Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

95582 October 7, 1991 DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners, vs. COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by Inocencia Cudiamat, respondents. Francisco S. Reyes Law Office for petitioners. Antonio C. de Guzman for private respondents.

REGALADO, J.:p On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective destinations before banging said victim to the Lepanto Hospital where he expired. On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in the operation of the transportation company and the supervision of the employees, even as they add that they are not absolute insurers of the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and negligence which gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their favor by way of a counterclaim. On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion: IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount

defendants initially offered said heirs for the amicable settlement of the case. No costs.
SO ORDERED. 2

Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of the lower court, and ordered petitioners to pay private respondents: 1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat; 2. The sum of Twenty Thousand (P20,000.00) by way of moral damages; 3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;
4. The costs of this suit. 4

Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990,5 hence this petition with the central issue herein being whether respondent court erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the damages claimed. It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6 In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners and the victim is guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the proper calibration of their conflicting factual findings and legal conclusions. The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella. And, without having given the driver or the conductor any indication that he wishes to board the bus. But defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7

However, respondent court, in arriving at a different opinion, declares that:

From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to board the bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus was at the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code). 8

After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as follows: Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing? A The way going to the mines but it is not being pass(ed) by the bus. Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses. 9

The bus conductor, Martin Anglog, also declared: Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that occurred? A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54. Q What happened when you delivered this passenger at this particular place in Lepanto? A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella about a split second and I signalled again the driver,

so the driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was lying down. Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down from the bus how far was he? A It is about two to three meters. Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)

The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence. The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of the bus in this case was a breach of such duty. 11 It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 12 Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, the bus had "just started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13 It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14 An ordinarily prudent person would have made the attempt board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from slowly moving vehicle is a matter of common experience both the driver and conductor in this case could not have been unaware of such an ordinary practice. The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the rights and protection pertaining to such a contractual relation.

Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported by the according to all the circumstances of each case. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence very cautious persons, with a due regard for all the circumstances. It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and helpless husband. 19

Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. In fact, it was only after the refrigerator was unloaded that one of the passengers thought of sending somebody to the house of the victim, as shown by the testimony of Virginia Abalos again, to wit: Q Why, what happened to your refrigerator at that particular time? A I asked them to bring it down because that is the nearest place to our house and when I went down and asked somebody to bring down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat. COURT: Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat. Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21

With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and minus living and other incidental expenses. We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects. SO ORDERED. Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 114061 August 3, 1994 KOREAN AIRLINES CO., LTD., petitioner, vs. COURT OF APPEALS and JUANITO C. LAPUZ, respondents. G.R. No. 113842 August 3, 1994

JUANITO C. LAPUZ, petitioner, vs. COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents. M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd. Camacho and Associates for Juanito Lapuz.

CRUZ, J.: Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait-listed," which meant that he could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure. When two of such passengers did not appear, Lapuz and another person by the name of Perico were given the two unclaimed seats. According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL. He passed through the customs and immigration sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight. When he later asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi Arabia within the stipulated 2-week period and so lost his employment. KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for the departure of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed that there was a possibility of having one or two seats becoming available, gave priority to Perico, who was one of the supervisors of the hiring company in Saudi Arabia. The other seat was won through lottery by Lapuz. However, only one seat became available and so, pursuant to the earlier agreement that Perico was to be given priority, he alone was allowed to board. After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages, disposing as follows: WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered sentencing the defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the following: 1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY (P272,160.00) PESOS as actual/compensatory damages, with legal interest thereon from the date of the filing of the complaint until fully paid.

2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's fees; and 3. The costs of suit. The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting Services, Inc. The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise dismissed. On appeal, this decision was modified by the Court of Appeals 2 as follows: WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED with the following modifications: the amount of actual damages and compensatory damages is reduced to P60,000.00 and defendant-appellant is hereby ordered to pay plaintiff-appellant the sum of One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages, at 6% interest per annum from the date of the filing of the Complaint until fully paid. KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of merit. Hence, the present petitions for review which have been consolidated because of the identity of the parties and the similarity of the issues. In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds: 1. That the Court of Appeals erred in concluding that petitioner committed a breach of contract of carriage notwithstanding lack of proper, competent and sufficient evidence of the existence of such contract. 2. That the Court of Appeals erred in not according the proper evidentiary weight to some evidence presented and the fact that private respondent did not have any boarding pass to prove that he was allowed to board and to prove that his airline ticket was confirmed. 3. That the Court of Appeals erred in concluding that the standby passenger status of private respondent Lapuz was changed to a confirmed status when his name was entered into the passenger manifest. 4. That the Court of Appeals abused its discretion in awarding moral and exemplary damages in the amount of P100,000.00 in favor of private respondent notwithstanding its lack of basis and private respondent did not state such amount in his complaint nor had private respondent proven the said damages. 5. That the Court of Appeals erred in dismissing the counterclaims.

6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan Pacific. 7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the judgment shall be computed from the filing of the complaint. In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals insofar as it modifies the award of damages; b) actual and compensatory damages in the sum equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600 Saudi rials at the current conversion rate plus the cost of baggage and personal belongings worth P2,000 and the service fee of P3,000 paid to the recruiting agency, all with legal interest from the filing of the complaint until fully paid; c) moral damages of not less than P1 million and exemplary damages of not less than P500,000.00, both with interest at 6% per annum from the filing of the complaint; and d) attorney's fees in the sum equivalent to 30% of the award of damages. It is evident that the issues raised in these petitions relate mainly to the correctness of the factual findings of the Court of Appeals and the award of damages. The Court has consistently affirmed that the findings of fact of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed. The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it failed to bring Lapuz to his destination. This Court has held that a contract to transport passengers is different in kind and degree from any other contractual relation. 3 The business of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it offers. The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. 4 So it is that any discourteous conduct on the part of these employees toward a passenger gives the latter an action for damages against the carrier. The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment and public humiliation. KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a chance passenger in the passenger manifest nor the clearance from the Commission on Immigration and Deportation, because they are merely means of facilitating the boarding of a chance passenger in case his status is confirmed." We are not persuaded. The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be

flown with him to Jeddah. The contract of carriage between him and KAL had already been perfected when he was summarily and insolently prevented from boarding the aircraft. KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also not tenable. The Court of Appeals granted moral and exemplary damages because: The findings of the court a quo that the defendant-appellant has committed breach of contract of carriage in bad faith and in wanton, disregard of plaintiff-appellant's rights as passenger laid the basis and justification of an award for moral damages. xxxx In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton, fraudulent, reckless, oppressive or malevolent manner when it "bumped off" plaintiff-appellant on November 8, 1980, and in addition treated him rudely and arrogantly as a "patay gutom na contract worker fighting Korean Air Lines," which clearly shows malice and bad faith, thus entitling plaintiff-appellant to moral damages. xxxx Considering that the plaintiff-appellant's entitlement to moral damages has been fully established by oral and documentary evidence, exemplary damages may be awarded. In fact, exemplary damages may be awarded, even though not so expressly pleaded in the complaint (Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an example for the public good, an award of exemplary damages is also proper (Armovit vs. Court of Appeals, supra). On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary damages is inadequate is not acceptable either. His prayer for moral damages of not less than P1 million and exemplary damages of not less than P500,000.00 is overblown. The well-entrenched principle is that moral damages depend upon the discretion of the court based on the circumstances of each case. 5 This discretion is limited by the principle that the "amount awarded should not be palpably and scandalously excessive" as to indicate that it was the result of prejudice or corruption on the part of the trial court. 6 Damages are not intended to enrich the complainant at the expense of the defendant. They are awarded only to alleviate the moral suffering that the injured party had undergone by reason of the defendant's culpable action. 7 There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since each case must be governed by its own peculiar facts. A review of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive as to warrant an award of P1.5 million. The assessment of P100,000 as moral and exemplary damages in his favor is, in our view, reasonable and realistic.

Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of actual damages because it had not been assigned as an error by KAL. Not so. The rule is that only errors specifically assigned and properly argued in the brief will be considered except errors affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this is not without qualification for, as the Court held in Vda. de Javellana vs. Court of Appeals: 9 . . . [T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise: Issues, though not specifically raised in the pleading in the appellate court, may, in the interest of justice, be properly considered by said court in deciding a case, if they are questions raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or the lower court ignored. The Court of Appeals was therefore justified in decreasing the award of actual damages even if the issue was not assigned as an error by KAL. Consideration of this question was necessary for the just and complete resolution of the present case. Furthermore, there was enough evidence to warrant the reduction of the original award, as the challenged decision correctly observed: A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the contract is for only one year, renewable every year for five years. Although plaintiff-appellant intends to renew his contract, such renewal will still be subject to his foreign employer. Plaintiffappellant had not yet started working with his foreign employer, hence, there can be no basis as to whether his contract will be renewed by his foreign employer or not. Thus, the damages representing the loss of earnings of plaintiff-appellant in the renewal of the contract of employment is at most speculative. Damages may not be awarded on the basis of speculation or conjecture (Gachalian vs. Delim, 203 SCRA 126). Hence, defendant-appellant's liability is limited to the one year contract only. Plaintiff-appellant is, therefore, entitled only to his lost earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of actual damages, representing lost earnings for five years prayed for in the Complaint. Plaintiff-appellant's contention that in computing his lost earnings, the current rate of the Saudi Rial to the Philippine Peso at the time of payment should be used, is untenable, considering that in his Complaint, plaintiff-appellant has quantified in Philippine Peso his lost earnings for five years. We disagree with the respondent court, however, on the date when the legal interest should commence to run. The rule is that the legal interest of six percent (6%) on the amounts adjudged in favor of Lapuz should resume from the time of the rendition of the trial court's decision instead of November 28, 1980, the date of the filing of the complaint.

On this matter, the Court has held: If suit were for payment of a definite sum of money, the contention might be tenable. However, if it is for damages, unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof, interest should be from the date of the decision. 11 xxxx The obligation to pay interest on a sum filed in a judgment exists from the date of the sentence, when so declared; for until the net amount of the debtor's liability has been determined, he cannot he considered delinquent in the fulfillment of his obligation to pay the debt with interest thereon. 12 Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of KAL's counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose responsibility ended with the confirmation by KAL of Lapuz as its passenger in its Flight No. 903. This is still another case of the maltreatment of our overseas contract workers, this time by the airline supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice much in seeking employment abroad, where they are deprived of the company of their loved ones, the direct protection of our laws, and the comfort of our own native culture and way of life. This Court shall exert every effort to vindicate their rights when they are abused and shall accord them the commensurate reparation of their injuries consistent with their dignity and worth as members of the working class. WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on the damages awarded to private respondent should commence from the date of the decision of the trial court on November 14, 1990. The parties shall bear their own costs. SO ORDERED. Davide, Jr., Quiason and Kapunan, JJ., concur. Bellosillo, J., is on official leave.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 145804 February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs.

MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents. DECISION VITUG, J.: The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad. On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously. On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and supervision of its security guards. The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the following: "a) 1) Actual damages of P44,830.00; 2) Compensatory damages of P443,520.00; 3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00; "b) Moral damages of P50,000.00;

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

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR. "III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA."3 Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a common carrier was not overcome. Petitioners would insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act of a stranger that could not have been foreseen or prevented. The LRTA would add that the appellate courts conclusion on the existence of an employer-employee relationship between Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and not of the LRTA. Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier. Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety of passengers.4 The Civil Code, governing the liability of a common carrier for death of or injury to its passengers, provides: "Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. "Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755." "Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the formers employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. "This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees." "Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carriers employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances.5 Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of strangers if the common carriers employees through the exercise of due diligence could have prevented or stopped the act or omission.7 In case of such death or injury, a carrier is presumed to have been at fault or been negligent, 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 LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage. Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 217612 and related provisions, in conjunction with Article 2180,13 of the Civil Code. The premise, however, for the employers liability is negligence or fault on the part of the employee. Once such fault is established, the employer can then be made liable on the basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual matter that has not been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 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 quasidelictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.17 Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not without substantial justification in our own review of the records of the case. There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.18 It is an established rule that nominal damages cannot 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. Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-47822 December 22, 1988 PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO CENDANA, respondents. Vicente D. Millora for petitioner. Jacinto Callanta for private respondent.

