G.R. No.

145804 February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,

vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.

DECISION

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.,"
which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266,
Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.

On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of
the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin,
the security guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No evidence, however,
was adduced to indicate how the fight started or who, between the two, delivered the first
blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT
train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving
train, and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA,
the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband.
LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence
in the selection and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of
presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin
was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the
plaintiffs the following:
 "a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

"d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated
its now assailed decision exonerating Prudent from any liability for the death of Nicanor
Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly:

"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from
any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the
Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay
jointly and severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorney’s fees."2

The appellate court ratiocinated that while the deceased might not have then as yet boarded
the train, a contract of carriage theretofore had already existed when the victim entered the
place where passengers were supposed to be after paying the fare and getting the
corresponding token therefor. In exempting Prudent from liability, the court stressed that there
was nothing to link the security agency to the death of Navidad. It said that Navidad failed to
show that Escartin inflicted fist blows upon the victim and the evidence merely established the
fact of death of Navidad by reason of his having been hit by the train owned and managed by
the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their
failure to present expert evidence to establish the fact that the application of emergency brakes
could not have stopped the train.

The appellate court denied petitioners’ motion for reconsideration in its resolution of 10
October 2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court;
viz:

"I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF

FACTS BY THE TRIAL COURT

"II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE
LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.

"III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS
AN EMPLOYEE OF LRTA."3

Petitioners would contend that the appellate court ignored the evidence and the factual
findings of the trial court by holding them liable on the basis of a sweeping conclusion that the
presumption of negligence on the part of a common carrier was not overcome. Petitioners
would insist that Escartin’s assault upon Navidad, which caused the latter to fall on the tracks,
was an act of a stranger that could not have been foreseen or prevented. The LRTA would add
that the appellate court’s conclusion on the existence of an employer-employee relationship
between Roman and LRTA lacked basis because Roman himself had testified being an employee
of Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of
carriage was deemed created from the moment Navidad paid the fare at the LRT station and
entered the premises of the latter, entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had correctly held LRTA and Roman liable for
the death of Navidad in failing to exercise extraordinary diligence imposed upon a common
carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and
for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring
the safety of passengers.4 The Civil Code, governing the liability of a common carrier for death
of or injury to its passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.

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

"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.

"This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees."

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account
of the willful acts or negligence of other passengers or of strangers, if the common carrier’s
employees through the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances.5 Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage.6 The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or wilful acts of its employees or b) on account
of wilful acts or negligence of other passengers or of strangers if the common carrier’s
employees through the exercise of due diligence could have prevented or stopped the act or
omission.7 In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and8 by simple proof of injury, the passenger is relieved of the duty to still establish
the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier
to prove that the injury is due to an unforeseen event or to force majeure.9 In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners,
according to the appellate court, have failed to show, the presumption would be that it has
been at fault,10 an exception from the general rule that negligence must be proved.11

The foundation of 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 217612 and related provisions, in conjunction with Article 2180,13 of the
Civil Code. The premise, however, for the employer’s liability is negligence or fault on the part
of the employee. Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris
families in the selection and supervision of its employees. The liability is primary and can only
be negated by showing due diligence in the selection and supervision of the employee, a factual
matter that has not been shown. Absent such a showing, one might ask further, how then must
the liability of the common carrier, on the one hand, and an independent contractor, on the
other hand, be described? It would be solidary. A contractual obligation can be breached by
tort and when the same act or omission causes the injury, one resulting in culpa contractual
and the other in culpa aquiliana, Article 219414 of the Civil Code can well apply.15 In fine, a
liability for tort may arise even under a contract, where tort is that which breaches the
contract.16 Stated differently, when an act which constitutes a breach of contract would have
itself constituted the source of a 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.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is
nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence
of its employee, Escartin, has not been duly proven x x x." This finding of the appellate court is
not without substantial justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the latter
and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages
are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.18 It is an established rule that nominal damages cannot co-
exist with compensatory damages.19

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but
only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is
absolved from liability. No costs.

SO ORDERED.
G.R. No. L-20761 July 27, 1966

LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents.

G. E. Yabut, R. Monterey and M.C. Lagman for petitioner.

Ahmed Garcia for respondents.

BARRERA, J.:

La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R,
holding it liable for quasi-delict and ordering it to pay to respondents Mariano Beltran, et al.,
P6,000.00 for the death of his minor daughter Raquel Beltran, plus P400.00 as actual damages.

The facts of the case as found by the Court of Appeals, briefly are:

On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with
their minor daughters, namely, Milagros, 13 years old, Raquel, about 4½ years old, and
Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No. 757
(1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga,
bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four
pieces of baggages containing their personal belonging. The conductor of the bus, who
happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets (Exhs. A,
B, & C) covering the full fares of the plaintiff and their eldest child, Milagros. No fare was
charged on Raquel and Fe, since both were below the height at which fare is charged in
accordance with the appellant's rules and regulations.

After about an hour's trip, the bus reached Anao whereat it stopped to allow the
passengers bound therefor, among whom were the plaintiffs and their children to get
off. With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of
their baggages, was the first to get down the bus, followed by his wife and his children.
Mariano led his companions to a shaded spot on the left pedestrians side of the road
about four or five meters away from the vehicle. Afterwards, he returned to the bus in
controversy to get his other bayong, which he had left behind, but in so doing, his
daughter Raquel followed him, unnoticed by her father. While said Mariano Beltran was
on the running board of the bus waiting for the conductor to hand him his bayong which
he left under one of its seats near the door, the bus, whose motor was not shut off
while unloading, suddenly started moving forward, evidently to resume its trip,
notwithstanding the fact that the conductor has not given the driver the customary
signal to start, since said conductor was still attending to the baggage left behind by
Mariano Beltran. Incidentally, when the bus was again placed into a complete stop, it
had travelled about ten meters from the point where the plaintiffs had gotten off.
 Sensing that the bus was again in motion, Mariano Beltran immediately jumped from
the running board without getting his bayong from the conductor. He landed on the
side of the road almost in front of the shaded place where he left his wife and children.
At that precise time, he saw people beginning to gather around the body of a child lying
prostrate on the ground, her skull crushed, and without life. The child was none other
than his daughter Raquel, who was run over by the bus in which she rode earlier
together with her parents.

For the death of their said child, the plaintiffs commenced the present suit against the
defendant seeking to recover from the latter an aggregate amount of P16,000 to cover
moral damages and actual damages sustained as a result thereof and attorney's fees.
After trial on the merits, the court below rendered the judgment in question.

On the basis of these facts, the trial court found defendant liable for breach of contract of
carriage and sentenced it to pay P3,000.00 for the death of the child and P400.00 as
compensatory damages representing burial expenses and costs.

On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of
contract in the case, for the reason that when the child met her death, she was no longer a
passenger of the bus involved in the incident and, therefore, the contract of carriage had
already terminated. Although the Court of Appeals sustained this theory, it nevertheless found
the defendant-appellant guilty of quasi-delict and held the latter liable for damages, for the
negligence of its driver, in accordance with Article 2180 of the Civil Code. And, the Court of
Appeals did not only find the petitioner liable, but increased the damages awarded the
plaintiffs-appellees to P6,000.00, instead of P3,000.00 granted by the trial court.

In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it
liable for quasi-delict, considering that respondents complaint was one for breach of contract,
and (2) in raising the award of damages from P3,000.00 to P6,000.00 although respondents did
not appeal from the decision of the lower court.

Under the facts as found by the Court of Appeals, we have to sustain the judgement holding
petitioner liable for damages for the death of the child, Raquel Beltran. It may be pointed out
that although it is true that respondent Mariano Beltran, his wife, and their children (including
the deceased child) had alighted from the bus at a place designated for disembarking or
unloading of passengers, it was also established that the father had to return to the vehicle
(which was still at a stop) to get one of his bags or bayong that was left under one of the seats
of the bus. There can be no controversy that as far as the father is concerned, when he
returned to the bus for his bayongwhich was not unloaded, the relation of passenger and
carrier between him and the petitioner remained subsisting. For, the relation of carrier and
passenger does not necessarily cease where the latter, after alighting from the car, aids the
carrier's servant or employee in removing his baggage from the car.1 The issue to be
determined here is whether as to the child, who was already led by the father to a place about
5 meters away from the bus, the liability of the carrier for her safety under the contract of
carriage also persisted.

It has been recognized as a rule that the relation of carrier and passenger does not cease at the
moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the
point of destination, but continues until the passenger has had a reasonable time or a
reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances. Thus, a person
who, after alighting from a train, walks along the station platform is considered still a
passenger.2 So also, where a passenger has alighted at his destination and is proceeding by the
usual way to leave the company's premises, but before actually doing so is halted by the report
that his brother, a fellow passenger, has been shot, and he in good faith and without intent of
engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and
necessarily delayed and thus continues to be a passenger entitled as such to the protection of
the railroad and company and its agents.3

In the present case, the father returned to the bus to get one of his baggages which was not
unloaded when they alighted from the bus. Raquel, the child that she was, must have followed
the father. However, although the father was still on the running board of the bus awaiting for
the conductor to hand him the bag or bayong, the bus started to run, so that even he (the
father) had to jump down from the moving vehicle. It was at this instance that the child, who
must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that
the carrier's agent had exercised the "utmost diligence" of a "very cautions person" required by
Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its
obligation to transport safely its passengers. In the first place, the driver, although stopping the
bus, nevertheless did not put off the engine. Secondly, he started to run the bus even before
the bus conductor gave him the signal to go and while the latter was still unloading part of the
baggages of the passengers Mariano Beltran and family. The presence of said passengers near
the bus was not unreasonable and they are, therefore, to be considered still as passengers of
the carrier, entitled to the protection under their contract of carriage.

But even assuming arguendo that the contract of carriage has already terminated, herein
petitioner can be held liable for the negligence of its driver, as ruled by the Court of Appeals,
pursuant to Article 2180 of the Civil Code. Paragraph 7 of the complaint, which reads —

That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs'
daughter, was caused by the negligence and want of exercise of the utmost diligence of
a very cautious person on the part of the defendants and their agent, necessary to
transport plaintiffs and their daughter safely as far as human care and foresight can
provide in the operation of their vehicle.

is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while
incompatible with the other claim under the contract of carriage, is permissible under Section 2
of Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the
alternative, be they compatible with each other or not, to the end that the real matter in
controversy may be resolved and determined.4

The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated
when it was alleged in the complaint that "the death of Raquel Beltran, plaintiffs' daughter, was
caused by the negligence and want of exercise of the utmost diligence of a very cautious person
on the part of the defendants and their agent." This allegation was also proved when it was
established during the trial that the driver, even before receiving the proper signal from the
conductor, and while there were still persons on the running board of the bus and near it,
started to run off the vehicle. The presentation of proof of the negligence of its employee gave
rise to the presumption that the defendant employer did not exercise the diligence of a good
father of the family in the selection and supervision of its employees. And this presumption, as
the Court of Appeals found, petitioner had failed to overcome. Consequently, petitioner must
be adjudged peculiarily liable for the death of the child Raquel Beltran.

The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals,
however, cannot be sustained. Generally, the appellate court can only pass upon and consider
questions or issues raised and argued in appellant's brief. Plaintiffs did not appeal from that
portion of the judgment of the trial court awarding them on P3,000.00 damages for the death
of their daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs
have pointed out in their brief the inadequacy of the award, or that the inclusion of the figure
P3,000.00 was merely a clerical error, in order that the matter may be treated as an exception
to the general rule.5Herein petitioner's contention, therefore, that the Court of Appeals
committed error in raising the amount of the award for damages is, evidently,
meritorious.1äwphï1.ñët

Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the
petitioner to pay to the respondents Mariano Beltran, et al., the sum of P3,000.00 for the death
of the child, Raquel Beltran, and the amount of P400.00 as actual damages. No costs in this
instance. So ordered.

G.R. No. 102316 June 30, 1997

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,

vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.

PANGANIBAN, J.:

Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, short-
landing, breakages and any kind of damages to the cargo" 1 valid? This is the main question
raised in this petition for review assailing the Decision of Respondent Court of Appeals 2 in CA-
G.R. No. CV-20156 promulgated on October 15, 1991. The Court of Appeals modified the
judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive
portion of which reads:

WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and

Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS
(P2,000,000.00) representing the value of the policy of the lost logs with legal
interest thereon from the date of demand on February 2, 1984 until the amount
is fully paid or in the alternative, defendant Seven Brothers Shipping Corporation
to pay plaintiff the amount of TWO MILLION PESOS (2,000,000.00) representing
the value of lost logs plus legal interest from the date of demand on April 24,
1984 until full payment thereof; the reasonable attorney's fees in the amount
equivalent to five (5) percent of the amount of the claim and the costs of the
suit.

Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping

Corporation the sum of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00)
representing the balance of the stipulated freight charges.

Defendant South Sea Surety and Insurance Company's counterclaim is hereby

dismissed.

In its assailed Decision, Respondent Court of Appeals held:

WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as

the liability of the Seven Brothers Shipping Corporation to the plaintiff is
concerned which is hereby REVERSED and SET ASIDE. 3

The Facts

The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows:

It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial

Supply, Inc.) entered into an agreement with the defendant Seven Brothers
(Shipping Corporation) whereby the latter undertook to load on board its vessel
M/V Seven Ambassador the former's lauan round logs numbering 940 at the port
of Maconacon, Isabela for shipment to Manila.

On 20 January 1984, plaintiff insured the logs against loss and/or damage with
defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the
latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00
on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on
the insurance policy to Mr. Victorio Chua.

In the meantime, the said vessel M/V Seven Ambassador sank on 25 January
1984 resulting in the loss of the plaintiff's insured logs.

On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the
premium and documentary stamps due on the policy was tendered due to the
insurer but was not accepted. Instead, the South Sea Surety and Insurance Co.,
Inc. cancelled the insurance policy it issued as of the date of the inception for
non-payment of the premium due in accordance with Section 77 of the
Insurance Code.

On 2 February 1984, plaintiff demanded from defendant South Sea Surety and
Insurance Co., Inc. the payment of the proceeds of the policy but the latter
denied liability under the policy. Plaintiff likewise filed a formal claim with
defendant Seven Brothers Shipping Corporation for the value of the lost logs but
the latter denied the claim.

After due hearing and trial, the court a quo rendered judgment in favor of
plaintiff and against defendants. Both defendants shipping corporation and the
surety company appealed.

Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the

court a quo the following assignment of errors, to wit:

A. The lower court erred in holding that the proximate cause of the sinking of the
vessel Seven Ambassadors, was not due to fortuitous event but to the
negligence of the captain in stowing and securing the logs on board, causing the
iron chains to snap and the logs to roll to the portside.

B. The lower court erred in declaring that the non-liability clause of the Seven
Brothers Shipping Corporation from logs (sic) of the cargo stipulated in the
charter party is void for being contrary to public policy invoking article 1745 of
the New Civil Code.

C. The lower court erred in holding defendant-appellant Seven Brothers Shipping

Corporation liable in the alternative and ordering/directing it to pay plaintiff-
appellee the amount of two million (2,000,000.00) pesos representing the value
of the logs plus legal interest from date of demand until fully paid.

D. The lower court erred in ordering defendant-appellant Seven Brothers

Shipping Corporation to pay appellee reasonable attorney's fees in the amount
equivalent to 5% of the amount of the claim and the costs of the suit.
 E. The lower court erred in not awarding defendant-appellant Seven Brothers
Corporation its counter-claim for attorney's fees.

F. The lower court erred in not dismissing the complaint against Seven Brothers
Shipping Corporation.

Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:

A. The trial court erred in holding that Victorio Chua was an agent of defendant-
appellant South Sea Surety and Insurance Company, Inc. and likewise erred in
not holding that he was the representative of the insurance broker Columbia
Insurance Brokers, Ltd.

B. The trial court erred in holding that Victorio Chua received

compensation/commission on the premiums paid on the policies issued by the
defendant-appellant South Sea Surety and Insurance Company, Inc.

C. The trial court erred in not applying Section 77 of the Insurance Code.

D. The trial court erred in disregarding the "receipt of payment clause" attached
to and forming part of the Marine Cargo Insurance Policy No. 84/24229.

E. The trial court in disregarding the statement of account or bill stating the
amount of premium and documentary stamps to be paid on the policy by the
plaintiff-appellee.

F. The trial court erred in disregarding the endorsement of cancellation of the

policy due to non-payment of premium and documentary stamps.

G. The trial court erred in ordering defendant-appellant South Sea Surety and
Insurance Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing
value of the policy with legal interest from 2 February 1984 until the amount is
fully paid,

H. The trial court erred in not awarding to the defendant-appellant the

attorney's fees alleged and proven in its counterclaim.

The primary issue to be resolved before us is whether defendants shipping

corporation and the surety company are liable to the plaintiff for the latter's lost
logs. 4

The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea
Surety and Insurance Company ("South Sea"), but modified it by holding that Seven Brothers
Shipping Corporation ("Seven Brothers") was not liable for the lost cargo. 5 In modifying the RTC
judgment, the respondent appellate court ratiocinated thus:

It appears that there is a stipulation in the charter party that the ship owner
would be exempted from liability in case of loss.

