transpo case 1

8/13/2019 Transpo Case 1

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Pedro de Guzman v. Court of AppealsG.R. No. L-47822, December 22, 1988PARTIES:

Pedro de Guzman, petitioner

Court of Appeals and Ernesto Cendana, respondents

BRIEF STATEMENT OF THE CASE:

Breach of the contract to carry Extraordinary diligence needed over common carriers

BRIEF STATEMENT OF THE FACTS:

Ernesto Cendana was engaged in buying up used bottles and scrap metal inPangasinan. Upon gathering

sufficient quantities of such scrap material, respondent would bring such material to Manila for resale.

He utilized (2) two six-wheeler trucks which he owned for the purpose. Upon returning to Pangasinan,

he would load his vehicle with cargo belonging to different merchants to different establishments inPangasisnan which respondents charged a freight fee for. Sometime in November 1970, herein

petitioner Pedro de Guzman, a merchant and dealer of General Milk Company Inc. in Pangasinan

contracted with respondent for hauling 750 cartons of milk. Unfortunately, only 150 cartons made it, as

the other 600 cartons were intercepted by hijackers along Marcos Highway. Hence, petitioners

commenced an action against private respondent. In his defense, respondent argued that he cannot be

held liable due to force majuere, and that he is not a common carrier and hence is not required to

exercise extraordinary diligence. On appeal before the Court of Appeals, Cendana urged that the trial

court had erred in considering him a common carrier; in finding that he had habitually offered trucking

services to the public; in not exempting him from liability on the ground of force majeure; and in

ordering him to pay damages and attorneys fees. The Court of Appeals reversed the judgment of thetrial court and held that Cendana had been engaged in transporting return loads of freight as a casual

occupation a sideline to his scrap iron business and not as a common carrier. DeGuzman came to the

Supreme Court by way of a Petition for Review.

ISSUES:

1. Is respondent a common carrier?

2. Is the respondent liable for the loss of the cartons of milk due to force majeure?

ARGUMENTS:

1. Herein respondent is considered as a common carrier. Article 1732 of the New Civil Code avoidsany distinction between one whose principal business activity is the carrying of persons or goods

or both and one who does such carrying only as an ancillary activity. It also avoids a distinction

between a person or enterprise offering transportation services on a regular or scheduled basis

and one offering such services on an occasional, episodic, and unscheduled basis.2. Respondent

is not liable for the value of the undelivered merchandise. Article 1734 of the Civil Code- The


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general rule is established by the article that common carriers are responsible for the loss,

destruction or deterioration of the goods which they carry, unless the same is due to any of the

following causes only: a. Flood, storm, earthquake, lightning or other natural disasters; b. Act of

the public enemy, whether international or civil ;c. Act or omission of the shipper or owner of

the goods; d. Character of the goods or defects in the packing; e. Order or act of competent

public authority. Applying the above article, we note firstly that the specific cause alleged in the

instant case the hijacking of the carrier's truck does not fall within any of the five

(5)categories of exempting causes listed in Article 1734. It would follow; therefore, that the

hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735,in other

words, the private respondent as common carrier is presumed to have been at fault or to have

acted negligently. This presumption, however, may be overthrown by proof of extraordinary

diligence on the part of private respondent.

2. Article 1745: Any of the following or similar stipulations shall be considered unreasonable,unjust and contrary to public policy:

THIRD DIVISION

SPOUSES DANTE CRUZ and

LEONORA CRUZ,

Petitioners,

- versus -

SUN HOLIDAYS, INC.,

Respondent.

G.R. No. 186312

Present:

CARPIO MORALES, J.,

Chairperson,

BRION,

BERSAMIN,

ABAD,* and

VILLARAMA, JR., JJ.


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Promulgated

June 29, 2010

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D E C I S I O N

CARPIO MORALES, J.:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001[1] against

Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from

the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on

board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental

Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by

respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by

virtue of a tour package-contract with respondent that included transportation to and from the Resort

and the point of departure in Batangas.

Miguel C. Matute (Matute),[2] a scuba diving instructor and one of the survivors, gave his account

of the incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave

the Resort in the afternoon of September 10, 2000, but was advised to stay for another night because of

strong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including

petitioners son and his wife trekked to the other side of the Coco Beach mountain that was sheltered

from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and

into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the

captain to step forward to the front, leaving the wheel to one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B

Coco Beach III capsized putting all passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing

the captain, Matute and the other passengers who reached the surface asked him what they could do to

save the people who were still trapped under the boat. The captain replied Iligtas niyo na lang ang

sarili niyo (Just save yourselves).


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Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera

passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of

18 passengers and four crew members, who were brought to Pisa Island. Eight passengers, including

petitioners son and his wife, died during the incident

At the time of Ruelitos death, he was 28 years old and employed as a contractual worker forMitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.[3]

Petitioners, by letter of October 26, 2000,[4] demanded indemnification from respondent for the

death of their son in the amount of at least P4,000,000

Replying, respondent, by letter dated November 7, 2000,[5] denied any responsibility for the

incident which it considered to be a fortuitous event. It nevertheless offered, as an act of

commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.

As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging

that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sailnotwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and

Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.[6]

In its Answer,[7] respondent denied being a common carrier, alleging that its boats are not

available to the general public as they only ferry Resort guests and crew members. Nonetheless, it

claimed that it exercised the utmost diligence in ensuring the safety of its passengers; contrary to

petitioners allegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the

voyage; and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its

passengers. By way of Counterclaim, respondent alleged that it is entitled to an award for attorneys

fees and litigation expenses amounting to not less than P300,000.

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four

conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance

from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the

Resorts assistant manager.*8+ He added that M/B Coco Beach III met all four conditions on September

11, 2000,[9] but a subasco or squall, characterized by strong winds and big waves, suddenly occurred,

causing the boat to capsize.[10]

By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed petitioners

Complaint and respondents Counterclaim.

