PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, respondents.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th,
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. 3Riders to the aforesaid charter-party
starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and
4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of
May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to
par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo
Bureau inspector or substitute appointed by charterers for his account certifying the vessel's
readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at
the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of
the inspector before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout
the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its
steelbodied dump trucks which were parked alongside the berth, using metal scoops attached to
the ship, pursuant to the terms and conditions of the charter-partly (which provided for an F.I.O.S.
clause). 6 The hatches remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway
to the warehouse, the trucks were made to pass through a weighing scale where they were
individually weighed for the purpose of ascertaining the net weight of the cargo. The port area
was windy, certain portions of the route to the warehouse were sandy and the weather was
variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse
was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump
trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were
placed in-between and alongside the trucks to contain spillages of the ferilizer. 9
14th and 18th). 10A private marine and cargo surveyor, Cargo Superintendents Company Inc.
(CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings
of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the
consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a
portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results
were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI
which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were
rendered unfit for commerce, having been polluted with sand, rust and dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in value of that portion said to have
been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was denied by them because they "had
nothing to do with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action
for damages with the Court of First Instance of Manila. The defendant carrier argued that the
strict public policy governing common carriers does not apply to them because they have become
private carriers by reason of the provisions of the charter-party. The court a quo however
sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or
damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed negligent in case
of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to
recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it of
less than what it received. After that, the burden of proving that the loss or damage was due to
any of the causes which exempt him from liability is shipted to the carrier, common or private he
may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the
defendants considered private carriers, it was still incumbent upon them to prove that the
shortage or contamination sustained by the cargo is attributable to the fault or negligence on the
part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo . This
they failed to do. By this omission, coupled with their failure to destroy the presumption of
negligence against them, the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo
vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a
common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on
common carriers which set forth a presumption of negligence do not find application in the case
at bar. Thus
. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce
sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It
is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause
of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or defense (Moran, Commentaries on the
Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of
action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under the
impression that it did not have to establish defendant's negligence. Be that as it may, contrary to
the trial court's finding, the record of the instant case discloses ample evidence showing that
defendant carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not
whether the presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues that since the possession and
control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the
appellate court in not applying the presumption of negligence against respondent carrier, and
instead shifting the onus probandi on the shipper to show want of due deligence on the part of the
carrier, when he was not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier
by reason of a charter-party; in the negative, whether the shipowner in the instant case was able
to prove that he had exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being
so, we find it fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is
let by the owner to another person for a specified time or use; 20 a contract of affreightment by
which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration of the payment of
freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or as a whole, to carry goods for others;
and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the
charterer with a transfer to him of its entire command and possession and consequent control
over its navigation, including the master and the crew, who are his servants. Contract of
affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed
period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases,
the charter-party provides for the hire of vessel only, either for a determinate period of time or for
a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of
the master and the crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves out
as ready to engage in carrying goods or transporting passengers or both for compensation as a
public employment and not as a casual occupation. The distinction between a "common or public
carrier" and a "private or special carrier" lies in the character of the business, such that if the
undertaking is a single transaction, not a part of the general business or occupation, although
involving the carriage of goods for a fee, the person or corporation offering such service is a
private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of
their business, should observe extraordinary diligence in the vigilance over the goods they
carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage
of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted negligently, and the burden
of proving otherwise rests on them. 26 On the contrary, no such presumption applies to private
carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of
proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the
vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of
the shipowner and therefore continued to be under its direct supervision and control. Hardly then
can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control of the means in doing so. This is evident in the
present case considering that the steering of the ship, the manning of the decks, the
determination of the course of the voyage and other technical incidents of maritime navigation
were all consigned to the officers and crew who were screened, chosen and hired by the
shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of
the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship
only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both
the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at
least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a
shipowner in a time or voyage charter retains possession and control of the ship, although her
holds may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the
validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to
the negligence of its agent, and not the effects of a special charter on common carriers. At any
rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo
is not a common carrier, 29 does not find application in our jurisdiction, for we have observed that
the growing concern for safety in the transportation of passengers and /or carriage of goods by
sea requires a more exacting interpretation of admiralty laws, more particularly, the rules
governing common carriers.
30
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law
As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is
used to convey the goods of one and of several persons. Where the ship herself is let to a
charterer, so that he takes over the charge and control of her, the case is different; the shipowner
is not then a carrier. But where her services only are let, the same grounds for imposing a strict
responsibility exist, whether he is employed by one or many. The master and the crew are in each
case his servants, the freighter in each case is usually without any representative on board the
ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the
truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the shipper
or consignee should first prove the fact of shipment and its consequent loss or damage while the
same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof
shifts to respondent to prove that he has exercised extraordinary diligence required by law or that
the loss, damage or deterioration of the cargo was due to fortuitous event, or some other
circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977
before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned,
dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel
pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of
serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly
sealed while the ship was in transit as the weight of the steel covers made it impossible for a
person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores,
and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates
who were overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care
of the cargo. This was confirmed by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses
ample evidence showing that defendant carrier was not negligent in performing its obligations.
Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show absence
of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of
the cargo was sealed and nobody could open the same except in the presence of the owner of
the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the
hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and
therefore their contents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to
open these hatches, the seals would have to be broken, all the seals were found to be intact
(TSN, 20 July 1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of it
as a public carrier began from the time the cargo was unconditionally placed in its charge after
the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the
vessel reached its destination and its hull was reexamined by the consignee, but prior to
unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to
the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from
all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the cargo
resulting from improper stowage only when the stowing is done by stevedores employed by him,
and therefore under his control and supervision, not when the same is done by the consignee or
stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the
shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is
proved, as against him, that they arose through his negligence or by reason of his having failed to
take the precautions which usage has established among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer
working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of
ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46%
nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not
normally evaporate even on a long voyage, provided that the temperature inside the hull does not
exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in
bulk with the use of a clamped shell, losses due to spillage during such operation amounting to
one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause
of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to
blow away some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an
extremely high temperature in its place of storage, or when it comes in contact with water. When
Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged
portion which is in liquid form still remains potent and usable although no longer saleable in its
original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various pieces of
equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to
seep into the vessel's holds during the voyage since the hull of the vessel was in good condition
and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects
seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the
cargo, it was more likely to have occurred while the same was being transported from the ship to
the dump trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained
that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an
approximation or estimate made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her
cargo. It rained from time to time at the harbor area while the cargo was being discharged
according to the supply officer of PPI, who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed enroute to the consignee's warehouse.