The court a quo erred in applying the provisions of the Civil Code on common
carriers to establish the liability of the shipping corporation. The provisions on
common carriers should not be applied where the carrier is not acting as such
but as a private carrier.

Under American jurisprudence, a common carrier undertaking to carry a special

cargo or chartered to a special person only, becomes a private carrier.

As a private carrier, a stipulation exempting the owner from liability even for the
negligence of its agent is valid (Home Insurance Company, Inc. vs. American
Steamship Agencies, Inc., 23 SCRA 24).

The shipping corporation should not therefore be held liable for the loss of the
logs. 6

South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. ("Valenzuela")
filed separate petitions for review before this Court. In a Resolution dated June 2, 1995, this
Court denied the petition of South
Sea. 7 There the Court found no reason to reverse the factual findings of the trial court and the
Court of Appeals that Chua was indeed an authorized agent of South Sea when he received
Valenzuela's premium payment for the marine cargo insurance policy which was thus binding
on the insurer. 8

The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the
CA Decision which exempted Seven Brothers from any liability for the lost cargo.

The Issue

Petitioner Valenzuela's arguments resolve around a single issue: "whether or not respondent
Court (of Appeals) committed a reversible error in upholding the validity of the stipulation in
the charter party executed between the petitioner and the private respondent exempting the
latter from liability for the loss of petitioner's logs arising from the negligence of its (Seven
Brothers') captain." 9

The Court's Ruling

The petition is not meritorious.

 Validity of Stipulation is Lis Mota

The charter party between the petitioner and private respondent stipulated that the "(o)wners
shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the
cargo." 10 The validity of this stipulation is the lis mota of this case.

It should be noted at the outset that there is no dispute between the parties that the proximate
cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the
"snapping of the iron chains and the subsequent rolling of the logs to the portside due to the
negligence of the captain in stowing and securing the logs on board the vessel and not due to
fortuitous event." 11 Likewise undisputed is the status of Private Respondent Seven Brothers as
a private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the
latter admits this in its petition. 12

The trial court deemed the charter party stipulation void for being contrary to public
policy, 13 citing 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:

(1) That the goods are transported at the risk of the owner or shipper;

(2) That the common carrier will not be liable for any loss, destruction, or
deterioration of the goods;

(3) That the common carrier need not observe any diligence in the custody of the
goods;

(4) That the common carrier shall exercise a degree of diligence less than that of
a good father of a family, or of a man of ordinary prudence in the vigilance over
the movables transported;

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

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

(7) That the common carrier is 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.
Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587
of the Code of Commerce 14 and Articles 1170 and 1173 of the Civil Code. Citing Article 1306
and paragraph 1, Article 1409 of the Civil Code, 15 petitioner further contends that said
stipulation "gives no duty or obligation to the private respondent to observe the diligence of a
good father of a family in the custody and transportation of the cargo."

The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had
acted as a private carrier in transporting petitioner's lauan logs. Thus, Article 1745 and other
Civil Code provisions on common carriers which were cited by petitioner may not be applied
unless expressly stipulated by the parties in their charter party. 16

In a contract of private carriage, the parties may validly stipulate that responsibility for the
cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage
to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of
the Civil Code, such stipulation is valid because it is freely entered into by the parties and the
same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their
contract of private carriage is not even a contract of adhesion. We stress that 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.

The issue posed in this case and the arguments raised by petitioner are not novel; they were
resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies,
Inc. 18 In that case, the trial court similarly nullified a stipulation identical to that involved in the
present case for being contrary to public policy based on Article 1744 of the Civil Code and
Article 587 of the Code of Commerce. Consequently, the trial court held the shipowner liable
for damages resulting for the partial loss of the cargo. This Court reversed the trial court and
laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and
doctrine:

The provisions of our Civil Code on common carriers were taken from Anglo-
American law. Under American jurisprudence, a common carrier undertaking to
carry a special cargo or chartered to a special person only, becomes a private
carrier. As a private carrier, a stipulation exempting the owner from liability for
the negligence of its agent is not against public policy, and is deemed valid.

Such doctrine We find reasonable. The Civil Code provisions on common carriers
should not be applied where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent would be void if the strict public policy
 governing common carriers is applied. Such policy has no force where the public
at large is not involved, as in this case of a ship totally chartered for the used of a
single party. 19(Emphasis supplied.)

Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public
enters into a contract of transportation with common carriers without a hand or a voice in the
preparation thereof. The riding public merely adheres to the contract; even if the public wants
to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law
on common carriers extends its protective mantle against one-sided stipulations inserted in
tickets, invoices or other documents over which the riding public has no understanding or,
worse, no choice. Compared to the general public, a charterer in a contract of private carriage is
not similarly situated. It can — and in fact it usually does — enter into a free and voluntary
agreement. In practice, the parties in a contract of private carriage can stipulate the carrier's
obligations and liabilities over the shipment which, in turn, determine the price or
consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may
opt to set aside the protection of the law on common carriers. When the charterer decides to
exercise this option, he takes a normal business risk.

Petitioner contends that the rule in Home Insurance is not applicable to the present case
because it "covers only a stipulation exempting a private carrier from liability for the negligence
of his agent, but it does not apply to a stipulation exempting a private carrier like private
respondent from the negligence of his employee or servant which is the situation in this
case." 20 This contention of petitioner is bereft of merit, for it raises a distinction without any
substantive difference. The case Home Insurance specifically dealt with "the liability of the
shipowner for acts or negligence of its captain and crew" 21 and a charter party stipulation
which "exempts the owner of the vessel from any loss or damage or delay arising from any
other source, even from the neglect or fault of the captain or crew or some other person
employed by the owner on
board, for whose acts the owner would ordinarily be liable except for said
paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at bar.

The naked assertion of petitioner that the American rule enunciated in Home Insurance is not
the rule in the Philippines 23 deserves scant consideration. The Court there categorically held
that said rule was "reasonable" and proceeded to apply it in the resolution of that case.
Petitioner miserably failed to show such circumstances or arguments which would necessitate a
departure from a well-settled rule. Consequently, our ruling in said case remains a binding
judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code which
provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall
form part of the legal system of the Philippines."

In fine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a
stipulation exempting the owner from liability even for the negligence of its agents is valid." 24

Other Arguments
On the basis of the foregoing alone, the present petition may already be denied; the Court,
however, will discuss the other arguments of petitioner for the benefit and satisfaction of all
concerned.

Articles 586 and 587, Code of Commerce

Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and
587 of the Code of Commerce which confer on petitioner the right to recover damages from
the shipowner and ship agent for the acts or conduct of the captain. 25 We are not persuaded.
Whatever rights petitioner may have under the aforementioned statutory provisions were
waived when it entered into the charter party.

Article 6 of the Civil Code provides that "(r)ights may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good customs, or prejudicial to a person with a right
recognized by law." As a general rule, patrimonial rights may be waived as opposed to rights to
personality and family rights which may not be made the subject of waiver. 26 Being patently
and undoubtedly patrimonial, petitioner's right conferred under said articles may be waived.
This, the petitioner did by acceding to the contractual stipulation that it is solely responsible or
any damage to the cargo, thereby exempting the private carrier from any responsibility for loss
or damage thereto. Furthermore, as discussed above, the contract of private carriage binds
petitioner and private respondent alone; it is not imbued with public policy considerations for
the general public or third persons are not affected thereby.

Articles 1170 and 1173, Civil Code

Petitioner likewise argues that the stipulation subject of this controversy is void for being
contrary to Articles 1170 and 1173 of the Civil Code 27 which read:

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 2201, shall apply.

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

The Court notes that the foregoing articles are applicable only to the obligor or the one with an
obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor
in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of
the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions
cited by petitioner are, therefore, inapplicable to the present case.

Moreover, the factual milieu of this case does not justify the application of the second
paragraph of Article 1173 of the Civil Code which prescribes the standard of diligence to be
observed in the event the law or the contract is silent. In the instant case, Article 362 of the
Code of Commerce 28 provides the standard of ordinary diligence for the carriage of goods by a
carrier. The standard of diligence under this statutory provision may, however, be modified in a
contract of private carriage as the petitioner and private respondent had done in their charter
party.

Cases Cited by Petitioner Inapplicable

Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn, quoted Juan Ysmael &
Co. vs. Gabino Barreto & Co. 30 and argues that the public policy considerations stated there vis-
a-vis contractual stipulations limiting the carrier's liability be applied "with equal force" to this
case. 31 It also cites Manila Railroad Co. vs.Compañia Transatlantica 32 and contends that
stipulations exempting a party from liability for damages due to negligence "should not be
countenanced" and should be "strictly construed" against the party claiming its benefit. 33We
disagree.

The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily
justify the application of such policy considerations and concomitantly stricter rules. As already
discussed above, the public policy considerations behind the rigorous treatment of common
carriers are absent in the case of private carriers. Hence, the stringent laws applicable to
common carriers are not applied to private carries. The case of Manila Railroad is also
inapplicable because the action for damages there does not involve a contract for
transportation. Furthermore, the defendant therein made a "promise to use due care in the
lifting operations" and, consequently, it was "bound by its undertaking"'; besides, the
exemption was intended to cover accidents due to hidden defects in the apparatus or other
unforseeable occurrences" not caused by its "personal negligence." This promise was thus
constructed to make sense together with the stipulation against liability for damages. 34 In the
present case, we stress that the private respondent made no such promise. The agreement of
the parties to exempt the shipowner from responsibility for any damage to the cargo and place
responsibility over the same to petitioner is the lone stipulation considered now by this Court.

Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo, 35 Walter A. Smith &
Co. vs.Cadwallader Gibson Lumber Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta
Development Co. vs.Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship Co. 39 in
support of its contention that the shipowner be held liable for damages. 40 These however are
not on all fours with the present case because they do not involve a similar factual milieu or an
identical stipulation in the charter party expressly exempting the shipowner form responsibility
for any damage to the cargo.
 Effect of the South Sea Resolution

In its memorandum, Seven Brothers argues that petitioner has no cause of action against it
because this Court has earlier affirmed the liability of South Sea for the loss suffered by
petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for
a single loss. 41 In view of the above disquisition upholding the validity of the questioned
charter party stipulation and holding that petitioner may not recover from private respondent,
the present issue is moot and academic. It suffices to state that the Resolution of this Court
dated June 2, 1995 42 affirming the liability of South Sea does not, by itself, necessarily preclude
the petitioner from proceeding against private respondent. An aggrieved party may still recover
the deficiency for the person causing the loss in the event the amount paid by the insurance
company does not fully cover the loss. Article 2207 of the Civil Code provides:

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

WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show
any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED.

SO ORDERED.
G.R. No. 157481 January 24, 2006

LOADSTAR SHIPPING CO., INC., Petitioner,

vs.
PIONEER ASIA INSURANCE CORP., Respondent.

DECISION

QUISUMBING, J.:

For review on certiorari are (1) the Decision1 dated October 15, 2002 and (2)
the Resolution2 dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No. 40999,
which affirmed with modification the Decision3 dated February 15, 1993 of the Regional Trial
Court of Manila, Branch 8 in Civil Case No. 86-37957.

The pertinent facts are as follows:

Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered owner and operator
of the vessel M/V Weasel. It holds office at 1294 Romualdez St., Paco, Manila.

On June 6, 1984, Loadstar entered into a voyage-charter with Northern Mindanao Transport
Company, Inc. for the carriage of 65,000 bags of cement from Iligan City to Manila. The shipper
was Iligan Cement Corporation, while the consignee in Manila was Market Developers, Inc.

On June 24, 1984, 67,500 bags of cement were loaded on board M/V Weasel and stowed in the
cargo holds for delivery to the consignee. The shipment was covered by petitioner’s Bill of
Lading4 dated June 23, 1984.

Prior to the voyage, the consignee insured the shipment of cement with respondent Pioneer
Asia Insurance Corporation for P1,400,000, for which respondent issued Marine Open Policy
No. MOP-006 dated September 17, 1980, covering all shipments made on or after September
30, 1980.5

At 12:50 in the afternoon of June 24, 1984, M/V Weasel left Iligan City for Manila in good
weather. However, at 4:31 in the morning of June 25, 1984, Captain Vicente C. Montera, master
of M/V Weasel, ordered the vessel to be forced aground. Consequently, the entire shipment of
cement was good as gone due to exposure to sea water. Petitioner thus failed to deliver the
goods to the consignee in Manila.

The consignee demanded from petitioner full reimbursement of the cost of the lost shipment.
Petitioner, however, refused to reimburse the consignee despite repeated demands.

Nonetheless, on March 11, 1985, respondent insurance company paid the

consignee P1,400,000 plus an additional amount of P500,000, the value of the lost shipment of
cement. In return, the consignee executed a Loss and Subrogation Receipt in favor of
respondent concerning the latter’s subrogation rights against petitioner.

Hence, on October 15, 1986, respondent filed a complaint docketed as Civil Case No. 86-37957,
against petitioner with the Regional Trial Court of Manila, Branch 8. It alleged that: (1) the M/V
Weasel was not seaworthy at the commencement of the voyage; (2) the weather and sea
conditions then prevailing were usual and expected for that time of the year and as such, was
an ordinary peril of the voyage for which the M/V Weasel should have been normally able to
cope with; and (3) petitioner was negligent in the selection and supervision of its agents and
employees then manning the M/V Weasel.

In its Answer, petitioner alleged that no fault nor negligence could be attributed to it because it
exercised due diligence to make the ship seaworthy, as well as properly manned and equipped.
Petitioner insisted that the failure to deliver the subject cargo to the consignee was due to force
majeure. Petitioner claimed it could not be held liable for an act or omission not directly
attributable to it.

On February 15, 1993, the RTC rendered a Decision in favor of respondent, to wit:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff and
against defendant Loadstar Shipping Co., Inc. ordering the latter to pay as follows:

1. To pay plaintiff the sum of P1,900,000.00 with legal rate of interest per annum from
date of complaint until fully paid;

2. To pay the sum equal to 25% of the claim as and for attorney’s fees and litigation
expenses; and,

3. To pay the costs of suit.

IT IS SO ORDERED.6

The RTC reasoned that petitioner, as a common carrier, bears the burden of proving that it
exercised extraordinary diligence in its vigilance over the goods it transported. The trial court
explained that in case of loss or destruction of the goods, a statutory presumption arises that
the common carrier was negligent unless it could prove that it had observed extraordinary
diligence.

Petitioner’s defense of force majeure was found bereft of factual basis. The RTC called attention
to the PAG-ASA report that at the time of the incident, tropical storm "Asiang" had moved
away from the Philippines. Further, records showed that the sea and weather conditions in the
area of Hinubaan, Negros Occidental from 8:00 p.m. of June 24, 1984 to 8:00 a.m. the next day
were slight and smooth. Thus, the trial court concluded that the cause of the loss was not
tropical storm "Asiang" or any other force majeure, but gross negligence of petitioner.
Petitioner appealed to the Court of Appeals.

In its Decision dated October 15, 2002, the Court of Appeals affirmed the RTC Decision with
modification that Loadstar shall only pay the sum of 10% of the total claim for attorney’s fees
and litigation expenses. It ruled,

WHEREFORE, premises considered, the Decision dated February 15, 1993, of the Regional Trial
Court of Manila, National Capital Judicial Region, Branch 8, in Civil Case No. 86-37957 is hereby
AFFIRMED with the MODIFICATION that the appellant shall only pay the sum of 10% of the total
claim as and for attorney’s fees and litigation expenses. Costs against the appellant.

SO ORDERED.7

Petitioner’s Motion for Reconsideration was denied.8

The instant petition is anchored now on the following assignments of error:

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS A COMMON

CARRIER UNDER ARTICLE 1732 OF THE CIVIL CODE.

II

ASSUMING ARGUENDO THAT PETITIONER IS A COMMON CARRIER, THE HONORABLE COURT OF

APPEALS ERRED IN HOLDING THAT THE PROXIMATE CAUSE OF THE LOSS OF CARGO WAS NOT A
FORTUITOUS EVENT BUT WAS ALLEGEDLY DUE TO THE FAILURE OF PETITIONER TO EXERCISE
EXTRAORDINARY DILIGENCE.

III

THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD BY THE TRIAL COURT
OF ATTORNEY’S FEES AND LITIGATION EXPENSES IN FAVOR OF HEREIN RESPONDENT.9

On the first and second issues, petitioner contends that at the time of the voyage the carrier’s
voyage-charter with the shipper converted it into a private carrier. Thus, the presumption of
negligence against common carriers could not apply. Petitioner further avers that the
stipulation in the voyage-charter holding it free from liability is valid and binds the respondent.
In any event, petitioner insists that it had exercised extraordinary diligence and that the
proximate cause of the loss of the cargo was a fortuitous event.

With regard to the third issue, petitioner points out that the award of attorney’s fees and
litigation expenses appeared only in the dispositive portion of the RTC Decision with nary a
justification. Petitioner maintains that the Court of Appeals thus erred in affirming the award.
For its part, respondent dismisses as factual issues the inquiry on (1) whether the loss of the
cargo was due to force majeure or due to petitioner’s failure to exercise extraordinary
diligence; and (2) whether respondent is entitled to recover attorney’s fees and expenses of
litigation.