Petitioners Motion for Reconsideration having been denied by Order dated September 2,

2005,[12] they appealed to the Court of Appeals.

By Decision of August 19, 2008,[13] the appellate court denied petitioners appeal, holding, among other

things, that the trial court correctly ruled that respondent is a private carrier which is only required to

observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its


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guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a

fortuitous event.

Petitioners Motion for Reconsideration having been denied by Resolution dated January 16,

2009,[14] they filed the present Petition for Review.[15]

Petitioners maintain the position they took before the trial court, adding that respondent is a common

carrier since by its tour package, the transporting of its guests is an integral part of its resort business.

They inform that another division of the appellate court in fact held respondent liable for damages to

the other survivors of the incident

Upon the other hand, respondent contends that petitioners failed to present evidence to prove

that it is a common carrier; that the Resorts ferry services for guests cannot be considered as ancillary

to its business as no income is derived therefrom; that it exercised extraordinary diligence as shown by

the conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was caused

by a fortuitous event without any contributory negligence on its part; and that the other case wherein

the appellate court held it liable for damages involved different plaintiffs, issues and evidence.[16]

The petition is impressed with merit.

Petitioners correctly rely on De Guzman v. Court of Appeals[17] in characterizing respondent as a

common carrier.

The Civil Code defines common carriers in the following terms

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the

business of carrying or transporting passengers or goods or both, by land, water, or air for

compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the

carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in

local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person

or enterprise offering transportation service on a regular or scheduled basis and one offering such

service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between

a carrier offering its services to the general public, i.e., the general community or population, and one

who offers services or solicits business only from a narrow segment of the general population. We think

that Article 1733 deliberately refrained from making such distinctions

So understood, the concept of common carrier under Article 1732 may be seen to coincide

neatly with the notion of public service, under the Public Service Act (Commonwealth Act No. 1416, as

amended) which at least partially supplements the law on common carriers set forth in the Civil Code.

Under Section 13, paragraph (b) of the Public Service Act, public service includes:


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Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of

voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondents position does

not impress.

The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone

warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzonwhich would also affect the province of Mindoro.[22] By the testimony of Dr. Frisco Nilo, supervising

weather specialist of PAGASA, squalls are to be expected under such weather condition.[23]

A very cautious person exercising the utmost diligence would thus not brave such stormy weather

and put other peoples lives at risk. The extraordinary diligence required of common carriers demands

that they take care of the goods or lives entrusted to their hands as if they were their own. This

respondent failed to do.

Respondents insistence that the incident was caused by a fortuitous event does not impress either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpectedoccurrence, or the failure of the debtors to comply with their obligations, must have been independent

of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or,

if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for

the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from

any participation in the aggravation of the resulting injury to the creditor.[24]

To fully free a common carrier from any liability, the fortuitous event must have been the

proximate and only cause of the loss. And it should have exercised due diligence to prevent or minimize

the loss before, during and after the occurrence of the fortuitous event.[25]

Respondent cites the squall that occurred during the voyage as the fortuitous event that

overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected

under the weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach

III suffered engine trouble before it capsized and sank.[26] The incident was, therefore, not completely

free from human intervention.

The Court need not belabor how respondents evidence likewise fails to demonstrate that it

exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the

squall.


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Article 1764[27] vis--vis Article 2206[28] of the Civil Code holds the common carrier in breach of its

contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for

death, (2) indemnity for loss of earning capacity and (3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.[29]

As for damages representing unearned income, the formula for its computation is:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary

living expenses).

Life expectancy is determined in accordance with the formula:

2 / 3 x [80 age of deceased at the time of death][30]

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death])

adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table

of Mortality.[31]

The second factor is computed by multiplying the life expectancy by the net earnings of the deceased,

i.e., the total earnings less expenses necessary in the creation of such earnings or income and less living

and other incidental expenses.[32] The loss is not equivalent to the entire earnings of the deceased, but

only such portion as he would have used to support his dependents or heirs. Hence, to be deducted

from his gross earnings are the necessary expenses supposed to be used by the deceased for his own

needs.[33]

In computing the third factornecessary living expense, Smith Bell Dodwell Shipping Agency Corp. v.

Borja[34] teaches that when, as in this case, there is no showing that the living expenses constituted the

smaller percentage of the gross income, the living expenses are fixed at half of the gross income.

Applying the above guidelines, the Court determines Ruelito's life expectancy as follows

Life expectancy = 2/3 x [80 - age of deceased at the time of death]

2/3 x [80 - 28]

2/3 x [52]

Life expectancy = 35

Documentary evidence shows that Ruelito was earning a basic monthly salary of $900[35] which, when

converted to Philippine peso applying the annual average exchange rate of $1 = P44 in 2000,[36]

amounts to P39,600. Ruelitos net earning capacity is thus computed as follows:

Net Earning Capacity = life expectancy x (gross annual income -


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reasonable and necessary living expenses).

= 35 x (P475,200 - P237,600)

= 35 x (P237,600)

Net Earning Capacity = P8,316,000

Respecting the award of moral damages, since respondent common carriers breach of contract of

carriage resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206 of the Civil

Code, petitioners are entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence required of common

carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary damages,which are granted in contractual obligations if the defendant acted in a wanton, fraudulent, reckless,

oppressive or malevolent manner.[37]

Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral

damages and P100,000 as exemplary damages.[38]

Pursuant to Article 2208[39] of the Civil Code, attorney's fees may also be awarded where exemplary

damages are awarded. The Court finds that 10% of the total amount adjudged against respondent is

reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals[40] teaches that when an obligation, regardlessof its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor

can be held liable for payment of interest in the concept of actual and compensatory damages, subject

to the following rules, to wit

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or

forbearance of money, the interest due should be that which may have been stipulated in writing.

Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In

the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,

i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil

Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on

the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per

annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until

the demand can be established with reasonable certainty. Accordingly, where the demand is established

with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or

extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the


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time the demand is made, the interest shall begin to run only from the date the judgment of the court is

made (at which time the quantification of damages may be deemed to have been reasonably

ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount

finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rateof legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per

annum from such finality until its satisfaction, this interim period being deemed to be by then an

equivalent to a forbearance of credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty only in the

present petition, the interest due shall be computed upon the finality of this decision at the rate of 12%

per annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline

in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.

Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1)

P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelitos loss of

earning capacity; (3) P100,000 as moral damages; (4) P100,000 as exemplary damages; (5) 10% of

the total amount adjudged against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum

computed from the finality of this decision until full payment.

SO ORDERED.


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Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

vs.

COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO,

in her official capacity as City Treasurer of Batangas, respondents.

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29,

1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch

84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by

the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract,

install and operate oil pipelines. The original pipeline concession was granted in 1967 1 and renewed by

the Energy Regulatory Board in 1992. 2


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Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of

Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer

required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the

Local Government Code 3. The respondent City Treasurer assessed a business tax on the petitioner

amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped

at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its

operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of

1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the

pertinent portion of which reads:

Please note that our Company (FPIC) is a pipeline operator with a government concession granted underthe Petroleum Act. It is engaged in the business of transporting petroleum products from the Batangas

refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from

paying tax on gross receipts under Section 133 of the Local Government Code of 1991 . . . .

Moreover, Transportation contractors are not included in the enumeration of contractors under Section

131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax "on

contractors and other independent contractors" under Section 143, Paragraph (e) of the Local

Government Code does not include the power to levy on transportation contractors.

The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of

the Local Government Code. The said section limits the imposition of fees and charges on business to

such amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence,

assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts

is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not

commensurate to the cost of regulation, inspection and licensing. The fee is already a revenue raising

measure, and not a mere regulatory imposition. 4

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot

be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j)

of the Local Government Code. 5


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On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax

refund with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion

Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the

imposition and collection of the business tax on its gross receipts violates Section 133 of the Local

Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of

"contractors and independent contractors" under Sec. 141 (e) and 151 does not include the authority to

collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term

"contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously

imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under

Section 133 (j) of the Local Government Code as said exemption applies only to "transportation

contractors and persons engaged in the transportation by hire and common carriers by air, land and

water." Respondents assert that pipelines are not included in the term "common carrier" which refers

solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the

term "common carrier" under the said code pertains to the mode or manner by which a product is

delivered to its destination. 8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:

. . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are

to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption

may therefore be granted only by clear and unequivocal provisions of law.

Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A) whose

concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the

deed of concession grant any tax exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax

Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to

distinctions or other considerations may be of help:


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1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to

overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special

carrier extending its services and facilities to a single specific or "special customer" under a "special

contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to

local governments than the previous enactments, to make them economically and financially viable to

serve the people and discharge their functions with a concomitant obligation to accept certain

devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed (Sec. 137) and

contractors are also taxed under Sec. 143 (e) and 151 of the Code. 9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27,

1995, we referred the case to the respondent Court of Appeals for consideration and adjudication. 10

On November 29, 1995, the respondent court rendered a decision 11 affirming the trial court's dismissal

of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,

1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of

January 22, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a

common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not

clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in

the business of transporting persons or property from place to place, for compensation, offering his

services to the public generally.


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Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association

engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,

for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a public employment, and

must hold himself out as ready to engage in the transportation of goods for person generally as a

business and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;

3. He must undertake to carry by the method by which his business is conducted and over his

established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier.

It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a

public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose

to employ its services, and transports the goods by land and for compensation. The fact that petitioner

has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs.

Court of Appeals 16 we ruled that:

The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business

activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary

activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction between a person

or enterprise offering transportation service on a regular or scheduled basis and one offering such

service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a

carrier offering its services to the "general public," i.e., the general community or population, and one

who offers services or solicits business only from a narrow segment of the general population. We think

that Article 1877 deliberately refrained from making such distinctions.


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So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with

the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended)

which at least partially supplements the law on common carriers set forth in the Civil Code. Under

Section 13, paragraph (b) of the Public Service Act, "public service" includes:

every person that now or hereafter may own, operate. manage, or control in the Philippines, for hire or

compensation, with general or limited clientele, whether permanent, occasional or accidental, and done

for general business purposes, any common carrier, railroad, street railway, traction railway, subway

motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be

its classification, freight or carrier service of any class, express service, steamboat, or steamship line,

pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,

shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system

gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or

wireless communications systems, wire or wireless broadcasting stations and other similar public

services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local

Government Code refers only to common carriers transporting goods and passengers through moving

vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no

distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that

the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States,

oil pipe line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common

carrier." Thus, Article 86 thereof provides that:

Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have the preferential right to

utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the

remaining transportation capacity pro rata for the transportation of such other petroleum as may be

offered by others for transport, and to charge without discrimination such rates as may have been

approved by the Secretary of Agriculture and Natural Resources.


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Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7

thereof provides:

that everything relating to the exploration for and exploitation of petroleum . . . and everything relating

to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby

declared to be a public utility. (Emphasis Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No.

069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum

products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case, it is

not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore,

exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless

otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and

barangays shall not extend to the levy of the following:

xxx xxx xxx

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the

transportation of passengers or freight by hire and common carriers by air, land or water, except as

provided in this Code.