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

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of
the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
PHILAM INSURANCE COMPANY, INC. (now CHARTIS PHILIPPINES INSURANCE,
INC.*), Petitioner, vs. HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES
SHIPPING, INC., Respondents.
At bar are consolidated petitions for review on certiorari 1 under Rule 45 of the Rules of Court
assailing the Decision2dated January 30, 2009 of the Court of Appeals (CA) in CA-G.R. CV No.
89482 affirming with modifications the Decision 3 dated February 26, 2007 of the Regional Trial
Court (RTC) of Makati City, Branch 148, in Civil Case No. 01-889.
The Factual Antecedents
On December 19, 2000, Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported from
Jinsuk Trading Co. Ltd., (JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18
Glaminated plastic packaging material.
In order to ship the goods to the Philippines, JINSUK engaged the services of Protop Shipping
Corporation (PROTOP), a freight forwarder likewise based in South Korea, to forward the goods
to their consignee, NOVARTIS.
Based on Bill of Lading No. PROTAS 200387 issued by PROTOP, the cargo was on freight
prepaid basis and on "shippers load and count" which means that the "container [was] packed
with cargo by one shipper where the quantity, description and condition of the cargo is the sole
responsibility of the shipper." 4 Likewise stated in the bill of lading is the name Sagawa Express
Phils., Inc., (SAGAWA) designated as the entity in the Philippines which will obtain the delivery
contract.
PROTOP shipped the cargo through Dongnama Shipping Co. Ltd. (DONGNAMA) which in turn
loaded the same on M/V Heung-A Bangkok V-019 owned and operated by Heung-A Shipping
Corporation, (HEUNG-A), a Korean corporation, pursuant to a slot charter agreement whereby a
space in the latters vessel was reserved for the exclusive use of the former. Wallem Philippines
Shipping, Inc. (WALLEM) is the ship agent of HEUNG-A in the Philippines. NOVARTIS insured
the shipment with Philam Insurance Company, Inc. (PHILAM, now Chartis Philippines Insurance,
Inc.) under All Risk Marine Open Insurance Policy No. MOP-0801011828 against all loss,
damage, liability, or expense before, during transit and even after the discharge of the shipment
from the carrying vessel until its complete delivery to the consignees premises. The vessel
arrived at the port ofManila, South Harbor, on December 27, 2000 and the subject shipment
contained in Sea Van Container No. DNAU 420280-9 was discharged without exception into the
possession, custody and care of Asian Terminals, Inc. (ATI) as the customs arrastre operator.
The shipment was thereafter withdrawn on January 4, 2001, by NOVARTIS appointed broker,
Stephanie Customs Brokerage Corporation (STEPHANIE) from ATIs container yard.
The shipment reached NOVARTIS premises on January 5, 2001 and was thereupon inspected
by the companys Senior Laboratory Technician, Annie Rose Caparoso (Caparoso). 5
Upon initial inspection, Caparoso found the container van locked with its load intact. After opening
the same, she inspected its contents and discovered that the boxes of the shipment were wet and
damp. The boxes on one side of the van were in disarray while others were opened or damaged
due to the dampness. Caparoso further observed that parts of the container van were damaged
and rusty. There were also water droplets on the walls and the floor was wet. Since the damaged
packaging materials might contaminate the product they were meant to hold, Caparoso rejected
the entire shipment.
Renato Layug and Mario Chin, duly certified adjusters of the Manila Adjusters and Surveyors
Company wereforthwith hailed to inspect and conduct a survey of the shipment. 6 Their Certificate
of Survey7 dated January 17, 2001 yielded results similar to the observations of Caparoso, thus:
[T]he sea van panels/sidings and roofing were noted with varying degrees of indentations and
partly corroded/rusty. Internally, water bead clung along the roofs from rear to front section. The
mid section dented/sagged with affected area was noted withminutes hole evidently due to
thinning/corroded rusty metal plates. The shipment was noted with several palletized cartons
already in collapsed condition due to wetting. The vans entire floor length was also observed
wet.8
All 17 pallets of the 184 cartons/rolls contained in the sea van were found wet/water damaged.
Sixteen (16)cartons/rolls supposedly contained in 2 pallets were unaccounted for although the
surveyors remarked that this may be due to short shipment by the supplier considering that the
sea van was fully loaded and can no longer accommodate the said unaccounted items. The
survey report further stated that the "wetting sustained by the shipment may have reasonably be
attributed to the water seepage that gain entry into the sea van container damageroofs (minutes
hole) during transit period[sic]."9
Samples from the wet packing materials/boxes were submitted to the chemist of Precision
Analytical Services, Inc. (PRECISION), Virgin Hernandez (Hernandez), and per Laboratory
Report No. 042-07 dated January 16, 2001, the cause of wetting in the carton boxes and kraft
paper/lining materials as well as the aluminum foil laminated plastic packaging material, was salt
water.10
Aggrieved, NOVARTIS demanded indemnification for the lost/damaged shipment from PROTOP,
SAGAWA, ATI and STEPHANIE but was denied. Insurance claims were, thus, filed with PHILAM
which paid the insured value of the shipment inthe adjusted amount of One Million Nine Hundred
Four Thousand Six Hundred Thirteen Pesos and Twenty Centavos (P1,904,613.20). Claiming
that after such payment, it was subrogated to all the rights and claims of NOVARTIS against the
parties liable for the lost/damaged shipment, PHILAM filed on June 4, 2001, a complaint for
damages against PROTOP, as the issuer of Bill of Lading No. PROTAS 200387, its ship agent in
the Philippines, SAGAWA, consignee, ATI and the broker, STEPHANIE.
On October 12, 2001, PHILAM sent a demand letter to WALLEM for reimbursement of the
insurance claims paid to NOVARTIS. 11 When WALLEM ignored the demand, PHILAM impleaded
it as additional defendant in an Amended Complaint duly admitted by the trial court on October
19, 2001.12
On December 11, 2001, PHILAM filed a Motion to Admit Second Amended Complaint this time
designating PROTOP as the owner/operator of M/V Heung-A Bangkok V-019 and adding
HEUNG-A as party defendant for being the registered owner of the vessel. 13 The motion was
granted and the second amended complaint was admitted by the trial court on December 14,
2001.14
PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and HEUNG-A denied liability for the
lost/damaged shipment.
SAGAWA refuted the allegation that it is the ship agent of PROTOP and argued that a ship agent
represents the owner of the vessel and not a mere freight forwarder like PROTOP. SAGAWA
averred that its only role with respect to the shipment was to inform NOVARTIS of its arrival in the
Philippines and to facilitate the surrender of the original bill of lading issued by PROTOP.
SAGAWA further remarked that it was deprived an opportunity to examine and investigate the
nature and extent of the damage while the matter was still fresh so as tosafeguard itself from
false/fraudulent claims because NOVARTIS failed totimely give notice about the loss/damage. 15
SAGAWA admitted that it has a non-exclusive agency agreement with PROTOP to serve as the
latters delivery contact person in the Philippines with respect to the subject shipment. SAGAWA
is also a freight forwarding company and that PROTOPwas not charged any fee for the services
rendered by SAGAWA with respect to the subject shipment and instead the latter was given
US$10 as commission.16 For having been dragged into court on a baseless cause, SAGAWA
counterclaimed for damages in the form of attorneys fees.
ATI likewise interposed a counterclaim for damages against PHILAM for its allegedly baseless
complaint. ATI averred that it exercised due care and diligence in handling the subject container.
Also, NOVARTIS, through PHILAM, is now barred from filing any claim for indemnification
because the latter failed to file the same within 15 days from receipt of the
shipment.17 Meanwhile, STEPHANIE asserted that its only role with respect to the shipment was
its physical retrieval from ATI and thereafter its delivery to NOVARTIS. That entire time, the
sealwas intact and not broken. Also, based on the Certificate of Survey, the damage to the
shipment was due to salt water which means that it could not have occurred while STEPHANIE
was in possession thereof during its delivery from ATIs container yard to NOVARTIS premises.
STEPHANIE counterclaimed for moral damages and attorneys fees. 18
WALLEM alleged that the damageand shortages in the shipment were the responsibility of the
shipper, JINSUK, because it was taken on board on a "shippers load and count" basis which
means that it was the shipper that packed, contained and stuffed the shipment in the container
van without the carriers participation. The container van was already sealed when it was
loadedon the vessel and hence, the carrier was in no position to verify the condition and other
particulars of the shipment.
WALLEM also asserted that the shipment was opened long after it was discharged from the
vessel and that WALLEM or HEUNG-A were not present during the inspection, examination and
survey.
WALLEM pointed the blame to PROTOP because its obligation to the shipper as freight forwarder
carried the concomitant responsibility of ensuring the shipments safety from the port of loading
until the final place of delivery. WALLEM claimed to haveexercised due care and diligence in
handling the shipment.
In the alternative, WALLEM averred that any liability which may be imputed to it is limited only to
US$8,500.00 pursuant to the Carriage of Goods by Sea Act (COGSA). 19
HEUNG-A argued that it is not the carrier insofar as NOVARTIS is concerned. The carrier was
either PROTOP, a freight forwarder considered as a non-vessel operating common carrier or
DONGNAMA which provided the container van to PROTOP.20 HEUNG-A denied being the carrier
of the subjectshipment and asserted that its only obligation was to provide DONGNAMA a space
on board M/V Heung-A Bangkok V-019.
PROTOP failed to file an answer to the complaint despite having been effectively served with
alias summons. It was declared in default in the RTC Order dated June 6, 2002. 21
Ruling of the RTC
In a Decision22 dated February 26, 2007, the RTC ruled that the damage to the shipment occurred
onboard the vessel while in transit from Korea to the Philippines.
HEUNG-A was adjudged as the common carrier of the subject shipment by virtue of the
admissions of WALLEMs witness, Ronald Gonzales (Gonzales) that despite the slot charter
agreement with DONGNAMA, it was still the obligation of HEUNG-A to transport the cargo from
Busan, Korea to Manila and thus any damage to the shipment is the responsibility of the carrier to
the consignee.
The RTC further observed that HEUNG-A failed to present evidence showing that it exercised the
diligence required of a common carrier in ensuring the safety of the shipment.
The RTC discounted the slot charter agreement between HEUNG-A and DONGNAMA, and held
that it did not bind the consignee who was not a party thereto. Further, it was HEUNG-As duty to
ensure that the container van was in good condition by taking an initiative to state in its contract
and demand from the owner of the container van that it should be in a good condition all the time.
Such initiative cannot be shifted to the shipper because it is in no position to demand the same
from the owner of the container van.
WALLEM was held liable as HEUNG-As ship agent in the Philippines while PROTOP was
adjudged liable because the damage sustained by the shipment was due to the bad condition of
the container van. Also, based on the statement at the backof the bill of lading, it assumed
responsibility for loss and damage as freight forwarder, viz:
6.1 The responsibility of the Freight Forwarder for the goods under these conditions covers the
period from the time the Freight Forwarder has taken the goods in his charge to the time of the
delivery.
6.2 The Freight Forwarde[r] shall beliable for loss or damage to the goods as well as for delay in
delivery if the occurrence which caused the loss, damage, delay in delivery took place while the
goods were in his charge as defined in clause 2.1.a unless the Freight Forwarder proves that no
fault or neglect of his own servants or agents or any other person referred to in Clause 2.2 has
caused or contributed to such loss, damage or delay. However, the Freight Forwarder shall only
be liable for loss following from delay in delivery if the Consignor has made a declaration of
interest in timely delivery which has been accepted by the Freight Forwarder and stated in this
FBL.23
PHILAM was declared to havebeen validly subrogated in NOVARTIS stead and thus entitled to
recover the insurance claims it paid to the latter.
ATI and STEPHANIE were exonerated from any liability. SAGAWA was likewise adjudged not
liable for the loss/damage to the shipment by virtue of the phrase "Shippers Load and Count"
reflected in the bill of lading issued by PROTOP. Since the container van was packed under the
sole responsibility of the shipper in Korea, SAGAWA, which is based in the Philippines, had no
chance to check if the contents were in good condition or not. The RTC concluded that SAGAWA
cannot be expected to observe the diligence or care required of a carrier or ship agent. SAGAWA,
ATI and STEPHANIEs counterclaims for attorneys fees were granted and PHILAM was ordered
to pay the same for having been filed a shotgun case against them. Accordingly, the dispositive
portion of the RTC decision read:
WHEREFORE, premises considered, judgment is hereby rendered declaring defendants
PROTOP SHIPPING CORPORATION, HEUNG-A SHIPPING CORPORATION and WALLEM
PHILIPPINES SHIPPING, INC. solidarily liable to pay x x x PHILAM INSURANCE COMPANY,
INC. the following amounts:
1. [P]1,904,613.20 plus interest of 12% per annum from December 26, 2001 (date of service of
summons to defendant Heung-A) until full payment;
2. [P]350,000.00 as attorneys fees; and 3. Cost of suit.
With regards to the counter claims, x x x PHILAM INSURANCE COMPANY, INC. is hereby
ordered to pay defendants SAGAWA EXPRESS PHILIPPINES, INC., ASIAN TERMINALS, INC.,
and STEPHANIE CUSTOMS BROKERAGE CORPORATION the amount of [P]100,000.00 each
as attorneys fees.
SO ORDERED.24
Ruling of the CA
An appeal to the CA was interposed by PHILAM, WALLEM and HEUNG-A. In a Decision 25 dated
January 30, 2009, the CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM are liable
for the damaged shipment. The fact that HEUNG-A was not a party to the bill of lading did not
negate the existence of a contract of carriage between HEUNG-A and/or WALLEM and
NOVARTIS. A bill of lading is not indispensable for the creation of a contract of carriage. By
agreeing to transport the goods contained in the sea van providedby DONGNAMA, HEUNG-A
impliedly entered into a contract of carriage with NOVARTIS with whom the goods were
consigned. Hence, it assumed the obligations of a common carrier to observe extraordinary
diligence in the vigilance over the goods transported by it. Further the Slot Charter Agreement did
not change HEUNG-As character as a common carrier.
Moreover, the proximate cause ofthe damage was the failure of HEUNG-A to inspect and
examine the actual condition of the sea van before loading it on the vessel. Also, propermeasures
in handling and stowage should have been adopted to prevent seepage of sea water into the sea
van.
