[TRANSPORTTATION CASES PART I]

G.R. No. L-47822 December 22, 1988 extraordinary diligence required of him by the law, should be held
PEDRO DE GUZMAN, petitioner, liable for the value of the undelivered goods.
vs. In his Answer, private respondent denied that he was a common
COURT OF APPEALS and ERNESTO CENDANA, respondents. carrier and argued that he could not be held responsible for the value
Vicente D. Millora for petitioner. of the lost goods, such loss having been due to force majeure.
Jacinto Callanta for private respondent. On 10 December 1975, the trial court rendered a Decision 1 finding
private respondent to be a common carrier and holding him liable for
FELICIANO, J.: the value of the undelivered goods (P 22,150.00) as well as for P
Respondent Ernesto Cendana, a junk dealer, was engaged in buying 4,000.00 as damages and P 2,000.00 as attorney's fees.
up used bottles and scrap metal in Pangasinan. Upon gathering On appeal before the Court of Appeals, respondent urged that the trial
sufficient quantities of such scrap material, respondent would bring court had erred in considering him a common carrier; in finding that he
such material to Manila for resale. He utilized two (2) six-wheeler had habitually offered trucking services to the public; in not exempting
trucks which he owned for hauling the material to Manila. On the him from liability on the ground of force majeure; and in ordering him
return trip to Pangasinan, respondent would load his vehicles with to pay damages and attorney's fees.
cargo which various merchants wanted delivered to differing The Court of Appeals reversed the judgment of the trial court and held
establishments in Pangasinan. For that service, respondent charged that respondent had been engaged in transporting return loads of
freight rates which were commonly lower than regular commercial freight "as a casual
rates. occupation — a sideline to his scrap iron business" and not as a
Sometime in November 1970, petitioner Pedro de Guzman a common carrier. Petitioner came to this Court by way of a Petition for
merchant and authorized dealer of General Milk Company Review assigning as errors the following conclusions of the Court of
(Philippines), Inc. in Urdaneta, Pangasinan, contracted with Appeals:
respondent for the hauling of 750 cartons of Liberty filled milk from a 1. that private respondent was not a common carrier;
warehouse of General Milk in Makati, Rizal, to petitioner's 2. that the hijacking of respondent's truck was force majeure; and
establishment in Urdaneta on or before 4 December 1970. 3. that respondent was not liable for the value of the undelivered
Accordingly, on 1 December 1970, respondent loaded in Makati the cargo. (Rollo, p. 111)
merchandise on to his trucks: 150 cartons were loaded on a truck We consider first the issue of whether or not private respondent
driven by respondent himself, while 600 cartons were placed on board Ernesto Cendana may, under the facts earlier set forth, be properly
the other truck which was driven by Manuel Estrada, respondent's characterized as a common carrier.
driver and employee. The Civil Code defines "common carriers" in the following terms:
Only 150 boxes of Liberty filled milk were delivered to petitioner. The Article 1732. Common carriers are persons, corporations, firms or
other 600 boxes never reached petitioner, since the truck which associations engaged in the business of carrying or transporting
carried these boxes was hijacked somewhere along the MacArthur passengers or goods or both, by land, water, or air for compensation,
Highway in Paniqui, Tarlac, by armed men who took with them the offering their services to the public.
truck, its driver, his helper and the cargo. The above article makes no distinction between one
On 6 January 1971, petitioner commenced action against private whose principal business activity is the carrying of persons or goods
respondent in the Court of First Instance of Pangasinan, demanding or both, and one who does such carrying only as an ancillary activity
payment of P 22,150.00, the claimed value of the lost merchandise, (in local Idiom as "a sideline"). Article 1732 also carefully avoids
plus damages and attorney's fees. Petitioner argued that private making any distinction between a person or enterprise offering
respondent, being a common carrier, and having failed to exercise the transportation service on a regular or scheduled basis and one
1
 [TRANSPORTTATION CASES PART I]
offering such service on an occasional, episodic or unscheduled convenience is not a requisite for the incurring of liability under the
basis. Neither does Article 1732 distinguish between a carrier offering Civil Code provisions governing common carriers. That liability arises
its services to the "general public," i.e., the general community or the moment a person or firm acts as a common carrier, without regard
population, and one who offers services or solicits business only from to whether or not such carrier has also complied with the
a narrow segment of the general population. We think that Article requirements of the applicable regulatory statute and implementing
1733 deliberaom making such distinctions. regulations and has been granted a certificate of public convenience
So understood, the concept of "common carrier" under Article 1732 or other franchise. To exempt private respondent from the liabilities of
may be seen to coincide neatly with the notion of "public service," a common carrier because he has not secured the necessary
under the Public Service Act (Commonwealth Act No. 1416, as certificate of public convenience, would be offensive to sound public
amended) which at least partially supplements the law on common policy; that would be to reward private respondent precisely for failing
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of to comply with applicable statutory requirements. The business of a
the Public Service Act, "public service" includes: common carrier impinges directly and intimately upon the safety and
... every person that now or hereafter may own, operate, manage, or well being and property of those members of the general community
control in the Philippines, for hire or compensation, with general or who happen to deal with such carrier. The law imposes duties and
limited clientele, whether permanent, occasional or accidental, and liabilities upon common carriers for the safety and protection of those
done for general business purposes, any common carrier, railroad, who utilize their services and the law cannot allow a common carrier
street railway, traction railway, subway motor vehicle, either for freight to render such duties and liabilities merely facultative by simply failing
or passenger, or both, with or without fixed route and whatever may to obtain the necessary permits and authorizations.
be its classification, freight or carrier service of any class, express We turn then to the liability of private respondent as a common
service, steamboat, or steamship line, pontines, ferries and water carrier.
craft, engaged in the transportation of passengers or freight or both, Common carriers, "by the nature of their business and for reasons of
shipyard, marine repair shop, wharf or dock, ice plant, public policy" 2 are held to a very high degree of care and diligence
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat ("extraordinary diligence") in the carriage of goods as well as of
and power, water supply and power petroleum, sewerage system, passengers. The specific import of extraordinary diligence in the care
wire or wireless communications systems, wire or wireless of goods transported by a common carrier is, according to Article
broadcasting stations and other similar public services. ... (Emphasis 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5,
supplied) 6 and 7" of the Civil Code.
It appears to the Court that private respondent is properly Article 1734 establishes the general rule that common carriers are
characterized as a common carrier even though he merely "back- responsible for the loss, destruction or deterioration of the goods
hauled" goods for other merchants from Manila to Pangasinan, which they carry, "unless the same is due to any of the following
although such back-hauling was done on a periodic or occasional causes only:
rather than regular or scheduled manner, and even though private (1) Flood, storm, earthquake, lightning or other natural disaster or
respondent's principal occupation was not the carriage of goods for calamity;
others. There is no dispute that private respondent charged his (2) Act of the public enemy in war, whether international or civil;
customers a fee for hauling their goods; that fee frequently fell below (3) Act or omission of the shipper or owner of the goods;
commercial freight rates is not relevant here. (4) The character-of the goods or defects in the packing or-in the
The Court of Appeals referred to the fact that private respondent held containers; and
no certificate of public convenience, and concluded he was not a (5) Order or act of competent public authority.
common carrier. This is palpable error. A certificate of public
2
 [TRANSPORTTATION CASES PART I]
It is important to point out that the above list of causes of loss, xxx xxx xxx
destruction or deterioration which exempt the common carrier for (5) that the common carrier shall not be responsible for the acts or
responsibility therefor, is a closed list. Causes falling outside the omissions of his or its employees;
foregoing list, even if they appear to constitute a species of force (6) that the common carrier's liability for acts committed by thieves, or
majeure fall within the scope of Article 1735, which provides as of robbers who do not act with grave or irresistible threat, violence or
follows: force, is dispensed with or diminished; and
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of (7) that the common carrier shall not responsible for the loss,
the preceding article, if the goods are lost, destroyed or deteriorated, destruction or deterioration of goods on account of the defective
common carriers are presumed to have been at fault or to have acted condition of the car vehicle, ship, airplane or other equipment used in
negligently, unless they prove that they observed extraordinary the contract of carriage. (Emphasis supplied)
diligence as required in Article 1733. (Emphasis supplied) Under Article 1745 (6) above, a common carrier is held responsible —
Applying the above-quoted Articles 1734 and 1735, we note firstly that and will not be allowed to divest or to diminish such responsibility —
the specific cause alleged in the instant case — the hijacking of the even for acts of strangers like thieves or robbers, except where such
carrier's truck — does not fall within any of the five (5) categories of thieves or robbers in fact acted "with grave or irresistible threat,
exempting causes listed in Article 1734. It would follow, therefore, that violence or force." We believe and so hold that the limits of the duty of
the hijacking of the carrier's vehicle must be dealt with under the extraordinary diligence in the vigilance over the goods carried are
provisions of Article 1735, in other words, that the private respondent reached where the goods are lost as a result of a robbery which is
as common carrier is presumed to have been at fault or to have acted attended by "grave or irresistible threat, violence or force."
negligently. This presumption, however, may be overthrown by proof In the instant case, armed men held up the second truck owned by
of extraordinary diligence on the part of private respondent. private respondent which carried petitioner's cargo. The record shows
Petitioner insists that private respondent had not observed that an information for robbery in band was filed in the Court of First
extraordinary diligence in the care of petitioner's goods. Petitioner Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled
argues that in the circumstances of this case, private respondent "People of the Philippines v. Felipe Boncorno, Napoleon Presno,
should have hired a security guard presumably to ride with the truck Armando Mesina, Oscar Oria and one John Doe." There, the accused
carrying the 600 cartons of Liberty filled milk. We do not believe, were charged with willfully and unlawfully taking and carrying away
however, that in the instant case, the standard of extraordinary with them the second truck, driven by Manuel Estrada and loaded with
diligence required private respondent to retain a security guard to ride the 600 cartons of Liberty filled milk destined for delivery at petitioner's
with the truck and to engage brigands in a firelight at the risk of his store in Urdaneta, Pangasinan. The decision of the trial court shows
own life and the lives of the driver and his helper. that the accused acted with grave, if not irresistible, threat, violence or
The precise issue that we address here relates to the specific force.3 Three (3) of the five (5) hold-uppers were armed with firearms.
requirements of the duty of extraordinary diligence in the vigilance The robbers not only took away the truck and its cargo but also
over the goods carried in the specific context of hijacking or armed kidnapped the driver and his helper, detaining them for several days
robbery. and later releasing them in another province (in Zambales). The
As noted earlier, the duty of extraordinary diligence in the vigilance hijacked truck was subsequently found by the police in Quezon City.
over goods is, under Article 1733, given additional specification not The Court of First Instance convicted all the accused of robbery,
only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 though not of robbery in band.  4
and 6, Article 1745 provides in relevant part: In these circumstances, we hold that the occurrence of the loss must
Any of the following or similar stipulations shall be considered reasonably be regarded as quite beyond the control of the common
unreasonable, unjust and contrary to public policy: carrier and properly regarded as a fortuitous event. It is necessary to
3
 [TRANSPORTTATION CASES PART I]
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.

4
 [TRANSPORTTATION CASES PART I]
SECOND DIVISION 1990, Petitioner, pursuant to her contract with SMC, withdrew the
cargo from the arrastre operator and delivered it to SMC’s warehouse
[G.R. No. 148496. March 19, 2002.] in Ermita, Manila. On July 25, 1990, the goods were inspected by
Marine Cargo Surveyors, who found that 15 reels of the semi-
VIRGINES CALVO doing business under the name and style chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner
TRANSORIENT CONTAINER TERMINAL SERVICES, board were likewise torn. The damage was placed at P93,112.00.
INC., Petitioner, v. UCPB GENERAL INSURANCE CO., INC.
(formerly Allied Guarantee Ins. Co., Inc.), Respondent. SMC collected payment from respondent UCPB under its insurance
contract for the aforementioned amount. In turn, respondent, as
DECISION 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
MENDOZA, J.: damage to the shipment.

The trial court held:chanrob1es virtual 1aw library

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 It cannot be denied . . . that the subject cargoes sustained damage
Court, Makati City, Branch 148, which ordered petitioner to pay while in the custody of defendants. Evidence such as the Warehouse
respondent, as subrogee, the amount of P93,112.00 with legal Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries
interest, representing the value of damaged cargo handled by appearing therein, classified as "TED" and "TSN", which the claims
petitioner, 25% thereof as attorney’s fees, and the cost of the processor, Ms. Agrifina De Luna, claimed to be tearrage at the end
suit.chanrob1es virtua1 law library and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh. "H" -
The facts are as follows:chanrob1es virtual 1aw library "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
Petitioner Virgines Calvo is the owner of Transorient Container provides among others that:jgc:chanrobles.com.ph
Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker.
At the time material to this case, petitioner entered into a contract with ". . . we opine that damages sustained by shipment is attributable to
San Miguel Corporation (SMC) for the transfer of 114 reels of semi- improper handling in transit presumably whilst in the custody of the
chemical fluting paper and 124 reels of kraft liner board from the Port broker . . . ."cralaw virtua1aw library
Area in Manila to SMC’s warehouse at the Tabacalera Compound,
Romualdez St., Ermita, Manila. The cargo was insured by respondent is a finding which cannot be traversed and overturned.
UCPB General Insurance Co., Inc.
The evidence adduced by the defendants is not enough to sustain
On July 14, 1990, the shipment in question, contained in 30 metal [her] defense that [she is] are not liable. Defendant by reason of the
vans, arrived in Manila on board "M/V Hayakawa Maru" and, after 24 nature of [her] business should have devised ways and means in
hours, were unloaded from the vessel to the custody of the arrastre order to prevent the damage to the cargoes which it is under
operator, Manila Port Services, Inc. From July 23 to July 25, obligation to take custody of and to forthwith deliver to the consignee.
Defendant did not present any evidence on what precaution [she]
5
 [TRANSPORTTATION CASES PART I]
performed to prevent [the] said incident, hence the presumption is that
the moment the defendant accepts the cargo [she] shall perform such The decision was affirmed by the Court of Appeals on appeal. Hence
extraordinary diligence because of the nature of the cargo. this petition for review on certiorari.

.... Petitioner contends that:chanrob1es virtual 1aw library

Generally speaking under Article 1735 of the Civil Code, if the goods I. THE COURT OF APPEALS COMMITTED SERIOUS AND
are proved to have been lost, destroyed or deteriorated, common REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE
carriers are presumed to have been at fault or to have acted EVIDENCE PRESENTED BUT ON PURE SURMISES,
negligently, unless they prove that they have observed the SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been II. THE COURT OF APPEALS COMMITTED SERIOUS AND
lost, destroyed or deteriorated. Thereafter, the burden is shifted to the REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A
carrier to prove that he has exercised the extraordinary diligence COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
required by law. Thus, it has been held that the mere proof of delivery CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC. 5
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 It will be convenient to deal with these contentions in the inverse
carrier, so that if no explanation is given as to how the injury occurred, order, for if petitioner is not a common carrier, although both the trial
the carrier must be held responsible. It is incumbent upon the carrier court and the Court of Appeals held otherwise, then she is indeed not
to prove that the loss was due to accident or some other liable beyond what ordinary diligence in the vigilance over the goods
circumstances inconsistent with its liability." (cited in Commercial transported by her, would require. 6 Consequently, any damage to the
Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.) cargo she agrees to transport cannot be presumed to have been due
to her fault or negligence.
Defendant, being a customs brother, warehouseman and at the same
time a common carrier is supposed [to] exercise [the] extraordinary Petitioner contends that contrary to the findings of the trial court and
diligence required by law, hence the extraordinary responsibility lasts the Court of Appeals, she is not a common carrier but a private carrier
from the time the goods are unconditionally placed in the possession because, as a customs broker and warehouseman, she does not
of and received by the carrier for transportation until the same are indiscriminately hold her services out to the public but only offers the
delivered actually or constructively by the carrier to the consignee or same to select parties with whom she may contract in the conduct of
to the person who has the right to receive the same. 3 her business.

Accordingly, the trial court ordered petitioner to pay the following The contention has no merit. In De Guzman v. Court of Appeals, 7 the
amounts — Court dismissed a similar contention and held the party to be a
common carrier, thus —
1. The sum of P93,112.00 plus interest;
The Civil Code defines "common carriers" in the following
2. 25% thereof as lawyer’s fee; terms:jgc:chanrobles.com.ph

3. Costs of suit. 4 "Article 1732. Common carriers are persons, corporations, firms or
6
 [TRANSPORTTATION CASES PART I]
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation, There is greater reason for holding petitioner to be a common carrier
offering their services to the public."cralaw virtua1aw library because the transportation of goods is an integral part of her
business. To uphold petitioner’s contention would be to deprive those
The above article makes no distinction between one whose principal with whom she contracts the protection which the law affords them
business activity is the carrying of persons or goods or both, and one notwithstanding the fact that the obligation to carry goods for her
who does such carrying only as an ancillary activity. Article 1732 also customers, as already noted, is part and parcel of petitioner’s
carefully avoids making any distinction between a person or business.
enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or Now, as to petitioner’s liability, Art. 1733 of the Civil Code
unscheduled basis. Neither does Article 1732 distinguish between a provides:chanrob1es virtual 1aw library
carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits Common carriers, from the nature of their business and for reasons of
business only from a narrow segment of the general population. We public policy, are bound to observe extraordinary diligence in the
think that Article 1732 deliberately refrained from making such vigilance over the goods and for the safety of the passengers
distinctions. transported by them, according to all the circumstances of each
case. . . .
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service," In Compania Maritima v. Court of Appeals, 9 the meaning of
under the Public Service Act (Commonwealth Act No. 1416, as "extraordinary diligence in the vigilance over goods" was explained
amended) which at least partially supplements the law on common thus:chanrob1es virtual 1aw library
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" The extraordinary diligence in the vigilance over the goods tendered
includes:jgc:chanrobles.com.ph for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
". . . every person that now or hereafter may own, operate, manage, goods entrusted to it for sale, carriage and delivery. It requires
or control in the Philippines, for hire or compensation, with general or common carriers to render service with the greatest skill and foresight
limited clientele, whether permanent, occasional or accidental, and and "to use all reasonable means to ascertain the nature and
done for general business purposes, any common carrier, railroad, characteristic of goods tendered for shipment, and to exercise due
street railway, traction railway, subway motor vehicle, either for freight care in the handling and stowage, including such methods as their
or passenger, or both, with or without fixed route and whatever may nature requires."cralaw virtua1aw library
be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water In the case at bar, petitioner denies liability for the damage to the
craft, engaged in the transportation of passengers or freight or both, cargo. She claims that the "spoilage or wettage" took place while the
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration goods were in the custody of either the carrying vessel "M/V
plant, canal, irrigation system, gas, electric light, heat and power, Hayakawa Maru," which transported the cargo to Manila, or the
water supply and power petroleum, sewerage system, wire or wireless arrastre operator, to whom the goods were unloaded and who
communications systems, wire or wireless broadcasting stations and allegedly kept them in open air for nine days from July 14 to July 23,
other similar public services. . ." 8 1998 notwithstanding the fact that some of the containers were
7
 [TRANSPORTTATION CASES PART I]
deformed, cracked, or otherwise damaged, as noted in the Marine
Survey Report (Exh. H), to wit:chanrob1es virtual 1aw library Details of Discharge:chanrob1es virtual 1aw library