FELICIANO, J.: Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates. Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati,

Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo. On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods. In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure. On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees. On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees. The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals: 1. that private respondent was not a common carrier; 2. that the hijacking of respondent's truck was force majeure; and 3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111) We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly characterized as a common carrier. The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberaom making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: ... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. ... (Emphasis supplied) It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent'sprincipal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here. The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of

public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. We turn then to the liability of private respondent as a common carrier. Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character-of the goods or defects in the packing or-in the containers; and (5) Order or act of competent public authority. It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows: In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied) Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of

Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his helper. The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery. As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part: Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: xxx xxx xxx (5) that the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act with grave or irresistible threat, violence or force, is dispensed with or diminished; and (7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of carriage. (Emphasis supplied) Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The

hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery in band. 4 In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control. ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 101503 September 15, 1993 PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA,respondents. Gonzales, Sinense, Jimenez & Associates for petitioner. Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo? Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charterparty starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party which reads: 16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau inspector or substitute appointed by charterers for his account certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences. (emphasis supplied) After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. 5 Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-partly (which provided for an F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7 Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th).10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. 11The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. 12 Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13 Respondent SSA explained that they were not able to respond to the consignee's claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this "request" was denied by them because they "had nothing to do with the discharge of the shipment." 14Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15 . . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from liability is shipted to the carrier, common or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants are liable (emphasis supplied). On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Thus . . . In the absence of such presumption, it was incumbent upon the plaintiffappellee to adduce sufficient evidence to prove the negligence of the defendant

carrier as alleged in its complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that it did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for loss or damage to goods cause by want of due deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that since the possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus probandi on the shipper to show want of due deligence on the part of the carrier, when he was not even at hand to witness what transpired during the entire voyage. As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence required of him under the law. It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it fitting to first define important terms which are relevant to our discussion. A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship. Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a

public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24 Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. 26 On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27 It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 28 Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her

services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the truth as to what has taken place arises . . . In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31 To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima faciepresumption of negligence. The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32 It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34 Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This was confirmed by respondent appellate court thus . . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the following testimonies of plaintiffappellee's own witnesses clearly show absence of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody could open the same except in the presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 36 Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. 38 Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process. The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value. The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it. The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the

ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo. The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse. Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried. WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED. Costs against petitioner. SO ORDERED. Davide, Jr. and Quiason, JJ., concur. Cruz, J., took no part. Grio-Aquino, J., is on leave.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

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

ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents. Modesto S. Bascos for petitioner. Pelaez, Adriano & Gregorio for private respondent. SYLLABUS 1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus: "The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions." 2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption . . . The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her. 3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not

act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held that: "Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." 4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. 5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it. 6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses. 7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. Granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called by the contracting parties. DECISION CAMPOS, JR., J p: This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiffappellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder: "PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs against appellant." 1 The facts, as gathered by this Court, are as follows: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port

Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract which stated that: "1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages to the cargo during transport at market value, . . ." 3 Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the following allegations: "4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of preliminary attachment may lawfully issue, namely: "(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;" 5. That there is no sufficient security for the claim sought to be enforced by the present action; 6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;" The trial court granted the writ of preliminary attachment on February 17, 1987. In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation, an information for robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability to CIPTRADE. After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows: "WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the former: 1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to be counted from December 4, 1986 until fully paid; 2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and 3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED for being moot and academic. SO ORDERED." 6 Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment. Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit: "I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK. II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING. III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7 The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the hijacking referred to a force majeure? The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did business under the name A.M. Bascos Trucking and that said admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier, Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was placed in petitioner's care. In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his testimony his statement that the contract was a lease contract. 10 She also stated that: she was not catering to the general public. Thus, in her answer to the amended complaint, she said that she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to the general public but to a few customers only in view of the fact that it is only a small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier. Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." 12 In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. 13 But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people and because the private respondents, plaintiffs in the lower court, did not object to the presentation of affidavits by petitioner where the transaction was referred to as a lease contract. Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it held thus: "The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions." Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed them as self-serving and petitioner contests the conclusion. We are bound by the appellate court's factual conclusions. Yet, granting that the said evidence were not selfserving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it. 16 Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure. Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption. In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the

provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy; xxx xxx xxx (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or diminished;" In the same case, 21 the Supreme Court also held that: "Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with grave or irresistible threat, violence or force. We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have concluded that these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of objection on the part of private respondent, the respondent Court had discretion in assigning weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for review on certiorari, We are not to determine the probative value of evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the information for carnapping and robbery against the accused named in said affidavits did not necessarily mean that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal cases. The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her. Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered moot and academic by the decision on the merits. In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED. Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 111127 July 26, 1996 MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.

MENDOZA, J.:p This is a petition for review on certiorari of the decision of the Court of Appeals 1 in CA-GR No. 28245, dated September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its resolution which denied petitioners' motion for reconsideration for lack of merit. Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus principally in connection with a bus service for school children which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks, His job was to take school children to and from the St. Scholastica's College in Malate, Manila. On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which private respondent paid petitioners the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, as several members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the minibus. The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Baay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction, which he described as "siete." The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion. Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her from this portion. She was in great pain and could not move. The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with the area and he could not have seen the curve despite the care he took in driving the bus, because it was dark and there was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late. The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latter's fence. On the basis of Escano's affidavit of desistance the case against petitioners Fabre was dismissed. Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the trial she described the operations she underwent and adduced evidence regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Baay, Lingayen. As this hospital was not adequately equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken and the damage to her spine was determined to be too severe to be treated there. She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical Center where she underwent an operation to correct the dislocation of her spine. In its decision dated April 17, 1989, the trial court found that: No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and that the driver was properly screened and tested before being admitted for employment. Indeed, all the evidence presented have shown the negligent act of the defendants which ultimately resulted to the accident subject of this case.

Accordingly, it gave judgment for private respondents holding: Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only ones who adduced evidence in support of their claim for damages, the Court is therefore not in a position to award damages to the other plaintiffs. WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs the following amount: 1) P93,657.11 as compensatory and actual damages; 2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio; 3) P20,000.00 as moral damages; 4) P20,000.00 as exemplary damages; and 5) 25% of the recoverable amount as attorney's fees; 6) Costs of suit. SO ORDERED. The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it with respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of Appeals modified the award of damages as follows: 1) P93,657.11 as actual damages; 2) P600,000.00 as compensatory damages; 3) P50,000.00 as moral damages; 4) P20,000.00 as exemplary damages; 5) P10,000.00 as attorney's fees; and 6) Costs of suit. The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due care and precaution in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following issues: I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY PRIVATE RESPONDENTS. III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT EXTENT. Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is insisted that, on the assumption that petitioners are liable an award of P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees do not have security of tenure, the award of P600,000.00, considering Amyline Antonio's earnings, is without factual basis as there is no assurance that she would be regularly earning these amounts. With the exception of the award of damages, the petition is devoid of merit. First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is "contractual both in origin and nature," nevertheless "the act that breaks the contract may be also a tort." 2 In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent. The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabil's first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony 4that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed. Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervisions of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver's license. The employer should also examine the applicant for his

qualifications, experience and record of service. 5 Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules. 6 In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholastica's College in Metro Manila. 7 They had hired him only after a two-week apprenticeship. They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such as whether he could remember the names of the children he would be taking to school, which were irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of negligence on the part of an employer. 8 Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the congregation's delayed meeting) could have a averted the mishap and (2) under the contract, the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been fixed. Even if it had been, the delay did not bear directly on the cause of the accident. With respect to the second contention, it was held in an early case that: [A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of negligence of the latter or prevented from recovering for injuries suffered from a collision between the automobile and a train, caused by the negligence or the automobile driver. 9 As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. As this Court has held: 10 Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions. As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercise the diligence of a good father of

the family in the selection and supervision of their employee. As Art. 1759 of the Code provides: Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code. Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals erred in increasing the amount of compensatory damages because private respondents did not question this award as inadequate. 11 To the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable considering the contingent nature of her income as a casual employee of a company and as distributor of beauty products and the fact that the possibility that she might be able to work again has not been foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her again. With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence in the records of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad faith. 12 Amyline Antonio's testimony, as well as the testimonies of her father and copassengers, fully establish the physical suffering and mental anguish she endured as a result of the injuries caused by petitioners' negligence. The award of exemplary damages and attorney's fees was also properly made. However, for the same reason that it was error for the appellate court to increase the award of compensatory damages, we hold that it was also error for it to increase the award of moral damages and reduce the award of attorney's fees, inasmuch as private respondents, in whose favor the awards were made, have not appealed. 13 As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those in this case, this Court held the bus company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again, inBachelor Express, Inc. v. Court of Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a

fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable with the bus company to the injured passengers. The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo, 16 Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters' heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasidelict. As early as 1913, we already ruled inGutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the jeepney driver from liability to the injured passengers and their families while holding the owners of the jeepney jointly and severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa contractual. As this Court there explained: The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and Carreon (the jeepney owners) were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with carrier in case of breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). 22 As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out their claim against the carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was permitted for them to allege alternative causes of action and join as many parties as may be liable on such causes of action 23 so long as private respondent and her coplaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus, justifying the holding that the carrier and the driver were jointly and severally liable because their separate and distinct acts concurred to produce the same injury. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the following amounts: 1) P93,657.11 as actual damages; 2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages; 4) P20,000.00 as exemplary damages; 5) 25% of the recoverable amount as attorney's fees; and 6) costs of suit. SO ORDERED. Regalado, Romero, Puno and Torres, Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 125948 December 29, 1998 FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.

MARTINEZ, J.: This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by the City of Batangas. Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 1 and renewed by the Energy Regulatory Board in 1992. 2 Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code 3. The

respondent City Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993. On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads: Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum Act. It is engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 . . . . Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax "on contractors and other independent contractors" under Section 143, Paragraph (e) of the Local Government Code does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local Government Code. The said section limits the imposition of fees and charges on business to such amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition. 4

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code. 5 On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax refund with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7 Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local Government Code as said exemption applies only

to "transportation contractors and persons engaged in the transportation by hire and common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said code pertains to the mode or manner by which a product is delivered to its destination. 8 On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise: . . . Plaintiff is either a contractor or other independent contractor. . . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law. Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff. Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help: 1. That the exemption granted under Sec. 133 (j) encompasses onlycommon carriers so as not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities to a single specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than the previous enactments, to make them economically and financially viable to serve the people and discharge their functions with a concomitant obligation to accept certain devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code. 9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the respondent Court of Appeals for consideration and adjudication. 10On November 29, 1995, the respondent court rendered a decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated. Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law. There is merit in the petition. A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." The test for determining whether a party is a common carrier of goods is: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; 2. He must undertake to carry goods of the kind to which his business is confined; 3. He must undertake to carry by the method by which his business is conducted and over his established roads; and
4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16 we ruled that: The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction between a person or enterprise offering transportation

service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1877 deliberately refrained from making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: every person that now or hereafter may own, operate. manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. (Emphasis Supplied) Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous. As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof provides that: Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have the preferential right to utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources. Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides: that everything relating to the exploration for and exploitation of petroleum . . . and everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be a public utility. (Emphasis Supplied) The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared: . . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended. From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx (j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common

carriers by air, land or water, except as provided in this Code. The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating: MR. AQUINO (A). Thank you, Mr. Speaker. Mr. Speaker, we would like to proceed to page 95, line 1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local Government Units." . . . MR. AQUINO (A.). Thank you Mr. Speaker. Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being deemed to be exempted from the taxing powers of the local government units. May we know the reason why the transportation business is being excluded from the taxing powers of the local government units? MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that local government units may not impose taxes on the business of transportation, except as otherwise provided in this code. Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker. What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier business. Local government units may impose taxes on top of what is already being imposed by the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18

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

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE. SO ORDERED. Bellosillo, Puno and Mendoza, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 131621 September 28, 1999 LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.

