SECTION 4 • Implies a public use and service to the public, and
Common Carriers (n) indeed, the principal determinative characteristic of a
SUBSECTION 1. General Provisions
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.
Article 1733. Common carriers, from the nature of their
business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the
goods is further expressed in articles 1734, 1735, and
1745, Nos. 5, 6, and 7, while the extraordinary diligence for
the safety of the passengers is further set forth in articles
1755 and 1756.
SUBSECTION 2. Vigilance Over Goods
Article 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same
is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or
in the containers;
(5) Order or act of competent public authority.
Article 1735. In all cases other than those mentioned in
Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods
are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence as required in article 1733.
Article 1736. 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, without prejudice to the provisions of article 1738.
Article 1737. The common carrier's duty to observe
extraordinary diligence over the goods remains in full force
and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner has made use
of the right of stoppage in transitu.
Article 1738. The extraordinary liability of the common
carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place
of destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them.
Definition
Public utility
• A business or service which is engaged in regularly
supplying the public with some commodity or service of
public consequence, such as electricity, gas, water,
transportation or telephone or telegraph service.
1
public utility is that of service to or readiness to serve, an
indefinite public (or portion of the public as such) which
has a legal right to demand and receive its services and
commodities. There must be a dedication or holding out,
either express or implied, of produce or services to the
public as a class
Public service
• In respect of the public service or use of public utilities,
the word public does not mean the whole public nor does
it mean all the people in a certain area or political
subdivision. Rather it means individuals in general
without restriction or selection to the extent that
the capacity of the utility may admit of such
service or use. Accordingly, the use and enjoyment of
the utility service may be local and limited in the territory
served and the fact that the service is limited to a
particular district or a part of a town does not prevent
the organization or business from being a public utility.
• The number of people actually served does not
determine whether a person or company is a public
utility. Such a person or company which holds himself or
itself out to serve all who wish to avail themselves of the
service may be a public utility even though only one or
two people actually receive service. Furthermore, the
mere fact that service is rendered only under contract
does not prevent a company from being a public utility.
Transportation
• A movement of things or persons from one place to
another; a carrying across; and it is immaterial whether
the carrying be by rail, by water or by air.
• Includes waiting time, loading and unloading, stopping in
transit and all other accessorial service in connection
with the loaded movement
• Includes locomotives and cars and other vehicles and all
instrumentalities and facilities of shipment or carriage,
irrespective of ownership or of any contract, express or
implied, for the use thereof, and all services in
connection with the receipt, delivery, elevation and
transfer in transit, ventilation, refrigerating or icing,
storage and handling of property transported
• Intended to include every phase logically or reasonably
connected with the transportation of property, from the
time of its initial delivery to the carrier until its final
delivery by the carrier to the consignee
G.R. No. L-25599 April 4, 1968
HOME INSURANCE COMPANY, plaintiff-appellee, vs.
AMERICAN STEAMSHIP AGENCIES, INC. and LUZON
STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-
appellant.
"Consorcio Pesquero del Peru of South America" shipped
freight pre-paid at Chimbate, Peru, 21,740 jute bags of
Peruvian fish meal through SS Crowborough, covered by
clean bills of lading Numbers 1 and 2, both dated January
17, 1963. The cargo, consigned to San Miguel Brewery,
Inc., now San Miguel Corporation, and insured by Home
Insurance Company for $202,505, arrived in Manila on
March 7, 1963 and was discharged into the lighters of
Luzon Stevedoring Company. When the cargo was
delivered to consignee San Miguel Brewery Inc., there were
shortages amounting to P12,033.85, causing the latter to
lay claims against Luzon Stevedoring Corporation, Home
Insurance Company and the American Steamship
Agencies, owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance
Company paid the consignee P14,870.71 — the insurance
value of the loss, as full settlement of the claim. Having
been refused reimbursement by both the Luzon
Stevedoring Corporation and American Steamship
Agencies, Home Insurance Company, as subrogee to the
consignee, filed against them on March 6, 1964 before the
Court of First Instance of Manila a complaint for recovery of
P14,870.71 with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it
delivered with due diligence the goods in the same
quantity and quality that it had received the same from the
carrier. It also claimed that plaintiff's claim had prescribed
under Article 366 of the Code of Commerce stating that the
claim must be made within 24 hours from receipt of the
cargo.
American Steamship Agencies denied liability by alleging
that under the provisions of the Charter party referred to in
the bills of lading, the charterer, not the shipowner, was
responsible for any loss or damage of the cargo.
Furthermore, it claimed to have exercised due diligence in
stowing the goods and that as a mere forwarding agent, it
was not responsible for losses or damages to the cargo.
On November 17, 1965, the Court of First Instance, after
trial, absolved Luzon Stevedoring Corporation, having
found the latter to have merely delivered what it received
from the carrier in the same condition and quality, and
ordered American Steamship Agencies to pay plaintiff
P14,870.71 with legal interest plus P1,000 attorney's fees.
Said court cited the following grounds:
(a) The non-liability claim of American Steamship Agencies
under the charter party contract is not tenable because
Article 587 of the Code of Commerce makes the ship agent
also civilly liable for damages in favor of third persons due
to the conduct of the captain of the carrier;
(b) The stipulation in the charter party contract exempting
the owner from liability is against public policy under
Article 1744 of the Civil Code;
(c) In case of loss, destruction or deterioration of goods,
common carriers are presumed at fault or negligent under
Article 1735 of the Civil Code unless they prove
extraordinary diligence, and they cannot by contract
exempt themselves from liability resulting from their
negligence or that of their servants; and
(d) When goods are delivered to the carrier in good order
and the same are in bad order at the place of destination,
the carrier is prima facie liable.
Disagreeing with such judgment, American Steamship
Agencies appealed directly to Us. The appeal brings forth
for determination this legal issue: Is the stipulation in the
charter party of the owner's non-liability valid so as to
absolve the American Steamship Agencies from liability for
loss?
The bills of lading,1 covering the shipment of Peruvian fish
meal provide at the back thereof that the bills of lading
shall be governed by and subject to the terms and
conditions of the charter party, if any, otherwise, the bills
of lading prevail over all the agreements.2 On the of the
bills are stamped "Freight prepaid as per charter party.
Subject to all terms, conditions and exceptions of charter
party dated London, Dec. 13, 1962."
A perusal of the charter party3 referred to shows that while
2
the possession and control of the ship were not entirely
transferred to the charterer, 4 the vessel was chartered to
its full and complete capacity (Exh. 3). Furthermore, the,
charter had the option to go north or south or vice-
versa,5 loading, stowing and discharging at its risk and
expense.6 Accordingly, the charter party contract is one of
affreightment over the whole vessel rather than a demise.
As such, the liability of the shipowner for acts or
negligence of its captain and crew, would remain in the
absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that
the owner is liable for loss or damage to the goods caused
by personal want of due diligence on its part or its
manager to make the vessel in all respects seaworthy and
to secure that she be properly manned, equipped and
supplied or by the personal act or default of the owner or
its manager. Said paragraph, however, exempts the owner
of the vessel from any loss or damage or delay arising from
any other source, even from the neglect or fault of the
captain or crew or some other person employed by the
owner on board, for whose acts the owner would ordinarily
be liable except for said paragraph..
Regarding the stipulation, the Court of First Instance
declared the contract as contrary to Article 587 of the Code
of Commerce making the ship agent civilly liable for
indemnities suffered by third persons arising from acts or
omissions of the captain in the care of the goods and
Article 1744 of the Civil Code under which a stipulation
between the common carrier and the shipper or owner
limiting the liability of the former for loss or destruction of
the goods to a degree less than extraordinary diligence is
valid provided it be reasonable, just and not contrary to
public policy. The release from liability in this case was
held unreasonable and contrary to the public policy on
common carriers.
The provisions of our Civil Code on common carriers were
taken from Anglo-American law.7 Under American
jurisprudence, a common carrier undertaking to carry a
special cargo or chartered to a special person only,
becomes a private carrier.8 As a private carrier, a
stipulation exempting the owner from liability for the
negligence of its agent is not against public policy,9 and is
deemed valid.
Such doctrine We find reasonable. The Civil Code
provisions on common carriers should not be applied
where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the
owner from liability for loss due to the negligence of its
agent would be void only if the strict public policy
governing common carriers is applied. Such policy has no
force where the public at large is not involved, as in the
case of a ship totally chartered for the use of a single
party.
And furthermore, in a charter of the entire vessel, the bill
of lading issued by the master to the charterer, as shipper,
is in fact and legal contemplation merely a receipt and a
document of title not a contract, for the contract is the
charter party.10 The consignee may not claim ignorance of
said charter party because the bills of lading expressly
referred to the same. Accordingly, the consignees under
the bills of lading must likewise abide by the terms of the
charter party. And as stated, recovery cannot be had
thereunder, for loss or damage to the cargo, against the
shipowners, unless the same is due to personal acts or
negligence of said owner or its manager, as distinguished
from its other agents or employees. In this case, no such
personal act or negligence has been proved.
WHEREFORE, the judgment appealed from is hereby
reversed and appellant is absolved from liability to plaintiff.
No costs. So ordered.
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners, vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO,
respondents.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO
DETERMINE COMMON CARRIER. — Article 1732 of the Civil
Code defines a common carrier as "(a) person, corporation
or firm, or association engaged in the business of carrying
or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the
public." The test to determine a common carrier is
"whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or
extent of the business transacted." . . . The holding of the
Court in De Guzman vs. Court of Appeals is instructive. In
referring to Article 1732 of the Civil Code, it held thus: "The
above article makes no distinction between one whose
principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as a "sideline"). Article
1732 also carefully avoids making any distinction between
a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguished between a carrier offering its
services to the "general public," i.e., the general
community or population, and one who offers services or
solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately
refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER
GOODS TRANSPORTED; WHEN PRESUMPTION OF
NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME;
WHEN PRESUMPTION MADE ABSOLUTE. — Common
carriers are obliged to observe extraordinary diligence in
the vigilance over the goods transported by them.
Accordingly, they are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the
presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases
where the presumption is applied, the common carrier
must prove that it exercised extraordinary diligence in
order to overcome the presumption . . . The presumption of
negligence was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her assertion,
private respondent need not introduce any evidence to
prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption
conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED
NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. —
In De Guzman vs. Court of Appeals, the Court held that
hijacking, not being included in the provisions of Article
1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have
been at fault or negligent. To exculpate the carrier from
liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible
threat, violence, or force. This is in accordance with Article
1745 of the Civil Code which provides: "Art. 1745. Any of
the following or similar stipulations shall be considered
3
unreasonable, unjust and contrary to public policy . . . (6)
That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or
irresistible threat, violences or force, is dispensed with or
diminished"; In the same case, the Supreme Court also
held that: "Under Article 1745 (6) above, a common carrier
is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers
like thieves or robbers, except where such thieves or
robbers in fact acted "with grave of irresistible threat,
violence of force," We believe and so hold that the limits of
the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or
irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS
CONCLUSIVE. — In this case, petitioner herself has made
the admission that she was in the trucking business,
offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to
prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO
ALLEGES A FACT. — Petitioner presented no other proof of
the existence of the contract of lease. He who alleges a
fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE
IF AFFIANTS AVAILABLE AS WITNESSES. — While the
affidavit of Juanito Morden, the truck helper in the hijacked
truck, was presented as evidence in court, he himself was
a witness as could be gleaned from the contents of the
petition. Affidavits are not considered the best evidence if
the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT
IS WHAT LAW DEFINES IT TO BE. — Granting that the said
evidence were not self-serving, the same were not
sufficient to prove that the contract was one of lease. It
must be understood that a contract is what the law defines
it to be and not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision **
of the Court of Appeals in "RODOLFO A. CIPRIANO, doing
business under the name CIPRIANO TRADING ENTERPRISES
plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing
business under the name of BASCOS TRUCKING,
defendant-appellant," C.A.-G.R. CV No. 25216, the
dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the
decision appealed from, which is hereby affirmed in toto.
Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading
Enterprise (CIPTRADE for short) entered into a hauling
contract 2 with Jibfair Shipping Agency Corporation
whereby the former bound itself to haul the latter's 2,000
m/tons of soya bean meal from Magallanes Drive, Del Pan,
Manila to the warehouse of Purefoods Corporation in
Calamba, Laguna. To carry out its obligation, CIPTRADE,
through Rodolfo Cipriano, subcontracted with Estrellita
Bascos (petitioner) to transport and to deliver 400 sacks of
soya bean meal worth P156,404.00 from the Manila Port
Area to Calamba, Laguna at the rate of P50.00 per metric
ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping
Agency the amount of the lost goods in accordance with
the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any
loss in bags due to theft, hijacking and non-delivery or
damages to the cargo during transport at market
value, . . ." 3
Cipriano demanded reimbursement from petitioner but the
latter refused to pay. Eventually, Cipriano filed a complaint
for a sum of money and damages with writ of preliminary
attachment 4 for breach of a contract of carriage. The
prayer for a Writ of Preliminary Attachment was supported
by an affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in
Sec. 1, Rule 57 the Rules of Court, whereby a writ of
preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or
disposed of his property, or is about to do so, with intent to
defraud his creditors;"
5. That there is no sufficient security for the claim sought
to be enforced by the present action;
6. That the amount due to the plaintiff in the above-
entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment
on February 17, 1987.
In her answer, petitioner interposed the following defenses:
that there was no contract of carriage since CIPTRADE
leased her cargo truck to load the cargo from Manila Port
Area to Laguna; that CIPTRADE was liable to petitioner in
the amount of P11,000.00 for loading the cargo; that the
truck carrying the cargo was hijacked along Canonigo St.,
Paco, Manila on the night of October 21, 1988; that the
hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the
hijacked properties; that after preliminary investigation, an
information for robbery and carnapping were filed against
Jose Opriano, et al.; and that hijacking, being a force
majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the
dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of
plaintiff and against defendant ordering the latter to pay
the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND
FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for
actual damages with legal interest of 12% per cent per
annum to be counted from December 4, 1986 until fully
paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as
and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary
Attachment" dated March 10, 1987 filed by defendant is
DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent
Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she
makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND
4
NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING
OF THE RESPONDENT COURT THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT,
NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS
DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE
FINDING OF THE TRIAL COURT THAT PETITIONER'S MOTION
TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY
ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC
BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1)
was petitioner a common carrier?; and (2) was the
hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a
common carrier, found that she admitted in her answer
that she did business under the name A.M. Bascos Trucking
and that said admission dispensed with the presentation by
private respondent, Rodolfo Cipriano, of proofs that
petitioner was a common carrier. The respondent Court
also adopted in toto the trial court's decision that petitioner
was a common carrier, Moreover, both courts appreciated
the following pieces of evidence as indicators that
petitioner was a common carrier: the fact that the truck
driver of petitioner, Maximo Sanglay, received the cargo
consisting of 400 bags of soya bean meal as evidenced by
a cargo receipt signed by Maximo Sanglay; the fact that
the truck helper, Juanito Morden, was also an employee of
petitioner; and the fact that control of the cargo was
placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts
that petitioner was a common carrier, she alleged in this
petition that the contract between her and Rodolfo A.
Cipriano, representing CIPTRADE, was lease of the truck.
She cited as evidence certain affidavits which referred to
the contract as "lease". These affidavits were made by
Jesus Bascos 8 and by petitioner herself. 9 She further
averred that Jesus Bascos confirmed in his testimony his
statement that the contract was a lease contract. 10 She
also stated that: she was not catering to the general public.
Thus, in her answer to the amended complaint, she said
that she does business under the same style of A.M.
Bascos Trucking, offering her trucks for lease to those who
have cargo to move, not to the general public but to a few
customers only in view of the fact that it is only a small
business. 11
We agree with the respondent Court in its finding that
petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as
"(a) person, corporation or firm, or association engaged in
the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation,
offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has
held out to the general public as his occupation rather than
the quantity or extent of the business transacted." 12 In
this case, petitioner herself has made the admission that
she was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same.
13
But petitioner argues that there was only a contract of
lease because they offer their services only to a select
group of people and because the private respondents,
plaintiffs in the lower court, did not object to the
presentation of affidavits by petitioner where the
transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in
De Guzman vs. Court of Appeals 14 is instructive. In
referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one
whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a "sideline"). Article
1732 also carefully avoids making any distinction between
a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general
community or population, and one who offers services or
solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately
refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the
court, both the trial and appellate courts have dismissed
them as self-serving and petitioner contests the
conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not
self-serving, the same were not sufficient to prove that the
contract was one of lease. It must be understood that a
contract is what the law defines it to be and not what it is
called by the contracting parties. 15 Furthermore,
petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of
proving it. 16
Likewise, We affirm the holding of the respondent court
that the loss of the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by
them. 17 Accordingly, they are presumed to have been at
fault or to have acted negligently if the goods are lost,
destroyed or deteriorated. 18 There are very few instances
when the presumption of negligence does not attach and
these instances are enumerated in Article 1734. 19 In
those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted
force majeure which exculpated her from liability for the
loss of the cargo. In De Guzman vs. Court of Appeals, 20
the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is
presumed to have been at fault or negligent. To exculpate
the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or
irresistible threat, violence, or force. This is in accordance
with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall
be considered unreasonable, unjust and contrary to public
policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed
by thieves, or of robbers who do not act with grave or
irresistible threat, violences or force, is dispensed with or
diminished;"
In the same case, 21 the Supreme Court also held that:
5
"Under Article 1745 (6) above, a common carrier is held
responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers
like thieves or robbers except where such thieves or
robbers in fact acted with grave or irresistible threat,
violence or force. We believe and so hold that the limits of
the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or
irresistible threat, violence or force."
To establish grave and irresistible force, petitioner
presented her accusatory affidavit, 22 Jesus Bascos'
affidavit, 23 and Juanito Morden's 24 "Salaysay". However,
both the trial court and the Court of Appeals have
concluded that these affidavits were not enough to
overcome the presumption. Petitioner's affidavit about the
hijacking was based on what had been told her by Juanito
Morden. It was not a first-hand account. While it had been
admitted in court for lack of objection on the part of private
respondent, the respondent Court had discretion in
assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review
on certiorari, We are not to determine the probative value
of evidence but to resolve questions of law. Secondly, the
affidavit of Jesus Bascos did not dwell on how the hijacking
took place. Thirdly, while the affidavit of Juanito Morden,
the truck helper in the hijacked truck, was presented as
evidence in court, he himself was a witness as could be
gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available
as witnesses. 25 The subsequent filing of the information
for carnapping and robbery against the accused named in
said affidavits did not necessarily mean that the contents
of the affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against
petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not
introduce any evidence to prove her negligence. Her own
failure to adduce sufficient proof of extraordinary diligence
made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on
the substantial issues involved, We find no reason to
disturb the conclusion that the motion to lift/dissolve the
writ of preliminary attachment has been rendered moot
and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that
the petitioner's claim cannot be sustained. The petition is
DISMISSED and the decision of the Court of Appeals is
hereby AFFIRMED.
SO ORDERED.
G.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner, vs.
COURT OF APPEALS AND VLASONS SHIPPING,
INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner, vs.
COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
The Court finds occasion to apply the rules on the
seaworthiness of private carrier, its owner's responsibility
for damage to the cargo and its liability for demurrage and
attorney's fees. The Court also reiterates the well-known
rule that findings of facts of trial courts, when affirmed by
the Court of Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by
National Steel Corporation (NSC) and Vlasons Shipping, Inc.
(VSI), both of which assail the August 12, 1993 Decision of
the Court of Appeals. 1 The Court of Appeals modified the
decision of the Regional Trial Court of Pasig, Metro Manila,
Branch 163 in Civil Case No. 23317. The RTC disposed as
follows:
WHEREFORE, judgment is hereby rendered in favor of
defendant and against the plaintiff dismissing the
complaint with cost against plaintiff, and ordering plaintiff
to pay the defendant on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00
as demurrage with interest at the legal rate on both
amounts from April 7, 1976 until the same shall have been
fully paid;
2. Attorney's fees and expenses of litigation in the sum of
P100,000.00; and
3. Costs of suit.
SO ORDERED. 2
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed
from is modified by reducing the award for demurrage to
P44,000.00 and deleting the award for attorney's fees and
expenses of litigation. Except as thus modified, the
decision is AFFIRMED. There is no pronouncement as to
costs.
SO ORDERED. 3
The Facts
The MV Vlasons I is a vessel which renders tramping
service and, as such, does not transport cargo or shipment
for the general public. Its services are available only to
specific persons who enter into a special contract of
charter party with its owner. It is undisputed that the ship
is a private carrier. And it is in the capacity that its owner,
Vlasons Shipping, Inc., entered into a contract of
affreightment or contract of voyage charter hire with
National Steel Corporation.
The facts as found by Respondent Court of Appeals are as
follows:
(1) On July 17, 1974, plaintiff National Steel Corporation
(NSC) as Charterer and defendant Vlasons Shipping, Inc.
(VSI) as Owner, entered into a Contract of Voyage Charter
Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's
vessel, the MV "VLASONS I" to make one (1) voyage to load
steel products at Iligan City and discharge them at North
Harbor, Manila, under the following terms and
conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500
MT, 10% more or less at Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis.
Payment upon presentation of Bill of Lading within fifteen
(15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
(Weather Working Day of 24 consecutive hours, Sundays
and Holidays Included).
6
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must
insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of the
officers of the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI
C/P [sic] or other internationally recognized Charter Party
Agreement shall form part of this Contract.
xxx xxx xxx
The terms "F.I.O.S.T." which is used in the shipping
business is a standard provision in the NANYOZAI Charter
Party which stands for "Freight In and Out including
Stevedoring and Trading", which means that the handling,
loading and unloading of the cargoes are the responsibility
of the Charterer. Under Paragraph 5 of the NANYOZAI
Charter Party, it states, "Charterers to load, stow and
discharge the cargo free of risk and expenses to owners. . .
. (Emphasis supplied).
Under paragraph 10 thereof, it is provided that "(o)wners
shall, before and at the beginning of the voyage, exercise
due diligence to make the vessel seaworthy and properly
manned, equipped and supplied and to make the holds and
all other parts of the vessel in which cargo is carried, fit
and safe for its reception, carriage and preservation.
Owners shall not be liable for loss of or damage of the
cargo arising or resulting from: unseaworthiness unless
caused by want of due diligence on the part of the owners
to make the vessel seaworthy, and to secure that the
vessel is properly manned, equipped and supplied and to
make the holds and all other parts of the vessel in which
cargo is carried, fit and safe for its reception, carriage and
preservation; . . . ; perils, dangers and accidents of the sea
or other navigable waters; . . . ; wastage in bulk or weight
or any other loss or damage arising from inherent defect,
quality or vice of the cargo; insufficiency of packing; . . . ;
latent defects not discoverable by due diligence; any other
cause arising without the actual fault or privity of Owners
or without the fault of the agents or servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides
that "(o)wners shall not be responsible for split, chafing
and/or any damage unless caused by the negligence or
default of the master and crew."
(2) On August 6, 7 and 8, 1974, in accordance with the
Contract of Voyage Charter Hire, the MV "VLASONS I"
loaded at plaintiffs pier at Iligan City, the NSC's shipment
of 1,677 skids of tinplates and 92 packages of hot rolled
sheets or a total of 1,769 packages with a total weight of
about 2,481.19 metric tons for carriage to Manila. The
shipment was placed in the three (3) hatches of the ship.
Chief Mate Gonzalo Sabando, acting as agent of the
vessel[,] acknowledged receipt of the cargo on board and
signed the corresponding bill of lading, B.L.P.P. No. 0233
(Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North
Harbor, Manila, on August 12, 1974. The following day,
August 13, 1974, when the vessel's three (3) hatches
containing the shipment were opened by plaintiff's agents,
nearly all the skids of tinplates and hot rolled sheets were
allegedly found to be wet and rusty. The cargo was
discharged and unloaded by stevedores hired by the
Charterer. Unloading was completed only on August 24,
1974 after incurring a delay of eleven (11) days due to the
heavy rain which interrupted the unloading operations.