MAXU-2062880 - rain gutter deformed/cracked Shipment, provided with our protective supervision was noted
discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14
ICSU-363461-3 - left side rubber gasket on door distorted/partly July 1990, containerized onto 30’ x 20’ secure metal vans, covered by
clean EIRs. Except for slight dents and paint scratches on side and
loose roof panels, these containers were deemed to have [been] received in
good condition.
PERU-204209-4 - with pinholes on roof panel right portion
....
TOLU-213674-3 - wood flooring we[t] and/or with signs of water
Transfer/Delivery:chanrob1es virtual 1aw library
soaked
On July 23, 1990, shipment housed onto 30’ x 20’ cargo containers
MAXU-201406-0 - with dent/crack on roof panel was [withdrawn] by Transorient Container Services, Inc.... without
exception.
ICSU-412105-0 - rubber gasket on left side/door panel partly
[The cargo] was finally delivered to the consignee’s storage
detached loosened. 10 warehouse located at Tabacalera Compound, Romualdez Street,
Ermita, Manila from July 23/25, 1990. 12
In addition, petitioner claims that Marine Cargo Surveyor Ernesto
Tolentino testified that he has no personal knowledge on whether the As found by the Court of Appeals:chanrob1es virtual 1aw library
container vans were first stored in petitioner’s warehouse prior to their
delivery to the consignee. She likewise claims that after withdrawing From the [Survey Report], it [is] clear that the shipment was
the container vans from the arrastre operator, her driver, Ricardo discharged from the vessel to the arrastre, Marina Port Services Inc.,
Nazarro, immediately delivered the cargo to SMC’s warehouse in in good order and condition as evidenced by clean Equipment
Ermita, Manila, which is a mere thirty-minute drive from the Port Area Interchange Reports (EIRs). Had there been any damage to the
where the cargo came from. Thus, the damage to the cargo could not shipment, there would have been a report to that effect made by the
have taken place while these were in her custody. 11 arrastre operator. The cargoes were withdrawn by the defendant-
appellant from the arrastre still in good order and condition as the
Contrary to petitioner’s assertion, the Survey Report (Exh. H) of the same were received by the former without exception, that is, without
Marine Cargo Surveyors indicates that when the shipper transferred any report of damage or loss. Surely, if the container vans were
the cargo in question to the arrastre operator, these were covered by deformed, cracked, distorted or dented, the defendant-appellant
clean Equipment Interchange Report (EIR) and, when petitioner’s would report it immediately to the consignee or make an exception on
employees withdrew the cargo from the arrastre operator, they did so the delivery receipt or note the same in the Warehouse Entry Slip
without exception or protest either with regard to the condition of (WES). None of these took place. To put it simply, the defendant-
container vans or their contents. The Survey Report pertinently reads appellant received the shipment in good order and condition and
— delivered the same to the consignee damaged. We can only conclude
8
 [TRANSPORTTATION CASES PART I]
that the damages to the cargo occurred while it was in the possession container vans. Hence, for failure of petitioner to prove that she
of the defendant-appellant. Whenever the thing is lost (or damaged) in exercised extraordinary diligence in the carriage of goods in this case
the possession of the debtor (or obligor), it shall be presumed that the or that she is exempt from liability, the presumption of negligence as
loss (or damage) was due to his fault, unless there is proof to the provided under Art. 1735 15 holds.
contrary. No proof was proffered to rebut this legal presumption and
the presumption of negligence attached to a common carrier in case WHEREFORE, the decision of the Court of Appeals, dated May 31,
of loss or damage to the goods. 13 2001, is AFFIRMED.chanrob1es virtua1 1aw 1ibrary

Anent petitioner’s insistence that the cargo could not have been SO ORDERED.
damaged while in her custody as she immediately delivered the
containers to SMC’s compound, suffice it to say that to prove the Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ., concur.
exercise of extraordinary diligence, petitioner must do more than Endnotes:
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 1. Per Justice Presbitero J. Velasco, Jr., and concurred in by Justices
[transport] and that [it] exercise[d] due care in the handling [thereof]." Bienvenido L. Reyes and Juan Q. Enriquez, Jr.
Petitioner failed to do this.
2. Per Judge Oscar Pimentel.
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides — 3. RTC Decision, pp. 3-5; Rollo, pp. 31-33.

Common carriers are responsible for the loss, destruction, or 4. Id., p. 6; id., p. 34.
deterioration of the goods, unless the same is due to any of the
following causes only:chanrob1es virtual 1aw library 5. Petition, p. 5, Rollo, p. 13.

.... 6. Planters Products, Inc. v. Court of Appeals, 226 SCRA 476 (1993).

(4) The character of the goods or defects in the packing or in the ..7. 68 SCRA 612 (1988).
containers.
8. Id., pp. 617-618 (italics in the original).
....
9. 164 SCRA 685, 692 (1988).
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 10. CA Decision, p. 5; Rollo, p. 25.
his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception 11. Petition, pp. 6-9; Rollo, pp. 14-17.
notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom. 14 In this case, petitioner accepted the 12. CA Decision, p. 6; Rollo, p. 26 (emphasis in the original).
cargo without exception despite the apparent defects in some of the
9
 [TRANSPORTTATION CASES PART I]
13. Id., pp. 6-7; id., pp. 26-27 (emphasis in the original).

14. See 5-A AMBROSIO PADILLA, CIVIL CODE ANNOTATED 472

(6th ed., 1990) citing Southern Lines, Inc. v. Court of Appeals and City
of Iloilo, 114 Phil. 198 (1962).

15. Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3,
4 and 5 of [Art. 1734], 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.

10
 [TRANSPORTTATION CASES PART I]
G.R. No. 147246            August 19, 2003 The barge was then towed to ISLOFF terminal before it finally headed
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, towards the consignee's wharf on September 5, 1990. Upon reaching
vs. the Sta. Mesa spillways, the barge again ran aground due to strong
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND current. To avoid the complete sinking of the barge, a portion of the
ASSURANCE, INC., respondents. goods was transferred to three other barges.10
PUNO, J.: The next day, September 6, 1990, the towing bits of the barge broke.
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. It sank completely, resulting in the total loss of the remaining
CV No. 49195 and February 21, 2001 Resolution2 affirming with cargo.11 A second Marine Protest was filed on September 7, 1990.12
modification the April 6, 1994 Decision3 of the Regional Trial Court of On September 14, 1990, a bidding was conducted to dispose of the
Manila which found petitioner liable to pay private respondent the damaged wheat retrieved and loaded on the three other barges.13 The
amount of indemnity and attorney's fees. total proceeds from the sale of the salvaged cargo was P201,379.75.14
First, the facts. On the same date, September 14, 1990, consignee sent a claim letter
On June 13, 1990, 3,150 metric tons of Better Western White Wheat to the petitioner, and another letter dated September 18, 1990 to the
in bulk, valued at US$423,192.354 was shipped by Marubeni private respondent for the value of the lost cargo.
American Corporation of Portland, Oregon on board the vessel M/V On January 30, 1991, the private respondent indemnified the
NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling consignee in the amount of P4,104,654.22.15 Thereafter, as subrogee,
Corporation in Manila, evidenced by Bill of Lading No. PTD/Man- it sought recovery of said amount from the petitioner, but to no avail.
4.5 The shipment was insured by the private respondent Prudential On July 3, 1991, the private respondent filed a complaint against the
Guarantee and Assurance, Inc. against loss or damage petitioner for recovery of the amount of indemnity, attorney's fees and
for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.6 cost of suit.16 Petitioner filed its answer with counterclaim.17
On July 25, 1990, the carrying vessel arrived in Manila and the cargo The Regional Trial Court ruled in favor of the private respondent. The
was transferred to the custody of the petitioner Asia Lighterage and dispositive portion of its Decision states:
Shipping, Inc. The petitioner was contracted by the consignee as WHEREFORE, premises considered, judgment is hereby rendered
carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, ordering defendant Asia Lighterage & Shipping, Inc. liable to pay
Pasig City. plaintiff Prudential Guarantee & Assurance Co., Inc. the sum
On August 15, 1990, 900 metric tons of the shipment was loaded on of P4,104,654.22 with interest from the date complaint was filed on
barge PSTSI III, evidenced by Lighterage Receipt No. 03647 for July 3, 1991 until fully satisfied plus 10% of the amount awarded as
delivery to consignee. The cargo did not reach its destination. and for attorney's fees. Defendant's counterclaim is hereby
It appears that on August 17, 1990, the transport of said cargo was DISMISSED. With costs against defendant.18
suspended due to a warning of an incoming typhoon. On August 22, Petitioner appealed to the Court of Appeals insisting that it is not a
1990, the petitioner proceeded to pull the barge to Engineering Island common carrier. The appellate court affirmed the decision of the trial
off Baseco to seek shelter from the approaching typhoon. PSTSI III court with modification. The dispositive portion of its decision reads:
was tied down to other barges which arrived ahead of it while WHEREFORE, the decision appealed from is hereby AFFIRMED with
weathering out the storm that night. A few days after, the barge modification in the sense that the salvage value of P201,379.75 shall
developed a list because of a hole it sustained after hitting an unseen be deducted from the amount of P4,104,654.22. Costs against
protuberance underneath the water. The petitioner filed a Marine appellant.
Protest on August 28, 1990.8 It likewise secured the services of SO ORDERED.
Gaspar Salvaging Corporation which refloated the barge.9 The hole
was then patched with clay and cement.
11
 [TRANSPORTTATION CASES PART I]
Petitioner's Motion for Reconsideration dated June 3, 2000 was We disagree.
likewise denied by the appellate court in a Resolution promulgated on In De Guzman vs. Court of Appeals,21 we held that the definition
February 21, 2001. of common carriers in Article 1732 of the Civil Code makes no
Hence, this petition. Petitioner submits the following errors allegedly distinction between one whose principal business activity is the
committed by the appellate court, viz:19 carrying of persons or goods or both, and one who does such carrying
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A only as an ancillary activity. We also did not distinguish between a
WAY NOT IN ACCORD WITH LAW AND/OR WITH THE person or enterprise offering transportation service on a regular or
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT scheduled basis and one offering such service on an occasional,
HELD THAT PETITIONER IS A COMMON CARRIER. episodic or unscheduled basis. Further, we ruled that Article 1732
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A does not distinguish between a carrier offering its services to
WAY NOT IN ACCORD WITH LAW AND/OR WITH THE the general public, and one who offers services or solicits business
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT only from a narrow segment of the general population.
AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT In the case at bar, the principal business of the petitioner is that of
ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE lighterage and drayage22 and it offers its barges to the public for
APPLICABLE TO COMMON CARRIERS, "THE LOSS OF THE carrying or transporting goods by water for compensation. Petitioner is
CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL clearly a common carrier. In De Guzman, supra,23 we considered
CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED." private respondent Ernesto Cendaña to be a common carrier even if
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A his principal occupation was not the carriage of goods for others, but
WAY NOT IN ACCORD WITH LAW AND/OR WITH THE that of buying used bottles and scrap metal in Pangasinan and selling
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT these items in Manila.
EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO We therefore hold that petitioner is a common carrier whether its
EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS carrying of goods is done on an irregular rather than scheduled
CARE AND CUSTODY OF THE CONSIGNEE'S CARGO. manner, and with an only limited clientele. A common carrier need not
The issues to be resolved are: have fixed and publicly known routes. Neither does it have to maintain
(1) Whether the petitioner is a common carrier; and, terminals or issue tickets.
(2) Assuming the petitioner is a common carrier, whether it exercised To be sure, petitioner fits the test of a common carrier as laid down
extraordinary diligence in its care and custody of the consignee's in Bascos vs. Court of Appeals.24 The test to determine a common
cargo. carrier is "whether the given undertaking is a part of the business
On the first issue, we rule that petitioner is a common carrier. engaged in by the carrier which he has held out to the general public
Article 1732 of the Civil Code defines common carriers as persons, as his occupation rather than the quantity or extent of the business
corporations, firms or associations engaged in the business of transacted."25 In the case at bar, the petitioner admitted that it is
carrying or transporting passengers or goods or both, by land, water, engaged in the business of shipping and lighterage,26 offering its
or air, for compensation, offering their services to the public. barges to the public, despite its limited clientele for carrying or
Petitioner contends that it is not a common carrier but a private transporting goods by water for compensation.27
carrier. Allegedly, it has no fixed and publicly known route, maintains On the second issue, we uphold the findings of the lower courts that
no terminals, and issues no tickets. It points out that it is not obliged to petitioner failed to exercise extraordinary diligence in its care and
carry indiscriminately for any person. It is not bound to carry goods custody of the consignee's goods.
unless it consents. In short, it does not hold out its services to the Common carriers are bound to observe extraordinary diligence in the
general public.20 vigilance over the goods transported by them.28 They are presumed to
12
 [TRANSPORTTATION CASES PART I]
have been at fault or to have acted negligently if the goods are lost, and bring it to the anchor terminal for safety, then after deciding if the
destroyed or deteriorated.29 To overcome the presumption of vessel is stabilized, they tried to pull it to the consignee's warehouse,
negligence in the case of loss, destruction or deterioration of the now while on route another accident occurred, now this time the barge
goods, the common carrier must prove that it exercised extraordinary totally hitting something in the course.
diligence. There are, however, exceptions to this rule. Article 1734 of q     -     You said there was another accident, can you tell the court
the Civil Code enumerates the instances when the presumption of the nature of the second accident?
negligence does not attach: a     -     The sinking, sir.
Art. 1734. Common carriers are responsible for the loss, destruction, q     -     Can you tell the nature . . . can you tell the court, if you know
or deterioration of the goods, unless the same is due to any of the what caused the sinking?
following causes only: a     -     Mostly it was related to the first accident because there was
(1) Flood, storm, earthquake, lightning, or other natural disaster or already a whole (sic) on the bottom part of the barge.
calamity; x x x           x x x           x x x
(2) Act of the public enemy in war, whether international or civil; This is not all. Petitioner still headed to the consignee's wharf despite
(3) Act or omission of the shipper or owner of the goods; knowledge of an incoming typhoon. During the time that the barge
(4) The character of the goods or defects in the packing or in the was heading towards the consignee's wharf on September 5, 1990,
containers; typhoon "Loleng" has already entered the Philippine area of
(5) Order or act of competent public authority. responsibility.32 A part of the testimony of Robert Boyd, Cargo
In the case at bar, the barge completely sank after its towing bits Operations Supervisor of the petitioner, reveals:
broke, resulting in the total loss of its cargo. Petitioner claims that this DIRECT-EXAMINATION BY ATTY. LEE:33
was caused by a typhoon, hence, it should not be held liable for the x x x           x x x           x x x
loss of the cargo. However, petitioner failed to prove that the typhoon q     -     Now, Mr. Witness, did it not occur to you it might be safer to
is the proximate and only cause of the loss of the goods, and that it just allow the Barge to lie where she was instead of towing it?
has exercised due diligence before, during and after the occurrence of a     -     Since that time that the Barge was refloated, GMC (General
the typhoon to prevent or minimize the loss.30 The evidence show that, Milling Corporation, the consignee) as I have said was in a hurry for
even before the towing bits of the barge broke, it had already their goods to be delivered at their Wharf since they needed badly the
previously sustained damage when it hit a sunken object while docked wheat that was loaded in PSTSI-3. It was needed badly by the
at the Engineering Island. It even suffered a hole. Clearly, this could consignee.
not be solely attributed to the typhoon. The partly-submerged vessel q     -     And this is the reason why you towed the Barge as you did?
was refloated but its hole was patched with only clay and cement. The a     -     Yes, sir.
patch work was merely a provisional remedy, not enough for the x x x           x x x           x x x
barge to sail safely. Thus, when petitioner persisted to proceed with CROSS-EXAMINATION BY ATTY. IGNACIO:34
the voyage, it recklessly exposed the cargo to further damage. A x x x           x x x           x x x
portion of the cross-examination of Alfredo Cunanan, cargo-surveyor q     -     And then from ISLOFF Terminal you proceeded to the
of Tan-Gatue Adjustment Co., Inc., states: premises of the GMC? Am I correct?
CROSS-EXAMINATION BY ATTY. DONN LEE:31 a     -     The next day, in the morning, we hired for additional two (2)
x x x           x x x           x x x tugboats as I have stated.
q     -     Can you tell us what else transpired after that incident? q     -     Despite of the threats of an incoming typhoon as you testified
a     -     After the first accident, through the initiative of the barge a while ago?
owners, they tried to pull out the barge from the place of the accident,
13
 [TRANSPORTTATION CASES PART I]
4
a     -     It is already in an inner portion of Pasig River. The typhoon  Exhibit "B," Records, p. 91.
5
would be coming and it would be dangerous if we are in the vicinity of  Exhibit "A," id., p. 90.
6
Manila Bay.  Exhibits "I" and "I-1," id., pp. 107-108.
7
q     -     But the fact is, the typhoon was incoming? Yes or no?  Exhibit "C," id., p. 92.
8
a     -     Yes.  Exhibit "4," id., p. 144.
9
q     -     And yet as a standard operating procedure of your Company,  Exhibits "G-1" and "1-A," id., p. 100.
10
you have to secure a sort of Certification to determine the weather  Exhibits "G-2" and "1-B," id., p. 101.
11
condition, am I correct?  Ibid.
12
a     -     Yes, sir.  Exhibit "5," Records, p. 145.
13
q     -     So, more or less, you had the knowledge of the incoming  Supra note 10.
14
typhoon, right?  Exhibits "G-3" and "1-C," Records, p. 102.
15
a     -     Yes, sir.  Exhibit "L," id., p. 110.
16
q     -     And yet you proceeded to the premises of the GMC?  Id., pp. 1-4.
17
a     -     ISLOFF Terminal is far from Manila Bay and anytime even  Id., pp. 21-22.
18
with the typhoon if you are already inside the vicinity or inside Pasig  Id., p. 172.
19
entrance, it is a safe place to tow upstream.  Rollo, p. 22.
20
Accordingly, the petitioner cannot invoke the occurrence of the  Id., pp. 147-150.
21
typhoon as force majeure to escape liability for the loss sustained by  G.R. No. L-47822, 22 December 1988.
22
the private respondent. Surely, meeting a typhoon head-on falls short  Rollo, p. 127.
23
of due diligence required from a common carrier. More importantly,  See note 21.
24
the officers/employees themselves of petitioner admitted that when  G.R. No. 101089, 07 April 1993, 221 SCRA 318.
25
the towing bits of the vessel broke that caused its sinking and the total  Id., pp. 323-324.
26
loss of the cargo upon reaching the Pasig River, it was no longer  Rollo, p. 14.
27
affected by the typhoon. The typhoon then is not the proximate cause  Id., pp. 148-150.
28
of the loss of the cargo; a human factor, i.e., negligence had  Article 1733, Civil Code. Common carriers, from the nature of their
intervened. business and for reasons of public policy, are bound to observe
IN VIEW THEREOF, the petition is DENIED. The Decision of the extraordinary diligence in the vigilance over the goods and for the
Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and safety of the passengers transported by them, according to all the
its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs circumstances of each case.
against petitioner. Such extraordinary diligence in vigilance over the goods is further
SO ORDERED. expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while
Panganiban, and Sandoval-Gutierrez, JJ., concur. the extraordinary diligence for the safety of the passengers is further
Corona, and Carpio-Morales, JJ., on official leave. set forth in articles 1755 and 1756.
29
 Article 1735, Civil Code. In all cases other than those mentioned in
Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost,
Footnotes destroyed or deteriorated, common carriers are presumed to have
1
 Rollo, pp. 49-59. been at fault or to have acted negligently, unless they prove that they
2
 Id., p. 61. observed extraordinary diligence as required in article 1733.
3
 Id., pp. 71-73.
14
 [TRANSPORTTATION CASES PART I]
30
 Article 1739, Civil Code. In order that the common carrier may be
exempted from responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the common carrier
must exercise due diligence to prevent or minimize the loss before,
during and after the occurrence of flood, storm or other natural
disaster in order that the common carrier may be exempted from
liability for the loss, destruction, or deterioration of the goods. The
same duty is incumbent upon the common carrier in case of an act of
the public enemy referred to in article 1734, no. 2.
31
 TSN, 04 March 1993, pp. 12-13.
32
 Certification dated 02 August 1991 issued by the Philippine
Atmospheric Geophysical & Astronomical Services Administration
(PAGASA), Exhibit "7," Records, p. 147.
33
 TSN, 09 March 1993, pp. 70-71.
34
 Id., pp. 76-77.