DAVIDE, JR., C.J.: Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the following: (a) the 30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4 October 1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing of the compliant until fully paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November 1997, 3 denying LOADSTAR's motion for reconsideration of said decision. The facts are undisputed.
1wphi1. nt

On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the following goods for shipment:

a) 705 bales of lawanit hardwood; b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49 bundles of mouldings R & W (3) Apitong Bolidenized. The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor. On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss the vessel directly to MIC, said amount to be deducted from MIC's claim from LOADSTAR. In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR. As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the court of Appeals, which, however, agreed with the trial court and affirmed its decision in toto. In dismissing LOADSTAR's appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper on that fateful voyage. The court noted that the charter of the vessel was limited to the ship, but LOADSTAR retained control over its crew. 4

2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been seaworthy, it could have withstood the "natural and inevitable action of the sea" on 20 November 1984, when the condition of the sea was moderate. The vessel sank, not because offorce majeure, but because it was not seaworthy. LOADSTAR'S allegation that the sinking was probably due to the "convergence of the winds," as stated by a PAGASA expert, was not duly proven at the trial. The "limited liability" rule, therefore, is not applicable considering that, in this case, there was an actual finding of negligence on the part of the carrier. 5

4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions bind only the shipper/consignee and the carrier. When MIC paid the shipper for the goods insured, it was subrogated to the latter's rights as against the carrier, LOADSTAR. 6

5) There was a clear breach of the contract of carriage when the shipper's goods never reached their destination. LOADSTAR's defense of "diligence of a good father of a family" in the training and selection of its crew is unavailing because this is not a proper or complete defense in culpa contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are delivered on board a ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by reason of some fact which legally exempts him from liability." Transportation of the merchandise at the risk and venture of the shipper means that the latter bears the risk of loss or deterioration of his goods arising from fortuitous events, force majeure, or the inherent nature and defects of the goods, but not those caused by the presumed negligence or fault of the carrier, unless otherwise proved. 7

The errors assigned by LOADSTAR boil down to a determination of the following issues: (1) Is the M/V "Cherokee" a private or a common carrier? (2) Did LOADSTAR observe due and/or ordinary diligence in these premises. Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo." In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was also carrying passengers as part of its regular business. Moreover, the bills of lading in this case made no mention of any charter party but only a statement that the vessel was a "general cargo carrier." Neither was there any "special arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a private carrier. As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving otherwise devolved upon MIC. 8 LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent. With all these precautions, there could be no other conclusion

except that LOADSTAR exercised the diligence of a good father of a family in ensuring the vessel's seaworthiness. LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until the next day when the vessel sank due to strong waves. MCI's witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area of responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa Island. Tapel also testified that the convergence of winds brought about by these two typhoons strengthened wind velocity in the area, naturally producing strong waves and winds, in turn, causing the vessel to list and eventually sink. LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what transpired in this case, is valid. Since the cargo was being shipped at "owner's risk," LOADSTAR was not liable for any loss or damage to the same. Therefore, the Court of Appeals erred in holding that the provisions of the bills of lading apply only to the shipper and the carrier, and not to the insurer of the goods, which conclusion runs counter to the Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10 Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted beyond the period stated in the bills of lading for instituting the same suits based upon claims arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985. MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due toforce majeure, because the same concurred with LOADSTAR's fault or negligence. Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be deemed waived. Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence. We find no merit in this petition. Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled. In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 11 where this Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict policy

governing common carriers is upheld. Such policy has no force where the public at is not involved, as in the case of a ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwoodand Industrial Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of which upheld the Home Insurance doctrine. These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings are different. The records do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers. Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, 15 the Court juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that case, viz.: The Civil Code defines "common carriers" in the following terms: Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as ancillary activity (in local idiom, as "a sideline". Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions. xxx xxx xxx It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or scheduled manner, and eventhough private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code." 16 Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this case. The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent. 17 LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the performance of its duties, LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo. LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter disregard of this Court's pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., 18 andNational Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these two cases that after paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR involved a limitation on the carrier's liability to an amount fixed in the bill of lading which the parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces the common carrier's liability for the loss or destruction of the goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to shipments made at "owner's

risk." Such stipulation is obviously null and void for being contrary to public policy." 20 It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of. freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable. 21

Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter has against the common carrier, LOADSTAR. Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the goods. 22 In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void; 23 it must, accordingly, be struck down. WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.
1wphi1. nt

SO ORDERED. Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 148496 March 19, 2002

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent. MENDOZA, J.:

This is a petition for review of the decision,1 dated May 31, 2001, of the Court of Appeals, affirming the decision2 of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by petitioner, 25% thereof as attorney's fees, and the cost of the suit.
1wphi1.nt

The facts are as follows: Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc. On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00. SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the damage to the shipment. The trial court held: It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries appearing therein, classified as "TED" and "TSN", which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the fact of the damaged condition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular, which provides among others that: " . . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably whilst in the custody of the broker . . . ." is a finding which cannot be traversed and overturned. The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not liable. Defendant by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she] performed to prevent [the] said incident,

hence the presumption is that the moment the defendant accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo. .... Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they have observed the extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has exercised the extraordinary diligence required by law. Thus, it has been held that the mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability." (cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.) Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received by the carrier for transportation until the same are delivered actually or constructively by the carrier to the consignee or to the person who has the right to receive the same.3 Accordingly, the trial court ordered petitioner to pay the following amounts -1. The sum of P93,112.00 plus interest; 2. 25% thereof as lawyer's fee; 3. Costs of suit.4 The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari. Petitioner contends that: I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE. II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.5 It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common carrier, although both the trial court and the Court of Appeals held otherwise, then she

is indeed not liable beyond what ordinary diligence in the vigilance over the goods transported by her, would require.6 Consequently, any damage to the cargo she agrees to transport cannot be presumed to have been due to her fault or negligence. Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a common carrier but a private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to select parties with whom she may contract in the conduct of her business. The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a similar contention and held the party to be a common carrier, thus The Civil Code defines "common carriers" in the following terms: "Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public." The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrowsegment of the general population. We think that Article 1732 deliberately refrained from making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: " x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. x x x" 8 There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law affords them

notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's business. Now, as to petitioner's liability, Art. 1733 of the Civil Code provides: Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. . . . In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary diligence in the vigilance over goods" was explained thus: The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires." In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or wettage" took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru," which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit: MAXU-2062880 ICSU-363461-3 PERU-204209-4 TOLU-213674-3 MAXU-201406-0 ICSU-412105-0 loosened.10 rain gutter deformed/cracked left side rubber gasket on door distorted/partly loose with pinholes on roof panel right portion wood flooring we[t] and/or with signs of water soaked with dent/crack on roof panel rubber gasket on left side/door panel partly detached

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal knowledge on whether the container vans were first stored in petitioner's warehouse prior to their delivery to the consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMC's warehouse in Ermita, Manila, which is a mere thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the cargo could not have taken place while these were in her custody.11

Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report (EIR) and, when petitioner's employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with regard to the condition of container vans or their contents. The Survey Report pertinently reads -Details of Discharge: Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30' x 20' secure metal vans, covered by clean EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were deemed to have [been] received in good condition. .... Transfer/Delivery: On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn] by Transorient Container Services, Inc. . . . without exception. [The cargo] was finally delivered to the consignee's storage warehouse located at Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.12 As found by the Court of Appeals: From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange Reports (EIRs). Had there been any damage to the shipment, there would have been a report to that effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from the arrastre still in good order and condition as the same were received by the former without exception, that is, without any report of damage or loss. Surely, if the container vans were deformed, cracked, distorted or dented, the defendant-appellant would report it immediately to the consignee or make an exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To put it simply, the defendantappellant received the shipment in good order and condition and delivered the same to the consignee damaged. We can only conclude that the damages to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the presumption of negligence attached to a common carrier in case of loss or damage to the goods.13 Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used "all

reasonable means to ascertain the nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]." Petitioner failed to do this. Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides -Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: .... (4) The character of the goods or defects in the packing or in the containers. .... For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom.14 In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art. 173515 holds. WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED. SO ORDERED. Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.
1wphi1. nt

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 147246 August 19, 2003

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents. PUNO, J.: On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No. 49195 and February 21, 2001 Resolution2 affirming with modification the April 6, 1994 Decision3 of the

Regional Trial Court of Manila which found petitioner liable to pay private respondent the amount of indemnity and attorney's fees. First, the facts. On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.354 was shipped by Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.5 The shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.6 On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City. On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage Receipt No. 03647 for delivery to consignee. The cargo did not reach its destination. It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges which arrived ahead of it while weathering out the storm that night. A few days after, the barge developed a list because of a hole it sustained after hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990.8 It likewise secured the services of Gaspar Salvaging Corporation which refloated the barge.9 The hole was then patched with clay and cement. The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the complete sinking of the barge, a portion of the goods was transferred to three other barges.10 The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining cargo.11 A second Marine Protest was filed on September 7, 1990.12 On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on the three other barges.13 The total proceeds from the sale of the salvaged cargo was P201,379.75.14 On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another letter dated September 18, 1990 to the private respondent for the value of the lost cargo. On January 30, 1991, the private respondent indemnified the consignee in the amount of P4,104,654.22. 15 Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of indemnity, attorney's fees and cost of suit.16 Petitioner filed its answer with counterclaim.17 The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its Decision states: WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fully satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant.18 Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate court affirmed the decision of the trial court with modification. The dispositive portion of its decision reads: WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense that the salvage value of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs against appellant. SO ORDERED. Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate court in a Resolution promulgated on February 21, 2001. Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:19 (1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER. (2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, "THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED." (3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEE'S CARGO. The issues to be resolved are: (1) Whether the petitioner is a common carrier; and,

(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and custody of the consignee's cargo. On the first issue, we rule that petitioner is a common carrier. Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public.20 We disagree. In De Guzman vs. Court of Appeals,21 we held that the definition of common carriers in Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We also did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population. In the case at bar, the principal business of the petitioner is that of lighterage and 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 Cendaa 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 q xxx xxx

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

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 q a q Yes, sir. So, more or less, you had the knowledge of the incoming typhoon, right? Yes, sir. 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. 147079

December 21, 2004

A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION, respondents.