Respondent further counters that the Court of Appeals was correct when it held that petitioner
was a common carrier despite the charter of the whole vessel, since the charter was limited to
the ship only.

Prefatorily, we stress that the finding of fact by the trial court, when affirmed by the Court of
Appeals, is not reviewable by this Court in a petition for review on certiorari. However, the
conclusions derived from such factual finding are not necessarily pure issues of fact when they
are inextricably intertwined with the determination of a legal issue. In such instances, the
conclusions made may be raised in a petition for review before this Court.10

The threshold issues in this case are: (1) Given the circumstances of this case, is petitioner a
common or a private carrier? and (2) In either case, did petitioner exercise the required
diligence i.e., the extraordinary diligence of a common carrier or the ordinary diligence of a
private carrier?

Article 1732 of the Civil Code defines a "common carrier" as follows:

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.

Petitioner is a corporation engaged in the business of transporting cargo by water and for
compensation, offering its services indiscriminately to the public. Thus, without doubt, it is a
common carrier. However, petitioner entered into a voyage-charter with the Northern
Mindanao Transport Company, Inc. Now, had the voyage-charter converted petitioner into a
private carrier?

We think not. The voyage-charter agreement between petitioner and Northern Mindanao
Transport Company, Inc. did not in any way convert the common carrier into a private carrier.
We have already resolved this issue with finality in Planters Products, Inc. v. Court of
Appeals11 where we ruled that:

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited to
the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control
of the ship, although her holds may, for the moment, be the property of the charterer.12
Conformably, petitioner remains a common carrier notwithstanding the existence of the
charter agreement with the Northern Mindanao Transport Company, Inc. since the said charter
is limited to the ship only and does not involve both the vessel and its crew. As elucidated
in Planters Products, its charter is only a voyage-charter, not a bareboat charter.

As a common carrier, petitioner is required to observe extraordinary diligence in the vigilance

over the goods it transports.13 When the goods placed in its care are lost, petitioner is
presumed to have been at fault or to have acted negligently. Petitioner therefore has the
burden of proving that it observed extraordinary diligence in order to avoid responsibility for
the lost cargo.14

In Compania Maritima v. Court of Appeals,15 we said:

… it is incumbent upon the common carrier to prove that the loss, deterioration or destruction
was due to accident or some other circumstances inconsistent with its liability.

...

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 safe carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and "to use all reasonable means
to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their nature requires." 16

Article 1734 enumerates the instances when a carrier might be exempt from liability for the loss
of the goods. These are:

(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.17

Petitioner claims that the loss of the goods was due to a fortuitous event under paragraph 1.
Yet, its claim is not substantiated. On the contrary, we find supported by evidence on record
the conclusion of the trial court and the Court of Appeals that the loss of the entire shipment of
cement was due to the gross negligence of petitioner.
Records show that in the evening of June 24, 1984, the sea and weather conditions in the
vicinity of Negros Occidental were calm. The records reveal that petitioner took a shortcut
route, instead of the usual route, which exposed the voyage to unexpected hazard. Petitioner
has only itself to blame for its misjudgment.

Petitioner heavily relies on Home Insurance Co. v. American Steamship Agencies,

Inc.18 and Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals.19 The said cases
involved a private carrier, not a common carrier. Moreover, the issue in both cases is not the
effect of a voyage-charter on a common carrier, but the validity of a stipulation absolving the
private carrier from liability in case of loss of the cargo attributable to the negligence of the
private carrier.

Lastly, on the third issue, we find consistent with law and prevailing jurisprudence the Court of
Appeals’ award of attorney’s fees and expenses of litigation equivalent to ten percent (10%) of
the total claim. The contract between the parties in this case contained a stipulation that in
case of suit, attorney’s fees and expenses of litigation shall be limited to only ten percent (10%)
of the total monetary award. Given the circumstances of this case, we deem the said amount
just and equitable.

WHEREFORE, the petition is DENIED. The assailed Decision dated October 15, 2002 and the
Resolution dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No. 40999,
are AFFIRMED.

Costs against petitioner.

SO ORDERED.
G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,

vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party1 between a shipowner and a charterer transform a common carrier into a
private one as to negate the civil law presumption of negligence in case of loss or damage to its
cargo?

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

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-
party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1,
2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and
27th of May 1974, respectively.

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

16. . . . At loading port, notice of readiness to be accomplished by certificate

from National Cargo Bureau inspector or substitute appointed by charterers for
his account certifying the vessel's readiness to receive cargo spaces. The vessel's
hold to be properly swept, cleaned and dried at the vessel's expense and the
vessel to be presented clean for use in bulk to the satisfaction of the inspector
before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed
throughout the entire voyage.5

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

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

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

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

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

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

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

. . . In the absence of such presumption, it was incumbent upon the plaintiff-

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

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

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

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

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

A "charter-party" is defined as a contract by which an entire ship, or some principal part

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

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting passengers or both for compensation
as a public employment and not as a casual occupation. The distinction between a "common or
public carrier" and a "private or special carrier" lies in the character of the business, such that if
the undertaking is a single transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of
their business, should observe extraordinary diligence in the vigilance over the goods they
carry.25 In the case of private carriers, however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the
goods, common carriers are presumed to have been at fault or to have acted negligently, and
the burden of proving otherwise rests on them.26 On the contrary, no such presumption applies
to private carriers, for whosoever alleges damage to or deterioration of the goods carried has
the onus of proving that the cause was the negligence of the carrier.

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

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

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

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

As a matter of principle, it is difficult to find a valid distinction between cases in

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

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

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.

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

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

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

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

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

Article 1734 of the New Civil Code provides that common carriers are not responsible for the
loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects
in the packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the account and risk of
the shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is
proved, as against him, that they arose through his negligence or by reason of his having failed
to take the precautions which usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer
working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of
ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46%
nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not
normally evaporate even on a long voyage, provided that the temperature inside the hull does
not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading
fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The
primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the
wind tends to blow away some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an

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

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

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

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

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

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

Costs against petitioner.

SO ORDERED.
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.
G.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.

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

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

Was MV Vlasons I Seaworthy?

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

Who Were Negligent:

Seamen or Stevedores?

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

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

The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in
addition to the new one used primarily to make the ship's hatches watertight. The foregoing
are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and
the deposition of the ship's boatswain, Jose Pascua. The salient portions of said marine protest
read:
 . . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8,
1974, loaded with approximately 2,487.9 tons of steel plates and tin plates consigned to
National Steel Corporation; that before departure, the vessel was rigged, fully equipped
and cleared by the authorities; that on or about August 9, 1974, while in the vicinity of
the western part of Negros and Panay, we encountered very rough seas and strong
winds and Manila office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather condition changed to
worse and strong winds and big waves continued pounding the vessel at her port side
causing sea water to overflow on deck andhatch (sic) covers and which caused the first
layer of the canvass covering to give way while the new canvass covering still holding
on;

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

xxx xxx xxx 28

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

q What is the purpose of the canvas cover?

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

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

WITNESS

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

ATTY DEL ROSARIO

q And will you tell us the size of the hatch opening? The length and the
width of the hatch opening.

a Forty-five feet by thirty-five feet, sir.

 xxx xxx xxx

q How was the canvas supported in the middle of the hatch opening?

a There is a hatch board.

ATTY DEL ROSARIO

q What is the hatch board made of?

a It is made of wood, with a handle.

q And aside from the hatch board, is there any other material there to
cover the hatch?

a There is a beam supporting the hatch board.

q What is this beam made of?

a It is made of steel, sir.

q Is the beam that was placed in the hatch opening covering the whole
hatch opening?

a No, sir.

q How many hatch beams were there placed across the opening?

a There are five beams in one hatch opening.

ATTY DEL ROSARIO

q And on top of the beams you said there is a hatch board. How many
pieces of wood are put on top?

a Plenty, sir, because there are several pieces on top of the hatch beam.

q And is there a space between the hatch boards?

a There is none, sir.

q They are tight together?

a Yes, sir.
 q How tight?

a Very tight, sir.

q Now, on top of the hatch boards, according to you, is the canvass cover.
How many canvas covers?

a Two, sir.29

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

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

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

ATTY ZAMORA:

Q Now, during your testimony on November 5, 1979, you stated on

August 14 you went on board the vessel upon notice from the National
Steel Corporation in order to conduct the inspection of the cargo. During
the course of the investigation, did you chance to see the discharging
operation?

WITNESS:

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

Q In connection with these cargoes which were unloaded, where is the

place.
A At the Pier.

Q What was used to protect the same from weather?

ATTY LOPEZ:

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

ATTY ZAMORA:

Precisely, your Honor, we would like to go on detail, this is the serious

part of the testimony.

COURT:

All right, witness may answer.

ATTY LOPEZ:

Q What was used in order to protect the cargo from the weather?

A A base of canvas was used as cover on top of the tin plates, and tents
were built at the opening of the hatches.

Q You also stated that the hatches were already opened and that there
were tents constructed at the opening of the hatches to protect the
cargo from the rain. Now, will you describe [to] the Court the tents
constructed.

A The tents are just a base of canvas which look like a tent of an Indian
camp raise[d] high at the middle with the whole side separated down to
the hatch, the size of the hatch and it is soaks [sic] at the middle because
of those weather and this can be used only to temporarily protect the
cargo from getting wet by rains.

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

proper?

A No, sir, at the time they were discharging the cargo, there was a
typhoon passing by and the hatch tent was not good enough to hold all of
it to prevent the water soaking through the canvass and enter the cargo.
 Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact
the water enter and soak into the canvass and tinplates.

A Yes, sir, the second time I went there, I saw it.

Q As owner of the vessel, did you not advise the National Steel
Corporation [of] the procedure adopted by its stevedores in discharging
the cargo particularly in this tent covering of the hatches?

A Yes, sir, I did the first time I saw it, I called the attention of the
stevedores but the stevedores did not mind at all, so, called the attention
of the representative of the National Steel but nothing was done, just the
same. Finally, I wrote a letter to them.31

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

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

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

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

Do Tinplates "Sweat"?

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

A discussion of this issue appears inconsequential and unnecessary. As previously discussed,

the damage to the tinplates was occasioned not by airborne moisture but by contact with rain
and seawater which the stevedores negligently allowed to seep in during the unloading.

Second Issue: Effect of NSC's Failure 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.

SO ORDERED.
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 vs. Court of
Appeals.24 The test to determine a common carrier is "whether the given undertaking is a part
of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted."25 In the case at bar,
the petitioner admitted that it is engaged in the business of shipping and lighterage, 26 offering
its barges to the public, despite its limited clientele for carrying or transporting goods by water
for compensation.27

On the second issue, we uphold the findings of the lower courts that petitioner failed to
exercise extraordinary diligence in its care and custody of the consignee's goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.28 They are presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated.29 To overcome the presumption of negligence in
the case of loss, destruction or deterioration of the goods, the common carrier must prove that
it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only:

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

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

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

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

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total
loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be
held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence
before, during and after the occurrence of the typhoon to prevent or minimize the loss. 30 The
evidence show that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-
submerged vessel was refloated but its hole was patched with only clay and cement. The patch
work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when
petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further
damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue
Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE:31

xxx xxx xxx

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

a - After the first accident, through the initiative of the barge owners, they tried to
pull out the barge from the place of the accident, and bring it to the anchor terminal for
safety, then after deciding if the vessel is stabilized, they tried to pull it to the
consignee's warehouse, now while on route another accident occurred, now this time
the barge totally hitting something in the course.

q - You said there was another accident, can you tell the court the nature of the
second accident?

a - The sinking, sir.

q - Can you tell the nature . . . can you tell the court, if you know what caused the
sinking?

a - Mostly it was related to the first accident because there was already a
whole (sic) on the bottom part of the barge.

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:
DIRECT-EXAMINATION BY ATTY. LEE:33

xxx xxx xxx

q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the
Barge to lie where she was instead of towing it?

a - Since that time that the Barge was refloated, GMC (General Milling Corporation,
the consignee) as I have said was in a hurry for their goods to be delivered at their
Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was needed
badly by the consignee.

q - And this is the reason why you towed the Barge as you did?

a - Yes, sir.

xxx xxx xxx

CROSS-EXAMINATION BY ATTY. IGNACIO:34

xxx xxx xxx

q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am
I correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I have
stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

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

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

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

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.
 q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you
are already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon
head-on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing bits of the vessel
broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it
was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss
of the cargo; a human factor, i.e., negligence had intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 182208

ASIAN TERMINALS, INC., Petitioner

vs.
ALLIED GUARANTEE INSURANCE CO., INC., Respondent

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to annul and set aside the Court of Appeals Decision1 dated November 9, 2007 and
Resolution2 dated March 26, 2008 in CA-G.R. CV. No. 48661, which affirmed the trial court's
finding that petitioner is liable for the damage to certain goods within its custody.

The facts of the case follow.

Marina Port Services, Inc. (Marina), the predecessor of herein petitioner Asian Terminals, Inc.
(petitioner ATI), is an arrastre operator based in the South Harbor, Port Area, Manila. 3 0n
February 5, 1989, a shipment was made of 72,322 lbs. of kraft linear board (a type of
paperboard) loaded and received from the ports of Lake Charles, LA, and Mobile, AL, U.S.A., for
transport and delivery to San Miguel Corporation (San Miguel) in Manila, Philippines.4 The
vessel used was the M/V Nicole, operated by Transocean Marine, Inc. (Transocean), a foreign
corporation, whose Philippine representative is Philippine Transmarine Carrier, Inc. (Philippine
Transmarine).5

The M/V Nicole arrived in Manila on April 8, 1989 and, shortly thereafter, the subject shipment
was offloaded from the vessel to the arrastre Marina until April 13, 1989.6 Thereafter, it was
assessed that a total of 158 rolls of the goods were "damaged" during shipping.7 Further, upon
the goods' withdrawal from the arrastre and their delivery, first, to San Miguel'.s customs
broker, Dynamic Brokerage Co. Inc. (Dynamic), and, eventually, to the consignee San Miguel,
another 54 rolls were found to have been damaged, for a total of 212 rolls of damaged
shipment worth P755,666.84.8

Herein respondent Allied Guarantee Insurance, Co., Inc., (respondent Allied), was the insurer of
the shipment. Thus, it paid San Miguel P755,666.84 and was subrogated in the latter's rights. 9

On March 8, 1990, Allied filed a Complaint10 (and later, an Amended Complaint) for maritime
damages against Transocean, Philippine Transmarine, Dynamic and Marina seeking to be
indemnified for the F755,666.84 it lost in paying the consignee San Miguel. The suit alleged that
the shipment was loaded from the ports of origin "in good and complete order condition," and
all lo.sses were due to the fault of the named defendants.11 In addition, the suit sought legal
interest, 25% of the indemnity as attorney's fees, and costs of the suit.12
In its Amended Answer with Compulsory Counterclaim and Crossclaim, 13 Marina denied the
complaint's allegations and maintained that 158 rolls in the shipment were already in "bad
order condition" when it turned over the same to the consignee's representative/broker. It
claimed due care and diligence in the handling of the goods and that no damage was sustained
by the same while in its custody or care.14 It alleged that whatever damage incured was
attributable to its co-defendants who should reimburse it for whatever amount the latter may
be adjudged liable.15

The other co-defendants Transocean and Philippine Transmarine also denied most of the
complaint's allegations and counter-alleged that a large portion of "the shipment was already in
torn/scuffed condition prior to loading" in their vessel.16 In addition, they attributed the
damage to the nature, vice or defect of the goods, the perils and accidents of the sea, to pre-
shipment loss and insufficiency of packing.17 They claimed to have exercised the diligence
required by law so that the damage incurred was Jaot their fault.18

The case underwent trial and, thereafter, the Regional Trial Court (RTC) of Makati City, Branch
148, found all the defendants, including the predecessor of herein petitioner, liable for the
losses. The dispositive portion of the trial court's Decision dated September 9, 1993 states:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants, thereby ordering the latter to pay the obligation in the following
manner:

a) the amount of P.623,935.76 plus interest corresponding to the 158 rolls of kraft linear
board that was damaged while in the custody of defendant Transocean Inc. to be paid
by the latter to the plaintiff with legal rate of interest from the time when it was due
and until fully paid;

b) the amount of P131,731.08 plus interest corresponding to the additional 54 rolls of

kraft linear board that was damaged, to be paid jointly and severally by defendants
Marina Port Services Inc. and Dynamic Brokerage Co. Inc. to the plaintiff with legal rate
of interest from the time when it was due until fully paid;

c) 25% of the aforesaid principal amounts as attorney's fees to be paid jointly and
severally by all the defendants.

d) plus costs of suit.

SO ORDERED.19

The RTC found the defendant shipping company Transocean liable for the 158 rolls of damaged
goods due to the latter's failure to observe the necessary precautions and extraordinary
diligence as common carrier to
prevent such damage.20 Then, the additional 54 rolls of the goods that were lost were found to
have been damages while in the possession of Marina, the arrastre operator and Dynamic, the
broker.21 It found Marina and Dynamic solidarily liable for the said damaged goods.22 Thus, the
trial court found all the defendants liable for portions of the cargo that were damaged in their
respective custody. It dismissed the parties' counterclaims and crossclaims.