15
 [TRANSPORTTATION CASES PART I]
G.R. No. 125948 December 29, 1998 paying tax on gross receipts under Section 133 of the Local
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, Government Code of 1991 . . . .
vs. Moreover, Transportation contractors are not included in the
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, enumeration of contractors under Section 131, Paragraph (h) of
BATANGAS CITY and ADORACION C. ARELLANO, in her official the Local Government Code. Therefore, the authority to impose
capacity as City Treasurer of Batangas, respondents. tax "on contractors and other independent contractors" under
Section 143, Paragraph (e) of the Local Government Code does
MARTINEZ, J.: not include the power to levy on transportation contractors.
This petition for review on certiorari assails the Decision of the The imposition and assessment cannot be categorized as a mere
Court of Appeals dated November 29, 1995, in CA-G.R. SP No. fee authorized under Section 147 of the Local Government Code.
36801, affirming the decision of the Regional Trial Court of The said section limits the imposition of fees and charges on
Batangas City, Branch 84, in Civil Case No. 4293, which business to such amounts as may be commensurate to the cost
dismissed petitioners' complaint for a business tax refund of regulation, inspection, and licensing. Hence, assuming
imposed by the City of Batangas. arguendo that FPIC is liable for the license fee, the imposition
Petitioner is a grantee of a pipeline concession under Republic thereof based on gross receipts is violative of the aforecited
Act No. 387, as amended, to contract, install and operate oil provision. The amount of P956,076.04 (P239,019.01 per quarter)
pipelines. The original pipeline concession was granted in is not commensurate to the cost of regulation, inspection and
19671 and renewed by the Energy Regulatory Board in 1992. 2 licensing. The fee is already a revenue raising measure, and not
Sometime in January 1995, petitioner applied for a mayor's a mere regulatory imposition.4
permit with the Office of the Mayor of Batangas City. However, On March 8, 1994, the respondent City Treasurer denied the
before the mayor's permit could be issued, the respondent City protest contending that petitioner cannot be considered engaged
Treasurer required petitioner to pay a local tax based on its in transportation business, thus it cannot claim exemption under
gross receipts for the fiscal year 1993 pursuant to the Local Section 133 (j) of the Local Government Code.5
Government Code3. The respondent City Treasurer assessed a On June 15, 1994, petitioner filed with the Regional Trial Court of
business tax on the petitioner amounting to P956,076.04 payable Batangas City a complaint6 for tax refund with prayer for writ of
in four installments based on the gross receipts for products preliminary injunction against respondents City of Batangas and
pumped at GPS-1 for the fiscal year 1993 which amounted to Adoracion Arellano in her capacity as City Treasurer. In its
P181,681,151.00. In order not to hamper its operations, petitioner complaint, petitioner alleged, inter alia, that: (1) the imposition
paid the tax under protest in the amount of P239,019.01 for the and collection of the business tax on its gross receipts violates
first quarter of 1993. Section 133 of the Local Government Code; (2) the authority of
On January 20, 1994, petitioner filed a letter-protest addressed to cities to impose and collect a tax on the gross receipts of
the respondent City Treasurer, the pertinent portion of which "contractors and independent contractors" under Sec. 141 (e)
reads: and 151 does not include the authority to collect such taxes on
Please note that our Company (FPIC) is a pipeline operator with a transportation contractors for, as defined under Sec. 131 (h), the
government concession granted under the Petroleum Act. It is term "contractors" excludes transportation contractors; and, (3)
engaged in the business of transporting petroleum products the City Treasurer illegally and erroneously imposed and
from the Batangas refineries, via pipeline, to Sucat and JTF collected the said tax, thus meriting the immediate refund of the
Pandacan Terminals. As such, our Company is exempt from tax paid.7

16
 [TRANSPORTTATION CASES PART I]
Traversing the complaint, the respondents argued that petitioner concomitant obligation to accept certain devolution of powers, . .
cannot be exempt from taxes under Section 133 (j) of the Local . So, consistent with this policy even franchise grantees are
Government Code as said exemption applies only to taxed (Sec. 137) and contractors are also taxed under Sec. 143
"transportation contractors and persons engaged in the (e) and 151 of the Code.9
transportation by hire and common carriers by air, land and Petitioner assailed the aforesaid decision before this Court via a
water." Respondents assert that pipelines are not included in the petition for review. On February 27, 1995, we referred the case to
term "common carrier" which refers solely to ordinary carriers the respondent Court of Appeals for consideration and
such as trucks, trains, ships and the like. Respondents further adjudication. 10 On November 29, 1995, the respondent court
posit that the term "common carrier" under the said code rendered a decision 11 affirming the trial court's dismissal of
pertains to the mode or manner by which a product is delivered petitioner's complaint. Petitioner's motion for reconsideration
to its destination.8 was denied on July 18, 1996. 12
On October 3, 1994, the trial court rendered a decision Hence, this petition. At first, the petition was denied due course
dismissing the complaint, ruling in this wise: in a Resolution dated November 11, 1996. 13 Petitioner moved for
. . . Plaintiff is either a contractor or other independent a reconsideration which was granted by this Court in a
contractor. Resolution 14 of January 22, 1997. Thus, the petition was
. . . the exemption to tax claimed by the plaintiff has become reinstated.
unclear. It is a rule that tax exemptions are to be strictly Petitioner claims that the respondent Court of Appeals erred in
construed against the taxpayer, taxes being the lifeblood of the holding that (1) the petitioner is not a common carrier or a
government. Exemption may therefore be granted only by clear transportation contractor, and (2) the exemption sought for by
and unequivocal provisions of law. petitioner is not clear under the law.
Plaintiff claims that it is a grantee of a pipeline concession under There is merit in the petition.
Republic Act 387. (Exhibit A) whose concession was lately A "common carrier" may be defined, broadly, as one who holds
renewed by the Energy Regulatory Board (Exhibit B). Yet neither himself out to the public as engaged in the business of
said law nor the deed of concession grant any tax exemption transporting persons or property from place to place, for
upon the plaintiff. compensation, offering his services to the public generally.
Even the Local Government Code imposes a tax on franchise Art. 1732 of the Civil Code defines a "common carrier" as "any
holders under Sec. 137 of the Local Tax Code. Such being the person, corporation, firm or association engaged in the business
situation obtained in this case (exemption being unclear and of carrying or transporting passengers or goods or both, by land,
equivocal) resort to distinctions or other considerations may be water, or air, for compensation, offering their services to the
of help: public."
1. That the exemption granted under Sec. 133 (j) encompasses The test for determining whether a party is a common carrier of
only common carriers so as not to overburden the riding public goods is:
or commuters with taxes. Plaintiff is not a common carrier, but a 1. He must be engaged in the business of carrying goods for
special carrier extending its services and facilities to a single others as a public employment, and must hold himself out as
specific or "special customer" under a "special contract." ready to engage in the transportation of goods for person
2. The Local Tax Code of 1992 was basically enacted to give generally as a business and not as a casual occupation;
more and effective local autonomy to local governments than the 2. He must undertake to carry goods of the kind to which his
previous enactments, to make them economically and financially business is confined;
viable to serve the people and discharge their functions with a
17
 [TRANSPORTTATION CASES PART I]
3. He must undertake to carry by the method by which his service of any class, express service, steamboat, or steamship
business is conducted and over his established roads; and line, pontines, ferries and water craft, engaged in the
4. The transportation must be for hire. 15 transportation of passengers or freight or both, shipyard, marine
Based on the above definitions and requirements, there is no repair shop, wharf or dock, ice plant, ice-refrigeration plant,
doubt that petitioner is a common carrier. It is engaged in the canal, irrigation system gas, electric light heat and power, water
business of transporting or carrying goods, i.e. petroleum supply and power petroleum, sewerage system, wire or wireless
products, for hire as a public employment. It undertakes to carry communications systems, wire or wireless broadcasting stations
for all persons indifferently, that is, to all persons who choose to and other similar public services. (Emphasis Supplied)
employ its services, and transports the goods by land and for Also, respondent's argument that the term "common carrier" as
compensation. The fact that petitioner has a limited clientele used in Section 133 (j) of the Local Government Code refers only
does not exclude it from the definition of a common carrier. In De to common carriers transporting goods and passengers through
Guzman vs. Court of Appeals  16 we ruled that: moving vehicles or vessels either by land, sea or water, is
The above article (Art. 1732, Civil Code) makes no distinction erroneous.
between one whose principal business activity is the carrying of As correctly pointed out by petitioner, the definition of "common
persons or goods or both, and one who does such carrying only carriers" in the Civil Code makes no distinction as to the means
as an ancillary activity (in local idiom, as a "sideline"). Article of transporting, as long as it is by land, water or air. It does not
1732 . . . avoids making any distinction between a person or provide that the transportation of the passengers or goods
enterprise offering transportation service on should be by motor vehicle. In fact, in the United States, oil pipe
a regular or scheduled basis and one offering such service on line operators are considered common carriers. 17
an occasional, episodic or unscheduled basis. Neither does Under the Petroleum Act of the Philippines (Republic Act 387),
Article 1732 distinguish between a carrier offering its services to petitioner is considered a "common carrier." Thus, Article 86
the "general public," i.e., the general community or population, thereof provides that:
and one who offers services or solicits business only from a Art. 86. Pipe line concessionaire as common carrier. — A pipe
narrow segment of the general population. We think that Article line shall have the preferential right to utilize installations for the
1877 deliberately refrained from making such distinctions. transportation of petroleum owned by him, but is obligated to
So understood, the concept of "common carrier" under Article utilize the remaining transportation capacity pro rata for the
1732 may be seen to coincide neatly with the notion of "public transportation of such other petroleum as may be offered by
service," under the Public Service Act (Commonwealth Act No. others for transport, and to charge without discrimination such
1416, as amended) which at least partially supplements the law rates as may have been approved by the Secretary of Agriculture
on common carriers set forth in the Civil Code. Under Section 13, and Natural Resources.
paragraph (b) of the Public Service Act, "public service" Republic Act 387 also regards petroleum operation as a public
includes: utility. Pertinent portion of Article 7 thereof provides:
every person that now or hereafter may own, operate. manage, or that everything relating to the exploration for and exploitation of
control in the Philippines, for hire or compensation, with general petroleum . . . and everything relating to the manufacture,
or limited clientele, whether permanent, occasional or accidental, refining, storage, or transportation by special methods of
and done for general business purposes, any common carrier, petroleum, is hereby declared to be a public utility. (Emphasis
railroad, street railway, traction railway, subway motor vehicle, Supplied)
either for freight or passenger, or both, with or without fixed The Bureau of Internal Revenue likewise considers the petitioner
route and whatever may be its classification, freight or carrier a "common carrier." In BIR Ruling No. 069-83, it declared:
18
 [TRANSPORTTATION CASES PART I]
. . . since [petitioner] is a pipeline concessionaire that is engaged transportation contractors who are enjoying a franchise would
only in transporting petroleum products, it is considered a be subject to tax by the province. That is the exception, Mr.
common carrier under Republic Act No. 387 . . . . Such being the Speaker.
case, it is not subject to withholding tax prescribed by Revenue What we want to guard against here, Mr. Speaker, is the
Regulations No. 13-78, as amended. imposition of taxes by local government units on the carrier
From the foregoing disquisition, there is no doubt that petitioner business. Local government units may impose taxes on top of
is a "common carrier" and, therefore, exempt from the business what is already being imposed by the National Internal Revenue
tax as provided for in Section 133 (j), of the Local Government Code which is the so-called "common carriers tax." We do not
Code, to wit: want a duplication of this tax, so we just provided for an
Sec. 133. Common Limitations on the Taxing Powers of Local exception under Section 125 [now Sec. 137] that a province may
Government Units. — Unless otherwise provided herein, the impose this tax at a specific rate.
exercise of the taxing powers of provinces, cities, municipalities, MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . .
and barangays shall not extend to the levy of the following: . 18
x x x           x x x          x x x It is clear that the legislative intent in excluding from the taxing
(j) Taxes on the gross receipts of transportation contractors and power of the local government unit the imposition of business
persons engaged in the transportation of passengers or freight tax against common carriers is to prevent a duplication of the so-
by hire and common carriers by air, land or water, except as called "common carrier's tax."
provided in this Code. Petitioner is already paying three (3%) percent common carrier's
The deliberations conducted in the House of Representatives on tax on its gross sales/earnings under the National Internal
the Local Government Code of 1991 are illuminating: Revenue Code. 19 To tax petitioner again on its gross receipts in
MR. AQUINO (A). Thank you, Mr. Speaker. its transportation of petroleum business would defeat the
Mr. Speaker, we would like to proceed to page 95, line purpose of the Local Government Code.
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on WHEREFORE, the petition is hereby GRANTED. The decision of
the Taxing Powers of Local Government Units." . . . the respondent Court of Appeals dated November 29, 1995 in CA-
MR. AQUINO (A.). Thank you Mr. Speaker. G.R. SP No. 36801 is REVERSED and SET ASIDE.
Still on page 95, subparagraph 5, on taxes on the business of SO ORDERED.
transportation. This appears to be one of those being deemed to Bellosillo, Puno and Mendoza, JJ., concur.
be exempted from the taxing powers of the local government Footnotes
units. May we know the reason why the transportation business 1 Rollo, pp. 90-94.
is being excluded from the taxing powers of the local 2 Decision of the Energy Regulatory Board in ERB Case No. 92-
government units? 94, renewing the Pipeline Concession of petitioner First
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Philippine Industrial Corporation, formerly known as Meralco
Section 121 (now Sec. 131), line 16, paragraph 5. It states that Securities Industrial Corporation. (Rollo, pp. 95-100).
local government units may not impose taxes on the business of 3 Sec. 143. Tax on Business. The municipality may impose taxes
transportation, except as otherwise provided in this code. on the following business:
Now, Mr. Speaker, if the Gentleman would care to go to page 98 xxx xxx xxx
of Book II, one can see there that provinces have the power to (e) On contractors and other independent contractors, in
impose a tax on business enjoying a franchise at the rate of not accordance with the following schedule:
more than one-half of 1 percent of the gross annual receipts. So, With gross receipts for the preceding Amount of Tax Per Annum
19
 [TRANSPORTTATION CASES PART I]
calendar year in the amount of 133 (j) of the Local Government Code must be given its simple
...... and ordinary or generally accepted meaning which definitely not
P2, 000,000.00 or more at a rate not exceeding fifty include operators of pipelines."
percent (50%) of one percent (1%) 14 G.R. No. 125948 (First Philippine Industrial Corporation vs.
4 Letter Protest dated January 20, 1994, Rollo, pp. 110-111. Court of Appeals, et. al.) — Considering the grounds of the
5 Letter of respondent City Treasurer, Rollo, p. 112. motion for reconsideration, dated December 23, 1996, filed by
6 Complaint, Annex "C", Rollo, pp. 51-56. counsel for petitioner, of the resolution of November 11, 1996
7 Rollo, pp. 51-57. which denied the petition for review on certiorari, the Court
8 Answer, Annex "J", Rollo, pp. 122-127. Resolved:
9 RTC Decision, Rollo, pp. 58-62. (a) to GRANT the motion for reconsideration and to REINSTATE
10 Rollo, p. 84. the petition; and
11 CA-G.R. SP No. 36801; Penned by Justice Jose C. De la Rama (b) to require respondent to COMMENT on the petition, within ten
and concurred in by Justice Jaime M. Lantin and Justice (10) days from notice.
Eduardo G. Montenegro; Rollo, pp. 33-47. 15 Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.
12 Rollo, p. 49. 16 168 SCRA 617-618 [1988].
13 Resolution dated November 11, 1996 excerpts of which are 17 Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp.
hereunder quoted: Co. v. Railroad Commission, 241 US 228, 64 L ed 239, 40 S Ct
"The petition is unmeritorious 131.
"As correctly ruled by respondent appellate court, petitioner is 18 Journal and Record of the House of Representatives, Fourth
not a common carrier as it is not offering its services to the Regular Session, Volume 2, pp. 87-89, September 6, 1990;
public. Emphasis Ours.
"Art. 1732 of the Civil Code defines Common Carriers as: 19 Annex "D" of Petition, Rollo, pp. 101-109.
persons, corporations, 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.
"We sustain the view that petitioner is a special carrier. Based on
the facts on hand, it appears that petitioner is not offering its
services to the public.
"We agree with the findings of the appellate court that the claim
for exemption from taxation must be strictly construed against
the taxpayer. The present understanding of the concept of
"common carries" does not include carriers of petroleum using
pipelines. It is highly unconventional to say that the business of
transporting petroleum through pipelines involves "common
carrier" business. The Local Government Code intended to give
exemptions from local taxation to common carriers transporting
goods and passengers through moving vehicles or vessels and
not through pipelines. The term common carrier under Section
20
 [TRANSPORTTATION CASES PART I]
G.R. No. 149038            April 9, 2003 the time it undertook to transport the bags of cement was wanting
PHILIPPINE AMERICAN GENERAL INSURANCE because the peculiar method of the shipping company’s carrying
COMPANY, petitioner, goods for others was not generally held out as a business but as a
vs. casual occupation. It then concluded that PKS Shipping, not being a
PKS SHIPPING COMPANY, respondent. common carrier, was not expected to observe the stringent
VITUG, J.: extraordinary diligence required of common carriers in the care of
The petition before the Court seeks a review of the decision of the goods. The appellate court, moreover, found that the loss of the
Court of Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June goods was sufficiently established as having been due to fortuitous
2001, which has affirmed in toto the judgment of the Regional Trial event, negating any liability on the part of PKS Shipping to the
Court (RTC), Branch 65, of Makati, dismissing the complaint for shipper.
damages filed by petitioner insurance corporation against respondent In the instant appeal, Philamgen contends that the appellate court has
shipping company. committed a patent error in ruling that PKS Shipping is not a common
Davao Union Marketing Corporation (DUMC) contracted the services carrier and that it is not liable for the loss of the subject cargo. The
of respondent PKS Shipping Company (PKS Shipping) for the fact that respondent has a limited clientele, petitioner argues, does not
shipment to Tacloban City of seventy-five thousand (75,000) bags of militate against respondent’s being a common carrier and that the
cement worth Three Million Three Hundred Seventy-Five Thousand only way by which such carrier can be held exempt for the loss of the
Pesos (P3,375,000.00). DUMC insured the goods for its full value with cargo would be if the loss were caused by natural disaster or calamity.
petitioner Philippine American General Insurance Company Petitioner avers that typhoon "APIANG" has not entered the Philippine
(Philamgen). The goods were loaded aboard the dumb barge Limar area of responsibility and that, even if it did, respondent would not be
I belonging to PKS Shipping. On the evening of 22 December 1988, exempt from liability because its employees, particularly the
about nine o’clock, while Limar I was being towed by respondent’s tugmaster, have failed to exercise due diligence to prevent or
tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast minimize the loss.
of Dumagasa Point, in Zamboanga del Sur, bringing down with it the PKS Shipping, in its comment, urges that the petition should be
entire cargo of 75,000 bags of cement. denied because what Philamgen seeks is not a review on points or
DUMC filed a formal claim with Philamgen for the full amount of the errors of law but a review of the undisputed factual findings of the
insurance. Philamgen promptly made payment; it then sought RTC and the appellate court. In any event, PKS Shipping points out,
reimbursement from PKS Shipping of the sum paid to DUMC but the the findings and conclusions of both courts find support from the
shipping company refused to pay, prompting Philamgen to file suit evidence and applicable jurisprudence.
against PKS Shipping with the Makati RTC. The determination of possible liability on the part of PKS Shipping
The RTC dismissed the complaint after finding that the total loss of boils down to the question of whether it is a private carrier or a
the cargo could have been caused either by a fortuitous event, in common carrier and, in either case, to the other question of whether
which case the ship owner was not liable, or through the negligence of or not it has observed the proper diligence (ordinary, if a private
the captain and crew of the vessel and that, under Article 587 of the carrier, or extraordinary, if a common carrier) required of it given the
Code of Commerce adopting the "Limited Liability Rule," the ship circumstances.
owner could free itself of liability by abandoning, as it apparently so The findings of fact made by the Court of Appeals, particularly when
did, the vessel with all her equipment and earned freightage. such findings are consistent with those of the trial court, may not at
Philamgen interposed an appeal to the Court of Appeals which liberty be reviewed by this Court in a petition for review under Rule 45
affirmed in toto the decision of the trial court. The appellate court ruled of the Rules of Court.1 The conclusions derived from those factual
that evidence to establish that PKS Shipping was a common carrier at findings, however, are not necessarily just matters of fact as when
21
 [TRANSPORTTATION CASES PART I]
they are so linked to, or inextricably intertwined with, a requisite basis. Neither does Article 1732 distinguish between a carrier offering
appreciation of the applicable law. In such instances, the conclusions its services to the `general public,’ i.e., the general community or
made could well be raised as being appropriate issues in a petition for population, and one who offers services or solicits business only from
review before this Court. Thus, an issue whether a carrier is private or a narrow segment of the general population. We think that Article
common on the basis of the facts found by a trial court or the 1732 deliberately refrained from making such distinctions.
appellate court can be a valid and reviewable question of law. "So understood, the concept of `common carrier’ under Article 1732
The Civil Code defines "common carriers" in the following terms: may be seen to coincide neatly with the notion of `public service,’
"Article 1732. Common carriers are persons, corporations, firms or under the Public Service Act (Commonwealth Act No. 1416, as
associations engaged in the business of carrying or transporting amended) which at least partially supplements the law on common
passengers or goods or both, by land, water, or air for compensation, carriers set forth in the Civil Code."
offering their services to the public." Much of the distinction between a "common or public carrier" and a
Complementary to the codal definition is Section 13, paragraph (b), of "private or special carrier" lies in the character of the business, such
the Public Service Act; it defines "public service" to be – that if the undertaking is an isolated transaction, not a part of the
"x x x every person that now or hereafter may own, operate, manage, business or occupation, and the carrier does not hold itself out to
or control in the Philippines, for hire or compensation, with general or carry the goods for the general public or to a limited clientele,
limited clientele, whether permanent, occasional or accidental, and although involving the carriage of goods for a fee,3 the person or
done for general business purposes, any common carrier, railroad, corporation providing such service could very well be just a private
street railway, subway motor vehicle, either for freight or passenger, carrier. A typical case is that of a charter party which includes both the
or both, with or without fixed route and whatever may be its vessel and its crew, such as in a bareboat or demise, where the
classification, freight or carrier service of any class, express service, charterer obtains the use and service of all or some part of a ship for a
steamboat, or steamship, or steamship line, pontines, ferries and period of time or a voyage or voyages4 and gets the control of the
water craft, engaged in the transportation of passengers or freight or vessel and its crew.5 Contrary to the conclusion made by the appellate
both, shipyard, marine repair shop, wharf or dock, ice plant, ice court, its factual findings indicate that PKS Shipping has engaged
refrigeration plant, canal, irrigation system, gas, electric light, heat and itself in the business of carrying goods for others, although for a
power, water supply and power petroleum, sewerage system, wire or limited clientele, undertaking to carry such goods for a fee. The
wireless communication systems, wire or wireless broadcasting regularity of its activities in this area indicates more than just a casual
stations and other similar public services. x x x. (Underscoring activity on its part.6 Neither can the concept of a common carrier
supplied)." change merely because individual contracts are executed or entered
The prevailing doctrine on the question is that enunciated in the into with patrons of the carrier. Such restrictive interpretation would
leading case of De Guzman vs. Court of Appeals.2 Applying Article make it easy for a common carrier to escape liability by the simple
1732 of the Code, in conjunction with Section 13(b) of the Public expedient of entering into those distinct agreements with clients.
Service Act, this Court has held: Addressing now the issue of whether or not PKS Shipping has
"The above article makes no distinction between one exercised the proper diligence demanded of common carriers, Article
whose principal business activity is the carrying of persons or goods 1733 of the Civil Code requires common carriers to observe
or both, and one who does such carrying only as an ancillary activity extraordinary diligence in the vigilance over the goods they carry. In
(in local idiom, as `a sideline’). Article 1732 also carefully avoids case of loss, destruction or deterioration of goods, common carriers
making any distinction between a person or enterprise offering are presumed to have been at fault or to have acted negligently, and
transportation service on a regular or scheduled basis and one the burden of proving otherwise rests on them.7 The provisions of
offering such service on an occasional, episodic or unscheduled Article 1733, notwithstanding, common carriers are exempt from
22
 [TRANSPORTTATION CASES PART I]
liability for loss, destruction, or deterioration of the goods due to any of evidence on record – would appear to be clearly extant in this
the following causes: instance.
(1) Flood, storm, earthquake, lightning, or other natural disaster or All given then, the appellate court did not err in its judgment absolving
calamity; PKS Shipping from liability for the loss of the DUMC cargo.
(2) Act of the public enemy in war, whether international or civil; WHEREFORE, the petition is DENIED. No costs.
(3) Act or omission of the shipper or owner of the goods; SO ORDERED.
(4) The character of the goods or defects in the packing or in the Davide, Jr., C.J., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
containers; and
(5) Order or act of competent public authority.8
The appellate court ruled, gathered from the testimonies and sworn Footnotes
marine protests of the respective vessel masters of Limar I and MT 1
 National Steel Corporation vs. Court of Appeals, 283 SCRA 45.
Iron Eagle, that there was no way by which the barge’s or the 2
 168 SCRA 612.
tugboat’s crew could have prevented the sinking of Limar I. The 3
 Planters Products, Inc. vs. Court of Appeals, G.R. No. 101503, 15
vessel was suddenly tossed by waves of extraordinary height of six September 1993, 226 SCRA 476.
(6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting 4
 National Steel Corporation vs. Court of Appeals, G.R. No. 112287,
in the entry of water into the barge’s hatches. The official Certificate of 12 December 1997, 283 SCRA 45.
Inspection of the barge issued by the Philippine Coastguard and the 5
 National Steel Corporation vs. Court of Appeals, G.R. No. 112287,
Coastwise Load Line Certificate would attest to the seaworthiness 12 December 1997, 283 SCRA 45.
of Limar I and should strengthen the factual findings of the appellate 6
 The testimony of respondent’s own witness, Capt. Andres Elbena, is
court. quite revealing. He testified that he had been working for respondent
Findings of fact of the Court of Appeals generally conclude this Court; as tugmaster for the past twenty-five (25) years and that the company
none of the recognized exceptions from the rule - (1) when the factual owns several vessels.
findings of the Court of Appeals and the trial court are contradictory; 7
 Article 1735, Civil Code of the Philippines.
(2) when the conclusion is a finding grounded entirely on speculation, 8
 Article 1734, Civil Code of the Philippines.
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