DECISION

CARPIO MORALES, J.:

Before this Court on a petition for Certiorari is the appellate courts Decision1 of August 10, 2000 reversing and setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez Brokerage). On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc.2 The Femenal tablets were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were packed together in one (1) LD3 aluminum container, while the Trinordial tablets were packed in two pallets, each of which contained 30 cartons.3 Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy No. 138.4 Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),5 it was discharged "without exception"6 and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.7 In order to secure the release of the cargoes from the PSI and the Bureau of Customs, WyethSuaco engaged the services of Sanchez Brokerage which had been its licensed broker since 1984.8 As its customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.9 On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,10 was issued. On the receipt, another representative of Sanchez Brokerage, M. Sison,11 acknowledged that he received the cargoes consisting ofthree pieces in good condition.12 Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes13 which were thereupon stripped from the aluminum containers14 and loaded inside two transport vehicles hired by Sanchez Brokerage.15 Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and Tony Akas,16 employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU Insurance. Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for quality control check.17 The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery consisted of one container with 144 cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.18 On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes by affixing his signature on the delivery receipt.19 Upon inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order.20 He thus placed a note above his signature on the

delivery receipt stating that 44 cartons of oral contraceptives were in bad order. The remaining 160 cartons of oral contraceptives were accepted as complete and in good order. Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report21 dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were "wetted" (sic).22 The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 attached to which was an "Annexed Schedule" whereon it was indicated that prior to the loading of the cargoes to the brokers trucks at the NAIA, they were inspected and found to be in "apparent good condition."24 Also noted was that at the time of delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account for the wetting of the 44 cartons of Femenal and Nordiol tablets.25 On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report26 confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily damaged with water and emitted foul smell. On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection27 of 38 cartons of Femenal and 3 cartons of Nordiol on the ground that they were "delivered to Hizon Laboratories with heavy water damaged (sic) causing the cartons to sagged (sic) emitting a foul order and easily attracted flies."28 Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez Brokerage the payment of P191,384.25 representing the value of its loss arising from the damaged tablets. As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU Insurance which paid Wyeth-Suaco the amount ofP181,431.49 in settlement of its claim under Marine Risk Note Number 4995. Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance. On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by letter31 of January 7, 1993, disclaimed liability for the damaged goods, positing that the damage was due to improper and insufficient export packaging; that when the sealed containers were opened outside the PSI warehouse, it was discovered that some of the loose cartons were wet,32 prompting its (Sanchez Brokerages) representative Morales to inform the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter advised to still deliver them to Hizon Laboratories where an adjuster would assess the damage.33 Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati City against the Sanchez Brokerage. The trial court, by Decision34 of July 29, 1996, dismissed the complaint, holding that the Survey Report prepared by the Elite Surveyors is bereft of any evidentiary support and a mere product of pure guesswork.35 On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez Brokerage engaged not only in the business of customs brokerage but also in the

transportation and delivery of the cargo of its clients, hence, a common carrier within the context of Article 1732 of the New Civil Code.36 Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order and condition but were in a damaged state when delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed negligent and upon it rested the burden of proving that it exercised extraordinary negligence not only in instances when negligence is directly proven but also in those cases when the cause of the damage is not known or unknown.37 The appellate court thus disposed: IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered in favor of the Appellant and against the Appellee as follows: 1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181, 431.49, with interest thereupon at the rate of 6% per annum, from the date of the Decision of the Court, until the said amount is paid in full; 2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as and by way of attorneys fees; and 3. The counterclaims of the Appellee are DISMISSED. 38 Sanchez Brokerages Motion for Reconsideration having been denied by the appellate courts Resolution of December 8, 2000 which was received by petitioner on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6, 2001. In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount to abuse of discretion when it found petitioner a "common carrier" within the context of Article 1732 of the New Civil Code. Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner should have taken was to file a petition for review on certiorari since the sole office of a writ of certiorari is the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction and does not include correction of the appellate courts evaluation of the evidence and factual findings thereon. On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to overcome the presumption of negligence, it being documented that petitioner withdrew from the warehouse of PSI the subject shipment entirely in good order and condition.39 The petition fails. Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case.40

The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration of its Decision of August 10, 2000 was received by petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on or before January 20, 2001, the appellate courts decision had become final and executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of appeal. In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not merely reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial court based on its finding that petitioner is liable for the damage to the cargo as a common carrier. What petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the subject of an ordinary appeal. Where the issue or question involves or affects the wisdom or legal soundness of the decision not the jurisdiction of the court to render said decision the same is beyond the province of a petition for certiorari.41 The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in order to review the judgment of lower courts as to its intrinsic correctness, either upon the law or the facts of the case.42 Procedural technicalities aside, the petition still fails. The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit: Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the services the firm offers include the delivery of goods to the warehouse of the consignee or importer. ATTY. FLORES: Q: What are the functions of these license brokers, license customs broker? WITNESS: As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the importer, we prepare the entry together for processing and claims from customs and finally deliver the goods to the warehouse of the importer.43 Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity.44The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as

required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration. In this light, petitioner as a common carrier is mandated to observe, under Article 173345 of the Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence.46 The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of Appeals:47 The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."48 In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and condition;49 and that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order, as noted in the Delivery Receipt50 issued by petitioner, and as indicated in the Survey Report of Elite Surveyors51 and the Destruction Report of Hizon Laboratories, Inc.52 In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were damaged due to the fault or negligence of the shipper for failing to properly pack them and to the inherent characteristics of the goods53; and that it should not be faulted for following the instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter that some of the cartons, on examination outside the PSI warehouse, were found to be wet.54 While paragraph No. 4 of Article 173455 of the Civil Code exempts a common carrier from liability if the loss or damage is due to the character of the goods or defects in the packing or in the containers, the rule is that if the improper packing is known to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for the resulting damage. 56 If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it should naturally have received the cargo under protest or with reservations duly noted on the receipt issued by PSI. But it made no such protest or reservation.57 Moreover, as observed by the appellate court, if indeed petitioners employees only examined the cargoes outside the PSI warehouse and found some to be wet, they would certainly have gone back to PSI, showed to the warehouseman the damage, and demanded then and there for Bad Order documents or a certification confirming the damage.58 Or, petitioner would have presented, as witness, the employees of the PSI from whom Morales and Domingo took

delivery of the cargo to prove that, indeed, part of the cargoes was already damaged when the container was allegedly opened outside the warehouse.59 Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it asserts that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse but such notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon Laboratories, Inc. While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he failed to specifically declare what time he received the call. As to whether the call was made at the PSI warehouse when the shipment was stripped from the airport containers, or when the cargoes were already in transit to Antipolo, it is not determinable. Aside from that phone call, petitioner admitted that it had no documentary evidence to prove that at the time it received the cargoes, a part of it was wet, damaged or in bad condition.60 The 4-page weather data furnished by PAGASA61 on request of Sanchez Brokerage hardly impresses, no witness having identified it and interpreted the technical terms thereof. The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were damaged by rainwater while in transit to Antipolo City is more likely then. Sanchez himself testified that in the past, there was a similar instance when the shipment of Wyeth-Suaco was also found to be wet by rain. ATTY. FLORES: Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA were damaged and claimed by the Wyeth-Suaco without any question? WITNESS: A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but WyethSuaco did not claim anything against us. ATTY. FLORES: Q: HOW IS IT? WITNESS: A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic) up to the bottom are wet specially during rainy season.62 Since petitioner received all the cargoes in good order and condition at the time they were turned over by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on petitioner to prove that it exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence, its presumed negligence under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED. Costs against petitioner. SO ORDERED.

THIRD DIVISION [G.R. No. 150255, April 22, 2005] SCHMITZ TRANSPORT & BROKERAGE CORPORATION, PETITIONER, VS. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE COMPANY, LTD., AND BLACK SEA SHIPPING AND DODWELL NOW INCHCAPE SHIPPING SERVICES, RESPONDENTS. DECISION
CARPIO-MORALES, J.: On petition for review is the June 27, 2001 Decision[1] of the Court of Appeals, as well as its Resolution[2] dated September 28, 2001 denying the motion for reconsideration, which affirmed that of Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-63132[3] holding petitioner Schmitz Transport Brokerage Corporation (Schmitz Transport), together with Black Sea Shipping Corporation (Black Sea), represented by its ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the loss of 37 hot rolled steel sheets in coil that were washed overboard a barge. On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V Alexander Saveliev (a vessel of Russian registry and owned by Black Sea) 545 hot rolled steel sheets in coil weighing 6,992,450 metric tons. The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel Pipe Corporation (Little Giant),[4] were insured against all risks with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747-TIS.[5] The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila South Harbor.[6] Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive the cargoes from the shipside, and to deliver them to its (the consignees) warehouse at Cainta, Rizal,[7] in turn engaged the services of TVI to send a barge and tugboat at shipside. On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge Erika V to shipside.[8] By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left and returned to the port terminal.[9] At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the barge. By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an

approaching storm, the unloading unto the barge of the 37 coils was accomplished.[10] No tugboat pulled the barge back to the pier, however. At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the barge abandoned it and transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally arrived to pull the already empty and damaged barge back to the pier.[13] Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost cargoes proved futile.[14] Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of P5,246,113.11. Little Giant thereupon executed a subrogation receipt[15]in favor of Industrial Insurance. Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the amount it paid to Little Giant plus adjustment fees, attorneys fees, and litigation expenses.[16] Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while typhoon signal No. 1 was raised in Metro Manila.[17] By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for unloading the cargoes outside of the breakwater notwithstanding the storm signal.[18] The dispositive portion of the decision reads: WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 with interest from the date the complaint was filed until fully satisfied, as well as the sum of P5,000.00 representing the adjustment fee plus the sum of 20% of the amount recoverable from the defendants as attorneys fees plus the costs of suit. The counterclaims and cross claims of defendants are hereby DISMISSED for lack of [m]erit.[19] To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint motion for reconsideration assailing the finding that they are common carriers and the award of excessive attorneys fees of more than P1,000,000. And they argued that they were not motivated by gross or evident bad faith and that the incident was caused by a fortuitous event. [20] By resolution of February 4, 1998, the trial court denied the motion for reconsideration.
[21]

All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in toto the decision of the trial court, [22] it finding that all the defendants were common carriers Black Sea and TVI for engaging in the transport of goods and cargoes over the seas as a regular business and not as an isolated transaction,[23] and Schmitz Transport for entering into a contract with Little Giant to transport the cargoes from ship to port for a fee.[24] In holding all the defendants solidarily liable, the appellate court ruled that each one was essential such that without each others contributory negligence the incident would not have happened and so much so that the person principally liable cannot be distinguished with sufficient accuracy.[25] In discrediting the defense of fortuitous event, the appellate court held that although defendants obviously had nothing to do with the force of nature, they however had control of where to anchor the vessel, where discharge will take place and even when the discharging will commence.[26] The defendants respective motions for reconsideration having been denied by Resolution[27] of September

28, 2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present petition against TVI, Industrial Insurance and Black Sea. Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal, consignee Little Giant, hence, the transportation contract was by and between Little Giant and TVI.[28] By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were required to file their respective Comments.[29] By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner in good order, hence, it cannot be faulted, it having had no control and supervision thereover.[30] For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and transferred them unto the barge upon the instruction of petitioner.[31] In issue then are: (1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence on the part of petitioner Black Sea and TVI, and (2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI. When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all liability arising therefrom: ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor.[32] [T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God.[33] The appellate court, in affirming the finding of the trial court that human intervention in the form of contributory negligence by all the defendants resulted to the loss of the cargoes,[34] held that unloading outside the breakwater, instead of inside the breakwater, while a storm signal was up constitutes negligence.[35] It thus concluded that the proximate cause of the loss was Black Seas negligence in deciding to unload the cargoes at an unsafe place and while a typhoon was approaching.[36] From a review of the records of the case, there is no indication that there was greater risk in loading the cargoes outside the breakwater. As the defendants proffered, the weather on October 26, 1991 remained normal with moderate sea condition such that port operations continued and proceeded normally.[37] The weather data report,[38] furnished and verified by the Chief of the Climate Data Section of PAG-ASA and marked as a common exhibit of the parties, states that while typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October