Marina, which changed its name to Asian Terminals Inc. (ATI), elevated the case to the Court of
Appeals.23 The lone assignment of error it attributes to the RTC decision is:

THE COURT A QUO ERRED IN RENDERING

ATI LIABLE FOR THE ADDITIONAL DAMAGES
SUSTAINED BY THE SUBJECT SHIPMENT.

ATI maintained that the goods were withdrawn by the broker in the same condition as they
were discharged from the vessel.24 It argued that it is not liable for the damage to the
additional 54 rolls as these were discovered only at the warehouse of San Miguel and these
were the broker's responsibility after

they were released from ATI's custody until delivery to the consignee.25 It accused the trial
court of merely speculating when it held ATI and Dynamic to be jointly and severally liable for
the the additional damage.26

In its assailed Decision, the Court of Appeals did not sustain ATI's appeal and affirmed the
decision of the RTC, as follows:

WHEREFORE, premises considered, the assailed September 9, 1993 Decision of the Regional
Trial Court of Makati City, Branch 148, in Civil Case No. 904661, is hereby AFFIRMED.

SO ORDERED.27

Like the trial court, the appellate court found the carriers Transocean and Philippine
Transmarine liable to the plaintiff insurer, the subrogee of the consignee, for the 158 rolls of
kraft linear board that were lost or damaged while in the former's custody during
shipping.28 The common carriers were held liable because they were found unable to overcome
the presumption of negligence while in custody of the goods.29 Then: the arrastre ATI and the
broker Dynamic were likewise found liable for the additional 54 rolls of the same goods
destroyed as both failed to prove the exercise of the amount of diligence required in- the
safekeeping of said goods.30 In particular, the appellate court stated that A TI failed to present
the Turn Over Inspector and Bad Order Inspector as witnesses who could have testified that no
additional goods were damaged during its custody.31

A TI filed a motion for reconsideration of the above decision, but the same was denied by the
appellate court.32
From the said decision, ATI filed the instant' petition for review.

Petitioner ATI argues that the appellate court erroneously failed to note the so-called Turn Over
Survey of Bad Order Cargoes and the Requests for Bad Order Survey which supposedly could
absolve it from liability for the damaged shipment.33 The reports were allegedly made prior to
the shipment's turnover from ATI to Dynamic and they purportedly show that no additional loss
or damage happened while the shipment was in ATI's custody as the reports only mention the
158 rolls that were damaged during shipping or prior to ATI's possession.34 ATI also assails the
award of attorney's fees, stating that no findings of fact or law mas made to justify the grant of
such an award.35

Hence, the Court resolves the issues of whether or hot petitioner has been proven liable for the
additional 54 rolls of damaged goods to respondent and, if so, whether it is also liable for
attorney's fees.

The court denies the petition with respect to the additional 54 rolls of damaged goods, as
petitioner's liability thereon was duly proven and well established during trial. The rulings of
both the trial and appellate courts in this respect are upheld.

At the outset, it is fairly evident that the petition prays for this Court to re-examine the factual
findings of the lower courts.1âwphi1 But well-settled is the rule that an appeal to the Court via
a petition for review on certiorari under Rule 45 should raise or involve only pure questions of
law.36 The distinction between questions of law and questions of fact are explained in Microsoft
Corporation v. Maxicorp, Inc.37 as follows:

x x x A question of law exists when the doubt or difference centers on what the law is on a
certain state of facts. A question of fact exists if the doubt centers on the truth or falsity of the
alleged facts. Though this delineation seems simple, determining the true nature and extent of
the distinction is sometimes problematic. For example, it is incorrect to presume that all cases
where the facts are not in dispute automatically involve purely questions of law.

There is a question of law if the issue raised is capable of being resolved without need of
reviewing the probative value of the evidence. The resolution of the issue must rest solely on
what the law provides on the given set of circumstances. Once it is clear that the issue invites a
review of the evidence presented, the question posed is one of fact. If the query requires a re-
evaluation of the credibility of witnesses, or the existence or relevance of surrounding
circumstances and their relation to each other, the issue in that query is factual. x x x

A perusal of the current petition would show that it is disputing the facts as found by the courts
below. Verily, the nexus of the petition is the allegation that the trial court did not appreciate
the Turn Over Survey of Bad Order Cargoes and the Requests for Bad Order Survey which were
supposedly proof that the goods suffered no additional damage while in petitioner's custody.
Plainly, the petition requests this Court to re-examine these particular evidence and again
weigh the same in relation to all other evidence in the case in the hope that a conclusion
different from those arrived at by the trial court and appellate court may be reached. Such,
however, is a resolution of a question of fact which is outside the office of a petition for review
on certiorari under Rule 45 Verily, there are exceptions to this rule that only questions of law
may be entertained by this Court in a petition for review on certiorari, such as when:

(1) the conclusion is grounded on speculations, surmises or conjectures;

(2) the inference is manifestly mistaken, absurd or impossible;

(3) there is giaye abuse of discretion;

(4) the judgment is based on a misapprehension of facts;

(5) the findings of fact are conflicting;

(6) there is no citation· of specific evidence on which the factual findings are based;

(7) the findings of absence of facts are contradicted by the presence of evidence on record;

(8) the findings of the Court of Appeals are contrary to those of the trial court;

(9) the Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different conclusion;

(10) the findings of the Court of Appeals are beyond the issues of the case; and

(11) such findings are contrary to the admissions of both parties.38

None of these, however, obtains in the case at bar. The petition fails to even explain or argue if
or why any of these apply to th'e present case. In fact, the petition cites only three (3) of the
said exceptions, namely:

(a) when the findings of facts of the appellate court are at variance with those of the trial court;

(b) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties which, if properly considered, would justify a different conclusion; and

(c) when the judgment itself is based on misapprehension of facts.39

Still, none of the above applies in the present case. The first exception does not apply as it is
well established that the trial court and the Court of Appeals have made similar findings in-this
case as, in fact, the latter's decision fully affirms the former's. Then, as for the second and third
exceptions, petitioner could cite no undisputed fact that was "overlooked" by the Court of
Appeals and neither does it explain any "misapprehension" of established facts and even if it is
granted, for argument's sake, that by "misapprehension" is meant the trial court's alleged
failure to see the significance of the Turn Over Survey of Bad Order Cargoes and the Requests
for Bad Order Survey in absolving petitioner of liability over the additional damage, the trial
court had sufficiently explained why it gave 'little or no credence to these pieces of evidence.
The trial court narrated:

Similarly; defendant Dynamic Brokerage Co., Inc., points to the same facts. Its witness, Mr.
Robert Rosario, Head of defendant's trucking department, whose duties and functions consist
of monitoring and supervising the delivery of cargoes from the pier zone to the consignee's
warehouse, claimed that Dynamic received the subject cargoes in damaged condition and when
it was delivered to the consignee, San Miguel Corporation's warehouse, the condition of the
cargoes were the same as when it was received by Dynamic Brokerage.

He further claimed that the personnel of Marina Port Services loaded the cargoes to Dynamic's
truck. After the loading, their truck proceeded to the consignee's warehouse which is lbcated in
Tabacalera, at United Nations, Manila, and then they vnloaded said cargoes with their
equipments. He claimed that the Marina personnel used a "grabbed lift." The consignee
sometimes used forklift(s), depending on the availability of equipment. Before they received
the cargoes from Marina, the condition of the cargoes were already in damaged condition
(sic). He noted that there were some tearages due to the use of equipment in loading to their
truck. When tl1ey delivered the cargoes to the consignee's warehouse, they issued delivery
receipt(s). He does not know ifthere are·additional damages (sic) sustained by the cargoes from
the time that they withdrew the same from the pier zone (Marina's custody) up to the
consignee's warehouse.x x x40

xxxx

It is noteworthy to mention that "in general, the nature of the work of an arrastre operator
covers the handling of cargoes at piers and wharves," which was what exactly defendant
Marina's function entails in this case. "To carry out its duties, the arrastre is required to provide
cargo handling equipment which includes, among others, trailer, chassis for containers." On the
other hand, defendant Dynamic (which) in its capacity as broker, withdrew the 357 rolls of kraft
linear board from the custody of defendant Marina and delivered the same to the consignee,
San Miguel Corporation's warehouse in Tabacalera at United Nations, Manila, is considered a
common carrier.

Hence, the "legal relationship between the consignee and the arrastre operator is akin to that
of a depositor and the 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 develops 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."41
The trial court correctly held that the broker, Dynamic, cannot alone be held liable for the
additional 54 rolls of damaged goods since such damage occurred during the following
instances: (1) while the goods were in the custody of the arrastre ATI; (2) when they were in
transition from ATI's custody to that of Dynamic (i.e., during loading to Dynamic's trucks); and
(3) during Dynamic's custody. While the trial court could not determine with pinpoint accuracy
who among the two caused which particular damage and in what proportion or quantity, it was
clear that both ATI and Dynamic failed to discharge the burden of proving that da111age on the
54 rolls did not occur during their custody. As for petitioner ATI, in particular, what worked
against it was the testimony, as cited above, that its employees' use of the wrong lifting
equipment while loading the goods onto Dynamic's trucks had a role in causing the damage.
Such is a finding of fact made by the trial court which this Court, without a justifiable ground,
will not disturb.

As previously held by this Court, the arrastre operator's principal work is that of handling cargo,
so that its drivers/operators or employees should observe the standards and measures
necessary to prevent losses and damage to shipments under its custody.42 In the performance
of its obligations, an arrastre operator should observe the same degree of diligence as that
required of a common carrier and a warehouseman.43 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.44 With such a responsibility, the
arrastre operator must prove that the losses were not due to its negligence or to that of its
employees.45 And to prove the exercise of diligence in handling the subject cargoes, petitioner
must do more than merely show the possibility that some other party could be responsible for
the loss or the damage,46 It must prove that it exercised due care in the handling thereof.47

But ATI submits that the Turn Over Survey of Bad Order Cargoes and the Requests for Bad
Order Survey help establish that damage to the additional 54 rolls of goods did not happen in
its custody. In particular, the Requests for Bad Order Survey was allegedly signed by Dynamic
representative stating that only 158 rolls were damaged as of the goods' transfer from ATI to
Dynamic. However, this Court has already held that a mere sign-off from the customs broker's
representative that he had received the subject shipment "in good order and condition without
exception" would not absolve the arrastre from liability, simply because the representative's
signature merely signifies that said person thereby frees the arrastre from any liability for loss
or damage to the cargo· so withdrawn while the same was in the custody of such
representative to whom the cargo was released, but it does not foreclose the remedy or right
of the consignee (or its subrogee) to prove that any loss or damage to the subject shipment
occurred while the same was under the custody, control and possession of th,e .arrastre
operator.48 Additionally, the finding of the trial court, as stated above, that at least some of the
damage occurred during ATl's custody cannot be ignored.

Certainly, ATI's reliance on the Turn Over Survey of Bad Order Cargoes as well as the Requests
for Bad Order Survey is misplaced. An examination of the documents would even reveal · that
the first set of documents, the Turn Over Survey of Bad Order Cargoes, pertain to the 158 rolls
of damaged goods which occurred during shipment and prior to ATl's custody. 49 But
responsibility for the 158 rolls was already established to be that of the common carrier and is
no longer disputed by the parties. Thus, this fact has little or no more relevance to the issue of
liability over the additional 54 rolls of damaged goods. Anent the second set of documents, the
Requests for Bad Order Survey, which mention only 158 rolls of damaged goods and do not
mention any additional damage, the same do not result in an automatic exculpcition of ATI
from liability. As previously stated, jurisprudence states that the signature by acustoms broker's
representative of "receipt in good order" does not foreclose the consignee's or its subrogee's
right or remedy to prove that additional loss or darriage to the subject shipment occurred while
the same was under the custody, control and possession of the arrastre operator.50 Further, it is
unclear whether these Requests for Bad Order Survey were executed prior to or after loading
was done onto Dynamic's trucks. As earlier indi~ated, there is testimony that it was during the
loading to the trucks that some or all of the damage was incurred.

Since the relationship of an arrastre operator and a consignee is akin to that between a
warehouseman and a depositor, then, in instances when the consignee claims any loss, the
burden of proof is on the arrastre operator to show that it complied with the obligation to
deliver the goods and that the losses were not due to its negligence or that of its
employees.51 ATI failed to dislodge this burden. As observed by the Court of Appeals, Marina,
the arrastre operator, from the above evidence, was not able to overcome the presumption of
negligence. The Bad Order Cargo Receipts, the Turn Over Survey of Bad Order Cargoes as well
as the Request for Bad Order Survey did not establish that the additional 54 rolls were in good
condition while in the custody of the arrastre. Said documents proved only that indeed the 158
rolls were already damaged when they were discharged to the arrastre operator and when it
was subsequently withdrawn from the arrastre operator by [the] customs broker. Further, the
Turn Over Inspector and the Bad Order Inspector who conducted the inspections and who
signed the Turn Over Survey of Bad [Order] Cargoes and the Request for Bad Order Survey,
respectively, were not presented by Marina as witnesses to verify the correctness of the
document and to testify that only 158 rolls was reported and no others sustained damage while
the shipment was in its possession.52

The non-presentation of ATI of the so-called inspectors who prepared the Requests for Bad
Order Survey further proved detrimental to its case.1âwphi1 The inspectors could have verified
on direct and cross-examination when the additional damage was sustained and by whose
fault. They could have testified on whether the surveys on the 158 damaged rolls were the only
ones prepared by them or if there were others, pertaining to additional damage during ATI's
possession. Or they could have categorically stated whether all such additional damage was
sustained while in ATI's or Dynamic's custody alone. Instead, all that ATI presented were the
Requests for Bad Order Survey which, being private documents that had not been
authenticated by the inspectors who prepared them, were correctly disregarded by the trial
court and appellate court. Private documents whose authenticity and due execution was not
established may not be received in evidence and are hearsay.53

Failing to present the necessary evidence, ATI was unable to overcome the presumption of its
own negligence while in the custody of the goods.
As it is now established that there was negligence in both petitioner ATI's and Dynamic's
performance of their duties in the handling, storage and delivery of the subject shipment to San
Miguel, resulting in the loss of 54 rolls of kraft linear board, both shall be solidarily liable for
such loss.54

Anent the grant of attorney's fees, the Court sustains the petitioner's stance that the same is
unjustified. The Court has held, with respect to the award of attorney's fees, as follows:

We have consistently held that ai;i award of attorney's fees under Article 2208 demands
factual, legal, and equitable justification to avoid speculation and conjecture surrounding the
gi:ant thereof. Due to the special nature of the award of attorney's fees, a rigid standard is
imposed on the courts before these fees could be granted. Hence, it is imperative that they
clearly and distinctly set forth in their decisions the basis for the award thereof. It is not enough
that they merely state the amount of the grant in the dispasitive portion of their decisions. It
bears reiteration that the award of attorneyis fees is an exception rather than the general rule;
thus, there must be compelling legal reason to bring the case within the exceptions provided
under Article 2208 of the Civil Code to justify the award.55

The court must always state the basis for the grant of attorney's fees before such is justified,
because the principle that is generally observed is that no premium should be placed on the
right to litigate.56 Under Article 2208 of the New Civil Code, absent any stipulation from the
parties as to the award of attorney's fees, the instances under which the same may be granted
is restricted in the following manner:

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs
plainly valid, jttst and demandable claim;

(6) Ip actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial.costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses oflitigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

In the case at ·bar, other than a mere mention that "plaintiff was constrained to litigate to
enforce its valid claim" by the trial court,57 there is no other compelling reason cited that would
make the respondent entitled to attorney's fees as held in the trial court's as well as the
appellate court's decision. It has been previously held tl)at the mere fact of having been forced
to litigate to protect one's interest" does not amount to the compelling legal reason that would
make a case covered by any of the exceptions provided under Article 2208.58 Although
attorney's fees may be awarded when a claimant is "compelled to litigate with third persons or
incur expenses to protect his interest" by reason of an unjustified act or omission on the part of
the party from whom it is sought, but wheh there is a lack of findings on the amount to be
awarded, and since there is no suffic~ent showing of bad faith in the defendant's refusal to pay
other than an erroneous assertion of the righteousness of its cause, attorney's fees cannot be
awarded against the latter.59

Hence, such an award in the case at bar is unjustified and must be deleted.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated November 9, 2007 in
CA:..G.R .. CV. No. 48661 is AFFIRMED with the MODIFICATION that the award of attorney's
fees is DELETED.

SO ORDERED.
G.R. No. 150403 January 25, 2007

CEBU SALVAGE CORPORATION, Petitioner,

vs.
PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.

DECISION

CORONA, J.:

May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not
own?

This is the issue presented for the Court’s resolution in this petition for review on
certiorari1 assailing the March 16, 2001 decision2 and September 17, 2001 resolution3 of the
Court of Appeals (CA) in CA-G.R. CV No. 40473 which in turn affirmed the December 27, 1989
decision4 of the Regional Trial Court (RTC), Branch 145, Makati, Metro Manila.5

The pertinent facts follow.

