G.R. No.

125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, .COURT OF APPEALS
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 19671 and renewed by the Energy
Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas
City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to
pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code3.
The respondent City Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in
four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which
amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in
the amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent
portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a government concession
granted under the Petroleum Act. It is engaged in the business of transporting petroleum
products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As
such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose
tax "on contractors and other independent contractors" under Section 143, Paragraph (e) of the
Local Government Code does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee authorized under Section
147 of the Local Government Code. The said section limits the imposition of fees and charges
on business to such amounts as may be commensurate to the cost of regulation, inspection,
and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation,
inspection and licensing. The fee is already a revenue raising measure, and not a mere
regulatory imposition.4
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be
considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the
Local Government Code.5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax refund
with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in
her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the
authority of cities to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and,
(3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate
refund of the tax paid.7
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section
133 (j) of the Local Government Code as said exemption applies only to "transportation contractors and
persons engaged in the transportation by hire and common carriers by air, land and water." Respondents
assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such
as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said
code pertains to the mode or manner by which a product is delivered to its destination.8
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
 . . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax
exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the
government. Exemption may therefore be granted only by clear and unequivocal provisions of
law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A)
whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither
said law nor the deed of concession grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the
Local Tax Code. Such being the situation obtained in this case (exemption being unclear and
equivocal) resort to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses
only common carriers so as not to overburden the riding public or
commuters with taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities to a single
specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give
more and effective local autonomy to local governments than the
previous enactments, to make them economically and financially
viable to serve the people and discharge their functions with a
concomitant obligation to accept certain devolution of powers, . . .
So, consistent with this policy even franchise grantees are taxed
(Sec. 137) and contractors are also taxed under Sec. 143 (e) and
151 of the Code.9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we
referred the case to the respondent Court of Appeals for consideration and adjudication. 10 On November 29,
1995, the respondent court rendered a decision 11 affirming the trial court's dismissal of petitioner's complaint.
Petitioner's motion for reconsideration was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996. 13Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of January
22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common
carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the
business of transporting persons or property from place to place, for compensation, offering his services to the
public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for
others as a public employment, and must hold himself out as
ready to engage in the transportation of goods for person
generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his
business is confined;
3. He must undertake to carry by the method by which his
business is conducted and over his established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele
does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction between one
whose principal business activity is the carrying of persons or goods or both, and
 one who does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen
to coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:
every person that now or hereafter may own, operate. manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation
of passengers or freight or both, shipyard, marine repair shop,
wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water supply andpower
petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar
public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through moving vehicles
or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction
as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation
of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are
considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier."
Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned
by him, but is obligated to utilize the remaining transportation capacity pro rata
for the transportation of such other petroleum as may be offered by others for
transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof
provides:
that everything relating to the exploration for and exploitation of petroleum . . .
and everything relating to the manufacture, refining, storage, or transportation by
special methods of petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-
83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 . . . . Such being the case, it is not subject to withholding
tax prescribed by Revenue Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt
from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units.
— Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of the
following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the
transportation of passengers or freight by hire and
common carriers by air, land or water, except as
provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are
illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing
Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation.
This appears to be one of those being deemed to be exempted from the taxing
powers of the local government units. May we know the reason why the
transportation business is being excluded from the taxing powers of the local
government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121
(now Sec. 131), line 16, paragraph 5. It states that local government units may
not impose taxes on the business of transportation, except as otherwise provided
in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one
can see there that provinces have the power to impose a tax on business
enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by
local government units on the carrier business. Local government units may
impose taxes on top of what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125
[now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of the local government unit the
imposition of business tax against common carriers is to prevent a duplication of the so-called "common
carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the
National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.

G.R. No. 165647 March 26, 2009

PHILIPPINES FIRST INSURANCE CO., INC., Petitioner, vs.
WALLEM PHILS. SHIPPING, INC., UNKNOWN OWNER AND/OR UNKNOWN CHARTERER OF THE
VESSEL M/S "OFFSHORE MASTER" AND "SHANGHAI FAREAST SHIP BUSINESS
COMPANY," Respondents.
TINGA, J.:
Before us is a Rule 45 petition1 which seeks the reversal of the Decision2 and Resolution3 of the Court of
Appeals in CA-G.R. No. 61885. The Court of Appeals reversed the Decision4 of the Regional Trial Court (RTC)
of Manila, Branch 55 in Civil Case No. 96-80298, dismissing the complaint for sum of money.
The facts of the case follow.5
On or about 2 October 1995, Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore
Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous 99 PCT Min. (shipment), complete
and in good order for transportation to and delivery at the port of Manila for consignee, L.G. Atkimson Import-
Export, Inc. (consignee), covered by a Clean Bill of Lading. The Bill of Lading reflects the gross weight of the
total cargo at 500,200 kilograms.6 The Owner and/or Charterer of M/V Offshore Master is unknown while the
shipper of the shipment is Shanghai Fareast Ship Business Company. Both are foreign firms doing business in
the Philippines, thru its local ship agent, respondent Wallem Philippines Shipping, Inc. (Wallem). 7
On or about 16 October 1995, the shipment arrived at the port of Manila on board the vessel M/S Offshore
Master from which it was subsequently discharged. It was disclosed during the discharge of the shipment from
the carrier that 2,426 poly bags (bags) were in bad order and condition, having sustained various degrees of
spillages and losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes (turn-over survey) of
the arrastre operator, Asian Terminals, Inc. (arrastre operator). 8 The bad state of the bags is also evinced by
the arrastre operator’s Request for Bad Order Survey.9
Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from the pier to the consignee’s
warehouse in Quezon City,10 while the final inspection was conducted jointly by the consignee’s representative
and the cargo surveyor. During the unloading, it was found and noted that the bags had been discharged in
damaged and bad order condition. Upon inspection, it was discovered that 63,065.00 kilograms of the
shipment had sustained unrecovered spillages, while 58,235.00 kilograms had been exposed and
contaminated, resulting in losses due to depreciation and downgrading.11
On 29 April 1996, the consignee filed a formal claim with Wallem for the value of the damaged shipment, to no
avail. Since the shipment was insured with petitioner Philippines First Insurance Co., Inc. against all risks in the
amount of ₱2,470,213.50,12 the consignee filed a formal claim13 with petitioner for the damage and losses
sustained by the shipment. After evaluating the invoices, the turn-over survey, the bad order certificate and
other documents,14petitioner found the claim to be in order and compensable under the marine insurance
policy. Consequently, petitioner paid the consignee the sum of ₱397,879.69 and the latter signed a
subrogation receipt.