The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are

illuminating:


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MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local

Government Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of

those being deemed to be exempted from the taxing powers of the local government units. May we

know the reason why the transportation business is being excluded from the taxing powers of the local

government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16,

paragraph 5. It states that local government units may not impose taxes on the business of

transportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that

provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than

one-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a

franchise would be subject to tax by the province. That is the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units

on the carrier business. Local government units may impose taxes on top of what is already being

imposed by the National Internal Revenue Code which is the so-called "common carriers tax." We do not

want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137]

that a province may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18


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It is clear that the legislative intent in excluding from the taxing power of the local government unit the

imposition of business tax against common carriers is to prevent a duplication of the so-called "common

carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under

the National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its transportation

of petroleum business would defeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated

November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 148496 March 19, 2002

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL

SERVICES, INC., petitioner,

vs.

UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.


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MENDOZA, J.:

This is a petition for review of the decision,1 dated May 31, 2001, of the Court of Appeals, affirming the

decision2 of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay

respondent, as subrogee, the amount of P93,112.00 with legal interest, representing the value of

damaged cargo handled by petitioner, 25% thereof as attorney's fees, and the cost of the

suit.1wphi1.nt

The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole

proprietorship customs broker. At the time material to this case, petitioner entered into a contract with

San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels

of kraft liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound,

Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.

On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V

Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre

operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract

with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in

Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that

15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board

were likewise torn. The damage was placed at P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for the aforementioned

amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial

Court, Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner

liable to respondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants.

Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries


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appearing therein, classified as "TED" and "TSN", which the claims processor, Ms. Agrifina De Luna,

claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoes

respectively, coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the fact of the

damaged condition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular, which

provides among others that:

" . . . we opine that damages sustained by shipment is attributable to improper handling in transit

presumably whilst in the custody of the broker . . . ."

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not

liable. Defendant by reason of the nature of [her] business should have devised ways and means in

order to prevent the damage to the cargoes which it is under obligation to take custody of and to

forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she]

performed to prevent [the] said incident, hence the presumption is that the moment the defendant

accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo.

. . . .

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost,

destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted

negligently, unless they prove that they have observed the extraordinary diligence required by law. The

burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost,

destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has exercised

the extraordinary diligence required by law. Thus, it has been held that the mere proof of delivery of

goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a

prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the

carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due toaccident or some other circumstances inconsistent with its liability." (cited in Commercial Laws of the

Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a common carrier is

supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary


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responsibility lasts from the time the goods are unconditionally placed in the possession of and received

by the carrier for transportation until the same are delivered actually or constructively by the carrier to

the consignee or to the person who has the right to receive the same.3

Accordingly, the trial court ordered petitioner to pay the following amounts --

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyer's fee;

3. Costs of suit.4

The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on

certiorari.

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE NOT

ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN

INFERENCE.

II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE

PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD

ITS SERVICES TO THE PUBLIC.5

It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a

common carrier, although both the trial court and the Court of Appeals held otherwise, then she is

indeed not liable beyond what ordinary diligence in the vigilance over the goods transported by her,

would require.6 Consequently, any damage to the cargo she agrees to transport cannot be presumed to

have been due to her fault or negligence.


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Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a

common carrier but a private carrier because, as a customs broker and warehouseman, she does not

indiscriminately hold her services out to the public but only offers the same to select parties with whom

she may contract in the conduct of her business.

The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a similar

contention and held the party to be a common carrier, thus -

The Civil Code defines "common carriers" in the following terms:

"Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business

of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering

their services to the public."

The above article makes no distinction between one whose principal business activity is the carrying of

persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732

also carefully avoids making any distinction between a person or enterprise offering transportation

service on a regular or scheduled basis and one offering such service on an occasional, episodic or

unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the

"general public," i.e., the general community or population, and one who offers services or solicits

business only from a narrow segment of the general population. We think that Article 1732 deliberately

refrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with

the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended)

which at least partially supplements the law on common carriers set forth in the Civil Code. Under

Section 13, paragraph (b) of the Public Service Act, "public service" includes:

" x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for

hire or compensation, with general or limited clientele, whether permanent, occasional or accidental,

and done for general business purposes, any common carrier, railroad, street railway, traction railway,

subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever


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may be its classification, freight or carrier service of any class, express service, steamboat, or steamship

line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,

shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,

gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or

wireless communications systems, wire or wireless broadcasting stations and other similar public

services. x x x" 8

There is greater reason for holding petitioner to be a common carrier because the transportation of

goods is an integral part of her business. To uphold petitioner's contention would be to deprive those

with whom she contracts the protection which the law affords them notwithstanding the fact that the

obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's business.

Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:

Common carriers, from the nature of their business and for reasons of public policy, are bound to

observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers

transported by them, according to all the circumstances of each case. . . .

In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary diligence in the vigilance

over goods" was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common

carrier to know and to follow the required precaution for avoiding damage to, or destruction of the

goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with

the greatest skill and foresight and "to use all reasonable means to ascertain the nature and

characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage,

including such methods as their nature requires."

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or

wettage" took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa

Maru," which transported the cargo to Manila, or the arrastre operator, to whom the goods were

unloaded and who allegedly kept them in open air for nine days from July 14 to July 23, 1998

notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged,

as noted in the Marine Survey Report (Exh. H), to wit:


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MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.10

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no

personal knowledge on whether the container vans were first stored in petitioner's warehouse prior to

their delivery to the consignee. She likewise claims that after withdrawing the container vans from the

arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMC's warehouse inErmita, Manila, which is a mere thirty-minute drive from the Port Area where the cargo came from.

Thus, the damage to the cargo could not have taken place while these were in her custody.11

Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates

that when the shipper transferred the cargo in question to the arrastre operator, these were covered by

clean Equipment Interchange Report (EIR) and, when petitioner's employees withdrew the cargo from

the arrastre operator, they did so without exception or protest either with regard to the condition of

container vans or their contents. The Survey Report pertinently reads --

Details of Discharge:


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Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13

South Harbor, Manila on 14 July 1990, containerized onto 30' x 20' secure metal vans, covered by clean

EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were deemed

to have [been] received in good condition.

