosco in Pasong Tamo, Makati
City, and back. In their business, the Pereñas used a KIA Ceres Van (van) with
Plate No. PYA 896, which had the capacity to transport 14 students at a time,
two of whom would be seated in the front beside the driver, and the others in
the rear, with six students on either side. They employed Clemente Alfaro
(Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from
Don Bosco. On August 22, 1996, as on previous school days, the van picked
Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place
on the left side of the van near the rear door. The van, with its air-conditioning
unit turned on and the stereo playing loudly, ultimately carried all the 14 student
riders on their way to Don Bosco. Considering that the students were due at
Don Bosco by 7:15 a.m., and that they were already running late because of the
heavy vehicular traffic on the South Superhighway, Alfaro took the van to an
alternate route at about 6:45 a.m. by traversing the narrow path underneath the
Magallanes Interchange that was then commonly used by Makati-bound
vehicles as a short cut into Makati. At the time, the narrow path was marked by
piles of construction materials and parked passenger jeepneys, and the railroad
crossing in the narrow path had no railroad warning signs, or watchmen, or
other responsible persons manning the crossing. In fact, the bamboo barandilla
was up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter
No. 302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the
Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely
tailing a large passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train blew its horn
to warn motorists of its approach. When the train was about 50 meters away
from the passenger bus and the van, Alano applied the ordinary brakes of the
train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the
van driven by Alfaro did not. The train hit the rear end of the van, and the impact
threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron
landed in the path of the train, which dragged his body and severed his head,
instantaneously killing him. Alano fled the scene on board the train, and did not
wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced
this action for damages against Alfaro, the Pereñas, PNR and Alano. The
Pereñas and PNR filed their respective answers, with cross-claims against each
other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John
L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereña for the
adequate and safe transportation carriage of the former spouses' son
from their residence in Parañaque to his school at the Don Bosco
Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the
implementation thereof, Aaron, the minor son of spouses Zarate died
in connection with a vehicular/train collision which occurred while
Aaron was riding the contracted carrier Kia Ceres van of spouses
Pereña, then driven and operated by the latter's employee/authorized
driver Clemente Alfaro, which van collided with the train of PNR,
at around 6:45 A.M. of August 22, 1996, within the vicinity of the
Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of
the vehicular/train collision was a railroad crossing used by
motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were
no appropriate and safety warning signs and railings at the site
commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public
utility and private vehicles used on a daily basis the site of the
collision as an alternative route and short-cut to Makati;
 (7) The train driver or operator left the scene of the incident on
board the commuter train involved without waiting for the police
investigator;
(8) The site commonly used for railroad crossing by motorists was
not in fact intended by the railroad operator for railroad crossing at
the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the
vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR
was an internal arrangement between the former and its project
contractor; and
(12) The site of the vehicular/train collision was within the vicinity
or less than 100 meters from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance
of his functions, liable for negligence constituting the proximate
cause of the vehicular collision, which resulted in the death of
plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer
of defendant Alfaro are liable for any negligence which may be
attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being
the operator of the railroad system is liable for negligence in failing
to provide adequate safety warning signs and railings in the area
commonly used by motorists for railroad crossings, constituting the
proximate cause of the vehicular collision which resulted in the
death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of
the contract of carriage with plaintiff-spouses in failing to provide
adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral
damages, exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette
Pereña observed the diligence of employers and school bus
operators;
(7) Whether or not defendant-spouses are civilly liable for the
accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in
operating the commuter train involved in the accident, in allowing
or tolerating the motoring public to cross, and its failure to install
safety devices or equipment at the site of the accident for the
protection of the public;
(9) Whether or not defendant PNR should be made to reimburse
defendant spouses for any and whatever amount the latter may be
held answerable or which they may be ordered to pay in favor of
plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly
and fully on the amounts claimed by the latter in their Complaint by
reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses
for actual, moral and exemplary damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of
carriage for the safe transport of Aaron; but that against PNR was based on
quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised
the diligence of a good father of the family in the selection and supervision of
Alfaro, by making sure that Alfaro had been issued a driver’s license and had
not been involved in any vehicular accident prior to the collision; that their own
son had taken the van daily; and that Teodoro Pereña had sometimes
accompanied Alfaro in the van’s trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had
been the reckless crossing of the van whose driver had not first stopped, looked
and listened; and that the narrow path traversed by the van had not been
intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff and against the defendants ordering them to jointly and severally
pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for
reconsideration,4 reiterating that the cooperative gross negligence of the Pereñas
and PNR had caused the collision that led to the death of Aaron; and that the
damages awarded to the Zarates were not excessive, but based on the
established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways
jointly and severally liable together with defendant-appellants
spouses Teodorico and Nanette Pereña and defendant-appellant
Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron
Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-
appellees witnesses despite overwhelming documentary evidence
on record, supporting the case of defendants-appellants Philippine
National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable
for actual, moral and exemplary damages and attorney’s fees with the other
defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas
against the Philippine National Railways and in not holding the latter and its
train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of
earning capacity in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings
of the RTC, but limited the moral damages to ₱ 2,500,000.00; and deleted the
attorney’s fees because the RTC did not state the factual and legal bases, to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional
Trial Court, Branch 260 of Parañaque City is AFFIRMED with the modification
that the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages
is reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking
cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum
representing the loss of the deceased’s earning capacity despite Cariaga being
only a medical student at the time of the fatal incident. Applying the formula
adopted in the American Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning
his life expectancy from age of 21 (the age when he would have graduated from
college and started working for his own livelihood) instead of 15 years (his age
when he died). Considering that the nature of his work and his salary at the time
of Aaron’s death were unknown, it used the prevailing minimum wage of ₱
280.00/day to compute Aaron’s gross annual salary to be ₱ 110,716.65,
inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s
life expectancy of 39.3 years, his gross income would aggregate to ₱
4,351,164.30, from which his estimated expenses in the sum of ₱ 2,189,664.30
was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s
computed net income turning out to be higher than the amount claimed by the
Zarates, only ₱ 2,109,071.00, the amount expressly prayed for by them, was
granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA,
to wit:
I. The lower court erred when it upheld the trial court’s decision holding the
petitioners jointly and severally liable to pay damages with Philippine National
Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding
damages for loss of earning capacity of a minor who was only a high school
student at the time of his death in the absence of sufficient basis for such an
award.
III. The lower court erred in not reducing further the amount of damages
awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the
Pereñas and the PNR, basing their claim against the Pereñas on breach of
contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the
findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a
good father of the family in the selection and supervision of Alfaro, the van
driver, by seeing to it that Alfaro had a driver’s license and that he had not been
involved in any vehicular accident prior to the fatal collision with the train; that
they even had their own son travel to and from school on a daily basis; and that
Teodoro Pereña himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such
defense by regarding such defense as inappropriate in an action for breach of
contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts
that the Pereñas operated as a common carrier; and that their standard of care
was extraordinary diligence, not the ordinary diligence of a good father of a
family.
Although in this jurisdiction the operator of a school bus service has been
usually regarded as a private carrier,9primarily because he only caters to some
specific or privileged individuals, and his operation is neither open to the
indefinite public nor for public use, the exact nature of the operation of a school
bus service has not been finally settled. This is the occasion to lay the matter to
rest.
A carrier is a person or corporation who undertakes to transport or convey goods
or persons from one place to another, gratuitously or for hire. The carrier is
classified either as a private/special carrier or as a common/public carrier. 10 A
private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire
his or its services, undertakes, by special agreement in a particular instance
only, to transport goods or persons from one place to another either gratuitously
or for hire.11 The provisions on ordinary contracts of the Civil Code govern the
contract of private carriage.The diligence required of a private carrier is only
ordinary, that is, the diligence of a good father of the family. In contrast, a
common carrier is a person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering such services to the public.12 Contracts of
common carriage are governed by the provisions on common carriers of the
Civil Code, the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence,
and is presumed to be at fault or to have acted negligently in case of the loss of
the effects of passengers, or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the following
terms in United States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of the
public use is not confined to privileged individuals, but is open to the indefinite
public. It is this indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing it.
If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of
the public utility commission. There must be, in general, a right which the law
compels the owner to give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not synonymous with public
interest. The true criterion by which to judge the character of the use is whether
the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the
Civil Code avoided any distinction between a person or an enterprise offering
transportation on a regular or an isolated basis; and has not distinguished a
carrier offering his services to the general public, that is, the general community
or population, from one offering his services only to a narrow segment of the
general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the
Civil Code coincides neatly with the notion of public service under the Public
Service Act, which supplements the law on common carriers found in the Civil
Code. Public service, according to Section 13, paragraph (b) of the Public
Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientèle,
whether permanent or occasional, and done for the general business purposes,
any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both, shipyard, marine repair
shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and
other similar public services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the
Court has considered as common carriers pipeline operators,18 custom brokers
and warehousemen,19 and barge operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the
quantity or extent of the business actually transacted, or the number and
character of the conveyances used in the activity, but whether the undertaking
is a part of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity
rendering such service is a private, not a common, carrier. The question must
be determined by the character of the business actually carried on by the carrier,
not by any secret intention or mental reservation it may entertain or assert when
charged with the duties and obligations that the law imposes.21
Applying these considerations to the case before us, there is no question that the
Pereñas as the operators of a school bus service were: (a) engaged in
transporting passengers generally as a business, not just as a casual occupation;
(b) undertaking to carry passengers over established roads by the method by
which the business was conducted; and (c) transporting students for a fee.