Petitioner, in the exercise of its right of subrogation, sent a demand letter to Wallem for the recovery of the
amount paid by petitioner to the consignee. However, despite receipt of the letter, Wallem did not settle nor
even send a response to petitioner’s claim.15
Consequently, petitioner instituted an action before the RTC for damages against respondents for the recovery
of ₱397,879.69 representing the actual damages suffered by petitioner plus legal interest thereon computed
from the time of the filing of the complaint until fully paid and attorney’s fees equivalent to 25% of the principal
claim plus costs of suit.
In a decision16 dated 3 November 1998, the RTC ordered respondents to pay petitioner ₱397,879.69 with 6%
interest plus attorney’s fees and costs of the suit. It attributed the damage and losses sustained by the
shipment to the arrastre operator’s mishandling in the discharge of the shipment. Citing Eastern Shipping
Lines, Inc. v. Court of Appeals,17 the RTC held the shipping company and the arrastre operator solidarily liable
since both the arrastre operator and the carrier are charged with and obligated to deliver the goods in good
order condition to the consignee. It also ruled that the ship functioned as a common carrier and was obliged to
observe the degree of care required of a common carrier in handling cargoes. Further, it held that a notice of
loss or damage in writing is not required in this case because said goods already underwent a joint inspection
or survey at the time of receipt thereof by the consignee, which dispensed with the notice requirement.
The Court of Appeals reversed and set aside the RTC’s decision.18 According to the appellate court, there is no
solidary liability between the carrier and the arrastre operator because it was clearly established by the court a
quo that the damage and losses of the shipment were attributed to the mishandling by the arrastre operator in
the discharge of the shipment. The appellate court ruled that the instant case falls under an exception
recognized in Eastern
Shipping Lines.19 Hence, the arrastre operator was held solely liable to the consignee.
Petitioner raises the following issues:
1. Whether or not the Court of Appeals erred in not holding that as a common carrier, the carrier’s
duties extend to the obligation to safely discharge the cargo from the vessel;
 2. Whether or not the carrier should be held liable for the cost of the damaged shipment;
3. Whether or not Wallem’s failure to answer the extra judicial demand by petitioner for the cost of the
lost/damaged shipment is an implied admission of the former’s liability for said goods;
4. Whether or not the courts below erred in giving credence to the testimony of Mr. Talens.
It is beyond question that respondent’s vessel is a common carrier.20 Thus, the standards for determining the
existence or absence of the respondent’s liability will be gauged on the degree of diligence required of a
common carrier. Moreover, as the shipment was an exercise of international trade, the provisions of the
Carriage of Goods
by Sea Act21 (COGSA), together with the Civil Code and the Code of Commerce, shall apply.22
The first and second issues raised in the petition will be resolved concurrently since they are interrelated.
It is undisputed that the shipment was damaged prior to its receipt by the insured consignee. The damage to
the shipment was documented by the turn-over survey23 and Request for Bad Order Survey.24 The turn-over
survey, in particular, expressly stipulates that 2,426 bags of the shipment were received by the arrastre
operator in damaged condition. With these documents, petitioner insists that the shipment incurred damage or
losses while still in the care and responsibility of Wallem and before it was turned over and delivered to the
arrastre operator.
The trial court, however, found through the testimony of Mr. Maximino Velasquez Talens, a cargo surveyor of
Oceanica Cargo Marine Surveyors Corporation, that the losses and damage to the cargo were caused by the
mishandling of the arrastre operator. Specifically, that the torn cargo bags resulted from the use of steel
hooks/spikes in piling the cargo bags to the pallet board and in pushing the bags by the stevedores of the
arrastre operator to the tug boats then to the ports.25 The appellate court affirmed the finding of mishandling in
the discharge of cargo and it served as its basis for exculpating respondents from liability, rationalizing that
with the fault of the arrastre operator in the unloading of the cargo established it should bear sole liability for
the cost of the damaged/lost cargo.
While it is established that damage or losses were incurred by the shipment during the unloading, it is disputed
who should be liable for the damage incurred at that point of transport. To address this issue, the pertinent
laws and jurisprudence are examined.
Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods transported by them. 26 Subject to certain exceptions
enumerated under Article 173427 of the Civil Code, common carriers are responsible for the loss, destruction,
or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right
to receive them.28
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo
from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he
delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise.
In Standard Oil Co. of New York v. Lopez Castelo,29 the Court interpreted the ship captain’s liability as
ultimately that of the shipowner by regarding the captain as the representative of the ship owner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier in
relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be
subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the
Act.30 Section 3 (2) thereof then states that among the carriers’ responsibilities are to properly and carefully
load, handle, stow, carry, keep, care for, and discharge the goods carried.
The above doctrines are in fact expressly incorporated in the bill of lading between the shipper Shanghai
Fareast Business Co., and the consignee, to wit:
4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier shall commence from the time when the
goods are loaded on board the vessel and shall cease when they are discharged from the vessel.
The Carrier shall not be liable of loss of or damage to the goods before loading and after discharging from the
vessel, howsoever such loss or damage arises.31
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ship's tackle. 32 Being the custodian of the
goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them
over to the party entitled to their possession.33
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees should
observe the standards and measures necessary to prevent losses and damage to shipments under its
custody.34
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc.35 the Court explained the relationship and
responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the consignee and the common carrier is similar to that of the
consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves
upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with and obligated to
deliver the goods in good condition to the consignee.(Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals36 with the
clarification that the arrastre operator and the carrier are not always and necessarily solidarily liable as the
facts of a case may vary the rule.
