A. Common Carrier in General (Cases)

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Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities
of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750
cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in
Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and
employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway
in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages
and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to
exercise the extraordinary diligence required of him by the law, should be held liable for the value of the
undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could not be held
responsible for the value of the lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision finding private respondent to be a common carrier
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and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as
damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a
common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him
from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court
by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
Definition; liability of registered owner; common carriers vs private carriers; Nature and Basis of Liability-
(Articles 1732 and 1733 of the New Civil Code) ©: PDC
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2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier
set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a
sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733 deliberaom making
such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine repair shop,
wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications systems, wire or
wireless broadcasting stations and other similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even though he
merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was
done on a periodic or occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial
freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and
concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and implementing regulations and
has been granted a certificate of public convenience or other franchise. To exempt private respondent from
the liabilities of a common carrier because he has not secured the necessary certificate of public convenience,
would be offensive to sound public policy; that would be to reward private respondent precisely for failing to
comply with applicable statutory requirements. The business of a common carrier impinges directly and
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intimately upon the safety and well being and property of those members of the general community who
happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety
and protection of those who utilize their services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" are held to a very high
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degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The
specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to
Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers;
and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they
appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if
the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant
case — the hijacking of the carrier's truck — does not fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt
with under the provisions of Article 1735, in other words, that the private respondent as common carrier is
presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown
by proof of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's
goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a
security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not
believe, however, that in the instant case, the standard of extraordinary diligence required private respondent
to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life
and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6,
Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
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(5) that the common carrier shall not be responsible for the acts or omissions
of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or
deterioration of goods on account of the defective condition of the car vehicle,
ship, airplane or other equipment used in the contract of carriage. (Emphasis
supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are
lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First
Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with
willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and
loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force. Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took
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away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and
later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the
police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery
in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond
the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that
even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and
are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not
liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of
Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
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SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 131621 September 28, 1999

LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the following: (a) the 30 January
1997 decision 1 of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4 October
1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR to pay
private respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the
filing of the compliant until fully paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19
November 1997, 3 denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed. 1âwphi1.nêt
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the
following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks
including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by
Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its way to
Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island.
As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however,
ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the
latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the
vessel was due to the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be
ordered to pay the insurance proceeds from the loss the vessel directly to MIC, said amount to be deducted
from MIC's claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its
vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it,
LOADSTAR being the party insured. In any event, PGAI was later dropped as a party defendant after it paid
the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate
the matter to the court of Appeals, which, however, agreed with the trial court and affirmed its decision in toto.
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In dismissing LOADSTAR's appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that

there was a single shipper on that fateful voyage. The court noted that the
charter of the vessel was limited to the ship, but LOADSTAR retained control
over its crew. 4
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which
should be applied in determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of
the voyage. If it had been seaworthy, it could have withstood the "natural and
inevitable action of the sea" on 20 November 1984, when the condition of the
sea was moderate. The vessel sank, not because of force majeure, but
because it was not seaworthy. LOADSTAR'S allegation that the sinking was
probably due to the "convergence of the winds," as stated by a PAGASA
expert, was not duly proven at the trial. The "limited liability" rule, therefore, is
not applicable considering that, in this case, there was an actual finding of
negligence on the part of the carrier. 5
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not
apply because said provisions bind only the shipper/consignee and the carrier.
When MIC paid the shipper for the goods insured, it was subrogated to the
latter's rights as against the carrier, LOADSTAR. 6
5) There was a clear breach of the contract of carriage when the shipper's goods
never reached their destination. LOADSTAR's defense of "diligence of a good
father of a family" in the training and selection of its crew is unavailing because this
is not a proper or complete defense in culpa contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially construed to mean
that when goods are delivered on board a ship in good order and condition,
and the shipowner delivers them to the shipper in bad order and condition, it
then devolves upon the shipowner to both allege and prove that the goods
were damaged by reason of some fact which legally exempts him from
liability." Transportation of the merchandise at the risk and venture of the
shipper means that the latter bears the risk of loss or deterioration of his goods
arising from fortuitous events, force majeure, or the inherent nature and
defects of the goods, but not those caused by the presumed negligence or fault
of the carrier, unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V "Cherokee" a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued
certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only
"one shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised
below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood
products for delivery to one consignee, it was also carrying passengers as part of its regular business.