Despite catering to a limited clientèle, the Pereñas operated as a common carrier
because they held themselves out as a ready transportation indiscriminately to
the students of a particular school living within or near where they operated the
service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the
passengers is defined by law. Given the nature of the business and for reasons
of public policy, the common carrier is bound "to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case."22 Article
1755 of the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the
circumstances." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of
that extraordinary diligence; otherwise, the legal presumption that he or it was
at fault or acted negligently would stand.23 No device, whether by stipulation,
posting of notices, statements on tickets, or otherwise, may dispense with or
lessen the responsibility of the common carrier as defined under Article 1755
of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or
reason by which the Court might now reverse the CA’s findings on their
liability. On the contrary, an examination of the records shows that the evidence
fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already
presumed to be negligent at the time of the accident because death had occurred
to their passenger.25 The presumption of negligence, being a presumption of
law, laid the burden of evidence on their shoulders to establish that they had not
been negligent.26 It was the law no less that required them to prove their
observance of extraordinary diligence in seeing to the safe and secure carriage
of the passengers to their destination. Until they did so in a credible manner,
they stood to be held legally responsible for the death of Aaron and thus to be
held liable for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their
negligence by credible evidence. Their defense of having observed the diligence
of a good father of a family in the selection and supervision of their driver was
not legally sufficient. According to Article 1759 of the Civil Code, their liability
as a common carrier did not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their
employee. This was the reason why the RTC treated this defense of the Pereñas
as inappropriate in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver
might have acted beyond the scope of his authority or even in violation of the
orders of the common carrier.27 In this connection, the records showed their
driver’s actual negligence. There was a showing, to begin with, that their driver
traversed the railroad tracks at a point at which the PNR did not permit motorists
going into the Makati area to cross the railroad tracks. Although that point had
been used by motorists as a shortcut into the Makati area, that fact alone did not
excuse their driver into taking that route. On the other hand, with his familiarity
with that shortcut, their driver was fully aware of the risks to his passengers but
he still disregarded the risks. Compounding his lack of care was that loud music
was playing inside the air-conditioned van at the time of the accident. The
loudness most probably reduced his ability to hear the warning horns of the
oncoming train to allow him to correctly appreciate the lurking dangers on the
railroad tracks. Also, he sought to overtake a passenger bus on the left side as
both vehicles traversed the railroad tracks. In so doing, he lost his view of the
train that was then coming from the opposite side of the passenger bus, leading
him to miscalculate his chances of beating the bus in their race, and of getting
clear of the train. As a result, the bus avoided a collision with the train but the
van got slammed at its rear, causing the fatality. Lastly, he did not slow down
or go to a full stop before traversing the railroad tracks despite knowing that his
slackening of speed and going to a full stop were in observance of the right of
way at railroad tracks as defined by the traffic laws and regulations.28He thereby
violated a specific traffic regulation on right of way, by virtue of which he was
immediately presumed to be negligent.29
The omissions of care on the part of the van driver constituted
negligence,30 which, according to Layugan v. Intermediate Appellate Court,31 is
"the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would
do, or the doing of something which a prudent and reasonable man would not
do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of
the interests of another person, that degree of care, precaution, and vigilance
which the circumstances justly demand, whereby such other person suffers
injury.’"33
The test by which to determine the existence of negligence in a particular case
has been aptly stated in the leading case of Picart v. Smith, 34 thuswise:
The test by which to determine the existence of negligence in a particular case
may be stated as follows: Did the defendant in doing the alleged negligent act
use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence. The law
here in effect adopts the standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law. The existence of
negligence in a given case is not determined by reference to the personal
judgment of the actor in the situation before him. The law considers what would
be reckless, blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a
given situation must of course be always determined in the light of human
experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances which are before
them or known to them. They are not, and are not supposed to be, omniscient
of the future. Hence they can be expected to take care only when there is
something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against
that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the
existence of negligence in a given case is this: Conduct is said to be negligent
when a prudent man in the position of the tortfeasor would have foreseen that
an effect harmful to another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was
entirely negligent when he traversed the railroad tracks at a point not allowed
for a motorist’s crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he disregarded the foresight of harm
to his passengers by overtaking the bus on the left side as to leave himself blind
to the approach of the oncoming train that he knew was on the opposite side of
the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate
Court,35 where the Court held the PNR solely liable for the damages caused to
a passenger bus and its passengers when its train hit the rear end of the bus that
was then traversing the railroad crossing. But the circumstances of that case and
this one share no similarities. In Philippine National Railways v. Intermediate
Appellate Court, no evidence of contributory negligence was adduced against
the owner of the bus. Instead, it was the owner of the bus who proved the
exercise of extraordinary diligence by preponderant evidence. Also, the records
are replete with the showing of negligence on the part of both the Pereñas and
the PNR. Another distinction is that the passenger bus in Philippine National
Railways v. Intermediate Appellate Court was traversing the dedicated railroad
crossing when it was hit by the train, but the Pereñas’ school van traversed the
railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR
"jointly and severally" liable for damages arising from the death of Aaron. They
had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative,
in respect to or arising out of the accident, and questions of fact and of law were
common as to the Zarates.36 Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct
from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict
under Article 2176, Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause the
death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
negligence despite the school van of the Pereñas traversing the railroad tracks
at a point not dedicated by the PNR as a railroad crossing for pedestrians and
motorists, because the PNR did not ensure the safety of others through the
placing of crossbars, signal lights, warning signs, and other permanent safety
barriers to prevent vehicles or pedestrians from crossing there. The RTC
observed that the fact that a crossing guard had been assigned to man that point
from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks
to others as well as the need to control the vehicular and other traffic there.