. . . .

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn] by Transorient

Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignee's storage warehouse located at Tabacalera

Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.12

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre,

Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange

Reports (EIRs). Had there been any damage to the shipment, there would have been a report to that

effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from the

arrastre still in good order and condition as the same were received by the former without exception,

that is, without any report of damage or loss. Surely, if the container vans were deformed, cracked,

distorted or dented, the defendant-appellant would report it immediately to the consignee or make an

exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these

took place. To put it simply, the defendant-appellant received the shipment in good order and condition

and delivered the same to the consignee damaged. We can only conclude that the damages to the cargo

occurred while it was in the possession of the defendant-appellant. Whenever the thing is lost (or

damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or damage)

was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal

presumption and the presumption of negligence attached to a common carrier in case of loss or damage

to the goods.13


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Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she

immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of

extraordinary diligence, petitioner must do more than merely show the possibility that some other party

could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the

nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the

handling [thereof]." Petitioner failed to do this.

Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides --

Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the

same is due to any of the following causes only:

. . . .

(4) The character of the goods or defects in the packing or in the containers.

. . . .

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the

container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he

nevertheless accepts the same without protest or exception notwithstanding such condition, he is not

relieved of liability for damage resulting therefrom.14 In this case, petitioner accepted the cargo without

exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to

prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is

exempt from liability, the presumption of negligence as provided under Art. 173515 holds.

WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.1wphi1.nt

SO ORDERED.


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Asia vs. CA

G.R. No. 147246

August 19, 2003

On appeal is the CAs May 11, 2000 Decision in CA-G.R. CV No. 49195 and February 21, 2001 Resolution

affirming with modification the April 6,1994 Decision of the RTC of Manila which found petitioner liable

to pay private respondent the amount of indemnity and attorneys fees.

FACTS:

Asia Lighterage and Shipping, Inc was contracted as carrier to deliver 3,150 metric tons of Better

Western White Wheat in bulk, (US$423,192.35) to the consignees (General Milling Corporation)

warehouse at Bo. Ugong, Pasig City. The cargo was transferred to its custody on July 25, 1990. The

shipment was insured by Prudential Guarantee and Assurance, Inc. against loss/damage for

P14,621,771.75.

On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III for delivery to

consignee. However, the cargo did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an

incoming typhoon. 5 days later, the petitioner proceeded to pull the barge to Engineering Island off

Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges which

arrived ahead of it while weathering out the storm that night. A few days after, the barge developed a

list because of a hole it sustained after hitting an unseen protuberance underneath the water. It filed a

Marine Protest on August 28, 1990 and also secured the services of Gaspar Salvaging Corporation to

refloat the barge. The hole was then patched with clay and cement.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignees wharf on

September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong

current. To avoid the complete sinking of the barge, a portion of the goods was transferred to 3 other

barges.


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The next day, the towing bits of the barge broke. It sank completely, resulting in the total loss of the

remaining cargo. A 2nd Marine Protest was filed on September 7, 1990.

7 days later, a bidding was conducted to dispose of the damaged wheat retrieved & loaded on the 3

other barges. The total proceeds from the sale of the salvaged cargo was P201,379.75.

On the same date, consignee sent a claim letter to the petitioner, and another letter dated September

18, 1990 to the private respondent for the value of the lost cargo. On January 30, 1991, the private

respondent indemnified the consignee in the amount of P4,104,654.22. Thereafter, as subrogee, it

sought recovery of said amount from the petitioner, but to no avail.

ISSUES:

1. Whether petitioner is a common carrier.

2. Assuming petitioner is a common carrier, whether it exercised extraordinary care and diligence in its

care and custody of the consignees cargo.

HELD:

1. Petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,

for compensation, offering their services to the public.

In De Guzman vs. CA (G.R. No. L-47822, 22 December 1988) it was held that the definition of common

carriers in Article 1732 of the Civil Code makes no distinction between one whose principal business

activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary

activity. There is also no distinction between a person or enterprise offering transportation service on a


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regular/scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.

Further, Article 1732 does not distinguish between a carrier offering its services to the general public,

and one who offers services or solicits business only from a narrow segment of the general

population.Private respondent Ernesto Cendaa was considered to be a common carrier even if his

principal occupation was not the carriage of goods for others, but that of buying used bottles and scrap

metal in Pangasinan and selling these items in Manila.

To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. CA (G.R. No. 101089,

07 April 1993, 221 SCRA 318). The test to determine a common carrier is whether the given

undertaking is a part of the business engaged in by the carrier which he has held out to the general

public as his occupation rather than the quantity or extent of the business transacted. In the case at

bar, the petitioner admitted that it is engaged in the business of shipping, lighterage and drayage,

offering its barges to the public, despite its limited clientele for carrying/transporting goods by water for

compensation. Petitioner is clearly a common carrier.

Therefore, petitioner is a common carrier whether its carrying of goods is done on an irregular rather

than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and

publicly known routes. Neither does it have to maintain terminals or issue tickets.

2. The findings of the lower courts should be upheld. Petitioner failed to exercise extraordinary diligence

in its care and custody of the consignees goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods

transported by them. They are presumed to have been at fault or to have acted negligently if the goods

are lost, destroyed or deteriorated. To overcome the presumption of negligence in the case of loss,

destruction or deterioration of the goods, the common carrier must prove that it exercised

extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code

enumerates the instances when the presumption of negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,

unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;


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(2) Act of the public enemy in war, whether international or civil;

(3) Act/omission of the shipper/owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order/act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its

cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the

loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause

of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence

of the typhoon to prevent/minimize the loss. The evidence show that, even before the towing bits of the

barge broke, it had already previously sustained damage when it hit a sunken object while docked at the

Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon.