Thus, in this case the appellate court is correct insofar as it ruled that an arrastre operator and a carrier may
not be held solidarily liable at all times. But the precise question is which entity had custody of the shipment
during its unloading from the vessel?
The aforementioned Section 3(2) of the COGSA states that among the carriers’ responsibilities are to properly
and carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment
likewise stipulates that the carrier’s liability for loss or damage to the goods ceases after its discharge from the
vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned
over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M./V. Farland,37 it was ruled that like the duty
of seaworthiness, the duty of care of the cargo is non-delegable,38 and the carrier is accordingly responsible for
the acts of the master, the crew, the stevedore, and his other agents. It has also been held that it is ordinarily
the duty of the master of a vessel to unload the cargo and place it in readiness for delivery to the consignee,
and there is an implied obligation that this shall be accomplished with sound machinery, competent hands, and
in such manner that no unnecessary injury shall be done thereto.39 And the fact that a consignee is required to
furnish persons to assist in unloading a shipment may not relieve the carrier of its duty as to such unloading. 40
The exercise of the carrier’s custody and responsibility over the subject shipment during the unloading actually
transpired in the instant case during the unloading of the shipment as testified by Mr. Talens, the cargo
surveyor, to quote:
Atty. Repol:
- Do you agree with me that Wallem Philippines is a shipping [company]?
A Yes, sir.
Q And, who hired the services of the stevedores?
A The checker of the vessel of Wallem, sir.41
xxx
Q Mr. Witness, during the discharging operation of this cargo, where was the master of the vessel?
A On board the vessel, supervising, sir.
Q And, observed the discharging operation?
A Yes, sir.
Q And, what did the master of the vessel do when the cargo was being unloaded from the vessel?
A He would report to the head checker, sir.
Q He did not send the stevedores to what manner in the discharging of the cargo from the vessel?
A And head checker po and siyang nagpapatakbo ng trabaho sa loob ng barko, sir.42
xxx
Q Is he [the head checker] an employee of the company?
A He is a contractor/checker of Wallem Philippines, sir.43
Moreover, the liability of Wallem is highlighted by Mr. Talen’s notes in the Bad Order Inspection, to wit:
"The bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes in piling the cargo to [the] pallet
board at the vessel’s cargo holds and at the pier designated area before and after discharged that cause the
bags to torn [sic]."44 (Emphasis supplied)
The records are replete with evidence which show that the damage to the bags happened before and after
their discharge45 and it was caused by the stevedores of the arrastre operator who were then under the
supervision of Wallem.1awphi1.net
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the
custody of the carrier. In the instant case, the damage or losses were incurred during the discharge of the
shipment while under the supervision of the carrier. Consequently, the carrier is liable for the damage or losses
caused to the shipment. As the cost of the actual damage to the subject shipment has long been settled, the
trial court’s finding of actual damages in the amount of ₱397,879.69 has to be sustained.
On the credibility of Mr. Talens which is the fourth issue, the general rule in assessing credibility of witnesses is
well-settled:
x x x the trial court's evaluation as to the credibility of witnesses is viewed as correct and entitled to the highest
respect because it is more competent to so conclude, having had the opportunity to observe the witnesses'
demeanor and deportment on the stand, and the manner in which they gave their testimonies. The trial judge
therefore can better determine if such witnesses were telling the truth, being in the ideal position to weigh
conflicting testimonies. Therefore, unless the trial judge plainly overlooked certain facts of substance and value
which, if considered, might affect the result of the case, his assessment on credibility must be respected.46
Contrary to petitioner’s stance on the third issue, Wallem’s failure to respond to its demand letter does not
constitute an implied admission of liability. To borrow the words of Mr. Justice Oliver Wendell Holmes, thus:
A man cannot make evidence for himself by writing a letter containing the statements that he wishes to prove.
He does not make the letter evidence by sending it to the party against whom he wishes to prove the facts
[stated therein]. He no more can impose a duty to answer a charge than he can impose a duty to pay by
sending goods. Therefore a failure to answer such adverse assertions in the absence of further circumstances
making an answer requisite or natural has no effect as an admission.47
With respect to the attorney’s fees, it is evident that petitioner was compelled to litigate this matter to protect its
interest. The RTC’s award of ₱20,000.00 as attorney’s fees is reasonable.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 22 June 2004 and its
Resolution dated 11 October 2004 are REVERSED and SET ASIDE. Wallem is ordered to pay petitioner the
sum of ₱397,879.69, with interest thereon at 6% per annum from the filing of the complaint on 7 October 1996
until the judgment becomes final and executory. Thereafter, an interest rate of 12% per annum shall be
imposed.48Respondents are also ordered to pay petitioner the amount of ₱20,000.00 for and as attorney’s
fees, together with the costs of the suit.
SO ORDERED.
.R. No. 137775. March 31, 2005
FGU INSURANCE CORPORATION, Petitioners, vs.
THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by
LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO TO, Respondents.
G.R. No. 140704. March 31, 2005
ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed ANG, and CO
TO,Petitioners,
vs.
THE HONORABLE COURT OF APPEALS, SAN MIGUEL CORP., and FGU INSURANCE
CORP., Respondents.
CHICO-NAZARIO, J.:
Before Us are two separate Petitions for review assailing the Decision1 of the Court of Appeals in CA-G.R. CV
No. 49624 entitled, "San Miguel Corporation, Plaintiff-Appellee versus Estate of Ang Gui, represented by
Lucio, Julian and Jaime, all surnamed Ang, and Co To, Defendants-Appellants, Third–Party Plaintiffs versus
FGU Insurance Corporation, Third-Party Defendant-Appellant," which affirmed in toto the decision2 of the
Regional Trial Court of Cebu City, Branch 22. The dispositive portion of the Court of Appeals decision reads:
WHEREFORE, for all the foregoing, judgment is hereby rendered as follows:
1) Ordering defendants to pay plaintiff the sum of P1,346,197.00 and an interest of 6% per annum to be
reckoned from the filing of this case on October 2, 1990;
2) Ordering defendants to pay plaintiff the sum of P25,000.00 for attorney’s fees and an additional sum of
P10,000.00 as litigation expenses;
3) With cost against defendants.