Verily, the Pereñas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although
agreeing with the RTC on the liability, the CA modified the amount. Both lower
courts took into consideration that Aaron, while only a high school student, had
been enrolled in one of the reputable schools in the Philippines and that he had
been a normal and able-bodied child prior to his death. The basis for the
computation of Aaron’s earning capacity was not what he would have become
or what he would have wanted to be if not for his untimely death, but the
minimum wage in effect at the time of his death. Moreover, the RTC’s
computation of Aaron’s life expectancy rate was not reckoned from his age of
15 years at the time of his death, but on 21 years, his age when he would have
graduated from college.
We find the considerations taken into account by the lower courts to be
reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was
speculative and unfounded.1âwphi1 They cited People v. Teehankee,
Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of
earning capacity as a pilot for being speculative due to his having graduated
from high school at the International School in Manila only two years before
the shooting, and was at the time of the shooting only enrolled in the first
semester at the Manila Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court, that he was for all intents
and purposes only a high school graduate.
 We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation
there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC
were not speculating that Aaron would be some highly-paid professional, like a
pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the
computation of Aaron’s earning capacity was premised on him being a lowly
minimum wage earner despite his being then enrolled at a prestigious high
school like Don Bosco in Makati, a fact that would have likely ensured his
success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should
not be taken against his parents and in favor of the defendants whose negligence
not only cost Aaron his life and his right to work and earn money, but also
deprived his parents of their right to his presence and his services as well. Our
law itself states that the loss of the earning capacity of the deceased shall be the
liability of the guilty party in favor of the heirs of the deceased, and shall in
every case be assessed and awarded by the court "unless the deceased on
account of permanent physical disability not caused by the defendant, had no
earning capacity at the time of his death."38 Accordingly, we emphatically hold
in favor of the indemnification for Aaron’s loss of earning capacity despite him
having been unemployed, because compensation of this nature is awarded not
for loss of time or earnings but for loss of the deceased’s power or ability to
earn money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga
v. Laguna Tayabas Bus Company and Manila Railroad Company,40 fourth-year
medical student Edgardo Carriaga’s earning capacity, although he survived the
accident but his injuries rendered him permanently incapacitated, was computed
to be that of the physician that he dreamed to become. The Court considered his
scholastic record sufficient to justify the assumption that he could have finished
the medical course and would have passed the medical board examinations in
due time, and that he could have possibly earned a modest income as a medical
practitioner. Also, in People v. Sanchez,41 the Court opined that murder and rape
victim Eileen Sarmienta and murder victim Allan Gomez could have easily
landed good-paying jobs had they graduated in due time, and that their jobs
would probably pay them high monthly salaries from ₱ 10,000.00 to ₱
15,000.00 upon their graduation. Their earning capacities were computed at
rates higher than the minimum wage at the time of their deaths due to their being
already senior agriculture students of the University of the Philippines in Los
Baños, the country’s leading educational institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and exemplary damages
awarded to the Zarates in the respective amounts of ₱ 2,500,000.00 and ₱
1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just and reasonable under the
established circumstances of this case because they were intended by the law to
assuage the Zarates’ deep mental anguish over their son’s unexpected and
violent death, and their moral shock over the senseless accident. That amount
would not be too much, considering that it would help the Zarates obtain the
means, diversions or amusements that would alleviate their suffering for the
loss of their child. At any rate, reducing the amount as excessive might prove
to be an injustice, given the passage of a long time from when their mental
anguish was inflicted on them on August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce
the amount if only to render effective the desired example for the public good.
As a common carrier, the Pereñas needed to be vigorously reminded to observe
their duty to exercise extraordinary diligence to prevent a similarly senseless
accident from happening again. Only by an award of exemplary damages in that
amount would suffice to instill in them and others similarly situated like them
the ever-present need for greater and constant vigilance in the conduct of a
business imbued with public interest.
WHEREFORE, we DENY the petition for review
on certiorari; AFFIRM the decision promulgated on November 13, 2002;
and ORDER the petitioners to pay the costs of suit.
SO ORDERED.