The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The

patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when

petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage.

Moreover, petitioner still headed to the consignees wharf despite knowledge of an incoming typhoon.

During the time that the barge was heading towards the consignees wharf on September 5, 1990,

typhoon Loleng has already entered the Philippine area of responsibility.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape

liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short

of due diligence required from a common carrier. More importantly, the officers/employees themselvesof petitioner admitted that when the towing bits of the vessel broke that caused its sinking and the total

loss of the cargo upon reaching the Pasig River, it was no longer affected by the typhoon. The typhoon

then is not the proximate cause of the loss of the cargo; a human factor, i.e., negligence had intervened.


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THIRD DIVISION

ASIAN TERMINALS, INC.,

Petitioner,

- versus -

DAEHAN FIRE AND MARINE INSURANCE CO., LTD.,

Respondent.

G.R. No. 171194

Present:

CARPIO, J.,*

CORONA,

Chairperson,

VELASCO, JR.,

NACHURA, and


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PERALTA, JJ.

Promulgated:

February 4, 2010

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of

Appeals (CA) September 14, 2005 Decision[1] and December 20, 2005 Resolution[2] in CA-G.R. CV No.

83647. The assailed Decision reversed and set aside the Regional Trial Court (RTC)[3] August 4, 2004

Decision[4] in Civil Case No. 01-101309, while the assailed resolution denied petitioner Asian Terminals,

Inc.s motion for reconsideration.

The case stemmed from the following facts:

On July 8, 2000, Doosan Corporation (Doosan) shipped twenty-six (26) boxes of printed aluminum

sheets on board the vessel Heung-A Dragon owned by Dongnama Shipping Co., Ltd. (Dongnama).[5] The

shipment was covered by Bill of Lading No. DNALHMBUMN010010[6] and consigned to Access

International, with address at No. 9 Parada St., San Juan, Metro Manila. Doosan insured the subject


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shipment with respondent Daehan Fire and Marine Insurance Co., Ltd. under an all-risk marine cargo

insurance policy,[7] payable to its settling agent in the Philippines, the Smith Bell & Co., Inc. (Smith Bell).

On July 12, 2000, the vessel arrived in Manila and the containerized van was discharged and

unloaded in apparent good condition, as no survey and exceptions were noted in the Equipment

Interchange Receipt (EIR) issued by petitioner.[8] The container van was stored in the Container Yard of

the Port. On July 18, 2000, Access International requested[9] from petitioner and the licensed Customs

Broker, Victoria Reyes Lazo (V. Reyes Lazo), a joint survey of the shipment at the place of storage in the

Container Yard, but no such inspection was conducted.

On July 19, 2000, V. Reyes Lazo withdrew, and petitioner released, the shipment and delivered it to

Access Internationals warehouse in Binondo, Manila.*10+ While the shipment was at Access

Internationals warehouse, the latter, together with its surveyor, Lloyds Agency, conducted aninspection and noted that only twelve (12) boxes were accounted for, while fourteen (14) boxes were

missing.[11] Access International thus filed a claim against petitioner and V. Reyes Lazo for the missing

shipment amounting to $34,993.28.[12] For failure to collect its claim, Access International sought

indemnification from respondent in the amount of $45,742.81.[13] On November 8, 2000, respondent

paid the amount of the claim and Access International accordingly executed a Subrogation Receipt in

favor of the former.[14]

On July 10, 2001, respondent, represented by Smith Bell, instituted the present case against

Dongnama, Uni-ship, Inc. (Uni-ship), petitioner, and V. Reyes Lazo before the RTC.[15] Respondent

alleged that the losses, shortages and short deliveries sustained by the shipment were caused by the

joint fault and negligence of Dongnama, petitioner and V. Reyes Lazo.

Dongnama and Uni-ship filed a Motion to Dismiss[16] on the grounds that Daehan lacked legal capacity

to sue and that the complaint stated no cause of action. The trial court, however, denied the motion in

an Order dated August 31, 2001.[17]

Thereafter, Dongnama and Uni-ship filed their Answer with Counterclaim and Cross-Claim Ad Cautelam

denying any liability for the damages/losses sustained by the shipment, pointing out that it was on a

Full Container Load, Said to Contain, and Shippers Load and Count bases, under which they had

no means of verifying the contents of the containers. They also alleged that the container van was

properly discharged from the vessel with seals intact and no exceptions noted. Moreover, they claimed

that the losses occurred while the subject shipment was in the custody, possession or control of the


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shipper, its trucker, the arrastre operator, or their representatives, or due to the consignees own

negligence. They further questioned the absence of notice of loss within the three (3)-day period

provided under the Carriage of Goods by Sea Act. Finally, they averred that their liability, if there be any,

should only be limited to US$500.00 per package or customary freight unit. [18]

For its part, petitioner denied liability, claiming that it exercised due diligence in handling and storing the

subject container van. It, likewise, assailed the timeliness of the complaint, having been filed beyond

the fifteen (15)-day period under its Contract for Cargo Handling Services with the Philippine Ports

Authority (PPA). If at all, petitioner added, its liability should only be limited to P5,000.00.[19]

In her Answer, V. Reyes Lazo questioned respondents capacity to sue in Philippine courts. She accused

respondent of engaging in a fishing expedition since the latter could not determine with clarity the party

at fault.[20]

On December 2, 2002, in their Joint Motion to Dismiss,[21] respondent, on one hand, and Dongnama

and Uni-ship, on the other, prayed that the complaint be dismissed against the latter, alleging that they

could not be held liable based on the EIR. The motion was granted on December 9, 2002.[22]

Consequently, the case proceeded as against petitioner and V. Reyes Lazo.

