epublic of the Philippines

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

FELICIANO, J .:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would
load his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent
for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati,
Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on
1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons
were loaded on a truck driven by respondent himself, while 600 cartons were placed on board
the other truck which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere along
the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of
First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent,
being a common carrier, and having failed to exercise the extraordinary diligence required of
him by the law, should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he
could not be held responsible for the value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision
1
finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services to
the public; in not exempting him from liability on the ground of force majeure; and in ordering
him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner
came to this Court by way of a Petition for Review assigning as errors the following conclusions
of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under
the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733
deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
... every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent'sprincipal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged his customers
a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate
of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers. That liability arises the moment a person or firm acts as
a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary certificate of
public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business
of a common carrier impinges directly and intimately upon the safety and well being and
property of those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of those
who utilize their services and the law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy"
2
are held to
a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as
well as of passengers. The specific import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article 1733, "further expressed in Articles
1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
alleged in the instant case the hijacking of the carrier's truck does not fall within any of the
five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the
hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other
words, that the private respondent as common carrier is presumed to have been at fault or to
have acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to ride with the
truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver
and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking
or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by
thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment
used in the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to
divest or to diminish such responsibility even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and carrying away
with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force.
3
Three (3) of the five (5) hold-uppers were armed with firearms. The robbers
not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band.
4

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

Footnotes
1 Rollo, p. 14.
2 Article 1733, Civil Code.
3 Rollo, p. 22.
4 The evidence of the prosecution did not show that more than three (3) of the
five (5) hold-uppers were armed. Thus, the existence of a "band" within the
technical meaning of Article 306 of the Revised Penal Code, was not affirmatively
proved by the prosecution.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL CORPORATION, respondents.

PANGANIBAN, J .:
The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's
responsibility for damage to the cargo and its liability for demurrage and attorney's fees. The
Court also reiterates the well-known rule that findings of facts of trial courts, when affirmed by
the Court of Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and
Vlasons Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of
Appeals.
1
The Court of Appeals modified the decision of the Regional Trial Court of Pasig,
Metro Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the
plaintiff dismissing the complaint with cost against plaintiff, and ordering plaintiff to pay
the defendant on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest
at the legal rate on both amounts from April 7, 1976 until the same shall have been fully
paid;
2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and
3. Costs of suit.
SO ORDERED.
2

On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by
reducing the award for demurrage to P44,000.00 and deleting the award for attorney's
fees and expenses of litigation. Except as thus modified, the decision is AFFIRMED.
There is no pronouncement as to costs.
SO ORDERED.
3

The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport
cargo or shipment for the general public. Its services are available only to specific persons who
enter into a special contract of charter party with its owner. It is undisputed that the ship is a
private carrier. And it is in the capacity that its owner, Vlasons Shipping, Inc., entered into a
contract of affreightment or contract of voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage
Charter Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's vessel, the MV
"VLASONS I" to make one (1) voyage to load steel products at Iligan City and discharge
them at North Harbor, Manila, under the following terms and conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at
Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill
of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24
consecutive hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners
not responsible for losses/damages except on proven willful negligence of the officers of
the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally
recognized Charter Party Agreement shall form part of this Contract.
xxx xxx xxx
The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in
the NANYOZAI Charter Party which stands for "Freight In and Out including Stevedoring
and Trading", which means that the handling, loading and unloading of the cargoes are
the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it
states, "Charterers to load, stow and discharge the cargo free of risk and expenses to
owners. . . . (Emphasis supplied).
Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the
beginning of the voyage, exercise due diligence to make the vessel seaworthy and
properly manned, equipped and supplied and to make the holds and all other parts of
the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation. Owners shall not be liable for loss of or damage of the cargo arising or
resulting from: unseaworthiness unless caused by want of due diligence on the part of
the owners to make the vessel seaworthy, and to secure that the vessel is properly
manned, equipped and supplied and to make the holds and all other parts of the vessel
in which cargo is carried, fit and safe for its reception, carriage and preservation; . . . ;
perils, dangers and accidents of the sea or other navigable waters; . . . ; wastage in bulk
or weight or any other loss or damage arising from inherent defect, quality or vice of the
cargo; insufficiency of packing; . . . ; latent defects not discoverable by due diligence;
any other cause arising without the actual fault or privity of Owners or without the fault of
the agents or servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be
responsible for split, chafing and/or any damage unless caused by the negligence or
default of the master and crew."
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire,
the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677
skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with
a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was
placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as
agent of the vessel[,] acknowledged receipt of the cargo on board and signed the
corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12,
1974. The following day, August 13, 1974, when the vessel's three (3) hatches
containing the shipment were opened by plaintiff's agents, nearly all the skids of tinplates
and hot rolled sheets were allegedly found to be wet and rusty. The cargo was
discharged and unloaded by stevedores hired by the Charterer. Unloading was
completed only on August 24, 1974 after incurring a delay of eleven (11) days due to the
heavy rain which interrupted the unloading operations. (Exhibit "E")
(4) To determine the nature and extent of the wetting and rusting, NSC called for a
survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a
letter to the NSC dated March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular
inspection conducted on the cargo, both while it was still on board the vessel and later at
the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and
stored. MASCO reported that it found wetting and rusting of the packages of hot rolled
sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at
various extents; that container/metal casings of the skids were rusting all over. MASCO
ventured the opinion that "rusting of the tinplates was caused by contact with SEA
WATER sustained while still on board the vessel as a consequence of the heavy
weather and rough seas encountered while en route to destination (Exhibit "F"). It was
also reported that MASCO's surveyors drew at random samples of bad order packing
materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories for
analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770
(Exhibit "I") which in part, states, "The analysis of bad order samples of packing
materials . . . shows that wetting was caused by contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed
with the defendant its claim for damages suffered due to the downgrading of the
damaged tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiff
formally demanded payment of said claim but defendant VSI refused and failed to pay.
Plaintiff filed its complaint against defendant on April 21, 1976 which was docketed as
Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of
P941,145.18 as a result of the act, neglect and default of the master and crew in the
management of the vessel as well as the want of due diligence on the part of the
defendant to make the vessel seaworthy and to make the holds and all other parts of the
vessel in which the cargo was carried, fit and safe for its reception, carriage and
preservation all in violation of defendant's undertaking under their Contract of Voyage
Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV
"VLASONS I" was seaworthy in all respects for the carriage of plaintiff's cargo; that said
vessel was not a "common carrier" inasmuch as she was under voyage charter contract
with the plaintiff as charterer under the charter party; that in the course of the voyage
from Iligan City to Manila, the MV "VLASONS I" encountered very rough seas, strong
winds and adverse weather condition, causing strong winds and big waves to
continuously pound against the vessel and seawater to overflow on its deck and hatch
covers, that under the Contract of Voyage Charter Hire, defendant shall not be
responsible for losses/damages except on proven willful negligence of the officers of the
vessel, that the officers of said MV "VLASONS I" exercised due diligence and proper
seamanship and were not willfully negligent; that furthermore the Voyage Charter Party
provides that loading and discharging of the cargo was on FIOST terms which means
that the vessel was free of risk and expense in connection with the loading and
discharging of the cargo; that the damage, if any, was due to the inherent defect, quality
or vice of the cargo or to the insufficient packing thereof or to latent defect of the cargo
not discoverable by due diligence or to any other cause arising without the actual fault or
privity of defendant and without the fault of the agents or servants of defendant;
consequently, defendant is not liable; that the stevedores of plaintiff who discharged the
cargo in Manila were negligent and did not exercise due care in the discharge of the
cargo; land that the cargo was exposed to rain and seawater spray while on the pier or
in transit from the pier to plaintiff's warehouse after discharge from the vessel; and that
plaintiff's claim was highly speculative and grossly exaggerated and that the small stain
marks or sweat marks on the edges of the tinplates were magnified and considered total
loss of the cargo. Finally, defendant claimed that it had complied with all its duties and
obligations under the Voyage Charter Hire Contract and had no responsibility
whatsoever to plaintiff. In turn, it alleged the following counterclaim:
(a) That despite the full and proper performance by defendant of its
obligations under the Voyage Charter Hire Contract, plaintiff failed and
refused to pay the agreed charter hire of P75,000.00 despite demands
made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to
pay defendant the sum of P8,000.00 per day for demurrage. The vessel
was on demurrage for eleven (11) days in Manila waiting for plaintiff to
discharge its cargo from the vessel. Thus, plaintiff was liable to pay
defendant demurrage in the total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff
should be ordered to pay defendant attorney's fees and all expenses of
litigation in the amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came out with the
following findings which were set forth in its decision:
(a) The MV "VLASONS I" is a vessel of Philippine registry engaged in the
tramping service and is available for hire only under special contracts of
charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage
Charter Hire (Exh. "1"), the MV VLASONS I" was covered by the required
seaworthiness certificates including the Certification of Classification
issued by an international classification society, the NIPPON KAIJI
KYOKAI (Exh. "4"); Coastwise License from the Board of Transportation
(Exh. "5"); International Loadline Certificate from the Philippine Coast
Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also from the
Philippine Coast Guard (Exh. "7"); Ship Radio Station License (Exh. "8");
Certificate of Inspection by the Philippine Coast Guard (Exh. "12"); and
Certificate of Approval for Conversion issued by the Bureau of Customs
(Exh. "9"). That being a vessel engaged in both overseas and coastwise
trade, the MV "VLASONS I" has a higher degree of seaworthiness and
safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by
the Contract of Voyage Charter Hire, the MV "VLASONS I" underwent
drydocking in Cebu and was thoroughly inspected by the Philippine Coast
Guard. In fact, subject voyage was the vessel's first voyage after the
drydocking. The evidence shows that the MV "VLASONS I" was
seaworthy and properly manned, equipped and supplied when it
undertook the voyage. It has all the required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the
ship. The hatch openings were covered by hatchboards which were in
turn covered by two or double tarpaulins. The hatch covers were water
tight. Furthermore, under the hatchboards were steel beams to give
support.
(e) The claim of the plaintiff that defendant violated the contract of
carriage is not supported by evidence. The provisions of the Civil Code on
common carriers pursuant to which there exists a presumption of
negligence in case of loss or damage to the cargo are not applicable. As
to the damage to the tinplates which was allegedly due to the wetting and
rusting thereof, there is unrebutted testimony of witness Vicente
Angliongto that tinplates "sweat" by themselves when packed even
without being in contract (sic) with water from outside especially when the
weather is bad or raining. The trust caused by sweat or moisture on the
tinplates may be considered as a loss or damage but then, defendant
cannot be held liable for it pursuant to Article 1734 of the Civil Case which
exempts the carrier from responsibility for loss or damage arising from the
"character of the goods . . ." All the 1,769 skids of the tinplates could not
have been damaged by water as claimed by plaintiff. It was shown as
claimed by plaintiff that the tinplates themselves were wrapped in kraft
paper lining and corrugated cardboards could not be affected by water
from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates
were negligent in not closing the hatch openings of the MV "VLASONS I"
when rains occurred during the discharging of the cargo thus allowing
rainwater to enter the hatches. It was proven that the stevedores merely
set up temporary tents to cover the hatch openings in case of rain so that
it would be easy for them to resume work when the rains stopped by just
removing the tent or canvas. Because of this improper covering of the
hatches by the stevedores during the discharging and unloading
operations which were interrupted by rains, rainwater drifted into the
cargo through the hatch openings. Pursuant to paragraph 5 of the
NANYOSAI [sic] Charter Party which was expressly made part of the
Contract of Voyage Charter Hire, the loading, stowing and discharging of
the cargo is the sole responsibility of the plaintiff charterer and defendant
carrier has no liability for whatever damage may occur or maybe [sic]
caused to the cargo in the process.
(g) It was also established that the vessel encountered rough seas and
bad weather while en route from Iligan City to Manila causing sea water
to splash on the ship's deck on account of which the master of the vessel
(Mr. Antonio C. Dumlao) filed a "Marine Protest" on August 13, 1974
(Exh. "15"); which can be invoked by defendant as a force majeure that
would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9
of the Voyage Charter Hire contract that it was to insure the cargo
because it did not. Had plaintiff complied with the requirement, then it
could have recovered its loss or damage from the insurer. Plaintiff also
violated the charter party contract when it loaded not only "steel
products", i.e. steel bars, angular bars and the like but also tinplates and
hot rolled sheets which are high grade cargo commanding a higher
freight. Thus plaintiff was able to ship grade cargo at a lower freight rate.
(i) As regards defendant's counterclaim, the contract of voyage charter
hire under Paragraph 4 thereof, fixed the freight at P30.00 per metric ton
payable to defendant carrier upon presentation of the bill of lading within
fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00
despite demands. The evidence also showed that the plaintiff was
required and bound under paragraph 7 of the same Voyage Charter Hire
contract to pay demurrage of P8,000.00 per day of delay in the unloading
of the cargoes. The delay amounted to eleven (11) days thereby making
plaintiff liable to pay defendant for demurrage in the amount of
P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly
manned, equipped and supplied, and that there is no proof of willful negligence of the
vessel's officers.
II
The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent
nature or character of the goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired by NSC were negligent in the
unloading of NSC's shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to
VSI.
4

As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and
expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a
Resolution
5
dated October 20, 1993, the appellate court denied both motions. Undaunted, NSC
and VSI filed their respective petitions for review before this Court. On motion of VSI, the Court
ordered on February 14, 1994 the consolidation of these petitions.
6

The Issues
In its petition
7
and memorandum,
8
NSC raises the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading
delays caused by weather interruption;
2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7",
"8", "9", "11" and "12") were admissible in evidence and constituted evidence of the
vessel's seaworthiness at the beginning of the voyages; and
3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from
liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessel's officers and crew were negligent in handling and caring for
NSC's cargo;
3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence,
rusted on their own; and
4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of
NSC's tinplates.
In its separate petition,
9
VSI submits for the consideration of this Court the following alleged
errors of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of
demurrage from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of
P100,000 for attorney's fees and expenses of litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum:
10

I. Whether or not the provisions of the Civil Code of the Philippines on common carriers
pursuant to which there exist[s] a presumption of negligence against the common carrier
in case of loss or damage to the cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire,
including the Nanyozai Charter, are valid and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSC's Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorney's Fees.
The Court's Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the
demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier
or as a private carrier. The resolution of this preliminary question determines the law, standard
of diligence and burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public." It has been held
that the true test of a common carrier is the carriage of passengers or goods, provided it has
space, for all who opt to avail themselves of its transportation service for a fee.
11
A carrier which
does not qualify under the above test is deemed a private carrier. "Generally, private carriage is
undertaken by special agreement and the carrier does not hold himself out to carry goods for
the general public. The most typical, although not the only form of private carriage, is the charter
party, a maritime contract by which the charterer, a party other than the shipowner, obtains the
use and service of all or some part of a ship for a period of time or a voyage or voyages."
12