26, 1991 was moderate. It cannot, therefore, be said that the defendants were negligent in not unloading the cargoes upon the barge on October 26, 1991 inside the breakwater. That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in the morning[39] is, however, a material fact which the appellate court failed to properly consider and appreciate[40] the proximate cause of the loss of the cargoes. Had the barge been towed back promptly to the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the barge was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes.[41] The loss thus falls outside the act of God doctrine. The proximate cause of the loss having been determined, who among the parties is/are responsible therefor? Contrary to petitioners insistence, this Court, as did the appellate court, finds that petitioner is a common carrier. For it undertook to transport the cargoes from the shipside of M/V Alexander Saveliev to the consignees warehouse at Cainta, Rizal. As the appellate court put it, as long as a person or corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered a common carrier regardless if [it] owns the vehicle to be used or has to hire one.[42] That petitioner is a common carrier, the testimony of its own Vice-President and General Manager Noel Aro that part of the services it offers to its clients as a brokerage firm includes the transportation of cargoes reflects so. Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and General Manager of said Company? Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the company. I also handle the various division heads of the company for operation matters, and all other related functions that the President may assign to me from time to time, Sir. Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the Honorable Court if you came to know the company by the name Little Giant Steel Pipe Corporation? A: Yes, Sir. Actually, we are the brokerage firm of that Company. Q: And since when have you been the brokerage firm of that company, if you can recall? A: Since 1990, Sir. Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you perform in behalf of this company? A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-charged of the delivery of the goods to their warehouses. We also handled the clearances of their shipment at the Bureau of Customs, Sir. xxx Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with regards to this shipment? What work did you do with this shipment? A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the] cargo[es] from lighter to BASECO then to the truck and to the warehouse, Sir. Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to perform, what equipment do (sic) you require or did you use in order to effect this unloading, transfer and delivery to the warehouse? A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter, and on

this we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also, in BASECO compound we are leasing cranes to have the cargo unloaded from the barge to trucks, [and] then we used trucks to deliver [the cargoes] to the consignees warehouse, Sir. Q: And whose trucks do you use from BASECO compound to the consignees warehouse? A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir. xxx ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract for the barges of Transport Ventures Incorporated in this particular operation? A: Firstly, we dont own any barges. That is why we hired the services of another firm whom we know [al]ready for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied)[43] It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44] held: The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit, Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. xxx Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.[45] And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods is an integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of petitioners business.[47] As for petitioners argument that being the agent of Little Giant, any negligence it committed was deemed the negligence of its principal, it does not persuade. True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the transportation of the cargoes from the shipside and into Little Giants warehouse, however, petitioner was discharging its own personal obligation under a contact of carriage. Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler[48] to provide the barge and the tugboat. In their Service Contract,[49]while Little Giant was named as the consignee, petitioner did not disclose that it was acting on commission and was chartering the vessel for Little Giant. [50] Little Giant did not thus automatically become a party to the Service Contract and was not, therefore, bound by the terms and conditions therein. Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can maintain a cause of action for negligence.[51] In the case of TVI, while it acted as a private carrier for which it was under no duty to observe extraordinary diligence, it was still required to observe ordinary diligence to ensure the proper and careful handling, care

and discharge of the carried goods. Thus, Articles 1170 and 1173 of the Civil Code provide: ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. Was the reasonable care and caution which an ordinarily prudent person would have used in the same situation exercised by TVI?[52] This Court holds not. TVIs failure to promptly provide a tugboat did not only increase the risk that might have been reasonably anticipated during the shipside operation, but was theproximate cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge floating for a considerable number of hours, at such a precarious time, and in the open sea, knowing that the barge does not have any power of its own and is totally defenseless from the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a tugboat would be charging overtime pay did not excuse TVI from calling for one such tugboat. As for petitioner, for it to be relieved of liability, it should, following Article 1739[53] of the Civil Code, prove that it exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of the storm in order that it may be exempted from liability for the loss of the goods. While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-check the operations of TVI, it failed to take all available and reasonable precautions to avoid the loss. After noting that TVI failed to arrange for the prompt towage of the barge despite the deteriorating sea conditions, it should have summoned the same or another tugboat to extend help, but it did not. This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of the cargoes. The following pronouncement of the Supreme Court is instructive: The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage. Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 and related provisions, in conjunction with Article 2180 of the Civil Code. x x x[O]ne might ask further, how then must the liability of the common carrier, on one hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract

existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.[57] As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or unconditionally placed in its possession and received for transportation until they were delivered actually or constructively to consignee Little Giant.[58] Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be made to the port of dischargeor so near thereto as she may safely get, always afloat.[59] The delivery of the goods to the consignee was not from pier to pier but from the shipside of M/V Alexander Saveliev and into barges, for which reason the consignee contracted the services of petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant, through petitioner, it had discharged its duty.[60] In fine, no liability may thus attach to Black Sea. Respecting the award of attorneys fees in an amount over P1,000,000.00 to Industrial Insurance, for lack of factual and legal basis, this Court sets it aside. While Industrial Insurance was compelled to litigate its rights, such fact by itself does not justify the award of attorneys fees under Article 2208 of the Civil Code. For no sufficient showing of bad faith would be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause.[61] To award attorneys fees to a party just because the judgment is rendered in its favor would be tantamount to imposing a premium on ones right to litigate or seek judicial redress of legitimate grievances.[62] On the award of adjustment fees: The adjustment fees and expense of divers were incurred by Industrial Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo. They do not constitute actual damages.[63] As for the court a quos award of interest on the amount claimed, the same calls for modification following the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals[64]that when the demand cannot be reasonably established at the time the demand is made, the interest shall begin to run not from the time the claim is made judicially or extrajudicially but from the date the judgment of the court is made (at which the time the quantification of damages may be deemed to have been reasonably ascertained).[65] WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage Corporation, and Transport Venture Incorporation jointly and severally liable for the amount of P5,246,113.11 with the MODIFICATION that interest at SIX PERCENT per annum of the amount due should be computed from the promulgation on November 24, 1997 of the decision of the trial court. Costs against petitioner. SO ORDERED.

SECOND DIVISION [G.R. No. 161833, July 08, 2005] PHILIPPINE CHARTER INSURANCE CORPORATION, PETITIONER, VS. UNKNOWN OWNER

OF THE VESSEL M/V NATIONAL HONOR, NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES AND INTERNATIONAL CONTAINER SERVICES, INC., RESPONDENTS. DECISION
CALLEJO, SR., J.: This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the Decision[1] dated January 19, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 57357 which affirmed the Decision dated February 17, 1997 of the Regional Trial Court (RTC) of Manila, Branch 37, in Civil Case No. 95-73338. The Antecedent On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and accessories in the port of Pusan, Korea, on board the vessel M/V National Honor, represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The shipment was for delivery to Manila, Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of Lading No. SH9410306[2] in the name of the shipper consigned to the order of Metropolitan Bank and Trust Company with arrival notice in Manila to ultimate consignee Blue Mono International Company, Incorporated (BMICI), Binondo, Manila. NSCP, for its part, issued Bill of Lading No. NSGPBSML512565[3] in the name of the freight forwarder, as shipper, consigned to the order of Stamm International Inc., Makati, Philippines. It is provided therein that: 12. This Bill of Lading shall be prima facie evidence of the receipt of the Carrier in apparent good order and condition except as, otherwise, noted of the total number of Containers or other packages or units enumerated overleaf. Proof to the contrary shall be admissible when this Bill of Lading has been transferred to a third party acting in good faith. No representation is made by the Carrier as to the weight, contents, measure, quantity, quality, description, condition, marks, numbers, or value of the Goods and the Carrier shall be under no responsibility whatsoever in respect of such description or particulars. 13. The shipper, whether principal or agent, represents and warrants that the goods are properly described, marked, secured, and packed and may be handled in ordinary course without damage to the goods, ship, or property or persons and guarantees the correctness of the particulars, weight or each piece or package and description of the goods and agrees to ascertain and to disclose in writing on shipment, any condition, nature, quality, ingredient or characteristic that may cause damage, injury or detriment to the goods, other property, the ship or to persons, and for the failure to do so the shipper agrees to be liable for and fully indemnify the carrier and hold it harmless in respect of any injury or death of any person and loss or damage to cargo or property. The carrier shall be responsible as to the correctness of any such mark, descriptions or representations.[4] The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate No. 2, complete and in good order condition, covered by Commercial Invoice No. YJ-73564 DTD[5] and a Packing List.[6] There were no markings on the outer portion of the crates except the name of the consignee.[7] Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. It contained the following articles: one (1) unit Lathe Machine complete with parts and accessories; one (1) unit Surface Grinder complete with parts and accessories; and one (1) unit Milling Machine complete with parts and accessories. On the flooring of the wooden crates were three wooden battens placed side by side to support the weight of the cargo. Crate No. 2, on the other hand, measured 10 cubic meters and weighed 2,060 kgs. The Lathe Machine was stuffed in the crate. The shipment had a total invoice value of US$90,000.00 C&F Manila.[8] It was

insured for P2,547,270.00 with the Philippine Charter Insurance Corporation (PCIC) thru its general agent, Family Insurance and Investment Corporation,[9] under Marine Risk Note No. 68043 dated October 24, 1994.[10] The M/V National Honor arrived at the Manila International Container Terminal (MICT) on November 14, 1995. The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the contents of the crate.[11] The following day, the vessel started discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winchman from the ICTSI,[12] the exclusive arrastre operator of MICT. Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the cargo.[13] They inspected the hatches, checked the cargo and found it in apparent good condition.[14] Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1.[15] No sling cable was fastened on the mid-portion of the crate. In Dauzs experience, this was a normal procedure.[16] As the crate was being hoisted from the vessels hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessels twin deck, sending all its contents crashing down hard,[17] resulting in extensive damage to the shipment. BMICIs customs broker, JRM Incorporated, took delivery of the cargo in such damaged condition.[18] Upon receipt of the damaged shipment, BMICI found that the same could no longer be used for the intended purpose. The Mariners Adjustment Corporation hired by PCIC conducted a survey and declared that the packing of the shipment was considered insufficient. It ruled out the possibility of taxes due to insufficiency of packing. It opined that three to four pieces of cable or wire rope slings, held in all equal setting, never by-passing the center of the crate, should have been used, considering that the crate contained heavy machinery.[19] BMICI subsequently filed separate claims against the NSCP,[20] the ICTSI,[21] and its insurer, the PCIC,[22] for US$61,500.00. When the other companies denied liability, PCIC paid the claim and was issued a Subrogation Receipt[23] for P1,740,634.50. On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a Complaint for Damages[24] against the Unknown owner of the vessel M/V National Honor, NSCP and ICTSI, as defendants. PCIC alleged that the loss was due to the fault and negligence of the defendants. It prayed, among others WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered ordering defendants to pay plaintiff, jointly or in the alternative, the following: 1.Actual damages in the amount of P1,740,634.50 plus legal interest at the time of the filing of this complaint until fully paid; 2.Attorneys fees in the amount of P100,000.00; 3.Cost of suit.[25] ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-defendant NSCP, claiming that the loss/damage of the shipment was caused exclusively by the defective material of the wooden battens of the shipment, insufficient packing or acts of the shipper. At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified that the wooden battens placed on the wooden flooring of the crate was of good material but was not strong enough to support the weight of

the machines inside the crate. He averred that most stevedores did not know how to read and write; hence, he placed the sling cables only on those portions of the crate where the arrow signs were placed, as in the case of fragile cargo. He said that unless otherwise indicated by arrow signs, the ICTSI used only two cable slings on each side of the crate and would not place a sling cable in the mid-section.[26] He declared that the crate fell from the cranes because the wooden batten in the mid-portion was broken as it was being lifted.[27] He concluded that the loss/damage was caused by the failure of the shipper or its packer to place wooden battens of strong materials under the flooring of the crate, and to place a sign in its mid-term section where the sling cables would be placed. The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the damage to the cargo could be attributed to insufficient packing and unbalanced weight distribution of the cargo inside the crate as evidenced by the types and shapes of items found.[28] The trial court rendered judgment for PCIC and ordered the complaint dismissed, thus: WHEREFORE, the complaint of the plaintiff, and the respective counterclaims of the two defendants are dismissed, with costs against the plaintiff. SO ORDERED.[29] According to the trial court, the loss of the shipment contained in Crate No. 1 was due to the internal defect and weakness of the materials used in the fabrication of the crates. The middle wooden batten had a hole (bukong-bukong). The trial court rejected the certification[30] of the shipper, stating that the shipment was properly packed and secured, as mere hearsay and devoid of any evidentiary weight, the affiant not having testified. Not satisfied, PCIC appealed[31] to the CA which rendered judgment on January 19, 2004 affirming in toto the appealed decision, with this fallo WHEREFORE, the decision of the Regional Trial Court of Manila, Branch 35, dated February 17, 1997, is AFFIRMED. SO ORDERED.[32] The appellate court held, inter alia, that it was bound by the finding of facts of the RTC, especially so where the evidence in support thereof is more than substantial. It ratiocinated that the loss of the shipment was due to an excepted cause [t]he character of the goods or defects in the packing or in the containers and the failure of the shipper to indicate signs to notify the stevedores that extra care should be employed in handling the shipment.[33] It blamed the shipper for its failure to use materials of stronger quality to support the heavy machines and to indicate an arrow in the middle portion of the cargo where additional slings should be attached.[34] The CA concluded that common carriers are not absolute insurers against all risks in the transport of the goods.[35] Hence, this petition by the PCIC, where it alleges that: I. The court of appeals committed serious error of law in not holding that respondent common carrier is liable for the damage sustained by the shipment in the possession of the arrastre operator. II. The court of appeals committed serious error of law in not applying the statutory presumption of fault and negligence in the case at bar. III.