On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina
Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter 6 wherein
petitioner was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu
Santo7 at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis
Oriental to consignee Ferrochrome Phils., Inc.8

Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric
tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next
day.9 The shipment never reached its destination, however, because the M/T Espiritu Santo
sank in the afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting
in the total loss of the cargo.10

MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home
Assurance Corporation.11 Respondent paid the claim in the amount of P211,500 and was
subrogated to the rights of MCCII.12Thereafter, it filed a case in the RTC13 against petitioner for
reimbursement of the amount it paid MCCII.

After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay
respondent P211,500 plus legal interest, attorney’s fees equivalent to 25% of the award and
costs of suit.

On appeal, the CA affirmed the decision of the RTC. Hence, this petition.
Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment
wherein the ship was leased for a single voyage for the conveyance of goods, in consideration
of the payment of freight.14 Under a voyage charter, the shipowner retains the possession,
command and navigation of the ship, the charterer or freighter merely having use of the space
in the vessel in return for his payment of freight.15 An owner who retains possession of the ship
remains liable as carrier and must answer for loss or non-delivery of the goods received for
transportation.16

Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter it
entered into with MCCII was a contract of carriage.17 It insists that the agreement was merely a
contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises
(ALS).18 Not being the owner of the M/T Espiritu Santo, petitioner did not have control and
supervision over the vessel, its master and crew.19 Thus, it could not be held liable for the loss
of the shipment caused by the sinking of a ship it did not own.

We disagree.

Based on the agreement signed by the parties and the testimony of petitioner’s operations
manager, it is clear that it was a contract of carriage petitioner signed with MCCII. It actively
negotiated and solicited MCCII’s account, offered its services to ship the silica quartz and
proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the M/T Shirley (as
previously agreed upon in the voyage charter) since these vessels had broken down.20

There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it
was engaged in the business of carrying and transporting goods by water, for compensation,
and offered its services to the public.21

From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport according to the
circumstances of each case.22 In the event of loss of the goods, common carriers are
responsible, unless they can prove that this was brought about by the causes specified in Article
1734 of the Civil Code.23 In all other cases, common carriers are presumed to be at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence. 24

Petitioner was the one which contracted with MCCII for the transport of the cargo. It had
control over what vessel it would use. All throughout its dealings with MCCII, it represented
itself as a common carrier. The fact that it did not own the vessel it decided to use to
consummate the contract of carriage did not negate its character and duties as a common
carrier. The MCCII (respondent’s subrogor) could not be reasonably expected to inquire about
the ownership of the vessels which petitioner carrier offered to utilize. As a practical matter, it
is very difficult and often impossible for the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the actual owner of the vessel is.25 In
fact, in this case, the voyage charter itself denominated petitioner as the "owner/operator" of
the vessel.26
Petitioner next contends that if there was a contract of carriage, then it was between MCCII
and ALS as evidenced by the bill of lading ALS issued.27

Again, we disagree.

The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had
been received for transportation. It was not signed by MCCII, as in fact it was simply signed by
the supercargo of ALS.28 This is consistent with the fact that MCCII did not contract directly with
ALS. While it is true that a bill of lading may serve as the contract of carriage between the
parties,29 it cannot prevail over the express provision of the voyage charter that MCCII and
petitioner executed:

[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a
vessel under a charter party, and the charterer is also the holder of the bill of lading, "the bill of
lading operates as the receipt for the goods, and as document of title passing the property of
the goods, but not as varying the contract between the charterer and the shipowner." The Bill
of Lading becomes, therefore, only a receipt and not the contract of carriage in a charter of the
entire vessel, for the contract is the Charter Party, and is the law between the parties who are
bound by its terms and condition provided that these are not contrary to law, morals, good
customs, public order and public policy. 30

Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage
charter stipulated that cargo insurance was for the charterer’s account.31 This deserves scant
consideration. This simply meant that the charterer would take care of having the goods
insured. It could not exculpate the carrier from liability for the breach of its contract of carriage.
The law, in fact, prohibits it and condemns it as unjust and contrary to public policy. 32

To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on
board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove
that it exercised extraordinary diligence to prevent such loss or that it was due to some casualty
or force majeure. The voyage charter here being a contract of affreightment, the carrier was
answerable for the loss of the goods received for transportation.33

The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a
carrier that enters into a contract of carriage is not liable to the charterer or shipper if it does
not own the vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists that
MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to
escape its responsibility for the goods it agreed to transport (by the expedient of alleging non-
ownership of the vessel it employed) would radically derogate from the carrier's duty of
extraordinary diligence. It would also open the door to collusion between the carrier and the
supposed owner and to the possible shifting of liability from the carrier to one without any
financial capability to answer for the resulting damages.34

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

SO ORDERED.
G.R. No. 162467 May 8, 2009

MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner,

vs.
PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO., INC., Respondent.

DECISION

TINGA, J.:

Before us is a petition for review on certiorari1 under Rule 45 of the 1997 Rules of Civil
Procedure of the 29 October 20032 Decision of the Court of Appeals and the 26 February 2004
Resolution3 of the same court denying petitioner’s motion for reconsideration.

The facts of the case are not disputed.

Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and
Brokerage Service, Inc. (Mindanao Terminal), a stevedoring company, to load and stow a
shipment of 146,288 cartons of fresh green Philippine bananas and 15,202 cartons of fresh
pineapples belonging to Del Monte Fresh Produce International, Inc. (Del Monte Produce) into
the cargo hold of the vessel M/V Mistrau. The vessel was docked at the port of Davao City and
the goods were to be transported by it to the port of Inchon, Korea in favor of consignee Taegu
Industries, Inc. Del Monte Produce insured the shipment under an "open cargo policy" with
private respondent Phoenix Assurance Company of New York (Phoenix), a non-life insurance
company, and private respondent McGee & Co. Inc. (McGee), the underwriting manager/agent
of Phoenix.4

Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel set sail
from the port of Davao City and arrived at the port of Inchon, Korea. It was then discovered
upon discharge that some of the cargo was in bad condition. The Marine Cargo Damage
Surveyor of Incok Loss and Average Adjuster of Korea, through its representative Byeong Yong
Ahn (Byeong), surveyed the extent of the damage of the shipment. In a survey report, it was
stated that 16,069 cartons of the banana shipment and 2,185 cartons of the pineapple
shipment were so damaged that they no longer had commercial value.5

Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment.
McGee’s Marine Claims Insurance Adjuster evaluated the claim and recommended that
payment in the amount of $210,266.43 be made. A check for the recommended amount was
sent to Del Monte Produce; the latter then issued a subrogation receipt 6 to Phoenix and
McGee.

Phoenix and McGee instituted an action for damages7 against Mindanao Terminal in the
Regional Trial Court (RTC) of Davao City, Branch 12. After trial, the RTC,8 in a decision dated 20
October 1999, held that the only participation of Mindanao Terminal was to load the cargoes
on board the M/V Mistrau under the direction and supervision of the ship’s officers, who would
not have accepted the cargoes on board the vessel and signed the foreman’s report unless they
were properly arranged and tightly secured to withstand voyage across the open seas.
Accordingly, Mindanao Terminal cannot be held liable for whatever happened to the cargoes
after it had loaded and stowed them. Moreover, citing the survey report, it was found by the
RTC that the cargoes were damaged on account of a typhoon which M/V Mistrau had
encountered during the voyage. It was further held that Phoenix and McGee had no cause of
action against Mindanao Terminal because the latter, whose services were contracted by Del
Monte, a distinct corporation from Del Monte Produce, had no contract with the assured Del
Monte Produce. The RTC dismissed the complaint and awarded the counterclaim of Mindanao
Terminal in the amount of ₱83,945.80 as actual damages and ₱100,000.00 as attorney’s
fees.9 The actual damages were awarded as reimbursement for the expenses incurred by
Mindanao Terminal’s lawyer in attending the hearings in the case wherein he had to travel all
the way from Metro Manila to Davao City.

Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set
aside10 the decision of the RTC in its 29 October 2003 decision. The same court ordered
Mindanao Terminal to pay Phoenix and McGee "the total amount of $210,265.45 plus legal
interest from the filing of the complaint until fully paid and attorney’s fees of 20% of the
claim."11 It sustained Phoenix’s and McGee’s argument that the damage in the cargoes was the
result of improper stowage by Mindanao Terminal. It imposed on Mindanao Terminal, as the
stevedore of the cargo, the duty to exercise extraordinary diligence in loading and stowing the
cargoes. It further held that even with the absence of a contractual relationship between
Mindanao Terminal and Del Monte Produce, the cause of action of Phoenix and McGee could
be based on quasi-delict under Article 2176 of the Civil Code.12

Mindanao Terminal filed a motion for reconsideration,13 which the Court of Appeals denied in
its 26 February 200414 resolution. Hence, the present petition for review.

Mindanao Terminal raises two issues in the case at bar, namely: whether it was careless and
negligent in the loading and stowage of the cargoes onboard M/V Mistrau making it liable for
damages; and, whether Phoenix and McGee has a cause of action against Mindanao Terminal
under Article 2176 of the Civil Code on quasi-delict. To resolve the petition, three questions
have to be answered: first, whether Phoenix and McGee have a cause of action against
Mindanao Terminal; second, whether Mindanao Terminal, as a stevedoring company, is under
obligation to observe the same extraordinary degree of diligence in the conduct of its business
as required by law for common carriers15 and warehousemen;16 and third, whether Mindanao
Terminal observed the degree of diligence required by law of a stevedoring company.

We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against
Mindanao Terminal, from which the present case has arisen, states a cause of action. The
present action is based on quasi-delict, arising from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte Produce. Even assuming that both Phoenix and
McGee have only been subrogated in the rights of Del Monte Produce, who is not a party to the
contract of service between Mindanao Terminal and Del Monte, still the insurance carriers may
have a cause of action in light of the Court’s consistent ruling that the act that breaks the
contract may be also a tort.17 In fine, a liability for tort may arise even under a contract, where
tort is that which breaches the contract18 . In the present case, Phoenix and McGee are not
suing for damages for injuries arising from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal handled the cargoes belonging to Del
Monte Produce. Despite the absence of contractual relationship between Del Monte Produce
and Mindanao Terminal, the allegation of negligence on the part of the defendant should be
sufficient to establish a cause of action arising from quasi-delict.19

The resolution of the two remaining issues is determinative of the ultimate result of this case.

Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree
of diligence which is to be observed in the performance of an obligation then that which is
expected of a good father of a family or ordinary diligence shall be required. Mindanao
Terminal, a stevedoring company which was charged with the loading and stowing the cargoes
of Del Monte Produce aboard M/V Mistrau, had acted merely as a labor provider in the case at
bar. There is no specific provision of law that imposes a higher degree of diligence than ordinary
diligence for a stevedoring company or one who is charged only with the loading and stowing of
cargoes. It was neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was
bound by contractual stipulation to observe a higher degree of diligence than that required of a
good father of a family. We therefore conclude that following Article 1173, Mindanao Terminal
was required to observe ordinary diligence only in loading and stowing the cargoes of Del
Monte Produce aboard M/V Mistrau.

imposing a higher degree of diligence,21 on Mindanao Terminal in loading and stowing the
cargoes. The case of Summa Insurance Corporation v. CA, which involved the issue of whether
an arrastre operator is legally liable for the loss of a shipment in its custody and the extent of its
liability, is inapplicable to the factual circumstances of the case at bar. Therein, a vessel owned
by the National Galleon Shipping Corporation (NGSC) arrived at Pier 3, South Harbor, Manila,
carrying a shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal
Corporation (Semirara) as "notify party." The shipment, including a bundle of PC 8 U blades,
was discharged from the vessel to the custody of the private respondent, the exclusive arrastre
operator at the South Harbor. Accordingly, three good-order cargo receipts were issued by
NGSC, duly signed by the ship's checker and a representative of private respondent. When
Semirara inspected the shipment at house, it discovered that the bundle of PC8U blades was
missing. From those facts, the Court observed:

x x x The relationship therefore between the consignee and the arrastre operator must be
examined. This relationship is much akin to that existing between the consignee or owner of
shipped goods and the common carrier, or that between a depositor and a warehouseman[22 ].
In the performance of its obligations, an arrastre operator should observe the same degree of
diligence as that required of a common carrier and a warehouseman as enunciated under
Article 1733 of the Civil Code and Section 3(b) of the Warehouse Receipts Law,
respectively. Being the custodian of the goods discharged from a vessel, an arrastre operator's
duty is to take good care of the goods and to turn them over to the party entitled to their
possession. (Emphasis supplied)23

There is a distinction between an arrastre and a stevedore.24 Arrastre, a Spanish word which
refers to hauling of cargo, comprehends the handling of cargo on the wharf or between the
establishment of the consignee or shipper and the ship's tackle. The responsibility of the
arrastre operator lasts until the delivery of the cargo to the consignee. The service is usually
performed by longshoremen. On the other hand, stevedoring refers to the handling of the
cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. The
responsibility of the stevedore ends upon the loading and stowing of the cargo in the
vessel.1avvphi1

It is not disputed that Mindanao Terminal was performing purely stevedoring function while the
private respondent in the Summa case was performing arrastre function. In the present case,
Mindanao Terminal, as a stevedore, was only charged with the loading and stowing of the
cargoes from the pier to the ship’s cargo hold; it was never the custodian of the shipment of Del
Monte Produce. A stevedore is not a common carrier for it does not transport goods or
passengers; it is not akin to a warehouseman for it does not store goods for profit. The loading
and stowing of cargoes would not have a far reaching public ramification as that of a common
carrier and a warehouseman; the public is adequately protected by our laws on contract and on
quasi-delict. The public policy considerations in legally imposing upon a common carrier or a
warehouseman a higher degree of diligence is not present in a stevedoring outfit which mainly
provides labor in loading and stowing of cargoes for its clients.

In the third issue, Phoenix and McGee failed to prove by preponderance of evidence 25 that
Mindanao Terminal had acted negligently. Where the evidence on an issue of fact is in
equipoise or there is any doubt on which side the evidence preponderates the party having the
burden of proof fails upon that issue. That is to say, if the evidence touching a disputed fact is
equally balanced, or if it does not produce a just, rational belief of its existence, or if it leaves
the mind in a state of perplexity, the party holding the affirmative as to such fact must
fail.261avvphi1

We adopt the findings27 of the RTC,28 which are not disputed by Phoenix and McGee. The Court
of Appeals did not make any new findings of fact when it reversed the decision of the trial
court. The only participation of Mindanao Terminal was to load the cargoes on board M/V
Mistrau.29 It was not disputed by Phoenix and McGee that the materials, such as ropes, pallets,
and cardboards, used in lashing and rigging the cargoes were all provided by M/V Mistrau and
these materials meets industry standard.30

It was further established that Mindanao Terminal loaded and stowed the cargoes of Del Monte
Produce aboard the M/V Mistrau in accordance with the stowage plan, a guide for the area
assignments of the goods in the vessel’s hold, prepared by Del Monte Produce and the officers
of M/V Mistrau.31 The loading and stowing was done under the direction and supervision of the
ship officers. The vessel’s officer would order the closing of the hatches only if the loading was
done correctly after a final inspection.32 The said ship officers would not have accepted the
cargoes on board the vessel if they were not properly arranged and tightly secured to withstand
the voyage in open seas. They would order the stevedore to rectify any error in its loading and
stowing. A foreman’s report, as proof of work done on board the vessel, was prepared by the
checkers of Mindanao Terminal and concurred in by the Chief Officer of M/V Mistrau after they
were satisfied that the cargoes were properly loaded.33

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

CAUSE OF DAMAGE

xxx

From the above facts and our survey results, we are of the opinion that damage occurred
aboard the carrying vessel during sea transit, being caused by ship’s heavy rolling and pitching
under boisterous weather while proceeding from 1600 hrs on 7th October to 0700 hrs on 12th
October, 1994 as described in the sea protest.40

As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in
loading and stowing the cargoes, which is the ordinary diligence of a good father of a family,
the grant of the petition is in order.

However, the Court finds no basis for the award of attorney’s fees in favor of
petitioner.lawphil.net None of the circumstances enumerated in Article 2208 of the Civil Code
exists. The present case is clearly not an unfounded civil action against the plaintiff as there is
no showing that it was instituted for the mere purpose of vexation or injury. It is not sound
public policy to set a premium to the right to litigate where such right is exercised in good faith,
even if erroneously.41 Likewise, the RTC erred in awarding ₱83,945.80 actual damages to
Mindanao Terminal. Although actual expenses were incurred by Mindanao Terminal in relation
to the trial of this case in Davao City, the lawyer of Mindanao Terminal incurred expenses for
plane fare, hotel accommodations and food, as well as other miscellaneous expenses, as he
attended the trials coming all the way from Manila. But there is no showing that Phoenix and
McGee made a false claim against Mindanao Terminal resulting in the protracted trial of the
case necessitating the incurrence of expenditures.42

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No.
66121 is SET ASIDE and the decision of the Regional Trial Court of Davao City, Branch 12 in Civil
Case No. 25,311.97 is hereby REINSTATED MINUS the awards of ₱100,000.00 as attorney’s fees
and ₱83,945.80 as actual damages.