For the Third-Party Complaint:
1) Ordering third-party defendant FGU Insurance Company to pay and reimburse defendants the amount of
P632,700.00.3
The Facts
Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was
engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were
operated as common carriers. Since the D/B Lucio had no engine of its own, it could not maneuver by itself
and had to be towed by a tugboat for it to move from one place to another.
On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B
Lucio, for towage by M/T ANCO, the following cargoes:
Bill of Lading No. Shipment Destination
1 25,000 cases Pale Pilsen Estancia, Iloilo
350 cases Cerveza Negra Estancia, Iloilo
2 15,000 cases Pale Pilsen San Jose, Antique
200 cases Cerveza Negra San Jose, Antique
The consignee for the cargoes covered by Bill of Lading No. 1 was SMC’s Beer Marketing Division (BMD)-
Estancia Beer Sales Office, Estancia, Iloilo, while the consignee for the cargoes covered by Bill of Lading No. 2
was SMC’s BMD-San Jose Beer Sales Office, San Jose, Antique.
The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique. The vessels
arrived at San Jose, Antique, at about one o’clock in the afternoon of 30 September 1979. The tugboat M/T
ANCO left the barge immediately after reaching San Jose, Antique.
When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds
over the area were dark and the waves were already big. The arrastre workers unloading the cargoes of SMC
on board the D/B Lucio began to complain about their difficulty in unloading the cargoes. SMC’s District Sales
Supervisor, Fernando Macabuag, requested ANCO’s representative to transfer the barge to a safer place
because the vessel might not be able to withstand the big waves.
ANCO’s representative did not heed the request because he was confident that the barge could withstand the
waves. This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of San Jose,
Antique, as all other vessels already left the wharf to seek shelter. With the waves growing bigger and bigger,
only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the
arrastre operator.
At about ten to eleven o’clock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel
because the barge’s rope attached to the wharf was cut off by the big waves. At around midnight, the barge
run aground and was broken and the cargoes of beer in the barge were swept away.
As a result, ANCO failed to deliver to SMC’s consignee Twenty-Nine Thousand Two Hundred Ten (29,210)
cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per case of Pale Pilsen
was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza Negra was Forty-Seven
Pesos and Ten Centavos (P47.10), hence, SMC’s claim against ANCO amounted to One Million Three
Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).
As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages
against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven
Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%) of the total claim as
attorney’s fees.
Upon Ang Gui’s death, ANCO, as a partnership, was dissolved hence, on 26 January 1993, SMC filed a
second amended complaint which was admitted by the Court impleading the surviving partner, Co To and the
Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang. The substituted defendants
adopted the original answer with counterclaim of ANCO "since the substantial allegations of the original
complaint and the amended complaint are practically the same."
ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were indeed
loaded on the vessel belonging to ANCO. It claimed however that it had an agreement with SMC that ANCO
would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event. Since the
cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which battered
and sunk the vessel in which they were loaded, they should not be held liable. ANCO further asserted that
there was an agreement between them and SMC to insure the cargoes in order to recover indemnity in case of
loss. Pursuant to that agreement, the cargoes to the extent of Twenty Thousand (20,000) cases was insured
with FGU Insurance Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight Thousand Five
Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591.
Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU, alleging that before the
vessel of ANCO left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to the extent of
Twenty Thousand (20,000) cases, were insured with FGU for a total amount of Eight Hundred Fifty-Eight
Thousand Five Hundred Pesos (P858,500.00) under Marine Insurance Policy No. 29591. ANCO further
alleged that on or about 02 October 1979, by reason of very strong winds and heavy waves brought about by a
passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a result of which, the vessel
was totally wrecked and its cargoes owned by SMC were lost and/or destroyed. According to ANCO, the loss
of said cargoes occurred as a result of risks insured against in the insurance policy and during the existence
and lifetime of said insurance policy. ANCO went on to assert that in the remote possibility that the court will
order ANCO to pay SMC’s claim, the third-party defendant corporation should be held liable to indemnify or
reimburse ANCO whatever amounts, or damages, it may be required to pay to SMC.
In its answer to the Third-Party complaint, third-party defendant FGU admitted the existence of the Insurance
Policy under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the
said insurance policy cannot be attributed directly or indirectly to any of the risks insured against in the said
insurance policy. According to FGU, it is only liable under the policy to Third-party Plaintiff ANCO and/or
Plaintiff SMC in case of any of the following:
a) total loss of the entire shipment;
b) loss of any case as a result of the sinking of the vessel; or
c) loss as a result of the vessel being on fire.
Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise ordinary
diligence or the diligence of a good father of the family in the care and supervision of the cargoes insured to
prevent its loss and/or destruction.
Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and asked for actual, moral,
and exemplary damages and attorney’s fees.
The trial court found that while the cargoes were indeed lost due to fortuitous event, there was failure on
ANCO’s part, through their representatives, to observe the degree of diligence required that would exonerate
them from liability. The trial court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of
the lost shipment. With respect to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-
Three Percent (53%) of the amount of the lost cargoes. According to the trial court:
. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground and was broken and
the beer cargoes on the said barge were swept away. It is the sense of this Court that the risk insured against
was the cause of the loss.
...
Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the amount of the
policy was only for P858,500.00, defendants as assured, therefore, were considered co-insurers of third-party
defendant FGU Insurance Corporation to the extent of 975,405.00 value of the cargo. Consequently, inasmuch
as there was partial loss of only P1,346,197.00, the assured shall bear 53% of the loss…4 [Emphasis ours]
The appellate court affirmed in toto the decision of the lower court and denied the motion for reconsideration
and the supplemental motion for reconsideration.
Hence, the petitions.
The Issues
In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized into two: 1) Whether
or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the
insurance contract considering the circumstances surrounding the loss of the cargoes; and 2) Whether or not
the Court of Appeals committed an error of law in holding that the doctrine of res judicata applies in the instant
case.