the court of appeals grossly miscomprehended the facts in finding that the damage sustained by the [shipment] was due to its defective packing and not to the fault and negligence of the respondents.[36] The petitioner asserts that the mere proof of receipt of the shipment by the common carrier (to the carrier) in good order, and their arrival at the place of destination in bad order makes out a prima facie case against it; in such case, it is liable for the loss or damage to the cargo absent satisfactory explanation given by the carrier as to the exercise of extraordinary diligence. The petitioner avers that the shipment was sufficiently packed in wooden boxes, as shown by the fact that it was accepted on board the vessel and arrived in Manila safely. It emphasizes that the respondents did not contest the contents of the bill of lading, and that the respondents knew that the manner and condition of the packing of the cargo was normal and barren of defects. It maintains that it behooved the respondent ICTSI to place three to four cables or wire slings in equal settings, including the center portion of the crate to prevent damage to the cargo: [A] simple look at the manifesto of the cargo and the bill of lading would have alerted respondents of the nature of the cargo consisting of thick and heavy machinery. Extra-care should have been made and extended in the discharge of the subject shipment. Had the respondent only bothered to check the list of its contents, they would have been nervous enough to place additional slings and cables to support those massive machines, which were composed almost entirely of thick steel, clearly intended for heavy industries. As indicated in the list, the boxes contained one lat[h]e machine, one milling machine and one grinding machine-all coming with complete parts and accessories. Yet, not one among the respondents were cautious enough. Here lies the utter failure of the respondents to observed extraordinary diligence in the handling of the cargo in their custody and possession, which the Court of Appeals should have readily observed in its appreciation of the pertinent facts.[37] The petitioner posits that the loss/damage was caused by the mishandling of the shipment by therein respondent ICTSI, the arrastre operator, and not by its negligence. The petitioner insists that the respondents did not observe extraordinary diligence in the care of the goods. It argues that in the performance of its obligations, the respondent ICTSI should observe the same degree of diligence as that required of a common carrier under the New Civil Code of the Philippines. Citing Eastern Shipping Lines, Inc. v. Court of Appeals,[38] it posits that respondents are liable in solidum to it, inasmuch as both are charged with the obligation to deliver the goods in good condition to its consignee, BMICI. Respondent NSCP counters that if ever respondent ICTSI is adjudged liable, it is not solidarily liable with it. It further avers that the carrier cannot discharge directly to the consignee because cargo discharging is the monopoly of the arrastre. Liability, therefore, falls solely upon the shoulder of respondent ICTSI, inasmuch as the discharging of cargoes from the vessel was its exclusive responsibility. Besides, the petitioner is raising questions of facts, improper in a petition for review oncertiorari.[39] Respondent ICTSI avers that the issues raised are factual, hence, improper under Rule 45 of the Rules of Court. It claims that it is merely a depository and not a common carrier; hence, it is not obliged to exercise extraordinary diligence. It reiterates that the loss/damage was caused by the failure of the shipper or his packer to place a sign on the sides and middle portion of the crate that extra care should be employed in handling the shipment, and that the middle wooden batten on the flooring of the crate had a hole. The respondent asserts that the testimony of Anthony Abarquez, who conducted his investigation at the site of the incident, should prevail over that of Rolando Balatbat. As an alternative, it argues that if ever adjudged liable, its liability is limited only to P3,500.00 as expressed in the liability clause of Gate Pass CFS-BR-GP No. 319773. The petition has no merit.

The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this Court in a petition for review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the Court of Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.[40] We have reviewed the records and find no justification to warrant the application of any exception to the general rule. We agree with the contention of the petitioner that common carriers, from the nature of their business and for reasons of public policy, are mandated 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. [41] The Court has defined extraordinary diligence in the vigilance over the goods as follows: The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.[42] The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them.[43] When the goods shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable.[44] 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.[45] However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following causes: 1. 2. 3. 4. 5. Flood, storm, earthquake, lightning or other natural disaster or calamity; Act of the public enemy in war, whether international or civil; Act or omission of the shipper or owner of the goods; The character of the goods or defects in the packing or in the containers; Order or act of competent public authority.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the loss or damage to the cargo is a closed list.[46] To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the aforecited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent.[47] Defect is the want or absence of something necessary for completeness or perfection; a lack or absence of something essential to completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be used.[48] On the other hand, inferior means of poor quality, mediocre, or second

rate.[49] A thing may be of inferior quality but not necessarily defective. In other words, defectiveness is not synonymous with inferiority. In the present case, the trial court declared that based on the record, the loss of the shipment was caused by the negligence of the petitioner as the shipper: The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and the total destruction of its contents were not imputable to any fault or negligence on the part of said defendant in handling the unloading of the cargoes from the carrying vessel, but was due solely to the inherent defect and weakness of the materials used in the fabrication of said crate. The crate should have three solid and strong wooden batten placed side by side underneath or on the flooring of the crate to support the weight of its contents. However, in the case of the crate in dispute, although there were three wooden battens placed side by side on its flooring, the middle wooden batten, which carried substantial volume of the weight of the crates contents, had a knot hole or bukong-bukong, which considerably affected, reduced and weakened its strength. Because of the enormous weight of the machineries inside this crate, the middle wooden batten gave way and collapsed. As the combined strength of the other two wooden battens were not sufficient to hold and carry the load, they too simultaneously with the middle wooden battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24). Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea. There is nothing in the record which would indicate that defendant ICTSI had any role in the choice of the materials used in fabricating this crate. Said defendant, therefore, cannot be held as blame worthy for the loss of the machineries contained in Crate No. 1.[50] The CA affirmed the ruling of the RTC, thus: The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil Code, particularly number (4) thereof, i.e., the character of the goods or defects in the packing or in the containers. The trial court found that the breakage of the crate was not due to the fault or negligence of ICTSI, but to the inherent defect and weakness of the materials used in the fabrication of the said crate. Upon examination of the records, We find no compelling reason to depart from the factual findings of the trial court. It appears that the wooden batten used as support for the flooring was not made of good materials, which caused the middle portion thereof to give way when it was lifted. The shipper also failed to indicate signs to notify the stevedores that extra care should be employed in handling the shipment. Claudio Cansino, a stevedore of ICTSI, testified before the court their duties and responsibilities: Q: With regard to crates, what do you do with the crates? A: Everyday with the crates, there is an arrow drawn where the sling is placed, Maam. Q: When the crates have arrows drawn and where you placed the slings, what do you do with these crates? A: A sling is placed on it, Maam. Q: After you placed the slings, what do you do with the crates? A: After I have placed a sling properly, I ask the crane (sic) to haul it, Maam. Q: Now, what, if any, were written or were marked on the crate? A: The thing that was marked on the cargo is an arrow just like of a chain, Maam.

Q: And where did you see or what parts of the crate did you see those arrows? A: At the corner of the crate, Maam. Q: How many arrows did you see? A: Four (4) on both sides, Maam. Q: What did you do with the arrows? A: When I saw the arrows, thats where I placed the slings, Maam. Q: Now, did you find any other marks on the crate? A: Nothing more, Maam. Q: Now, Mr. Witness, if there are no arrows, would you place slings on the parts where there are no arrows? A: You can not place slings if there are no arrows, Maam. Appellants allegation that since the cargo arrived safely from the port of [P]usan, Korea without defect, the fault should be attributed to the arrastre operator who mishandled the cargo, is without merit. The cargo fell while it was being carried only at about five (5) feet high above the ground. It would not have so easily collapsed had the cargo been properly packed. The shipper should have used materials of stronger quality to support the heavy machines. Not only did the shipper fail to properly pack the cargo, it also failed to indicate an arrow in the middle portion of the cargo where additional slings should be attached. At any rate, the issue of negligence is factual in nature and in this regard, it is settled that factual findings of the lower courts are entitled to great weight and respect on appeal, and, in fact, accorded finality when supported by substantial evidence.[51] We agree with the trial and appellate courts. The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The petitioner failed to rebut the testimony of Dauz, that the crates were sealed and that the contents thereof could not be seen from the outside.[52] While it is true that the crate contained machineries and spare parts, it cannot thereby be concluded that the respondents knew or should have known that the middle wooden batten had a hole, or that it was not strong enough to bear the weight of the shipment. There is no showing in the Bill of Lading that the shipment was in good order or condition when the carrier received the cargo, or that the three wooden battens under the flooring of the cargo were not defective or insufficient or inadequate. On the other hand, under Bill of Lading No. NSGPBSML512565 issued by the respondent NSCP and accepted by the petitioner, the latter represented and warranted that the goods were properly packed, and disclosed in writing the condition, nature, quality or characteristic that may cause damage, injury or detriment to the goods. Absent any signs on the shipment requiring the placement of a sling cable in the mid-portion of the crate, the respondent ICTSI was not obliged to do so. The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects in the merchandise. Case law has it that such statement will create a prima facie presumption only as to the external condition and not to that not open to inspection.[53] IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.

SO ORDERED.

THIRD DIVISION [G.R. No. 161745, September 30, 2005] LEA MER INDUSTRIES, INC., PETITIONER, VS. MALAYAN INSURANCE CO., INC.,* RESPONDENT. DECISION
PANGANIBAN, J.: Common carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted to them, as required by the nature of their business and for reasons of public policy. Consequently, the law presumes that common carriers are at fault or negligent for any loss or damage to the goods that they transport. In the present case, the evidence submitted by petitioner to overcome this presumption was sorely insufficient. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the October 9, 2002 Decision[2] and the December 29, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 66028. The challenged Decision disposed as follows: WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the amount of P565,000.00. Costs against the [herein petitioner].[4] The assailed Resolution denied reconsideration. The Facts Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of silica sand valued at P565,000.[5] Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by Lea Mer.[6] During the voyage, the vessel sank, resulting in the loss of the cargo.[7] Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.[8] To recover the amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC) of Manila on September 4, 1992, for the collection of P565,000 representing the amount that respondent had paid Vulcan.[9] On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the loss was a fortuitous event.[10] The RTC noted that the vessel had sunk because of the bad weather condition brought about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming

typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.[11] Ruling of the Court of Appeals Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioners fault, not by a fortuitous event.[12] Hence, this recourse.[13] The Issues Petitioner states the issues in this wise: A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a witness of the said report during the trial of this case before the lower court can be admitted in evidence to prove the alleged facts cited in the said report. B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of the Regional Trial Court which clearly and unequivocally held that the loss of the cargo subject of this case was caused by fortuitous event for which herein petitioner could not be held liable. C. Whether or not the respondent, Court of Appeals, had committed serious error and grave abuse of discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the effect that the vessel Judy VII was seaworthy at the time of incident and further in disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon Trining did not hit Metro Manila or Palawan.[14] In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and (2) whether the survey report of Jesus Cortez is admissible in evidence. The Courts Ruling The Petition has no merit. First Issue: Liability for Loss of Cargo Question of Fact The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event. This issue involves primarily a question of fact, notwithstanding petitioners claim that it pertains only to a question of law. As a general rule, questions of fact may not be raised in a petition for review.[15] The present case serves as an exception to this rule, because the factual findings of the appellate and the trial courts vary.[16] This Court meticulously reviewed the records, but found no reason to reverse the CA. Rule on Common Carriers Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or both -- by land, water, or air -- when this service is offered to the public for compensation.[17] Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its vessels.[18]