Moreover, the bills of lading in this case made no mention of any charter party but only a statement that the
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vessel was a "general cargo carrier." Neither was there any "special arrangement" between LOADSTAR and
the shipper regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular
type of cargo for one shipper is not sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been
negligent, and the burden of proving otherwise devolved upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the
vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety
engineers of the Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the
time was experienced, licensed and unquestionably competent. With all these precautions, there could be no other
conclusion except that LOADSTAR exercised the diligence of a good father of a family in ensuring the vessel's
seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force
majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather
was fine until the next day when the vessel sank due to strong waves. MCI's witness, Gracelia Tapel, fully
established the existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area of
responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which includes
Limasawa Island. Tapel also testified that the convergence of winds brought about by these two typhoons
strengthened wind velocity in the area, naturally producing strong waves and winds, in turn, causing the
vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was being shipped at "owner's risk," LOADSTAR was not
liable for any loss or damage to the same. Therefore, the Court of Appeals erred in holding that the provisions
of the bills of lading apply only to the shipper and the carrier, and not to the insurer of the goods, which
conclusion runs counter to the Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v. Macondray
& Co., Inc., 9 and National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted beyond the
period stated in the bills of lading for instituting the same — suits based upon claims arising from shortage,
damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action. The
vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due
to force majeure, because the same concurred with LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be
deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at fault or
negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its
knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the
carrier be issued a certificate of public convenience, and this public character is not altered by the fact that the
carriage of the goods in question was periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship
Agencies, Inc., 11 where this Court held that a common carrier transporting special cargo or chartering the vessel to
a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in
the charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict
policy governing common carriers is upheld. Such policy has no force where the public at is not involved, as in the
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case of a ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela
Hardwood and Industrial Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of
which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the
factual settings are different. The records do not disclose that the M/V "Cherokee," on the date in question,
undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The
bills of lading failed to show any special arrangement, but only a general provision to the effect that the
M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that the vessel was carrying a particular
type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel
from a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying
passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier
under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, the Court juxtaposed the
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statutory definition of "common carriers" with the peculiar circumstances of that case, viz.:
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.
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 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.
xxx xxx xxx
It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such backhauling was done on a periodic or occasional rather than regular or
scheduled manner, and eventhough private respondent's principal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below commercial freight rates
is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate
of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers. That liability arises the moment a person or firm acts
as a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary certificate of
public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements The business
of a common carrier impinges directly and intimately upon the safety and well being and
property of those members of the general community who happen to deal with such carrier.
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The law imposes duties and liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it
embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. "For
a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number
of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this case.
The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or
agent. 17 LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its
vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that
may be deemed as force majeure, inasmuch as the wind condition in the performance of its duties, LOADSTAR
cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter
disregard of this Court's pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co.,
Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these two cases that after
paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to the
rights of the assured, that is, it can recover only the amount that may, in turn, be recovered by the latter. Since the
right of the assured in case of loss or damage to the goods is limited or restricted by the provisions in the bills of
lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and restrictions. We do not
agree. In the first place, the cases relied on by LOADSTAR involved a limitation on the carrier's liability to an
amount fixed in the bill of lading which the parties may enter into, provided that the same was freely and fairly
agreed upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces the
common carrier's liability for the loss or destruction of the goods to a degree less than extraordinary (Articles 1744
and 1745), that is, the carrier is not liable for any loss or damage to shipments made at "owner's risk." Such
stipulation is obviously null and void for being contrary to public policy." 20 It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first one exempting
the carrier from any and all liability for loss or damage occasioned by its own negligence. The
second is one providing for an unqualified limitation of such liability to an agreed valuation.
And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of. freight. According to an almost uniform
weight of authority, the first and second kinds of stipulations are invalid as being contrary to
public policy, but the third is valid and enforceable. 21
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's cause of
action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code
of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)
— which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained
during transit — may be applied suppletorily to the case at bar. This one-year prescriptive period also applies
to the insurer of the goods. 22 In this case, the period for filing the action for recovery has not yet elapsed.