In the instant case, it is undisputed that VSI did not offer its services to the general public. As
found by the Regional Trial Court, it carried passengers or goods only for those it chose under a
"special contract of charter party."
13
As correctly concluded by the Court of Appeals, the MV
Vlasons I "was not a common but a private carrier."
14
Consequently, the rights and obligations of
VSI and NSC, including their respective liability for damage to the cargo, are determined
primarily by stipulations in their contract of private carriage or charter party.
15
Recently,
in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers
Shipping Corporation,
16
the Court ruled:
. . . in a contract of private carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public. Hence, the
stringent provisions of the Civil Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting commercial goods as a private carrier.
Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving
common carriers.
17

Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall
not be responsible for losses except on proven willful negligence of the officers of the vessel."
The NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation
further provided that the shipowner shall not be liable for loss of or a damage to the cargo
arising or resulting from unseaworthiness, unless the same was caused by its lack of due
diligence to make the vessel seaworthy or to ensure that the same was "properly manned,
equipped and supplied," and to "make the holds and all other parts of the vessel in which cargo
[was] carried, fit and safe for its reception, carriage and preservation."
18
The NANYOZAI
Charter Party also provided that "[o]wners shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of the master or crew."
19

Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its
shipment was caused by VSI's willful negligence or failure to exercise due diligence in
making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo.
Ineluctably, the burden of proof was placed on NSC by the parties' agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the
contrary has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation,
due to fortuitous event, force majeure, or the nature and inherent defect of the things,
shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause
mentioned in the preceding article if proofs against him show that they occurred on
account of his negligence or his omission to take the precautions usually adopted by
careful persons, unless the shipper committed fraud in the bill of lading, making him to
believe that the goods were of a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by
the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a
general rule, places the prima faciepresumption of negligence on a common carrier. It is a
hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the
plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the
goods were lost or damaged while in the carrier's custody does not put the burden of
proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes only to exercise due care in
the protection of the goods committed to its care, the burden of proving negligence or a
breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the
carrier's possession does not cast on it the burden of proving proper care and diligence
on its part or that the loss occurred from an excepted cause in the contract or bill of
lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of
the presumptions and inferences by which the law aids the bailor in an action against a
bailee, and since the carrier is in a better position to know the cause of the loss and that
it was not one involving its liability, the law requires that it come forward with the
information available to it, and its failure to do so warrants an inference or presumption
of its liability. However, such inferences and presumptions, while they may affect the
burden of coming forward with evidence, do not alter the burden of proof which remains
on plaintiff, and, where the carrier comes forward with evidence explaining the loss or
damage, the burden of going forward with the evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of seaworthiness, the burden of
proving a breach thereof and that such breach was the proximate cause of the damage
rests on plaintiff, and proof that the goods were lost or damaged while in the carrier's
possession does not cast on it the burden of proving seaworthiness. . . . Where the
contract of carriage exempts the carrier from liability for unseaworthiness not
discoverable by due diligence, the carrier has the preliminary burden of proving the
exercise of due diligence to make the vessel seaworthy.
20

In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct
position in relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11),
after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-
appellant's [NSC's] interpretation of Clause 12 is not even correct), it argues that 'a careful
examination of the evidence will show that VSI miserably failed to comply with any of these
obligation's as if defendant-appellee [VSI] had the burden of
proof."
21

First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is manifestly
relevant: (1) whether VSI exercised due diligence in making MV Vlasons I seaworthy for the
intended purpose under the charter party; (2) whether the damage to the cargo should be
attributed to the willful negligence of the officers and crew of the vessel or of the stevedores
hired by NSC; and (3) whether the rusting of the tinplates was caused by its own "sweat" or by
contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the
firsthand opportunity to hear the parties' conflicting claims and to carefully weigh their respective
evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals.
Where the factual findings of both the trial court and the Court of Appeals coincide, the same
are binding on this Court.
22
We stress that, subject to some exceptional instances,
23
only
questions of law not questions of fact may be raised before this Court in a petition for
review under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find
no reason to disturb the lower court's factual findings, as indeed NSC has not successfully
proven the application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy
and fit for the carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was
drylocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its
voyage to Manila under the contract of voyage charter hire.
24
The vessel's voyage from Iligan to
Manila was the vessel's first voyage after drydocking. The Philippine Coast Guard Station in
Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo
vessel.
25
The Court of Appeals itself sustained the conclusion of the trial court that MV Vlasons
I was seaworthy. We find no reason to modify or reverse this finding of both the trial and the
appellate courts.
Who Were Negligent:
Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused
by the negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy
and fit for the carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin
or canvas to cover the hatches through which the cargo was loaded into the cargo hold of the
ship. It faults the Court of Appeals for failing to consider such claim as an "uncontroverted
fact"
26
and denies that MV Vlasons I "was equipped with new canvas covers in tandem with the
old ones as indicated in the Marine Protest . . ."
27
We disagree.
The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in
addition to the new one used primarily to make the ship's hatches watertight. The foregoing are
clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the
deposition of the ship's boatswain, Jose Pascua. The salient portions of said marine protest
read:
. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8,
1974, loaded with approximately 2,487.9 tons of steel plates and tin plates consigned to
National Steel Corporation; that before departure, the vessel was rigged, fully equipped
and cleared by the authorities; that on or about August 9, 1974, while in the vicinity of
the western part of Negros and Panay, we encountered very rough seas and strong
winds and Manila office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather condition changed to
worse and strong winds and big waves continued pounding the vessel at her port side
causing sea water to overflow on deck andhatch (sic) covers and which caused the first
layer of the canvass covering to give way while the new canvass covering still holding
on;
That the weather condition improved when we reached Dumali Point protected by
Mindoro; that we re-secured the canvass covering back to position; that in the afternoon
of August 10, 1974, while entering Maricaban Passage, we were again exposed to
moderate seas and heavy rains; that while approaching Fortune Island, we encountered
again rough seas, strong winds and big waves which caused the same canvass to give
way and leaving the new canvass holding on;
xxx xxx xxx
28

And the relevant portions of Jose Pascua's deposition are as follows:
q What is the purpose of the canvas cover?
a So that the cargo would not be soaked with water.
q And will you describe how the canvas cover was secured on the hatch
opening?
WITNESS
a It was placed flat on top of the hatch cover, with a little canvas flowing
over the sides and we place[d] a flat bar over the canvas on the side of
the hatches and then we place[d] a stopper so that the canvas could not
be removed.
ATTY DEL ROSARIO
q And will you tell us the size of the hatch opening? The length and the
width of the hatch opening.
a Forty-five feet by thirty-five feet, sir.
xxx xxx xxx
q How was the canvas supported in the middle of the hatch opening?
a There is a hatch board.
ATTY DEL ROSARIO
q What is the hatch board made of?
a It is made of wood, with a handle.
q And aside from the hatch board, is there any other material there to
cover the hatch?
a There is a beam supporting the hatch board.
q What is this beam made of?
a It is made of steel, sir.
q Is the beam that was placed in the hatch opening covering the whole
hatch opening?
a No, sir.
q How many hatch beams were there placed across the opening?
a There are five beams in one hatch opening.
ATTY DEL ROSARIO
q And on top of the beams you said there is a hatch board. How many
pieces of wood are put on top?
a Plenty, sir, because there are several pieces on top of the hatch beam.
q And is there a space between the hatch boards?
a There is none, sir.
q They are tight together?
a Yes, sir.
q How tight?
a Very tight, sir.
q Now, on top of the hatch boards, according to you, is the canvass
cover. How many canvas covers?
a Two, sir.
29

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

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and
the crew of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC
who were negligent in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains
occasioned by a passing typhoon disrupted the unloading of the cargo. This tent-like covering,
however, was clearly inadequate for keeping rain and seawater away from the hatches of the
ship. Vicente Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q Now, during your testimony on November 5, 1979, you stated on
August 14 you went on board the vessel upon notice from the National
Steel Corporation in order to conduct the inspection of the cargo. During
the course of the investigation, did you chance to see the discharging
operation?
WITNESS:
A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates
already discharged on the pier but majority of the tinplates were inside the
hall, all the hatches were opened.
Q In connection with these cargoes which were unloaded, where is the
place.
A At the Pier.
Q What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular
matter . . . the transcript of stenographic notes shows the same was
covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious
part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q What was used in order to protect the cargo from the weather?
A A base of canvas was used as cover on top of the tin plates, and tents
were built at the opening of the hatches.
Q You also stated that the hatches were already opened and that there
were tents constructed at the opening of the hatches to protect the cargo
from the rain. Now, will you describe [to] the Court the tents constructed.
A The tents are just a base of canvas which look like a tent of an Indian
camp raise[d] high at the middle with the whole side separated down to
the hatch, the size of the hatch and it is soaks [sic] at the middle because
of those weather and this can be used only to temporarily protect the
cargo from getting wet by rains.
Q Now, is this procedure adopted by the stevedores of covering tents
proper?
A No, sir, at the time they were discharging the cargo, there was a
typhoon passing by and the hatch tent was not good enough to hold all of
it to prevent the water soaking through the canvass and enter the cargo.
Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact
the water enter and soak into the canvass and tinplates.
A Yes, sir, the second time I went there, I saw it.
Q As owner of the vessel, did you not advise the National Steel
Corporation [of] the procedure adopted by its stevedores in discharging
the cargo particularly in this tent covering of the hatches?
A Yes, sir, I did the first time I saw it, I called the attention of the
stevedores but the stevedores did not mind at all, so, called the attention
of the representative of the National Steel but nothing was done, just the
same. Finally, I wrote a letter to them.
31

NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain
immediately about the stevedores' negligence on the first day of unloading, pointing out that he
wrote his letter to petitioner only seven days later.
32
The Court is not persuaded. Angliongto's
candid answer in his aforequoted testimony satisfactorily explained the delay. Seven days
lapsed because he first called the attention of the stevedores, then the NSC's representative,
about the negligent and defective procedure adopted in unloading the cargo. This series of
actions constitutes a reasonable response in accord with common sense and ordinary human
experience. Vicente Angliongto could not be blamed for calling the stevedores' attention first
and then the NSC's representative on location before formally informing NSC of the negligence
he had observed, because he was not responsible for the stevedores or the unloading
operations. In fact, he was merely expressing concern for NSC which was ultimately responsible
for the stevedores it had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts' findings and conclusions on this
point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the
stevedores hired by NSC were negligent in the unloading of NSC's shipment. We do not
think so. Such negligence according to the trial court is evident in the stevedores hired
by [NSC], not closing the hatch of MV 'VLASONS I' when rains occurred during the
discharging of the cargo thus allowing rain water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set
up temporary tents or canvas to cover the hatch openings when it rained during the
unloading operations so that it would be easier for them to resume work after the rains
stopped by just removing said tents or canvass. It has also been shown that on August
20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the manner
the stevedores hired by [NSC] were discharging the cargo on rainy days and the
improper closing of the hatches which allowed continuous heavy rain water to leak
through and drip to the tinplates' covers and [Vicente Angliongto] also suggesting that
due to four (4) days continuos rains with strong winds that the hatches be totally closed
down and covered with canvas and the hatch tents lowered. (Exh. "13"). This letter was
received by [NSC] on 22 August 1974 while discharging operations were still going on
(Exhibit "13-A").
33

The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may
be noted that the NSC may seek indemnification, subject to the laws on prescription, from the
stevedoring company at fault in the discharge operations. "A stevedore company engaged in
discharging cargo . . . has the duty to load the cargo . . . in a prudent manner, and it is liable for
injury to, or loss of, cargo caused by its negligence . . . and where the officers and members and
crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores
. . . the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the
stevedores . . ."
34
as in the instant case.
Do Tinplates "Sweat"?
The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat'
by themselves when packed even without being in contact with water from outside especially
when the weather is bad or
raining . . ."
35
The Court of Appeals affirmed the trial court's finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed,
the damage to the tinplates was occasioned not by airborne moisture but by contact with rain
and seawater which the stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSC's Failure to
Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is
totally separate and distinct from the contractual or statutory responsibility that may be incurred
by VSI for damage to the cargo caused by the willful negligence of the officers and the crew
of MV Vlasons I. Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as
owner and real party in interest, to file an action against VSI for damages caused by the latter's
willful negligence. We do not find anything in the charter party that would make the liability of
VSI for damage to the cargo contingent on or affected in any manner by NSC's obtaining an
insurance over the cargo.
Third Issue: Admissibility of Certificates
Proving Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged
inadmissibility of the certificates of seaworthiness offered in evidence by VSI. The said
certificates include the following:
1. Certificate of Inspection of the Philippines Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs
36

NSC argues that the certificates are hearsay for not having been presented in accordance with
the Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records or
acts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official
publications or certified true copies" as required by Sections 25 and 26, Rule 132, of the Rules
of Court.
37

After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and
12 are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are
certificates issued by private parties, but they have not been proven by one who saw the writing
executed, or by evidence of the genuineness of the handwriting of the maker, or by a
subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under
the best evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay
rule per Section 44 of Rule 130 of the Rules of Court, which provides that "(e)ntries in official
records made in the performance of a duty by a public officer of the Philippines, or by a person
in the performance of a duty specially enjoined by law, areprima facie evidence of the facts
therein stated."
38
Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu
issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I' was
drydocked . . . and PCG Inspectors were sent on board for inspection . . . After completion of
drydocking and duly inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is in
seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel
was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974." (sic)
NSC's claim, therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the
obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to
discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting
in damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not
sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at
Master's option.
xxx xxx xxx
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
39

The Court defined demurrage in its strict sense as the compensation provided for in the contract
of affreightment for the detention of the vessel beyond the laytime or that period of time agreed
on for loading and unloading of cargo.
40
It is given to compensate the shipowner for the nonuse
of the vessel. On the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. . . . If laytime is
expressed in "running days," this means days when the ship would be run continuously,
and holidays are not excepted. A qualification of "weather permitting" excepts only those
days when bad weather reasonably prevents the work contemplated.
41