Thus, the Court corrects the trial courts finding that petitioner became a private carrier when Vulcan chartered it.[19] Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as follows: Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all.[20] The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. [21] Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers.[22] The Contract in the present case was one of affreightment, as shown by the fact that it was petitioners crew that manned the tugboat M/V Ayalit and controlled the bargeJudy VII.[23] Necessarily, petitioner was a common carrier, and the pertinent law governs the present factual circumstances. Extraordinary Diligence Required Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers they transport, as required by the nature of their business and for reasons of public policy.[24] Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery.[25] Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported.[26] This presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes:[27] (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.[28] Rule on Fortuitous Events Article 1174 of the Civil Code provides that no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. Thus, if the loss or damage was due to such an event, a common carrier is exempted from liability. Jurisprudence defines the elements of a fortuitous event as follows: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.[29] To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of the loss.[30] Moreover, it should have exercised due diligence to prevent or minimize the loss

before, during and after the occurrence of the fortuitous event.[31] Loss in the Instant Case There is no controversy regarding the loss of the cargo in the present case. As the common carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event -- an exempting circumstance. It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of the cargo was due to the bad weather condition brought about by Typhoon Trining.[32] Evidence was presented to show that petitioner had not been informed of the incoming typhoon, and that the Philippine Coast Guard had given it clearance to begin the voyage.[33] On October 25, 1991, the date on which the voyage commenced and the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only Signal No. 1.[34] The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. As required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably failed to prove. First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or after the alleged fortuitous event.[35] Its witness, Joey A. Draper, testified that he could no longer remember whether anything had been done to minimize loss when water started entering the barge.[36] This fact was confirmed during his cross-examination, as shown by the following brief exchange: Atty. Baldovino, Jr.: Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised by you and the crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII? x x x x x x x x x Atty. Baldovino, Jr.: Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking of barge Judy VII? x x x x x x x x x Court: Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy VII? Joey Draper: I can no longer remember sir, because that happened [a] long time ago.[37] Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a preponderance of evidence that the barge was not seaworthy when it sailed for Manila.[38] Respondent was able to prove that, in the hull of the barge, there were holes that might have caused or aggravated the sinking.[39] Because the presumption of negligence or fault applied to petitioner, it was incumbent upon it to show that there were no holes; or, if there were, that they did not aggravate the sinking. Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna, testified that the barge was in tip-top or excellent condition,[40]but that he had not personally inspected it when it

left Palawan.[41] The submission of the Philippine Coast Guards Certificate of Inspection of Judy VII, dated July 31, 1991, did not conclusively prove that the barge was seaworthy.[42] The regularity of the issuance of the Certificate is disputably presumed.[43] It could be contradicted by competent evidence, which respondent offered. Moreover, this evidence did not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage.[44] Second Issue: Admissibility of the Survey Report Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the cargo surveyor, should not have been admitted in evidence. The Court partly agrees. Because he did not testify during the trial,[46] then the Report that he had prepared was hearsay and therefore inadmissible for the purpose of proving the truth of its contents. The Survey Report Not the Sole Evidence The facts reveal that Cortezs Survey Report was used in the testimonies of respondents witnesses -Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and Harding Company.[47] Soriano testified that the Survey Report had been used in preparing the final Adjustment Report conducted by their company.[48] The final Report showed that the barge was not seaworthy because of the existence of the holes. Manlapig testified that he had prepared that Report after taking into account the findings of the surveyor, as well as the pictures and the sketches of the place where the sinking occurred.[49] Evidently, the existence of the holes was proved by the testimonies of the witnesses, not merely by Cortez Survey Report. Rule on Independently Relevant Statement That witnesses must be examined and presented during the trial,[50] and that their testimonies must be confined to personal knowledge is required by the rules on evidence, from which we quote: Section 36. Testimony generally confined to personal knowledge; hearsay excluded. A witness can testify only to those facts which he knows of his personal knowledge; that is, which are derived from his own perception, except as otherwise provided in these rules.[51] On this basis, the trial court correctly refused to admit Jesus Cortezs Affidavit, which respondent had offered as evidence.[52] Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is considered hearsay.[53] An exception to the foregoing rule is that on independently relevant statements. A report made by a person is admissible if it is intended to prove the tenor, not the truth, of the statements.[54] Independent of the truth or the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the hearsay rule does not apply.[55] In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of the testimonies of respondents witnesses. The referral to Cortezs Report was in relation to Manlapigs final Adjustment Report. Evidently, it was the existence of the Survey Report that was testified to. The admissibility of that Report as part of the testimonies of the witnesses was correctly ruled upon by the trial court. At any rate, even without the Survey Report, petitioner has already failed to overcome the presumption of

fault that applies to common carriers. WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution areAFFIRMED. Costs against petitioner. SO ORDERED. Sandoval-Gutierrez, Corona, Carpio Morales, and Garcia, JJ., concur.

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 Decision 1 dated October 15, 2002 and (2) the Resolution 2 dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No. 40999, which affirmed with modification the Decision 3 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 petitioners Bill of Lading 4 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 latters subrogation rights against petitioner. Hence, on October 15, 1986, respondent filed a complaint docketed as Civil Case No. 8637957, 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 attorneys 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. Petitioners 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 attorneys 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 attorneys fees and litigation expenses. Costs against the appellant. SO ORDERED. 7 Petitioners Motion for Reconsideration was denied. 8 The instant petition is anchored now on the following assignments of error: I 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 ATTORNEYS 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 carriers 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 attorneys 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 petitioners failure to exercise extraordinary diligence; and (2) whether respondent is entitled to recover attorneys 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 Appeals 11 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. 19The 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 attorneys 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, attorneys 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. 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 Courts 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 charter6 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.12 Thereafter, 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, attorneys 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 petitioners operations manager, it is clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited MCCIIs 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 (respondents 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 charterers 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 nonownership 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. L-25599

April 4, 1968

HOME INSURANCE COMPANY, plaintiff-appellee, vs. AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants, AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant. William H. Quasha and Associates for plaintiff-appellee. Ross, Selph, Salcedo and Associates for defendant-appellant. BENGZON, J.P., J.: "Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough. Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 the insurance value of the loss, as full settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on March 6, 1964 before the Court of First Instance of Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees. In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality that it had received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce stating that the claim must be made within 24 hours from receipt of the cargo. American Steamship Agencies denied liability by alleging that under the provisions of the Charter party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due diligence in

stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to the cargo. On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay plaintiff P14,870.71 with legal interest plus P1,000 attorney's fees. Said court cited the following grounds: (a) The non-liability claim of American Steamship Agencies under the charter party contract is not tenable because Article 587 of the Code of Commerce makes the ship agent also civilly liable for damages in favor of third persons due to the conduct of the captain of the carrier; (b) The stipulation in the charter party contract exempting the owner from liability is against public policy under Article 1744 of the Civil Code; (c) In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent under Article 1735 of the Civil Code unless they prove extraordinary diligence, and they cannot by contract exempt themselves from liability resulting from their negligence or that of their servants; and (d) When goods are delivered to the carrier in good order and the same are in bad order at the place of destination, the carrier is prima facie liable. Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal brings forth for determination this legal issue: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from liability for loss? The bills of lading,1 covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements.2 On the of the bills are stamped "Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13, 1962." A perusal of the charter party3 referred to shows that while the possession and control of the ship were not entirely transferred to the charterer,4 the vessel was chartered to its full and complete capacity (Exh. 3). Furthermore, the, charter had the option to go north or south or vice-versa,5 loading, stowing and discharging at its risk and expense.6 Accordingly, the charter party contract is one of affreightment over the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation. Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph, however, 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.. Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making the ship agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the care of the goods and Article 1744 of the Civil Code under which a stipulation between the common carrier and the shipper or owner limiting the liability of the former for loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be reasonable, just and not contrary to public policy. The release from liability in this case was held unreasonable and contrary to the public policy on common carriers. The provisions of our Civil Code on common carriers were taken from Anglo-American law.7 Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.8 As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy,9 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 only 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 the case of a ship totally chartered for the use of a single party. And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title not a contract, for the contract is the charter party.10 The consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other agents or employees. In this case, no such personal act or negligence has been proved. WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to plaintiff. No costs. 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. V The trial court erred in finding that NSC violated the contract of voyage charter hire. VI
The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI. 4

As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution 5 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 petition 7 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." 14 Consequently, 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. 15Recently, 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 plaintiffappellant'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, 23 only 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. 24 The 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 Iwas 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 Customs 36 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, areprima 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. 40 It 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. 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, shortlanding, 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 CAG.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 defendantappellant 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 AngloAmerican 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.Compaia 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.33 We 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. 141910

August 6, 2002

FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents. VITUG, J.:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the cause of damage was purely accidental.
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The issues having thus been joined, FGU presented its evidence, establishing the extent of damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier. The trial court, in its order of 30 April 1996,1 granted the motion to dismiss, explaining thusly: "Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove his own affirmative allegation, xxx. "In the instant case, plaintiff did not present any single evidence that would prove that defendant is a common carrier. "x x x xxx xxx

"Accordingly, the application of the law on common carriers is not warranted and the presumption of fault or negligence on the part of a common carrier in case of loss, damage or deterioration of goods during transport under 1735 of the Civil Code is not availing. "Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and the owner of the vehicle which transports the cargo are the laws on obligation and contract of the Civil Code as well as the law on quasi delicts. "Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict provides for some presumption of negligence but only upon the attendance of some circumstances. Thus, Article 2185 provides: Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation.

"Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence, the presumption of negligence is not obtaining. "Considering that plaintiff failed to adduce evidence that defendant is a common carrier and defendants driver was the one negligent, defendant cannot be made liable for the damages of the subject cargoes."2 The subsequent motion for reconsideration having been denied,3 plaintiff interposed an appeal to the Court of Appeals, contending that the trial court had erred (a) in holding that the appellee corporation was not a common carrier defined under the law and existing jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence. The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its decision of 10 June 1999,4 discoursed, among other things, that "x x x in order for the presumption of negligence provided for under the law governing common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a common carrier. Should the appellant fail to prove that the appellee is a common carrier, the presumption would not arise; consequently, the appellant would have to prove that the carrier was negligent. "x x x xxx xxx

"Because it is the appellant who insists that the appellees can still be considered as a common carrier, despite its `limited clientele, (assuming it was really a common carrier), it follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant) `must establish his case by a preponderance of evidence, which means that the evidence as a whole adduced by one side is superior to that of the other. (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the appellant failed to do -- hence, the dismissal of the plaintiffs complaint by the trial court is justified. "x x x xxx xxx

"Based on the foregoing disquisitions and considering the circumstances that the appellee trucking corporation has been `its exclusive contractor, hauler since 1970, defendant has no choice but to comply with the directive of its principal, the inevitable conclusion is that the appellee is a private carrier. "x x x xxx xxx

"x x x the lower court correctly ruled that 'the application of the law on common carriers is not warranted and the presumption of fault or negligence on the part of a common carrier in case of loss, damage or deterioration of good[s] during transport under [article] 1735 of the Civil Code is not availing.' x x x. "Finally, We advert to the long established rule that conclusions and findings of fact of a trial court are entitled to great weight on appeal and should not be disturbed unless for strong and valid reasons."5

Petitioner's motion for reconsideration was likewise denied;6 hence, the instant petition,7 raising the following issues: I WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE. II WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION. III WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE. On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or entity, cannot be considered a common carrier. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the public,8 whether to the public in general or to a limited clientele in particular, but never on an exclusive basis.9 The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation service for a fee.10 Given accepted standards, GPS scarcely falls within the term "common carrier." The above conclusion nothwithstanding, GPS cannot escape from liability. In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.11 The law, recognizing the obligatory force of contracts,12 will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof.13 A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may include his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party.14 Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for action.15 The effect of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to observe his contractual obligation16 unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that of the

diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability. Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioners assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place of destination gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so. Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality or their juridical position.17 Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioners civil action against the driver can only be based on culpa aquiliana, which, unlikeculpa contractual, would require the claimant for damages to prove negligence or fault on the part of the defendant.18 A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where the thing which caused the injury complained of is shown to be under the latters management and the accident is such that, in the ordinary course of things, cannot be expected to happen if those who have its management or control use proper care. It affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care.19 It is not a rule of substantive law and, as such, it does not create an independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply places on the defendant the burden of going forward with the proof.20 Resort to the doctrine, however, may be allowed only when (a) the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the plaintiff.21 Thus, it is not applicable when an unexplained accident may be attributable to one of several causes, for some of which the defendant could not be responsible.22 Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the relation of the parties.23 Nevertheless, the requirement that responsible causes other than those due to defendants conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure (non-contractual) tort since obviously the presumption of negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is predicated on culpa acquiliana, while he admittedly can be said to have been in control and management of the vehicle which figured in the accident, it is not equally shown, however, that the accident could have been exclusively due to his negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him.