(Exhibit "E")
(4) To determine the nature and extent of the wetting and
rusting, NSC called for a survey of the shipment by the
Manila Adjusters and Surveyors Company (MASCO). In a
letter to the NSC dated March 17, 1975 (Exhibit "G"),
MASCO made a report of its ocular inspection conducted on
the cargo, both while it was still on board the vessel and
later at the NDC warehouse in Pureza St., Sta. Mesa, Manila
where the cargo was taken and stored. MASCO reported
that it found wetting and rusting of the packages of hot
rolled sheets and metal covers of the tinplates; that
tarpaulin hatch covers were noted torn at various extents;
that container/metal casings of the skids were rusting all
over. MASCO ventured the opinion that "rusting of the
tinplates was caused by contact with SEA WATER sustained
while still on board the vessel as a consequence of the
heavy weather and rough seas encountered while en route
to destination (Exhibit "F"). It was also reported that
MASCO's surveyors drew at random samples of bad order
packing materials of the tinplates and delivered the same
to the M.I.T. Testing Laboratories for analysis. On August
31, 1974, the M.I.T. Testing Laboratories issued Report No.
1770 (Exhibit "I") which in part, states, "The analysis of bad
order samples of packing materials . . . shows that wetting
was caused by contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid
Report No. 1770, plaintiff filed with the defendant its claim
for damages suffered due to the downgrading of the
damaged tinplates in the amount of P941,145.18. Then on
October 3, 1974, plaintiff formally demanded payment of
said claim but defendant VSI refused and failed to pay.
Plaintiff filed its complaint against defendant on April 21,
1976 which was docketed as Civil Case No. 23317, CFI,
Rizal.
(6) In its complaint, plaintiff claimed that it sustained
losses in the aforesaid amount of P941,145.18 as a result
of the act, neglect and default of the master and crew in
the management of the vessel as well as the want of due
diligence on the part of the defendant to make the vessel
seaworthy and to make the holds and all other parts of the
vessel in which the cargo was carried, fit and safe for its
reception, carriage and preservation — all in violation of
defendant's undertaking under their Contract of Voyage
Charter Hire.
(7) In its answer, defendant denied liability for the alleged
damage claiming that the MV "VLASONS I" was seaworthy
in all respects for the carriage of plaintiff's cargo; that said
vessel was not a "common carrier" inasmuch as she was
under voyage charter contract with the plaintiff as
charterer under the charter party; that in the course of the
voyage from Iligan City to Manila, the MV "VLASONS I"
encountered very rough seas, strong winds and adverse
weather condition, causing strong winds and big waves to
continuously pound against the vessel and seawater to
overflow on its deck and hatch covers, that under the
Contract of Voyage Charter Hire, defendant shall not be
responsible for losses/damages except on proven willful
negligence of the officers of the vessel, that the officers of
said MV "VLASONS I" exercised due diligence and proper
seamanship and were not willfully negligent; that
furthermore the Voyage Charter Party provides that
loading and discharging of the cargo was on FIOST terms
which means that the vessel was free of risk and expense
in connection with the loading and discharging of the
cargo; that the damage, if any, was due to the inherent
defect, quality or vice of the cargo or to the insufficient
packing thereof or to latent defect of the cargo not
discoverable by due diligence or to any other cause arising
without the actual fault or privity of defendant and without
the fault of the agents or servants of defendant;
7
consequently, defendant is not liable; that the stevedores
of plaintiff who discharged the cargo in Manila were
negligent and did not exercise due care in the discharge of
the cargo; land that the cargo was exposed to rain and
seawater spray while on the pier or in transit from the pier
to plaintiff's warehouse after discharge from the vessel;
and that plaintiff's claim was highly speculative and grossly
exaggerated and that the small stain marks or sweat
marks on the edges of the tinplates were magnified and
considered total loss of the cargo. Finally, defendant
claimed that it had complied with all its duties and
obligations under the Voyage Charter Hire Contract and
had no responsibility whatsoever to plaintiff. In turn, it
alleged the following counterclaim:
(a) That despite the full and proper performance by
defendant of its obligations under the Voyage Charter Hire
Contract, plaintiff failed and refused to pay the agreed
charter hire of P75,000.00 despite demands made by
defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff
had agreed to pay defendant the sum of P8,000.00 per day
for demurrage. The vessel was on demurrage for eleven
(11) days in Manila waiting for plaintiff to discharge its
cargo from the vessel. Thus, plaintiff was liable to pay
defendant demurrage in the total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against
defendant, plaintiff should be ordered to pay defendant
attorney's fees and all expenses of litigation in the amount
of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial
court came out with the following findings which were set
forth in its decision:
(a) The MV "VLASONS I" is a vessel of Philippine registry
engaged in the tramping service and is available for hire
only under special contracts of charter party as in this
particular case.
(b) That for purposes of the voyage covered by the
Contract of Voyage Charter Hire (Exh. "1"), the MV
VLASONS I" was covered by the required seaworthiness
certificates including the Certification of Classification
issued by an international classification society, the
NIPPON KAIJI KYOKAI (Exh. "4"); Coastwise License from the
Board of Transportation (Exh. "5"); International Loadline
Certificate from the Philippine Coast Guard (Exh. "6");
Cargo Ship Safety Equipment Certificate also from the
Philippine Coast Guard (Exh. "7"); Ship Radio Station
License (Exh. "8"); Certificate of Inspection by the
Philippine Coast Guard (Exh. "12"); and Certificate of
Approval for Conversion issued by the Bureau of Customs
(Exh. "9"). That being a vessel engaged in both overseas
and coastwise trade, the MV "VLASONS I" has a higher
degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage
called for by the Contract of Voyage Charter Hire, the MV
"VLASONS I" underwent drydocking in Cebu and was
thoroughly inspected by the Philippine Coast Guard. In fact,
subject voyage was the vessel's first voyage after the
drydocking. The evidence shows that the MV "VLASONS I"
was seaworthy and properly manned, equipped and
supplied when it undertook the voyage. It has all the
required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3)
hatches of the ship. The hatch openings were covered by
hatchboards which were in turn covered by two or double
tarpaulins. The hatch covers were water tight.
Furthermore, under the hatchboards were steel beams to
give support.
(e) The claim of the plaintiff that defendant violated the
contract of carriage is not supported by evidence. The
provisions of the Civil Code on common carriers pursuant
to which there exists a presumption of negligence in case
of loss or damage to the cargo are not applicable. As to the
damage to the tinplates which was allegedly due to the
wetting and rusting thereof, there is unrebutted testimony
of witness Vicente Angliongto that tinplates "sweat" by
themselves when packed even without being in contract
(sic) with water from outside especially when the weather
is bad or raining. The trust caused by sweat or moisture on
the tinplates may be considered as a loss or damage but
then, defendant cannot be held liable for it pursuant to
Article 1734 of the Civil Case which exempts the carrier
from responsibility for loss or damage arising from the
"character of the goods . . ." All the 1,769 skids of the
tinplates could not have been damaged by water as
claimed by plaintiff. It was shown as claimed by plaintiff
that the tinplates themselves were wrapped in kraft paper
lining and corrugated cardboards could not be affected by
water from outside.
(f) The stevedores hired by the plaintiff to discharge the
cargo of tinplates were negligent in not closing the hatch
openings of the MV "VLASONS I" when rains occurred
during the discharging of the cargo thus allowing rainwater
to enter the hatches. It was proven that the stevedores
merely set up temporary tents to cover the hatch openings
in case of rain so that it would be easy for them to resume
work when the rains stopped by just removing the tent or
canvas. Because of this improper covering of the hatches
by the stevedores during the discharging and unloading
operations which were interrupted by rains, rainwater
drifted into the cargo through the hatch openings. Pursuant
to paragraph 5 of the NANYOSAI [sic] Charter Party which
was expressly made part of the Contract of Voyage Charter
Hire, the loading, stowing and discharging of the cargo is
the sole responsibility of the plaintiff charterer and
defendant carrier has no liability for whatever damage may
occur or maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel encountered
rough seas and bad weather while en route from Iligan City
to Manila causing sea water to splash on the ship's deck on
account of which the master of the vessel (Mr. Antonio C.
Dumlao) filed a "Marine Protest" on August 13, 1974 (Exh.
"15"); which can be invoked by defendant as a force
majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed
in paragraph 9 of the Voyage Charter Hire contract that it
was to insure the cargo because it did not. Had plaintiff
complied with the requirement, then it could have
recovered its loss or damage from the insurer. Plaintiff also
violated the charter party contract when it loaded not only
"steel products", i.e. steel bars, angular bars and the like
but also tinplates and hot rolled sheets which are high
grade cargo commanding a higher freight. Thus plaintiff
was able to ship grade cargo at a lower freight rate.
(i) As regards defendant's counterclaim, the contract of
voyage charter hire under Paragraph 4 thereof, fixed the
freight at P30.00 per metric ton payable to defendant
carrier upon presentation of the bill of lading within fifteen
(15) days. Plaintiff has not paid the total freight due of
P75,000.00 despite demands. The evidence also showed
that the plaintiff was required and bound under paragraph
7 of the same Voyage Charter Hire contract to pay
demurrage of P8,000.00 per day of delay in the unloading
of the cargoes. The delay amounted to eleven (11) days
thereby making plaintiff liable to pay defendant for
8
demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC
alleged six errors:
I
The trial court erred in finding that the MV "VLASONS I"
was seaworthy, properly manned, equipped and supplied,
and that there is no proof of willful negligence of the
vessel's officers.
II
The trial court erred in finding that the rusting of NSC's
tinplates was due to the inherent nature or character of the
goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired by
NSC were negligent in the unloading of NSC's shipment.
IV
The trial court erred in exempting VSI from liability on the
ground of force majeure.
V
The trial court erred in finding that NSC violated the
contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight,
demurrage and attorney's fees, to VSI. 4
As earlier stated, the Court of Appeals modified the
decision of the trial court by reducing the demurrage from
P88,000.00 to P44,000.00 and deleting the award of
attorneys fees and expenses of litigation. NSC and VSI filed
separate motions for reconsideration. In a
Resolution 5 dated October 20, 1993, the appellate court
denied both motions. Undaunted, NSC and VSI filed their
respective petitions for review before this Court. On motion
of VSI, the Court ordered on February 14, 1994 the
consolidation of these petitions. 6
The Issues
In its petition 7 and memorandum, 8 NSC raises the
following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for
demurrage due to cargo unloading delays caused by
weather interruption;
2. Whether or not the alleged "seaworthiness certificates"
(Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and "12")
were admissible in evidence and constituted evidence of
the vessel's seaworthiness at the beginning of the
voyages; and
3. Whether or not a charterer's failure to insure its cargo
exempts the shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-
worthy;
2. Whether or not vessel's officers and crew were negligent
in handling and caring for NSC's cargo;
3. Whether or not NSC's cargo of tinplates did sweat during
the voyage and, hence, rusted on their own; and
4. Whether or not NSC's stevedores were negligent and
caused the wetting[/]rusting of NSC's tinplates.
In its separate petition, 9 VSI submits for the consideration
of this Court the following alleged errors of the CA:
A. The respondent Court of Appeals committed an error of
law in reducing the award of demurrage from P88,000.00
to P44,000.00.
B. The respondent Court of Appeals committed an error of
law in deleting the award of P100,000 for attorney's fees
and expenses of litigation.
Amplifying the foregoing, VSI raises the following issues in
its memorandum: 10
I. Whether or not the provisions of the Civil Code of the
Philippines on common carriers pursuant to which there
exist[s] a presumption of negligence against the common
carrier in case of loss or damage to the cargo are
applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract
of Voyage Charter Hire, including the Nanyozai Charter, are
valid and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed
under the following headings:
1. Questions of Fact
2. Effect of NSC's Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorney's Fees.
The Court's Ruling
The Court affirms the assailed Decision of the Court of
Appeals, except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI
contracted with NSC as a common carrier or as a private
carrier. The resolution of this preliminary question
determines the law, standard of diligence and burden of
proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as
"persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public." It has been held that
the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt
to avail themselves of its transportation service for a
fee. 11 A carrier which does not qualify under the above test
is deemed a private carrier. "Generally, private carriage is
undertaken by special agreement and the carrier does not
hold himself out to carry goods for the general public. The
most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which
the charterer, a party other than the shipowner, obtains
the use and service of all or some part of a ship for a
period of time or a voyage or voyages." 12
In the instant case, it is undisputed that VSI did not offer its
services to the general public. As found by the Regional
Trial Court, it carried passengers or goods only for those it
chose under a "special contract of charter party." 13 As
correctly concluded by the Court of Appeals, the MV
Vlasons I "was not a common but a private
carrier." 14 Consequently, the rights and obligations of VSI
and NSC, including their respective liability for damage to
the cargo, are determined primarily by stipulations in their
contract of private carriage or charter party. 15Recently,
in Valenzuela Hardwood and Industrial Supply,
Inc., vs. Court of Appeals and Seven Brothers Shipping
9
Corporation, 16 the Court ruled:
. . . in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would
be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the
general public. Hence, the stringent provisions of the Civil
Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common
carriers. 17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter
Hire, dated July 17, 1974, that VSI "shall not be responsible
for losses except on proven willful negligence of the
officers of the vessel." The NANYOZAI Charter Party, which
was incorporated in the parties' contract of transportation
further provided that the shipowner shall not be liable for
loss of or a damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack
of due diligence to make the vessel seaworthy or to ensure
that the same was "properly manned, equipped and
supplied," and to "make the holds and all other parts of the
vessel in which cargo [was] carried, fit and safe for its
reception, carriage and preservation." 18 The NANYOZAI
Charter Party also provided that "[o]wners shall not be
responsible for split, chafing and/or any damage unless
caused by the negligence or default of the master or
crew." 19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC
must prove that the damage to its shipment was caused by
VSI's willful negligence or failure to exercise due diligence
in making MV Vlasons I seaworthy and fit for holding,
carrying and safekeeping the cargo. Ineluctably, the
burden of proof was placed on NSC by the parties'
agreement.