In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the appellate court based on
the following assignments of error: 1) The Court of Appeals committed grave abuse of discretion in affirming
the findings of the lower court that the negligence of the crewmembers of the D/B Lucio was the proximate
cause of the loss of the cargoes; and 2) The respondent court acted with grave abuse of discretion when it
ruled that the appeal was without merit despite the fact that said court had accepted the decision in Civil Case
No. R-19341, as affirmed by the Court of Appeals and the Supreme Court, as res judicata.
Ruling of the Court
First, we shall endeavor to dispose of the common issue raised by both petitioners in their respective petitions
for review, that is, whether or not the doctrine of res judicata applies in the instant case.
It is ANCO’s contention that the decision in Civil Case No. R-19341,5 which was decided in its favor,
constitutes res judicata with respect to the issues raised in the case at bar.
The contention is without merit. There can be no res judicata as between Civil Case No. R-19341 and the case
at bar. In order for res judicata to be made applicable in a case, the following essential requisites must be
present: 1) the former judgment must be final; 2) the former judgment must have been rendered by a court
having jurisdiction over the subject matter and the parties; 3) the former judgment must be a judgment or order
on the merits; and 4) there must be between the first and second action identity of parties, identity of subject
matter, and identity of causes of action.6
There is no question that the first three elements of res judicata as enumerated above are indeed satisfied by
the decision in Civil Case No. R-19341. However, the doctrine is still inapplicable due to the absence of the last
essential requisite of identity of parties, subject matter and causes of action.
The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case,
SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and
Co To as defendants, with the latter merely impleading FGU as third-party defendant.
The subject matter of Civil Case No. R-19341 was the insurance contract entered into by ANCO, the owner of
the vessel, with FGU covering the vessel D/B Lucio, while in the instant case, the subject matter of litigation is
the loss of the cargoes of SMC, as shipper, loaded in the D/B Lucio and the resulting failure of ANCO to deliver
to SMC’s consignees the lost cargo. Otherwise stated, the controversy in the first case involved the rights and
liabilities of the shipowner vis-à-vis that of the insurer, while the present case involves the rights and liabilities
of the shipper vis-à-vis that of the shipowner. Specifically, Civil Case No. R-19341 was an action for Specific
Performance and Damages based on FGU Marine Hull Insurance Policy No. VMF-MH-13519 covering the
vessel D/B Lucio, while the instant case is an action for Breach of Contract of Carriage and Damages filed by
SMC against ANCO based on Bill of Lading No. 1 and No. 2, with defendant ANCO seeking reimbursement
from FGU under Insurance Policy No. MA-58486, should the former be held liable to pay SMC.
Moreover, the subject matter of the third-party complaint against FGU in this case is different from that in Civil
Case No. R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the
former, the third-party complaint arose from the insurance contract covering the cargoes on board the D/B
Lucio.
The doctrine of res judicata precludes the re-litigation of a particular fact or issue already passed upon by a
court of competent jurisdiction in a former judgment, in another action between the same parties based on a
different claim or cause of action. The judgment in the prior action operates as estoppel only as to those
matters in issue or points controverted, upon the determination of which the finding or judgment was
rendered.7 If a particular point or question is in issue in the second action, and the judgment will depend on the
determination of that particular point or question, a former judgment between the same parties or their privies
will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first
suit.8
Since the case at bar arose from the same incident as that involved in Civil Case No. R-19341, only findings
with respect to matters passed upon by the court in the former judgment are conclusive in the disposition of the
instant case. A careful perusal of the decision in Civil Case No. R-19341 will reveal that the pivotal issues
resolved by the lower court, as affirmed by both the Court of Appeals and the Supreme Court, can be
summarized into three legal conclusions: 1) that the D/B Lucio before and during the voyage was seaworthy; 2)
that there was proper notice of loss made by ANCO within the reglementary period; and 3) that the vessel D/B
Lucio was a constructive total loss.
Said decision, however, did not pass upon the issues raised in the instant case. Absent therein was any
discussion regarding the liability of ANCO for the loss of the cargoes. Neither did the lower court pass upon the
issue of the alleged negligence of the crewmembers of the D/B Lucio being the cause of the loss of the
cargoes owned by SMC.
Therefore, based on the foregoing discussion, we are reversing the findings of the Court of Appeals that there
is res judicata.
Anent ANCO’s first assignment of error, i.e., the appellate court committed error in concluding that the
negligence of ANCO’s representatives was the proximate cause of the loss, said issue is a question of fact
assailing the lower court’s appreciation of evidence on the negligence or lack thereof of the crewmembers of
the D/B Lucio. As a rule, findings of fact of lower courts, particularly when affirmed by the appellate court, are
deemed final and conclusive. The Supreme Court cannot review such findings on appeal, especially when they
are borne out by the records or are based on substantial evidence.9 As held in the case of Donato v. Court of
Appeals,10 in this jurisdiction, it is a fundamental and settled rule that findings of fact by the trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because
the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the
witnesses while testifying in the case.11
It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing that
the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable
error or grave abuse of discretion.12
A careful study of the records shows no cogent reason to fault the findings of the lower court, as sustained by
the appellate court, that ANCO’s representatives failed to exercise the extraordinary degree of diligence
required by the law to exculpate them from liability for the loss of the cargoes.
First, ANCO admitted that they failed to deliver to the designated consignee the Twenty Nine Thousand Two
Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.
Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no engine of
its own and could not maneuver by itself. Yet, the patron of ANCO’s tugboat M/T ANCO left it to fend for itself
notwithstanding the fact that as the two vessels arrived at the port of San Jose, Antique, signs of the impending
storm were already manifest. As stated by the lower court, witness Mr. Anastacio Manilag testified that the
captain or patron of the tugboat M/T ANCO left the barge D/B Lucio immediately after it reached San Jose,
Antique, despite the fact that there were already big waves and the area was already dark. This is corroborated
by defendants’ own witness, Mr. Fernando Macabueg.13
The trial court continued:
At that precise moment, since it is the duty of the defendant to exercise and observe extraordinary diligence in
the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing the defendant
could have placed D/B Lucio in a very safe location before they left knowing or sensing at that time the coming
of a typhoon. The presence of big waves and dark clouds could have warned the patron or captain of M/T
ANCO to insure the safety of D/B Lucio including its cargo. D/B Lucio being a barge, without its engine, as the
patron or captain of M/T ANCO knew, could not possibly maneuver by itself. Had the patron or captain of M/T
ANCO, the representative of the defendants observed extraordinary diligence in placing the D/B Lucio in a safe
place, the loss to the cargo of the plaintiff could not have occurred. In short, therefore, defendants through their
representatives, failed to observe the degree of diligence required of them under the provision of Art. 1733 of
the Civil Code of the Philippines.14
Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the contention of respondents
SMC and FGU that "the crewmembers of D/B Lucio should have left port at the onset of the typhoon is like
advising the fish to jump from the frying pan into the fire and an advice that borders on madness." 15
The argument does not persuade. The records show that the D/B Lucio was the only vessel left at San Jose,
Antique, during the time in question. The other vessels were transferred and temporarily moved to Malandong,
5 kilometers from wharf where the barge remained.16 Clearly, the transferred vessels were definitely safer in
Malandong than at the port of San Jose, Antique, at that particular time, a fact which petitioners failed to
dispute
ANCO’s arguments boil down to the claim that the loss of the cargoes was caused by the typhoon Sisang, a
fortuitous event (caso fortuito), and there was no fault or negligence on their part. In fact, ANCO claims that
their crewmembers exercised due diligence to prevent or minimize the loss of the cargoes but their efforts
proved no match to the forces unleashed by the typhoon which, in petitioners’ own words was, by any
yardstick, a natural calamity, a fortuitous event, an act of God, the consequences of which petitioners could not
be held liable for.17
The Civil Code provides:
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 vigilance over the goods is further expressed in Articles 1734, 1735, and 1745
Nos. 5, 6, and 7 . . .
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;
...
Art. 1739. 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 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 . . . (Emphasis supplied)
Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability) 18 by
definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which
though foreseen, were inevitable. It is therefore not enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one impossible to foresee or to avoid.19
In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In
fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance
which prompted SMC’s District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to
no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if ANCO’s representatives
wanted to transfer it, they no longer had any means to do so as the tugboat M/T ANCO had already departed,
leaving the barge to its own devices. The captain of the tugboat should have had the foresight not to leave the
barge alone considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could
not escape liability to respondent SMC. The records clearly show the failure of petitioners’ representatives to
exercise the extraordinary degree of diligence mandated by law. To be exempted from responsibility, the
natural disaster should have been the proximate and only cause of the loss.20 There must have been no
contributory negligence on the part of the common carrier. As held in the case of Limpangco Sons v. Yangco
Steamship Co.:21
. . . To be exempt from liability because of an act of God, the tug must be free from any previous negligence or
misconduct by which that loss or damage may have been occasioned. For, although the immediate or
proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug
unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excused. 22
Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of M/T
ANCO’s crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the
assistance of the tugboat, and again in failing to heed the request of SMC’s representatives to have the barge
transferred to a safer place, as was done by the other vessels in the port; thus, making said blatant negligence
the proximate cause of the loss of the cargoes.
We now come to the issue of whether or not FGU can be held liable under the insurance policy to reimburse
ANCO for the loss of the cargoes despite the findings of the respondent court that such loss was occasioned
by the blatant negligence of the latter’s employees.
One of the purposes for taking out insurance is to protect the insured against the consequences of his own
negligence and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of
the insured or his agents constitute no defense on the part of the insurer.23 This rule however presupposes that
the loss has occurred due to causes which could not have been prevented by the insured, despite the exercise
of due diligence.
The question now is whether there is a certain degree of negligence on the part of the insured or his agents
that will deprive him the right to recover under the insurance contract. We say there is. However, to what extent
such negligence must go in order to exonerate the insurer from liability must be evaluated in light of the
circumstances surrounding each case. When evidence show that the insured’s negligence or recklessness is
so gross as to be sufficient to constitute a willful act, the insurer must be exonerated.
In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,24 the United States Supreme Court held
that:
The ordinary negligence of the insured and his agents has long been held as a part of the risk which the
insurer takes upon himself, and the existence of which, where it is the proximate cause of the loss, does not
absolve the insurer from liability. But willful exposure, gross negligence, negligence amounting to misconduct,
etc., have often been held to release the insurer from such liability.25 [Emphasis ours]
...
In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731, the owners of an
insured vessel attempted to put her across the bar at Hatteras Inlet. She struck on the bar and was wrecked.
The master knew that the depth of water on the bar was such as to make the attempted passage dangerous.
Judge Clifford held that, under the circumstances, the loss was not within the protection of the policy, saying:
Authorities to prove that persons insured cannot recover for a loss occasioned by their own wrongful acts are
hardly necessary, as the proposition involves an elementary principle of universal application. Losses may be
recovered by the insured, though remotely occasioned by the negligence or misconduct of the master or crew,
if proximately caused by the perils insured against, because such mistakes and negligence are incident to
navigation and constitute a part of the perils which those who engage in such adventures are obliged to
incur; but it was never supposed that the insured could recover indemnity for a loss occasioned by his own
wrongful act or by that of any agent for whose conduct he was responsible.26 [Emphasis ours]
From the above-mentioned decision, the United States Supreme Court has made a distinction between
ordinary negligence and gross negligence or negligence amounting to misconduct and its effect on the
insured’s right to recover under the insurance contract. According to the Court, while mistake and negligence
of the master or crew are incident to navigation and constitute a part of the perils that the insurer is obliged to
incur, such negligence or recklessness must not be of such gross character as to amount to misconduct or
wrongful acts; otherwise, such negligence shall release the insurer from liability under the insurance contract.