In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified
laytime as WWDSHINC or weather working days Sundays and holidays included.
42
The running
of laytime was thus made subject to the weather, and would cease to run in the event
unfavorable weather interfered with the unloading of cargo.
43
Consequently, NSC may not be
held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by
unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the Court of Appeals to have found and
affirmed respectively that NSC incurred eleven days of delay in unloading the cargo. The trial
court arrived at this erroneous finding by subtracting from the twelve days, specifically August
13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather or
rain, which was August 22, 1974. Based on our previous discussion, such finding is a reversible
error. As mentioned, the respondent appellate court also erred in ruling that NSC was liable to
VSI for demurrage, even if it reduced the amount by half.
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We
disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not
justify an award of attorney's fees under Article 2208 of the Civil Code when ". . . no sufficient
showing of bad faith would be reflected in a party's persistence in a case other than an
erroneous conviction of the righteousness of his cause . . ."
44
Moreover, attorney's fees may not
be awarded to a party for the reason alone that the judgment rendered was favorable to the
latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial
redress of legitimate grievances.
45

Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage
to the cargo? Ranged against NSC are two formidable truths. First, both lower courts found that
such damage was brought about during the unloading process when rain and seawater seeped
through the cargo due to the fault or negligence of the stevedores employed by it. Basic is the
rule that factual findings of the trial court, when affirmed by the Court of Appeals, are binding on
the Supreme Court. Although there are settled exceptions, NSC has not satisfactorily shown
that this case is one of them. Second, the agreement between the parties the Contract of
Voyage Charter Hire placed the burden of proof for such loss or damage upon the shipper,
not upon the shipowner. Such stipulation, while disadvantageous to NSC, is valid because the
parties entered into a contract of private charter, not one of common carriage. Basic too is the
doctrine that courts cannot relieve a parry from the effects of a private contract freely entered
into, on the ground that it is allegedly one-sided or unfair to the plaintiff. The charter party is a
normal commercial contract and its stipulations are agreed upon in consideration of many
factors, not the least of which is the transport price which is determined not only by the actual
costs but also by the risks and burdens assumed by the shipper in regard to possible loss or
damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper
should insure the cargo to protect itself from the risks it undertook under the charter party. That
NSC failed or neglected to protect itself with such insurance should not adversely affect VSI,
which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED.
The questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that
the demurrage awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Romero, Melo and Francisco, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

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

MARTINEZ, J .:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended,
to contract, install and operate oil pipelines. The original pipeline concession was
granted in 1967
1
and renewed by the Energy Regulatory Board in 1992.
2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross
receipts for the fiscal year 1993 pursuant to the Local Government Code
3
. The
respondent City Treasurer assessed a business tax on the petitioner amounting to
P956,076.04 payable in four installments based on the gross receipts for products
pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order
not to hamper its operations, petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is engaged in
the business of transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our
Company is exempt from paying tax on gross receipts under Section 133 of
the Local Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration
of contractors under Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax "on contractors and other
independent contractors" under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy on transportation
contractors.
The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said
section limits the imposition of fees and charges on business to such
amounts as may be commensurate to the cost of regulation, inspection,
and licensing. Hence, assuming arguendo that FPIC is liable for the license
fee, the imposition thereof based on gross receipts is violative of the
aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter)
is not commensurate to the cost of regulation, inspection and licensing.
The fee is already a revenue raising measure, and not a mere regulatory
imposition.
4

On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.
5

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

Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies only
to "transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers solely to ordinary carriers such as
trucks, trains, ships and the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or manner by which a product is
delivered to its destination.
8

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

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

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

Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a common carrier. In De Guzman vs.
Court of Appeals
16
we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction
between one whose principal business activity is the carrying
of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 . . . avoids making any distinction
between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or
solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained
from making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion of
"public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
every person that now or hereafter may own,
operate. manage, or control in the Philippines,
for hire or compensation, with general or
limited clientele, whether permanent,
occasional or accidental, and done for general
business purposes, any common carrier,
railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or
both, with or without fixed route and whatever
may be its classification, freight or carrier
service of any class, express service,
steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation
of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system
gas, electric light heat and power, water supply
and power petroleum, sewerage system, wire or
wireless communications systems, wire or
wireless broadcasting stations and other
similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of
the Local Government Code refers only to common carriers transporting goods and
passengers through moving vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil
Code makes no distinction as to the means of transporting, as long as it is by land, water
or air. It does not provide that the transportation of the passengers or goods should be
by motor vehicle. In fact, in the United States, oil pipe line operators are considered
common carriers.
17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A
pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation
capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to
charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural
Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:
that everything relating to the exploration for and exploitation
of petroleum . . . and everything relating to the manufacture,
refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In
BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is
engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 . . .
. Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier"
and, therefore, exempt from the business tax as provided for in Section 133 (j), of the
Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:
xxx xxx xxx
(j) Taxes on the gross receipts of
transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common
carriers by air, land or water,
except as provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government
Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations
on the Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed
to be exempted from the taxing powers of the local
government units. May we know the reason why the
transportation business is being excluded from the taxing
powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained
in Section 121 (now Sec. 131), line 16, paragraph 5. It states
that local government units may not impose taxes on the
business of transportation, except as otherwise provided in
this code.
Now, Mr. Speaker, if the Gentleman would care to go to page
98 of Book II, one can see there that provinces have the
power to impose a tax on business enjoying a franchise at
the rate of not more than one-half of 1 percent of the gross
annual receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the province.
That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the
imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top
of what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers tax."
We do not want a duplication of this tax, so we just provided
for an exception under Section 125 [now Sec. 137] that a
province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr.
Speaker. . . .
18

It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code.
19
To tax petitioner again on its
gross receipts in its transportation of petroleum business would defeat the purpose of
the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET
ASIDE.
SO ORDERED.
Bellosillo, Puno and Mendoza, J J ., concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER
TERMINAL SERVICES, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co.,
Inc.) respondent.
MENDOZA, J .:
This is a petition for review of the decision,
1
dated May 31, 2001, of the Court of Appeals,
affirming the decision
2
of the Regional Trial Court, Makati City, Branch 148, which ordered
petitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest,
representing the value of damaged cargo handled by petitioner, 25% thereof as attorney's fees,
and the cost of the suit.1wphi1.nt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI),
a sole proprietorship customs broker. At the time material to this case, petitioner entered into a
contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical
fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse
at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by
respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on
board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody
of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner,
pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered
it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine
Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were
"wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placed
at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against
petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995,
rendered judgment finding petitioner liable to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody
of defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage
Report (Exh. "F") with entries appearing therein, classified as "TED" and "TSN", which
the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and
tearrage at the middle of the subject damaged cargoes respectively, coupled with the
Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the fact of the damaged
condition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular,
which provides among others that:
" . . . we opine that damages sustained by shipment is attributable to improper
handling in transit presumably whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that
[she is] are not liable. Defendant by reason of the nature of [her] business should have
devised ways and means in order to prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to the consignee. Defendant did not
present any evidence on what precaution [she] performed to prevent [the] said incident,
hence the presumption is that the moment the defendant accepts the cargo [she] shall
perform such extraordinary diligence because of the nature of the cargo.
. . . .
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have
been lost, destroyed or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove
merely that the goods he transported have been lost, destroyed or deteriorated.
Thereafter, the burden is shifted to the carrier to prove that he has exercised the
extraordinary diligence required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the place of destination
in bad order, makes out a prima facie case against the carrier, so that if no explanation
is given as to how the injury occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was due to accident or some other
circumstances inconsistent with its liability." (cited in Commercial Laws of the Philippines
by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the
extraordinary responsibility lasts from the time the goods are unconditionally placed in
the possession of and received by the carrier for transportation until the same are
delivered actually or constructively by the carrier to the consignee or to the person who
has the right to receive the same.
3

Accordingly, the trial court ordered petitioner to pay the following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.
4

The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review
on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE
SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE
OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.
5

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

There is greater reason for holding petitioner to be a common carrier because the transportation
of goods is an integral part of her business. To uphold petitioner's contention would be to
deprive those with whom she contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for her customers, as already noted,
is part and parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each
case. . . .
In Compania Maritima v. Court of Appeals,
9
the meaning of "extraordinary diligence in the
vigilance over goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for avoiding
damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It
requires common carriers to render service with the greatest skill and foresight and "to
use all reasonable means to ascertain the nature and characteristic of goods tendered
for shipment, and to exercise due care in the handling and stowage, including such
methods as their nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the
"spoilage or wettage" took place while the goods were in the custody of either the carrying
vessel "M/V Hayakawa Maru," which transported the cargo to Manila, or the arrastre operator,
to whom the goods were unloaded and who allegedly kept them in open air for nine days from
July 14 to July 23, 1998 notwithstanding the fact that some of the containers were deformed,
cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit:
MAXU-2062880 - 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 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. 1735
15
holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1wphi1.nt
SO ORDERED.
Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 141910 August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
VITUG, J .:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert
Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in
Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was
traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban,
Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in
damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the
subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim,
FGU filed a complaint for damages and breach of contract of carriage against GPS and its
driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents further
claimed that the cause of damage was purely accidental.1wphi1.nt
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 x x x x x x
"Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss,
damage or deterioration of goods during transport under 1735 of the Civil Code is not
availing.
"Thus, the laws governing the contract between the owner of the cargo to whom the
plaintiff was subrogated and the owner of the vehicle which transports the cargo are the
laws on obligation and contract of the Civil Code as well as the law on quasi delicts.
"Under the law on obligation and contract, negligence or fault is not presumed. The law
on quasi delict provides for some presumption of negligence but only upon the
attendance of some circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person
driving a motor vehicle has been negligent if at the time of the mishap, he was
violating any traffic regulation.
"Evidence for the plaintiff shows no proof that defendant was violating any traffic
regulation. Hence, the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a common carrier
and defendants driver was the one negligent, defendant cannot be made liable for the
damages of the subject cargoes."
2

The subsequent motion for reconsideration having been denied,
3
plaintiff interposed an appeal
to the Court of Appeals, contending that the trial court had erred (a) in holding that the appellee
corporation was not a common carrier defined under the law and existing jurisprudence; and (b)
in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999,
4
discoursed, among other things, that -
"x x x in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to prove that the appellee is a
common carrier, the presumption would not arise; consequently, the appellant would
have to prove that the carrier was negligent.
"x x x x x x x x x
"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its `limited clientele, (assuming it was really a common carrier),
it follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant)
`must establish his case by a preponderance of evidence, which means that the
evidence as a whole adduced by one side is superior to that of the other. (Summa
Insurance Corporation vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the
appellant failed to do -- hence, the dismissal of the plaintiffs complaint by the trial court
is justified.
"x x x x x x x x x
"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 x x x x x x
"x x x the lower court correctly ruled that 'the application of the law on common carriers
is not warranted and the presumption of fault or negligence on the part of a common
carrier in case of loss, damage or deterioration of good[s] during transport under [article]
1735 of the Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a
trial court are entitled to great weight on appeal and should not be disturbed unless for
strong and valid reasons."
5

Petitioner's motion for reconsideration was likewise denied;
6
hence, the instant petition,
7
raising
the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER
AS DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE
CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS
IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED
WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE
INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a
common carrier. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for
hire or compensation, offering their services to the public,
8
whether to the public in general or to
a limited clientele in particular, but never on an exclusive basis.
9
The true test of a common
carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee.
10
Given accepted standards, GPS scarcely
falls within the term "common carrier."
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.
11
The law, recognizing the
obligatory force of contracts,
12
will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof.
13
A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee
that may include his "expectation interest," which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract been
performed, or his "reliance interest," which is his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a position as he would have been in had the
contract not been made; or his "restitution interest," which is his interest in having restored to
him any benefit that he has conferred on the other party.
14
Indeed, agreements can accomplish
little, either for their makers or for society, unless they are made the basis for action.
15
The
effect of every infraction is to create a new duty, that is, to make recompense to the one who
has been injured by the failure of another to observe his contractual obligation
16
unless he can
show extenuating circumstances, like proof of his exercise of due diligence (normally that of the
diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous
event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it
and petitioners assured, and admits that the cargoes it has assumed to deliver have been lost
or damaged while in its custody. In such a situation, a default on, or failure of compliance with,
the obligation in this case, the delivery of the goods in its custody to the place of destination -
gives rise to a presumption of lack of care and corresponding liability on the part of the
contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage
between petitioners principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their successors who have
assumed their personality or their juridical position.
17
Consonantly with the axiom res inter alios
acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person.
Petitioners civil action against the driver can only be based on culpa aquiliana, which,
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 latters
management and the accident is such that, in the ordinary course of things, cannot be expected
to happen if those who have its management or control use proper care. It affords reasonable
evidence, in the absence of explanation by the defendant, that the accident arose from want of
care.
19
It is not a rule of substantive law and, as such, it does not create an independent ground
of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it
furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of
negligence. The maxim simply places on the defendant the burden of going forward with the
proof.
20
Resort to the doctrine, however, may be allowed only when (a) the event is of a kind
which does not ordinarily occur in the absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the
plaintiff.
21
Thus, it is not applicable when an unexplained accident may be attributable to one of
several causes, for some of which the defendant could not be responsible.
22