This view finds further support in the Code of Commerce
which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and
venture of the shipper, if the contrary has not been
expressly stipulated.
Therefore, the damage and impairment suffered by the
goods during the transportation, due to fortuitous
event, force majeure, or the nature and inherent defect of
the things, shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages
arising from the cause mentioned in the preceding article if
proofs against him show that they occurred on account of
his negligence or his omission to take the precautions
usually adopted by careful persons, unless the shipper
committed fraud in the bill of lading, making him to believe
that the goods were of a class or quality different from
what they really were.
Because the MV Vlasons I was a private carrier, the
shipowner's obligations are governed by the foregoing
provisions of the Code of Commerce and not by the Civil
Code which, as a general rule, places the prima
faciepresumption of negligence on a common carrier. It is a
hornbook doctrine that:
In an action against a private carrier for loss of, or injury to,
cargo, the burden is on the plaintiff to prove that the
carrier was negligent or unseaworthy, and the fact that the
goods were lost or damaged while in the carrier's custody
does not put the burden of proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes
only to exercise due care in the protection of the goods
committed to its care, the burden of proving negligence or
a breach of that duty rests on plaintiff and proof of loss of,
or damage to, cargo while in the carrier's possession does
not cast on it the burden of proving proper care and
diligence on its part or that the loss occurred from an
excepted cause in the contract or bill of lading. However, in
discharging the burden of proof, plaintiff is entitled to the
benefit of the presumptions and inferences by which the
law aids the bailor in an action against a bailee, and since
the carrier is in a better position to know the cause of the
loss and that it was not one involving its liability, the law
requires that it come forward with the information
available to it, and its failure to do so warrants an
inference or presumption of its liability. However, such
inferences and presumptions, while they may affect the
burden of coming forward with evidence, do not alter the
burden of proof which remains on plaintiff, and, where the
carrier comes forward with evidence explaining the loss or
damage, the burden of going forward with the evidence is
again on plaintiff.
Where the action is based on the shipowner's warranty of
seaworthiness, the burden of proving a breach thereof and
that such breach was the proximate cause of the damage
rests on plaintiff, and proof that the goods were lost or
damaged while in the carrier's possession does not cast on
it the burden of proving seaworthiness. . . . Where the
contract of carriage exempts the carrier from liability for
unseaworthiness not discoverable by due diligence, the
carrier has the preliminary burden of proving the exercise
of due diligence to make the vessel seaworthy. 20
In the instant case, the Court of Appeals correctly found
the NSC "has not taken the correct position in relation to
the question of who has the burden of proof. Thus, in its
brief (pp. 10-11), after citing Clause 10 and Clause 12 of
the NANYOZAI Charter Party (incidentally plaintiff-
appellant's [NSC's] interpretation of Clause 12 is not even
correct), it argues that 'a careful examination of the
evidence will show that VSI miserably failed to comply with
any of these obligation's as if defendant-appellee [VSI] had
the burden of proof." 21
First Issue: Questions of Fact
Based on the foregoing, the determination of the following
factual questions is manifestly relevant: (1) whether VSI
exercised due diligence in making MV Vlasons I seaworthy
for the intended purpose under the charter party; (2)
whether the damage to the cargo should be attributed to
the willful negligence of the officers and crew of the vessel
or of the stevedores hired by NSC; and (3) whether the
rusting of the tinplates was caused by its own "sweat" or
by contact with seawater.
These questions of fact were threshed out and decided by
the trial court, which had the firsthand opportunity to hear
the parties' conflicting claims and to carefully weigh their
respective evidence. The findings of the trial court were
subsequently affirmed by the Court of Appeals. Where the
factual findings of both the trial court and the Court of
Appeals coincide, the same are binding on this Court. 22 We
stress that, subject to some exceptional instances, 23 only
questions of law — not questions of fact — may be raised
before this Court in a petition for review under Rule 45 of
10
the Rules of Court. After a thorough review of the case at
bar, we find no reason to disturb the lower court's factual
findings, as indeed NSC has not successfully proven the
application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due
diligence to make the ship seaworthy and fit for the
carriage of NSC's cargo of steel and tinplates. This is shown
by the fact that it was drylocked and inspected by the
Philippine Coast Guard before it proceeded to Iligan City for
its voyage to Manila under the contract of voyage charter
hire. 24 The vessel's voyage from Iligan to Manila was the
vessel's first voyage after drydocking. The Philippine Coast
Guard Station in Cebu cleared it as seaworthy, fitted and
equipped; it met all requirements for trading as cargo
vessel. 25 The Court of Appeals itself sustained the
conclusion of the trial court that MV Vlasons Iwas
seaworthy. We find no reason to modify or reverse this
finding of both the trial and the appellate courts.
Who Were Negligent:
Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that
the damage to the cargo was caused by the negligence of
the officers and the crew of MV Vlasons I in making their
vessel seaworthy and fit for the carriage of tinplates. NSC
failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons
I had used an old and torn tarpaulin or canvas to cover the
hatches through which the cargo was loaded into the cargo
hold of the ship. It faults the Court of Appeals for failing to
consider such claim as an "uncontroverted fact" 26 and
denies that MV Vlasons I "was equipped with new canvas
covers in tandem with the old ones as indicated in the
Marine Protest . . ." 27 We disagree.
The records sufficiently support VSI's contention that the
ship used the old tarpaulin, only in addition to the new one
used primarily to make the ship's hatches watertight. The
foregoing are clear from the marine protest of the master
of the MV Vlasons I, Antonio C. Dumlao, and the deposition
of the ship's boatswain, Jose Pascua. The salient portions of
said marine protest read:
. . . That the M/V "VLASONS I" departed Iligan City or about
0730 hours of August 8, 1974, loaded with approximately
2,487.9 tons of steel plates and tin plates consigned to
National Steel Corporation; that before departure, the
vessel was rigged, fully equipped and cleared by the
authorities; that on or about August 9, 1974, while in the
vicinity of the western part of Negros and Panay, we
encountered very rough seas and strong winds and Manila
office was advised by telegram of the adverse weather
conditions encountered; that in the morning of August 10,
1974, the weather condition changed to worse and strong
winds and big waves continued pounding the vessel at her
port side causing sea water to overflow on deck andhatch
(sic) covers and which caused the first layer of the canvass
covering to give way while the new canvass covering still
holding on;
That the weather condition improved when we reached
Dumali Point protected by Mindoro; that we re-secured the
canvass covering back to position; that in the afternoon of
August 10, 1974, while entering Maricaban Passage, we
were again exposed to moderate seas and heavy rains;
that while approaching Fortune Island, we encountered
again rough seas, strong winds and big waves which
caused the same canvass to give way and leaving the new
canvass holding on;
 28
xxx xxx xxx
And the relevant portions of Jose Pascua's deposition are
as follows:
q What is the purpose of the canvas cover?
a So that the cargo would not be soaked with water.
q And will you describe how the canvas cover was secured
on the hatch opening?
WITNESS
a It was placed flat on top of the hatch cover, with a little
canvas flowing over the sides and we place[d] a flat bar
over the canvas on the side of the hatches and then we
place[d] a stopper so that the canvas could not be
removed.
ATTY DEL ROSARIO
q And will you tell us the size of the hatch opening? The
length and the width of the hatch opening.
a Forty-five feet by thirty-five feet, sir.
xxx xxx xxx
q How was the canvas supported in the middle of the hatch
opening?
a There is a hatch board.
ATTY DEL ROSARIO
q What is the hatch board made of?
a It is made of wood, with a handle.
fact that, despite encountering rough weather twice, the
new tarpaulin did not give way and the ship's hatches and
cargo holds remained waterproof. As aptly stated by the
Court of Appeals, ". . . we find no reason not to sustain the
conclusion of the lower court based on overwhelming
evidence, that the MV 'VLASONS I' was seaworthy when it
undertook the voyage on August 8, 1974 carrying on board
thereof plaintiff-appellant's shipment of 1,677 skids of
tinplates and 92 packages of hot rolled sheets or a total of
1,769 packages from NSC's pier in Iligan City arriving
safely at North Harbor, Port Area, Manila, on August 12,
1974; . . . 30
Indeed, NSC failed to discharge its burden to show
negligence on the part of the officers and the crew of MV
Vlasons I. On the contrary, the records reveal that it was
the stevedores of NSC who were negligent in unloading the
cargo from the ship.
The stevedores employed only a tent-like material to cover
the hatches when strong rains occasioned by a passing
typhoon disrupted the unloading of the cargo. This tent-like
covering, however, was clearly inadequate for keeping rain
and seawater away from the hatches of the ship. Vicente
Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q Now, during your testimony on November 5, 1979, you
stated on August 14 you went on board the vessel upon
notice from the National Steel Corporation in order to
conduct the inspection of the cargo. During the course of
the investigation, did you chance to see the discharging
operation?

q And aside from the hatch board, is there any other WITNESS:
material there to cover the hatch? A Yes, sir, upon my arrival at the vessel, I saw some of the
a There is a beam supporting the hatch board. tinplates already discharged on the pier but majority of the
tinplates were inside the hall, all the hatches were opened.
q What is this beam made of?
Q In connection with these cargoes which were unloaded,
a It is made of steel, sir. where is the place.
q Is the beam that was placed in the hatch opening A At the Pier.
covering the whole hatch opening?
Q What was used to protect the same from weather?
a No, sir.
ATTY LOPEZ:
q How many hatch beams were there placed across the
opening? We object, your Honor, this question was already asked.
This particular matter . . . the transcript of stenographic
a There are five beams in one hatch opening. notes shows the same was covered in the direct
examination.
ATTY DEL ROSARIO
ATTY ZAMORA:
q And on top of the beams you said there is a hatch board.
How many pieces of wood are put on top? Precisely, your Honor, we would like to go on detail, this is
the serious part of the testimony.
a Plenty, sir, because there are several pieces on top of the
hatch beam. COURT:
q And is there a space between the hatch boards? All right, witness may answer.
a There is none, sir. ATTY LOPEZ:
q They are tight together? Q What was used in order to protect the cargo from the
weather?
a Yes, sir.
A A base of canvas was used as cover on top of the tin
q How tight?
plates, and tents were built at the opening of the hatches.
a Very tight, sir.
Q You also stated that the hatches were already opened
q Now, on top of the hatch boards, according to you, is the and that there were tents constructed at the opening of
canvass cover. How many canvas covers? the hatches to protect the cargo from the rain. Now, will
you describe [to] the Court the tents constructed.
a Two, sir. 29
A The tents are just a base of canvas which look like a tent
That due diligence was exercised by the officers and the of an Indian camp raise[d] high at the middle with the
crew of the MV Vlasons I was further demonstrated by the
11
whole side separated down to the hatch, the size of the
hatch and it is soaks [sic] at the middle because of those
weather and this can be used only to temporarily protect
the cargo from getting wet by rains.
Q Now, is this procedure adopted by the stevedores of
covering tents proper?
A No, sir, at the time they were discharging the cargo,
there was a typhoon passing by and the hatch tent was not
good enough to hold all of it to prevent the water soaking
through the canvass and enter the cargo.