In the case at bar, both the trial court and the appellate court had concluded from the evidence that the
crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent. To wit:
There was blatant negligence on the part of the employees of defendants-appellants when the patron
(operator) of the tug boat immediately left the barge at the San Jose, Antique wharf despite the looming bad
weather. Negligence was likewise exhibited by the defendants-appellants’ representative who did not heed
Macabuag’s request that the barge be moved to a more secure place. The prudent thing to do, as was done by
the other sea vessels at San Jose, Antique during the time in question, was to transfer the vessel to a safer
wharf. The negligence of the defendants-appellants is proved by the fact that on 01 October 1979, the only
simple vessel left at the wharf in San Jose was the D/B Lucio.27 [Emphasis ours]
As stated earlier, this Court does not find any reason to deviate from the conclusion drawn by the lower court,
as sustained by the Court of Appeals, that ANCO’s representatives had failed to exercise extraordinary
diligence required of common carriers in the shipment of SMC’s cargoes. Such blatant negligence being the
proximate cause of the loss of the cargoes amounting to One Million Three Hundred Forty-Six Thousand One
Hundred Ninety-Seven Pesos (P1,346,197.00)
This Court, taking into account the circumstances present in the instant case, concludes that the blatant
negligence of ANCO’s employees is of such gross character that it amounts to a wrongful act which must
exonerate FGU from liability under the insurance contract.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24 February 1999 is hereby
AFFIRMED with MODIFICATION dismissing the third-party complaint.
SO ORDERED.
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners, vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING
AND DODWELL now INCHCAPE SHIPPING SERVICES, Respondents.
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision1 of the Court of Appeals, as well as its Resolution2 dated
September 28, 2001 denying the motion for reconsideration, which affirmed that of Branch 21 of the Regional
Trial Court (RTC) of Manila in Civil Case No. 92-631323 holding petitioner Schmitz Transport Brokerage
Corporation (Schmitz Transport), together with Black Sea Shipping Corporation (Black Sea), represented by its
ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the loss of 37
hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V
"Alexander Saveliev" (a vessel of Russian registry and owned by Black Sea) 545 hot rolled steel sheets in coil
weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel
Pipe Corporation (Little Giant),4 were insured against all risks with Industrial Insurance Company Ltd.
(Industrial Insurance) under Marine Policy No. M-91-3747-TIS.5
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA) assigned
it a place of berth at the outside breakwater at the Manila South Harbor.6
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive the
cargoes from the shipside, and to deliver them to its (the consignee’s) warehouse at Cainta, Rizal, 7 in turn
engaged the services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the barge "Erika V" to shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left and
returned to the port terminal.9 At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. commenced to
unload 37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an
approaching storm, the unloading unto the barge of the 37 coils was accomplished.10 No tugboat pulled the
barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the crew of the barge abandoned it and
transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing the 37
coils into the sea.12 At 7:00 a.m., a tugboat finally arrived to pull the already empty and damaged barge back to
the pier.13
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost
cargoes proved futile.14
Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of ₱5,246,113.11.
Little Giant thereupon executed a subrogation receipt15 in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its
representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the amount it paid to
Little Giant plus adjustment fees, attorney’s fees, and litigation expenses.16
Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while typhoon signal
No. 1 was raised in Metro Manila.17
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for unloading the
cargoes outside of the breakwater notwithstanding the storm signal. 18 The dispositive portion of the decision
reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the
defendants to pay plaintiff jointly and severally the sum of ₱5,246,113.11 with interest from the date the
complaint was filed until fully satisfied, as well as the sum of ₱5,000.00 representing the adjustment fee plus
the sum of 20% of the amount recoverable from the defendants as attorney’s fees plus the costs of suit. The
counterclaims and cross claims of defendants are hereby DISMISSED for lack of [m]erit.19
To the trial court’s decision, the defendants Schmitz Transport and TVI filed a joint motion for reconsideration
assailing the finding that they are common carriers and the award of excessive attorney’s fees of more than
₱1,000,000. And they argued that they were not motivated by gross or evident bad faith and that the incident
was caused by a fortuitous event. 20
By resolution of February 4, 1998, the trial court denied the motion for reconsideration. 21
All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in toto the
decision of the trial court, 22 it finding that all the defendants were common carriers — Black Sea and TVI for
engaging in the transport of goods and cargoes over the seas as a regular business and not as an isolated
transaction,23 and Schmitz Transport for entering into a contract with Little Giant to transport the cargoes from
ship to port for a fee.24
In holding all the defendants solidarily liable, the appellate court ruled that "each one was essential such that
without each other’s contributory negligence the incident would not have happened and so much so that the
person principally liable cannot be distinguished with sufficient accuracy."25
In discrediting the defense of fortuitous event, the appellate court held that "although defendants obviously had
nothing to do with the force of nature, they however had control of where to anchor the vessel, where
discharge will take place and even when the discharging will commence."26
The defendants’ respective motions for reconsideration having been denied by Resolution27 of September 28,
2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present petition against TVI, Industrial
Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal, consignee Little
Giant, hence, the transportation contract was by and between Little Giant and TVI.28
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were required
to file their respective Comments.29
By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner in good
order, hence, it cannot be faulted, it having had no control and supervision thereover.30
For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and transferred
them unto the barge upon the instruction of petitioner.31
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence on the
part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all liability
arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it
must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be
impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury
resulting to the creditor.32
[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by
the violence of nature. Human intervention is to be excluded from creating or entering into the cause of the
mischief. When the effect is found to be in part the result of the participation of man, whether due to his active
intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules
applicable to the acts of God.33
The appellate court, in affirming the finding of the trial court that human intervention in the form of contributory
negligence by all the defendants resulted to the loss of the cargoes,34 held that unloading outside the
breakwater, instead of inside the breakwater, while a storm signal was up constitutes negligence. 35 It thus
concluded that the proximate cause of the loss was Black Sea’s negligence in deciding to unload the cargoes
at an unsafe place and while a typhoon was approaching.36
From a review of the records of the case, there is no indication that there was greater risk in loading the
cargoes outside the breakwater. As the defendants proffered, the weather on October 26, 1991 remained
normal with moderate sea condition such that port operations continued and proceeded normally.37
The weather data report,38 furnished and verified by the Chief of the Climate Data Section of PAG-ASA and
marked as a common exhibit of the parties, states that while typhoon signal No. 1 was hoisted over Metro
Manila on October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26,
1991 was moderate. It cannot, therefore, be said that the defendants were negligent in not unloading the
cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in the
morning39 is, however, a material fact which the appellate court failed to properly consider and appreciate40 —
the proximate cause of the loss of the cargoes. Had the barge been towed back promptly to the pier, the
deteriorating sea conditions notwithstanding, the loss could have been avoided. But the barge was left floating
in open sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes.41 The loss thus falls
outside the "act of God doctrine."