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties.
23
Nevertheless, the requirement that responsible causes other than those due to
defendants conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right to present evidence.
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.1wphi1.nt
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati
City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only
insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court
and decision of the appellate court are REVERSEDas regards G.P. Sarmiento Trucking
Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of
the damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 149038 April 9, 2003
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner,
vs.
PKS SHIPPING COMPANY, respondent.
VITUG, J .:
The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R.
CV No. 56470, promulgated on 25 June 2001, which has affirmed in toto the judgment of the
Regional Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for damages filed by
petitioner insurance corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS
Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-five thousand
(75,000) bags of cement worth Three Million Three Hundred Seventy-Five Thousand Pesos
(P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American
General Insurance Company (Philamgen). The goods were loaded aboard the dumb
barge Limar I belonging to PKS Shipping. On the evening of 22 December 1988, about nine
oclock, whileLimar I was being towed by respondents tugboat, MT Iron Eagle, the barge sank a
couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it
the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen
promptly made payment; it then sought reimbursement from PKS Shipping of the sum paid to
DUMC but the shipping company refused to pay, prompting Philamgen to file suit against PKS
Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo could have been
caused either by a fortuitous event, in which case the ship owner was not liable, or through the
negligence of the captain and crew of the vessel and that, under Article 587 of the Code of
Commerce adopting the "Limited Liability Rule," the ship owner could free itself of liability by
abandoning, as it apparently so did, the vessel with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of
the trial court. The appellate court ruled that evidence to establish that PKS Shipping was a
common carrier at the time it undertook to transport the bags of cement was wanting because
the peculiar method of the shipping companys carrying goods for others was not generally held
out as a business but as a casual occupation. It then concluded that PKS Shipping, not being a
common carrier, was not expected to observe the stringent extraordinary diligence required of
common carriers in the care of goods. The appellate court, moreover, found that the loss of the
goods was sufficiently established as having been due to fortuitous event, negating any liability
on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed a patent error
in ruling that PKS Shipping is not a common carrier and that it is not liable for the loss of the
subject cargo. The fact that respondent has a limited clientele, petitioner argues, does not
militate against respondents being a common carrier and that the only way by which such
carrier can be held exempt for the loss of the cargo would be if the loss were caused by natural
disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the Philippine area
of responsibility and that, even if it did, respondent would not be exempt from liability because
its employees, particularly the tugmaster, have failed to exercise due diligence to prevent or
minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because what
Philamgen seeks is not a review on points or errors of law but a review of the undisputed factual
findings of the RTC and the appellate court. In any event, PKS Shipping points out, the findings
and conclusions of both courts find support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to the question of
whether it is a private carrier or a common carrier and, in either case, to the other question of
whether or not it has observed the proper diligence (ordinary, if a private carrier, or
extraordinary, if a common carrier) required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly when such findings are
consistent with those of the trial court, may not at liberty be reviewed by this Court in a petition
for review under Rule 45 of the Rules of Court.
1
The conclusions derived from those factual
findings, however, are not necessarily just matters of fact as when they are so linked to, or
inextricably intertwined with, a requisite appreciation of the applicable law. In such instances,
the conclusions made could well be raised as being appropriate issues in a petition for review
before this Court. Thus, an issue whether a carrier is private or common on the basis of the
facts found by a trial court or the appellate court can be a valid and reviewable question of law.
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public."
Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it
defines "public service" to be
"x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice
refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communication
systems, wire or wireless broadcasting stations and other similar public services. x x x.
(Underscoring supplied)."
The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs.
Court of Appeals.
2
Applying Article 1732 of the Code, in conjunction with Section 13(b) of the
Public Service Act, this Court has held:
"The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as `a sideline). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the `general public, i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such
distinctions.
"So understood, the concept of `common carrier under Article 1732 may be seen to
coincide neatly with the notion of `public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code."
Much of the distinction between a "common or public carrier" and a "private or special carrier"
lies in the character of the business, such that if the undertaking is an isolated transaction, not a
part of the business or occupation, and the carrier does not hold itself out to carry the goods for
the general public or to a limited clientele, although involving the carriage of goods for a
fee,
3
the person or corporation providing such service could very well be just a private carrier. A
typical case is that of a charter party which includes both the vessel and its crew, such as in a
bareboat or demise, where the charterer obtains the use and service of all or some part of a
ship for a period of time or a voyage or voyages
4
and gets the control of the vessel and its
crew.
5
Contrary to the conclusion made by the appellate court, its factual findings indicate that
PKS Shipping has engaged itself in the business of carrying goods for others, although for a
limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this
area indicates more than just a casual activity on its part.
6
Neither can the concept of a common
carrier change merely because individual contracts are executed or entered into with patrons of
the carrier. Such restrictive interpretation would make it easy for a common carrier to escape
liability by the simple expedient of entering into those distinct agreements with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence
demanded of common carriers, Article 1733 of the Civil Code requires common carriers to
observe extraordinary diligence in the vigilance over the goods they carry. In case of loss,
destruction or deterioration of goods, common carriers are presumed to have been at fault or to
have acted negligently, and the burden of proving otherwise rests on them.
7
The provisions of
Article 1733, notwithstanding, common carriers are exempt from liability for loss, destruction, or
deterioration of the goods due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.
8

The appellate court ruled, gathered from the testimonies and sworn marine protests of the
respective vessel masters of Limar I and MT Iron Eagle, that there was no way by which the
barges or the tugboats crew could have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by
strong winds of 1.5 knots resulting in the entry of water into the barges hatches. The official
Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the
factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized
exceptions from the rule - (1) when the factual findings of the Court of Appeals and the trial
court are contradictory; (2) when the conclusion is a finding grounded entirely on speculation,
surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings
of fact is manifestly mistaken, absurd, or impossible; (4) when there is a grave abuse of
discretion in the appreciation of facts; (5) when the appellate court, in making its findings, went
beyond the issues of the case and such findings are contrary to the admissions of both
appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts
which, if properly considered, would justify a different conclusion; (8) when the findings of fact
are themselves conflicting; (9) when the findings of fact are conclusions without citation of the
specific evidence on which they are based; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence but such findings are contradicted by the
evidence on record would appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS Shipping from
liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
Davide, Jr., C.J., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 147246 August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE,
INC., respondents.
PUNO, J .:
On appeal is the Court of Appeals' May 11, 2000 Decision
1
in CA-G.R. CV No. 49195 and
February 21, 2001 Resolution
2
affirming with modification the April 6, 1994 Decision
3
of the
Regional Trial Court of Manila which found petitioner liable to pay private respondent the
amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.35
4
was shipped by Marubeni American Corporation of Portland, Oregon on board
the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling
Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.
5
The shipment was insured
by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage
for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.
6

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the
consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced
by Lighterage Receipt No. 0364
7
for delivery to consignee. The cargo did not reach its
destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning
of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to
Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied
down to other barges which arrived ahead of it while weathering out the storm that night. A few
days after, the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990.
8
It
likewise secured the services of Gaspar Salvaging Corporation which refloated the barge.
9
The
hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's
wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current. To avoid the complete sinking of the barge, a portion of the
goods was transferred to three other barges.
10

The next day, September 6, 1990, the towing bits of the barge broke. It sank completely,
resulting in the total loss of the remaining cargo.
11
A second Marine Protest was filed on
September 7, 1990.
12

On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved
and loaded on the three other barges.
13
The total proceeds from the sale of the salvaged cargo
was P201,379.75.
14

On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and
another letter dated September 18, 1990 to the private respondent for the value of the lost
cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.
15
Thereafter, as subrogee, it sought recovery of said amount from the
petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of
the amount of indemnity, attorney's fees and cost of suit.
16
Petitioner filed its answer with
counterclaim.
17

The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its
Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant
Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance
Co., Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on
July 3, 1991 until fully satisfied plus 10% of the amount awarded as and for attorney's
fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant.
18

Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The
appellate court affirmed the decision of the trial court with modification. The dispositive portion
of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate
court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate
court, viz:
19

(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A
QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE
TO COMMON CARRIERS, "THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY
THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED."
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER
FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE
AND CUSTODY OF THE CONSIGNEE'S CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary
diligence in its care and custody of the consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed
and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not
obliged to carry indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general public.
20

We disagree.
In De Guzman vs. Court of Appeals,
21
we held that the definition of common carriers in Article
1732 of the Civil Code makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity. We also did not distinguish between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between
a carrier offering its services to the general public, and one who offers services or solicits
business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage
22
and
it offers its barges to the public for carrying or transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De Guzman, supra,
23
we considered private
respondent Ernesto Cendaa to be a common carrier even if his principal occupation was not
the carriage of goods for others, but that of buying used bottles and scrap metal in Pangasinan
and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on
an irregular rather than scheduled manner, and with an only limited clientele. A common carrier
need not have fixed and publicly known routes. Neither does it have to maintain terminals or
issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.
24
The test to determine a common carrier is "whether the given undertaking is a part
of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted."
25
In the case at bar,
the petitioner admitted that it is engaged in the business of shipping and lighterage,
26
offering its
barges to the public, despite its limited clientele for carrying or transporting goods by water for
compensation.
27

On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.
28
They are presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated.
29
To overcome the presumption of negligence in
the case of loss, destruction or deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total
loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be
held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence
before, during and after the occurrence of the typhoon to prevent or minimize the loss.
30
The
evidence show that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged
vessel was refloated but its hole was patched with only clay and cement. The patch work was
merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner
persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. A
portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment
Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:
31

x x x x x x x x x
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they tried to
pull out the barge from the place of the accident, and bring it to the anchor terminal for
safety, then after deciding if the vessel is stabilized, they tried to pull it to the consignee's
warehouse, now while on route another accident occurred, now this time the barge
totally hitting something in the course.
q - You said there was another accident, can you tell the court the nature of the
second accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what caused the
sinking?
a - Mostly it was related to the first accident because there was already a
whole (sic) on the bottom part of the barge.
x x x x x x x x x
This is not all. Petitioner still headed to the consignee's wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee's wharf on
September 5, 1990, typhoon "Loleng" has already entered the Philippine area of
responsibility.
32
A part of the testimony of Robert Boyd, Cargo Operations Supervisor of the
petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:
33

x x x x x x x x x
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge
to lie where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation,
the consignee) as I have said was in a hurry for their goods to be delivered at their
Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was needed
badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.
x x x x x x x x x
CROSS-EXAMINATION BY ATTY. IGNACIO:
34

x x x x x x x x x
q - And then from ISLOFF Terminal you proceeded to the premises of the GMC?
Am I correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I have
stated.
q - Despite of the threats of an incoming typhoon as you testified a while ago?
a - It is already in an inner portion of Pasig River. The typhoon would be coming
and it would be dangerous if we are in the vicinity of Manila Bay.
q - But the fact is, the typhoon was incoming? Yes or no?
a - Yes.
q - And yet as a standard operating procedure of your Company, you have to
secure a sort of Certification to determine the weather condition, am I correct?
a - Yes, sir.
q - So, more or less, you had the knowledge of the incoming typhoon, right?
a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if
you are already inside the vicinity or inside Pasig entrance, it is a safe place to tow
upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon
head-on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing bits of the vessel
broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it
was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss
of the cargo; a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R.
CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, and Sandoval-Gutierrez, JJ., concur.
Corona, and Carpio-Morales, JJ., on official leave.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
D E C I S I O N
CARPIO MORALES, J .:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,
2001
1
against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City
for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his
wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach
Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was
by virtue of a tour package-contract with respondent that included transportation to and from the
Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),
2
a scuba diving instructor and one of the survivors, gave his account
of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of September 10, 2000, but was advised to stay for another
night because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to
Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and
into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the
other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing
the captain, Matute and the other passengers who reached the surface asked him what they
could do to save the people who were still trapped under the boat. The captain replied "Iligtas
niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22
persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island.
Eight passengers, including petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for
Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of
$900.
3

Petitioners, by letter of October 26, 2000,
4
demanded indemnification from respondent for the
death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,
5
denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging
that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III
to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric,
Geophysical and Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.
6

In its Answer,
7
respondent denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew members.
Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its
passengers; contrary to petitioners allegation, there was no storm on September 11, 2000 as
the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to capacity
and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged
that it is entitled to an award for attorneys fees and litigation expenses amounting to not less
than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires
four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is
clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is
clearance from the Resorts assistant manager.
8
He added that M/B Coco Beach III met all four
conditions on September 11, 2000,
9
but a subasco or squall, characterized by strong winds and
big waves, suddenly occurred, causing the boat to capsize.
10

By Decision of February 16, 2005,
11
Branch 267 of the Pasig RTC dismissed petitioners
Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated September 2,
2005,
12
they appealed to the Court of Appeals.
By Decision of August 19, 2008,
13
the appellate court denied petitioners appeal, holding, among
other things, that the trial court correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact observed extraordinary diligence
in transporting its guests on board M/B Coco Beach III; and that the proximate cause of the
incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution dated January 16,
2009,
14
they filed the present Petition for Review.
15

Petitioners maintain the position they took before the trial court, adding that respondent is a
common carrier since by its tour package, the transporting of its guests is an integral part of its
resort business. They inform that another division of the appellate court in fact held respondent
liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove
that it is a common carrier; that the Resorts ferry services for guests cannot be considered as
ancillary to its business as no income is derived therefrom; that it exercised extraordinary
diligence as shown by the conditions it had imposed before allowing M/B Coco Beach III to sail;
that the incident was caused by a fortuitous event without any contributory negligence on its
part; and that the other case wherein the appellate court held it liable for damages involved
different plaintiffs, issues and evidence.
16

The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals
17
in characterizing respondent as a
common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1733 deliberately refrained
from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
. . . every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar public services . . .
18
(emphasis and
underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondents ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And the
tour packages it offers, which include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in
arriving at the tour package price. That guests who opt not to avail of respondents ferry
services pay the same amount is likewise inconsequential. These guests may only be deemed
to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has
deliberately refrained from making distinctions on whether the carrying of persons or goods is
the carriers principal business, whether it is offered on a regular basis, or whether it is offered to
the general public. The intent of the law is thus to not consider such distinctions. Otherwise,
there is no telling how many other distinctions may be concocted by unscrupulous businessmen
engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities
of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case.
19
They are bound to carry
the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.
20

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed
that the common carrier is at fault or negligent. In fact, there is even no need for the court to
make an express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence.
21

Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of
voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondents
position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in
Northern Luzon which would also affect the province of Mindoro.
22
By the testimony of Dr.
Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under such
weather condition.
23

A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other peoples lives at risk. The extraordinary diligence required of common
carriers demands that they take care of the goods or lives entrusted to their hands as if they
were their own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event does not impress
either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been
such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and
(d) the obligor must have been free from any participation in the aggravation of the resulting
injury to the creditor.
24

To fully free a common carrier from any liability, the fortuitous event must have been
the proximate and only causeof the loss. And it should have exercised due diligence to prevent
or minimize the loss before, during and after the occurrence of the fortuitous event.
25

Respondent cites the squall that occurred during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was
expected under the weather condition of September 11, 2000. Moreover, evidence shows that
M/B Coco Beach III suffered engine trouble before it capsized and sank.
26
The incident was,
therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the occurrence
of the squall.
Article 1764
27
vis--vis Article 2206
28
of the Civil Code holds the common carrier in breach of its
contract of carriage that results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.
29

As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary
living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]
30

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at
death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.
31

The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses.
32
The loss is not equivalent to the entire
earnings of the deceased, but only such portion as he would have used to support his
dependents or heirs. Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own needs.
33

In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency
Corp. v. Borja
34
teaches that when, as in this case, there is no showing that the living expenses
constituted the smaller percentage of the gross income, the living expenses are fixed at half of
the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900
35
which,
when converted to Philippine peso applying the annual average exchange rate of $1 = P44 in
2000,
36
amounts to P39,600. Ruelitos net earning capacity is thus computed as follows:
Net Earning
Capacity
= life expectancy x (gross annual income - reasonable and
necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning
Capacity
= P8,316,000
Respecting the award of moral damages, since respondent common carriers breach of contract
of carriage resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206
of the Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of
common carriers, it is presumed to have acted recklessly, thus warranting the award too of
exemplary damages, which are granted in contractual obligations if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.
37

Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral
damages andP100,000 as exemplary damages.
38
1avvphi1
Pursuant to Article 2208
39
of the Civil Code, attorney's fees may also be awarded where
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals
40
teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for payment of interest in the concept of actual and
compensatory damages, subject to the following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the
date the judgment of the court is made (at which time the quantification of damages may
be deemed to have been reasonably ascertained). The actual base for the computation
of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
(emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the rate
of 12% per annum until satisfaction, in accordance with paragraph number 3 of the immediately
cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the
following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity
for Ruelitos loss of earning capacity; (3) P100,000 as moral damages; (4) P100,000 as
exemplary damages; (5) 10% of the total amount adjudged against respondent as attorneys
fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION



G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON
CARRIER. Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their services to
the public." The test to determine a common carrier is "whether the given undertaking is a part
of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." . . . The holding of the
Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil
Code, it held thus: "The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its
services to the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think
that Article 1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed
to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption . . . The presumption of negligence was raised against petitioner. It
was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need
not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER
ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following
or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . .
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the
same case, the Supreme Court also held that: "Under Article 1745 (6) above, a common carrier
is held responsible and will not be allowed to divest or to diminish such responsibility even
for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted
"with grave of irresistible threat, violence of force," We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence
or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case,
petitioner herself has made the admission that she was in the trucking business, offering her
trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS
WITNESSES. While the affidavit of Juanito Morden, the truck helper in the hijacked truck,
was presented as evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are
available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT
TO BE. Granting that the said evidence were not self-serving, the same were not sufficient to
prove that the contract was one of lease. It must be understood that a contract is what the law
defines it to be and not what it is called by the contracting parties.
D E C I S I O N
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO
A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-
appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is
quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is
hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into
a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to
haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the
warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to
transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port
Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the
said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount
of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking
and non-delivery or damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually,
Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment
4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was
supported by an affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court,
whereby a writ of preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do
so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the
cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability
to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering
the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to
be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's
judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors;
to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE
OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT
COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT
ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE
CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL
COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY
ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE
MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted
in her answer that she did business under the name A.M. Bascos Trucking and that said
admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs
that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's
decision that petitioner was a common carrier, Moreover, both courts appreciated the following
pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck
driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean
meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper,
Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier,
she alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the
contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9
She further averred that Jesus Bascos confirmed in his testimony his statement that the contract
was a lease contract. 10 She also stated that: she was not catering to the general public. Thus,
in her answer to the amended complaint, she said that she does business under the same style
of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to
the general public but to a few customers only in view of the fact that it is only a small business.
11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business transacted." 12 In this case, petitioner herself has made the admission
that she was in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services
only to a select group of people and because the private respondents, plaintiffs in the lower
court, did not object to the presentation of affidavits by petitioner where the transaction was
referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is
instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained from
making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts
have dismissed them as self-serving and petitioner contests the conclusion. We are bound by
the appellate court's factual conclusions. Yet, granting that the said evidence were not self-
serving, the same were not sufficient to prove that the contract was one of lease. It must be
understood that a contract is what the law defines it to be and not what it is called by the
contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due
to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances
when the presumption of negligence does not attach and these instances are enumerated in
Article 1734. 19 In those cases where the presumption is applied, the common carrier must
prove that it exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed
to divest or to diminish such responsibility even for acts of strangers like thieves or robbers
except where such thieves or robbers in fact acted with grave or irresistible threat, violence or
force. We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus
Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the
Court of Appeals have concluded that these affidavits were not enough to overcome the
presumption. Petitioner's affidavit about the hijacking was based on what had been told her by
Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of
objection on the part of private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for
review on certiorari, We are not to determine the probative value of evidence but to resolve
questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took
place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a witness as could be gleaned from the contents
of the petition. Affidavits are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and robbery against the
accused named in said affidavits did not necessarily mean that the contents of the affidavits
were true because they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion, private respondent need not introduce any
evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary
diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find
no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 147079 December 21, 2004
A.F. SANCHEZ BROKERAGE INC., petitioners,
vs.
THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION, respondents.


D E C I S I O N


CARPIO MORALES, J .:
Before this Court on a petition for Certiorari is the appellate courts Decision
1
of August 10, 2000
reversing and setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in
Civil Case No. 93-76B which dismissed the complaint of respondent FGU Insurance
Corporation (FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez
Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch
Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal
tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to
Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc.
2
The Femenal tablets were
placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were packed
together in one (1) LD3 aluminum container, while the Trinordial tablets were packed in two
pallets, each of which contained 30 cartons.
3

Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine
Risk Note No. 4995 pursuant to Marine Open Policy No. 138.
4

Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport
(NAIA),
5
it was discharged "without exception"
6
and delivered to the warehouse of the Philippine
Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.
7

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-
Suaco engaged the services of Sanchez Brokerage which had been its licensed broker since
1984.
8
As its customs broker, Sanchez Brokerage calculates and pays the customs duties,
taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.
9

On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage,
paid PSI storage fee amounting to P8,572.35 a receipt for which, Official Receipt No.
016992,
10
was issued. On the receipt, another representative of Sanchez Brokerage, M.
Sison,
11
acknowledged that he received the cargoes consisting of three pieces in good
condition.
12

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the
cargoes
13
which were thereupon stripped from the aluminum containers
14
and loaded inside two
transport vehicles hired by Sanchez Brokerage.
15

Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben
Alonso and Tony Akas,
16
employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a
marine and cargo surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on
behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in
Antipolo City for quality control check.
17
The delivery receipt, bearing No. 07037 dated July 29,
1992, indicated that the delivery consisted of one container with 144 cartons of Femenal and
Nordiol and 1 pallet containing Trinordiol.
18

On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of
the cargoes by affixing his signature on the delivery receipt.
19
Upon inspection, however, he,
together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal
and Nordiol tablets were in bad order.
20
He thus placed a note above his signature on the
delivery receipt stating that 44 cartons of oral contraceptives were in bad order. The remaining
160 cartons of oral contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report
21
dated July
31, 1992 stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were
"wetted" (sic).
22

The Elite Surveyors later issued Certificate No. CS-0731-1538/92
23
attached to which was an
"Annexed Schedule" whereon it was indicated that prior to the loading of the cargoes to the
brokers trucks at the NAIA, they were inspected and found to be in "apparent good
condition."
24
Also noted was that at the time of delivery to the warehouse of Hizon Laboratories
Inc., slight to heavy rains fell, which could account for the wetting of the 44 cartons of Femenal
and Nordiol tablets.
25

On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report
26
confirming that 38
x 700 blister packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700
blister packs of Nordiol tablets were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection
27
of 38 cartons of
Femenal and 3 cartons of Nordiol on the ground that they were "delivered to Hizon Laboratories
with heavy water damaged (sic) causing the cartons to sagged (sic) emitting a foul order and
easily attracted flies."
28

Wyeth-Suaco later demanded, by letter
29
of August 25, 1992, from Sanchez Brokerage the
payment ofP191,384.25 representing the value of its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim
against FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its
claim under Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt
30
in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco,
Sanchez Brokerage, by letter
31
of January 7, 1993, disclaimed liability for the damaged goods,
positing that the damage was due to improper and insufficient export packaging; that when the
sealed containers were opened outside the PSI warehouse, it was discovered that some of the
loose cartons were wet,
32
prompting its (Sanchez Brokerages) representative Morales to inform
the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes
but that the latter advised to still deliver them to Hizon Laboratories where an adjuster would
assess the damage.
33

Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court
of Makati City against the Sanchez Brokerage.
The trial court, by Decision
34
of July 29, 1996, dismissed the complaint, holding that the Survey
Report prepared by the Elite Surveyors is bereft of any evidentiary support and a mere product
of pure guesswork.
35

On appeal, the appellate court reversed the decision of the trial court, it holding that the
Sanchez Brokerage engaged not only in the business of customs brokerage but also in the
transportation and delivery of the cargo of its clients, hence, a common carrier within the context
of Article 1732 of the New Civil Code.
36

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in
good order and condition but were in a damaged state when delivered to Wyeth-Suaco, the
appellate court held that Sanchez Brokerage is presumed negligent and upon it rested the
burden of proving that it exercised extraordinary negligence not only in instances when
negligence is directly proven but also in those cases when the cause of the damage is not
known or unknown.
37

The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED.
The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered in
favor of the Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal amount of
P181, 431.49, with interest thereupon at the rate of 6% per annum, from the date
of the Decision of the Court, until the said amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of
P20,000.00 as and by way of attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED.
38

Sanchez Brokerages Motion for Reconsideration having been denied by the appellate courts
Resolution of December 8, 2000 which was received by petitioner on January 5, 2001, it comes
to this Court on petition for certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and reversible error
tantamount to abuse of discretion when it found petitioner a "common carrier" within the context
of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action which
petitioner should have taken was to file a petition for review on certiorari since the sole office of
a writ of certiorari is the correction of errors of jurisdiction including the commission of grave
abuse of discretion amounting to lack or excess of jurisdiction and does not include correction of
the appellate courts evaluation of the evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed
to overcome the presumption of negligence, it being documented that petitioner withdrew from
the warehouse of PSI the subject shipment entirely in good order and condition.
39

The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any
case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to
this Court by filing a petition for review, which would be but a continuation of the appellate
process over the original case.
40

The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for
reconsideration of its Decision of August 10, 2000 was received by petitioner on January 5,
2001. Since petitioner failed to appeal within 15 days or on or before January 20, 2001, the
appellate courts decision had become final and executory. The filing by petitioner of a petition
for certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove
not merely reversible error but also grave abuse of discretion amounting to lack or excess of
jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the
trial court based on its finding that petitioner is liable for the damage to the cargo as a common
carrier. What petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly
the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of the decision
not the jurisdiction of the court to render said decision the same is beyond the province of a
petition for certiorari.
41
The supervisory jurisdiction of this Court to issue a cert writ cannot be
exercised in order to review the judgment of lower courts as to its intrinsic correctness, either
upon the law or the facts of the case.
42

Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a common
carrier, as defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself
testified that the services the firm offers include the delivery of goods to the warehouse of the
consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon
approval of the importer, we prepare the entry together for processing and claims from
customs and finally deliver the goods to the warehouse of the importer.
43

Article 1732 does not distinguish between one whose principal business activity is the carrying
of goods and one who does such carrying only as an ancillary activity.
44
The contention,
therefore, of petitioner that it is not a common carrier but a customs broker whose principal
function is to prepare the correct customs declaration and proper shipping documents as
required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for
pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733
45
of the
Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all
the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated,
it is presumed to have been at fault or to have acted negligently, unless it proves that it
observed extraordinary diligence.
46

The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of
Appeals:
47

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for avoiding
damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It
requires common carriers to render service with the greatest skill and foresight and "to
use all reasonable means to ascertain the nature and characteristics of goods tendered
for shipment, and to exercise due care in the handling and stowage, including such
methods as their nature requires."
48

In the case at bar, it was established that petitioner received the cargoes from the PSI
warehouse in NAIA in good order and condition;
49
and that upon delivery by petitioner to Hizon
Laboratories Inc., some of the cargoes were found to be in bad order, as noted in the Delivery
Receipt
50
issued by petitioner, and as indicated in the Survey Report of Elite Surveyors
51
and
the Destruction Report of Hizon Laboratories, Inc.
52

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that
they were damaged due to the fault or negligence of the shipper for failing to properly pack them
and to the inherent characteristics of the goods
53
; and that it should not be faulted for following
the instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite information
conveyed to the latter that some of the cartons, on examination outside the PSI warehouse,
were found to be wet.
54

While paragraph No. 4 of Article 1734
55
of the Civil Code exempts a common carrier from
liability if the loss or damage is due to the character of the goods or defects in the packing or in
the containers, the rule is that if the improper packing is known to the carrier or his employees
or is apparent upon ordinary observation, but he nevertheless accepts the same without protest
or exception notwithstanding such condition, he is not relieved of liability for the resulting
damage.
56

If the claim of petitioner that some of the cartons were already damaged upon delivery to it were
true, then it should naturally have received the cargo under protest or with reservations duly
noted on the receipt issued by PSI. But it made no such protest or reservation.
57

Moreover, as observed by the appellate court, if indeed petitioners employees only examined
the cargoes outside the PSI warehouse and found some to be wet, they would certainly have
gone back to PSI, showed to the warehouseman the damage, and demanded then and there for
Bad Order documents or a certification confirming the damage.
58
Or, petitioner would have
presented, as witness, the employees of the PSI from whom Morales and Domingo took
delivery of the cargo to prove that, indeed, part of the cargoes was already damaged when the
container was allegedly opened outside the warehouse.
59

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day.
Instead, it asserts that some of the cargoes were already wet on delivery by PSI outside the PSI
warehouse but such notwithstanding Calicdan directed Morales to proceed with the delivery to
Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales on July 29,
1992, he failed to specifically declare what time he received the call. As to whether the call was
made at the PSI warehouse when the shipment was stripped from the airport containers, or
when the cargoes were already in transit to Antipolo, it is not determinable. Aside from that
phone call, petitioner admitted that it had no documentary evidence to prove that at the time it
received the cargoes, a part of it was wet, damaged or in bad condition.
60

The 4-page weather data furnished by PAGASA
61
on request of Sanchez Brokerage hardly
impresses, no witness having identified it and interpreted the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral
contraceptives were damaged by rainwater while in transit to Antipolo City is more likely then.
Sanchez himself testified that in the past, there was a similar instance when the shipment of
Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that
arrived at the NAIA were damaged and claimed by the Wyeth-Suaco without any
question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-
Suaco did not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there was a cartoon
(sic) wetted (sic) up to the bottom are wet specially during rainy season.
62