Moreover, a stipulation reducing the one-year period is null and void; 23 it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of
Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner. 1âwphi1.nêt
SO ORDERED.
9
10
Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.
SECOND DIVISION
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
MENDOZA, J.:
This is a petition for review of the decision,1 dated May 31, 2001, of the Court of Appeals, affirming the
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. 1âwphi1.nêt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft
liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St.,
Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V
Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC,
withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. On July
25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical
fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was
placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount.
In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch
148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for
the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants.
Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries
appearing therein, classified as "TED" and "TSN", which the claims processor, Ms. Agrifina De Luna,
claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the fact of the
damaged condition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular, which
provides among others that:
" . . . we opine that damages sustained by shipment is attributable to improper handling in

transit presumably whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
10
11
The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not
liable. Defendant by reason of the nature of [her] business should have devised ways and means in
order to prevent the damage to the cargoes which it is under obligation to take custody of and to
forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the presumption is that the moment the defendant
accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the extraordinary diligence required by law.
The burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has
exercised the extraordinary diligence required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order,
makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstances inconsistent with its liability." (cited in Commercial
Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common carrier is
supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary
responsibility lasts from the time the goods are unconditionally placed in the possession of and
received by the carrier for transportation until the same are delivered actually or constructively by the
carrier to the consignee or to the person who has the right to receive the same. 3
Accordingly, the trial court ordered petitioner to pay the following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING
THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS
AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN

CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC. 5
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common
carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable
beyond what ordinary diligence in the vigilance over the goods transported by her, would
require.6 Consequently, any damage to the cargo she agrees to transport cannot be presumed to have been
due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a
common carrier but a private carrier because, as a customs broker and warehouseman, she does not
11
12
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 -
"Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public."
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article
1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population. We think
that Article 1732 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire
or wireless communications systems, wire or wireless broadcasting stations and other similar
public services. x x x" 8
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is
an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she
contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods
for her customers, as already noted, is part and parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary diligence in the vigilance over
goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or destruction of
the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service
12
13
with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or
wettage" took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru,"
which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who
allegedly kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some
of the containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh.
H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened. 10
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal
knowledge on whether the container vans were first stored in petitioner's warehouse prior to their delivery to
the consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her
driver, Ricardo Nazarro, immediately delivered the cargo to SMC's warehouse in Ermita, Manila, which is a
mere thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the cargo could
not have taken place while these were in her custody. 11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that
when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean
Equipment Interchange Report (EIR) and, when petitioner's employees withdrew the cargo from the arrastre
operator, they did so without exception or protest either with regard to the condition of container vans or their
contents. The Survey Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier
#13 South Harbor, Manila on 14 July 1990, containerized onto 30' x 20' secure metal vans, covered by
clean EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were
deemed to have [been] received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn] by Transorient
Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignee's storage warehouse located at Tabacalera
Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990. 12
As found by the Court of Appeals:
13
14
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre,
Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange
Reports (EIRs). Had there been any damage to the shipment, there would have been a report to that
effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from
the arrastre still in good order and condition as the same were received by the former without
exception, that is, without any report of damage or loss. Surely, if the container vans were deformed,
cracked, distorted or dented, the defendant-appellant would report it immediately to the consignee or
make an exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None
of these took place. To put it simply, the defendant-appellant received the shipment in good order and
condition and delivered the same to the consignee damaged. We can only conclude that the damages
to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the thing is
lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or
damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this
legal presumption and the presumption of negligence attached to a common carrier in case of loss or
damage to the goods.13
Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she
immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than merely show the possibility that some other party could
be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and
characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]."
Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides --
Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container,
is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom.14 In this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised
extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735 15 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED. 1âwphi1.nêt
SO ORDERED.
Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

SUPREME COURT
Manila
14
15
SECOND DIVISION
G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. — Article
1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation,
offering their services to the public." The test to determine a common carrier is "whether the given undertaking
is a part of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." . . . The holding of the Court in De
Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus: "The
above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline").