23
 [TRANSPORTTATION CASES PART I]
G.R. No. 157917               August 29, 2012 stereo playing loudly, ultimately carried all the 14 student riders on
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, their way to Don Bosco. Considering that the students were due at
vs. Don Bosco by 7:15 a.m., and that they were already running late
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, because of the heavy vehicular traffic on the South Superhighway,
NATIONAL RAILWAYS, and the COURT OF Alfaro took the van to an alternate route at about 6:45 a.m. by
APPEALS Respondents. traversing the narrow path underneath the Magallanes Interchange
DECISION that was then commonly used by Makati-bound vehicles as a short cut
BERSAMIN, J.: into Makati. At the time, the narrow path was marked by piles of
The operator of a. school bus service is a common carrier in the eyes construction materials and parked passenger jeepneys, and the
of the law. He is bound to observe extraordinary diligence in the railroad crossing in the narrow path had no railroad warning signs, or
conduct of his business. He is presumed to be negligent when death watchmen, or other responsible persons manning the crossing. In
occurs to a passenger. His liability may include indemnity for loss of fact, the bamboo barandilla was up, leaving the railroad crossing open
earning capacity even if the deceased passenger may only be an to traversing motorists.
unemployed high school student at the time of the accident. At about the time the van was to traverse the railroad crossing, PNR
The Case Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in
By petition for review on certiorari, Spouses Teodoro and Nanette the vicinity of the Magallanes Interchange travelling northbound. As
Perefia (Perefias) appeal the adverse decision promulgated on the train neared the railroad crossing, Alfaro drove the van eastward
November 13, 2002, by which the Court of Appeals (CA) affirmed with across the railroad tracks, closely tailing a large passenger bus. His
modification the decision rendered on December 3, 1999 by the view of the oncoming train was blocked because he overtook the
Regional Trial Court (RTC), Branch 260, in Parañaque City that had passenger bus on its left side. The train blew its horn to warn
decreed them jointly and severally liable with Philippine National motorists of its approach. When the train was about 50 meters away
Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita from the passenger bus and the van, Alano applied the ordinary
Zarate (Zarates) for the death of their 15-year old son, Aaron John L. brakes of the train. He applied the emergency brakes only when he
Zarate (Aaron), then a high school student of Don Bosco Technical saw that a collision was imminent. The passenger bus successfully
Institute (Don Bosco). crossed the railroad tracks, but the van driven by Alfaro did not. The
Antecedents train hit the rear end of the van, and the impact threw nine of the 12
The Pereñas were engaged in the business of transporting students students in the rear, including Aaron, out of the van. Aaron landed in
from their respective residences in Parañaque City to Don Bosco in the path of the train, which dragged his body and severed his head,
Pasong Tamo, Makati City, and back. In their business, the Pereñas instantaneously killing him. Alano fled the scene on board the train,
used a KIA Ceres Van (van) with Plate No. PYA 896, which had the and did not wait for the police investigator to arrive.
capacity to transport 14 students at a time, two of whom would be Devastated by the early and unexpected death of Aaron, the Zarates
seated in the front beside the driver, and the others in the rear, with commenced this action for damages against Alfaro, the Pereñas, PNR
six students on either side. They employed Clemente Alfaro (Alfaro) and Alano. The Pereñas and PNR filed their respective answers, with
as driver of the van. cross-claims against each other, but Alfaro could not be served with
In June 1996, the Zarates contracted the Pereñas to transport Aaron summons.
to and from Don Bosco. On August 22, 1996, as on previous school At the pre-trial, the parties stipulated on the facts and issues, viz:
days, the van picked Aaron up around 6:00 a.m. from the Zarates’ A. FACTS:
residence. Aaron took his place on the left side of the van near the (1) That spouses Zarate were the legitimate parents of Aaron John L.
rear door. The van, with its air-conditioning unit turned on and the Zarate;
24
 [TRANSPORTTATION CASES PART I]
(2) Spouses Zarate engaged the services of spouses Pereña for the of the vehicular collision, which resulted in the death of plaintiff
adequate and safe transportation carriage of the former spouses' son spouses' son;
from their residence in Parañaque to his school at the Don Bosco (2) Whether or not the defendant spouses Pereña being the employer
Technical Institute in Makati City; of defendant Alfaro are liable for any negligence which may be
(3) During the effectivity of the contract of carriage and in the attributed to defendant Alfaro;
implementation thereof, Aaron, the minor son of spouses Zarate died (3) Whether or not defendant Philippine National Railways being the
in connection with a vehicular/train collision which occurred while operator of the railroad system is liable for negligence in failing to
Aaron was riding the contracted carrier Kia Ceres van of spouses provide adequate safety warning signs and railings in the area
Pereña, then driven and operated by the latter's employee/authorized commonly used by motorists for railroad crossings, constituting the
driver Clemente Alfaro, which van collided with the train of PNR, at proximate cause of the vehicular collision which resulted in the death
around 6:45 A.M. of August 22, 1996, within the vicinity of the of the plaintiff spouses' son;
Magallanes Interchange in Makati City, Metro Manila, Philippines; (4) Whether or not defendant spouses Pereña are liable for breach of
(4) At the time of the vehicular/train collision, the subject site of the the contract of carriage with plaintiff-spouses in failing to provide
vehicular/train collision was a railroad crossing used by motorists for adequate and safe transportation for the latter's son;
crossing the railroad tracks; (5) Whether or not defendants spouses are liable for actual, moral
(5) During the said time of the vehicular/train collision, there were no damages, exemplary damages, and attorney's fees;
appropriate and safety warning signs and railings at the site (6) Whether or not defendants spouses Teodorico and Nanette
commonly used for railroad crossing; Pereña observed the diligence of employers and school bus
(6) At the material time, countless number of Makati bound public operators;
utility and private vehicles used on a daily basis the site of the (7) Whether or not defendant-spouses are civilly liable for the
collision as an alternative route and short-cut to Makati; accidental death of Aaron John Zarate;
(7) The train driver or operator left the scene of the incident on board (8) Whether or not defendant PNR was grossly negligent in operating
the commuter train involved without waiting for the police investigator; the commuter train involved in the accident, in allowing or tolerating
the motoring public to cross, and its failure to install safety devices or
(8) The site commonly used for railroad crossing by motorists was
equipment at the site of the accident for the protection of the public;
not in fact intended by the railroad operator for railroad crossing at the
(9) Whether or not defendant PNR should be made to reimburse
time of the vehicular collision;
defendant spouses for any and whatever amount the latter may be
(9) PNR received the demand letter of the spouses Zarate;
held answerable or which they may be ordered to pay in favor of
(10) PNR refused to acknowledge any liability for the vehicular/train plaintiffs by reason of the action;
collision; (10) Whether or not defendant PNR should pay plaintiffs directly and
(11) The eventual closure of the railroad crossing alleged by PNR fully on the amounts claimed by the latter in their Complaint by reason
was an internal arrangement between the former and its project of its gross negligence;
contractor; and (11) Whether or not defendant PNR is liable to defendants spouses
(12) The site of the vehicular/train collision was within the vicinity or for actual, moral and exemplary damages and attorney's fees.2
less than 100 meters from the Magallanes station of PNR. The Zarates’ claim against the Pereñas was upon breach of the
B. ISSUES contract of carriage for the safe transport of Aaron; but that against
(1) Whether or not defendant-driver of the van is, in the performance PNR was based on quasi-delict under Article 2176, Civil Code.
of his functions, liable for negligence constituting the proximate cause In their defense, the Pereñas adduced evidence to show that they had
exercised the diligence of a good father of the family in the selection
25
 [TRANSPORTTATION CASES PART I]
and supervision of Alfaro, by making sure that Alfaro had been issued record, supporting the case of defendants-appellants Philippine
a driver’s license and had not been involved in any vehicular accident National Railways.
prior to the collision; that their own son had taken the van daily; and The Pereñas ascribed the following errors to the RTC, namely:
that Teodoro Pereña had sometimes accompanied Alfaro in the van’s The trial court erred in finding defendants-appellants jointly and
trips transporting the students to school. severally liable for actual, moral and exemplary damages and
For its part, PNR tended to show that the proximate cause of the attorney’s fees with the other defendants.
collision had been the reckless crossing of the van whose driver had The trial court erred in dismissing the cross-claim of the appellants
not first stopped, looked and listened; and that the narrow path Pereñas against the Philippine National Railways and in not holding
traversed by the van had not been intended to be a railroad crossing the latter and its train driver primarily responsible for the incident.
for motorists. The trial court erred in awarding excessive damages and attorney’s
Ruling of the RTC fees.
On December 3, 1999, the RTC rendered its decision,3 disposing: The trial court erred in awarding damages in the form of deceased’s
WHEREFORE, premises considered, judgment is hereby rendered in loss of earning capacity in the absence of sufficient basis for such an
favor of the plaintiff and against the defendants ordering them to award.
jointly and severally pay the plaintiffs as follows: On November 13, 2002, the CA promulgated its decision, affirming
(1) (for) the death of Aaron- Php50,000.00; the findings of the RTC, but limited the moral damages to ₱
(2) Actual damages in the amount of Php100,000.00; 2,500,000.00; and deleted the attorney’s fees because the RTC did
(3) For the loss of earning capacity- Php2,109,071.00; not state the factual and legal bases, to wit:6
(4) Moral damages in the amount of Php4,000,000.00; WHEREFORE, premises considered, the assailed Decision of the
(5) Exemplary damages in the amount of Php1,000,000.00; Regional Trial Court, Branch 260 of Parañaque City is AFFIRMED
(6) Attorney’s fees in the amount of Php200,000.00; and with the modification that the award of Actual Damages is reduced to
(7) Cost of suit. ₱ 59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and the
SO ORDERED. award for Attorney’s Fees is Deleted.
On June 29, 2000, the RTC denied the Pereñas’ motion for SO ORDERED.
reconsideration,4 reiterating that the cooperative gross negligence of The CA upheld the award for the loss of Aaron’s earning capacity,
the Pereñas and PNR had caused the collision that led to the death of taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus
Aaron; and that the damages awarded to the Zarates were not Company and Manila Railroad Company,7 wherein the Court gave the
excessive, but based on the established circumstances. heirs of Cariaga a sum representing the loss of the deceased’s
The CA’s Ruling earning capacity despite Cariaga being only a medical student at the
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916). time of the fatal incident. Applying the formula adopted in the
PNR assigned the following errors, to wit:5 American Expectancy Table of Mortality:–
The Court a quo erred in: 2/3 x (80 - age at the time of death) = life expectancy
1. In finding the defendant-appellant Philippine National Railways the CA determined the life expectancy of Aaron to be 39.3 years upon
jointly and severally liable together with defendant-appellants spouses reckoning his life expectancy from age of 21 (the age when he would
Teodorico and Nanette Pereña and defendant-appellant Clemente have graduated from college and started working for his own
Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and livelihood) instead of 15 years (his age when he died). Considering
damages. that the nature of his work and his salary at the time of Aaron’s death
2. In giving full faith and merit to the oral testimonies of plaintiffs- were unknown, it used the prevailing minimum wage of ₱ 280.00/day
appellees witnesses despite overwhelming documentary evidence on to compute Aaron’s gross annual salary to be ₱ 110,716.65, inclusive
26
 [TRANSPORTTATION CASES PART I]
of the thirteenth month pay. Multiplying this annual salary by Aaron’s Teodoro Pereña himself sometimes accompanied Alfaro in
life expectancy of 39.3 years, his gross income would aggregate to ₱ transporting the passengers to and from school. The RTC gave scant
4,351,164.30, from which his estimated expenses in the sum of ₱ consideration to such defense by regarding such defense as
2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net inappropriate in an action for breach of contract of carriage.
income. Due to Aaron’s computed net income turning out to be higher We find no adequate cause to differ from the conclusions of the lower
than the amount claimed by the Zarates, only ₱ 2,109,071.00, the courts that the Pereñas operated as a common carrier; and that their
amount expressly prayed for by them, was granted. standard of care was extraordinary diligence, not the ordinary
On April 4, 2003, the CA denied the Pereñas’ motion for diligence of a good father of a family.
reconsideration.8 Although in this jurisdiction the operator of a school bus service has
Issues been usually regarded as a private carrier,9 primarily because he only
In this appeal, the Pereñas list the following as the errors committed caters to some specific or privileged individuals, and his operation is
by the CA, to wit: neither open to the indefinite public nor for public use, the exact
I. The lower court erred when it upheld the trial court’s decision nature of the operation of a school bus service has not been finally
holding the petitioners jointly and severally liable to pay damages with settled. This is the occasion to lay the matter to rest.
Philippine National Railways and dismissing their cross-claim against A carrier is a person or corporation who undertakes to transport or
the latter. convey goods or persons from one place to another, gratuitously or
II. The lower court erred in affirming the trial court’s decision awarding for hire. The carrier is classified either as a private/special carrier or
damages for loss of earning capacity of a minor who was only a high as a common/public carrier.10 A private carrier is one who, without
school student at the time of his death in the absence of sufficient making the activity a vocation, or without holding himself or itself out
basis for such an award. to the public as ready to act for all who may desire his or its services,
III. The lower court erred in not reducing further the amount of undertakes, by special agreement in a particular instance only, to
damages awarded, assuming petitioners are liable at all. transport goods or persons from one place to another either
Ruling gratuitously or for hire.11 The provisions on ordinary contracts of the
The petition has no merit. Civil Code govern the contract of private carriage.The diligence
1. required of a private carrier is only ordinary, that is, the diligence of a
Were the Pereñas and PNR jointly good father of the family. In contrast, a common carrier is a person,
and severally liable for damages? corporation, firm or association engaged in the business of carrying or
The Zarates brought this action for recovery of damages against both transporting passengers or goods or both, by land, water, or air, for
the Pereñas and the PNR, basing their claim against the Pereñas on compensation, offering such services to the public.12 Contracts of
breach of contract of carriage and against the PNR on quasi-delict. common carriage are governed by the provisions on common carriers
The RTC found the Pereñas and the PNR negligent. The CA affirmed of the Civil Code, the Public Service Act,13 and other special laws
the findings. relating to transportation. A common carrier is required to observe
We concur with the CA. extraordinary diligence, and is presumed to be at fault or to have
To start with, the Pereñas’ defense was that they exercised the acted negligently in case of the loss of the effects of passengers, or
diligence of a good father of the family in the selection and the death or injuries to passengers.14
supervision of Alfaro, the van driver, by seeing to it that Alfaro had a In relation to common carriers, the Court defined public use in the
driver’s license and that he had not been involved in any vehicular following terms in United States v. Tan Piaco,15 viz:
accident prior to the fatal collision with the train; that they even had "Public use" is the same as "use by the public". The essential feature
their own son travel to and from school on a daily basis; and that of the public use is not confined to privileged individuals, but is open
27
 [TRANSPORTTATION CASES PART I]
to the indefinite public. It is this indefinite or unrestricted quality that operators,18 custom brokers and warehousemen,19 and barge
gives it its public character. In determining whether a use is public, we operators20 even if they had limited clientèle.
must look not only to the character of the business to be done, but As all the foregoing indicate, the true test for a common carrier is not
also to the proposed mode of doing it. If the use is merely optional the quantity or extent of the business actually transacted, or the
with the owners, or the public benefit is merely incidental, it is not a number and character of the conveyances used in the activity, but
public use, authorizing the exercise of the jurisdiction of the public whether the undertaking is a part of the activity engaged in by the
utility commission. There must be, in general, a right which the law carrier that he has held out to the general public as his business or