The CA rejected WALLEM and HEUNG-As argument that NOVARTIS failed to comply with Article
366 of the Code of Commerce requiring that a claim must be made against the carrier within 24
hours from receipt of the merchandise because such provision applies only to inter-island
shipments within the Philippines.
The CA limited the liability of PROTOP, WALLEM and HEUNG-A to US$8,500.00 pursuant to the
liability limitation under the COGSA since the shipper failed to declare the value of the subject
cargo in the bill of lading and since they could not be made answerable for the two (2)
unaccounted pallets because the shipment was on a "shippers load, count and seal" basis.
The attorneys fees awarded to SAGAWA, ATI and STEPHANIE were deleted because it was not
shown that PHILAM was motivated by malice and bad faith in impleading them as defendants.
Thus, the CA decision was disposed as follows:
WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED with
MODIFICATION.Defendants PROTOP SHIPPING CORPORATION, HEUNG-A SHIPPING
CORPORATION [and] WALLEM PHILIPPINES SHIPPING,INC.s solidary liability to PHILAM
INSURANCE COMPANY, INC. is reduced to $8,500.00 plus interest per annum from26
December 2001 (date ofservice of summons to defendant Heung-A) until full payment. The award
of attorneys fees in the amount of One Hundred Thousand Pesos ([P]100,000.[00]) each to
SAGAWA EXPRESS PHILIPPINES, INC., ASIAN TERMINALS, INC. and STEPHANIE
CUSTOMS BROKERAGE is hereby DELETED.
SO ORDERED.26
The foregoing judgment was reiterated in the CA Resolution 27 dated May 8, 2009 which denied
the motions for reconsideration filed by PHILAM, WALLEM and HEUNG-A.
PHILAM thereafter filed a petition for review before the Court docketed as G.R. No. 187701.
WALLEM and HEUNG-A followed suit and their petition was docketed as G.R. No. 187812.
Considering that both petitions involved similar parties and issue, emanated from the same Civil
Case No. 01-889 and assailed the same CA judgment, they were ordered consolidated in a
Resolution28 dated January 13, 2010.
In G.R. No. 187701, PHILAM raised the following grounds:
THE HONORABLE [CA] COMMITTED SERIOUS ERROR WHEN IT RULED IN ITS DECISION
OF 30 JANUARY 2009 THAT [HEUNG-A and WALLEM] HAVE THE RIGHT TO LIMIT THEIR
LIABILITY UNDER THE PACKAGE LIMITATION OF LIABILITY OF SECTION 4(5) OF THE
CARRIAGE OF GOODS BY SEA ACT, 1924, IN VIEW OF ITS OBSERVATION THAT
[NOWHERE] IN THE BILL OF LADING DID THE SHIPPER DECLARE THE VALUE OF THE
SUBJECT CARGO;
THE HONORABLE [CA] COMMITTED SERIOUS ERROR WHEN IT COMPLETELY
DISREGARDED THE FUNDAMENTAL BREACHES OF [HEUNG-A and WALLEM] OF [THEIR]
OBLIGATIONS AND RESPONSIBILITIES UNDER THE CONTRACT OF CARRIAGE AND LAW
OF THE CASE AS LEGAL GROUNDS TO PRECLUDE ITS AVAILMENT OF THE PACKAGE
LIMITATION OF LIABILITY UNDER SECTION 4(5) OF THE CARRIAGE OF GOODS BY SEA
ACT, 1924.29
In G.R. No. 187812, HEUNG-A and WALLEM argued that:
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT THE CODE
OFCOMMERCE, SPECIFICALLY ARTICLE 366 THEREOF, DOES NOT APPLY IN THIS CASE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT THE SO-CALLED
"PARAMOUNT CLAUSE" IN THE BILL OF LADING, WHICH PROVIDED THAT "COGSA" SHALL
GOVERN THE TRANSACTION, RESULTED IN THE EXCLUSION OR INAPPLICABILITY OF
THE CODE OF COMMERCE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN NOT RULING THAT [PHILAM] HAS
NO RIGHT OF ACTION AGAINST [HEUNG-A and WALLEM] INSOFAR AS DAMAGE TO
CARGO IS CONCERNED IN VIEW OF THE FACT THAT NO TIMELY CLAIM WAS FILED
PURSUANT TO ARTICLE 366 OF THE CODE OF COMMERCE OR THE PROVISIONS OF THE
BILL OF LADING NO.DNALGOBUM 005019[;]
THE [CA] GRAVELY ABUSED ITS DISCRETION AMOUNTING TO EXCESS OR LACK OF
JURISDICTION IN FINDING THAT THE CONTAINERIZED CARGO WAS DAMAGED WHILE IN
THE POSSESSION OR CUSTODY OF THE VESSEL "HEUNG-A BANGKOK". 30
Issues
The arguments proffered by the parties can be summed up into the following issues: (1) Whether
the shipment sustained damage while in the possession and custody of HEUNG-A, and if so,
whether HEUNG-As liability can be limited to US$500 per package pursuant tothe COGSA; (2)
Whether or not NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or
WALLEM.
Ruling of the Court
It must be stressed that the question on whether the subject shipment sustained damaged while
in the possession and custody of HEUNG-A is a factual matter which has already
beendetermined by the RTC and the CA. The courts a quowere uniform in finding that the goods
inside the container van were damaged by sea water whilein transit on board HEUNG-As vessel.
Being a factual question, it is notreviewable in the herein petition filed under Rule 45 of the Rules
of Court. It isnot the Courts duty to evaluate and weigh the evidence all over again as such
function is conceded to be within the expertise of the trial court whose findings, when supported
by substantial evidence on record and affirmed by the CA, are regarded with respect, if not
binding effect, by this Court.31
There are certain instances, however, when the Court is compelled to deviate from this rule,
dismantle the factual findings of the courts a quoand conduct a probe into the factual questions at
issue. These circumstances are: (1) the inference made ismanifestly mistaken, absurd or
impossible; (2) there is grave abuse of discretion; (3) the findings are grounded entirely on
speculations, surmises or conjectures; (4) the judgment of the CA is based on misapprehension
of facts; (5) the CA, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (6) the findings of fact are conclusions
without citation of specific evidence on which theyare based; (7) the CA manifestly overlooked
certain relevant facts not disputed by the parties and which, if properly considered, would justify a
different conclusion; and (8) the findings of fact of the CA are premised on the absence
ofevidence and are contradicted by the evidence on record. 32
None of the foregoing instances is extant from records of the present case. Instead, the Court
finds that the factual findings of the courts a quo are supported by evidence on record.
The uncontested results of the inspection survey conducted by Manila Adjusters Surveyors
Company showed that sea water seeped into the panels/sidings and roofing of the container van.
This was confirmed by the examination conducted by Hernandez, the chemist of PRECISION, on
samples from the cartons, boxes, aluminum foil and laminated plastic packaging materials. Based
on the laboratory examination results, the contents of the van were drenched by sea water, an
element which is highly conspicuous in the high seas. It can thus be reasonably concluded that
negligence occurred while the container van was in transit, in HEUNG-As possession, control
and custody as the carrier.
Although the container van had defects, they were not, however, so severe as to accommodate
heavy saturation of sea water. The holes were tiny and the rusty portions did not cause gaps or
tearing. Hence, the van was still in a suitable condition to hold the goods and protect them from
natural weather elements or even the normal flutter of waves in the seas.
The scale of the damage sustained by the cargo inside the van could have been only caused by
large volume of sea water since not a single package inside was spared. Aside from the defective
condition of the van, some other circumstance or occurrence contributed to the damages
sustained by the shipment. Since the presence of sea water is highly concentrated in the high
seas and considering HEUNG-As failure to demonstrate how it exercised due diligence in
handling and preserving the container van while in transit, it is liable for the damages sustained
thereby.
As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary diligence
in conveying the same and its slot charter agreement with DONGNAMA did not divest it of such
characterization nor relieve it of any accountability for the shipment.
Based on the testimony of Gonzales, 33 WALLEMs employee and witness, the charter party
between HEUNG-A and DONGNAMA was a contract of affreightment and not a bare boat or
demise charter, viz:
Q: Now, the space charter that you are mentioning is not either a bareboat or a demise?
A: Yes, sir.
Q: Okay. So in other words, that space charter party is only to allow the shipper, Dongnama, to
load its cargo for a certain specified space?
A: Yes, sir.34
A charter party has been defined in Planters Products, Inc. v. Court of Appeals 35 as:
[A] contract by which an entire ship, orsome principal part thereof, is let by the owner to another
person for a specified time or use; 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. x x x. 36 (Citations
omitted)
A charter party has two types. First, it could be a contract of affreightment whereby the use of
shipping space on vessels is leased in part or as a whole, to carry goods for others. The charter-
party provides for the hire of vessel only, either for a determinate period of time (time charter) or
for a single or consecutive voyage (voyage charter). The shipowner supplies the ships stores,
pay for the wages ofthe master and the crew, and defray the expenses for the maintenance of the
ship.37 The voyage remains under the responsibility of the carrier and it is answerable for the loss
of goods received for transportation. The charterer is free from liability to third persons in respect
of the ship.38
Second, charter by demise or bareboat charter under 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. 39 The charterer mans
the vessel with his own people and becomes, in effect, the owner for the voyage or service
stipulated and hence liable for damages or loss sustained by the goods transported. 40
Clearly then, despite its contract of affreightment with DONGNAMA, HEUNG-A remained
responsible as the carrier, hence, answerable for the damages incurred by the goods received for
transportation. "[C]ommon carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligenceand vigilance with respect to the safety of the
goods and the passengers they transport. Thus, common carriers are required to render service
with the greatest skill and foresight and to use all reasonable means to ascertain the nature and
characteristics of the goods tendered for shipment, and toexercise due care in the handling and
stowage, including such methods as their nature requires." 41
"[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the
goods they transported deteriorated or got lost or destroyed. That is, unless they provethat they
exercised extraordinary diligence in transporting the goods. Inorder to avoid responsibility for any
loss or damage, therefore, they have the burden of proving that they observed such
diligence."42 Further, under Article 1742 of the Civil Code, even if the loss, destruction, or
deterioration of the goods should be caused by the faulty nature of the containers, the common
carrier must exercise due diligence to forestall or lessen the loss.
Here, HEUNG-A failed to rebut this prima faciepresumption when it failed to give adequate
explanation as to how the shipment inside the container van was handled, stored and preserved
to forestall or prevent any damage or loss while the same was inits possession, custody and
control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of
lading the former issued to NOVARTIS. "A bill of lading is a written acknowledgement of the
receipt of goods and an agreement to transport and to deliver them at a specified place to a
person named or on his or her order. It operates both as a receipt and as a contract. It is a receipt
for the goods shipped and a contract to transport and deliver the same as therein
stipulated."43 PROTOP breached its contract with NOVARTIS when it failed to deliver the goods in
the same quantity, quality and description as stated in Bill of Lading No. PROTAS 200387.
The CA did not err in applying the provisions of the COGSA specifically, the rule on Package
Liability Limitation.
Under Article 1753 of the Civil Code, the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction or
deterioration. Since the subject shipment was being transported from South Korea to the
Philippines, the Civil Code provisions shall apply. In all mattersnot regulated by the Civil Code,
the rights and obligations of common carriers shall be governed by the Code of Commerce and
by special laws,44 such as the COGSA.
While the Civil Code contains provisions making the common carrier liable for loss/damage to the
goods transported, it failed to outline the manner of determining the amount of suchliability.
Article372 of the Code of Commerce fills in this gap, thus:
Article 372. The value of the goods which the carrier must pay in cases if loss or misplacement
shall be determined in accordance with that declared in the bill of lading, the shipper not being
allowed to present proof that among the goods declared therein there were articles of greater
value and money.
Horses, vehicles, vessels, equipment and all other principal and accessory means of
transportation shall be especially bound infavor of the shipper, although with respect to railroads
said liability shall be subordinated to the provisions of the laws of concession with respect to the
property, and to what this Code established as to the manner and form of effecting seizures and
attachments against said companies. (Emphasis ours)
In case, however, of the shippers failure to declare the value of the goods in the bill of lading,
Section 4, paragraph 5 of the COGSA provides:
Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to
or in connection with the transportation of goods in an amount exceeding $500 per package
lawful money of the United States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency, unless the nature and value of such
goods have been declared by the shipper before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading shall be prima facieevidence, but shall be conclusive
on the carrier.
Hence, when there is a loss/damage to goods covered by contracts of carriage from a foreign
port to a Philippine port and in the absence a shippers declaration of the value of the goods in
the bill of lading, as in the present case, the foregoing provisions of the COGSA shall apply. The
CA, therefore, did not err in ruling that HEUNG-A, WALLEM and PROTOPs liability is limited to
$500 per package or pallet.45
The Court likewise affirms the CA in pronouncing HEUNG-A, WALLEM and PROTOP liable only
for the lost/damaged 17 pallets instead of 19 pallets stated in the bill of lading. This is because,
per the "Shippers Load and Count" arrangement, the contents are not required to be checked
and inventoried by the carrier at the port of loading or before said carrier enters the port of
unloading in the Philippines since it is the shipper who has the sole responsibility for the quantity,
description and condition of the cargoes shipped in container vans. 46 As such, the carrier cannot
be held responsible for any discrepancy if the description in the bill of lading is different from the
actual contents of the container.47
Consonant with the ruling in the recent Asian Terminals, Inc. v. Philam Insurance Co., Inc., 48 the
prescriptive period for filing an action for lost/damaged goods governed by contracts of carriage
by sea to and from Philippine ports in foreign trade is governed by paragraph 6,Section 3 of the
COGSA which states:
(6) Unless notice of loss or damageand the general nature of such loss or damage be given in
writing to the carrier or his agent at the port of discharge before or at the time of the removal of
the goods into the custody of the person entitled to delivery thereof under the contract of carriage,
such removal shall be prima facieevidence of the delivery by the carrier of the goods as described
in the bill of lading. If the loss or damage is not apparent, the notice must be given within three
days of the delivery.

Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the
person taking delivery thereof.

The notice in writing need not be given if the state of the goods has at the time of their receipt
been the subject of joint survey or inspection. In any event the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit is brought withinone year
after delivery of the goods or the date when the goods should have been delivered: Provided,
That if a notice of loss or damage, either apparent or concealed, is not given as provided for in
this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should have been delivered.

It was further ruled in Asian Terminals that pursuant to the foregoing COGSA prov:sion, failure to
comply with the notice requirement shall not affect or prejudice the right of the shipper to bring
suit within one year after delivery of the goods.

The consignee, NOV ARTIS, received the subject shipment on January 5, 2001. PHILAM, as the
subrogee of NOVARTIS, filed a claim against PROTOP on June 4, 2001, against WALLEM on
October 12, 2001 and against HEUNG-A on December 11, 2001, or all within the one-year
prescriptive period. Verily then, despite NOV AR TIS' failure to comply with the three-day notice
requirement, its subrogee PHILAM is not barred from seeking reimbursement from PROTOP,
HEUNG-A and WALLEM because the demands for payment were timely filed.

The amount which PHILAM is entitled to receive shall earn a legal interest at the rate of six
percent (6%) per annum from the date of finality of this judgment until its full satisfaction pursuant
to Nacar v. Gallery Frames.49

WHEREFORE, all the foregoing considered, the Decision dated January 30, 2009 of the Court of
Appeals in CA-G.R. CV No. 89482 is hereby AFFlHMED with MODIFICATION in that the interest
rate on the award of US$8,500.00 shall be six percent (6%) per annum from the date of finality of
this judgment until fully paid.
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE
NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.
The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al., which
has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City,
exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit
Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor
Navidad.
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then
drunk, entered the EDSA LRT station after purchasing a token (representing payment of the
fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was
killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her
children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the
Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA
and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in
the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting
evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was
negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs
the following:
a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
b) Moral damages of P50,000.00;
c) Attorneys fees of P20,000;
d) Costs of suit.
The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
The compulsory counterclaim of LRTA and Roman are likewise dismissed. [1]
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated
its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad
and, instead, holding the LRTA and Roman jointly and severally liable thusly:
WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from
any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light
Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly
and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.[2]
The appellate court ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted
fist blows upon the victim and the evidence merely established the fact of death of Navidad by
reason of his having been hit by the train owned and managed by the LRTA and operated at the
time by Roman. The appellate court faulted petitioners for their failure to present expert evidence
to establish the fact that the application of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration in its resolution of 10 October
2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL COURT
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS
ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO
ROMAN IS AN EMPLOYEE OF LRTA.[3]
Petitioners would contend that the appellate court ignored the evidence and the factual findings of
the trial court by holding them liable on the basis of a sweeping conclusion that the presumption
of negligence on the part of a common carrier was not overcome. Petitioners would insist that
Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act of a
stranger that could not have been foreseen or prevented. The LRTA would add that the appellate
courts conclusion on the existence of an employer-employee relationship between Roman and
LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and
not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of carriage
was deemed created from the moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and protection under a contractual
relation, and that the appellate court had correctly held LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the
safety of passengers.[4] The Civil Code, governing the liability of a common carrier for death of or
injury to its passengers, provides:
Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for
all the circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or of strangers, if the common carriers
employees through the exercise of the diligence of a good father of a family could have prevented
or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. [5] Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage.[6] The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of
wilful acts or negligence of other passengers or of strangers if the common carriers employees
through the exercise of due diligence could have prevented or stopped the act or omission. [7] In
case of such death or injury, a carrier is presumed to have been at fault or been negligent,
and[8] by simple proof of injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure. [9] In the absence of satisfactory
explanation by the carrier on how the accident occurred, which petitioners, according to the
appellate court, have failed to show, the presumption would be that it has been at fault, [10] an
exception from the general rule that negligence must be proved. [11]
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176[12] and related provisions, in conjunction with Article 2180, [13] of the Civil
Code. The premise, however, for the employers liability is negligence or fault on the part of the
employee. Once such fault is established, the employer can then be made liable on the basis of
the presumption juris tantum that the employer failed to exercise diligentissimi patris families in
the selection and supervision of its employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the employee, a factual matter that has
not been shown. Absent such a showing, one might ask further, how then must the liability of the
common carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194[14] of the Civil Code can well apply.[15]In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. [16] Stated differently, when
an act which constitutes a breach of contract would have itself constituted the source of a quasi-
delictual liability had no contract existed between the parties, the contract can be said to have
been breached by tort, thereby allowing the rules on tort to apply.[17]
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that there is
nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of
its employee, Escartin, has not been duly proven x x x. This finding of the appellate court is not
without substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable
act or omission, he must also be absolved from liability. Needless to say, the contractual tie
between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus,
Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages
are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him. [18] It is an established rule that nominal damages cannot co-exist with
compensatory damages.[19]
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION
but only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman
is absolved from liability. No costs.
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated
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.
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
October 4, 1990, 5hence this petition with the central issue herein being whether respondent
court erred in reversing the decision of the trial court and in finding petitioners negligent and liable
for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final and
may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one
of which is when the findings of the appellate court are contrary to those of the trial court, in which
case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who
between the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an
evaluation of the evidence in this case for the prope calibration of their conflicting factual findings
and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle,
especially with one of his hands holding an umbrella. And, without having given the driver or the
conductor any indication that he wishes to board the bus. But defendants can also be found
wanting of the necessary diligence. In this connection, it is safe to assume that when the
deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of
being closed. This should be so, for it is hard to believe that one would even attempt to board a
vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence.
Under such circumstances, equity demands that there must be something given to the heirs of
the victim to assuage their feelings. This, also considering that initially, defendant common carrier
had made overtures to amicably settle the case. It did offer a certain monetary consideration to
the victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that
the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was
precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary
to the assertion of the appellees, the victim did indicate his intention to board the bus as can be
seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no
longer walking and made a sign to board the bus when the latter was still at a distance from him.
It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus
when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the 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, th bus had "just started" and "was still in
slow motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar
which is moving slowly. 14 An ordinarily prudent person would have made the attempt board the
moving conveyance under the same or similar circumstances. The fact that passengers board
and alight from slowly moving vehicle is a matter of common experience both the driver and
conductor in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to
persons boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to
observe extraordina diligence for the safety of the passengers transported by the according to all
the circumstances of each case. 16 A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence very cautious persons,
with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need
not make an express finding of fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By contract of carriage, the carrier
assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it is therefore incumbent
upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles
1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely
injured victim immediately to the hospital for medical treatment is a patent and incontrovertible
proof of their negligence. It defies understanding and can even be stigmatized as callous
indifference. The evidence shows that after the accident the bus could have forthwith turned at
Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to
allow a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim.
The vacuous reason given by petitioners that it was the wife of the deceased who caused the WHEREFORE, subject to the above modifications, the challenged judgment and resolution of
delay was tersely and correctly confuted by respondent court: respondent Court of Appeals are hereby AFFIRMED in all other respects.

... The pretension of the appellees that the delay was due to the fact that they had to wait for
about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is
rather scandalous and deplorable for a wife whose husband is at the verge of dying to have the
luxury of dressing herself up for about twenty minutes before attending to help her distressed and
helpless husband. 19

Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was
to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but
the companion of the victim who informed his family thereof. 20 In fact, it was only after the
refrigerator was unloaded that one of the passengers thought of sending somebody to the house
of the victim, as shown by the testimony of Virginia Abalos again, to wit:

Q Why, what happened to your refrigerator at that particular time?

A I asked them to bring it down because that is the nearest place to our house and when I went
down and asked somebody to bring down the refrigerator, I also asked somebody to call the
family of Mr. Cudiamat.

COURT:

Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr.
Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21

With respect to the award of damages, an oversight was, however, committed by respondent
Court of Appeals in computing the actual damages based on the gross income of the victim. The
rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire
earnings, but rather the loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings, not gross earnings, are to be considered, that is, the
total of the earnings less expenses necessary in the creation of such earnings or income and
minus living and other incidental expenses. 22