SO ORDERED.
G.R. No. 172822 Petitioner,

MOF COMPANY, INC., Petitioner,

vs.
SHIN YANG BROKERAGE CORPORATION Respondent.

DECISION

DEL CASTILLO, J.:

The necessity of proving lies with the person who sues.

The refusal of the consignee named in the bill of lading to pay the freightage on the claim that it
is not privy to the contract of affreightment propelled the shipper to sue for collection of
money, stressing that its sole evidence, the bill of lading, suffices to prove that the consignee is
bound to pay. Petitioner now comes to us by way of Petition for Review on Certiorari1 under
Rule 45 praying for the reversal of the Court of Appeals' (CA) judgment that dismissed its action
for sum of money for insufficiency of evidence.

Factual Antecedents

On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila
secondhand cars and other articles on board the vessel Hanjin Busan 0238W. The bill of lading
covering the shipment, i.e., Bill of Lading No. HJSCPUSI14168303,2 which was prepared by the
carrier Hanjin Shipping Co., Ltd. (Hanjin), named respondent Shin Yang Brokerage Corp. (Shin
Yang) as the consignee and indicated that payment was on a "Freight Collect" basis, i.e., that
the consignee/receiver of the goods would be the one to pay for the freight and other charges
in the total amount of ₱57,646.00.3

The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc.
(MOF), Hanjin’s exclusive general agent in the Philippines, repeatedly demanded the payment
of ocean freight, documentation fee and terminal handling charges from Shin Yang. The latter,
however, failed and refused to pay contending that it did not cause the importation of the
goods, that it is only the Consolidator of the said shipment, that the ultimate consignee did not
endorse in its favor the original bill of lading and that the bill of lading was prepared without its
consent.

Thus, on March 19, 2003, MOF filed a case for sum of money before the Metropolitan Trial
Court of Pasay City (MeTC Pasay) which was docketed as Civil Case No. 206-03 and raffled to
Branch 48. MOF alleged that Shin Yang, a regular client, caused the importation and shipment
of the goods and assured it that ocean freight and other charges would be paid upon arrival of
the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly breached its obligation
to pay. MOF argued that Shin Yang, as the named consignee in the bill of lading, entered itself
as a party to the contract and bound itself to the "Freight Collect" arrangement. MOF thus
prayed for the payment of ₱57,646.00 representing ocean freight, documentation fee and
terminal handling charges as well as damages and attorney’s fees.

Claiming that it is merely a consolidator/forwarder and that Bill of Lading No.

HJSCPUSI14168303 was not endorsed to it by the ultimate consignee, Shin Yang denied any
involvement in shipping the goods or in promising to shoulder the freightage. It asserted that it
never authorized Halla Trading Co. to ship the articles or to have its name included in the bill of
lading. Shin Yang also alleged that MOF failed to present supporting documents to prove that it
was Shin Yang that caused the importation or the one that assured payment of the shipping
charges upon arrival of the goods in Manila.

Ruling of the Metropolitan Trial Court

On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision4 in favor of MOF. It
ruled that Shin Yang cannot disclaim being a party to the contract of affreightment because:

x x x it would appear that defendant has business transactions with plaintiff. This is evident
from defendant’s letters dated 09 May 2002 and 13 May 2002 (Exhibits "1" and "2",
defendant’s Position Paper) where it requested for the release of refund of container deposits x
x x. [In] the mind of the Court, by analogy, a written contract need not be necessary; a mutual
understanding [would suffice]. Further, plaintiff would have not included the name of the
defendant in the bill of lading, had there been no prior agreement to that effect.

In sum, plaintiff has sufficiently proved its cause of action against the defendant and the latter
is obliged to honor its agreement with plaintiff despite the absence of a written contract.5

The dispositive portion of the MeTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and

against the defendant, ordering the latter to pay plaintiff as follows:

1. ₱57,646.00 plus legal interest from the date of demand until fully paid,

2. ₱10,000.00 as and for attorney’s fees and

3. the cost of suit.

SO ORDERED.6

Ruling of the Regional Trial Court

The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the Decision of the
MeTC. It held that:
MOF and Shin Yang entered into a contract of affreightment which Black’s Law Dictionary
defined as a contract with the ship owner to hire his ship or part of it, for the carriage of goods
and generally take the form either of a charter party or a bill of lading.

The bill of lading contain[s] the information embodied in the contract.

Article 652 of the Code of Commerce provides that the charter party must be in writing;
however, Article 653 says: "If the cargo should be received without charter party having been
signed, the contract shall be understood as executed in accordance with what appears in the
bill of lading, the sole evidence of title with regard to the cargo for determining the rights and
obligations of the ship agent, of the captain and of the charterer". Thus, the Supreme Court
opined in the Market Developers, Inc. (MADE) vs. Honorable Intermediate Appellate Court and
Gaudioso Uy, G.R. No. 74978, September 8, 1989, this kind of contract may be oral. In another
case, Compania Maritima vs. Insurance Company of North America, 12 SCRA 213 the contract
of affreightment by telephone was recognized where the oral agreement was later confirmed
by a formal booking.

xxxx

Defendant is liable to pay the sum of ₱57,646.00, with interest until fully paid, attorney’s fees
of ₱10,000.00 [and] cost of suit.

Considering all the foregoing, this Court affirms in toto the decision of the Court a quo.

SO ORDERED.7

Ruling of the Court of Appeals

Seeing the matter in a different light, the CA dismissed MOF’s complaint and refused to award
any form of damages or attorney’s fees. It opined that MOF failed to substantiate its claim that
Shin Yang had a hand in the importation of the articles to the Philippines or that it gave its
consent to be a consignee of the subject goods. In its March 22, 2006 Decision, 8 the CA said:

This Court is persuaded [that except] for the Bill of Lading, respondent has not presented any
other evidence to bolster its claim that petitioner has entered [into] an agreement of
affreightment with respondent, be it verbal or written. It is noted that the Bill of Lading was
prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal while respondent is the
former’s agent. (p. 43, rollo)

The conclusion of the court a quo, which was upheld by the RTC Pasay City, Branch 108 xxx is
purely speculative and conjectural. A court cannot rely on speculations, conjectures or
guesswork, but must depend upon competent proof and on the basis of the best evidence
obtainable under the circumstances. Litigation cannot be properly resolved by suppositions,
deductions or even presumptions, with no basis in evidence, for the truth must have to be
determined by the hard rules of admissibility and proof (Lagon vs. Hooven Comalco Industries,
Inc. 349 SCRA 363).

While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods
shipped; second, it is a contract by which three parties, namely, the shipper, the carrier and the
consignee who undertake specific responsibilities and assume stipulated obligations (Belgian
Overseas Chartering and Shipping N.V. vs. Phil. First Insurance Co., Inc., 383 SCRA 23), x x x if
the same is not accepted, it is as if one party does not accept the contract. Said the Supreme
Court:

"A bill of lading delivered and accepted constitutes the contract of carriage[,] even though not
signed, because the acceptance of a paper containing the terms of a proposed contract
generally constitutes an acceptance of the contract and of all its terms and conditions of which
the acceptor has actual or constructive notice" (Keng Hua Paper Products Co., Inc. vs. CA, 286
SCRA 257).

In the present case, petitioner did not only [refuse to] accept the bill of lading, but it likewise
disown[ed] the shipment x x x. [Neither did it] authorize Halla Trading Company or anyone to
ship or export the same on its behalf.

It is settled that a contract is upheld as long as there is proof of consent, subject matter and
cause (Sta. Clara Homeowner’s Association vs. Gaston, 374 SCRA 396). In the case at bar, there
is not even any iota of evidence to show that petitioner had given its consent.

"He who alleges a fact has the burden of proving it and a mere allegation is not evidence"
(Luxuria Homes Inc. vs. CA, 302 SCRA 315).

The 40-footer van contains goods of substantial value. It is highly improbable for petitioner not
to pay the charges, which is very minimal compared with the value of the goods, in order that it
could work on the release thereof.

For failure to substantiate its claim by preponderance of evidence, respondent has not
established its case against petitioner.9

Petitioners filed a motion for reconsideration but it was denied in a Resolution 10 dated May 25,
2006. Hence, this petition for review on certiorari.

Petitioner’s Arguments

In assailing the CA’s Decision, MOF argues that the factual findings of both the MeTC and RTC
are entitled to great weight and respect and should have bound the CA. It stresses that the
appellate court has no justifiable reason to disturb the lower courts’ judgments because their
conclusions are well-supported by the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower courts as purely
‘speculative and conjectural’. According to MOF, the bill of lading, which expressly stated Shin
Yang as the consignee, is the best evidence of the latter’s actual participation in the
transportation of the goods. Such document, validly entered, stands as the law among the
shipper, carrier and the consignee, who are all bound by the terms stated therein. Besides, a
carrier’s valid claim after it fulfilled its obligation cannot just be rejected by the named
consignee upon a simple denial that it ever consented to be a party in a contract of
affreightment, or that it ever participated in the preparation of the bill of lading. As against Shin
Yang’s bare denials, the bill of lading is the sufficient preponderance of evidence required to
prove MOF’s claim. MOF maintains that Shin Yang was the one that supplied all the details in
the bill of lading and acquiesced to be named consignee of the shipment on a ‘Freight Collect’
basis.

Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid its obligation to
pay, because it never objected to being named as the consignee in the bill of lading and that it
only protested when the shipment arrived in the Philippines, presumably due to a botched
transaction between it and Halla Trading Co. Furthermore, Shin Yang’s letters asking for the
refund of container deposits highlight the fact that it was aware of the shipment and that it
undertook preparations for the intended release of the shipment.

Respondent’s Arguments

Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it consented
to take part in the contract of affreightment. Shin Yang argues that MOF miserably failed to
present any evidence to prove that it was the one that made preparations for the subject
shipment, or that it is an ‘actual shipping practice’ that forwarders/consolidators as consignees
are the ones that provide carriers details and information on the bills of lading.

Shin Yang contends that a bill of lading is essentially a contract between the shipper and the
carrier and ordinarily, the shipper is the one liable for the freight charges. A consignee, on the
other hand, is initially a stranger to the bill of lading and can be liable only when the bill of
lading specifies that the charges are to be paid by the consignee. This liability arises from either
a) the contract of agency between the shipper/consignor and the consignee; or b) the
consignee’s availment of the stipulation pour autrui drawn up by and between the shipper/
consignor and carrier upon the consignee’s demand that the goods be delivered to it. Shin Yang
contends that the fact that its name was mentioned as the consignee of the cargoes did not
make it automatically liable for the freightage because it never benefited from the shipment. It
never claimed or accepted the goods, it was not the shipper’s agent, it was not aware of its
designation as consignee and the original bill of lading was never endorsed to it.

Issue

The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is
bound by the stipulations thereof. Corollarily, whether respondent who was not an agent of the
shipper and who did not make any demand for the fulfillment of the stipulations of the bill of
lading drawn in its favor is liable to pay the corresponding freight and handling charges.

Our Ruling

Since the CA and the trial courts arrived at different conclusions, we are constrained to depart
from the general rule that only errors of law may be raised in a Petition for Review on Certiorari
under Rule 45 of the Rules of Court and will review the evidence presented. 11

The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the
intervention of the consignee. However, the latter can be bound by the stipulations of the bill
of lading when a) there is a relation of agency between the shipper or consignor and the
consignee or b) when the consignee demands fulfillment of the stipulation of the bill of lading
which was drawn up in its favor.12

In Keng Hua Paper Products Co., Inc. v. Court of Appeals,13 we held that once the bill of lading is
received by the consignee who does not object to any terms or stipulations contained therein,
it constitutes as an acceptance of the contract and of all of its terms and conditions, of which
the acceptor has actual or constructive notice.1avvphi1

In Mendoza v. Philippine Air Lines, Inc.,14 the consignee sued the carrier for damages but
nevertheless claimed that he was never a party to the contract of transportation and was a
complete stranger thereto. In debunking Mendoza’scontention, we held that:

x x x First, he insists that the articles of the Code of Commerce should be applied; that he
invokes the provisions of said Code governing the obligations of a common carrier to make
prompt delivery of goods given to it under a contract of transportation. Later, as already said,
he says that he was never a party to the contract of transportation and was a complete stranger
to it, and that he is now suing on a tort or a violation of his rights as a stranger (culpa aquiliana).
If he does not invoke the contract of carriage entered into with the defendant company, then
he would hardly have any leg to stand on. His right to prompt delivery of the can of film at the
Pili Air Port stems and is derived from the contract of carriage under which contract, the PAL
undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore
that contract and the obligation to carry and to deliver and right to prompt delivery disappear.
Common carriers are not obligated by law to carry and to deliver merchandise, and persons are
not vested with the right to prompt delivery, unless such common carriers previously assume
the obligation. Said rights and obligations are created by a specific contract entered into by the
parties. In the present case, the findings of the trial court which as already stated, are
accepted by the parties and which we must accept are to the effect that the LVN Pictures Inc.
and Jose Mendoza on one side, and the defendant company on the other, entered into a
contract of transportation (p. 29, Rec. on Appeal). One interpretation of said finding is that
the LVN Pictures Inc. through previous agreement with Mendoza acted as the latter's agent.
When he negotiated with the LVN Pictures Inc. to rent the film 'Himala ng Birhen' and show it
during the Naga town fiesta, he most probably authorized and enjoined the Picture Company
to ship the film for him on the PAL on September 17th. Another interpretation is that even if
the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza
for the time being, made Mendoza a consignee. [Mendoza made himself a party to the
contract of transportaion when he appeared at the Pili Air Port armed with the copy of the
Air Way Bill (Exh. 1) demanding the delivery of the shipment to him.] The very citation made
by appellant in his memorandum supports this view. Speaking of the possibility of a conflict
between the order of the shipper on the one hand and the order of the consignee on the other,
as when the shipper orders the shipping company to return or retain the goods shipped while
the consignee demands their delivery, Malagarriga in his book Codigo de Comercio Comentado,
Vol. 1, p. 400, citing a decision of the Argentina Court of Appeals on commercial matters, cited
by Tolentino in Vol. II of his book entitled 'Commentaries and Jurisprudence on the Commercial
Laws of the Philippines' p. 209, says that the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of the bill of lading appears with such bill
of lading before the carrier and makes himself a party to the contract. Prior to that time he is
a stranger to the contract.

Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of
the old Civil Code (now Art. 1311, second paragraph) which reads thus:

‘Should the contract contain any stipulation in favor of a third person, he may demand its
fulfillment provided he has given notice of his acceptance to the person bound before the
stipulation has been revoked.'

Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier
contains the stipulations of delivery to Mendoza as consignee. His demand for the delivery of
the can of film to him at the Pili Air Port may be regarded as a notice of his acceptance of the
stipulation of the delivery in his favor contained in the contract of carriage and delivery. In
this case he also made himself a party to the contract, or at least has come to court to
enforce it. His cause of action must necessarily be founded on its breach.15(Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the shipper
and the carrier, becomes a party to the contract by reason of either a) the relationship of
agency between the consignee and the shipper/ consignor; b) the unequivocal acceptance of
the bill of lading delivered to the consignee, with full knowledge of its contents or c) availment
of the stipulation pour autrui, i.e., when the consignee, a third person, demands before the
carrier the fulfillment of the stipulation made by the consignor/shipper in the consignee’s favor,
specifically the delivery of the goods/cargoes shipped.16

In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla
Trading, Co. to ship the goods on its behalf; or that it got hold of the bill of lading covering the
shipment or that it demanded the release of the cargo. Basic is the rule in evidence that the
burden of proof lies upon him who asserts it, not upon him who denies, since, by the nature of
things, he who denies a fact cannot produce any proof of it.17 Thus, MOF has the burden to
controvert all these denials, it being insistent that Shin Yang asserted itself as the consignee and
the one that caused the shipment of the goods to the Philippines.

In civil cases, the party having the burden of proof must establish his case by preponderance of
evidence,18 which means evidence which is of greater weight, or more convincing than that
which is offered in opposition to it.19 Here, MOF failed to meet the required quantum of proof.
Other than presenting the bill of lading, which, at most, proves that the carrier acknowledged
receipt of the subject cargo from the shipper and that the consignee named is to shoulder the
freightage, MOF has not adduced any other credible evidence to strengthen its cause of action.
It did not even present any witness in support of its allegation that it was Shin Yang which
furnished all the details indicated in the bill of lading and that Shin Yang consented to shoulder
the shipment costs. There is also nothing in the records which would indicate that Shin Yang
was an agent of Halla Trading Co. or that it exercised any act that would bind it as a named
consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish its
cause against respondent.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated March
22, 2006 dismissing petitioner’s complaint and the Resolution dated May 25, 2006 denying the
motion for reconsideration are AFFIRMED.

SO ORDERED.
G.R. No. 84458 November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and
GORGONIA VIANA, and PIONEER STEVEDORING CORPORATION, respondents.

Herenio E. Martinez for petitioner.

M.R. Villaluz Law Office for private respondent.