compels the owner to give to the general public. It is not enough that occupation. If the undertaking is a single transaction, not a part of the
the general prosperity of the public is promoted. Public use is not general business or occupation engaged in, as advertised and held
synonymous with public interest. The true criterion by which to judge out to the general public, the individual or the entity rendering such
the character of the use is whether the public may enjoy it by right or service is a private, not a common, carrier. The question must be
only by permission. determined by the character of the business actually carried on by the
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 carrier, not by any secret intention or mental reservation it may
of the Civil Code avoided any distinction between a person or an entertain or assert when charged with the duties and obligations that
enterprise offering transportation on a regular or an isolated basis; the law imposes.21
and has not distinguished a carrier offering his services to the general Applying these considerations to the case before us, there is no
public, that is, the general community or population, from one offering question that the Pereñas as the operators of a school bus service
his services only to a narrow segment of the general population. were: (a) engaged in transporting passengers generally as a
Nonetheless, the concept of a common carrier embodied in Article business, not just as a casual occupation; (b) undertaking to carry
1732 of the Civil Code coincides neatly with the notion of public passengers over established roads by the method by which the
service under the Public Service Act, which supplements the law on business was conducted; and (c) transporting students for a fee.
common carriers found in the Civil Code. Public service, according to Despite catering to a limited clientèle, the Pereñas operated as a
Section 13, paragraph (b) of the Public Service Act, includes: common carrier because they held themselves out as a ready
x x x every person that now or hereafter may own, operate, manage, transportation indiscriminately to the students of a particular school
or control in the Philippines, for hire or compensation, with general or living within or near where they operated the service and for a fee.
limited clientèle, whether permanent or occasional, and done for the The common carrier’s standard of care and vigilance as to the safety
general business purposes, any common carrier, railroad, street of the passengers is defined by law. Given the nature of the business
railway, traction railway, subway motor vehicle, either for freight or and for reasons of public policy, the common carrier is bound "to
passenger, or both, with or without fixed route and whatever may be observe extraordinary diligence in the vigilance over the goods and for
its classification, freight or carrier service of any class, express the safety of the passengers transported by them, according to all the
service, steamboat, or steamship line, pontines, ferries and water circumstances of each case."22 Article 1755 of the Civil Code specifies
craft, engaged in the transportation of passengers or freight or both, that the common carrier should "carry the passengers safely as far as
shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation human care and foresight can provide, using the utmost diligence of
system, gas, electric light, heat and power, water supply and power very cautious persons, with a due regard for all the circumstances."
petroleum, sewerage system, wire or wireless communications To successfully fend off liability in an action upon the death or injury to
systems, wire or wireless broadcasting stations and other similar a passenger, the common carrier must prove his or its observance of
public services. x x x.17 that extraordinary diligence; otherwise, the legal presumption that he
Given the breadth of the aforequoted characterization of a common or it was at fault or acted negligently would stand.23 No device,
carrier, the Court has considered as common carriers pipeline whether by stipulation, posting of notices, statements on tickets, or
28
 [TRANSPORTTATION CASES PART I]
otherwise, may dispense with or lessen the responsibility of the Compounding his lack of care was that loud music was playing inside
common carrier as defined under Article 1755 of the Civil Code. 24 the air-conditioned van at the time of the accident. The loudness most
And, secondly, the Pereñas have not presented any compelling probably reduced his ability to hear the warning horns of the
defense or reason by which the Court might now reverse the CA’s oncoming train to allow him to correctly appreciate the lurking dangers
findings on their liability. On the contrary, an examination of the on the railroad tracks. Also, he sought to overtake a passenger bus on
records shows that the evidence fully supported the findings of the the left side as both vehicles traversed the railroad tracks. In so doing,
CA. he lost his view of the train that was then coming from the opposite
As earlier stated, the Pereñas, acting as a common carrier, were side of the passenger bus, leading him to miscalculate his chances of
already presumed to be negligent at the time of the accident because beating the bus in their race, and of getting clear of the train. As a
death had occurred to their passenger.25 The presumption of result, the bus avoided a collision with the train but the van got
negligence, being a presumption of law, laid the burden of evidence slammed at its rear, causing the fatality. Lastly, he did not slow down
on their shoulders to establish that they had not been negligent.26 It or go to a full stop before traversing the railroad tracks despite
was the law no less that required them to prove their observance of knowing that his slackening of speed and going to a full stop were in
extraordinary diligence in seeing to the safe and secure carriage of observance of the right of way at railroad tracks as defined by the
the passengers to their destination. Until they did so in a credible traffic laws and regulations.28 He thereby violated a specific traffic
manner, they stood to be held legally responsible for the death of regulation on right of way, by virtue of which he was immediately
Aaron and thus to be held liable for all the natural consequences of presumed to be negligent.29
such death. The omissions of care on the part of the van driver constituted
There is no question that the Pereñas did not overturn the negligence,30 which, according to Layugan v. Intermediate Appellate
presumption of their negligence by credible evidence. Their defense Court,31 is "the omission to do something which a reasonable man,
of having observed the diligence of a good father of a family in the guided by those considerations which ordinarily regulate the conduct
selection and supervision of their driver was not legally sufficient. of human affairs, would do, or the doing of something which a prudent
According to Article 1759 of the Civil Code, their liability as a common and reasonable man would not do,32 or as Judge Cooley defines it,
carrier did not cease upon proof that they exercised all the diligence of ‘(t)he failure to observe for the protection of the interests of another
a good father of a family in the selection and supervision of their person, that degree of care, precaution, and vigilance which the
employee. This was the reason why the RTC treated this defense of circumstances justly demand, whereby such other person suffers
the Pereñas as inappropriate in this action for breach of contract of injury.’"33
carriage. The test by which to determine the existence of negligence in a
The Pereñas were liable for the death of Aaron despite the fact that particular case has been aptly stated in the leading case of Picart v.
their driver might have acted beyond the scope of his authority or Smith,34 thuswise:
even in violation of the orders of the common carrier.27 In this The test by which to determine the existence of negligence in a
connection, the records showed their driver’s actual negligence. There particular case may be stated as follows: Did the defendant in doing
was a showing, to begin with, that their driver traversed the railroad the alleged negligent act use that reasonable care and caution which
tracks at a point at which the PNR did not permit motorists going into an ordinarily prudent person would have used in the same situation? If
the Makati area to cross the railroad tracks. Although that point had not, then he is guilty of negligence. The law here in effect adopts the
been used by motorists as a shortcut into the Makati area, that fact standard supposed to be supplied by the imaginary conduct of the
alone did not excuse their driver into taking that route. On the other discreet paterfamilias of the Roman law. The existence of negligence
hand, with his familiarity with that shortcut, their driver was fully aware in a given case is not determined by reference to the personal
of the risks to his passengers but he still disregarded the risks. judgment of the actor in the situation before him. The law considers
29
 [TRANSPORTTATION CASES PART I]
what would be reckless, blameworthy, or negligent in the man of part of both the Pereñas and the PNR. Another distinction is that the
ordinary intelligence and prudence and determines liability by that. passenger bus in Philippine National Railways v. Intermediate
The question as to what would constitute the conduct of a prudent Appellate Court was traversing the dedicated railroad crossing when it
man in a given situation must of course be always determined in the was hit by the train, but the Pereñas’ school van traversed the railroad
light of human experience and in view of the facts involved in the tracks at a point not intended for that purpose.
particular case. Abstract speculation cannot here be of much value At any rate, the lower courts correctly held both the Pereñas and the
but this much can be profitably said: Reasonable men govern their PNR "jointly and severally" liable for damages arising from the death
conduct by the circumstances which are before them or known to of Aaron. They had been impleaded in the same complaint as
them. They are not, and are not supposed to be, omniscient of the defendants against whom the Zarates had the right to relief, whether
future. Hence they can be expected to take care only when there is jointly, severally, or in the alternative, in respect to or arising out of the
something before them to suggest or warn of danger. Could a prudent accident, and questions of fact and of law were common as to the
man, in the case under consideration, foresee harm as a result of the Zarates.36 Although the basis of the right to relief of the Zarates (i.e.,
course actually pursued? If so, it was the duty of the actor to take breach of contract of carriage) against the Pereñas was distinct from
precautions to guard against that harm. Reasonable foresight of harm, the basis of the Zarates’ right to relief against the PNR (i.e., quasi-
followed by the ignoring of the suggestion born of this prevision, is delict under Article 2176, Civil Code), they nonetheless could be held
always necessary before negligence can be held to exist. Stated in jointly and severally liable by virtue of their respective negligence
these terms, the proper criterion for determining the existence of combining to cause the death of Aaron. As to the PNR, the RTC
negligence in a given case is this: Conduct is said to be negligent rightly found the PNR also guilty of negligence despite the school van
when a prudent man in the position of the tortfeasor would have of the Pereñas traversing the railroad tracks at a point not dedicated
foreseen that an effect harmful to another was sufficiently probable to by the PNR as a railroad crossing for pedestrians and motorists,
warrant his foregoing the conduct or guarding against its because the PNR did not ensure the safety of others through the
consequences. (Emphasis supplied) placing of crossbars, signal lights, warning signs, and other
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver permanent safety barriers to prevent vehicles or pedestrians from
was entirely negligent when he traversed the railroad tracks at a point crossing there. The RTC observed that the fact that a crossing guard
not allowed for a motorist’s crossing despite being fully aware of the had been assigned to man that point from 7 a.m. to 5 p.m. was a good
grave harm to be thereby caused to his passengers; and when he indicium that the PNR was aware of the risks to others as well as the
disregarded the foresight of harm to his passengers by overtaking the need to control the vehicular and other traffic there. Verily, the
bus on the left side as to leave himself blind to the approach of the Pereñas and the PNR were joint tortfeasors.
oncoming train that he knew was on the opposite side of the bus. 2.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Was the indemnity for loss of
Appellate Court,35 where the Court held the PNR solely liable for the Aaron’s earning capacity proper?
damages caused to a passenger bus and its passengers when its The RTC awarded indemnity for loss of Aaron’s earning capacity.
train hit the rear end of the bus that was then traversing the railroad Although agreeing with the RTC on the liability, the CA modified the
crossing. But the circumstances of that case and this one share no amount. Both lower courts took into consideration that Aaron, while
similarities. In Philippine National Railways v. Intermediate Appellate only a high school student, had been enrolled in one of the reputable
Court, no evidence of contributory negligence was adduced against schools in the Philippines and that he had been a normal and able-
the owner of the bus. Instead, it was the owner of the bus who proved bodied child prior to his death. The basis for the computation of
the exercise of extraordinary diligence by preponderant evidence. Aaron’s earning capacity was not what he would have become or
Also, the records are replete with the showing of negligence on the what he would have wanted to be if not for his untimely death, but the
30
 [TRANSPORTTATION CASES PART I]
minimum wage in effect at the time of his death. Moreover, the RTC’s earnings but for loss of the deceased’s power or ability to earn
computation of Aaron’s life expectancy rate was not reckoned from his money.39
age of 15 years at the time of his death, but on 21 years, his age This favorable treatment of the Zarates’ claim is not unprecedented. In
when he would have graduated from college. Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
We find the considerations taken into account by the lower courts to Company,40 fourth-year medical student Edgardo Carriaga’s earning
be reasonable and fully warranted. capacity, although he survived the accident but his injuries rendered
Yet, the Pereñas submit that the indemnity for loss of earning capacity him permanently incapacitated, was computed to be that of the
was speculative and unfounded.1âwphi1 They cited People v. physician that he dreamed to become. The Court considered his
Teehankee, Jr.,37 where the Court deleted the indemnity for victim scholastic record sufficient to justify the assumption that he could
Jussi Leino’s loss of earning capacity as a pilot for being speculative have finished the medical course and would have passed the medical
due to his having graduated from high school at the International board examinations in due time, and that he could have possibly
School in Manila only two years before the shooting, and was at the earned a modest income as a medical practitioner. Also, in People v.
time of the shooting only enrolled in the first semester at the Manila Sanchez,41 the Court opined that murder and rape victim Eileen
Aero Club to pursue his ambition to become a professional pilot. That Sarmienta and murder victim Allan Gomez could have easily landed
meant, according to the Court, that he was for all intents and good-paying jobs had they graduated in due time, and that their jobs
purposes only a high school graduate. would probably pay them high monthly salaries from ₱ 10,000.00 to ₱
We reject the Pereñas’ submission. 15,000.00 upon their graduation. Their earning capacities were
First of all, a careful perusal of the Teehankee, Jr. case shows that computed at rates higher than the minimum wage at the time of their
the situation there of Jussi Leino was not akin to that of Aaron here. deaths due to their being already senior agriculture students of the
The CA and the RTC were not speculating that Aaron would be some University of the Philippines in Los Baños, the country’s leading
highly-paid professional, like a pilot (or, for that matter, an engineer, a educational institution in agriculture.
physician, or a lawyer). Instead, the computation of Aaron’s earning 3.
capacity was premised on him being a lowly minimum wage earner Were the amounts of damages excessive?
despite his being then enrolled at a prestigious high school like Don The Pereñas plead for the reduction of the moral and exemplary
Bosco in Makati, a fact that would have likely ensured his success in damages awarded to the Zarates in the respective amounts of ₱
his later years in life and at work. 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts
And, secondly, the fact that Aaron was then without a history of were excessive.
earnings should not be taken against his parents and in favor of the The plea is unwarranted.
defendants whose negligence not only cost Aaron his life and his right The moral damages of ₱ 2,500,000.00 were really just and
to work and earn money, but also deprived his parents of their right to reasonable under the established circumstances of this case because
his presence and his services as well. Our law itself states that the they were intended by the law to assuage the Zarates’ deep mental
loss of the earning capacity of the deceased shall be the liability of the anguish over their son’s unexpected and violent death, and their
guilty party in favor of the heirs of the deceased, and shall in every moral shock over the senseless accident. That amount would not be
case be assessed and awarded by the court "unless the deceased on too much, considering that it would help the Zarates obtain the
account of permanent physical disability not caused by the defendant, means, diversions or amusements that would alleviate their suffering
had no earning capacity at the time of his death."38 Accordingly, we for the loss of their child. At any rate, reducing the amount as
emphatically hold in favor of the indemnification for Aaron’s loss of excessive might prove to be an injustice, given the passage of a long
earning capacity despite him having been unemployed, because time from when their mental anguish was inflicted on them on August