Since petitioner received all the cargoes in good order and condition at the time they were
turned over by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a
portion thereof was found to be in bad order, it was incumbent on petitioner to prove that it
exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence, its
presumed negligence under Article 1735 of the Civil Code remains unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138334 August 25, 2003
ESTELA L. CRISOSTOMO, Petitioner,
vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL,
INC., Respondents.
D E C I S I O N
YNARES-SANTIAGO, J .:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan
Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed "Jewels of Europe". The package tour included the countries
of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the
booking fee was also waived because petitioners niece, Meriam Menor, was respondent
companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday
to deliver petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the
full payment for the package tour. Menor then told her to be at the Ninoy Aquino International
Airport (NAIA) on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to
take the flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay,
she discovered that the flight she was supposed to take had already departed the previous day.
She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called
up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the "British Pageant"
which included England, Scotland and Wales in its itinerary. For this tour package, petitioner
was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of
P26.60). She gave respondent US$300 or P7,980.00 as partial payment and commenced the
trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for "Jewels of Europe" and
the amount she owed respondent for the "British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount, contending that the same was non-
refundable.
1
Petitioner was thus constrained to file a complaint against respondent for breach of
contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled to
Branch 59 of the Regional Trial Court of Makati City.
In her complaint,
2
petitioner alleged that her failure to join "Jewels of Europe" was due to
respondents fault since it did not clearly indicate the departure date on the plane ticket.
Respondent was also negligent in informing her of the wrong flight schedule through its
employee Menor. She insisted that the "British Pageant" was merely a substitute for the "Jewels
of Europe" tour, such that the cost of the former should be properly set-off against the sum paid
for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco,
denied responsibility for petitioners failure to join the first tour. Chipeco insisted that petitioner
was informed of the correct departure date, which was clearly and legibly printed on the plane
ticket. The travel documents were given to petitioner two days ahead of the scheduled trip.
Petitioner had only herself to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for "Jewels of Europe",
considering that the same had already been remitted to its principal in Singapore, Lotus Travel
Ltd., which had already billed the same even if petitioner did not join the tour. Lotus European
tour organizer, Insight International Tours Ltd., determines the cost of a package tour based on
a minimum number of projected participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked tour.
3

Lastly, respondent maintained that the "British Pageant" was not a substitute for the package
tour that petitioner missed. This tour was independently procured by petitioner after realizing
that she made a mistake in missing her flight for "Jewels of Europe". Petitioner was allowed to
make a partial payment of only US$300.00 for the second tour because her niece was then an
employee of the travel agency. Consequently, respondent prayed that petitioner be ordered to
pay the balance of P12,901.00 for the "British Pageant" package tour.
After due proceedings, the trial court rendered a decision,
4
the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty
Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per annum
starting January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00)
Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.
5

The trial court held that respondent was negligent in erroneously advising petitioner of her
departure date through its employee, Menor, who was not presented as witness to rebut
petitioners testimony. However, petitioner should have verified the exact date and time of
departure by looking at her ticket and should have simply not relied on Menors verbal
representation. The trial court thus declared that petitioner was guilty of contributory negligence
and accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than respondent because as
a lawyer and well-traveled person, she should have known better than to simply rely on what
was told to her. This being so, she is not entitled to any form of damages. Petitioner also
forfeited her right to the "Jewels of Europe" tour and must therefore pay respondent the balance
of the price for the "British Pageant" tour. The dispositive portion of the judgment appealed from
reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26,
1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring
the plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00, representing
the balance of the price of the British Pageant Package Tour, the same to earn legal interest at
the rate of SIX PERCENT (6%) per annum, to be computed from the time the counterclaim was
filed until the finality of this decision. After this decision becomes final and executory, the rate of
TWELVE PERCENT (12%) interest per annum shall be additionally imposed on the total
obligation until payment thereof is satisfied. The award of attorneys fees is DELETED. Costs
against the plaintiff-appellee.
SO ORDERED.
6

Upon denial of her motion for reconsideration,
7
petitioner filed the instant petition under Rule 45
on the following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a reversible
error in reversing and setting aside the decision of the trial court by ruling that the
petitioner is not entitled to a refund of the cost of unavailed "Jewels of Europe" tour she
being equally, if not more, negligent than the private respondent, for in the contract of
carriage the common carrier is obliged to observe utmost care and extra-ordinary
diligence which is higher in degree than the ordinary diligence required of the passenger.
Thus, even if the petitioner and private respondent were both negligent, the petitioner
cannot be considered to be equally, or worse, more guilty than the private respondent.
At best, petitioners negligence is only contributory while the private respondent [is guilty]
of gross negligence making the principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the "Jewels of Europe" tour
was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential damages
due her as a result of breach of contract of carriage.
8

Petitioner contends that respondent did not observe the standard of care required of a common
carrier when it informed her wrongly of the flight schedule. She could not be deemed more
negligent than respondent since the latter is required by law to exercise extraordinary diligence
in the fulfillment of its obligation. If she were negligent at all, the same is merely contributory and
not the proximate cause of the damage she suffered. Her loss could only be attributed to
respondent as it was the direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one place
to another for a fixed price.
9
Such person or association of persons are regarded as carriers and
are classified as private or special carriers and common or public carriers.
10
A common carrier is
defined under Article 1732 of the Civil Code as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business
of transporting either passengers or goods and is therefore, neither a private nor a common
carrier. Respondent did not undertake to transport petitioner from one place to another since its
covenant with its customers is simply to make travel arrangements in their behalf. Respondents
services as a travel agency include procuring tickets and facilitating travel permits or visas as
well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company,
this does not mean that the latter ipso facto is a common carrier. At most, respondent acted
merely as an agent of the airline, with whom petitioner ultimately contracted for her carriage to
Europe. Respondents obligation to petitioner in this regard was simply to see to it that petitioner
was properly booked with the airline for the appointed date and time. Her transport to the place
of destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service of arranging
and facilitating petitioners booking, ticketing and accommodation in the package tour. In
contrast, the object of a contract of carriage is the transportation of passengers or goods. It is in
this sense that the contract between the parties in this case was an ordinary one for services
and not one of carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is determinative of the
degree of care required in the performance of the latters obligation under the contract. For
reasons of public policy, a common carrier in a contract of carriage is bound by law to carry
passengers as far as human care and foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the circumstances.
11
As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of care
required of respondent is that of a good father of a family under Article 1173 of the Civil
Code.
12
This connotes reasonable care consistent with that which an ordinarily prudent person
would have observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence.
13

In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner
of the wrong day of departure. Petitioners testimony was accepted as indubitable evidence of
Menors alleged negligent act since respondent did not call Menor to the witness stand to refute
the allegation. The lower court applied the presumption under Rule 131, Section 3 (e)
14
of the
Rules of Court that evidence willfully suppressed would be adverse if produced and thus
considered petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and maintains
that petitioners assertion is belied by the evidence on record. The date and time of departure
was legibly written on the plane ticket and the travel papers were delivered two days in advance
precisely so that petitioner could prepare for the trip. It performed all its obligations to enable
petitioner to join the tour and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony could not give
rise to an inference unfavorable to the former. Menor was already working in France at the time
of the filing of the complaint,
15
thereby making it physically impossible for respondent to present
her as a witness. Then too, even if it were possible for respondent to secure Menors testimony,
the presumption under Rule 131, Section 3(e) would still not apply. The opportunity and
possibility for obtaining Menors testimony belonged to both parties, considering that Menor was
not just respondents employee, but also petitioners niece. It was thus error for the lower court
to invoke the presumption that respondent willfully suppressed evidence under Rule 131,
Section 3(e). Said presumption would logically be inoperative if the evidence is not intentionally
omitted but is simply unavailable, or when the same could have been obtained by both parties.
16

In sum, we do not agree with the finding of the lower court that Menors negligence concurred
with the negligence of petitioner and resultantly caused damage to the latter. Menors
negligence was not sufficiently proved, considering that the only evidence presented on this
score was petitioners uncorroborated narration of the events. It is well-settled that the party
alleging a fact has the burden of proving it and a mere allegation cannot take the place of
evidence.
17
If the plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner facts upon which he bases his claim, the defendant is under no
obligation to prove his exception or defense.
18

Contrary to petitioners claim, the evidence on record shows that respondent exercised due
diligence in performing its obligations under the contract and followed standard procedure in
rendering its services to petitioner. As correctly observed by the lower court, the plane
ticket
19
issued to petitioner clearly reflected the departure date and time, contrary to petitioners
contention. The travel documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents and procured the plane tickets. It
arranged petitioners hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised due
diligence in the conduct of her affairs, there would have been no reason for her to miss the
flight. Needless to say, after the travel papers were delivered to petitioner, it became incumbent
upon her to take ordinary care of her concerns. This undoubtedly would require that she at least
read the documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the obligation as
the nature of the obligation so demands.
20
There is no fixed standard of diligence applicable to
each and every contractual obligation and each case must be determined upon its particular
facts. The degree of diligence required depends on the circumstances of the specific obligation
and whether one has been negligent is a question of fact that is to be determined after taking
into account the particulars of each case.
21
1wphi1
The lower court declared that respondents employee was negligent. This factual finding,
however, is not supported by the evidence on record. While factual findings below are generally
conclusive upon this court, the rule is subject to certain exceptions, as when the trial court
overlooked, misunderstood, or misapplied some facts or circumstances of weight and substance
which will affect the result of the case.
22

In the case at bar, the evidence on record shows that respondent company performed its duty
diligently and did not commit any contractual breach. Hence, petitioner cannot recover and must
bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of
Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay
respondent the amount of P12,901.00 representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the rate of 6% per annum, to be computed
from the time the counterclaim was filed until the finality of this Decision. After this Decision
becomes final and executory, the rate of 12% per annum shall be imposed until the obligation is
fully settled, this interim period being deemed to be by then an equivalent to a forbearance of
credit.
23

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171194 February 4, 2010
ASIAN TERMINALS, INC., Petitioner,
vs.
DAEHAN FIRE AND MARINE INSURANCE CO., LTD., Respondent.
D E C I S I O N
NACHURA, J .:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court
of Appeals (CA) September 14, 2005 Decision
1
and December 20, 2005 Resolution
2
in CA-G.R.
CV No. 83647. The assailed Decision reversed and set aside the Regional Trial Court
(RTC)
3
August 4, 2004 Decision
4
in Civil Case No. 01-101309, while the assailed resolution
denied petitioner Asian Terminals, Inc.s motion for reconsideration.
The case stemmed from the following facts:
On July 8, 2000, Doosan Corporation (Doosan) shipped twenty-six (26) boxes of printed
aluminum sheets on board the vessel Heung-A Dragon owned by Dongnama Shipping Co., Ltd.
(Dongnama).
5
The shipment was covered by Bill of Lading No. DNALHMBUMN010010
6
and
consigned to Access International, with address at No. 9 Parada St., San Juan, Metro Manila.
Doosan insured the subject shipment with respondent Daehan Fire and Marine Insurance Co.,
Ltd. under an "all-risk" marine cargo insurance policy,
7
payable to its settling agent in the
Philippines, the Smith Bell & Co., Inc. (Smith Bell).
On July 12, 2000, the vessel arrived in Manila and the containerized van was discharged and
unloaded in apparent good condition, as no survey and exceptions were noted in the Equipment
Interchange Receipt (EIR) issued by petitioner.
8
The container van was stored in the Container
Yard of the Port. On July 18, 2000, Access International requested
9
from petitioner and the
licensed Customs Broker, Victoria Reyes Lazo (V. Reyes Lazo), a joint survey of the shipment
at the place of storage in the Container Yard, but no such inspection was conducted.
On July 19, 2000, V. Reyes Lazo withdrew, and petitioner released, the shipment and delivered
it to Access Internationals warehouse in Binondo, Manila.
10
While the shipment was at Access
Internationals warehouse, the latter, together with its surveyor, Lloyds Agency, conducted an
inspection and noted that only twelve (12) boxes were accounted for, while fourteen (14) boxes
were missing.
11
Access International thus filed a claim against petitioner and V. Reyes Lazo for
the missing shipment amounting to $34,993.28.
12
For failure to collect its claim, Access
International sought indemnification from respondent in the amount of $45,742.81.
13
On
November 8, 2000, respondent paid the amount of the claim and Access International
accordingly executed a Subrogation Receipt in favor of the former.
14

On July 10, 2001, respondent, represented by Smith Bell, instituted the present case against
Dongnama, Uni-ship, Inc. (Uni-ship), petitioner, and V. Reyes Lazo before the
RTC.
15
Respondent alleged that the losses, shortages and short deliveries sustained by the
shipment were caused by the joint fault and negligence of Dongnama, petitioner and V. Reyes
Lazo.
Dongnama and Uni-ship filed a Motion to Dismiss
16
on the grounds that Daehan lacked legal
capacity to sue and that the complaint stated no cause of action. The trial court, however,
denied the motion in an Order dated August 31, 2001.
17

Thereafter, Dongnama and Uni-ship filed their Answer with Counterclaim and Cross-Claim Ad
Cautelam denying any liability for the damages/losses sustained by the shipment, pointing out
that it was on a "Full Container Load," "Said to Contain," and "Shippers Load and Count" bases,
under which they had no means of verifying the contents of the containers. They also alleged
that the container van was properly discharged from the vessel with seals intact and no
exceptions noted. Moreover, they claimed that the losses occurred while the subject shipment
was in the custody, possession or control of the shipper, its trucker, the arrastre operator, or
their representatives, or due to the consignees own negligence. They further questioned the
absence of notice of loss within the three (3)-day period provided under the Carriage of Goods
by Sea Act. Finally, they averred that their liability, if there be any, should only be limited to
US$500.00 per package or customary freight unit.
18

For its part, petitioner denied liability, claiming that it exercised due diligence in handling and
storing the subject container van. It, likewise, assailed the timeliness of the complaint, having
been filed beyond the fifteen (15)-day period under its Contract for Cargo Handling Services
with the Philippine Ports Authority (PPA). If at all, petitioner added, its liability should only be
limited to P5,000.00.
19

In her Answer, V. Reyes Lazo questioned respondents capacity to sue in Philippine courts. She
accused respondent of engaging in a fishing expedition since the latter could not determine with
clarity the party at fault.
20

On December 2, 2002, in their Joint Motion to Dismiss,
21
respondent, on one hand, and
Dongnama and Uni-ship, on the other, prayed that the complaint be dismissed against the latter,
alleging that they could not be held liable based on the EIR. The motion was granted on
December 9, 2002.
22
Consequently, the case proceeded as against petitioner and V. Reyes
Lazo.
As no amicable settlement was reached during the pretrial, trial on the merits ensued.
On August 4, 2004, the RTC dismissed the complaint for insufficiency of evidence.
23
It found the
complaint fatally flawed, having been signed by a person who had no authority from
complainant (respondent herein) corporation to act for and on behalf of the latter.
24
The RTC,
likewise, held that respondent failed to prove that the loss/damage of the subject cargoes was
due to the fault or negligence of petitioner or V. Reyes Lazo. It added that the cargoes were
damaged when they were already in Access Internationals possession, considering that an
inspection was conducted in the latters warehouse.
25