We are of the opinion that the deductible living and other expense of the deceased may fairly and
reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or
compensatory damages, respondent court found that the deceased was 48 years old, in good
health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a
year. Using the gross annual income as the basis, and multiplying the same by 12 years, it
accordingly awarded P288,000. Applying the aforestated rule on computation based on the net
earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in
accordance with prevailing jurisprudence, the death indemnity is hereby increased to
P50,000.00. 23
WESTWIND SHIPPING CORPORATION, Petitioner, vs. UCPB GENERAL INSURANCE CO.,
INC. and ASIAN TERMINALS INC., Respondents.
These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the
1997 Rules of Civil Procedure, September 13, 2011 Decision 1 and January 19, 2012
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set aside
the January 27, 2006 Decision 3 of the Manila City Regional Trial Court Branch (RTC) 30. The
facts, as established by the records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197
metal containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation
(SMC). The shipment, covered by Bill of Lading No. KBMA-1074, 4 was loaded and received clean
on board M/V Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind
Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for US
Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven
Centavos (US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six Million
Two Hundred Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos
(P6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the
custody of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services,
Inc.5 During the unloading operation, however, six containers/skids worth Philippine Pesos: One
Hundred Seventeen Thousand Ninety-Three and Twelve Centavos (P117,093.12) sustained
dents and punctures from the forklift used by the stevedores of Ocean Terminal Services, Inc.
(OTSI) in centering and shuttling the containers/skids. As a consequence, the local ship agent of
the vessel, Baliwag Shipping Agency, Inc., issued two Bad Order Cargo Receipt dated September
1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC,
withdrew from ATI the 197 containers/skids, including the six in damaged condition, and delivered
the same at SMCs warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was
discovered upon discharge that additional nine containers/skids valued at Philippine Pesos: One
Hundred Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-Eight Centavos
(P175,639.68) were also damaged due to the forklift operations; thus, making the total number of
15 containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and
OFII to recover the amount corresponding to the damaged 15 containers/skids. When UCPB paid
the total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two
and Eighty Centavos (P292,732.80), SMC signed the subrogation receipt. Thereafter, in the
exercise of its right of subrogation, UCPB instituted on August 30, 1994 a complaint for damages
against Westwind, ATI, and OFII.6
After trial, the RTC dismissed UCPBs complaint and the counterclaims of Westwind, ATI, and
OFII. It ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16
Cargo Gate Passes issued, as well as the doctrine laid down in International Container Terminal
Services, Inc. v. Prudential Guarantee & Assurance Co. Inc. 7 that a claim for reimbursement for
damaged goods must be filed within 15 days from the date of consignees knowledge. With
respect to Westwind, even if the action against it is not yet barred by prescription, conformably
with Section 3 (6) of the Carriage of Goods by Sea Act (COGSA) and Our rulings in E.E. Elser,
Inc., et al. v. Court of Appeals, et al. 8 and Belgian Overseas Chartering and Shipping N.V. v. Phil.
First Insurance Co., Inc., 9 the court a quo still opined that Westwind is not liable, since the
discharging of the cargoes were done by ATI personnel using forklifts and that there was no
allegation that it (Westwind) had a hand in the conduct of the stevedoring operations. Finally, the
trial court likewise absolved OFII from any liability, reasoning that it never undertook the operation
of the forklifts which caused the dents and punctures, and that it merely facilitated the release and
delivery of the shipment as the customs broker and representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13,
2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision
dated January 27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee
Westwind Shipping Corporation is hereby ordered to pay to the appellant UCPB General
Insurance Co., Inc., the amount of One Hundred Seventeen Thousand and Ninety-Three Pesos
and Twelve Centavos (Php117,093.12), while Orient Freight International, Inc. is hereby ordered
to pay to UCPB the sum of One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine Pesos
and Sixty-Eight Centavos (Php175,639.68). Both sums shall bear interest at the rate of six (6%)
percent per annum, from the filing of the complaint on August 30, 1994 until the judgment
becomes final and executory. Thereafter, an interest rate of twelve (12%) percent per annum shall
be imposed from the time this decision becomes final and executory until full payment of said
amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it
rendered a contrary view as regards the liability of Westwind and OFII. For the appellate court,
Westwind, not ATI, is responsible for the six damaged containers/skids at the time of its
unloading. In its rationale, which substantially followed Philippines First Insurance Co., Inc. v.
Wallem Phils. Shipping, Inc., 11 it concluded that the common carrier, not the arrastre operator, is
responsible during the unloading of the cargoes from the vessel and that it is not relieved from
liability and is still bound to exercise extraordinary diligence at the time in order to see to it that
the cargoes under its possession remain in good order and condition. The CA also considered
that OFII is liable for the additional nine damaged containers/skids, agreeing with UCPBs
contention that OFII is a common carrier bound to observe extraordinary diligence and is
presumed to be at fault or have acted negligently for such damage. Noting the testimony of OFIIs
own witness that the delivery of the shipment to the consignee is part of OFIIs job as a cargo
forwarder, the appellate court ruled that Article 1732 of the New Civil Code (NCC) does not
distinguish between one whose principal business activity is the carrying of persons or goods or
both and one who does so as an ancillary activity. The appellate court further ruled that OFII
cannot excuse itself from liability by insisting that JBL undertook the delivery of the cargoes to
SMCs warehouse. It opined that the delivery receipts signed by the inspector of SMC showed
that the containers/skids were received from OFII, not JBL. At the most, the CA said, JBL was
engaged by OFII to supply the trucks necessary to deliver the shipment, under its supervision, to
SMC.
Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied;
hence, they elevated the case before Us via petitions docketed as G.R. Nos. 200289 and
200314, respectively.
Westwind argues that it no longer had actual or constructive custody of the containers/skids at
the time they were damaged by ATIs forklift operator during the unloading operations. In
accordance with the stipulation of the bill of lading, which allegedly conforms to Article 1736 of the
NCC, it contends that its responsibility already ceased from the moment the cargoes were
delivered to ATI, which is reckoned from the moment the goods were taken into the latters
custody. Westwind adds that ATI, which is a completely independent entity that had the right to
receive the goods as exclusive operator of stevedoring and arrastre functions in South Harbor,
Manila, had full control over its employees and stevedores as well as the manner and procedure
of the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI by
overseeing and documenting the turnover and counterchecking if the quantity of the shipments
were in tally with the shipping documents at hand, but without participating in the physical
withdrawal and loading of the shipments into the delivery trucks of JBL. Assuming that it is a
common carrier, OFII insists that there is no need to rely on the presumption of the law that, as
a common carrier, it is presumed to have been at fault or have acted negligently in case of
damaged goods considering the undisputed fact that the damages to the containers/skids were
caused by the forklift blades, and that there is no evidence presented to show that OFII and
Westwind were the owners/operators of the forklifts. It asserts that the loading to the trucks were
made by way of forklifts owned and operated by ATI and the unloading from the trucks at the
SMC warehouse was done by way of forklifts owned and operated by SMC employees. Lastly,
OFII avers that neither the undertaking to deliver nor the acknowledgment by the consignee of
the fact of delivery makes a person or entity a common carrier, since delivery alone is not the
controlling factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc. 12 applies, as it
settled the query on which between a common carrier and an arrastre operator should be
responsible for damage or loss incurred by the shipment during its unloading. We elucidated at
length:
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the goods are unconditionally placed in
the possession of, and received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable
for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the
port of loading, until he delivers it on the shore or on the discharging wharf at the port of
unloading, unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court
interpreted the ship captains liability as ultimately that of the shipowner by regarding the captain
as the representative of the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea,
the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of
such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and
immunities set forth in the Act. Section 3 (2) thereof then states that among the carriers
responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited
on the wharf or between the establishment of the consignee or shipper and the ship's tackle.
Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to take
good care of the goods and to turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody.
In Firemans Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship
and responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and warehouseman. The relationship between the consignee and the common carrier
is similar to that of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE
to take good care of the goods that are in its custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the
CARRIER are therefore charged with and obligated to deliver the goods in good condition to the
consignee. (Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of
Appeals with the clarification that the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a
carrier may not be held solidarily liable at all times. But the precise question is which entity had
custody of the shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers responsibilities
are to properly and carefully load, care for and discharge the goods carried. The bill of lading
covering the subject shipment likewise stipulates that the carriers liability for loss or damage to
the goods ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds
a ship captain liable for the cargo from the time it is turned over to him until its delivery at the port
of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that
like the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is
accordingly responsible for the acts of the master, the crew, the stevedore, and his other agents.
It has also been held that it is ordinarily the duty of the master of a vessel to unload the cargo and
place it in readiness for delivery to the consignee, and there is an implied obligation that this shall
be accomplished with sound machinery, competent hands, and in such manner that no
unnecessary injury shall be done thereto. And the fact that a consignee is required to furnish
persons to assist in unloading a shipment may not relieve the carrier of its duty as to such
unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain
under the custody of the carrier x x x. 13
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines),
Inc.14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc., 15 the Court echoed the doctrine that
cargoes, while being unloaded, generally remain under the custody of the carrier. We cannot
agree with Westwinds disputation that "the carrier in Wallem clearly exercised supervision during
the discharge of the shipment and that is why it was faulted and held liable for the damage
incurred by the shipment during such time." What Westwind failed to realize is that the
extraordinary responsibility of the common carrier lasts until the time the goods are actually or
constructively delivered by the carrier to the consignee or to the person who has a right to receive
them. There is actual delivery in contracts for the transport of goods when possession has been
turned over to the consignee or to his duly authorized agent and a reasonable time is given him to
remove the goods.16 In this case, since the discharging of the containers/skids, which were
covered by only one bill of lading, had not yet been completed at the time the damage occurred,
there is no reason to imply that there was already delivery, actual or constructive, of the cargoes
to ATI. Indeed, the earlier case of Delsan Transport Lines, Inc. v. American Home Assurance
Corp.17 serves as a useful guide, thus:
Delsans argument that it should not be held liable for the loss of diesel oil due to backflow
because the same had already been actually and legally delivered to Caltex at the time it entered
the shore tank holds no water. It had been settled that the subject cargo was still in the custody of
Delsan because the discharging thereof has not yet been finished when the backflow occurred.
Since the discharging of the cargo into the depot has not yet been completed at the time of the
spillage when the backflow occurred, there is no reason to imply that there was actual delivery of
the cargo to the consignee. Delsan is straining the issue by insisting that when the diesel oil
entered into the tank of Caltex on shore, there was legally, at that moment, a complete delivery
thereof to Caltex. To be sure, the extraordinary responsibility of common carrier lasts from the
time the goods are unconditionally placed in the possession of, and received by, the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to a person who has the right to receive them. The discharging of oil products to
Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve
the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty
incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in vigilance over the goods and for the safety
of the passengers transported by them, according to all the circumstances of each case. The
mere proof of delivery of goods in good order to the carrier, and their arrival in the place of
destination in bad order, make 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.18
The contention of OFII is likewise untenable. A customs broker has been regarded as a common
carrier because transportation of goods is an integral part of its business. 19 In Schmitz Transport
& Brokerage Corporation v. Transport Venture, Inc., 20 the Court already reiterated: It is settled that
under a given set of facts, a customs broker may be regarded as a common
carrier.1wphi1 Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of
Appeals 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.
xxxx
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.
And in Calvo v. UCPB General Insurance Co. Inc., 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."21
That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric
Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which includes
the delivery of the shipment to the consignee. 22 Thus, for undertaking the transport of cargoes
from ATI to SMCs warehouse in Calamba, Laguna, OFII is considered a common carrier. 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 of whether it owns the vehicle to
be used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,23 extraordinary diligence in the vigilance over the goods 24 it transports according to the
peculiar 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.25 In the case at bar it was established that except for the six
containers/skids already damaged OFII received the cargoes from ATI in good order and
condition; and that upon its delivery to SMC additional nine containers/skids were found to be in
bad order as noted in the Delivery Receipts issued by OFII and as indicated in the Report of
Cares Marine Cargo Surveyors. Instead of merely excusing itself from liability by putting the
blame to ATI and SMC it is incumbent upon OFII to prove that it actively took care of the goods by
exercising extraordinary diligence in the carriage thereof. It failed to do so. Hence its presumed
negligence under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and
200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the
January 27 2006 Decision of the Manila City Regional Trial Court Branch 30 are AFFIRMED.
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS,
INC., Respondent.
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 1 against
Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages
arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on
September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas
from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was
by virtue of a tour package-contract with respondent that included transportation to and from the
Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account
of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave
the Resort in the afternoon of September 10, 2000, but was advised to stay for another night
because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to
Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and
into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other,
M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing
the captain, Matute and the other passengers who reached the surface asked him what they
could do to save the people who were still trapped under the boat. The captain replied "Iligtas
niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22
persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island.
Eight passengers, including petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for
Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of
$900.3
Petitioners, by letter of October 26, 2000, 4 demanded indemnification from respondent for the
death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000, 5 denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging
that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to
sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical
and Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11,
2000.6
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available
to the general public as they only ferry Resort guests and crew members. Nonetheless, it claimed
that it exercised the utmost diligence in ensuring the safety of its passengers; contrary to
petitioners allegation, there was no storm on September 11, 2000 as the Coast Guard in fact
cleared the voyage; and M/B Coco Beach III was not filled to capacity and had sufficient life
jackets for its passengers. By way of Counterclaim, respondent alleged that it is entitled to an
award for attorneys fees and litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four
conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is
clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is
clearance from the Resorts assistant manager.8 He added that M/B Coco Beach III met all four
conditions on September 11, 2000,9 but a subasco or squall, characterized by strong winds and
big waves, suddenly occurred, causing the boat to capsize. 10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners
Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated September 2,
2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008, 13 the appellate court denied petitioners appeal, holding, among
other things, that the trial court correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident
was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that respondent is a
common carrier since by its tour package, the transporting of its guests is an integral part of its
resort business. They inform that another division of the appellate court in fact held respondent
liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove
that it is a common carrier; that the Resorts ferry services for guests cannot be considered as
ancillary to its business as no income is derived therefrom; that it exercised extraordinary
diligence as shown by the conditions it had imposed before allowing M/B Coco Beach III to sail;
that the incident was caused by a fortuitous event without any contributory negligence on its part;
and that the other case wherein the appellate court held it liable for damages involved different
plaintiffs, issues and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals 17 in characterizing respondent 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 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 . . . 18 (emphasis and
underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondents ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And the
tour packages it offers, which include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in
arriving at the tour package price. That guests who opt not to avail of respondents ferry services
pay the same amount is likewise inconsequential. These guests may only be deemed to have
overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has
deliberately refrained from making distinctions on whether the carrying of persons or goods is the
carriers principal business, whether it is offered on a regular basis, or whether it is offered to the
general public. The intent of the law is thus to not consider such distinctions. Otherwise, there is
no telling how many other distinctions may be concocted by unscrupulous businessmen engaged
in the carrying of persons or goods in order to avoid the legal obligations and liabilities of common
carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case. 19 They are bound to carry
the passengers safely as far as human care and foresight can provide, using the utmost diligence
of very cautious persons, with due regard for all the circumstances. 20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that
the common carrier is at fault or negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence.21
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of
voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondents
position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern
Luzon which would also affect the province of Mindoro. 22 By the testimony of Dr. Frisco Nilo,
supervising weather specialist of PAGASA, squalls are to be expected under such weather
condition.23
A very cautious person exercising the utmost diligence would thus not brave such stormy weather
and put other peoples lives at risk. The extraordinary diligence required of common carriers
demands that they take care of the goods or lives entrusted to their hands as if they were their
own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event does not impress
either.
The elements of a "fortuitous event" are: (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.24
To fully free a common carrier from any liability, the fortuitous event must have been 2/3 x [52]
the proximate and only causeof the loss. And it should have exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the fortuitous event. 25
Life expectancy = 35
Respondent cites the squall that occurred during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 35 which,
expected under the weather condition of September 11, 2000. Moreover, evidence shows that when converted to Philippine peso applying the annual average exchange rate of $1 = P44 in
M/B Coco Beach III suffered engine trouble before it capsized and sank. 26 The incident was, 2000,36 amounts to P39,600. Ruelitos net earning capacity is thus computed as follows:
therefore, not completely free from human intervention.