compensation of this nature is awarded not for loss of time or 22, 1996.
31
 [TRANSPORTTATION CASES PART I]
5 
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should Id. at 25-46.
6 
not reduce the amount if only to render effective the desired example Rollo, pp. 70-80.
7 
for the public good. As a common carrier, the Pereñas needed to be 110 Phil. 346 (1960).
8 
vigorously reminded to observe their duty to exercise extraordinary Id. at 82.
9 
diligence to prevent a similarly senseless accident from happening Agbayani, Commentaries and Jurisprudence on the Commercial
again. Only by an award of exemplary damages in that amount would Laws of the Philippines, 1993 Edition, at p. 7.
10 
suffice to instill in them and others similarly situated like them the Id. at 4.
11 
ever-present need for greater and constant vigilance in the conduct of Perez, Transportation Laws and Public Service Act, 2001 Edition, p.
a business imbued with public interest. 6.
12 
WHEREFORE, we DENY the petition for review Article 1732 of the Civil Code states:
on certiorari; AFFIRM the decision promulgated on November 13, Article 1732. Common carriers are persons, corporations, firms or
2002; and ORDER the petitioners to pay the costs of suit. associations engaged in the business of carrying or transporting
SO ORDERED. passengers or goods or both, by land, water, or air, for compensation,
LUCAS P. BERSAMIN offering their services to the public.
13 
Associate Justice Commonwealth Act No. 146, as amended, particularly by PD No. 1,
WE CONCUR: Integrated Reorganization Plan and E.O. 546.
14 
MARIA LOURDES P. A. SERENO Article 1756 of the Civil Code reads:
Chief Justice Article 1756. In case of death of or injuries to passengers, common
TERESITA J. LEONARDO-DE carriers are presumed to have been at fault or to have acted
MARTIN S. VILLARAMA, JR.
CASTRO negligently, unless they prove that they observed extraordinary
Associate Justice
Associate Justice diligence as prescribed in articles 1733 and 1755.
15 
BIENVENIDO L. REYES 40 Phil 853, 856 (1920).
16 
Associate Justice G.R. No. L-47822, December 22, 1988, 168 SCRA 612, 617-618.
17 
CERTIFICATION Public Service Act.
18 
Pursuant to Section 13, Article VIII of the Constitution, I certify that the First Philippine Industrial Corporation v. Court of Appeals, G.R. No.
conclusions in the above Decision had been reached in consultation 125948, December 29, 1998, 300 SCRA 661, 670.
19 
before the case was assigned to the writer of the opinion of the Calvo v. UCPB General Insurance Co., G.R. No. 148496, March 19,
Court's Division. 2002, 379 SCRA 510, 516.
20 
MARIA LOURDES P. A. SERENO Asia Lighterage and Shipping, Inc. v. Court of Appeals, G.R. No.
Chief Justice 147246, August 9, 2003, 409 SCRA 340.
21 
Agbayani, supra, note 9, pp. 7-8.
22 
Article 1733, Civil Code.
23 
Footnotes Article 1756, Civil Code.
24 
1 
In the title of the case, the petitioner's name appears as Teodoro Article 1757, Civil Code.
25 
Perefia, but he signed his name as Teodorico Perefia in the Supra, note 13.
26 
verification/certification of the petition for review on certiorari. 31A CJS, Evidence §134, citing State Tax Commission v. Phelps
2 
CA Rollo, pp. 47-49. Dodge Corporation, 157 P. 2d 693, 62 Ariz. 320; Kott v. Hilton, 114 P.
3 
Id. at 47-55. 2d 666, 45 C.A. 2d 548; Lindley v. Mowell, Civ. Ap. 232 S.W. 2d 256.
27 
4 
Id. at 142. Article 1759, Civil Code.
32
 [TRANSPORTTATION CASES PART I]
28 
E.g., Section 42(d) of Republic Act No. 4136 (Land Transportation
and Traffic Code), which pertinently provides:
Section 42. Right of way. — xxx
xxx
(d) The driver of a vehicle upon a highway shall bring to a full stop
such vehicle before traversing any "through highway" or railroad
crossing: provided, that when it is apparent that no hazard exists, the
vehicle may be slowed down to five miles per hour instead of bringing
it to a full stop.
29 
Article 2185 of the Civil Code provides:
Article 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. (n)
See also BLT Bus Company v. Intermediate Appellate Court, No. L-
74387-90, November 14, 1988, 167 SCRA 379.
30 
Yamada v. Manila Railroad Co., No. 10073, 33 Phil. 8, 11 (1915).
31 
G.R. No. L-73998, November 14, 1988, 167 SCRA 363.
32 
Citing Black Law Dictionary, Fifth Edition, p. 930.
33 
Citing Cooley on Torts, Fourth Edition, Volume 3, p. 265.
34 
37 Phil 809 (1918).
35 
G.R. No. 70547, January 22, 1993, 217 SCRA 401.
36 
The rule on permissive joinder of parties is Section 6, Rule 3, of the
Rules of Court, to wit:
Section 6. Permissive joinder of parties. — All persons in whom or
against whom any right to relief in respect to or arising out of the
same transaction or series of transactions is alleged to exist, whether
jointly, severally, or in the alternative, may, except as otherwise
provided in these Rules, join as plaintiffs or be joined as defendants in
one complaint, where any question of law or fact common to all such
plaintiffs or to all such defendants may arise in the action; but the
court may make such orders as may be just to prevent any plaintiff or
defendant from being embarrassed or put to expense in connection
with any proceedings in which he may have no interest. (6)
37 
G.R. Nos. 111206-08, October 6, 1995, 249 SCRA 54.
38 
Article 2206 (1), Civil Code.
39 
People v. Teehankee, Jr., supra, note 37, at 207. See also 25 CJS,
Damages, §40.
40 
110 Phil 346 (1960).
41 
G.R. Nos. 121039-121045, October 18, 2001, 367 SCRA 520.
33
 [TRANSPORTTATION CASES PART I]
G.R. No. 141716 - July 4, 2002 9. There shall be no employer-employee relations between the
SAN MIGUEL CORPORATION, Petitioner, vs. HEIRS OF OWNER and/or its vessel's crew on one hand and the CHARTERER
SABINIANO INGUITO, and JULIUS OUANO, Respondents. on the other. The crew of the vessel shall continue to be under the
x---------------------------------------------------------x employ, control and supervision of the OWNER. Consequently,
G.R. No. 142025 July 4, 2002 damage or loss that may be attributable to the crew, including loss of
JULIUS C. OUANO, Petitioner, vs. THE COURT OF APPEALS, SAN the vessel used shall continue to be the responsibility of, and shall be
MIGUEL CORPORATION and THE HEIRS OF SABINIANO borne, by the OWNER; the OWNER further covenants to hold the
INGIUTO, FELIPE PUSA, ABUNDIO GALON, ISIDRO CELETARIA, CHARTERER free from all claims and liabilities arising out of the acts
GILBERT GONZAGA, HENRY CABIGAS, RAFAEL MACAIRAN, of the crew and the condition of the vessel;
ROGELIO MORENO, PETER ABAYON, SIMEON ASENTISTA, 10. The OWNER shall undertake to pay all compensation of all the
NORMAN LOON, EUGENIO GESTOPA, CHRISTOPHER vessel's crew, including the benefits, premia and protection in
SAVELLON, GEORGE BASILGO, RAMIL PABAYO, FLAVIANO accordance with the provisions of the New Labor Code and other
WABENA, NESTOR GESTOPA, Respondents. applicable laws and decrees and the rules and regulations
YNARES-SANTIAGO, J.: promulgated by competent authorities as well as all of the SSS
San Miguel Corporation entered into a Time Charter Party Agreement premium. Thus, it is understood that the crew of he vessel shall and
with Julius Ouano, doing business under the name and style J. Ouano always remain the employees of the OWNER;
Marine Services. Under the terms of the agreement, SMC chartered 11. The OWNER shall be responsible to and shall indemnify the
the M/V Doña Roberta owned by Julius Ouano for a period of two CHARTERER for damages and losses arising from the incompetence
years, from June 1, 1989 to May 31, 1991, for the purpose of and/or negligence of, and/or the failure to observe the required extra-
transporting SMC's beverage products from its Mandaue City plant to ordinary diligence by the crew. It shall be automatically liable to the
various points in Visayas and Mindanao. Pertinent portions of the CHARTERER for shortlanded shipment and wrong levels, the value of
Time Charter Party Agreement state: which shall be withheld from the OWNER's collectibles with the
1. OWNER [i.e., Ouano] warrants ownership, title and interest over CHARTERER. However, in the case of wrong levels, CHARTERER
the vessel DOÑA ROBERTA and represents that on the date the shall immediately reimburse OWNER after the former's laboratory
vessel is placed at CHARTERER's San Miguel Corporation] disposal shall be able to determine that the bottles were never opened after it
the following shall be the accurate or approximate description of the left the Plant;
particulars and capacities of the vessel and her equipment: xxx - xxx - xxx.1
xxx - xxx - xxx. On November 11, 1990, during the term of the charter, SMC issued
2. That for and in consideration of the premises hereinafter stipulated, sailing orders to the Master of the MN Doña Roberta, Captain
the OWNER hereby lets, demises and the CHARTERER hereby hires Sabiniano Inguito, instructing him as follows:
the use and service of the aforementioned vessel; 1. Sail for Opol, Cagayan 0500H Nov. 12, 1990, or as soon as loading
xxx - xxx - xxx. of FGS is completed, with load:
4. OWNER warrants that the vessel is seaworthy and in proper, useful SEE BILL OF LADING
and operational condition and in the event that CHARTERER finds 2. You are expected to arrive Opol 0900H Nov. 13, 1990.
any defect in the vessel with regards to its working order, condition 3. You are expected to depart Opol 0900H Nov. 14, 1990, or as soon
and function, CHARTERER shall immediately notify OWNER of this as loading of empties is completed, back to Mandaue.
fact; 4. You are expected to arrive Mandaue 1300H Nov. 15, 1990.
xxx - xxx - xxx. 5. In case you need cash advance, send your request thru radio
addressed to us for needed authority.
34
 [TRANSPORTTATION CASES PART I]
6. Maintain communications and keep us posted of your Roberta was 25 miles approaching Sulauan Point.10 Moments later,
developments. power went out in Moreno's office and resumed at 11:40 p.m. He
7. Observe weather condition, exercise utmost precautionary immediately made a series of calls to the M/V Doña Roberta but he
measures. failed to get in touch with anyone in the vessel.11
BON VOYAGE AND GOOD LUCK.2 At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over
In accordance with the sailing orders, Captain Inguito obtained the the radio and requested him to contact Rico Ouano, son of Julius
necessary sailing clearance from the Philippine Coast Ouano, because they needed a helicopter to rescue them. The vessel
Guard.3 Loading of the cargo on the M/V Doña Roberta was was about 20 miles west of Sulauan Point.12
completed at 8:30 p.m. of November 11, 1990. However, the vessel Upon being told by SMC's radio operator, Rico Ouano turned on his
did not leave Mandaue City until 6:00 a.m. of the following day, radio and read the distress signal from Captain Ingiuto. When he
November 12, 1990. talked to the captain, the latter requested for a helicopter to rescue
Meanwhile, at 4:00 a.m. of November 12, 1990, typhoon Ruping was them.13 Rico Ouano talked to the Chief Engineer who informed him
spotted 570 kilometers east-southeast of Borongan, Samar, moving that they can no longer stop the water from coming into the vessel
west-northwest at 22 kilometers per hour in the general direction of because the crew members were feeling dizzy from the petroleum
Eastern Visayas. The typhoon had maximum sustained winds of 240 fumes.14
kilometers per hour near the center with gustiness of up to 280 At 2:30 a.m. of November 13, 1990, the M/V Doña Roberta sank. Out
kilometers per hour.4 of the 25 officers and crew on board the vessel, only five survived,
At 7:00 a.m., November 12, 1990, one hour after the M/V Doña namely, Fernando Bucod, Rafael Macairan, Chenito Sugabo, Ramil
Roberta departed from Mandaue City and while it was abeam Cawit Pabayo and Gilbert Gonzaga.15
Island off Cebu, SMC Radio Operator Rogelio P. Moreno contacted On November 24, 1990, shipowner Julius Ouano, in lieu of the captain
Captain Inguito through the radio and advised him to take shelter. who perished in the sea tragedy, filed a Marine Protest.16
Captain Inguito replied that they will proceed since the typhoon was The heirs of the deceased captain and crew, as well as the
far away from them, and that the winds were in their favor.5 survivors,17 of the ill-fated M/V Doña Roberta filed a complaint for tort
At 2:00 p.m., while the vessel was two kilometers abeam Boljoon against San Miguel Corporation and Julius Ouano, docketed as Civil
Point, Moreno again communicated with Captain Inguito and advised Case No. 2472-L of the Regional Trial Court of Lapu-Lapu City,
him to take shelter. The captain responded that they can Branch 27.18
manage.6 Hearing this, Moreno immediately tried to get in touch with Julius Ouano filed an answer with cross-claim,19 alleging that the
Rico Ouano to tell him that Captain Inguito did not heed their advice. proximate cause of the loss of the vessel and its officers and crew
However, Rico Ouano was out of his office, so Moreno left the was the fault and negligence of SMC, which had complete control and
message with the secretary.7 disposal of the vessel as charterer and which issued the sailing order
Moreno again contacted Captain Inguito at 4:00 p.m. of November 12, for its departure despite being forewarned of the impending typhoon.
1990. By then the vessel was already 9.5 miles southeast of Thus, he prayed that SMC indemnify him for the cost of the vessel
Balicasag Island heading towards Sulauan Point. The sky was cloudy and the unrealized rentals and earnings thereof.
with southwesterly winds and the sea was choppy.8 Moreno reiterated In its answer to the complaint19 and answer to the cross-claim,20 SMC
the advice and pointed out that it will be difficult to take shelter after countered that it was Ouano who had the control, supervision and
passing Balicasag Island because they were approaching an open responsibilities over the navigation of the vessel. This
sea. Still, the captain refused to heed his advice.9 notwithstanding, and despite his knowledge of the incoming typhoon,
At 8:00 p.m., the vessel was 38 miles southeast of Balicasag Island. Ouano never bothered to initiate contact with his vessel. Contrary to
West-southwest winds were prevailing. At 10:00 p.m., the M/V Doña his allegation, SMC argued that the proximate cause of the sinking
35
 [TRANSPORTTATION CASES PART I]
was Ouano's breach of his obligation to provide SMC with a 6. Abayon, Pedro P 660,000 (50% x P
seaworthy vessel duly manned by competent crew members. SMC 1,320,000)
interposed counterclaims against Ouano for the value of the cargo lost
in the sea tragedy. 7. Asentista, Simeon P 500,000 (50% x
After trial, the court a quo rendered judgment finding that the P1,000,000)
proximate cause of the loss of the M/V Doña Roberta was attributable 8. Loon, Norman P 550,000 (50% x P
to SMC. Thus, it disposed of the case as follows: 1,100,000)
WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered: 9. Presbitero, Leonardo P 460,000 (50% x P
1. Declaring defendant San Miguel Corporation and its acts or 920,000)
omissions as having produced the proximate cause which resulted in 10. Suscano, Renato P 460,000 (50% x P
the death of the crew members of MN Doña Roberta at past midnight 920,000)
of November 12, 1990 during the height of super typhoon "Ruping"
and as such said defendant is hereby ordered and sentenced to pay 11. Du, Antonio P 480,000 (50% x P
to the heirs of the deceased crew members the following sum[s] plus 960,000)
12% per annum from the filing of the Complaint: 12. Basilgo, George P 120,000 (Apprentice)
A.         For loss of life. . . . . . . P50,000.00 each of the deceased crew
13. Dayondon, Isagani P 120,000 (Ditto)
members, namely: Sabiniano Inguito Felipe Pusa, Abundio Galon,
Isidro Celetaria, Henry Cabigas, Pedro Abayon, Simeon Asentista,   --------------------------------------
Norman Loon, Leonardo Presbitero, Renato Suscano, Antonio Du, ------
George Basilgo, Isagani Dayondon;
- Total: P8,645,000
B. For loss of earnings based on life expectancy
vvvvvvvvvvvvvv
less 50% representing estimated living expenses except for the
apprentices as they were presumed at the time of their deaths to be C. P300,000.00 for moral damages and P200,000.00 for exemplary
dependent on their parents: damages for the heirs of each of the deceased crew members of the
M/V Doña Roberta named in the Amended Complaint including
Name Total loss of earnings
survivor Gilbert Gonzaga;
1. Sabiniano, Inguito (sic) P1,740,000 (50% x D. To pay plaintiffs' counsel attorney's fees in the sum of
P3,480,000) P500,000.00;
2. Under the cross-claim of defendant, Ouano, San Miguel
2. Pusa, Felipe P 1,200,000 (50% x
Corporation is further ordered and sentenced to pay defendant cross-
P2,400,000)
claimant Engr. Julius C. Ouano the total sum of P32,893,300.00 plus
3. Galon, Abundio P 825,000 (50% x P 12% per annum from the filing of his crossclaim, broken down as
1,650,000) follows:
4. Celetaria, Isidro P 600,000 (50% x 1) P9.8 million for the value of the total loss of the vessel M/V Doña
P1,200,000) Roberta;
2) P1,833,300.00 for unrealized rental earnings (P3,666,600.00 less
5. Cabigas, Henry P 930,000 (50% x P 50% for operating expenses and taxes) from November 19, 1990 to
1,860,000) May 31, 1991 as stipulated in the Charter Party Agreement;
36
 [TRANSPORTTATION CASES PART I]
3) P21,000,000.00 for unrealized earnings of M/V Doña Roberta SMC and Ouano filed separate motions for reconsideration, which
based on the expected additional lifetime of the vessel estimated at were denied by the Court of Appeals for lack of merit.24
seven (7) years (42,000,000.00 less 50% for operating expenses and Petitioner SMC, in G.R. No. 141716, raises the following arguments:
taxes); I.
4) P250,000.00 for and as attorney's fees and P 10,000.00 as SMC COULD NOT BE A TORTFEASOR CONSIDERING THE
expenses of litigation; UNDISPUTED FACT THAT:
3. The counter-claims against plaintiffs and the cross-claim of A.         SMC HAS NO LEGAL OR CONTRACTUAL DUTY TO
defendant San Miguel Corporation against defendant Engr. Julius C. INFORM OUANO ABOUT THE SITUATION OF THE VESSEL.
Ouano are hereby dismissed for lack of merit. B. EVEN WITHOUT SUCH DUTY, SMC NEVERTHELESS
With costs against defendant San Miguel Corporation. EXERCISED THE NECESSARY DEGREE OF PRUDENCE BY
SO ORDERED.22 INFORMING OUANO ABOUT INGUITO'S REFUSAL TO TAKE
Both SMC and Ouano appealed to the Court of Appeals, docketed as SHELTER.
CA-G.R. CV No. 48296. SMC argued that as mere charterer, it did not C. THE COURT OF APPEALS ITSELF FOUND THAT THE
have control of the vessel and that the proximate cause of the loss of PROXIMATE CAUSE OF THE LOSS OF THE VESSEL WAS
the vessel and its cargo was the negligence of the ship captain. For INGUITO'S FAILURE TO HEED SMC'S ADVICE TO TAKE
his part, Ouano complained of the reduced damages awarded to him SHELTER, AND INGUITO WAS AN EMPLOYEE OF OUANO AND