On appeal, the CA reversed and set aside the RTC decision. The dispositive portion of the CA
decision reads:
WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed
Decision dated August 4, 2004 of the Regional Trial Court of Manila, Branch 21 in Civil Case
No. 01-101309 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered
ordering the defendants-appellees Asian Terminals, Inc. and V. Reyes Lazo to pay, jointly and
severally, the plaintiff-appellant Daehan Fire & Marine Insurance Co., Ltd. the sums
of P2,295,374.20 with interest at the legal rate (6% per annum) from the date of the filing of the
complaint and P229,537.42 by way of attorneys fees.
No pronouncement as to costs.
SO ORDERED.
26

Applying the principle of substantial compliance, the CA recognized the validity of respondents
complaint after the submission, albeit late, of the board resolution, indicating the authority of the
signatory to represent the corporation.
27
Pursuant to the Management Contract between
petitioner and the PPA, the former may not disclaim responsibility for the shortage of the subject
cargoes while the container van remained in its custody for seven (7) days, despite the
withdrawal of the subject shipment by the brokers representative without any complaint.
Applying E. Razon, Inc. v. Court of Appeals,
28
the CA refused to impose the P5,000.00
limitation, considering that petitioner was aware of the value of the subject goods shown in the
pertinent shipping documents.
29
The CA added that petitioner could not disclaim any liability,
having refused or ignored Access Internationals request for a joint survey at the time when the
goods were still in the possession and custody of the former.
30
Lastly, V. Reyes Lazo was also
made liable jointly and severally with petitioner in negligently withdrawing the container van from
the premises of the pier, notwithstanding Access Internationals request for a joint survey.
31

Aggrieved, petitioner comes before us in this petition for review on certiorari, raising the
following issues:
1. WHETHER OR NOT PETITIONER ATI IS LIABLE FOR THE LOSS TO THE
SUBJECT SHIPMENT NOTWITHSTANDING THE ACKNOWLEDGMENT BY THE
CONSIGNEES BROKER/REPRESENTATIVE IN THE EQUIPMENT INTERCHANGE
RECEIPT THAT THE SHIPMENT WAS RECEIVED IN GOOD ORDER AND WITHOUT
EXCEPTION.
2. WHAT IS THE EXTENT OF PETITIONER ATIS LIABILITY, IF ANY?
32

Simply put, we are tasked to determine the propriety of making petitioner, as arrastre operator,
liable for the loss of the subject shipment, and if so, the extent of its liability.
Petitioner denies liability for the loss of the subject shipment, considering that the consignees
representative signified receipt of the goods in good order without exception. This being the
case, respondent, as subrogee, is bound by such acknowledgment. As to the extent of its
liability, if there be any, petitioner insists that it be limited toP5,000.00 per package, as provided
for in its Management Contract with the PPA.
33

We do not agree with petitioner.
Respondent, as insurer, was subrogated to the rights of the consignee, pursuant to the
subrogation receipt executed by the latter in favor of the former. The relationship, therefore,
between the consignee and the arrastre operator must be examined. This relationship is akin to
that existing between the consignee and/or the owner of the shipped goods and the common
carrier, or that between a depositor and a warehouseman.
34
In the performance of its
obligations, an arrastre operator should observe the same degree of diligence as that required
of a common carrier and a warehouseman. Being the custodian of the goods discharged from a
vessel, an arrastre operators duty is to take good care of the goods and to turn them over to the
party entitled to their possession.
35

The loss of 14 out of 26 boxes of printed aluminum sheets is undisputed. It is, likewise, settled
that Dongnama (the shipping company) and Uni-ship were absolved from liability because
respondent realized that they had no liability based on the EIR issued by Dongnama. This
resulted in the withdrawal of the complaint against them. What remained was the complaint
against petitioner as the arrastre operator and V. Reyes Lazo as the customs broker. Records
show that the subject shipment was discharged from the vessel and placed under the custody of
petitioner for a period of seven (7) days. Thereafter, the same was withdrawn from the container
yard by the customs broker, then delivered to the consignee. It was after such delivery that the
loss of 14 boxes was discovered. Hence, the complaint against both the arrastre operator and
the customs broker.
In a claim for loss filed by the consignee (or the insurer), the burden of proof to show
compliance with the obligation to deliver the goods to the appropriate party devolves upon the
arrastre operator. Since the safekeeping of the goods is its responsibility, it must prove that the
losses were not due to its negligence or to that of its employees.
36
To prove the exercise of
diligence in handling the subject cargoes, petitioner must do more than merely show the
possibility that some other party could be responsible for the loss or the damage. It must prove
that it exercised due care in the handling thereof.
37
Petitioner failed to do this. Instead, it insists
that it be exonerated from liability, because the customs brokers representative received the
subject shipment in good order and condition without exception. The appellate courts
conclusion on this matter is instructive:
ATI may not disclaim responsibility for the shortage/pilferage of fourteen (14) boxes of printed
aluminum sheet while the container van remained in its custody for seven (7) days (at the
Container Yard) simply because the alleged representative of the customs broker had
withdrawn the shipment from its premises and signed the EIR without any complaint. The
signature of the person/broker representative merely signifies that said person thereby frees the
ATI from any liability for loss or damage to the cargo so withdrawn while the same was in the
custody of such representative to whom the cargo was released. It does not foreclose any
remedy or right of the consignee to prove that any loss or damage to the subject shipment
occurred while the same was under the custody, control and possession of the arrastre
operator.
38

Clearly, petitioner cannot be excused from culpability simply because another person could be
responsible for the loss. This is especially true in the instant case because, while the subject
shipment was in petitioners custody, Access International requested
39
that a joint survey be
conducted at the place of storage. And as correctly observed by the CA:
There is no dispute that it was the customs broker who in behalf of the consignee took delivery
of the subject shipment from the arrastre operator. However, the trial court apparently
disregarded documentary evidence showing that the consignee made a written request on both
the appellees ATI and V. Reyes Lazo for a joint survey of the container van on July 18, 2000
while the same was still in the possession, control and custody of the arrastre operator at the
Container Yard of the pier. Both ATI and Lazo merely denied being aware of the letters (Exhibits
"M" and "N"). The fact remains that the consignee complained of short-delivery and while
inspection of the cargo was made only at its warehouse after delivery by the customs broker,
the arrastre ATI together with said broker both refused or ignored the written request for a joint
survey at the premises of the arrastre. Instead of complying with the consignees demand, the
broker withdrew and the arrastre released the shipment the very next day, July 19, 2000 without
even acting upon the consignees request for a joint survey.
40

Moreover, it was shown in the Survey Report prepared by Access Internationals surveyor that
petitioner was remiss in its obligations to handle the goods with due care and to ensure that
they reach the proper party in good order as to quality and quantity. Specifically, the Survey
Report states:
DELIVERY
On July 19, 2000, V. Reyes-Lazo (Licensed Customs Broker) effected delivery of the 1 x 20
Van Container from the Container Yard of said port to the Consignees designated warehouse
at No. 622 Asuncion Street, Binondo, Manila.
Prior to withdrawal from the said port, the Brokers representative noticed that the padlock
secured to the doors of the Van Container was forcibly pulled-out resulting to its breakage. He
then immediately informed the Arrastre Contractors (ATI) and requested that Van Container be
opened and inventory of its contents be made as he suspected the contents might have been
pilfered.
However, his request was denied averring that stripping of "FCL Van Containers" are not
allowed inside the Customs Zone. As all efforts exerted proved futile, he instead bought new
padlock and secured same to the Van. He then informed the Consignee about the incident upon
delivery of the Container at the Consignees designated warehouse, who immediately requested
for survey.
41

Considering that both petitioner and V. Reyes Lazo were negligent in the performance of their
duties in the handling, storage and delivery of the subject shipment to the consignee, resulting
in the loss of 14 boxes of printed aluminum sheets, both shall be solidarily liable for such loss.
As to the extent of petitioners liability, we cannot sustain its contention that it be limited
to P5,000.00 per package. Petitioners responsibility and liability for losses and damages are set
forth in Section 7.01 of the Management Contract drawn between the PPA and the Marina Port
Services, Inc., petitioners predecessor-in-interest, to wit:
CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES
Section 7.01. Responsibility and Liability for Losses and Damages; Exceptions. The
CONTRACTOR shall, at its own expense, handle all merchandise in all work undertaken by it,
hereunder, diligently and in a skillful, workman-like and efficient manner. The CONTRACTOR
shall be solely responsible as an independent contractor, and hereby agrees to accept liability
and to pay to the shipping company, consignees, consignors or other interested party or parties
for the loss, damage or non-delivery of cargoes in its custody and control to the extent of the
actual invoice value of each package which in no case shall be more than FIVE THOUSAND
PESOS (P5,000.00) each, unless the value of the cargo shipment is otherwise specified or
manifested or communicated in writing together with the declared Bill of Lading value and
supported by a certified packing list to the CONTRACTOR by the interested party or parties
before the discharge or loading unto vessel of the goods. This amount of Five Thousand Pesos
(P5,000.00) per package may be reviewed and adjusted by the AUTHORITY from time to time.
The CONTRACTOR shall not be responsible for the condition or the contents of any package
received, nor for the weight nor for any loss, injury or damage to the said cargo before or while
the goods are being received or remains in the piers, sheds, warehouses or facility, if the loss,
injury or damage is caused by force majeure or other causes beyond the CONTRACTORS
control or capacity to prevent or remedy; PROVIDED that a formal claim together with the
necessary copies of Bill of Lading, Invoice, Certified Packing List and Computation arrived at
covering the loss, injury or damage or non-delivery of such goods shall have been filed with the
CONTRACTOR within fifteen (15) days from day of issuance by the CONTRACTOR of a
certificate of non-delivery; PROVIDED, however, that if said CONTRACTOR fails to issue such
certification within fifteen (15) days from receipt of a written request by the shipper/consignee or
his duly authorized representative or any interested party, said certification shall be deemed to
have been issued, and thereafter, the fifteen (15) day period within which to file the claim
commences; PROVIDED, finally, that the request for certification of loss shall be made within
thirty (30) days from the date of delivery of the package to the consignee.
x x x x
The CONTRACTOR shall be solely responsible for any and all injury or damage that may arise
on account of the negligence or carelessness of the CONTRACTOR, its agent or employees in
the performance of the undertaking under the Contract. Further, the CONTRACTOR hereby
agrees to hold free the AUTHORITY, at all times, from any claim that may be instituted by its
employee by reason of the provisions of the Labor Code, as amended.
42

As clearly stated above, such limitation does not apply if the value of the cargo shipment is
communicated to the arrastre operator before the discharge of the cargoes.1avvph!1
It is undisputed that Access International, upon arrival of the shipment, declared the same for
taxation purposes, as well as for the assessment of arrastre charges and other fees. For the
purpose, the invoice, packing list and other shipping documents were presented to the Bureau
of Customs as well as to petitioner for the proper assessment of the arrastre charges and other
fees. Such manifestation satisfies the condition of declaration of the actual invoices of the value
of the goods before their arrival, to overcome the limitation on the liability of the arrastre
operator.
43
Then, the arrastre operator, by reason of the payment to it of a commensurate
charge based on the higher declared value of the merchandise, could and should take
extraordinary care of the special or valuable cargo.
44
What would, indeed, be unfair and
arbitrary is to hold the arrastre operator liable for the full value of the merchandise after the
consignee has paid the arrastre charges only on a basis much lower than the true value of the
goods.
45

What is essential is knowledge beforehand of the extent of the risk to be undertaken by the
arrastre operator, as determined by the value of the property committed to its care. This defines
its responsibility for loss of or damage to such cargo and ascertains the compensation
commensurate to such risk assumed. Having been duly informed of the actual invoice value of
the merchandise under its custody and having received payment of arrastre charges based
thereon, petitioner cannot therefore insist on a limitation of its liability under the contract to less
than the value of each lost cargo.
46

The stipulation requiring the consignee to inform the arrastre operator and to give advance
notice of the actual invoice value of the goods to be put in its custody is adopted for the purpose
of determining its liability, that it may obtain compensation commensurate to the risk it assumes,
not for the purpose of determining the degree of care or diligence it must exercise as a
depositary or warehouseman.
47

WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit. The Court
of Appeals September 14, 2005 Decision and December 20, 2005 Resolution in CA-G.R. CV
No. 83647 are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO
1
and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and
the COURT OF APPEALS Respondents.
D E C I S I O N
BERSAMIN, J .:
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to
observe extraordinary diligence in the conduct of his business. He is presumed to be negligent
when death occurs to a passenger. His liability may include indemnity for loss of earning
capacity even if the deceased passenger may only be an unemployed high school student at
the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the
adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA)
affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial
Court (RTC), Branch 260, in Paraaque City that had decreed them jointly and severally liable
with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita
Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a
high school student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting students from their respective
residences in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated in the front beside the
driver, and the others in the rear, with six students on either side. They employed Clemente
Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco.
On August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m.
from the Zarates residence. Aaron took his place on the left side of the van near the rear door.
The van, with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried
all the 14 student riders on their way to Don Bosco. Considering that the students were due at
Don Bosco by 7:15 a.m., and that they were already running late because of the heavy
vehicular traffic on the South Superhighway, Alfaro took the van to an alternate route at about
6:45 a.m. by traversing the narrow path underneath the Magallanes Interchange that was then
commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow
path was marked by piles of construction materials and parked passenger jeepneys, and the
railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other
responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the
railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train),
operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was
blocked because he overtook the passenger bus on its left side. The train blew its horn to warn
motorists of its approach. When the train was about 50 meters away from the passenger bus
and the van, Alano applied the ordinary brakes of the train. He applied the emergency brakes
only when he saw that a collision was imminent. The passenger bus successfully crossed the
railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the
impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in
the path of the train, which dragged his body and severed his head, instantaneously killing him.
Alano fled the scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro could not be served with
summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Perea for the adequate and safe
transportation carriage of the former spouses' son from their residence in Paraaque to
his school at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the implementation thereof,
Aaron, the minor son of spouses Zarate died in connection with a vehicular/train collision
which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses
Perea, then driven and operated by the latter's employee/authorized driver Clemente
Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996,
within the vicinity of the Magallanes Interchange in Makati City, Metro Manila,
Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train
collision was a railroad crossing used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and
safety warning signs and railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private
vehicles used on a daily basis the site of the collision as an alternative route and short-
cut to Makati;
(7) The train driver or operator left the scene of the incident on board the commuter
train involved without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended
by the railroad operator for railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100
meters from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions,
liable for negligence constituting the proximate cause of the vehicular collision, which
resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Perea being the employer of defendant
Alfaro are liable for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the
railroad system is liable for negligence in failing to provide adequate safety warning
signs and railings in the area commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular collision which resulted in the death of
the plaintiff spouses' son;
(4) Whether or not defendant spouses Perea are liable for breach of the contract of
carriage with plaintiff-spouses in failing to provide adequate and safe transportation for
the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the
diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron
John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train
involved in the accident, in allowing or tolerating the motoring public to cross, and its
failure to install safety devices or equipment at the site of the accident for the protection
of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for
any and whatever amount the latter may be held answerable or which they may be
ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the
amounts claimed by the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and
exemplary damages and attorney's fees.
2