Q In the course of your inspection, Mr. Anglingto [sic], did
you see in fact the water enter and soak into the canvass
and tinplates.
A Yes, sir, the second time I went there, I saw it.
Q As owner of the vessel, did you not advise the National
Steel Corporation [of] the procedure adopted by its
stevedores in discharging the cargo particularly in this tent
covering of the hatches?
A Yes, sir, I did the first time I saw it, I called the attention
of the stevedores but the stevedores did not mind at all,
so, called the attention of the representative of the
National Steel but nothing was done, just the same. Finally,
I wrote a letter to them. 31
NSC attempts to discredit the testimony of Angliongto by
questioning his failure to complain immediately about the
stevedores' negligence on the first day of unloading,
pointing out that he wrote his letter to petitioner only
seven days later. 32 The Court is not persuaded.
Angliongto's candid answer in his aforequoted testimony
satisfactorily explained the delay. Seven days lapsed
because he first called the attention of the stevedores,
then the NSC's representative, about the negligent and
defective procedure adopted in unloading the cargo. This
series of actions constitutes a reasonable response in
accord with common sense and ordinary human
experience. Vicente Angliongto could not be blamed for
calling the stevedores' attention first and then the NSC's
representative on location before formally informing NSC of
the negligence he had observed, because he was not
responsible for the stevedores or the unloading operations.
In fact, he was merely expressing concern for NSC which
was ultimately responsible for the stevedores it had hired
and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate
courts' findings and conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial
court erred in finding that the stevedores hired by NSC
were negligent in the unloading of NSC's shipment. We do
not think so. Such negligence according to the trial court is
evident in the stevedores hired by [NSC], not closing the
hatch of MV 'VLASONS I' when rains occurred during the
discharging of the cargo thus allowing rain water and
seawater spray to enter the hatches and to drift to and fall
on the cargo. It was proven that the stevedores merely set
up temporary tents or canvas to cover the hatch openings
when it rained during the unloading operations so that it
would be easier for them to resume work after the rains
stopped by just removing said tents or canvass. It has also
been shown that on August 20, 1974, VSI President Vicente
Angliongto wrote [NSC] calling attention to the manner the
stevedores hired by [NSC] were discharging the cargo on
rainy days and the improper closing of the hatches which
allowed continuous heavy rain water to leak through and
drip to the tinplates' covers and [Vicente Angliongto] also
suggesting that due to four (4) days continuos rains with
strong winds that the hatches be totally closed down and
12
covered with canvas and the hatch tents lowered. (Exh.
"13"). This letter was received by [NSC] on 22 August 1974
while discharging operations were still going on (Exhibit
"13-A"). 33
The fact that NSC actually accepted and proceeded to
remove the cargo from the ship during unfavorable
weather will not make VSI liable for any damage caused
thereby. In passing, it may be noted that the NSC may
seek indemnification, subject to the laws on prescription,
from the stevedoring company at fault in the discharge
operations. "A stevedore company engaged in discharging
cargo . . . has the duty to load the cargo . . . in a prudent
manner, and it is liable for injury to, or loss of, cargo
caused by its negligence . . . and where the officers and
members and crew of the vessel do nothing and have no
responsibility in the discharge of cargo by stevedores . . .
the vessel is not liable for loss of, or damage to, the cargo
caused by the negligence of the stevedores . . ." 34 as in the
instant case.
Do Tinplates "Sweat"?
The trial court relied on the testimony of Vicente
Angliongto in finding that ". . . tinplates 'sweat' by
themselves when packed even without being in contact
with water from outside especially when the weather is bad
or raining . . ." 35 The Court of Appeals affirmed the trial
court's finding.
A discussion of this issue appears inconsequential and
unnecessary. As previously discussed, the damage to the
tinplates was occasioned not by airborne moisture but by
contact with rain and seawater which the stevedores
negligently allowed to seep in during the unloading.
Second Issue: Effect of NSC's Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the
Contract of Voyage Charter Hire is totally separate and
distinct from the contractual or statutory responsibility that
may be incurred by VSI for damage to the cargo caused by
the willful negligence of the officers and the crew of MV
Vlasons I. Clearly, therefore, NSC's failure to insure the
cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused
by the latter's willful negligence. We do not find anything in
the charter party that would make the liability of VSI for
damage to the cargo contingent on or affected in any
manner by NSC's obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates Proving
Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is
anchored on the alleged inadmissibility of the certificates
of seaworthiness offered in evidence by VSI. The said
certificates include the following:
1. Certificate of Inspection of the Philippines Coast Guard
at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine
Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the
Bureau of Customs 36
NSC argues that the certificates are hearsay for not having
been presented in accordance with the Rules of Court. It
points out that Exhibits 3, 4 and 11 allegedly are "not
written records or acts of public officers"; while Exhibits 5,
6, 7, 8, 9, 11 and 12 are not "evidenced by official
publications or certified true copies" as required by
Sections 25 and 26, Rule 132, of the Rules of Court. 37
After a careful examination of these exhibits, the Court
rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as
evidence. Exhibits 3 and 4 are certificates issued by private
parties, but they have not been proven by one who saw
the writing executed, or by evidence of the genuineness of
the handwriting of the maker, or by a subscribing witness.
Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their
admission under the best evidence rule have not been
demonstrated.
We find, however, that Exhibit 11 is admissible under a
well-settled exception to the hearsay rule per Section 44 of
Rule 130 of the Rules of Court, which provides that
"(e)ntries in official records made in the performance of a
duty by a public officer of the Philippines, or by a person in
the performance of a duty specially enjoined by law,
areprima facie evidence of the facts therein
stated." 38 Exhibit 11 is an original certificate of the
Philippine Coast Guard in Cebu issued by Lieutenant Junior
Grade Noli C. Flores to the effect that "the vessel 'VLASONS
I' was drydocked . . . and PCG Inspectors were sent on
board for inspection . . . After completion of drydocking
and duly inspected by PCG Inspectors, the vessel
'VLASONS I', a cargo vessel, is in seaworthy condition,
meets all requirements, fitted and equipped for trading as
a cargo vessel was cleared by the Philippine Coast Guard
and sailed for Cebu Port on July 10, 1974." (sic) NSC's
claim, therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that NSC has the burden
of proving that MV Vlasons I was not seaworthy. As
observed earlier, the vessel was a private carrier and, as
such, it did not have the obligation of a common carrier to
show that it was seaworthy. Indeed, NSC glaringly failed to
discharge its duty of proving the willful negligence of VSI in
making the ship seaworthy resulting in damage to its
cargo. Assailing the genuineness of the certificate of
seaworthiness is not sufficient proof that the vessel was
not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500
MT, 10% more or less at Master's option.
xxx xxx xxx
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. 39
The Court defined demurrage in its strict sense as the
compensation provided for in the contract of affreightment
for the detention of the vessel beyond the laytime or that
period of time agreed on for loading and unloading of
cargo. 40 It is given to compensate the shipowner for the
nonuse of the vessel. On the other hand, the following is
well-settled:
Laytime runs according to the particular clause of the
charter party. . . . If laytime is expressed in "running days,"
this means days when the ship would be run continuously,
and holidays are not excepted. A qualification of "weather
permitting" excepts only those days when bad weather
reasonably prevents the work contemplated. 41
In this case, the contract of voyage charter hire provided
for a four-day laytime; it also qualified laytime as
13
WWDSHINC or weather working days Sundays and holidays
included. 42 The running of laytime was thus made subject
to the weather, and would cease to run in the event
unfavorable weather interfered with the unloading of
cargo. 43 Consequently, NSC may not be held liable for
demurrage as the four-day laytime allowed it did not lapse,
having been tolled by unfavorable weather condition in
view of the WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the
Court of Appeals to have found and affirmed respectively
that NSC incurred eleven days of delay in unloading the
cargo. The trial court arrived at this erroneous finding by
subtracting from the twelve days, specifically August 13,
1974 to August 24, 1974, the only day of unloading
unhampered by unfavorable weather or rain, which was
August 22, 1974. Based on our previous discussion, such
finding is a reversible error. As mentioned, the respondent
appellate court also erred in ruling that NSC was liable to
VSI for demurrage, even if it reduced the amount by half.
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of
the award of attorney's fees. We disagree. While VSI was
compelled to litigate to protect its rights, such fact by itself
will not justify an award of attorney's fees under Article
2208 of the Civil Code when ". . . no sufficient showing of
bad faith would be reflected in a party's persistence in a
case other than an erroneous conviction of the
righteousness of his cause . . ." 44 Moreover, attorney's fees
may not be awarded to a party for the reason alone that
the judgment rendered was favorable to the latter, as this
is tantamount to imposing a premium on one's right to
litigate or seek judicial redress of legitimate grievances. 45
Epilogue
At bottom, this appeal really hinges on a factual issue:
when, how and who caused the damage to the cargo?
Ranged against NSC are two formidable truths. First, both
lower courts found that such damage was brought about
during the unloading process when rain and seawater
seeped through the cargo due to the fault or negligence of
the stevedores employed by it. Basic is the rule that
factual findings of the trial court, when affirmed by the
Court of Appeals, are binding on the Supreme Court.
Although there are settled exceptions, NSC has not
satisfactorily shown that this case is one of them. Second,
the agreement between the parties — the Contract of
Voyage Charter Hire — placed the burden of proof for such
loss or damage upon the shipper, not upon the shipowner.
Such stipulation, while disadvantageous to NSC, is valid
because the parties entered into a contract of private
charter, not one of common carriage. Basic too is the
doctrine that courts cannot relieve a parry from the effects
of a private contract freely entered into, on the ground that
it is allegedly one-sided or unfair to the plaintiff. The
charter party is a normal commercial contract and its
stipulations are agreed upon in consideration of many
factors, not the least of which is the transport price which
is determined not only by the actual costs but also by the
risks and burdens assumed by the shipper in regard to
possible loss or damage to the cargo. In recognition of such
factors, the parties even stipulated that the shipper should
insure the cargo to protect itself from the risks it undertook
under the charter party. That NSC failed or neglected to
protect itself with such insurance should not adversely
affect VSI, which had nothing to do with such failure or
neglect.
WHEREFORE, premises considered, the instant
consolidated petitions are hereby DENIED. The questioned
Decision of the Court of Appeals is AFFIRMED with the
MODIFICATION that the demurrage awarded to VSI is was no storm and the sea was calm. Hence, said vessel left
deleted. No pronouncement as to costs. for Mandaue City. While it was navigating towards Cebu, a
typhoon developed and said vessel was buffeted on all its
SO ORDERED. sides by big waves. Its rudder was destroyed and it drifted
G.R. No. 98243 July 1, 1992 for sixteen (16) hours although its engine was running.

ALEJANDRO ARADA, doing business under the name On March 27, 1982 at about 4:00 a.m., the vessel sank
and style "SOUTH NEGROS with whatever was left of its cargoes. The crew was
ENTERPRISES", petitioner, vs. rescued by a passing pump boat and was brought to
HONORABLE COURT OF APPEALS, respondents. Calanggaman Island. Later in the afternoon, they were
brought to Palompon, Leyte, where Vivencio Babao filed a
This is a petition for review on certiorari which seeks to marine protest (Rollo, p. 10).
annul and set aside the decision * of the Court of Appeals
dated April 8, 1991 in CA-G.R. CV No. 20597 entitled "San On the basis of such marine protest, the Board of Marine
Miguel Corporation v. Alejandro Arada, doing business Inquiry conducted a hearing of the sinking of M/L Maya
under the name and style "South Negros Enterprises", wherein private respondent was duly represented. Said
reversing the decision of the RTC, Seventh Judicial Region, Board made its findings and recommendation dated
Branch XII, Cebu City, ordering petitioner to pay the private November 7, 1983, the dispositive portion of which reads
respondent tho amount of P172,284.80 representing the as:
value of the cargo lost on board the ill-fated, M/L Maya with WHEREFORE, premises considered, this Board
interest thereon at the legal rate from the date of the filing recommends as it is hereby recommended that the
of the complaint on March 25, 1983 until fully paid, and the owner/operator, officers and crew of M/L Maya be
costs. exonerated or absolved from any administrative liability on
The undisputed facts of the case are as follows: Alejandro account of this incident (Exh. 1).