The proximate cause of the loss having been determined, who among the parties is/are responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the appellate court, finds that petitioner is a common
carrier. For it undertook to transport the cargoes from the shipside of "M/V Alexander Saveliev" to the
consignee’s warehouse at Cainta, Rizal. As the appellate court put it, "as long as a person or corporation holds
[itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered a common
carrier regardless if [it] owns the vehicle to be used or has to hire one."42 That petitioner is a common carrier,
the testimony of its own Vice-President and General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and General
Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the company. I also
handle the various division heads of the company for operation matters, and all other related functions that the
President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the Honorable
Court if you came to know the company by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you perform in behalf
of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-charged of
the delivery of the goods to their warehouses. We also handled the clearances of their shipment at the Bureau
of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with regards to this
shipment? What work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the] cargo[es] from
lighter to BASECO then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to perform, what
equipment do (sic) you require or did you use in order to effect this unloading, transfer and delivery to the
warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter, and on this
we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also,
in BASECO compound we are leasing cranes to have the cargo unloaded from the barge to trucks, [and] then
we used trucks to deliver [the cargoes] to the consignee’s warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignee’s warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract for the
barges of Transport Ventures Incorporated in this particular operation?
A: Firstly, we don’t own any barges. That is why we hired the services of another firm whom we know [al]ready
for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied)43
It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. Thus, this
Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,44 held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public.
xxx
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and
one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare the correct customs declaration
and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to
deliver the goods for pecuniary consideration.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held that as the transportation of goods is an
integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise
"would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding
the fact that the obligation to carry goods for [its] customers, is part and parcel of petitioner’s business." 47
As for petitioner’s argument that being the agent of Little Giant, any negligence it committed was deemed the
negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the
transportation of the cargoes from the shipside and into Little Giant’s warehouse, however, petitioner was
discharging its own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler48 to provide the
barge and the tugboat. In their Service Contract,49 while Little Giant was named as the consignee, petitioner did
not disclose that it was acting on commission and was chartering the vessel for Little Giant. 50 Little Giant did
not thus automatically become a party to the Service Contract and was not, therefore, bound by the terms and
conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can maintain
a cause of action for negligence.51
In the case of TVI, while it acted as a private carrier for which it was under no duty to observe extraordinary
diligence, it was still required to observe ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by
the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
Was the reasonable care and caution which an ordinarily prudent person would have used in the same
situation exercised by TVI?52
This Court holds not.
TVI’s failure to promptly provide a tugboat did not only increase the risk that might have been reasonably
anticipated during the shipside operation, but was the proximate cause of the loss. A man of ordinary
prudence would not leave a heavily loaded barge floating for a considerable number of hours, at such a
precarious time, and in the open sea, knowing that the barge does not have any power of its own and is totally
defenseless from the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a
tugboat would be charging overtime pay did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 173953 of the Civil Code, prove that it
exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of the storm in
order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers54 and a supervisor55 on board the vessel to counter-check the operations of TVI,
it failed to take all available and reasonable precautions to avoid the loss. After noting that TVI failed to arrange
for the prompt towage of the barge despite the deteriorating sea conditions, it should have summoned the
same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable56 for the loss of the cargoes. The following
pronouncement of the Supreme Court is instructive:
The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises
from the breach of that contract by reason of its failure to exercise the high diligence required of the common
carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In
either case, the common carrier is not relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of
Article 2176 and related provisions, in conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask
further, how then must the liability of the common carrier, on one hand, and an independent contractor, on the
other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana,
Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where
tort is that which breaches the contract. Stated differently, when an act which constitutes a breach of contract
would have itself constituted the source of a quasi-delictual liability had no contract existed between the
parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply. 57
As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or
unconditionally placed in its possession and received for transportation until they were delivered actually or
constructively to consignee Little Giant.58
Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services
rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be
made "to the port of discharge or so near thereto as she may safely get, always afloat."59 The delivery of the
goods to the consignee was not from "pier to pier" but from the shipside of "M/V Alexander Saveliev" and into
barges, for which reason the consignee contracted the services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant, through petitioner, it had discharged its duty. 60
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorney’s fees in an amount over ₱1,000,000.00 to Industrial Insurance, for lack of
factual and legal basis, this Court sets it aside. While Industrial Insurance was compelled to litigate its rights,
such fact by itself does not justify the award of attorney’s fees under Article 2208 of the Civil Code. For no
sufficient showing of bad faith would be reflected in a party’s persistence in a case other than an erroneous
conviction of the righteousness of his cause.61 To award attorney’s fees to a party just because the judgment is
rendered in its favor would be tantamount to imposing a premium on one’s right to litigate or seek judicial
redress of legitimate grievances.62
On the award of adjustment fees: The adjustment fees and expense of divers were incurred by Industrial
Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo. They do not constitute
actual damages.63
As for the court a quo’s award of interest on the amount claimed, the same calls for modification following the
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals64 that when the demand cannot be reasonably
established at the time the demand is made, the interest shall begin to run not from the time the claim is made
judicially or extrajudicially but from the date the judgment of the court is made (at which the time the
quantification of damages may be deemed to have been reasonably ascertained).65
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage Corporation,
and Transport Venture Incorporation jointly and severally liable for the amount of ₱5,246,113.11 with the
MODIFICATION that interest at SIX PERCENT per annum of the amount due should be computed from the
promulgation on November 24, 1997 of the decision of the trial court.
Costs against petitioner.
SO ORDERED.