REGALADO, J.:

In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the
decision 1 of respondent Court of Appeals, dated July 29, 1988, the decretal portion of which
reads:

WHEREFORE, the judgment appealed from as modified by the order of October

27, 1982, is hereby affirmed with the modification that appellant Aboitiz
Shipping is hereby ordered to pay plaintiff-appellees the amount of P30,000.00
for the death of Anacleto Viana; actual damages of P9,800.00; P150,000.00 for
unearned income; P7,200.00 as support for deceased's parents; P20,000.00 as
moral damages; P10,000.00 as attorney's fees; and to pay the costs.

The undisputed facts of the case, as found by the court a quo and adopted by respondent court,
are as follows: .

The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel
M/V Antonia, owned by defendant, at the port at San Jose, Occidental Mindoro,
bound for Manila, having purchased a ticket (No. 117392) in the sum of P23.10
(Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor, Manila,
and the passengers therein disembarked, a gangplank having been provided
connecting the side of the vessel to the pier. Instead of using said gangplank
Anacleto Viana disembarked on the third deck which was on the level with the
pier. After said vessel had landed, the Pioneer Stevedoring Corporation took over
the exclusive control of the cargoes loaded on said vessel pursuant to the
Memorandum of Agreement dated July 26, 1975 (Exh. '2') between the third
party defendant Pioneer Stevedoring Corporation and defendant Aboitiz
Shipping Corporation.

The crane owned by the third party defendant and operated by its crane
operator Alejo Figueroa was placed alongside the vessel and one (1) hour after
 the passengers of said vessel had disembarked, it started operation by unloading
the cargoes from said vessel. While the crane was being operated, Anacleto
Viana who had already disembarked from said vessel obviously remembering
that some of his cargoes were still loaded in the vessel, went back to the vessel,
and it was while he was pointing to the crew of the said vessel to the place
where his cargoes were loaded that the crane hit him, pinning him between the
side of the vessel and the crane. He was thereafter brought to the hospital
where he later expired three (3) days thereafter, on May 15, 1975, the cause of
his death according to the Death Certificate (Exh. "C") being "hypostatic
pneumonia secondary to traumatic fracture of the pubic bone lacerating the
urinary bladder" (See also Exh. "B"). For his hospitalization, medical, burial and
other miscellaneous expenses, Anacleto's wife, herein plaintiff, spent a total of
P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana who was only forty (40)
years old when he met said fateful accident (Exh. 'E') was in good health. His
average annual income as a farmer or a farm supervisor was 400 cavans of palay
annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his
death had been recipient of twenty (20) cavans of palay as support or P120.00
monthly. Because of Anacleto's death, plaintiffs suffered mental anguish and
extreme worry or moral damages. For the filing of the instant case, they had to
hire a lawyer for an agreed fee of ten thousand (P10,000.00) pesos. 2

Private respondents Vianas filed a complaint 3 for damages against petitioner corporation
(Aboitiz, for brevity) for breach of contract of carriage.

In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the
vessel was completely under the control of respondent Pioneer Stevedoring Corporation
(Pioneer, for short) as the exclusive stevedoring contractor of Aboitiz, which handled the
unloading of cargoes from the vessel of Aboitiz. It is also averred that since the crane operator
was not an employee of Aboitiz, the latter cannot be held liable under the fellow-servant rule.

Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer

imputing liability thereto for Anacleto Viana's death as having been allegedly caused by the
negligence of the crane operator who was an employee of Pioneer under its exclusive control
and supervision.

Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no
cause of action against Pioneer considering that Aboitiz is being sued by the Vianas for breach
of contract of carriage to which Pioneer is not a party; that Pioneer had observed the diligence
of a good father of a family both in the selection and supervision of its employees as well as in
the prevention of damage or injury to anyone including the victim Anacleto Viana; that
Anacleto Viana's gross negligence was the direct and proximate cause of his death; and that the
filing of the third-party complaint was premature by reason of the pendency of the criminal
case for homicide through reckless imprudence filed against the crane operator, Alejo Figueroa.
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the
Vianas for damages incurred, and Pioneer was ordered to reimburse Aboitiz for whatever
amount the latter paid the Vianas. The dispositive portion of said decision provides:

WHEREFORE, judgment is hereby rendered in favor of the plantiffs:

(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum
of P12,000.00 for the death of Anacleto Viana P9,800.00 as actual damages;
P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan;
P10,000.00 as attorney's fees; F 5,000.00, value of the 100 cavans of palay as
support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio and
Gorgonia Viana computed at P50.00 per cavan; P7,200.00 as support for
deceased's parents computed at P120.00 a month for five years pursuant to Art.
2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and

(2) ordering the third party defendant Pioneer Stevedoring Corporation to

reimburse defendant and third party plaintiff Aboitiz Shipping Corporation the
said amounts that it is ordered to pay to herein plaintiffs.

Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly
raised the trial court's failure to declare that Anacleto Viana acted with gross negligence despite
the overwhelming evidence presented in support thereof. In addition, Aboitiz alleged, in
opposition to Pioneer's motion, that under the memorandum of agreement the liability of
Pioneer as contractor is automatic for any damages or losses whatsoever occasioned by and
arising from the operation of its arrastre and stevedoring service.

In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of
the Vianas and Aboitiz to preponderantly establish a case of negligence against the crane
operator which the court a quo ruled is never presumed, aside from the fact that the
memorandum of agreement supposedly refers only to Pioneer's liability in case of loss or
damage to goods handled by it but not in the case of personal injuries, and, finally that Aboitiz
cannot properly invoke the fellow-servant rule simply because its liability stems from a breach
of contract of carriage. The dispositive portion of said order reads:

WHEREFORE, judgment is hereby modified insofar as third party defendant

Pioneer Stevedoring Corporation is concerned rendered in favor of the plaintiffs-
,:

(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the sum
of P12,000.00 for the death of Anacleto Viana; P9,000.00 (sic) as actual damages;
P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan;
P10,000.00 as attorney's fees; P5,000.00 value of the 100 cavans of palay as
support for five (5) years for deceased's parents, herein plaintiffs Antonio and
Gorgonia Viana,computed at P50.00 per cavan; P7,200.00 as support for
 deceased's parents computed at P120.00 a month for five years pursuant to Art.
2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and

(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic) any
liability for the death of Anacleto Viana the passenger of M/V Antonia owned by
defendant third party plaintiff Aboitiz Shipping Corporation it appearing that the
negligence of its crane operator has not been established therein.

Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to
respondent Court of Appeals which affirmed the findings of of the trial court except as to the
amount of damages awarded to the Vianas.

Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:

(A) In holding that the doctrine laid down by this honorable Court in La Mallorca
vs. Court of Appeals, et al. (17 SCRA 739, July 27, 1966) is applicable to the case
in the face of the undisputable fact that the factual situation under the La
Mallorca case is radically different from the facts obtaining in this case;

(B) In holding petitioner liable for damages in the face of the finding of the court
a quo and confirmed by the Honorable respondent court of Appeals that the
deceased, Anacleto Viana was guilty of contributory negligence, which, We
respectfully submit contributory negligence was the proximate cause of his
death; specifically the honorable respondent Court of Appeals failed to apply Art.
1762 of the New Civil Code;

(C) In the alternative assuming the holding of the Honorable respondent Court of
Appears that petitioner may be legally condemned to pay damages to the
private respondents we respectfully submit that it committed a reversible error
when it dismissed petitioner's third party complaint against private respondent
Pioneer Stevedoring Corporation instead of compelling the latter to reimburse
the petitioner for whatever damages it may be compelled to pay to the private
respondents Vianas. 9

At threshold, it is to be observed that both the trial court and respondent Court of Appeals
found the victim Anacleto Viana guilty of contributory negligence, but holding that it was the
negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the
unloading of cargoes which was the direct, immediate and proximate cause of the victim's
death.

I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana
disembarked from the vessel and that he was given more than ample opportunity to unload his
cargoes prior to the operation of the crane, his presence on the vessel was no longer
reasonable e and he consequently ceased to be a passenger. Corollarily, it insists that the
doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to the case at bar.

The rule is that the relation of carrier and passenger continues until the passenger has been
landed at the port of destination and has left the vessel owner's dock or premises. 11 Once
created, the relationship will not ordinarily terminate until the passenger has, after reaching his
destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to
leave the carrier's premises. All persons who remain on the premises a reasonable time after
leaving the conveyance are to be deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare for his departure.12 The carrier-passenger
relationship is not terminated merely by the fact that the person transported has been carried
to his destination if, for example, such person remains in the carrier's premises to claim his
baggage.13

It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca
was enunciated, to wit:

It has been recognized as a rule that the relation of carrier and passenger does
not cease at the moment the passenger alights from the carrier's vehicle at a
place selected by the carrier at the point of destination, but continues until the
passenger has had a reasonable time or a reasonable opportunity to leave the
carrier's premises. And, what is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances. Thus, a person who,
after alighting from a train, walks along the station platform is considered still a
passenger. So also, where a passenger has alighted at his destination and is
proceeding by the usual way to leave the company's premises, but before
actually doing so is halted by the report that his brother, a fellow passenger, has
been shot, and he in good faith and without intent of engaging in the difficulty,
returns to relieve his brother, he is deemed reasonably and necessarily delayed
and thus continues to be a passenger entitled as such to the protection of the
railroad company and its agents.

In the present case, the father returned to the bus to get one of his baggages
which was not unloaded when they alighted from the bus. Racquel, the child that
she was, must have followed the father. However, although the father was still
on the running board of the bus waiting for the conductor to hand him the bag
or bayong, the bus started to run, so that even he (the father) had to jump down
from the moving vehicle. It was at this instance that the child, who must be near
the bus, was run over and killed. In the circumstances, it cannot be claimed that
the carrier's agent had exercised the 'utmost diligence' of a 'very cautious
person' required by Article 1755 of the Civil Code to be observed by a common
carrier in the discharge of its obligation to transport safely its passengers. ... The
presence of said passengers near the bus was not unreasonable and they are,
 therefore, to be considered still as passengers of the carrier, entitled to the
protection under their contract of carriage. 14

It is apparent from the foregoing that what prompted the Court to rule as it did in said case is
the fact of the passenger's reasonable presence within the carrier's premises. That
reasonableness of time should be made to depend on the attending circumstances of the case,
such as the kind of common carrier, the nature of its business, the customs of the place, and so
forth, and therefore precludes a consideration of the time element per se without taking into
account such other factors. It is thus of no moment whether in the cited case of La
Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's
premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim
met the accident. The primary factor to be considered is the existence of a reasonable cause as
will justify the presence of the victim on or near the petitioner's vessel. We believe there exists
such a justifiable cause.

It is of common knowledge that, by the very nature of petitioner's business as a shipper, the
passengers of vessels are allotted a longer period of time to disembark from the ship than other
common carriers such as a passenger bus. With respect to the bulk of cargoes and the number
of passengers it can load, such vessels are capable of accommodating a bigger volume of both
as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will
need at least an hour as is the usual practice, to disembark from the vessel and claim his
baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very
short period of time. Verily, petitioner cannot categorically claim, through the bare expedient
of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La
Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine
enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto
Viana was still a passenger at the time of the incident. When the accident occurred, the victim
was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel.
As earlier stated, a carrier is duty bound not only to bring its passengers safely to their
destination but also to afford them a reasonable time to claim their baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already
disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that at the
time the victim was taking his cargoes, the vessel had already docked an hour earlier. In
consonance with common shipping procedure as to the minimum time of one (1) hour allowed
for the passengers to disembark, it may be presumed that the victim had just gotten off the
vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour
earlier, his presence in petitioner's premises was not without cause. The victim had to claim his
baggage which was possible only one (1) hour after the vessel arrived since it was admittedly
standard procedure in the case of petitioner's vessels that the unloading operations shall start
only after that time. Consequently, under the foregoing circumstances, the victim Anacleto
Viana is still deemed a passenger of said carrier at the time of his tragic death.
II. Under the law, common carriers are, from the nature of their business and for reasons of
public policy, 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. 15 More particularly, a common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances. 16 Thus, where a passenger dies or is injured, the
common carrier is presumed to have been at fault or to have acted negligently. 17 This gives rise
to an action for breach of contract of carriage where all that is required of plaintiff is to prove
the existence of the contract of carriage and its non-performance by the carrier, that is, the
failure of the carrier to carry the passenger safely to his destination, 18which, in the instant
case, necessarily includes its failure to safeguard its passenger with extraordinary diligence
while such relation subsists.

The presumption is, therefore, established by law that in case of a passenger's death or injury
the operator of the vessel was at fault or negligent, having failed to exercise extraordinary
diligence, and it is incumbent upon it to rebut the same. This is in consonance with the avowed
policy of the State to afford full protection to the passengers of common carriers which can be
carried out only by imposing a stringent statutory obligation upon the latter. Concomitantly,
this Court has likewise adopted a rigid posture in the application of the law by exacting the
highest degree of care and diligence from common carriers, bearing utmost in mind the welfare
of the passengers who often become hapless victims of indifferent and profit-oriented carriers.
We cannot in reason deny that petitioner failed to rebut the presumption against it. Under the
facts obtaining in the present case, it cannot be gainsaid that petitioner had inadequately
complied with the required degree of diligence to prevent the accident from happening.

As found by the Court of Appeals, the evidence does not show that there was a cordon of
drums around the perimeter of the crane, as claimed by petitioner. It also adverted to the fact
that the alleged presence of visible warning signs in the vicinity was disputable and not
indubitably established. Thus, we are not inclined to accept petitioner's explanation that the
victim and other passengers were sufficiently warned that merely venturing into the area in
question was fraught with serious peril. Definitely, even assuming the existence of the
supposed cordon of drums loosely placed around the unloading area and the guard's
admonitions against entry therein, these were at most insufficient precautions which pale into
insignificance if considered vis-a-vis the gravity of the danger to which the deceased was
exposed. There is no showing that petitioner was extraordinarily diligent in requiring or seeing
to it that said precautionary measures were strictly and actually enforced to subserve their
purpose of preventing entry into the forbidden area. By no stretch of liberal evaluation can
such perfunctory acts approximate the "utmost diligence of very cautious persons" to be
exercised "as far as human care and foresight can provide" which is required by law of common
carriers with respect to their passengers.

While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to
exercise extraordinary diligence was the proximate and direct cause of, because it could
definitely have prevented, the former's death. Moreover, in paragraph 5.6 of its petition, at
bar, 19 petitioner has expressly conceded the factual finding of respondent Court of Appeals
that petitioner did not present sufficient evidence in support of its submission that the
deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard to
claim otherwise.

No excepting circumstance being present, we are likewise bound by respondent court's

declaration that there was no negligence on the part of Pioneer Stevedoring Corporation, a
confirmation of the trial court's finding to that effect, hence our conformity to Pioneer's being
absolved of any liability.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross
negligence of the victim, hence its present contention that the death of the passenger was due
to the negligence of the crane operator cannot be sustained both on grounds, of estoppel and
for lack of evidence on its present theory. Even in its answer filed in the court below it readily
alleged that Pioneer had taken the necessary safeguards insofar as its unloading operations
were concerned, a fact which appears to have been accepted by the plaintiff therein by not
impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party
complaint only after ten (10) months from the institution of the suit against it. Parenthetically,
Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the
corresponding presumption of negligence foisted on, common carriers like Aboitiz. This, of
course, does not detract from what we have said that no negligence can be imputed to Pioneer
but, that on the contrary, the failure of Aboitiz to exercise extraordinary diligence for the safety
of its passenger is the rationale for our finding on its liability.

WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in
toto.

SO ORDERED.
G.R. No. 47065 June 26, 1940

PANGASINAN TRANSPORTATION CO., INC., petitioner,

vs.
THE PUBLIC SERVICE COMMISSION, respondent.

C. de G. Alvear for petitioner.

Evaristo R. Sandoval for respondent.

LAUREL, J.:

The petitioner has been engaged for the past twenty years in the business of transporting
passengers in the Province of Pangasinan and Tarlac and, to a certain extent, in the Province of
Nueva Ecija and Zambales, by means of motor vehicles commonly known as TPU buses, in
accordance with the terms and conditions of the certificates of public convenience issued in its
favor by the former Public Utility Commission in cases Nos. 24948, 30973, 36830, 32014 and
53090. On August 26, 1939, the petitioner filed with the Public Service Commission an
application for authorization to operate ten additional new Brockway trucks (case No. 56641),
on the ground that they were needed to comply with the terms and conditions of its existing
certificates and as a result of the application of the Eight Hour Labor Law. In the decision of
September 26, 1939, granting the petitioner's application for increase of equipment, the Public
Service Commission ordered:

Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del Commonwealth,
tal como ha sido enmendada por el articulo 1 de la Ley No. 454, por la presente se
enmienda las condiciones de los certificados de convenciencia publica expedidos en los
expedientes Nos. 24948, 30973, 36831, 32014 y la authorizacion el el expediente No.
53090, asi que se consideran incorporadas en los mismos las dos siguientes condiciones:

Que los certificados de conveniencia publica y authorizacion arriba mencionados seran

validos y subsistentes solamente durante de veinticinco (25) anos, contados desde la
fecha de la promulgacion de esta decision.