Arada, herein petitioner, is the proprietor and operator of The Board's report containing its findings and
the firm South Negros Enterprises which has been recommendation was then forwarded to the headquarters
organized and established for more than ten (10) years. It of the Philippine Coast Guard for appropriate action. On the
is engaged in the business of small scale shipping as a basis of such report, the Commandant of the Philippine
common carrier, servicing the hauling of cargoes of Coast Guard rendered a decision dated December 21, 1984
different corporations and companies with the five (5) in SBMI Adm. Case No. 88-82 exonerating the
vessels it was operating (Rollo, p. 121). owner/operator officers and crew of the ill-fated M/L Maya
On March 24, 1982. petitioner entered into a contract with from any administrative liability on account of said incident
private respondent to safely transport as a common (Exh. 2).
carrier, cargoes of the latter from San Carlos City, Negros On March 25, 1983, Private respondent filed a complaint in
Occidental to Mandaue City using one of petitioner's the Regional Trial Court its first cause of action being for
vessels, M/L Maya. The cargoes of private respondent the recovery of the value of the cargoes anchored on
consisted of 9,824 cases of beer empties valued at breach of contract of carriage. After due hearing, said court
P176,824.80, were itemized as follows: rendered a decision dated July 18, 1988, the dispositive
portion of which reads
NO. OF CASES CARGO VALUE
WHEREFORE, judgment is hereby rendered as follows:
7,515 CS PPW STENIE MTS P136.773.00 (1) With respect to the first cause of action, claim of
plaintiff is hereby dismissed;
1,542 CS PLW GRANDE MTS 23,438.40 (2) Under the second cause of action, defendant must pay
plaintiff the sum of P2,000.00;
58 CS G.E. PLASTIC MTS 1,276.00 (3) In the third cause of action, the defendant must pay
plaintiff the sum of P2,849.20;
24 CS PLP MTS 456.00 (4) Since the plaintiff has withheld the payment of
P12,997.47 due the defendynt, the plaintiff should deduct
the amount of P4,849.20 from the P12,997.47 and the
37 CS CS WOODEN MTS 673.40 balance of P8,148.27 must be paid to the defendant; and
(5) Defendant's counterclaim not having been
8 CS LAGERLITE PLASTIC 128.00 substantiated by evidence is likewise dismissed. NO
MTS COSTS. (Orig. Record, pp. 193-195).
Thereafter, private respondent appealed said decision to
640 CS STENEI PLASTIC MTS 14,080.00 the Court of Appeals claiming that the trial court erred in —
(1) holding that nothing was shown that the defendant, or
9,824 CS P176,824.80 any of his employees who manned the M/L Maya was
negligent in any way nor did they fail to observe
On March 24, 1982, petitioner thru its crew master, Mr. extraordinary diligence over the cargoes of the plaintiff;
Vivencio Babao, applied for a clearance with the Philippine and
Coast Guard for M/L Maya to leave the port of San Carlos
City, but due to a typhoon, it was denied clearance by SNI (2) holding that the sinking of said vessel was caused by
Antonio Prestado PN who was then assigned at San Carlos the storm, consequently, dismissing the claim of plaintiff in
City Coast Guard Detachment (Rollo, p. 122). its first cause of action for breach of contract of carriage of
goods (Rollo, pp. 33-34; Decision, pp. 3-4).
On March 25, 1982 M/L Maya was given clearance as there
14
In its decision Promulgated on April 8, 1991, the Court of
Appeals reversed the decision of the court a quo, the
dispositive portion and the dispositive part of its decision
reads as:
WHEREFORE, that part of the Judgment appeal6d from is
REVERSED and the appellee Aleiandro Arada, doing
business by the name and style, "South Negros
Enterprises", ordered (sic) to pay unto the appellant San
Miguel Corporation the amount of P176,824.80
representing the value of the cargo lost on board the ill-
fated vessel, M/L Maya, with interest thereon at the legal
rate from date of the filing of the complaint on March 25,
1983, until fully paid, and the costs. (Rollo, p. 37)
The Court of Appeals ruled that "in view of his failure to
observe extraordinary diligence over the cargo in question
and his negligence previous to the sinking of the carrying
vessel, as above shown, the appellee is liable to the
appellant for the value of the lost cargo.
Hence the present recourse.
On November 20, 1991, this Court gave due course to the
petition. The pivotal issue to be resolved is whether or not
petitioner is liable for the value of the lost cargoes.
Petitioner contends that it was not in the exercise of its
function as a common carrier when it entered into a
contract with private respondent,but was then acting as a
private carrier not bound by the requirement of
extraordinary diligence (Rollo, p. 15) and that the factual
findings of the Board of Marine Inquiry and the Special
Board of Marine Inquiry are binding and conclusive on the
Court (Rollo, pp. 16-17).
Private respondent counters that M/L Maya was in the
exercise of its function as a common carrier and its failure
to observe the extraordinary diligence required of it in the
vigilance over their cargoes makes Petitioner liable for the
value of said cargoes.
The petition is devoid of merit.
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
(Art. 1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was
exercising its function as a common carrier when it entered
into a contract with private respondent to carry and
transport the latter's cargoes. This fact is best supported
by the admission of petitioner's son, Mr. Eric Arada, who
testified as the officer-in-charge for operations of South
Negros Enterprises in Cebu City. In substance his
testimony on January 14, 1985 is as follows:
Q. How many vessels are you operating?
A. There were all in all around five (5).
Q. And you were entering to service hauling of cargoes to
different companies, is that correct?
A. Yes, sir.
Q. In one word, the South Negros Enterprises is engaged in
the business of common carriers, is that correct?
A. Yes, sir,
Q. And in fact, at the time of the hauling of the San Miguel
Beer, it was also in the same category as a common
carrier?
A. Yes, sir,
15
(TSN. pp. 3-4, Jan. 29, 1985)
A common carrier, both from the nature of its business and
for insistent reasons of public policy is burdened by law
with the duty of exercising extraordinary diligence not only
in ensuring the safety of passengers, but in caring for the
goods transported by it. The loss or destruction or
deterioration of goods turned over to the common carrier
for the conveyance to a designated destination raises
instantly a presumption of fault or negligence on the part
of the carrier, save only where such loss, destruction or
damage arises from extreme circumstances such as a
natural disaster or calamity ... (Benedicto v. IAC, G.R. No.
70876, July 19, 1990, 187 SCRA 547) (Emphasis supplied).
In order that the common carrier may be exempted from
responsibility, the natural disaster must have been
the proximate andonly cause of the loss. However, the
common carrier must exercise due diligence to prevent or
minimize the loss before, during and after the occurrence
of flood, storm or other natural disaster in order that the
common carrier may be exempted from liability for the
destruction or deterioration of the goods (Article 1739, New
Civil Code).
In the instant case, the appellate court was correct in
finding that petitioner failed to observe the extraordinary
diligence over the cargo in question and he or the master
in his employ was negligent previous to the sinking of the
carrying vessel. In substance, the decision reads:
... VIVENCIO BABAO, the master of the carrying vessel,
knew that there was a typboon coming before his
departure but did not check where it was.
xxx xxx xxx
If only for the fact that he was first denied clearance to
depart on March 24, 1982, obviously because of a typhoon
coming, Babao, as master of the vessel, should have
verified first where the typhoon was before departing on
March 25, 1982. True, the sea was calm at departure time.
But that might be the calm before the storm. Prudence
dictates that he should have ascertained first where the
storm was before departing as it might be on his path.
(Rollo, pp. 35-36)
Respondent court's conclusion as to the negligence of
petitioner is supported by evidence. It will be noted that
Vivencio Babao knew of the impending typhoon on March
24, 1982 when the Philippine Coast Guard denied M/L Maya
the issuance of a clearance to sail. Less than 24 hours
elapsed since the time of the denial of said clearance and
the time a clearance to sail was finally issued on March 25,
1982. Records will show that Babao did not ascertain
where the typhoon was headed by the use of his vessel's
barometer and radio (Rorlo, p. 142). Neither did the
captain of the vessel monitor and record the weather
conditions everyday as required by Art, 612 of the Code of
Commerce (Rollo, pp. 142-143). Had he done so while
navigating for 31 hours, he could have anticipated the
strong winds and big waves and taken shelter (Rollo, pp-
36; 145). His testimony on May 4, 1982 is as follows:
Q. Did you not check on your own where the typhoon was?
A. No. sir. (TSN, May 4, 1982, pp. 58-59)
Noteworthy is the fact that as Per official records of the
Climatological Division of the Philippine Atmospheric,
Geophysical and Astronomical Services Administration
(PAG-ASA for brevity) issued by its Chief of Climatological
Division, Primitivo G. Ballan, Jr. as to the weather and sea
conditions that prevailed in the vicinity of Catmon, Cebu
during the period March 25-27, 1982, the sea conditions on
March 25, 1982 were slight to rough and the weather
the wind;
conditions then prevailing during those times were cloudy
skies with rainshowers and the small waves grew larger
and larger, to wit: Spindrift
begins
SPEE WAVE SEA WEATHE
D HT. R (Exh. 3)
A common carrier is obliged to observe extraordinary
KNOT (METER CONDITIO diligence and the failure of Babao to ascertain the direction
S S) NS of the storm and the weather condition of the path they
would be traversing, constitute lack of foresight and
minimum vigilance over its cargoes taking into account the
March
surrounding circumstances of the case.
25
While the goods are in the possession of the carrier, it is
but fair that it exercises extraordinary diligence in
8 AM 15 1-2 slight cloudy skies
protecting them from loss or damage, and if loss occurs,
the law presumes that it was due to the carrier's fault or
w/ rainshowers negligence; that is necessary to protect the interest of the
shipper which is at the mercy of the carrier (Art. 1756, Civil
Code, Aboitiz Shipping Corporation v. Court of Appeals,
2 PM 20-25 2.0-3.0 moderat overcast skies G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).
e
Furthermore, the records show that the crew of M/L Maya
did not have the required qualifications provided for in P.D.
to rough w/ some rains No. 97 or the Philippine Merchant Marine Officers Law, all
of whom were unlicensed. While it is true that they were
8 PM 30 3.7 rough sea heaps up given special permit to man the vessel, such permit was
issued at the risk and responsibility of the owner (Rollo, p.
36).
white foam
from Finally, petitioner claims that the factual findings of the
Special Board of Marine Inquiry exonerating the
owner/operator, crew officers of the ill-fated vessel M/L
breaking Maya from any administrative liability is binding on the
waves court.
In rejecting petitioner's claim, respondent court was
begin to be correct in ruling that "such exoneration was but with
blown respect to the administrative liability of the
owner/operator, officers and crew of the ill-fated" vessel. It
in streaks could not have meant exoneration of appellee from liability
along as a common carrier for his failure to observe
extraordinary diligence in the vigilance over the goods it
was transporting and for the negligent acts or omissions of
the direction of his employees. Such is the function of the Court, not the
Special Board of Marine Inquiry." (Rollo, P. 37, Annex A, p.
7)
the wind;
The Philippine Merchant Marine Rules and Regulations
particularly Chapter XVI thereof entitled "Marine
Spindrift
Investigation and Suspension and Revocation Proceedings"
begins
prescribes the Rules governing maritime casualties or
accidents, the rules and Procedures in administrative
2 AM 30 3.7 rough sea heaps up investigation of all maritime cases within the jurisdiction or
cognizance of the Philippine Coast Guard and the grounds
for suspension and revocation of licenses/certificates of
white foam marine officers and seamen (1601 — SCOPE); clearly,
from limiting the jurisdiction of the Board of Marine Inquiry and
Special Board of Marine Inquiry to the administrative
breaking aspect of marine casualties in so far as it involves the
waves shipowners and officers.
PREMISES CONSIDERED, the appealed decision is
begin to be AFFIRMED.
blown SO ORDERED.
G.R. No. 141910 August 6, 2002
in streaks
along FGU INSURANCE CORPORATION, petitioner, vs.
G.P. SARMIENTO TRUCKING CORPORATION and
LAMBERT M. EROLES, respondents.
the direction of

16
G.P. Sarmiento Trucking Corporation (GPS) undertook to
deliver on 18 June 1994 thirty (30) units of Condura S.D.
white refrigerators aboard one of its Isuzu truck, driven by
Lambert Eroles, from the plant site of Concepcion
Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan
City. While the truck was traversing the north diversion
road along McArthur highway in Barangay Anupol,
Bamban, Tarlac, it collided with an unidentified truck,
causing it to fall into a deep canal, resulting in damage to
the cargoes.