As no amicable settlement was reached during the pretrial, trial on the merits ensued.

On August 4, 2004, the RTC dismissed the complaint for insufficiency of evidence.[23] It found the

complaint fatally flawed, having been signed by a person who had no authority from complainant

(respondent herein) corporation to act for and on behalf of the latter.[24] The RTC, likewise, held that

respondent failed to prove that the loss/damage of the subject cargoes was due to the fault or

negligence of petitioner or V. Reyes Lazo. It added that the cargoes were damaged when they were

already in Access Internationals possession, considering that an inspection was conducted in the latters

warehouse.[25]

On appeal, the CA reversed and set aside the RTC decision. The dispositive portion of the CA decision

reads:


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WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision

dated August 4, 2004 of the Regional Trial Court of Manila, Branch 21 in Civil Case No. 01-101309 is

hereby REVERSED and SET ASIDE. A new judgment is hereby entered ordering the defendants-appellees

Asian Terminals, Inc. and V. Reyes Lazo to pay, jointly and severally, the plaintiff-appellant Daehan Fire &

Marine Insurance Co., Ltd. the sums of P2,295,374.20 with interest at the legal rate (6% per annum)

from the date of the filing of the complaint and P229,537.42 by way of attorneys fees.

No pronouncement as to costs.

SO ORDERED.[26]

Applying the principle of substantial compliance, the CA recognized the validity of respondents

complaint after the submission, albeit late, of the board resolution, indicating the authority of the

signatory to represent the corporation.[27] Pursuant to the Management Contract between petitioner

and the PPA, the former may not disclaim responsibility for the shortage of the subject cargoes whilethe container van remained in its custody for seven (7) days, despite the withdrawal of the subject

shipment by the brokers representative without any complaint. Applying E. Razon, Inc. v. Court of

Appeals,[28] the CA refused to impose the P5,000.00 limitation, considering that petitioner was aware

of the value of the subject goods shown in the pertinent shipping documents.[29] The CA added that

petitioner could not disclaim any liability, having refused or ignored Access Internationals request for a

joint survey at the time when the goods were still in the possession and custody of the former.[30]

Lastly, V. Reyes Lazo was also made liable jointly and severally with petitioner in negligently withdrawing

the container van from the premises of the pier, notwithstanding Access Internationals request for a

joint survey.[31]

Aggrieved, petitioner comes before us in this petition for review on certiorari, raising the following

issues:


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1. WHETHER OR NOT PETITIONER ATI IS LIABLE FOR THE LOSS TO THE SUBJECT SHIPMENT

NOTWITHSTANDING THE ACKNOWLEDGMENT BY THE CONSIGNEES BROKER/REPRESENTATIVE IN THE

EQUIPMENT INTERCHANGE RECEIPT THAT THE SHIPMENT WAS RECEIVED IN GOOD ORDER AND

WITHOUT EXCEPTION.

2. WHAT IS THE EXTENT OF PETITIONER ATIS LIABILITY, IF ANY?*32+

Simply put, we are tasked to determine the propriety of making petitioner, as arrastre operator, liable

for the loss of the subject shipment, and if so, the extent of its liability.

Petitioner denies liability for the loss of the subject shipment, considering that the consignees

representative signified receipt of the goods in good order without exception. This being the case,

respondent, as subrogee, is bound by such acknowledgment. As to the extent of its liability, if there be

any, petitioner insists that it be limited to P5,000.00 per package, as provided for in its Management

Contract with the PPA.[33]

We do not agree with petitioner.

Respondent, as insurer, was subrogated to the rights of the consignee, pursuant to the subrogation

receipt executed by the latter in favor of the former. The relationship, therefore, between the

consignee and the arrastre operator must be examined. This relationship is akin to that existing

between the consignee and/or the owner of the shipped goods and the common carrier, or that

between a depositor and a warehouseman.[34] In the performance of its obligations, an arrastre

operator should observe the same degree of diligence as that required of a common carrier and a

warehouseman. Being the custodian of the goods discharged from a vessel, an arrastre operators duty

is to take good care of the goods and to turn them over to the party entitled to their possession.[35]

The loss of 14 out of 26 boxes of printed aluminum sheets is undisputed. It is, likewise, settled that

Dongnama (the shipping company) and Uni-ship were absolved from liability because respondentrealized that they had no liability based on the EIR issued by Dongnama. This resulted in the withdrawal

of the complaint against them. What remained was the complaint against petitioner as the arrastre

operator and V. Reyes Lazo as the customs broker. Records show that the subject shipment was

discharged from the vessel and placed under the custody of petitioner for a period of seven (7) days.

Thereafter, the same was withdrawn from the container yard by the customs broker, then delivered to


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the consignee. It was after such delivery that the loss of 14 boxes was discovered. Hence, the complaint

against both the arrastre operator and the customs broker.

In a claim for loss filed by the consignee (or the insurer), the burden of proof to show compliance with

the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator. Since

the safekeeping of the goods is its responsibility, it must prove that the losses were not due to its

negligence or to that of its employees.[36] To prove the exercise of diligence in handling the subject

cargoes, petitioner must do more than merely show the possibility that some other party could be

responsible for the loss or the damage. It must prove that it exercised due care in the handling

thereof.[37] Petitioner failed to do this. Instead, it insists that it be exonerated from liability, because

the customs brokers representative received the subject shipment in good order and condition without

exception. The appellate courts conclusion on this matter is instructive:

ATI may not disclaim responsibility for the shortage/pilferage of fourteen (14) boxes of printed

aluminum sheet while the container van remained in its custody for seven (7) days (at the Container