The Court need not belabor how respondents evidence likewise fails to demonstrate that it Net Earning = life expectancy x (gross annual income - reasonable and necessary
exercised due diligence to prevent or minimize the loss before, during and after the occurrence of Capacity living expenses).
the squall. = 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Article 176427 vis--vis Article 220628 of the Civil Code holds the common carrier in breach of its
contract of carriage that results in the death of a passenger liable to pay the following: (1) Net Earning
indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages. = P8,316,000
Capacity

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.29
Respecting the award of moral damages, since respondent common carriers breach of contract
of carriage resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206 of
As for damages representing unearned income, the formula for its computation is:
the Civil Code, petitioners are entitled to moral damages.
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living
Since respondent failed to prove that it exercised the extraordinary diligence required of common
expenses).
carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary
damages, which are granted in contractual obligations if the defendant acted in a wanton,
Life expectancy is determined in accordance with the formula:
fraudulent, reckless, oppressive or malevolent manner.37
2 / 3 x [80 age of deceased at the time of death] 30
Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral
damages and P100,000 as exemplary damages.381avvphi1
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at
death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where
Experience Table of Mortality.31
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged against
respondent is reasonable for the purpose.
The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches that when an obligation,
income and less living and other incidental expenses. 32 The loss is not equivalent to the entire
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached,
earnings of the deceased, but only such portion as he would have used to support his
the contravenor can be held liable for payment of interest in the concept of actual and
dependents or heirs. Hence, to be deducted from his gross earnings are the necessary expenses
compensatory damages, subject to the following rules, to wit
supposed to be used by the deceased for his own needs. 33