FGU Insurance Corporation (FGU), an insurer of the
shipment, paid to Concepcion Industries, Inc., the value of
the covered cargoes in the sum of P204,450.00. FGU, in
turn, being the subrogee of the rights and interests of
Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the
trucking company failed to heed the claim, FGU filed a
complaint for damages and breach of contract of carriage
against GPS and its driver Lambert Eroles with the Regional
Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler
only of Concepcion Industries, Inc., since 1988, and it was
not so engaged in business as a common carrier.
Respondents further claimed that the cause of damage
was purely accidental.
The issues having thus been joined, FGU presented its
evidence, establishing the extent of damage to the cargoes
and the amount it had paid to the assured. GPS, instead of
submitting its evidence, filed with leave of court a motion
to dismiss the complaint by way of demurrer to evidence
on the ground that petitioner had failed to prove that it
was a common carrier.
The trial court, in its order of 30 April 1996,1 granted the
motion to dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is
provided that ‘Each party must prove his own affirmative
allegation, xxx.’
"In the instant case, plaintiff did not present any single
evidence that would prove that defendant is a common
carrier.
"x x x xxx xxx
"Accordingly, the application of the law on common
carriers is not warranted and the presumption of fault or
negligence on the part of a common carrier in case of loss,
damage or deterioration of goods during transport under
1735 of the Civil Code is not availing.
"Thus, the laws governing the contract between the owner
of the cargo to whom the plaintiff was subrogated and the
owner of the vehicle which transports the cargo are the
laws on obligation and contract of the Civil Code as well as
the law on quasi delicts.
"Under the law on obligation and contract, negligence or
fault is not presumed. The law on quasi delict provides for
some presumption of negligence but only upon the
attendance of some circumstances. Thus, Article 2185
provides:
‘Art. 2185. Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any
traffic regulation.’
"Evidence for the plaintiff shows no proof that defendant
was violating any traffic regulation. Hence, the
presumption of negligence is not obtaining.
17
"Considering that plaintiff failed to adduce evidence that
defendant is a common carrier and defendant’s driver was
the one negligent, defendant cannot be made liable for the
damages of the subject cargoes."2
The subsequent motion for reconsideration having been
denied,3 plaintiff interposed an appeal to the Court of
Appeals, contending that the trial court had erred (a) in
holding that the appellee corporation was not a common
carrier defined under the law and existing jurisprudence;
and (b) in dismissing the complaint on a demurrer to
evidence.
The Court of Appeals rejected the appeal of petitioner and
ruled in favor of GPS. The appellate court, in its decision of
10 June 1999,4discoursed, among other things, that -
"x x x in order for the presumption of negligence provided
for under the law governing common carrier (Article 1735,
Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to
prove that the appellee is a common carrier, the
presumption would not arise; consequently, the appellant
would have to prove that the carrier was negligent.
"x x x xxx xxx
"Because it is the appellant who insists that the appellees
can still be considered as a common carrier, despite its
`limited clientele,’ (assuming it was really a common
carrier), it follows that it (appellant) has the burden of
proving the same. It (plaintiff-appellant) `must establish his
case by a preponderance of evidence, which means that
the evidence as a whole adduced by one side is superior to
that of the other.’ (Summa Insurance Corporation vs. Court
of Appeals, 243 SCRA 175). This, unfortunately, the
appellant failed to do -- hence, the dismissal of the
plaintiff’s complaint by the trial court is justified.
"x x x xxx xxx
"Based on the foregoing disquisitions and considering the
circumstances that the appellee trucking corporation has
been `its exclusive contractor, hauler since 1970,
defendant has no choice but to comply with the directive of
its principal,’ the inevitable conclusion is that the appellee
is a private carrier.
"x x x xxx xxx
"x x x the lower court correctly ruled that 'the application
of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a
common carrier in case of loss, damage or deterioration of
good[s] during transport under [article] 1735 of the Civil
Code is not availing.' x x x.
"Finally, We advert to the long established rule that
conclusions and findings of fact of a trial court are entitled
to great weight on appeal and should not be disturbed
unless for strong and valid reasons."5
Petitioner's motion for reconsideration was likewise
denied;6 hence, the instant petition,7 raising the following
issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A
COMMON CARRIER AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON
CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO
HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK
TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED
WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS
APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial
court and the Court of Appeals to be amply justified. GPS,
being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to no
other individual or entity, cannot be considered a common
carrier. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air, for hire or compensation, offering their services to
the public,8 whether to the public in general or to a limited
clientele in particular, but never on an exclusive
basis.9 The true test of a common carrier is the carriage of
passengers or goods, providing space for those who opt to
avail themselves of its transportation service for a
fee.10 Given accepted standards, GPS scarcely falls within
the term "common carrier."
The above conclusion nothwithstanding, GPS cannot
escape from liability.
In culpa contractual, upon which the action of petitioner
rests as being the subrogee of Concepcion Industries, Inc.,
the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a the proof.20 Resort to the doctrine, however, may be
corresponding right of relief.11 The law, recognizing the
obligatory force of contracts,12 will not permit a party to
be set free from liability for any kind of misperformance of
the contractual undertaking or a contravention of the tenor
thereof.13 A breach upon the contract confers upon the
injured party a valid cause for recovering that which may
have been lost or suffered. The remedy serves to preserve
the interests of the promisee that may include his
"expectation interest," which is his interest in having the
benefit of his bargain by being put in as good a position as
he would have been in had the contract been performed,
or his "reliance interest," which is his interest in being
reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been in
had the contract not been made; or his "restitution
interest," which is his interest in having restored to him
any benefit that he has conferred on the other
party.14 Indeed, agreements can accomplish little, either
for their makers or for society, unless they are made the
basis for action.15 The effect of every infraction is to
create a new duty, that is, to make recompense to the one
who has been injured by the failure of another to observe
his contractual obligation16 unless he can show
extenuating circumstances, like proof of his exercise of due
diligence (normally that of the diligence of a good father of
a family or, exceptionally by stipulation or by law such as
in the case of common carriers, that of extraordinary
diligence) or of the attendance of fortuitous event, to
excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence
of a contract of carriage between it and petitioner’s
assured, and admits that the cargoes it has assumed to
deliver have been lost or damaged while in its custody. In
such a situation, a default on, or failure of compliance with,
the obligation – in this case, the delivery of the goods in its
custody to the place of destination - gives rise to a
presumption of lack of care and corresponding liability on
the part of the contractual obligor the burden being on him
to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete
18
proof of his negligence or fault, may not himself be ordered
to pay petitioner. The driver, not being a party to the
contract of carriage between petitioner’s principal and
defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it
or their successors who have assumed their personality or
their juridical position.17 Consonantly with the axiom res
inter alios acta aliis neque nocet prodest, such contract can
neither favor nor prejudice a third person. Petitioner’s civil
action against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require
the claimant for damages to prove negligence or fault on
the part of the defendant.18
A word in passing. Res ipsa loquitur, a doctrine being
invoked by petitioner, holds a defendant liable where the
thing which caused the injury complained of is shown to be
under the latter’s management and the accident is such
that, in the ordinary course of things, cannot be expected
to happen if those who have its management or control
use proper care. It affords reasonable evidence, in the
absence of explanation by the defendant, that the accident
arose from want of care.19 It is not a rule of substantive
law and, as such, it does not create an independent ground
of liability. Instead, it is regarded as a mode of proof, or a
mere procedural convenience since it furnishes a
substitute for, and relieves the plaintiff of, the burden of
producing specific proof of negligence. The maxim simply
places on the defendant the burden of going forward with
allowed only when (a) the event is of a kind which does not
ordinarily occur in the absence of negligence; (b) other
responsible causes, including the conduct of the plaintiff
and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the
scope of the defendant's duty to the plaintiff.21Thus, it is
not applicable when an unexplained accident may be
attributable to one of several causes, for some of which the
defendant could not be responsible.22
Res ipsa loquitur generally finds relevance whether or not
a contractual relationship exists between the plaintiff and
the defendant, for the inference of negligence arises from
the circumstances and nature of the occurrence and not
from the nature of the relation of the
parties.23Nevertheless, the requirement that responsible
causes other than those due to defendant’s conduct must
first be eliminated, for the doctrine to apply, should be
understood as being confined only to cases of pure (non-
contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed
out, immediately attaches by a failure of the covenant or
its tenor. In the case of the truck driver, whose liability in a
civil action is predicated on culpa acquiliana, while he
admittedly can be said to have been in control and
management of the vehicle which figured in the accident,
it is not equally shown, however, that the accident could
have been exclusively due to his negligence, a matter that
can allow, forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the
order of dismissal is reversed, the movant shall be deemed
to have waived the right to present evidence.24 Thus,
respondent corporation may no longer offer proof to
establish that it has exercised due care in transporting the
cargoes of the assured so as to still warrant a remand of
the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the
Regional Trial Court, Branch 66, of Makati City, and the
decision, dated 10 June 1999, of the Court of Appeals,
are AFFIRMED only insofar as respondent Lambert M.
Eroles is concerned, but said assailed order of the trial
court and decision of the appellate court are REVERSED as
regards G.P. Sarmiento Trucking Corporation which,
instead, is hereby ordered to pay FGU Insurance
Corporation the value of the damaged and lost cargoes in
the amount of P204,450.00. No costs.
SO ORDERED.
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION,
petitioner, vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-
AN, BATANGAS CITY and ADORACION C. ARELLANO,
in her official capacity as City Treasurer of
Batangas, respondents.
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
19
licensing. The fee is already a revenue raising measure,
and not a mere regulatory imposition. 4
On March 8, 1994, the respondent City Treasurer denied
the protest contending that petitioner cannot be
considered engaged in transportation business, thus it
cannot claim exemption under Section 133 (j) of the Local
Government Code. 5
On June 15, 1994, petitioner filed with the Regional Trial
Court of Batangas City a complaint 6 for tax refund with
prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in
her capacity as City Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition and collection of
the business tax on its gross receipts violates Section 133
of the Local Government Code; (2) the authority of cities to
impose and collect a tax on the gross receipts of
"contractors and independent contractors" under Sec. 141
(e) and 151 does not include the authority to collect such
taxes on transportation contractors for, as defined under
Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer
illegally and erroneously imposed and collected the said
tax, thus meriting the immediate refund of the tax paid. 7
Traversing the complaint, the respondents argued that
petitioner cannot be exempt from taxes under Section 133
(j) of the Local Government Code as said exemption
applies only to "transportation contractors and persons
engaged in the transportation by hire and common carriers
by air, land and water." Respondents assert that pipelines
are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and
the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or
manner by which a product is delivered to its destination. 8
On October 3, 1994, the trial court rendered a decision
dismissing the complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent
contractor.
. . . the exemption to tax claimed by the plaintiff has
become unclear. It is a rule that tax exemptions are to be
strictly construed against the taxpayer, taxes being the
lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession
under Republic Act 387. (Exhibit A) whose concession was
lately renewed by the Energy Regulatory Board (Exhibit B).
Yet neither said law nor the deed of concession grant any
tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on
franchise holders under Sec. 137 of the Local Tax Code.
Such being the situation obtained in this case (exemption
being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j)
encompasses onlycommon carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a special
carrier extending its services and facilities to a single
specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to
give more and effective local autonomy to local
governments than the previous enactments, to make them
economically and financially viable to serve the people and
discharge their functions with a concomitant obligation to
accept certain devolution of powers, . . . So, consistent with
this policy even franchise grantees are taxed (Sec. 137)
and contractors are also taxed under Sec. 143 (e) and 151
of the Code. 9
Petitioner assailed the aforesaid decision before this
Court via a petition for review. On February 27, 1995, we
referred the case to the respondent Court of Appeals for
consideration and adjudication. 10On November 29, 1995,
the respondent court rendered a decision 11 affirming the
trial court's dismissal of petitioner's complaint. Petitioner's
motion for reconsideration was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due
course in a Resolution dated November 11,
1996. 13 Petitioner moved for a reconsideration which was
granted by this Court in a Resolution 14 of January 22, 1997.
Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals
erred in holding that (1) the petitioner is not a common
carrier or a transportation contractor, and (2) the
exemption sought for by petitioner is not clear under the
law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who
holds himself out to the public as engaged in the business
of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as
"any person, corporation, firm or association engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public."