Que la empresa de la solicitante porda ser adquirida por el Commonwealth de Filipinas

o por alguna dependencia del mismo en cualquier tiempo que lo deseare previo pago
del precio d costo de su equipo util, menos una depreciacion razonable que se ha fijar
por la Comision al tiempo de su adquisicion.

Not being agreeable to the two new conditions thus incorporated in its existing certificates, the
petitioner filed on October 9, 1939 a motion for reconsideration which was denied by the Public
Service Commission on November 14, 1939. Whereupon, on November 20, 1939, the present
petition for a writ of certiorari was instituted in this court praying that an order be issued
directing the secretary of the Public Service Commission to certify forthwith to this court the
records of all proceedings in case No. 56641; that this court, after hearing, render a decision
declaring section 1 of Commonwealth Act No. 454 unconstitutional and void; that, if this court
should be of the opinion that section 1 of Commonwealth Act No. 454 is constitutional, a
decision be rendered declaring that the provisions thereof are not applicable to valid and
subsisting certificates issued prior to June 8, 1939. Stated in the language of the petitioner, it is
contended:

1. That the legislative powers granted to the Public Service Commission by section 1 of
Commonwealth Act No. 454, without limitation, guide or rule except the unfettered
discretion and judgment of the Commission, constitute a complete and total abdication
by the Legislature of its functions in the premises, and for that reason, the Act, in so far
as those powers are concerned, is unconstitutional and void.

2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is valid
delegation of legislative powers, the Public Service Commission has exceeded its
authority because: (a) The Act applies only to future certificates and not to valid and
subsisting certificates issued prior to June 8, 1939, when said Act took effect, and (b) the
Act, as applied by the Commission, violates constitutional guarantees.

Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth Act No.
454, invoked by the respondent Public Service Commission in the decision complained of in the
present proceedings, reads as follows:

With the exception to those enumerated in the preceding section, no public service shall
operate in the Philippines without possessing a valid and subsisting certificate from the
Public Service Commission, known as "certificate of public convenience," or "certificate
of convenience and public necessity," as the case may be, to the effect that the
operation of said service and the authorization to do business will promote the public
interests in a proper and suitable manner.

The Commission may prescribed as a condition for the issuance of the certificate
provided in the preceding paragraph that the service can be acquired by the
Commonwealth of the Philippines or by any instrumentality thereof upon payment of
the cost price of its useful equipment, less reasonable depreciation; and likewise, that
the certificate shall valid only for a definite period of time; and that the violation of any
of these conditions shall produce the immediate cancellation of the certificate without
the necessity of any express action on the part of the Commission.

In estimating the depreciation, the effect of the use of the equipment, its actual
condition, the age of the model, or other circumstances affecting its value in the market
shall be taken into consideration.

The foregoing is likewise applicable to any extension or amendment of certificates

actually force and to those which may hereafter be issued, to permits to modify
 itineraries and time schedules of public services and to authorization to renew and
increase equipment and properties.

Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, no public
service can operate without a certificate of public convenience or certificate of convenience
and public necessity to the effect that the operation of said service and the authorization to do
business will "public interests in a proper and suitable manner." Under the second paragraph,
one of the conditions which the Public Service Commission may prescribed the issuance of the
certificate provided for in the first paragraph is that "the service can be acquired by the
Commonwealth of the Philippines or by any instrumental thereof upon payment of the cost
price of its useful equipment, less reasonable depreciation," a condition which is virtually a
restatement of the principle already embodied in the Constitution, section 6 of Article XII,
which provides that "the State may, in the interest of national welfare and defense, establish
and operate industries and means of transportation and communication, and, upon payment of
just compensation, transfer to public ownership utilities and other private enterprises to be
operated by the Government. "Another condition which the Commission may prescribed, and
which is assailed by the petitioner, is that the certificate "shall be valid only for a definite period
of time." As there is a relation between the first and second paragraphs of said section 15, the
two provisions must be read and interpreted together. That is to say, in issuing a certificate, the
Commission must necessarily be satisfied that the operation of the service under said
certificate during a definite period fixed therein "will promote the public interests in a proper
and suitable manner." Under section 16 (a) of Commonwealth Act. No. 146 which is a
complement of section 15, the Commission is empowered to issue certificates of public
convenience whenever it "finds that the operation of the public service proposed and the
authorization to do business will promote the public interests in a proper and suitable manner."
Inasmuch as the period to be fixed by the Commission under section 15 is inseparable from the
certificate itself, said period cannot be disregarded by the Commission in determining the
question whether the issuance of the certificate will promote the public interests in a proper
and suitable manner. Conversely, in determining "a definite period of time," the Commission
will be guided by "public interests," the only limitation to its power being that said period shall
not exceed fifty years (sec. 16 (a), Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.)
We have already ruled that "public interest" furnishes a sufficient standard.
(People vs. Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938;
People vs. Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12, 1939,
citing New York Central Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law. ed. 138,
145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585;
Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)

Section 8 of Article XIII of the Constitution provides, among other things, that no franchise,
certificate, or any other form of authorization for the operation of a public utility shall be "for a
longer period than fifty years," and when it was ordained, in section 15 of Commonwealth Act
No. 146, as amended by Commonwealth Act No. 454, that the Public Service Commission may
prescribed as a condition for the issuance of a certificate that it "shall be valid only for a definite
period of time" and, in section 16 (a) that "no such certificates shall be issued for a period of
more than fifty years," the National Assembly meant to give effect to the aforesaid
constitutional mandate. More than this, it has thereby also declared its will that the period to
be fixed by the Public Service Commission shall not be longer than fifty years. All that has been
delegated to the Commission, therefore, is the administrative function, involving the use
discretion, to carry out the will of the National Assembly having in view, in addition, the
promotion of "public interests in a proper and suitable manner." The fact that the National
Assembly may itself exercise the function and authority thus conferred upon the Public Service
Commission does not make the provision in question constitutionally objectionable.

The theory of the separation of powers is designed by its originators to secure action and at the
same time to forestall overaction which necessarily results from undue concentration of
powers, and thereby obtain efficiency and prevent deposition. Thereby, the "rule of law" was
established which narrows the range of governmental action and makes it subject to control by
certain devices. As a corollary, we find the rule prohibiting delegation of legislative authority,
and from the earliest time American legal authorities have proceeded on the theory that
legislative power must be exercised by the legislature alone. It is frankness, however, to confess
that as one delves into the mass of judicial pronouncement, he finds a great deal of confusion.
One thing, however, is apparent in the development of the principle of separation of powers
and that is that the maxim of delegatus non potest delegari or delegata potestas non potest
delegari, attributed to Bracton (De Legius et Consuetedinious Angliae, edited by G. E.
Woodbine, Yale University Press, 1922, vol. 2, p. 167) but which is also recognized in principle in
the Roman Law (D. 17.18.3), has been made to adapt itself to the complexities of modern
governments, giving rise to the adoption, within certain limits, of the principle of "subordinate
legislation," not only in the United States and England but in practically all modern
governments. (People vs. Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated
June 12, 1939.) Accordingly, with the growing complexity of modern life, the multiplication of
the subjects of governmental regulation, and the increased difficulty of administering the laws,
there is a constantly growing tendency toward the delegation of greater powers by the
legislature, and toward the approval of the practice by the court. (Dillon Catfish Drainage Dist,
v. Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d. 973, 976,
165 Tenn. 319.) In harmony with such growing tendency, this Court, since the decision in the
case of Compañia General de Tabacos de Filipinas vs. Board of Public Utility Commissioner (34
Phil., 136), relied upon by the petitioner, has, in instances, extended its seal of approval to the
"delegation of greater powers by the legislature." (Inchausti Steamship Co. vs. Public Utility
Commissioner, 44 Phil., Autobus Co. vs. De Jesus, 56 Phil., 446; People vs. Fernandez & Trinidad,
G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal & Osmeña, G. R. Nos. 46076,
46077, promulgated June 12, 1939; and Robb and Hilscher vs. People, G. R. No. 45866,
promulgated June 12, 1939.).

Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, the power of the Public Service Commission to prescribed the
conditions "that the service can be acquired by the Commonwealth of the Philippines or by any
instrumentality thereof upon payment of the cost price of its useful equipment, less
reasonable," and "that the certificate shall be valid only for a definite period of time" is
expressly made applicable "to any extension or amendment of certificates actually in force" and
"to authorizations to renew and increase equipment and properties." We have examined the
legislative proceedings on the subject and have found that these conditions were purposely
made applicable to existing certificates of public convenience. The history of Commonwealth
Act No. 454 reveals that there was an attempt to suppress, by way of amendment, the
sentence "and likewise, that the certificate shall be valid only for a definite period of time," but
the attempt failed:

xxx xxx xxx

Sr. CUENCO. Señor Presidente, para otra enmienda. En la misma pagina, lineas 23 y 24,
pido que se supriman las palabras 'and likewise, that the certificate shall be valid only
for a definite period time.' Esta disposicion del proyecto autoriza a la Comision de
Servicios Publicos a fijar un plazo de vigencia certificado de conveniencia publica. Todo
el mundo sabe que bo se puede determinar cuando los intereses del servicio publico
requiren la explotacion de un servicio publico y ha de saber la Comision de Servisios, si
en un tiempo determinado, la explotacion de algunos buses en cierta ruta ya no tiene de
ser, sobre todo, si tiene en cuenta; que la explotacion de los servicios publicos depende
de condiciones flutuantes, asi como del volumen como trafico y de otras condiciones.
Ademas, el servicio publico se concede por la Comision de Servicios Publicos el interes
publico asi lo exige. El interes publico no tiene duracion fija, no es permanente; es un
proceso mas o menos indefinido en cuanto al tiempo. Se ha acordado eso en el caucus
de anoche.

EL PRESIDENTE PRO TEMPORE. ¿Que dice el Comite?

Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que esto
certificados de conveniencia publica es igual que la franquicia: sepuede extender. Si los
servicios presentados por la compañia durante el tiempo de su certificado lo require,
puede pedir la extension y se le extendera; pero no creo conveniente el que nosotros
demos un certificado de conveniencia publica de una manera que podria pasar de
cincuenta anos, porque seria anticonstitucional.

xxx xxx xxx

By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de 1939,
Asamblea Nacional.)

The petitioner is mistaken in the suggestion that, simply because its existing certificates had
been granted before June 8, 1939, the date when Commonwealth Act No. 454, amendatory of
section 15 of Commonwealth Act No. 146, was approved, it must be deemed to have the right
of holding them in perpetuity. Section 74 of the Philippine Bill provided that "no franchise,
privilege, or concession shall be granted to any corporation except under the conditions that it
shall be subject to amendment, alteration, or repeal by the Congress of the United States." The
Jones Law, incorporating a similar mandate, provided, in section 28, that "no franchise or right
shall be granted to any individual, firm, or corporation except under the conditions that it shall
be subject to amendment, alteration, or repeal by the Congress of the United States." Lastly,
the Constitution of the Philippines provided, in section 8 of Article XIII, that "no franchise or
right shall be granted to any individual, firm, or corporation, except under the condition that it
shall be subject to amendment, alteration, or repeal by the National Assembly when the public
interest so requires." The National Assembly, by virtue of the Constitution, logically succeeded
to the Congress of the United States in the power to amend, alter or repeal any franchise or
right granted prior to or after the approval of the Constitution; and when Commonwealth Acts
Nos. 146 and 454 were enacted, the National Assembly, to the extent therein provided, has
declared its will and purpose to amend or alter existing certificates of public convenience.

Upon the other hand, statutes enacted for the regulation of public utilities, being a proper
exercise by the state of its police power, are applicable not only to those public utilities coming
into existence after its passage, but likewise to those already established and in operation.

Nor is there any merit in petitioner's contention, that, because of the establishment of
petitioner's operations prior to May 1, 1917, they are not subject to the regulations of
the Commission. Statutes for the regulation of public utilities are a proper exercise by
the state of its police power. As soon as the power is exercised, all phases of operation
of established utilities, become at once subject to the police power thus called into
operation. Procedures' Transportation Co. v. Railroad Commission, 251 U. S. 228, 40
Sup. Ct. 131, 64 Law. ed. 239, Law v. Railroad Commission, 184 Cal. 737, 195 Pac. 423,
14 A. L. R. 249. The statute is applicable not only to those public utilities coming into
existence after its passage, but likewise to those already established and in operation.
The 'Auto Stage and Truck Transportation Act' (Stats. 1917, c. 213) is a statute passed in
pursuance of the police power. The only distinction recognized in the statute between
those established before and those established after the passage of the act is in the
method of the creation of their operative rights. A certificate of public convenience and
necessity it required for any new operation, but no such certificate is required of any
transportation company for the operation which was actually carried on in good faith on
May 1, 1917, This distinction in the creation of their operative rights in no way affects
the power of the Commission to supervise and regulate them. Obviously the power of
the Commission to hear and dispose of complaints is as effective against companies
securing their operative rights prior to May 1, 1917, as against those subsequently
securing such right under a certificate of public convenience and necessity. (Motor
Transit Co. et al. v. Railroad Commission of California et al., 209 Pac. 586.)

Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public
Service Commission but are "a part of the charter of every utility company operating or seeking
to operate a franchise" in the Philippines. (Streator Aqueduct Co. v. et al., 295 Fed. 385.) The
business of a common carrier holds such a peculiar relation to the public interest that there is
superinduced upon it the right of public regulation. When private property is "affected with a
public interest it ceased to be juris privati only." When, therefore, one devotes his property to a
use in which the public has an interest, he, in effect, grants to the public an interest in that use,
and must submit to be controlled by the public for the common good, to the extent of the
interest he has thus created. He may withdraw his grant by discounting the use, but so long as
he maintains the use he must submit to control. Indeed, this right of regulation is so far beyond
question that it is well settled that the power of the state to exercise legislative control over
public utilities may be exercised through boards of commissioners. (Fisher vs. Yangco Steamship
Company, 31 Phil., 1, citing Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. vs. Smith, 128
U.S. 174; Budd vs. New York, 143 U.S. 517; New York etc. R. Co. vs. Bristol 151 U.S. 556, 571;
Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689; Louisville etc. Ry Co. vs. Kentucky, 161 U.S.
677, 695.) This right of the state to regulate public utilities is founded upon the police power,
and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the
protection of the public as well as of the utilities themselves. Such statutes are, therefore, not
unconstitutional, either impairing the obligation of contracts, taking property without due
process, or denying the equal protection of the laws, especially inasmuch as the question
whether or not private property shall be devoted to a public and the consequent burdens
assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public
service he cannot complain that it becomes subject to the regulatory powers of the state. (51 C.
J., sec. 21, pp. 9-10.) in the light of authorities which hold that a certificate of public
convenience constitutes neither a franchise nor contract, confers no property right, and is mere
license or privilege. (Burgess vs. Mayor & Alderman of Brockton, 235 Mass. 95, 100, 126 N. E.
456; Roberto vs. Commisioners of Department of Public Utilities, 262 Mass. 583, 160 N. E. 321;
Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J. L.] Cartage Co. [1937], 132
Ohio St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil., 773.)

Whilst the challenged provisions of Commonwealth Act No. 454 are valid and constitutional, we
are, however, of the opinion that the decision of the Public Service Commission should be
reversed and the case remanded thereto for further proceedings for the reason now to be
stated. The Public Service Commission has power, upon proper notice and hearing, "to amend,
modify or revoke at any time any certificate issued under the provisions of this Act, whenever
the facts and circumstances on the strength of which said certificate was issued have been
misrepresented or materially changed." (Section 16, par. [m], Commonwealth Act No. 146.) The
petitioner's application here was for an increase of its equipment to enable it to comply with
the conditions of its certificates of public convenience. On the matter of limitation to twenty
five (25) years of the life of its certificates of public convenience, there had been neither notice
nor opportunity given the petitioner to be heard or present evidence. The Commission appears
to have taken advantage of the petitioner to augment petitioner's equipment in imposing the
limitation of twenty-five (25) years which might as well be twenty or fifteen or any number of
years. This is, to say the least, irregular and should not be sanctioned. There are cardinal
primary rights which must be respected even in proceedings of this character. The first of these
rights is the right to a hearing, which includes the right of the party interested or affected to
present his own case and submit evidence in support thereof. In the language of Chief Justice
Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129), "the liberty and
property of the citizen shall be protected by the rudimentary requirements of fair play." Not
only must the party be given an opportunity to present his case and to adduce evidence
tending to establish the rights which he asserts but the tribunal must consider the evidence
presented. (Chief Justice Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 :Law. ed.
1288.) In the language of this Court in Edwards vs. McCoy (22 Phil., 598), "the right to adduce
evidence, without the corresponding duty on the part of the board to consider it, is vain. Such
right is conspicuously futile if the person or persons to whom the evidence is presented can
thrust it aside without or consideration." While the duty to deliberate does not impose the
obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that
of having something to support its decision. A decision with absolutely nothing to support it is a
nullity, at least when directly attacked. (Edwards vs. McCoy, supra.) This principle emanates
from the more fundamental principle that the genius of constitutional government is contrary
to the vesting of unlimited power anywhere. Law is both a grant and a limitation upon power.

The decision appealed from is hereby reversed and the case remanded to the Public Service
Commission for further proceedings in accordance with law and this decision, without any
pronouncement regarding costs. So ordered.