by the trial court. NOT OF SMC.
On December 10, 1998, the Court of Appeals rendered the decision II.
subject of the instant petitions for review, to wit: UNDER THE CHARTER, OUANO WAS RESPONSIBLE AND
WHEREFORE, judgment is hereby rendered, modifying the decision UNDERTOOK TO INDEMNIFY SMC FOR ALL DAMAGES ARISING
appealed from, declaring defendant-appellants San Miguel FROM THE NEGLIGENCE OF HIS CREW, PARTICULARLY
Corporation and Julian C. Ouano jointly and severally liable to INGUITO.25
plaintiffs-appellees, except to the heirs of Capt. Sabiniano Inguito, for Meanwhile, petitioner Ouano, in G.R. No. 142025, anchors his petition
the following reduced amounts: on the following assignment of errors:
A.         P50,000.00 death indemnity (loss of life) for each of the First Error
deceased officers and crew of M/V Doña Roberta. The Court of Appeals committed serious error of law and/or grave
b. Loss of earning for each of the deceased officers and crew, in the abuse of discretion in not finding that the Charter Party between SMC
amount awarded by the trial court. and Ouano is legally and in fact a demise charter, an issue raised by
c. P100,000.00 moral damages and P50,000.00 exemplary damages petitioner from the very start in the Trial Court
for each deceased officer and crew members, including Gilbert Second Error
Gonzaga. The Court of Appeals committed serious error of law and/or grave
d. P300,000,00 attorney's fees to plaintiffs-appellees. abuse of discretion in not finding that Capt. Inguito, master of the ill-
e. The counter-claims of defendants-appellants against plaintiffs- fated M/V Doña Roberta, was legally and in fact an agent/servant of
appellees are dismissed. SMC demise charterer as correctly characterized by the Trial Court
f. The cross-claims of defendants-appellants SMC and Julius Ouano Third Error
against each other are likewise dismissed. The Court of Appeals committed serious error of law and/or grave
g. Costs against defendants-appellants. abuse of discretion in completely disregarding or suppressing the
SO ORDERED.23 findings of fact of the Trial Court on the issues of possession and
control of M/V Doña Roberta by SMC and its actions relating thereto
37
 [TRANSPORTTATION CASES PART I]
as demise charterer/owner pro hac vice which led to the tragedy and In a contract of affreightment, on the other hand, the owner of the
in not declaring that said actions of SMC constituted the proximate vessel leases part or all of its space to haul goods for others. It is a
cause of the sinking and loss of the vessel and the death of most of its contract for special service to be rendered by the owner of the vessel.
crew members Under such contract the ship owner retains the possession, command
Fourth Error and navigation of the ship, the charterer or freighter merely having
The Court of Appeals committed serious error of law and/or grave use of the space in the vessel in return for his payment of the charter
abuse of discretion in finding Ouano at fault in the sinking of M/V hire.29 Otherwise put, a contract of affreightment is one by which the
Doña Roberta against the evidence on record which is largely owner of a ship or other vessel lets the whole or part of her to a
undisputed merchant or other person for the conveyance of goods, on a particular
Fifth Error voyage, in consideration of the payment of freight.
The Court of Appeals committed serious error of law and/or grave A contract of affreightment may be either time charter, wherein the
abuse of discretion insofar as it failed to find and declare respondent leased vessel is leased to the charterer for a fixed period of time, or
SMC's tort or negligence as the proximate cause which resulted in the voyage charter, wherein the ship is leased for a single voyage. In both
sinking and total loss of M/V Doña Roberta as well as the death of its cases, the charterer provides for the hire of the vessel only, either for
officers and crew members and correspondingly in not awarding to a determinate period of time or for a single or consecutive voyage, the
petitioner Ouano the sums of money as awarded by the Trial Court in ship owner to supply the ship's store, pay for the wages of the master
the dispositive part of its decision dated 10 December 1998. of the crew, and defray the expenses for the maintenance of the ship.
Sixth Error If the charter is a contract of affreightment, which leaves the general
In any event, the Court of Appeals committed serious error of law owner in possession of the ship as owner for the voyage, the rights
and/or grave abuse of discretion in not declaring and holding and the responsibilities of ownership rest on the owner. The charterer
petitioner Ouano not liable for the claims of private respondents heirs is free from liability to third persons in respect of the ship.30
of Sabiniano Inguito, et al. and SMC under the well-established We concur with the findings of the Court of Appeals that the charter
principle in Maritime Law that the owner's liability sinks with the party in these cases was a contract of affreightment, contrary to
vessel.26 petitioner Ouano's protestation that it was a demise charter, as shown
The two petitions were consolidated. by the following stipulations in the Time Charter Party Agreement:
In deciding the cases at bar, the Court of Appeals correctly resolved 9. There shall be no employer-employee relations between the
the issues with an initial discussion of the definition and kinds of OWNER and/or its vessel's crew on one hand and the CHARTERER
charter parties. Preliminarily, a charter party is a contract by virtue of on the other. The crew of the vessel shall continue to be under the
which the owner or the agent of a vessel binds himself to transport employ, control and supervision of the OWNER. Consequently,
merchandise or persons for a fixed price. It has also been defined as damage or loss that may be attributable to the crew, including loss of
a contract by virtue of which the owner or the agent of the vessel the vessel used shall continue to be the responsibility of, and shall be
leases for a certain price the whole or a portion of the vessel for the borne, by the OWNER; the OWNER further covenants to hold the
transportation of goods or persons from one port to another.27 CHARTERER free from all claims and liabilities arising out of the acts
A charter party may either be a (1) bareboat or demise charter or (2) of the crew and the condition of the vessel;
contract of affreightment. Under a demise or bareboat charter, the 10. The OWNER shall undertake to pay all compensation of all the
charterer mans the vessel with his own people and becomes, in vessel's crew, including the benefits, premia and protection in
effect, the owner of the ship for the voyage or service stipulated, accordance with the provisions of the New Labor Code and other
subject to liability for damages caused by negligence.28 applicable laws and decrees and the rules and regulations
promulgated by competent authorities as well as all of the SSS
38
 [TRANSPORTTATION CASES PART I]
premium. Thus, it is understood that the crew of he vessel shall and message. Neither Ouano nor his son was available during the entire
always remain the employees of the OWNER; time that the vessel set out and encountered foul weather.
11. The OWNER shall be responsible to and shall indemnify the Considering that the charter was a contract of affreightment, the
CHARTERER for damages and losses arising from the incompetence shipowner had the clear duty to ensure the safe carriage and arrival of
and/or, negligence of, and/or the failure to observe the required goods transported on board its vessels. More specifically, Ouano
extraordinary diligence by the crew. It shall be automatically liable to expressly warranted in the Time Charter Party that his vessel was
the CHARTERER for shortlanded shipment and wrong levels, the seaworthy.
value of which shall be withheld from the OWNER's collectibles with For a vessel to be seaworthy, it must be adequately equipped for the
the CHARTERER. However, in the case of wrong levels, voyage and manned with a sufficient number of competent officers
CHARTERER shall immediately reimburse OWNER after the former's and crew.33 Seaworthiness is defined as the sufficiency of the vessel
laboratory shall be able to determine that the bottles were never in materials, construction, equipment, officers, men, and outfit, for the
opened after it left the Plant; trade or service in which it is employed.34 It includes the fitness of a
It appearing that Ouano was the employer of the captain and crew of ship for a particular voyage with reference to its physical and
the M/V Doña Roberta during the term of the charter, he therefore had mechanical condition, the extent of its fuel and provisions supply, the
command and control over the vessel. His son, Rico Ouano, even quality of its officers and crew, and its adaptability for the time of
testified that during the period that the vessel was under charter to voyage proposed.35
SMC, the Captain thereof had control of the navigation of all In the assailed decision, the Court of Appeals found that the
voyages.31 proximate cause of the sinking of the vessel was the negligence of
Under the foregoing definitions, as well as the clear terms of the Captain Sabiniano Inguito, thus:
Charter Party Agreement between the parties, the charterer, SMC, It appears that the proximate cause of the sinking of the vessel was
should be free from liability for any loss or damage sustained during the gross failure of the captain of the vessel to observe due care and
the voyage,32 unless it be shown that the same was due to its fault or to heed SMC's advices to take shelter. Gilbert Gonsaga, Chief
negligence. Engineer of Doña Roberta, testified that the ship sank at 2:30 in the
The evidence does not show that SMC or its employees were amiss early morning of November 13th. On the other hand, from the time the
in their duties. The facts indubitably establish that SMC's Radio vessel left the port of Mandaue at six o'clock in the morning, Exh "15
Operator, Rogelio P. Moreno, who was tasked to monitor every SMC", Exh "16 SMC", Exh "17 SMC" and Exh "18 SMC" would show
shipment of its cargo, contacted Captain Inguito as early as 7:00 a.m., that Captain Sabiniano Inguito was able to contact the radio operator
one hour after the M/V Doña Roberta departed from Mandaue, and of SMC. He was fully apprised of typhoon "Ruping" and its strength.
advised him to take shelter from typhoon Ruping. This advice was Due diligence dictates that at any time before the vessel was in
reiterated at 2:00 p.m. At that point, Moreno thought of calling distress, he should have taken shelter in order to safeguard the vessel
Ouano's son, Rico, but failed to find him. At 4:00 p.m., Moreno again and its crew. Gonsaga testified that at 7:00 a.m. of November 12,
advised Captain Inguito to take shelter and stressed the danger of 1990, he was able to talk to the captain and inquired from him what
venturing into the open sea. The Captain insisted that he can handle the message was of the radio operator of SMC. The captain answered
the situation. that they would take shelter in Tagbilaran if the wind would grow
That evening, Moreno tried in vain to contact the captain. Later at 1:15 stronger. But Gonsaga was surprised when they did not take shelter
a.m., Captain Inguito himself radioed a distress signal and asked that and, instead, proceeded with the voyage.
the same be relayed to Rico Ouano. Gonsaga further testified that at 7:00 in the evening of November 12,
In contrast to the care exercised by Moreno, Rico Ouano tried to 1990, he went up to the office of the captain when the wind was
communicate with the captain only after receiving the S.O.S. getting stronger and asked him, "What is this captain, the wind is
39
 [TRANSPORTTATION CASES PART I]
already very strong and the waves are very big, what is the message Ouano miserably failed to overcome the presumption of his
of SMC?" The captain plotted the position of the typhoon and said that negligence. He failed to present proof that he exercised the due
the typhoon is still very far per the data supplied by SMC. diligence of a bonus paterfamilias in the selection and supervision of
It is very clear that Captain Sabiniano Inguito had sufficient time within the captain of the M/V Doña Roberta. Hence, he is vicariously liable
which to secure his men and the vessel. But he waited until the vessel for the loss of lives and property occasioned by the lack of care and
was already in distress at 1:15 in the early morning of November 13m, negligence of his employee.
1990 to seek help in saving his men and the vessel. In any event, However, we cannot sustain the appellate court's finding that SMC
Capt. Inguito had full control and responsibility, whether to follow a was likewise liable for the losses. The contention that it was the
sailing order or to take shelter when already at sea. In fact, there was issuance of the sailing order by SMC which was the proximate cause
an incident when a sailing order was issued by SMC to Inguito but he of the sinking is untenable. The fact that there was an approaching
decided not to proceed with the voyage because of a tropical storm.36 typhoon is of no moment. It appears that on one previous occasion,
The foregoing factual conclusions are binding on us. Settled is the SMC issued a sailing order to the captain of the M/V Doña Roberta,
rule that findings of fact of the Court of Appeals are conclusive and but the vessel cancelled its voyage due to typhoon.40 Likewise, it
are not reviewable by this Court,37 unless the case falls under any of appears from the records that SMC issued the sailing order on
the recognized exceptions, such as: (1) when the conclusion is a November 11, 1990, before typhoon "Ruping" was first spotted at 4:00
finding grounded entirely on speculation, surmises and conjectures; a.m. of November 12, 1990.41
(2) when the inference made is manifestly mistaken, absurd or Consequently, Ouano should answer for the loss of lives and
impossible; (3) where there is a grave abuse of discretion; (4) when damages suffered by the heirs of the officers and crew members who
the judgment is based on a misapprehension of facts; (5) when the perished on board the M/V Doña Roberta, except Captain Sabiniano
findings of fact are conflicting; (6) when the Court of Appeals, in Inguito. The award of damages granted by the Court of Appeals is
making its findings, went beyond the issues of the case and the same affirmed only against Ouano, who should also indemnify SMC for the
is contrary to the admissions of both appellant and appellee; (7) when cost of the lost cargo, in the total amount of P10,278,542.40.42
the findings are contrary to those of the trial court; (8) when the WHEREFORE, in view of the foregoing, the decision of the Court of
findings of fact are conclusions without citation of specific evidence on Appeals in CA-G.R. CV No. 48296 is MODIFIED as follows: Julius C.
which they are based; (9) when the facts set forth in the petition as Ouano is ordered to pay each of the deceased officers and crew of
well as in the petitioners' main and reply briefs are not disputed by the the M/V Doña Roberta, except Captain Sabinano Inguito, death
respondents; and (10) when the findings of fact of the Court of indemnity in the amount of P50,000.00 and damages for loss of
Appeals are premised on the supposed absence of evidence and earnings in the amounts awarded by the trial court. Further, Julius C.
contradicted by the evidence on record.38 None of these exceptions Ouano is ordered to pay each deceased officer and crew members,
obtain in the case at bar. except Captain Sabiniano Inguito, including Gilbert Gonzaga,
We likewise agree with the Court of Appeals that Ouano is vicariously P100,000.00 as moral damages, P50,000.00 as exemplary damages
liable for the negligent acts of his employee, Captain Inguito. Under and P300,000.00 as attorney's fees. Finally, Julius C. Ouano is
Articles 2176 and 2180 of the Civil Code, owners and managers are ordered to pay San Miguel Corporation the sums of P10,278,542.40
responsible for damages caused by the negligence of a servant or an as actual damages.
employee, the master or employer is presumed to be negligent either SO ORDERED.
in the selection or in the supervision of that employee. This Davide, Jr., Vitug, Kapunan, and Austria-Martinez, JJ., concur.
presumption may be overcome only by satisfactorily showing that the
employer exercised the care and the diligence of a good father of a
family in the selection and the supervision of its employee.39 Endnotes:
40
 [TRANSPORTTATION CASES PART I]
1 29
 Exhs. "E", "1-Ouano", "1-SMC".  National Food Authority v. Court of Appeals, 311 SCRA 700, 708
2
 Exhs. "B", "2-Ouano", "2-SMC". [1999].
3 30
 Exhs. "8-Ouano", "8-SMC".  Caltex (Philippines), Inc. v. Sulpicio Lines, Inc., supra.
4 31
 Exh. "29-SMC".  TSN, May 11, 1993, p. 58.
5 32
 Exh. "15-SMC"; TSN, September 13, 1993, pp. 18-19, 23.  Caltex (Philippines), Inc. v. Sulpicio Lines, Inc., supra, at 717
6
 Exh. "16-SMC"; TSN, September 13, 1993, pp. 27-31, September [1999].
33
14, 1993, p. 4.  Caltex (Philippines), Inc. v. Sulpicio Lines, Inc., supra, at 719.
7 34
 TSN, September 14, 1993, p. 5.  Bouvier's Law Dictionary, Third Revision.
8 35
 Exh. "17-SMC".  Webster's Third New International Dictionary, 1993.
9 36
 TSN, September 14, 1993, pp. 6, 9.  CA Decision, pp. 20-22.
10 37
 Exh. "18-SMC".  Atillo v. Court of Appeals, 334 Phil. 546 [1997].
11 38
 TSN, September 14, 1993, p. 11.  Cebu Shipyard and Engineering Works, Inc. v. William Lines, Inc.,
12
 lbid., p. 12. 366 Phil. 439, 452 [1999].
13 39
 TSN, May 11, 1993, pp. 65-66.  Pestaño v. Sumayang 346 SCRA 870, 878-879 [2000].
14 40
 TSN, September 14, 1993, pp. 14-15.  Exhs. "19-SMC", "20-SMC", "21-SMC"; TSN, May 13, 1993, pp. 16-
15
 TSN, July 29, 1992, pp. 32-34. 22.
16 41
 Exh. "17-Ouano".  Exh. "29-SMC".
17 42
 Sabiniano Inguito, Felipe Pusa, Abundio Galon, Isidro Celetaria,  Exhs. "6-Ouano", "6-SMC".
Henry Cabigas, Pedro Abayon, Simeon Asentista, Norman Loon,
George Basilgo, Flaviano Wabena, Leonardo Presbitero, Renato
Suscano, Isagani Dayondon, Antonio Du and Gilbert Gonzaga.
18
 Record, pp. 1-11.
19
 Ibid., pp. 40-47.
20
 Ibid., pp. 263-287.
21
 Ibid., pp. 114-137.
22
 Ibid., pp. 443-460, at 458-460; penned by Executive Judge Teodoro
K. Risos.
23
 Rollo, G.R. No. 141716, pp. 69-97, at 96-97; Associate Justice
Ruben T. Reyes, ponente, Associate Justices Salome A. Montoya
and Eloy R. Bello, Jr., concurring.
24
 Resolution dated January 19, 2000; Rollo, G.R. No. 141716, pp. 99-
100.
25
 Rollo, G.R. No. 141716, p. 32.
26
 Rollo, G.R. No. 142025, pp. 13-14.
27
 4 Agbayani, Commentaries and Jurisprudence on the Commercial
Laws of the Philippines, 277 [1993].
28
 Caltex (Philippines), Inc. v. Sulpicio Lines, Inc., 315 SCRA 709,
716-717 [1999].