The test for determining whether a party is a common
carrier of goods is:
1. He must be engaged in the business of carrying goods
for others as a public employment, and must hold himself
out as ready to engage in the transportation of goods for
person generally as a business and not as a casual
occupation;
2. He must undertake to carry goods of the kind to which
his business is confined;
3. He must undertake to carry by the method by which his
business is conducted and over his established roads; and
15
4. The transportation must be for hire.
Based on the above definitions and requirements, there is
no doubt that petitioner is a common carrier. It is engaged
in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to
all persons who choose to employ its services, and
transports the goods by land and for compensation. The
fact that petitioner has a limited clientele does not exclude
it from the definition of a common carrier. In De Guzman
vs. Court of Appeals 16 we ruled that:
The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local
idiom, as a "sideline"). Article 1732 . . . avoids making any
distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general
public," i.e., the general community or population, and one
20
who offers services or solicits business only from a narrow
segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth
in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
every person that now or hereafter may own, operate.
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric
light heat and power, water supply and power
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. (Emphasis
Supplied)
Also, respondent's argument that the term "common
carrier" as used in Section 133 (j) of the Local Government
Code refers only to common carriers transporting goods
and passengers through moving vehicles or vessels either
by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of
"common carriers" in the Civil Code makes no distinction
as to the means of transporting, as long as it is by land,
water or air. It does not provide that the transportation of
the passengers or goods should be by motor vehicle. In
fact, in the United States, oil pipe line operators are
considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act
387), petitioner is considered a "common carrier." Thus,
Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A
pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation
capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and
to charge without discrimination such rates as may have
been approved by the Secretary of Agriculture and Natural
Resources.
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof provides:
that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating to the
manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public
utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier." In BIR Ruling No. 069-83, it
declared:
. . . since [petitioner] is a pipeline concessionaire that is
engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No.
387 . . . . Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-
78, as amended.
From the foregoing disquisition, there is no doubt that
petitioner is a "common carrier" and, therefore, exempt
from the business tax as provided for in Section 133 (j), of
the Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units. — Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors
and persons engaged in the transportation of passengers
or freight by hire and common carriers by air, land or
water, except as provided in this Code.
The deliberations conducted in the House of
Representatives on the Local Government Code of 1991
are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations
on the Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business
of transportation. This appears to be one of those being
deemed to be exempted from the taxing powers of the
local government units. May we know the reason why the
transportation business is being excluded from the taxing
powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception
contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may not
impose taxes on the business of transportation, except as
otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to
page 98 of Book II, one can see there that provinces have
the power to impose a tax on business enjoying a franchise
at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who
are enjoying a franchise would be subject to tax by the
province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the
imposition of taxes by local government units on the
carrier business. Local government units may impose taxes
on top of what is already being imposed by the National
Internal Revenue Code which is the so-called "common
carriers tax." We do not want a duplication of this tax, so
we just provided for an exception under Section 125 [now
Sec. 137] that a province may impose this tax at a specific
rate.
MR. AQUINO (A.). Thank you for that clarification, Mr.
Speaker. . . . 18
It is clear that the legislative intent in excluding from the
taxing power of the local government unit the imposition of
business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common
carrier's tax on its gross sales/earnings under the National
Internal Revenue Code. 19 To tax petitioner again on its
gross receipts in its transportation of petroleum business
21
would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision
of the respondent Court of Appeals dated November 29,
1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name
and style TRANSORIENT CONTAINER TERMINAL
SERVICES, INC., petitioner, vs.
UCPB GENERAL INSURANCE CO., INC. (formerly
Allied Guarantee Ins. Co., Inc.) respondent.
This is a petition for review of the decision,1 dated May 31,
2001, of the Court of Appeals, affirming the decision2 of
the Regional Trial Court, Makati City, Branch 148, which
ordered petitioner to pay respondent, as subrogee, the
amount of P93,112.00 with legal interest, representing the
value of damaged cargo handled by petitioner, 25%
thereof as attorney's fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient
Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. At the time material to this
case, petitioner entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-
chemical fluting paper and 124 reels of kraft liner board
from the Port Area in Manila to SMC's warehouse at the
Tabacalera Compound, Romualdez St., Ermita, Manila. The
cargo was insured by respondent UCPB General Insurance
Co., Inc.
On July 14, 1990, the shipment in question, contained in 30
metal vans, arrived in Manila on board "M/V Hayakawa
Maru" and, after 24 hours, were unloaded from the vessel
to the custody of the arrastre operator, Manila Port
Services, Inc. From July 23 to July 25, 1990, petitioner,
pursuant to her contract with SMC, withdrew the cargo
from the arrastre operator and delivered it to SMC's
warehouse in Ermita, Manila. On July 25, 1990, the goods
were inspected by Marine Cargo Surveyors, who found that
15 reels of the semi-chemical fluting paper were
"wet/stained/torn" and 3 reels of kraft liner board were
likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its
insurance contract for the aforementioned amount. In turn,
respondent, as subrogee of SMC, brought suit against
petitioner in the Regional Trial Court, Branch 148, Makati
City, which, on December 20, 1995, rendered judgment
finding petitioner liable to respondent for the damage to
the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained
damage while in the custody of defendants. Evidence such
as the Warehouse Entry Slip (Exh. "E"); the Damage Report
(Exh. "F") with entries appearing therein, classified as
"TED" and "TSN", which the claims processor, Ms. Agrifina
De Luna, claimed to be tearrage at the end and tearrage at
the middle of the subject damaged cargoes respectively,
coupled with the Marine Cargo Survey Report (Exh. "H" -
"H-4-A") confirms the fact of the damaged condition of the
subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in
particular, which provides among others that:
" . . . we opine that damages sustained by shipment is
attributable to improper handling in transit presumably
whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to
sustain [her] defense that [she is] are not liable. Defendant
by reason of the nature of [her] business should have
devised ways and means in order to prevent the damage
to the cargoes which it is under obligation to take custody
of and to forthwith deliver to the consignee. Defendant did
not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the
cargo [she] shall perform such extraordinary diligence
because of the nature of the cargo.
Generally speaking under Article 1735 of the Civil Code, if
the goods are proved to have been lost, destroyed or
deteriorated, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that
they have observed the extraordinary diligence required by
law. The burden of the plaintiff, therefore, is to prove
merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted
to the carrier to prove that he has exercised the
extraordinary diligence required by law. Thus, it has been
held that the mere proof of delivery of goods in good order
to a carrier, and of their arrival at the place of destination
in bad order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was due
to accident or some other circumstances inconsistent with
its liability." (cited in Commercial Laws of the Philippines by
Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and
at the same time a common carrier is supposed [to]
exercise [the] extraordinary diligence required by law,
hence the extraordinary responsibility lasts from the time
the goods are unconditionally placed in the possession of
and received by the carrier for transportation until the
same are delivered actually or constructively by the carrier
to the consignee or to the person who has the right to
receive the same.3
Accordingly, the trial court ordered petitioner to pay the
following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on
appeal. Hence this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE
EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A
COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.5
It will be convenient to deal with these contentions in the
inverse order, for if petitioner is not a common carrier,
although both the trial court and the Court of Appeals held
otherwise, then she is indeed not liable beyond what
ordinary diligence in the vigilance over the goods
transported by her, would require.6 Consequently, any
damage to the cargo she agrees to transport cannot be
22
presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial
court and the Court of Appeals, she is not a common
carrier but a private carrier because, as a customs broker
and warehouseman, she does not indiscriminately hold her
services out to the public but only offers the same to select
parties with whom she may contract in the conduct of her
business.
The contention has no merit. In De Guzman v. Court of
Appeals,7 the Court dismissed a similar contention and
held the party to be a common carrier, thus -
The Civil Code defines "common carriers" in the following
terms:
"Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air for compensation, offering their services to the
public."
The above article makes no distinction between one
whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as
an ancillary activity . . . Article 1732 also carefully avoids
making any distinction between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the
"general public," i.e., the general community or population,
and one who offers services or solicits business only from a
narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth
in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or
compensation,with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other
similar public services. x x x" 8
There is greater reason for holding petitioner to be a
common carrier because the transportation of goods is an
integral part of her business. To uphold petitioner's
contention would be to deprive those with whom she
contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods
for her customers, as already noted, is part and parcel of
petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code
provides:
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them,
according to all the circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of
"extraordinary diligence in the vigilance over goods" was
explained thus:
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to
know and to follow the required precaution for avoiding
damage to, or destruction of the goods entrusted to it for
sale, carriage and delivery. It requires common carriers to
render service with the greatest skill and foresight and "to
use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including
such methods as their nature requires."
In the case at bar, petitioner denies liability for the damage
to the cargo. She claims that the "spoilage or wettage"
took place while the goods were in the custody of either
the carrying vessel "M/V Hayakawa Maru," which
transported the cargo to Manila, or the arrastre operator,
to whom the goods were unloaded and who allegedly kept
them in open air for nine days from July 14 to July 23, 1998
notwithstanding the fact that some of the containers were
deformed, cracked, or otherwise damaged, as noted in the
Marine Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door
distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right
portion
TOLU-213674-3 - wood flooring we[t] and/or with
signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door
panel partly detached loosened.10
In addition, petitioner claims that Marine Cargo Surveyor
Ernesto Tolentino testified that he has no personal
knowledge on whether the container vans were first stored
in petitioner's warehouse prior to their delivery to the
consignee. She likewise claims that after withdrawing the
container vans from the arrastre operator, her driver,
Ricardo Nazarro, immediately delivered the cargo to SMC's
warehouse in Ermita, Manila, which is a mere thirty-minute
drive from the Port Area where the cargo came from. Thus,
the damage to the cargo could not have taken place while
these were in her custody.11
Contrary to petitioner's assertion, the Survey Report (Exh.
H) of the Marine Cargo Surveyors indicates that when the
shipper transferred the cargo in question to the arrastre
operator, these were covered by clean Equipment
Interchange Report (EIR) and, when petitioner's employees
withdrew the cargo from the arrastre operator, they did so
without exception or protest either with regard to the
condition of container vans or their contents. The Survey
Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was
noted discharged ex vessel to dock of Pier #13 South
Harbor, Manila on 14 July 1990, containerized onto 30' x
20' secure metal vans, covered by clean EIRs. Except for
23
slight dents and paint scratches on side and roof panels,
these containers were deemed to have [been] received in
good condition.
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo
containers was [withdrawn] by Transorient Container
Services, Inc. . . .without exception.
[The cargo] was finally delivered to the consignee's storage
warehouse located at Tabacalera Compound, Romualdez
Street, Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment
was discharged from the vessel to the arrastre, Marina Port
Services Inc., in good order and condition as evidenced by
clean Equipment Interchange Reports (EIRs). Had there
been any damage to the shipment, there would have been
a report to that effect made by the arrastre operator. The
cargoes were withdrawn by the defendant-appellant from
the arrastre still in good order and condition as the same
were received by the former without exception, that is,
without any report of damage or loss. Surely, if the
container vans were deformed, cracked, distorted or
dented, the defendant-appellant would report it
immediately to the consignee or make an exception on the
delivery receipt or note the same in the Warehouse Entry
Slip (WES). None of these took place. To put it simply, the
defendant-appellant received the shipment in good order
and condition and delivered the same to the consignee
damaged. We can only conclude that the damages to the
cargo occurred while it was in the possession of the
defendant-appellant. Whenever the thing is lost (or
damaged) in the possession of the debtor (or obligor), it
shall be presumed that the loss (or damage) was due to his
fault, unless there is proof to the contrary. No proof was
proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier in
case of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not have
been damaged while in her custody as she immediately
delivered the containers to SMC's compound, suffice it to
say that to prove the exercise of extraordinary diligence,
petitioner must do more than merely show the possibility
that some other party could be responsible for the
damage. It must prove that it used "all reasonable means
to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care
in the handling [thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under
Art. 1734(4), which provides --
Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to
any of the following causes only:
(4) The character of the goods or defects in the packing or
in the containers.
For this provision to apply, the rule is that if the improper
packing or, in this case, the defect/s in the container, is/are
known to the carrier or his employees or apparent upon
ordinary observation, but he nevertheless accepts the
same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage resulting
therefrom.14 In this case, petitioner accepted the cargo
without exception despite the apparent defects in some of
the container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage
of goods in this case or that she is exempt from liability,
the presumption of negligence as provided under Art.
173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated
May 31, 2001, is AFFIRMED.
SO ORDERED.

24