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency
or forbearance of money, the interest due should be that which may have been stipulated in
Corp. v. Borja34teaches that when, as in this case, there is no showing that the living expenses
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
constituted the smaller percentage of the gross income, the living expenses are fixed at half of
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
the gross income.
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
Life expectancy = 2/3 x [80 - age of deceased at the time of death] on the amount of damages awarded may be imposed at the discretion of the court at the rate of
2/3 x [80 - 28] 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the rate of
12% per annum until satisfaction, in accordance with paragraph number 3 of the immediately
cited guideline in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the
following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for
Ruelitos loss of earning capacity; (3) P100,000 as moral damages; (4) P100,000 as exemplary
damages; (5) 10% of the total amount adjudged against respondent as attorneys fees; and (6) the
costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, vs. SPOUSES TERESITA
PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to
observe extraordinary diligence in the conduct of his business. He is presumed to be negligent
when death occurs to a passenger. His liability may include indemnity for loss of earning capacity
even if the deceased passenger may only be an unemployed high school student at the time of
the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the
adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA)
affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court
(RTC), Branch 260, in Paraaque City that had decreed them jointly and severally liable with
Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate
(Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting students from their respective
residences in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated in the front beside the
driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro
(Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On
August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the
Zarates residence. Aaron took his place on the left side of the van near the rear door. The van,
with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14
student riders on their way to Don Bosco. Considering that the students were due at Don Bosco
by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing
the narrow path underneath the Magallanes Interchange that was then commonly used by
Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was marked by
piles of construction materials and parked passenger jeepneys, and the railroad crossing in the
narrow path had no railroad warning signs, or watchmen, or other responsible persons manning
the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to
traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train),
operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train blew its horn to warn motorists
of its approach. When the train was about 50 meters away from the passenger bus and the van,
Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he
saw that a collision was imminent. The passenger bus successfully crossed the railroad tracks,
but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact threw
nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the
train, which dragged his body and severed his head, instantaneously killing him. Alano fled the
scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro could not be served with
summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Perea for the adequate and safe
transportation carriage of the former spouses' son from their residence in Paraaque to his school
at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the
minor son of spouses Zarate died in connection with a vehicular/train collision which occurred
while Aaron was riding the contracted carrier Kia Ceres van of spouses Perea, then driven and
operated by the latter's employee/authorized driver Clemente Alfaro, which van collided with the
train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes
Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a
railroad crossing used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and safety
warning signs and railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private vehicles
used on a daily basis the site of the collision as an alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on board the commuter train
involved without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended by the
railroad operator for railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement
between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from
the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for
negligence constituting the proximate cause of the vehicular collision, which resulted in the death
of plaintiff spouses' son;
(2) Whether or not the defendant spouses Perea being the employer of defendant Alfaro are
liable for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad
system is liable for negligence in failing to provide adequate safety warning signs and railings in
the area commonly used by motorists for railroad crossings, constituting the proximate cause of
the vehicular collision which resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Perea are liable for breach of the contract of carriage with
plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the diligence of
employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John
Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved
in the accident, in allowing or tolerating the motoring public to cross, and its failure to install safety
devices or equipment at the site of the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and
whatever amount the latter may be held answerable or which they may be ordered to pay in favor
of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed
by the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and
exemplary damages and attorney's fees.2
The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil
Code.
In their defense, the Pereas adduced evidence to show that they had exercised the diligence of
a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro
had been issued a drivers license and had not been involved in any vehicular accident prior to
the collision; that their own son had taken the van daily; and that Teodoro Perea had sometimes
accompanied Alfaro in the vans trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless
crossing of the van whose driver had not first stopped, looked and listened; and that the narrow
path traversed by the van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision, 3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorneys fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for reconsideration, 4 reiterating that the
cooperative gross negligence of the Pereas and PNR had caused the collision that led to the
death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on
the established circumstances.
The CAs Ruling
Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit: 5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable
together with defendant-appellants spouses Teodorico and Nanette Perea and defendant-
appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of defendants-appellants
Philippine National Railways.
The Pereas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral
and exemplary damages and attorneys fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereas against the Philippine
National Railways and in not holding the latter and its train driver primarily responsible for the
incident.
The trial court erred in awarding excessive damages and attorneys fees.
The trial court erred in awarding damages in the form of deceaseds loss of earning capacity in
the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but
limited the moral damages to P 2,500,000.00; and deleted the attorneys fees because the RTC
did not state the factual and legal bases, to wit: 6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch
260 of Paraaque City is AFFIRMED with the modification that the award of Actual Damages is
reduced to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for
Attorneys Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the ruling
in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company, 7 wherein the Court
gave the heirs of Cariaga a sum representing the loss of the deceaseds earning capacity despite
Cariaga being only a medical student at the time of the fatal incident. Applying the formula
adopted in the American Expectancy Table of Mortality:
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and started
working for his own livelihood) instead of 15 years (his age when he died). Considering that the
nature of his work and his salary at the time of Aarons death were unknown, it used the
prevailing minimum wage of P 280.00/day to compute Aarons gross annual salary to
be P110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aarons
life expectancy of 39.3 years, his gross income would aggregate to P 4,351,164.30, from which
his estimated expenses in the sum of P2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aarons computed net income turning out to be higher than
the amount claimed by the Zarates, only P 2,109,071.00, the amount expressly prayed for by
them, was granted.
On April 4, 2003, the CA denied the Pereas motion for reconsideration. 8
Issues
In this appeal, the Pereas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-
claim against the latter.
II. The lower court erred in affirming the trial courts decision awarding damages for loss of
earning capacity of a minor who was only a high school student at the time of his death in the
absence of sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereas and PNR jointly and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereas and the PNR,
basing their claim against the Pereas on breach of contract of carriage and against the PNR on
quasi-delict.
The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereas defense was that they exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a
drivers license and that he had not been involved in any vehicular accident prior to the fatal
collision with the train; that they even had their own son travel to and from school on a daily basis;
and that Teodoro Perea himself sometimes accompanied Alfaro in transporting the passengers
to and from school. The RTC gave scant consideration to such defense by regarding such
defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereas
operated as a common carrier; and that their standard of care was extraordinary diligence, not
the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually regarded as a
private carrier,9primarily because he only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use, the exact nature of the
operation of a school bus service has not been finally settled. This is the occasion to lay the
matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from
one place to another, gratuitously or for hire. The carrier is classified either as a private/special
carrier or as a common/public carrier.10 A private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public as ready to act for all who may
desire his or its services, undertakes, by special agreement in a particular instance only, to
transport goods or persons from one place to another either gratuitously or for hire. 11 The
provisions on ordinary contracts of the Civil Code govern the contract of private carriage.The
diligence required of a private carrier is only ordinary, that is, the diligence of a good father of the
family. In contrast, a common carrier is a person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering such services to the public. 12 Contracts of common carriage are governed
by the provisions on common carriers of the Civil Code, the Public Service Act, 13 and other
special laws relating to transportation. A common carrier is required to observe extraordinary
diligence, and is presumed to be at fault or to have acted negligently in case of the loss of the
effects of passengers, or the death or injuries to passengers. 14
In relation to common carriers, the Court defined public use in the following terms in United
States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public, we
must look not only to the character of the business to be done, but also to the proposed mode of
doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it
is not a public use, authorizing the exercise of the jurisdiction of the public utility commission.
There must be, in general, a right which the law compels the owner to give to the general public.
It is not enough that the general prosperity of the public is promoted. Public use is not
synonymous with public interest. The true criterion by which to judge the character of the use is
whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals, 16 the Court noted that Article 1732 of the Civil Code avoided
any distinction between a person or an enterprise offering transportation on a regular or an
isolated basis; and has not distinguished a carrier offering his services to the general public, that
is, the general community or population, from one offering his services only to a narrow segment
of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which supplements
the law on common carriers found in the Civil Code. Public service, according to Section 13,
paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientle, whether permanent or occasional, and
done for the general business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services. x x x. 17
Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators, 18 custom brokers and warehousemen,19 and
barge operators20 even if they had limited clientle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the
activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has
held out to the general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as advertised and held
out to the general public, the individual or the entity rendering such service is a private, not a
common, carrier. The question must be determined by the character of the business actually
carried on by the carrier, not by any secret intention or mental reservation it may entertain or
assert when charged with the duties and obligations that the law imposes. 21
Applying these considerations to the case before us, there is no question that the Pereas as the
operators of a school bus service were: (a) engaged in transporting passengers generally as a
business, not just as a casual occupation; (b) undertaking to carry passengers over established
roads by the method by which the business was conducted; and (c) transporting students for a
fee. Despite catering to a limited clientle, the Pereas operated as a common carrier because
they held themselves out as a ready transportation indiscriminately to the students of a particular
school living within or near where they operated the service and for a fee.
The common carriers standard of care and vigilance as to the safety of the passengers is defined
by law. Given the nature of the business and for reasons of public policy, the common carrier is
bound "to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case." 22 Article 1755
of the Civil Code specifies that the common carrier should "carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances." To successfully fend off liability in an action upon the death
or injury to a passenger, the common carrier must prove his or its observance of that
extraordinary diligence; otherwise, the legal presumption that he or it was at fault or acted
negligently would stand.23 No device, whether by stipulation, posting of notices, statements on
tickets, or otherwise, may dispense with or lessen the responsibility of the common carrier as
defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereas have not presented any compelling defense or reason by which the
Court might now reverse the CAs findings on their liability. On the contrary, an examination of the
records shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger. 25 The
presumption of negligence, being a presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been negligent. 26 It was the law no less that required
them to prove their observance of extraordinary diligence in seeing to the safe and secure
carriage of the passengers to their destination. Until they did so in a credible manner, they stood
to be held legally responsible for the death of Aaron and thus to be held liable for all the natural
consequences of such death.
There is no question that the Pereas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a family in
the selection and supervision of their driver was not legally sufficient. According to Article 1759 of
the Civil Code, their liability as a common carrier did not cease upon proof that they exercised all
the diligence of a good father of a family in the selection and supervision of their employee. This
was the reason why the RTC treated this defense of the Pereas as inappropriate in this action
for breach of contract of carriage.
The Pereas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier. 27 In this
connection, the records showed their drivers actual negligence. There was a showing, to begin
with, that their driver traversed the railroad tracks at a point at which the PNR did not permit
motorists going into the Makati area to cross the railroad tracks. Although that point had been
used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver
into taking that route. On the other hand, with his familiarity with that shortcut, their driver was
fully aware of the risks to his passengers but he still disregarded the risks. Compounding his lack
of care was that loud music was playing inside the air-conditioned van at the time of the accident.
The loudness most probably reduced his ability to hear the warning horns of the oncoming train to
allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he sought to
overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so
doing, he lost his view of the train that was then coming from the opposite side of the passenger
bus, leading him to miscalculate his chances of beating the bus in their race, and of getting clear
of the train. As a result, the bus avoided a collision with the train but the van got slammed at its
rear, causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the
railroad tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and regulations. 28He
thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately
presumed to be negligent.29
The omissions of care on the part of the van driver constituted negligence, 30 which, according to
Layugan v. Intermediate Appellate Court, 31 is "the omission to do something which a reasonable
man, guided by those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man would not do, 32 or as
Judge Cooley defines it, (t)he failure to observe for the protection of the interests of another
person, that degree of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury." 33
The test by which to determine the existence of negligence in a particular case has been aptly
stated in the leading case of Picart v. Smith, 34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is guilty
of negligence. The law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law. The existence of negligence in
a given case is not determined by reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must
of course be always determined in the light of human experience and in view of the facts involved
in the particular case. Abstract speculation cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the circumstances which are before
them or known to them. They are not, and are not supposed to be, omniscient of the future.
Hence they can be expected to take care only when there is something before them to suggest or
warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result
of the course actually pursued? If so, it was the duty of the actor to take precautions to guard
against that harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born
of this prevision, is always necessary before negligence can be held to exist. Stated in these
terms, the proper criterion for determining the existence of negligence in a given case is this:
Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have
foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the
conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent when
he traversed the railroad tracks at a point not allowed for a motorists crossing despite being fully
aware of the grave harm to be thereby caused to his passengers; and when he disregarded the
foresight of harm to his passengers by overtaking the bus on the left side as to leave himself blind
to the approach of the oncoming train that he knew was on the opposite side of the bus.
Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the
Court held the PNR solely liable for the damages caused to a passenger bus and its passengers
when its train hit the rear end of the bus that was then traversing the railroad crossing. But the
circumstances of that case and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory negligence was adduced against the
owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete with the showing of negligence
on the part of both the Pereas and the PNR. Another distinction is that the passenger bus in
Philippine National Railways v. Intermediate Appellate Court was traversing the dedicated railroad
crossing when it was hit by the train, but the Pereas school van traversed the railroad tracks at
a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally"
liable for damages arising from the death of Aaron. They had been impleaded in the same
complaint as defendants against whom the Zarates had the right to relief, whether jointly,
severally, or in the alternative, in respect to or arising out of the accident, and questions of fact
and of law were common as to the Zarates. 36 Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the Pereas was distinct from the basis of the
Zarates right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they
nonetheless could be held jointly and severally liable by virtue of their respective negligence
combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty
of negligence despite the school van of the Pereas traversing the railroad tracks at a point not
dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did
not ensure the safety of others through the placing of crossbars, signal lights, warning signs, and
other permanent safety barriers to prevent vehicles or pedestrians from crossing there. The RTC
observed that the fact that a crossing guard had been assigned to man that point from 7 a.m. to 5
p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to
control the vehicular and other traffic there. Verily, the Pereas and the PNR were joint
tortfeasors.
2.
Was the indemnity for loss of Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the RTC
on the liability, the CA modified the amount. Both lower courts took into consideration that Aaron,
while only a high school student, had been enrolled in one of the reputable schools in the
Philippines and that he had been a normal and able-bodied child prior to his death. The basis for
the computation of Aarons earning capacity was not what he would have become or what he
would have wanted to be if not for his untimely death, but the minimum wage in effect at the time
of his death. Moreover, the RTCs computation of Aarons life expectancy rate was not reckoned
from his age of 15 years at the time of his death, but on 21 years, his age when he would have
graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully
warranted.
Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1wphi1 They cited People v. Teehankee, Jr., 37 where the Court deleted the indemnity
for victim Jussi Leinos loss of earning capacity as a pilot for being speculative due to his having
graduated from high school at the International School in Manila only two years before the
shooting, and was at the time of the shooting only enrolled in the first semester at the Manila Aero
Club to pursue his ambition to become a professional pilot. That meant, according to the Court,
that he was for all intents and purposes only a high school graduate.
We reject the Pereas submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi
Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron
would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician,
or a lawyer). Instead, the computation of Aarons earning capacity was premised on him being a
lowly minimum wage earner despite his being then enrolled at a prestigious high school like Don
Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at
work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken
against his parents and in favor of the defendants whose negligence not only cost Aaron his life
and his right to work and earn money, but also deprived his parents of their right to his presence
and his services as well. Our law itself states that the loss of the earning capacity of the deceased
shall be the liability of the guilty party in favor of the heirs of the deceased, and shall in every case
be assessed and awarded by the court "unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his
death."38 Accordingly, we emphatically hold in favor of the indemnification for Aarons loss of
earning capacity despite him having been unemployed, because compensation of this nature is
awarded not for loss of time or earnings but for loss of the deceaseds power or ability to earn
money.39
and that their jobs would probably pay them high monthly salaries from P 10,000.00
to P 15,000.00 upon their graduation. Their earning capacities were computed at rates higher
than the minimum wage at the time of their deaths due to their being already senior agriculture
students of the University of the Philippines in Los Baos, the countrys leading educational
institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and exemplary damages awarded to the
Zarates in the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that such
amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates deep
mental anguish over their sons unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it would help the
Zarates obtain the means, diversions or amusements that would alleviate their suffering for the
loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice,
given the passage of a long time from when their mental anguish was inflicted on them on August
22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if
only to render effective the desired example for the public good. As a common carrier, the
Pereas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award of
exemplary damages in that amount would suffice to instill in them and others similarly situated
like them the ever-present need for greater and constant vigilance in the conduct of a business
imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated
on November 13, 2002; and ORDER the petitioners to pay the costs of suit.