The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil
Code.
In their defense, the Pereas adduced evidence to show that they had exercised the diligence
of a good father of the family in the selection and supervision of Alfaro, by making sure that
Alfaro had been issued a drivers license and had not been involved in any vehicular accident
prior to the collision; that their own son had taken the van daily; and that Teodoro Perea had
sometimes accompanied Alfaro in the vans trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless
crossing of the van whose driver had not first stopped, looked and listened; and that the narrow
path traversed by the van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,
3
disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorneys fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for reconsideration,
4
reiterating that the
cooperative gross negligence of the Pereas and PNR had caused the collision that led to the
death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on
the established circumstances.
The CAs Ruling
Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:
5

The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally
liable together with defendant-appellants spouses Teodorico and Nanette Perea and
defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron
Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses
despite overwhelming documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.
The Pereas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral
and exemplary damages and attorneys fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.
The trial court erred in awarding excessive damages and attorneys fees.
The trial court erred in awarding damages in the form of deceaseds loss of earning capacity in
the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but
limited the moral damages to P 2,500,000.00; and deleted the attorneys fees because the RTC
did not state the factual and legal bases, to wit:
6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch
260 of Paraaque City is AFFIRMED with the modification that the award of Actual Damages is
reduced to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for
Attorneys Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the
ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,
7
wherein the
Court gave the heirs of Cariaga a sum representing the loss of the deceaseds earning capacity
despite Cariaga being only a medical student at the time of the fatal incident. Applying the
formula adopted in the American Expectancy Table of Mortality:
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and started
working for his own livelihood) instead of 15 years (his age when he died). Considering that the
nature of his work and his salary at the time of Aarons death were unknown, it used the
prevailing minimum wage of P 280.00/day to compute Aarons gross annual salary to
beP 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aarons
life expectancy of 39.3 years, his gross income would aggregate to P 4,351,164.30, from which
his estimated expenses in the sum ofP 2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aarons computed net income turning out to be higher than
the amount claimed by the Zarates, only P 2,109,071.00, the amount expressly prayed for by
them, was granted.
On April 4, 2003, the CA denied the Pereas motion for reconsideration.
8

Issues
In this appeal, the Pereas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly
and severally liable to pay damages with Philippine National Railways and dismissing their
cross-claim against the latter.
II. The lower court erred in affirming the trial courts decision awarding damages for loss of
earning capacity of a minor who was only a high school student at the time of his death in the
absence of sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereas and the
PNR, basing their claim against the Pereas on breach of contract of carriage and against the
PNR on quasi-delict.
The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereas defense was that they exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a
drivers license and that he had not been involved in any vehicular accident prior to the fatal
collision with the train; that they even had their own son travel to and from school on a daily
basis; and that Teodoro Perea himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such defense by
regarding such defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereas
operated as a common carrier; and that their standard of care was extraordinary diligence, not
the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually regarded as a
private carrier,
9
primarily because he only caters to some specific or privileged individuals, and
his operation is neither open to the indefinite public nor for public use, the exact nature of the
operation of a school bus service has not been finally settled. This is the occasion to lay the
matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons
from one place to another, gratuitously or for hire. The carrier is classified either as a
private/special carrier or as a common/public carrier.
10
A private carrier is one who, without
making the activity a vocation, or without holding himself or itself out to the public as ready to
act for all who may desire his or its services, undertakes, by special agreement in a particular
instance only, to transport goods or persons from one place to another either gratuitously or for
hire.
11
The provisions on ordinary contracts of the Civil Code govern the contract of private
carriage.The diligence required of a private carrier is only ordinary, that is, the diligence of a
good father of the family. In contrast, a common carrier is a person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering such services to the public.
12
Contracts of common
carriage are governed by the provisions on common carriers of the Civil Code, the Public
Service Act,
13
and other special laws relating to transportation. A common carrier is required to
observe extraordinary diligence, and is presumed to be at fault or to have acted negligently in
case of the loss of the effects of passengers, or the death or injuries to passengers.
14

In relation to common carriers, the Court defined public use in the following terms in United
States v. Tan Piaco,
15
viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public, we
must look not only to the character of the business to be done, but also to the proposed mode of
doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it
is not a public use, authorizing the exercise of the jurisdiction of the public utility commission.
There must be, in general, a right which the law compels the owner to give to the general public.
It is not enough that the general prosperity of the public is promoted. Public use is not
synonymous with public interest. The true criterion by which to judge the character of the use is
whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,
16
the Court noted that Article 1732 of the Civil Code avoided
any distinction between a person or an enterprise offering transportation on a regular or an
isolated basis; and has not distinguished a carrier offering his services to the general public, that
is, the general community or population, from one offering his services only to a narrow
segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil Code. Public service, according to
Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientle, whether permanent or
occasional, and done for the general business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x x.
17

Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators,
18
custom brokers and warehousemen,
19
and
barge operators
20
even if they had limited clientle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of
the business actually transacted, or the number and character of the conveyances used in the
activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has
held out to the general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as advertised and held
out to the general public, the individual or the entity rendering such service is a private, not a
common, carrier. The question must be determined by the character of the business actually
carried on by the carrier, not by any secret intention or mental reservation it may entertain or
assert when charged with the duties and obligations that the law imposes.
21

Applying these considerations to the case before us, there is no question that the Pereas as
the operators of a school bus service were: (a) engaged in transporting passengers generally as
a business, not just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and (c) transporting
students for a fee. Despite catering to a limited clientle, the Pereas operated as a common
carrier because they held themselves out as a ready transportation indiscriminately to the
students of a particular school living within or near where they operated the service and for a
fee.
The common carriers standard of care and vigilance as to the safety of the passengers is
defined by law. Given the nature of the business and for reasons of public policy, the common
carrier is bound "to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each
case."
22
Article 1755 of the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances." To successfully fend off
liability in an action upon the death or injury to a passenger, the common carrier must prove his
or its observance of that extraordinary diligence; otherwise, the legal presumption that he or it
was at fault or acted negligently would stand.
23
No device, whether by stipulation, posting of
notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of
the common carrier as defined under Article 1755 of the Civil Code.
24

And, secondly, the Pereas have not presented any compelling defense or reason by which the
Court might now reverse the CAs findings on their liability. On the contrary, an examination of
the records shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger.
25
The
presumption of negligence, being a presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been negligent.
26
It was the law no less that required
them to prove their observance of extraordinary diligence in seeing to the safe and secure
carriage of the passengers to their destination. Until they did so in a credible manner, they stood
to be held legally responsible for the death of Aaron and thus to be held liable for all the natural
consequences of such death.
There is no question that the Pereas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a family in
the selection and supervision of their driver was not legally sufficient. According to Article 1759
of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their employee.
This was the reason why the RTC treated this defense of the Pereas as inappropriate in this
action for breach of contract of carriage.
The Pereas were liable for the death of Aaron despite the fact that their driver might have
acted beyond the scope of his authority or even in violation of the orders of the common
carrier.
27
In this connection, the records showed their drivers actual negligence. There was a
showing, to begin with, that their driver traversed the railroad tracks at a point at which the PNR
did not permit motorists going into the Makati area to cross the railroad tracks. Although that
point had been used by motorists as a shortcut into the Makati area, that fact alone did not
excuse their driver into taking that route. On the other hand, with his familiarity with that
shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the
risks. Compounding his lack of care was that loud music was playing inside the air-conditioned
van at the time of the accident. The loudness most probably reduced his ability to hear the
warning horns of the oncoming train to allow him to correctly appreciate the lurking dangers on
the railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles
traversed the railroad tracks. In so doing, he lost his view of the train that was then coming from
the opposite side of the passenger bus, leading him to miscalculate his chances of beating the
bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with the
train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go
to a full stop before traversing the railroad tracks despite knowing that his slackening of speed
and going to a full stop were in observance of the right of way at railroad tracks as defined by
the traffic laws and regulations.
28
He thereby violated a specific traffic regulation on right of way,
by virtue of which he was immediately presumed to be negligent.
29

The omissions of care on the part of the van driver constituted negligence,
30
which, according to
Layugan v. Intermediate Appellate Court,
31
is "the omission to do something which a reasonable
man, guided by those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man would not do,
32
or as
Judge Cooley defines it, (t)he failure to observe for the protection of the interests of another
person, that degree of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury."
33

The test by which to determine the existence of negligence in a particular case has been aptly
stated in the leading case of Picart v. Smith,
34
thuswise:
The test by which to determine the existence of negligence in a particular case may be stated
as follows: Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not, then
he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied
by the imaginary conduct of the discreet paterfamilias of the Roman law. The existence of
negligence in a given case is not determined by reference to the personal judgment of the actor
in the situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must
of course be always determined in the light of human experience and in view of the facts
involved in the particular case. Abstract speculation cannot here be of much value but this much
can be profitably said: Reasonable men govern their conduct by the circumstances which are
before them or known to them. They are not, and are not supposed to be, omniscient of the
future. Hence they can be expected to take care only when there is something before them to
suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm
as a result of the course actually pursued? If so, it was the duty of the actor to take precautions
to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can be held to exist.
Stated in these terms, the proper criterion for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor
would have foreseen that an effect harmful to another was sufficiently probable to warrant his
foregoing the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent
when he traversed the railroad tracks at a point not allowed for a motorists crossing despite
being fully aware of the grave harm to be thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by overtaking the bus on the left side as to
leave himself blind to the approach of the oncoming train that he knew was on the opposite side
of the bus.
Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court,
35
where
the Court held the PNR solely liable for the damages caused to a passenger bus and its
passengers when its train hit the rear end of the bus that was then traversing the railroad
crossing. But the circumstances of that case and this one share no similarities. In Philippine
National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was
adduced against the owner of the bus. Instead, it was the owner of the bus who proved the
exercise of extraordinary diligence by preponderant evidence. Also, the records are replete with
the showing of negligence on the part of both the Pereas and the PNR. Another distinction is
that the passenger bus in Philippine National Railways v. Intermediate Appellate Court was
traversing the dedicated railroad crossing when it was hit by the train, but the Pereas school
van traversed the railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally"
liable for damages arising from the death of Aaron. They had been impleaded in the same
complaint as defendants against whom the Zarates had the right to relief, whether jointly,
severally, or in the alternative, in respect to or arising out of the accident, and questions of fact
and of law were common as to the Zarates.
36
Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the Pereas was distinct from the basis of
the Zarates right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they
nonetheless could be held jointly and severally liable by virtue of their respective negligence
combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also
guilty of negligence despite the school van of the Pereas traversing the railroad tracks at a
point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because
the PNR did not ensure the safety of others through the placing of crossbars, signal lights,
warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from
crossing there. The RTC observed that the fact that a crossing guard had been assigned to man
that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to
others as well as the need to control the vehicular and other traffic there. Verily, the Pereas
and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the
RTC on the liability, the CA modified the amount. Both lower courts took into consideration that
Aaron, while only a high school student, had been enrolled in one of the reputable schools in the
Philippines and that he had been a normal and able-bodied child prior to his death. The basis
for the computation of Aarons earning capacity was not what he would have become or what he
would have wanted to be if not for his untimely death, but the minimum wage in effect at the
time of his death. Moreover, the RTCs computation of Aarons life expectancy rate was not
reckoned from his age of 15 years at the time of his death, but on 21 years, his age when he
would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully
warranted.
Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1wphi1 They cited People v. Teehankee, Jr.,
37
where the Court deleted the
indemnity for victim Jussi Leinos loss of earning capacity as a pilot for being speculative due to
his having graduated from high school at the International School in Manila only two years
before the shooting, and was at the time of the shooting only enrolled in the first semester at the
Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according
to the Court, that he was for all intents and purposes only a high school graduate.
We reject the Pereas submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi
Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron
would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician,
or a lawyer). Instead, the computation of Aarons earning capacity was premised on him being a
lowly minimum wage earner despite his being then enrolled at a prestigious high school like Don
Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at
work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken
against his parents and in favor of the defendants whose negligence not only cost Aaron his life
and his right to work and earn money, but also deprived his parents of their right to his presence
and his services as well. Our law itself states that the loss of the earning capacity of the
deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall
in every case be assessed and awarded by the court "unless the deceased on account of
permanent physical disability not caused by the defendant, had no earning capacity at the time
of his death."
38
Accordingly, we emphatically hold in favor of the indemnification for Aarons loss
of earning capacity despite him having been unemployed, because compensation of this nature
is awarded not for loss of time or earnings but for loss of the deceaseds power or ability to earn
money.
39

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,
40
fourth-year medical student Edgardo
Carriagas earning capacity, although he survived the accident but his injuries rendered him
permanently incapacitated, was computed to be that of the physician that he dreamed to
become. The Court considered his scholastic record sufficient to justify the assumption that he
could have finished the medical course and would have passed the medical board examinations
in due time, and that he could have possibly earned a modest income as a medical practitioner.
Also, in People v. Sanchez,
41
the Court opined that murder and rape victim Eileen Sarmienta
and murder victim Allan Gomez could have easily landed good-paying jobs had they graduated
in due time, and that their jobs would probably pay them high monthly salaries from P 10,000.00
to P 15,000.00 upon their graduation. Their earning capacities were computed at rates higher
than the minimum wage at the time of their deaths due to their being already senior agriculture
students of the University of the Philippines in Los Baos, the countrys leading educational
institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and exemplary damages awarded to the
Zarates in the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that
such amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates deep
mental anguish over their sons unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it would help the
Zarates obtain the means, diversions or amusements that would alleviate their suffering for the
loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice,
given the passage of a long time from when their mental anguish was inflicted on them on
August 22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if
only to render effective the desired example for the public good. As a common carrier, the
Pereas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award of
exemplary damages in that amount would suffice to instill in them and others similarly situated
like them the ever-present need for greater and constant vigilance in the conduct of a business
imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated
on November 13, 2002; and ORDER the petitioners to pay the costs of suit.
SO ORDERED.