Yard) simply because the alleged representative of the customs broker had withdrawn the shipment

from its premises and signed the EIR without any complaint. The signature of the person/broker

representative merely signifies that said person thereby frees the ATI from any liability for loss or

damage to the cargo so withdrawn while the same was in the custody of such representative to whom

the cargo was released. It does not foreclose any remedy or right of the consignee to prove that any loss

or damage to the subject shipment occurred while the same was under the custody, control and

possession of the arrastre operator.[38]

Clearly, petitioner cannot be excused from culpability simply because another person could be

responsible for the loss. This is especially true in the instant case because, while the subject shipment

was in petitioners custody,Access International requested[39] that a joint survey be conducted at the

place of storage. And as correctly observed by the CA:

There is no dispute that it was the customs broker who in behalf of the consignee took delivery of

the subject shipment from the arrastre operator. However, the trial court apparently disregarded

documentary evidence showing that the consignee made a written request on both the appellees ATI

and V. Reyes Lazo for a joint survey of the container van on July 18, 2000 while the same was still in the

possession, control and custody of the arrastre operator at the Container Yard of the pier. Both ATI and

Lazo merely denied being aware of the letters (Exhibits M and N). The fact remains that the

consignee complained of short-delivery and while inspection of the cargo was made only at its


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warehouse after delivery by the customs broker, the arrastre ATI together with said broker both refused

or ignored the written request for a joint survey at the premises of the arrastre. Instead of complying

with the consignees demand, the broker withdrew and the arrastre released the shipment the very next

day, July 19, 2000 without even acting upon the consignees request for a joint survey.*40+

Moreover, it was shown in the Survey Report prepared by Access Internationals surveyor that

petitioner was remiss in its obligations to handle the goods with due care and to ensure that they reach

the proper party in good order as to quality and quantity. Specifically, the Survey Report states:

DELIVERY

On July 19, 2000, V. Reyes-Lazo (Licensed Customs Broker) effected delivery of the 1 x 20 Van Container

from the Container Yard of said port to the Consignees designated warehouse at No. 622 Asuncion

Street, Binondo, Manila.

Prior to withdrawal from the said port, the Brokers representative noticed that the padlock secured to

the doors of the Van Container was forcibly pulled-out resulting to its breakage. He then immediately

informed the Arrastre Contractors (ATI) and requested that Van Container be opened and inventory of

its contents be made as he suspected the contents might have been pilfered.

However, his request was denied averring that stripping of FCL Van Containers arenot allowed inside

the Customs Zone. As all efforts exerted proved futile, he instead bought new padlock and secured

same to the Van. He then informed the Consignee about the incident upon delivery of the Container at

the Consignees designated warehouse, who immediately requested for survey.[41]


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Considering that both petitioner and V. Reyes Lazo were negligent in the performance of their duties in

the handling, storage and delivery of the subject shipment to the consignee, resulting in the loss of 14

boxes of printed aluminum sheets, both shall be solidarily liable for such loss.

As to the extent of petitioners liability, we cannot sustain its contention that it be limited to P5,000.00

per package. Petitioners responsibilityand liability for losses and damages are set forth in Section 7.01

of the Management Contract drawn between the PPA and the Marina Port Services, Inc., petitioners

predecessor-in-interest, to wit:

CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES

Section 7.01. Responsibility and Liability for Losses and Damages; Exceptions. The CONTRACTOR

shall, at its own expense, handle all merchandise in all work undertaken by it, hereunder, diligently and

in a skillful, workman-like and efficient manner. The CONTRACTOR shall be solely responsible as an

independent contractor, and hereby agrees to accept liability and to pay to the shipping company,

consignees, consignors or other interested party or parties for the loss, damage or non-delivery of

cargoes in its custody and control to the extent of the actual invoice value of each package which in no

case shall be more than FIVE THOUSAND PESOS (P5,000.00) each, unless the value of the cargo

shipment is otherwise specified or manifested or communicated in writing together with the declared

Bill of Lading value and supported by a certified packing list to the CONTRACTOR by the interested party

or parties before the discharge or loading unto vessel of the goods. This amount of Five Thousand Pesos

(P5,000.00) per package may be reviewed and adjusted by the AUTHORITY from time to time. The

CONTRACTOR shall not be responsible for the condition or the contents of any package received, nor for

the weight nor for any loss, injury or damage to the said cargo before or while the goods are being

received or remains in the piers, sheds, warehouses or facility, if the loss, injury or damage is caused by

force majeure or other causes beyond the CONTRACTORS control or capacity to prevent or remedy;

PROVIDED that a formal claim together with the necessary copies of Bill of Lading, Invoice, Certified

Packing List and Computation arrived at covering the loss, injury or damage or non-delivery of such

goods shall have been filed with the CONTRACTOR within fifteen (15) days from day of issuance by the

CONTRACTOR of a certificate of non-delivery; PROVIDED, however, that if said CONTRACTOR fails to

issue such certification within fifteen (15) days from receipt of a written request by the

shipper/consignee or his duly authorized representative or any interested party, said certification shall

be deemed to have been issued, and thereafter, the fifteen (15) day period within which to file the claim

commences; PROVIDED, finally, that the request for certification of loss shall be made within thirty (30)

days from the date of delivery of the package to the consignee.


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x x x x

The CONTRACTOR shall be solely responsible for any and all injury or damage that may arise on account

of the negligence or carelessness of the CONTRACTOR, its agent or employees in the performance of the

undertaking under the Contract. Further, the CONTRACTOR hereby agrees to hold free the AUTHORITY,

at all times, from any claim that may be instituted by its employee by reason of the provisions of the

Labor Code, as amended.[42]

As clearly stated above, such limitation does not apply if the value of the cargo shipment is

communicated to the arrastre operator before the discharge of the cargoes.

It is undisputed that Access International, upon arrival of the shipment, declared the same for taxation

purposes, as well as for the

transpo case 1

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