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical student Edgardo
Carriagas earning capacity, although he survived the accident but his injuries rendered him
permanently incapacitated, was computed to be that of the physician that he dreamed to become.
The Court considered his scholastic record sufficient to justify the assumption that he could have
finished the medical course and would have passed the medical board examinations in due time,
and that he could have possibly earned a modest income as a medical practitioner. Also, in
People v. Sanchez,41the Court opined that murder and rape victim Eileen Sarmienta and murder
victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time,
COMPAIA MARITIMA, petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone
the services of the Compaia Maritima, a shipping corporation, for the shipment of 2,645 bales of
hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent
transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral
contract was later on confirmed by a formal and written booking issued by Macleod's branch
office in Sasa and handcarried to Compaia Maritima's branch office in Davao in compliance with
which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of
the hemp was completed on October 29, 1952. These two lighters were manned each by a
patron and an assistant patron. The patrons of both barges issued the corresponding carrier's
receipts and that issued by the patron of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the
government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot
belonging to Compaia Maritima on which the hemp was to be loaded. During the night of
October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the
damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly
notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The
damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing,
reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks
and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned
hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of
116,835.00. After reclassification, the value of the reconditioned hemp was reduced to
P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30
representing Macleod's expenses in checking, grading, rebating, and other fees for washing,
cleaning and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02.
All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025,
were insured with the Insurance Company of North America against all losses and damages. In
due time, Macleod filed a claim for the loss it suffered as above stated with said insurance
company, and after the same had been processed, the sum of P64,018.55 was paid, which was
noted down in a document which aside from being a receipt of the amount paid, was a
subrogation agreement between Macleod and the insurance company wherein the former
assigned to the latter its rights over the insured and damaged cargo. Having failed to recover
from the carrier the sum of P60,421.02, which is the only amount supported by receipts, the
insurance company instituted the present action on October 28, 1953. After trial, the court a
quo rendered judgment ordering the carrier to pay the insurance company the sum of
P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid,
and the costs. This judgment was affirmed by the Court of Appeals on December 14, 1960.
Hence, this petition for review.
The issues posed before us are: (1) Was there a contract of carriage between the carrier and the
shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier
which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which
would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage
caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event,
storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent
insurance company sue the carrier under its insurance contract as assignee of Macleod in spite
of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has
the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of
the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of
proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality
to do so?
1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod
and Company contracted by telephone the services of petitioner to ship the hemp in question
from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to
Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written
booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of
its lighters to undertake the service. It also appears that the patrons of said lighters were
employees of the carrier with due authority to undertake the transportation and to sign the
documents that may be necessary therefor so much so that the patron of LCT No. 1025 signed
the receipt covering the cargo of hemp loaded therein as follows: .
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at
Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the
contract of carriage already entered into between the carrier and the shipper, for that preparatory
step is but part and parcel of said contract of carriage. The lighters were merely employed as the
first step of the voyage, but once that step was taken and the hemp delivered to the carrier's
employees, the rights and obligations of the parties attached thereby subjecting them to the
principles and usages of the maritime law. In other words, here we have a complete contract of
carriage the consummation of which has already begun: the shipper delivering the cargo to the
carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized
employees, under which Macleod became entitled to the privilege secured to him by law for its
safe transportation and delivery, and the carrier to the full payment of its freight upon completion
of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry
and deliver, and if actually no goods are received there can be no such contract. The liability and
responsibility of the carrier under a contract for the carriage of goods commence on their actual
delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge
of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good
delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery
to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another,
and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the
goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to
the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied)
... The test as to whether the relation of shipper and carrier had been established is, Had the
control and possession of the cotton been completely surrendered by the shipper to the railroad
company? Whenever the control and possession of goods passes to the carrier and nothing
remains to be done by the shipper, then it can be said with certainty that the relation of shipper
and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St.
Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews &
Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart &
Co., et al. v. Wade, et al., 200 S.W. 148).
The claim that there can be no contract of affreightment because the hemp was not actually
loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as already
stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the
receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the
cargo "in behalf of S.S. Bowline Knot in good order and condition." On the other hand, the
authorities are to the effect that a bill of lading is not indispensable for the creation of a contract of
carriage.
Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading,
although article 350 of the Code of Commerce provides that "the shipper as well as the carrier of
merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As regards
the form of the contract of carriage it can be said that provided that there is a meeting of the
minds and from such meeting arise rights and obligations, there should be no limitations as to
form." The bill of lading is not essential to the contract, although it may become obligatory by
reason of the regulations of railroad companies, or as a condition imposed in the contract by the
agreement of the parties themselves. The bill of lading is juridically a documentary proof of the
stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs.
Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite in the
contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the
carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct.
Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)
The liability of the carrier as common carrier begins with the actual delivery of the goods for
transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance
of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided
by statute that liability commences with the issuance of the bill of lading, actual delivery and
acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself
behind the claim of force majeure or storm which occurred on the night of October 29, 1952. But
the evidence fails to bear this out.
Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure,
but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may
be inferred from the following findings of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on
its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as
rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4)
conclusively showing that the barge was not seaworthy it should be noted that on the night of
the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly,
winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing
in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's
wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine
Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order
to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation
Co., CA-G.R. No. 23167-R, March 12, 1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors,
attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy
compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of
two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the
rain water 'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals.
3. There can also be no doubt that the insurance company can recover from the carrier as
assignee of the owner of the cargo for the insurance amount it paid to the latter under the
insurance contract. And this is so because since the cargo that was damaged was insured with
respondent company and the latter paid the amount represented by the loss, it is but fair that it be
given the right to recover from the party responsible for the loss. The instant case, therefore, is
not one between the insured and the insurer, but one between the shipper and the carrier,
because the insurance company merely stepped into the shoes of the shipper. And since the
shipper has a direct cause of action against the carrier on account of the damage of the cargo, no
valid reason is seen why such action cannot be asserted or availed of by the insurance company
as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the insurance
policy not only because it is not a privy to it but also because it cannot avoid its liability to the
shipper under the contract of carriage which binds it to pay any loss that may be caused to the
cargo involved therein. Thus, we find fitting the following comments of the Court of Appeals:
It was not imperative and necessary for the trial court to pass upon the question of whether or not
the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by
appellee. Appellant was neither a party nor privy to this insurance contract, and therefore cannot
avail itself of any defect in the policy which may constitute a valid reason for appellee, as the
insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the policy
contained, if any, is deemed to have been waived by the subsequent payment of Macleod's claim
by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and appellee
is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated,
appellant is liable to Macleod and Company of the Philippines for the los or damage to the 1,162
bales of hemp after these were received in good order and condition by the patron of appellant's
LCT No. 1025, it necessarily follows that appellant is likewise liable to appellee who, as assignee
of Macleod, merely stepped into the shoes of and substi-tuted the latter in demanding from
appellant the payment for the loss and damage aforecited.
4. It should be recalled in connection with this issue that during the trial of this case the carrier
asked the lower court to order the production of the books of accounts of the Odell Plantation
containing the charges it made for the loss of the damaged hemp for verification of its
accountants, but later it desisted therefrom on the claim that it finds their production no longer
necessary. This desistance notwithstanding, the shipper however pre-sented other documents to
prove the damage it suffered in connection with the cargo and on the strength thereof the court a
quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals affirmed this
award upon the theory that the desistance of the carrier from producing the books of accounts of
Odell Plantation implies an admission of the correctness of the statements of accounts contained
therein, petitioner now contends that the Court of Appeals erred in basing the affirmance of the
award on such erroneous interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the books of
accounts of Odell Plantation presented in court is tantamount to an admission that the statements
contained therein are correct and their verification not necessary because its main defense here,
as well as below, was that it is not liable for the loss because there was no contract of carriage
between it and the shipper and the loss caused, if any, was due to a fortuitous event. Hence,
under the carrier's theory, the correctness of the account representing the loss was not so
material as would necessitate the presentation of the books in question. At any rate, even if the
books of accounts were not produced, the correctness of the accounts cannot now be disputed
for the same is supported by the original documents on which the entries in said books were
based which were presented by the shipper as part of its evidence. And according to the Court of
Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of
respondent.

5. Finally, with regard to the question concerning the personality of the insurance company to
maintain this action, we find the same of no importance, for the attorney himself of the carrier
admitted in open court that it is a foreign corporation doing business in the Philippines with a
personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO
CENDANA, respondents.
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's principaloccupation 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.
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners, vs. COURT OF
APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., respondents.
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 4 that the vehicles passing on that portion of
the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil
was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it was
dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed
was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly
negligent and should be held liable for the injuries suffered by private respondent Amyline
Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and 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. 7They 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, in Bachelor
Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a
fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus
and suffered injuries, was held also jointly and severally liable with the bus company to the
injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the bus
on which plaintiff was riding concurred with the negligence of a third party who was the driver of
another vehicle, thus causing an accident. In Anuran v. Buo, 16 Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of
Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the
vehicle were jointly and severally held liable to the injured passenger or the latters' heirs. The
basis of this allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from contract
while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as
1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a
passenger due to the negligence of the driver of the bus on which he was riding and of the driver
of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally
liable for damages. Some members of the Court, though, are of the view that under the
circumstances they are liable on quasi-delict. 20
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the
jeepney driver from liability to the injured passengers and their families while holding the owners
of the jeepney jointly and severally liable, but that is because that case was expressly tried and
decided exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and
Carreon (the jeepney owners) were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly
and severally liable with 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.
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.
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 only common carriers so as not
to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities to a single specific or "special customer" under
a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy
to local governments than the previous enactments, to make them economically and financially
viable to serve the people and discharge their functions with a concomitant obligation to accept
certain devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed
(Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code. 9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February
27, 1995, we referred the case to the respondent Court of Appeals for consideration and
adjudication. 10 On November 29, 1995, the respondent court rendered a decision 11 affirming the
trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied
on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated November
11, 1996. 13Petitioner moved for a reconsideration which was granted by this Court in a
Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is
not a common carrier or a transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and
must hold himself out as ready to engage in the transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for
hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all
persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the
definition of a common carrier. In De Guzman vs. Court of Appeals 16we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any
distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article 1877
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
every person that now or hereafter may own, operate. manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier, railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation system gas, electric light heat and power, water
supply andpower petroleum, sewerage system, wire or wireless communications systems, wire or
wireless broadcasting stations and other similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes
no distinction as to the means of transporting, as long as it is by land, water or air. It does not
provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in
the United States, oil pipe line operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have the preferential right
to utilize installations for the transportation of petroleum owned by him, but is obligated to utilize
the remaining transportation capacity pro rata for the transportation of such other petroleum as
may be offered by others for transport, and to charge without discrimination such rates as may
have been approved by the Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides:
that everything relating to the exploration for and exploitation of petroleum . . . and everything
relating to the manufacture, refining, storage, or transportation by special methods of petroleum,
is hereby declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum
products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the
case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as
amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water, except
as provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government Code of
1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local
Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be
one of those being deemed to be exempted from the taxing powers of the local government units.
May we know the reason why the transportation business is being excluded from the taxing
powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131),
line 16, paragraph 5. It states that local government units may not impose taxes on the business
of transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there
that provinces have the power to impose a tax on business enjoying a franchise at the rate of not
more than one-half of 1 percent of the gross annual receipts. So, transportation contractors who
are enjoying a franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government
units on the carrier business. Local government units may impose taxes on top of what is already
being imposed by the National Internal Revenue Code which is the so-called "common carriers
tax." We do not want a duplication of this tax, so we just provided for an exception under Section
125 [now Sec. 137] that a province may impose this tax at a specific rate.
18
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . .
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.