41
 [TRANSPORTTATION CASES PART I]
G.R. No. 101503 September 15, 1993 presented clean for use in bulk to the satisfaction of the inspector
PLANTERS PRODUCTS, INC., petitioner, before daytime commences. (emphasis supplied)
vs. After the Urea fertilizer was loaded in bulk by stevedores hired by and
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND under the supervision of the shipper, the steel hatches were closed
KYOSEI KISEN KABUSHIKI KAISHA, respondents. with heavy iron lids, covered with three (3) layers of tarpaulin, then
Gonzales, Sinense, Jimenez & Associates for petitioner. tied with steel bonds. The hatches remained closed and tightly sealed
Siguion Reyna, Montecillo & Ongsiako Law Office for private throughout the entire voyage.5
respondents. Upon arrival of the vessel at her port of call on 3 July 1974, the steel
pontoon hatches were opened with the use of the vessel's boom.
BELLOSILLO, J.: Petitioner unloaded the cargo from the holds into its steelbodied dump
Does a charter-party1 between a shipowner and a charterer transform trucks which were parked alongside the berth, using metal scoops
a common carrier into a private one as to negate the civil law attached to the ship, pursuant to the terms and conditions of the
presumption of negligence in case of loss or damage to its cargo? charter-partly (which provided for an F.I.O.S. clause).6 The hatches
Planters Products, Inc. (PPI), purchased from Mitsubishi International remained open throughout the duration of the discharge.7
Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric Each time a dump truck was filled up, its load of Urea was covered
tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 with tarpaulin before it was transported to the consignee's warehouse
June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private located some fifty (50) meters from the wharf. Midway to the
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, warehouse, the trucks were made to pass through a weighing scale
Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, where they were individually weighed for the purpose of ascertaining
as evidenced by Bill of Lading No. KP-1 signed by the master of the the net weight of the cargo. The port area was windy, certain portions
vessel and issued on the date of departure. of the route to the warehouse were sandy and the weather was
On 17 May 1974, or prior to its voyage, a time charter-party on the variable, raining occasionally while the discharge was in
vessel M/V "Sun Plum" pursuant to the Uniform General Charter2 was progress.8 The petitioner's warehouse was made of corrugated
entered into between Mitsubishi as shipper/charterer and KKKK as galvanized iron (GI) sheets, with an opening at the front where the
shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-party dump trucks entered and unloaded the fertilizer on the warehouse
starting from par. 16 to 40 were attached to the pre-printed floor. Tarpaulins and GI sheets were placed in-between and alongside
agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also the trucks to contain spillages of the ferilizer.9
subsequently entered into on the 18th, 20th, 21st and 27th of May It took eleven (11) days for PPI to unload the cargo, from 5 July to 18
1974, respectively. July 1974 (except July 12th, 14th and 18th).10 A private marine and
Before loading the fertilizer aboard the vessel, four (4) of her cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was
holds4 were all presumably inspected by the charterer's representative hired by PPI to determine the "outturn" of the cargo shipped, by taking
and found fit to take a load of urea in bulk pursuant to par. 16 of the draft readings of the vessel prior to and after discharge. 11 The survey
charter-party which reads: report submitted by CSCI to the consignee (PPI) dated 19 July 1974
16. . . . At loading port, notice of readiness to be accomplished by revealed a shortage in the cargo of 106.726 M/T and that a portion of
certificate from National Cargo Bureau inspector or substitute the Urea fertilizer approximating 18 M/T was contaminated with dirt.
appointed by charterers for his account certifying the vessel's The same results were contained in a Certificate of
readiness to receive cargo spaces. The vessel's hold to be properly Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which
swept, cleaned and dried at the vessel's expense and the vessel to be showed that the cargo delivered was indeed short of 94.839 M/T and
about 23 M/T were rendered unfit for commerce, having been polluted
42
 [TRANSPORTTATION CASES PART I]
with sand, rust and KKKK was a private carrier and not a common carrier by reason of the
dirt. 12 time charterer-party. Accordingly, the Civil Code provisions on
Consequently, PPI sent a claim letter dated 18 December 1974 to common carriers which set forth a presumption of negligence do not
Soriamont Steamship Agencies (SSA), the resident agent of the find application in the case at bar. Thus —
carrier, KKKK, for P245,969.31 representing the cost of the alleged . . . In the absence of such presumption, it was incumbent upon the
shortage in the goods shipped and the diminution in value of that plaintiff-appellee to adduce sufficient evidence to prove the
portion said to have been contaminated with dirt. 13 negligence of the defendant carrier as alleged in its complaint. It is an
Respondent SSA explained that they were not able to respond to the old and well settled rule that if the plaintiff, upon whom rests the
consignee's claim for payment because, according to them, what they burden of proving his cause of action, fails to show in a satisfactory
received was just a request for shortlanded certificate and not a manner the facts upon which he bases his claim, the defendant is
formal claim, and that this "request" was denied by them because they under no obligation to prove his exception or defense
"had nothing to do with the discharge of the shipment." 14 Hence, on (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing
18 July 1975, PPI filed an action for damages with the Court of First Belen v. Belen, 13 Phil. 202).
Instance of Manila. The defendant carrier argued that the strict public But, the record shows that the plaintiff-appellee dismally failed to
policy governing common carriers does not apply to them because prove the basis of its cause of action, i.e. the alleged negligence of
they have become private carriers by reason of the provisions of the defendant carrier. It appears that the plaintiff was under the
charter-party. The court a quo however sustained the claim of the impression that it did not have to establish defendant's negligence. Be
plaintiff against the defendant carrier for the value of the goods lost or that as it may, contrary to the trial court's finding, the record of the
damaged when it ruled thus: 15 instant case discloses ample evidence showing that defendant carrier
. . . Prescinding from the provision of the law that a common carrier is was not negligent in performing its obligation . . . 18 (emphasis
presumed negligent in case of loss or damage of the goods it supplied).
contracts to transport, all that a shipper has to do in a suit to recover Petitioner PPI appeals to us by way of a petition for review assailing
for loss or damage is to show receipt by the carrier of the goods and the decision of the Court of Appeals. Petitioner theorizes that
to delivery by it of less than what it received. After that, the burden of the Home Insurance case has no bearing on the present controversy
proving that the loss or damage was due to any of the causes which because the issue raised therein is the validity of a stipulation in the
exempt him from liability is shipted to the carrier, common or private charter-party delimiting the liability of the shipowner for loss or
he may be. Even if the provisions of the charter-party aforequoted are damage to goods cause by want of due deligence on its part or that of
deemed valid, and the defendants considered private carriers, it was its manager to make the vessel seaworthy in all respects, and not
still incumbent upon them to prove that the shortage or contamination whether the presumption of negligence provided under the Civil Code
sustained by the cargo is attributable to the fault or negligence on the applies only to common carriers and not to private
part of the shipper or consignee in the loading, stowing, trimming and carriers. 19 Petitioner further argues that since the possession and
discharge of the cargo. This they failed to do. By this omission, control of the vessel remain with the shipowner, absent any stipulation
coupled with their failure to destroy the presumption of negligence to the contrary, such shipowner should made liable for the negligence
against them, the defendants are liable (emphasis supplied). of the captain and crew. In fine, PPI faults the appellate court in not
On appeal, respondent Court of Appeals reversed the lower court and applying the presumption of negligence against respondent carrier,
absolved the carrier from liability for the value of the cargo that was and instead shifting the onus probandi on the shipper to show want of
lost or damaged. 16 Relying on the 1968 case of Home Insurance due deligence on the part of the carrier, when he was not even at
Co. v. American Steamship Agencies, Inc.,17 the appellate court ruled hand to witness what transpired during the entire voyage.
that the cargo vessel M/V "Sun Plum" owned by private respondent
43
 [TRANSPORTTATION CASES PART I]
As earlier stated, the primordial issue here is whether a common Article 1733 of the New Civil Code mandates that common carriers,
carrier becomes a private carrier by reason of a charter-party; in the by reason of the nature of their business, should observe
negative, whether the shipowner in the instant case was able to prove extraordinary diligence in the vigilance over the goods they carry.25 In
that he had exercised that degree of diligence required of him under the case of private carriers, however, the exercise of ordinary
the law. diligence in the carriage of goods will suffice. Moreover, in the case of
It is said that etymology is the basis of reliable judicial decisions in loss, destruction or deterioration of the goods, common carriers are
commercial cases. This being so, we find it fitting to first define presumed to have been at fault or to have acted negligently, and the
important terms which are relevant to our discussion. burden of proving otherwise rests on them.26 On the contrary, no such
A "charter-party" is defined as a contract by which an entire ship, or presumption applies to private carriers, for whosoever alleges
some principal part thereof, is let by the owner to another person for a damage to or deterioration of the goods carried has the onus of
specified time or use; 20 a contract of affreightment by which the owner proving that the cause was the negligence of the carrier.
of a ship or other vessel lets the whole or a part of her to a merchant It is not disputed that respondent carrier, in the ordinary course of
or other person for the conveyance of goods, on a particular voyage, business, operates as a common carrier, transporting goods
in consideration of the payment of freight; 21 Charter parties are of two indiscriminately for all persons. When petitioner chartered the vessel
types: (a) contract of affreightment which involves the use of shipping M/V "Sun Plum", the ship captain, its officers and compliment were
space on vessels leased by the owner in part or as a whole, to carry under the employ of the shipowner and therefore continued to be
goods for others; and, (b) charter by demise or bareboat charter, by under its direct supervision and control. Hardly then can we charge
the terms of which the whole vessel is let to the charterer with a the charterer, a stranger to the crew and to the ship, with the duty of
transfer to him of its entire command and possession and consequent caring for his cargo when the charterer did not have any control of the
control over its navigation, including the master and the crew, who are means in doing so. This is evident in the present case considering
his servants. Contract of affreightment may either be time charter, that the steering of the ship, the manning of the decks, the
wherein the vessel is leased to the charterer for a fixed period of time, determination of the course of the voyage and other technical
or voyage charter, wherein the ship is leased for a single voyage. 22 In incidents of maritime navigation were all consigned to the officers and
both cases, the charter-party provides for the hire of vessel only, crew who were screened, chosen and hired by the shipowner. 27
either for a determinate period of time or for a single or consecutive It is therefore imperative that a public carrier shall remain as such,
voyage, the shipowner to supply the ship's stores, pay for the wages notwithstanding the charter of the whole or portion of a vessel by one
of the master and the crew, and defray the expenses for the or more persons, provided the charter is limited to the ship only, as in
maintenance of the ship. the case of a time-charter or voyage-charter. It is only when the
Upon the other hand, the term "common or public carrier" is defined in charter includes both the vessel and its crew, as in a bareboat or
Art. 1732 of the Civil Code. 23 The definition extends to carriers either demise that a common carrier becomes private, at least insofar as the
by land, air or water which hold themselves out as ready to engage in particular voyage covering the charter-party is concerned. Indubitably,
carrying goods or transporting passengers or both for compensation a shipowner in a time or voyage charter retains possession and
as a public employment and not as a casual occupation. The control of the ship, although her holds may, for the moment, be the
distinction between a "common or public carrier" and a "private or property of the charterer. 28
special carrier" lies in the character of the business, such that if the Respondent carrier's heavy reliance on the case of Home Insurance
undertaking is a single transaction, not a part of the general business Co. v. American Steamship Agencies, supra, is misplaced for the
or occupation, although involving the carriage of goods for a fee, the reason that the meat of the controversy therein was the validity of a
person or corporation offering such service is a private carrier. 24 stipulation in the charter-party exempting the shipowners from liability
for loss due to the negligence of its agent, and not the effects of a
44
 [TRANSPORTTATION CASES PART I]
special charter on common carriers. At any rate, the rule in the United weight of the steel covers made it impossible for a person to open
States that a ship chartered by a single shipper to carry special cargo without the use of the ship's boom. 32
is not a common carrier, 29 does not find application in our jurisdiction, It was also shown during the trial that the hull of the vessel was in
for we have observed that the growing concern for safety in the good condition, foreclosing the possibility of spillage of the cargo into
transportation of passengers and /or carriage of goods by sea the sea or seepage of water inside the hull of the vessel. 33 When M/V
requires a more exacting interpretation of admiralty laws, more "Sun Plum" docked at its berthing place, representatives of the
particularly, the rules governing common carriers. consignee boarded, and in the presence of a representative of the
We quote with approval the observations of Raoul Colinvaux, the shipowner, the foreman, the stevedores, and a cargo surveyor
learned barrister-at-law 30 — representing CSCI, opened the hatches and inspected the condition
As a matter of principle, it is difficult to find a valid distinction between of the hull of the vessel. The stevedores unloaded the cargo under the
cases in which a ship is used to convey the goods of one and of watchful eyes of the shipmates who were overseeing the whole
several persons. Where the ship herself is let to a charterer, so that operation on rotation basis. 34
he takes over the charge and control of her, the case is different; the Verily, the presumption of negligence on the part of the respondent
shipowner is not then a carrier. But where her services only are let, carrier has been efficaciously overcome by the showing of
the same grounds for imposing a strict responsibility exist, whether he extraordinary zeal and assiduity exercised by the carrier in the care of
is employed by one or many. The master and the crew are in each the cargo. This was confirmed by respondent appellate court thus —
case his servants, the freighter in each case is usually without any . . . Be that as it may, contrary to the trial court's finding, the record of
representative on board the ship; the same opportunities for fraud or the instant case discloses ample evidence showing that defendant
collusion occur; and the same difficulty in discovering the truth as to carrier was not negligent in performing its obligations. Particularly, the
what has taken place arises . . . following testimonies of plaintiff-appellee's own witnesses clearly
In an action for recovery of damages against a common carrier on the show absence of negligence by the defendant carrier; that the hull of
goods shipped, the shipper or consignee should first prove the fact of the vessel at the time of the discharge of the cargo was sealed and
shipment and its consequent loss or damage while the same was in nobody could open the same except in the presence of the owner of
the possession, actual or constructive, of the carrier. Thereafter, the the cargo and the representatives of the vessel (TSN, 20 July 1977, p.
burden of proof shifts to respondent to prove that he has exercised 14); that the cover of the hatches was made of steel and it was
extraordinary diligence required by law or that the loss, damage or overlaid with tarpaulins, three layers of tarpaulins and therefore their
deterioration of the cargo was due to fortuitous event, or some other contents were protected from the weather (TSN, 5 April 1978, p. 24);
circumstances inconsistent with its liability. 31 and, that to open these hatches, the seals would have to be broken,
To our mind, respondent carrier has sufficiently overcome, by clear all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16)
and convincing proof, the prima facie presumption of negligence. (emphasis supplied).
The master of the carrying vessel, Captain Lee Tae Bo, in his The period during which private respondent was to observe the
deposition taken on 19 April 1977 before the Philippine Consul and degree of diligence required of it as a public carrier began from the
Legal Attache in the Philippine Embassy in Tokyo, Japan, testified time the cargo was unconditionally placed in its charge after the
that before the fertilizer was loaded, the four (4) hatches of the vessel vessel's holds were duly inspected and passed scrutiny by the
were cleaned, dried and fumigated. After completing the loading of the shipper, up to and until the vessel reached its destination and its hull
cargo in bulk in the ship's holds, the steel pontoon hatches were was reexamined by the consignee, but prior to unloading. This is clear
closed and sealed with iron lids, then covered with three (3) layers of from the limitation clause agreed upon by the parties in the Addendum
serviceable tarpaulins which were tied with steel bonds. The hatches to the standard "GENCON" time charter-party which provided for an
remained close and tightly sealed while the ship was in transit as the F.I.O.S., meaning, that the loading, stowing, trimming and discharge
45
 [TRANSPORTTATION CASES PART I]
of the cargo was to be done by the charterer, free from all risk and potent and usable although no longer saleable in its original market
expense to the carrier. 35 Moreover, a shipowner is liable for damage value.
to the cargo resulting from improper stowage only when the stowing is The probability of the cargo being damaged or getting mixed or
done by stevedores employed by him, and therefore under his control contaminated with foreign particles was made greater by the fact that
and supervision, not when the same is done by the consignee or the fertilizer was transported in "bulk," thereby exposing it to the
stevedores under the employ of the latter. 36 inimical effects of the elements and the grimy condition of the various
Article 1734 of the New Civil Code provides that common carriers are pieces of equipment used in transporting and hauling it.
not responsible for the loss, destruction or deterioration of the goods if The evidence of respondent carrier also showed that it was highly
caused by the charterer of the goods or defects in the packaging or in improbable for sea water to seep into the vessel's holds during the
the containers. The Code of Commerce also provides that all losses voyage since the hull of the vessel was in good condition and her
and deterioration which the goods may suffer during the transportation hatches were tightly closed and firmly sealed, making the M/V "Sun
by reason of fortuitous event, force majeure, or the inherent defect of Plum" in all respects seaworthy to carry the cargo she was chartered
the goods, shall be for the account and risk of the shipper, and that for. If there was loss or contamination of the cargo, it was more likely
proof of these accidents is incumbent upon the carrier. 37 The carrier, to have occurred while the same was being transported from the ship
nonetheless, shall be liable for the loss and damage resulting from the to the dump trucks and finally to the consignee's warehouse. This may
preceding causes if it is proved, as against him, that they arose be gleaned from the testimony of the marine and cargo surveyor of
through his negligence or by reason of his having failed to take the CSCI who supervised the unloading. He explained that the 18 M/T of
precautions which usage has established among careful persons. 38 alleged "bar order cargo" as contained in their report to PPI was just
Respondent carrier presented a witness who testified on the an approximation or estimate made by them after the fertilizer was
characteristics of the fertilizer shipped and the expected risks of bulk discharged from the vessel and segregated from the rest of the cargo.
shipping. Mr. Estanislao Chupungco, a chemical engineer working The Court notes that it was in the month of July when the vessel
with Atlas Fertilizer, described Urea as a chemical compound arrived port and unloaded her cargo. It rained from time to time at the
consisting mostly of ammonia and carbon monoxide compounds harbor area while the cargo was being discharged according to the
which are used as fertilizer. Urea also contains 46% nitrogen and is supply officer of PPI, who also testified that it was windy at the
highly soluble in water. However, during storage, nitrogen and waterfront and along the shoreline where the dump trucks passed
ammonia do not normally evaporate even on a long voyage, provided enroute to the consignee's warehouse.
that the temperature inside the hull does not exceed eighty (80) Indeed, we agree with respondent carrier that bulk shipment of highly
degrees centigrade. Mr. Chupungco further added that in unloading soluble goods like fertilizer carries with it the risk of loss or damage.
fertilizer in bulk with the use of a clamped shell, losses due to spillage More so, with a variable weather condition prevalent during its
during such operation amounting to one percent (1%) against the bill unloading, as was the case at bar. This is a risk the shipper or the
of lading is deemed "normal" or "tolerable." The primary cause of owner of the goods has to face. Clearly, respondent carrier has
these spillages is the clamped shell which does not seal very tightly. sufficiently proved the inherent character of the goods which makes it
Also, the wind tends to blow away some of the materials during the highly vulnerable to deterioration; as well as the inadequacy of its
unloading process. packaging which further contributed to the loss. On the other hand, no
The dissipation of quantities of fertilizer, or its daterioration in value, is proof was adduced by the petitioner showing that the carrier was
caused either by an extremely high temperature in its place of remise in the exercise of due diligence in order to minimize the loss or
storage, or when it comes in contact with water. When Urea is damage to the goods it carried.
drenched in water, either fresh or saline, some of its particles WHEREFORE, the petition is DISMISSED. The assailed decision of
dissolve. But the salvaged portion which is in liquid form still remains the Court of Appeals, which reversed the trial court, is AFFIRMED.
46
 [TRANSPORTTATION CASES PART I]
Consequently, Civil Case No. 98623 of the then Court of the First 8 TSN, 20 July 1977, p. 18.
Instance, now Regional Trial Court, of Manila should be, as it is 9 Rollo, p. 130.
hereby DISMISSED. 10 Id., p. 129; ADDENDUM No. 4 dated 17 May 1974 provides: "The
Costs against petitioner. cargo to be discharged at the average rate of 1,000 metric tons per
SO ORDERED. day of 24 hours weather working days, Sundays, holidays excluded
Davide, Jr. and Quiason, JJ., concur. unless used, assuming four (4) sets of vessel's gear simultaneously
Cruz, J., took no part. workable a vessel's bearthing side."
Griño-Aquino, J., is on leave. 11 TSN, 5 April 1978, pp. 7-8. "Drop survey" is the drop of the vessel
  showing certain meters or centimeters of the vessel. In the ship there
# Footnotes is a draft from one meter upward. When the vessel arrives, (CSCI)
1 A charter-party is a contract by which an entire ship or some conducted initial draft survey before discharging, together with the
principal part thereof, is let by the owner to another person for a ship's representative by getting the draft forward and aft. They divided
specified time or use (70 Am Jur 2d, it by 2 to get the mean draft and the average draft. After getting the
p. 580, citing Ward v. Thompson, 63 US 330, 16 L Ed 249; a contract mean draft, they got the displacement scale of the vessel to show
in which the owner of a vessel lets for consideration the whole or part certain tons of the ship, then deducted the non-cargo weight, like the
thereof for the conveyance of goods and/or passengers on a fuel oil, the freshwater. Finally, the total load of the ship is taken. After
particular voyage to one or more places or until the expiration of a discharging, CSCI went over same procedure to get the weight of the
specified time and surrender unto the lessee or charterer the control, vessel. These figures were then subtracted from the total load of the
by vesting upon the latter the right to appoint the captain, officers and ships to get the weight of the cargo.
members of the crew, of the vessel leased or chartered during the 12 Id., p. 106.
duration of the contract (R.A. 913). 13 Id., pp. 49, 68.
2 The Baltic and International Maritime Uniform General Charter (As 14 TSN, 28 Aug. 1979, pp. 9-10.
Revised 1922 and 1976), Including "F.I.O.S." Alternative, etc., Code 15 Id., p. 68 "Planters Products, Inc. v. Soriamont Steamship
Name: "GENCON" Adopted by the Documentary Committee of the Agencies, et al., "Civil Case No. 98623, CFI of Manila, Br. 27, decision
General Council of British Shipping, London, and the Documentary penned by Judge E.L. Peralta, 24 March 1980.
Committee of the Japan Shipping Exchange, Inc., Tokyo. 16 The Court of Appeals (Twelfth Division) rendered its decision on 13
3 Rollo, pp. 105, 128. August 1991 in CA-G.R. CV No. 02736 entitled "Planters Products,
4 Although par. 40 of the Rider (Description of "Sun Plum") states that Inc. vs. Kyosei Kisen Kabushiki Kaisha & Soriamont Steamship
the vessel has 3 holds/3 hatches, Hatch No. 4 which usually was not Agencies." Decision penned by Justice Alfredo L. Benipayo,
used for cargo, was converted for such purpose. The time sheet for concurred in by Justices Manuel C. Herrera and Cancio C.
12 July 1974 shows that Hatch Garcia, Rollo, pp. 13-24.
No. 4 was first to be discharge of cargo. This was also testified by the 17 No. L-25599, 4 April 1968, 23 SCRA 24.
master of the vessel, Captain Lee Tae Bo. 18 Rollo, p. 109.
5 Id., p. 129. 19 Rollo, pp. 8 & 9.
6 Under the terms and conditions of the charter-party, F.I.O.S. (Free 20 Charter Partis; Charters of Demise and Contracts of Affreightment;
In and Out Shipping/Stevedoring) means that the shipper takes care 70 Am Jur 2d, p. 580; citing Ward v. Thompson, 63 US 330, 16 L d
of the loading, while the unloading is the sole responsibility of the 249; E.R. Harvey Ivamy, Carriage of Goods by Sea, 13th Ed., Chap.
consignee (Rollo, pp. 128, 184). 2, pp. 5, 8-10. The term is also defined under R.A. No. 913, known as
7 TSN, 20 July 1977, p. 17. "An Act Defining 'Lease' or 'Charter' of Vessels" as to mean a
47
 [TRANSPORTTATION CASES PART I]
"contract in which the owner of a vessel lets for consideration the 32 Deposition of Capt. Lee Tae Bo, Exh. "4", pp. 22-23.
whole or principal part thereof for the conveyance of goods and/or 33 TSN, 20 July 1977, p. 14.
passengers on a particular voyage to one or more places or until the 34 TSN, 5 April 1978, pp. 24-25.
expiration of a specified time and surrenders unto the lessee or 35 See Note 6.
charterer the control, by vesting upon the latter the right to appoint the 36 70 Am Jur 2d, p. 603 S 230, citing Oxford Paper Co. v. The
captain, officers and members of the crew, of the vessel leased or Nidarholm, 282 US 681, 75L ed 614, 51 S Ct 266.
chartered during the duration of the contract." 37 Art. 361, par. 4, Code of Commerce.
21 Bouvier's Law Dictionary, Third Rev., Vol. I, p. 470. 38 Art. 362, par. 1, id.
22 Id., pp. 581-582.
23 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.
24 See De Guzman v. Court of Appeals, No. L-47822, 22 December
1988, 168 SCRA 612; U.S. v. Quinajon, No. 8686, 30 July 1915.
25 Art. 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in Arts. 1734, 1735 and 1745, Nos. 5, 6 and 7, while the
extraordinary diligence for the safety of the passengers is further set
forth in Arts. 1755 and 1756.
26 Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4
and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed
extraordinary diligence as required in article 1733.
27 E.R. Harvey Ivamy, pp. 8-10.
28 70 Am Jur 2nd, P, 608 S 238, citing Grace v. Palmer, 21 US 605, 5
L Ed 696, and Kerry v. Pacific Marine Co., 12 CAL 564, 54, p. 89.
29 30 C.J.S., pp. 269-693.
30 British Shipping Laws, Vol. 2, "Carver's Carriage by Sea," By
Raoul Colinvaux, Vol. 1, 12th Ed., Published by Stevens & Sons
Limited of London, Printed in Great Britain, 1971.
31 See Ynchausti Steamship Co. v. Dexter, No. 15652, 41 Phil. 289,
14 Dec. 1920; Mirasol v. Robert Dollar, Co., No. 29721, 53 Phil. 124,
27 March 1929.
48