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to present evidence.24Thus, respondent corporation may no longer offer proof to establish that it has exercised due care in transporting the cargoes of the assured so as to still warrant a remand of the case to the trial court.
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WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and decision of the appellate court are REVERSEDas regards G.P. Sarmiento Trucking Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in the amount of P204,450.00. No costs. SO ORDERED. Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.

[G.R. No. 138334. August 25, 2003] ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., respondents. DECISION YNARES-SANTIAGO, J.:chanroblesvirtuallawlibrary In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of Europe. The package tour included the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the booking fee was also waived because petitioners niece, Meriam Menor, was respondent companys ticketing manager.chanroblesvirtuallawlibrary Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on board British Airways.chanroblesvirtuallawlibrary Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she discovered that the flight she was supposed to take had already departed the previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to complain.chanroblesvirtuallawlibrary Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which included England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave

respondent US$300 or P7,980.00 as partial payment and commenced the trip in July 1991.chanroblesvirtuallawlibrary Upon petitioners return from Europe, she demanded from respondent the reimbursement of P61,421.70, representing the difference between the sum she paid for Jewels of Europe and the amount she owed respondent for the British Pageant tour. Despite several demands, respondent company refused to reimburse the amount, contending that the same was non-refundable. [1] Petitioner was thus constrained to file a complaint against respondent for breach of contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati City.chanroblesvirtuallawlibrary In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was due to respondents fault since it did not clearly indicate the departure date on the plane ticket. Respondent was also negligent in informing her of the wrong flight schedule through its employee Menor. She insisted that the British Pageant was merely a substitute for the Jewels of Europe tour, such that the cost of the former should be properly set-off against the sum paid for the latter.chanroblesvirtuallawlibrary For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed of the correct departure date, which was clearly and legibly printed on the plane ticket. The travel documents were given to petitioner two days ahead of the scheduled trip. Petitioner had only herself to blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed on the ticket.chanroblesvirtuallawlibrary Respondent explained that it can no longer reimburse the amount paid for Jewels of Europe, considering that the same had already been remitted to its principal in Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did not join the tour. Lotus European tour organizer, Insight International Tours Ltd., determines the cost of a package tour based on a minimum number of projected participants. For this reason, it is accepted industry practice to disallow refund for individuals who failed to take a booked tour.[3]chanroblesvirtuallawlibrary Lastly, respondent maintained that the British Pageant was not a substitute for the package tour that petitioner missed. This tour was independently procured by petitioner after realizing that she made a mistake in missing her flight for Jewels of Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the second tour because her niece was then an employee of the travel agency. Consequently, respondent prayed that petitioner be ordered to pay the balance of P12,901.00 for the British Pageant package tour.chanroblesvirtuallawlibrary After due proceedings, the trial court rendered a decision,[4] the dispositive part of which reads:chanroblesvirtuallawlibrary WHEREFORE, premises considered, judgment is hereby rendered as follows:chanroblesvirtuallawlibrary 1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per annum starting January 16, 1992, the date when the complaint was filed;chanroblesvirtuallawlibrary 2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00) Pesos as and for reasonable attorneys fees;chanroblesvirtuallawlibrary

3. Dismissing the defendants counterclaim, for lack of merit; andchanroblesvirtuallawlibrary 4. With costs against the defendant.chanroblesvirtuallawlibrary SO ORDERED.[5]chanroblesvirtuallawlibrary The trial court held that respondent was negligent in erroneously advising petitioner of her departure date through its employee, Menor, who was not presented as witness to rebut petitioners testimony. However, petitioner should have verified the exact date and time of departure by looking at her ticket and should have simply not relied on Menors verbal representation. The trial court thus declared that petitioner was guilty of contributory negligence and accordingly, deducted 10% from the amount being claimed as refund.chanroblesvirtuallawlibrary Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault. However, the appellate court held that petitioner is more negligent than respondent because as a lawyer and well-traveled person, she should have known better than to simply rely on what was told to her. This being so, she is not entitled to any form of damages. Petitioner also forfeited her right to the Jewels of Europe tour and must therefore pay respondent the balance of the price for the British Pageant tour. The dispositive portion of the judgment appealed from reads as follows:chanroblesvirtuallawlibrary WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the plaintiffappellee to pay to the defendant-appellant the amount of P12,901.00, representing the balance of the price of the British Pageant Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the time the counterclaim was filed until the finality of this decision. After this decision becomes final and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be additionally imposed on the total obligation until payment thereof is satisfied. The award of attorneys fees is DELETED. Costs against the plaintiffappellee.chanroblesvirtuallawlibrary SO ORDERED.[6]chanroblesvirtuallawlibrary Upon denial of her motion for reconsideration,[7] petitioner filed the instant petition under Rule 45 on the following grounds: Ichanroblesvirtuallawlibrary It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in reversing and setting aside the decision of the trial court by ruling that the petitioner is not entitled to a refund of the cost of unavailed Jewels of Europe tour she being equally, if not more, negligent than the private respondent, for in the contract of carriage the common carrier is obliged to observe utmost care and extra-ordinary diligence which is higher in degree than the ordinary diligence required of the passenger. Thus, even if the petitioner and private respondent were both negligent, the petitioner cannot be considered to be equally, or worse, more guilty than the private respondent. At best, petitioners negligence is only contributory while the private respondent [is guilty] of gross negligence making the principle of pari delicto inapplicable in the case; IIchanroblesvirtuallawlibrary The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was not indivisible and the amount paid therefor refundable;

IIIchanroblesvirtuallawlibrary The Honorable Court erred in not granting to the petitioner the consequential damages due her as a result of breach of contract of carriage.[8]chanroblesvirtuallawlibrary Petitioner contends that respondent did not observe the standard of care required of a common carrier when it informed her wrongly of the flight schedule. She could not be deemed more negligent than respondent since the latter is required by law to exercise extraordinary diligence in the fulfillment of its obligation. If she were negligent at all, the same is merely contributory and not the proximate cause of the damage she suffered. Her loss could only be attributed to respondent as it was the direct consequence of its employees gross negligence.chanroblesvirtuallawlibrary Petitioners contention has no merit.chanroblesvirtuallawlibrary By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate themselves to transport persons, things, or news from one place to another for a fixed price.[9] Such person or association of persons are regarded as carriers and are classified as private or special carriers and common or public carriers.[10] A common carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public.chanroblesvirtuallawlibrary It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither a private nor a common carrier. Respondent did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to make travel arrangements in their behalf. Respondents services as a travel agency include procuring tickets and facilitating travel permits or visas as well as booking customers for tours.chanroblesvirtuallawlibrary While petitioner concededly bought her plane ticket through the efforts of respondent company, this does not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe. Respondents obligation to petitioner in this regard was simply to see to it that petitioner was properly booked with the airline for the appointed date and time. Her transport to the place of destination, meanwhile, pertained directly to the airline.chanroblesvirtuallawlibrary The object of petitioners contractual relation with respondent is the latters service of arranging and facilitatingpetitioners booking, ticketing and accommodation in the package tour. In contrast, the object of a contract of carriage is the transportation of passengers or goods. It is in this sense that the contract between the parties in this case was an ordinary one for services and not one of carriage. Petitioners submission is premised on a wrong assumption.chanroblesvirtuallawlibrary The nature of the contractual relation between petitioner and respondent is determinative of the degree of care required in the performance of the latters obligation under the contract. For reasons of public policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as human care and foresight can provide using the utmost diligence of very cautious persons and with due regard for all the circumstances.[11] As earlier stated, however, respondent is not a common carrier but a travel agency. It is thus not bound under the law to observe extraordinary diligence in the performance of its obligation, as petitioner claims.chanroblesvirtuallawlibrary Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is that of a good father of a family under Article 1173 of the Civil Code.

[12] This connotes reasonable care consistent with that which an ordinarily prudent person would

have observed when confronted with a similar situation. The test to determine whether negligence attended the performance of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.[13]chanroblesvirtuallawlibrary In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the wrong day of departure. Petitioners testimony was accepted as indubitable evidence of Menors alleged negligent act since respondent did not call Menor to the witness stand to refute the allegation. The lower court applied the presumption under Rule 131, Section 3 (e)[14] of the Rules of Court that evidence willfully suppressed would be adverse if produced and thus considered petitioners uncontradicted testimony to be sufficient proof of her claim.chanroblesvirtuallawlibrary On the other hand, respondent has consistently denied that Menor was negligent and maintains that petitioners assertion is belied by the evidence on record. The date and time of departure was legibly written on the plane ticket and the travel papers were delivered two days in advance precisely so that petitioner could prepare for the trip. It performed all its obligations to enable petitioner to join the tour and exercised due diligence in its dealings with the latter.chanroblesvirtuallawlibrary We agree with respondent.chanroblesvirtuallawlibrary Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise to an inference unfavorable to the former. Menor was already working in France at the time of the filing of the complaint,[15] thereby making it physically impossible for respondent to present her as a witness. Then too, even if it were possible for respondent to secure Menors testimony, the presumption under Rule 131, Section 3(e) would still not apply. The opportunity and possibility for obtaining Menors testimony belonged to both parties, considering that Menor was not just respondents employee, but also petitioners niece. It was thus error for the lower court to invoke the presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would logically be inoperative if the evidence is not intentionally omitted but is simply unavailable, or when the same could have been obtained by both parties.[16]chanroblesvirtuallawlibrary In sum, we do not agree with the finding of the lower court that Menors negligence concurred with the negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not sufficiently proved, considering that the only evidence presented on this score was petitioners uncorroborated narration of the events. It is well-settled that the party alleging a fact has the burden of proving it and a mere allegation cannot take the place of evidence.[17] If the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense.[18]chanroblesvirtuallawlibrary Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence in performing its obligations under the contract and followed standard procedure in rendering its services to petitioner. As correctly observed by the lower court, the plane ticket[19] issued to petitioner clearly reflected the departure date and time, contrary to petitioners contention. The travel documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary documents and procured the plane tickets. It arranged petitioners hotel accommodation as well as food, land transfers and sightseeing excursions, in accordance with its avowed undertaking. chanroblesvirtuallawlibrary Therefore, it is clear that respondent performed its prestation under the contract as well as everything else that was essential to book petitioner for the tour. Had petitioner exercised due

diligence in the conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say, after the travel papers were delivered to petitioner, it became incumbent upon her to take ordinary care of her concerns. This undoubtedly would require that she at least read the documents in order to assure herself of the important details regarding the trip.chanroblesvirtuallawlibrary The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation so demands.[20] There is no fixed standard of diligence applicable to each and every contractual obligation and each case must be determined upon its particular facts. The degree of diligence required depends on the circumstances of the specific obligation and whether one has been negligent is a question of fact that is to be determined after taking into account the particulars of each case.[21]chanroblesvirtuallawlibrary The lower court declared that respondents employee was negligent. This factual finding, however, is not supported by the evidence on record. While factual findings below are generally conclusive upon this court, the rule is subject to certain exceptions, as when the trial court overlooked, misunderstood, or misapplied some facts or circumstances of weight and substance which will affect the result of the case.[22] chanroblesvirtuallawlibrary In the case at bar, the evidence on record shows that respondent company performed its duty diligently and did not commit any contractual breach. Hence, petitioner cannot recover and must bear her own damage.chanroblesvirtuallawlibrary WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount of P12,901.00 representing the balance of the price of the British Pageant Package Tour, with legal interest thereon at the rate of 6% per annum, to be computed from the time the counterclaim was filed until the finality of this Decision. After this Decision becomes final and executory, the rate of 12% per annum shall be imposed until the obligation is fully settled, this interim period being deemed to be by then an equivalent to a forbearance of credit.
[23]chanroblesvirtuallawlibrary

SO ORDERED.chanroblesvirtuallawlibrary Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.