Article 1732 also carefully avoids making any distinction between a person or enterprise offering
episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its services
to the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION
OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
ABSOLUTE. — Common carriers are obliged to observe extraordinary diligence in the vigilance over the
goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently
if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of
negligence does not attach and these instances are enumerated in Article 1734. In those cases where the
presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption . . . The presumption of negligence was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to
prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED
FROM LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in
the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following
or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the
common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held
that: "Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest
or to diminish such responsibility — even for acts of strangers like thieves or robbers, except where such
thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold that
the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
15
16
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner herself
has made the admission that she was in the trucking business, offering her trucks to those with cargo to
move. Judicial admissions are conclusive and no evidence is required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner presented no
other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES.
— While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in
court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. —
Granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract
was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called
by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A.
CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs.
ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING, defendant-appellant,"
C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in
toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling
contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000
m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation
in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with
Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from
the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the
said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost
goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery
or damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a
complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of
carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the
following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ
of preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent
to defraud his creditors;"
16
17
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage since
CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was
liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was
hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was
immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked
properties; that after preliminary investigation, an information for robbery and carnapping were filed against
Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to
pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00)
as an (sic) for actual damages with legal interest of 12% per cent per annum to be counted from December 4,
1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is
DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE
OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN
RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the
hijacking referred to a force majeure?
17
18
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer
that she did business under the name A.M. Bascos Trucking and that said admission dispensed with the
presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The
respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier,
Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a
common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of
400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged
in this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of
the truck. She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits
were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in
his testimony his statement that the contract was a lease contract. 10 She also stated that: she was not
catering to the general public. Thus, in her answer to the amended complaint, she said that she does business
under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move,
not to the general public but to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a common carrier is "whether the
given undertaking is a part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business transacted." 12 In this case,
petitioner herself has made the admission that she was in the trucking business, offering her trucks to those
with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services only to a select
group of people and because the private respondents, plaintiffs in the lower court, did not object to the
presentation of affidavits by petitioner where the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In
referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed
them as self-serving and petitioner contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the same were not sufficient to prove
that the contract was one of lease. It must be understood that a contract is what the law defines it to be and
not what it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force
majeure.
18
19
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by
them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does not
attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for
the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included
in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like thieves or robbers except where such thieves or
robbers in fact acted with grave or irresistible threat, violence or force. We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are
lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos'
affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have
concluded that these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the
hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it
had been admitted in court for lack of objection on the part of private respondent, the respondent Court had
discretion in assigning weight to such evidence. We are bound by the conclusion of the appellate court. In a
petition for review on certiorari, We are not to determine the probative value of evidence but to resolve
questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place.
Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence
in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the
information for carnapping and robbery against the accused named in said affidavits did not necessarily mean
that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal
cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to
disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered
moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The
petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
19
20
SO ORDERED.
Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.
FIRST DIVISION
G.R. No. 141910 August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura
S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of
Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the Central Luzon
Appliances in Dagupan City. While the truck was traversing the north diversion road along McArthur highway
in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal,
resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value
of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests
of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since
the trucking company failed to heed the claim, FGU filed a complaint for damages and breach of contract of
carriage against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In
its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since
1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the
cause of damage was purely accidental. 1âwphi1.nêt
The issues having thus been joined, FGU presented its evidence, establishing the extent of damage to the
cargoes and the amount it had paid to the assured. GPS, instead of submitting its evidence, filed with leave of
court a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had
failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,1 granted the motion to dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is provided that ‘Each party must prove his own
affirmative allegation, xxx.’
"In the instant case, plaintiff did not present any single evidence that would prove that defendant is a
common carrier.
"x x x x x x x x x
"Accordingly, the application of the law on common carriers is not warranted and the presumption of
fault or negligence on the part of a common carrier in case of loss, damage or deterioration of goods
during transport under 1735 of the Civil Code is not availing.
"Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which transports the cargo are the laws on obligation and
contract of the Civil Code as well as the law on quasi delicts.
20
21
"Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict
provides for some presumption of negligence but only upon the attendance of some circumstances.
Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation.’
"Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence,
the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendant’s driver was the one negligent, defendant cannot be made liable for the damages of the
subject cargoes."2
The subsequent motion for reconsideration having been denied, 3 plaintiff interposed an appeal to the Court of
Appeals, contending that the trial court had erred (a) in holding that the appellee corporation was not a
common carrier defined under the law and existing jurisprudence; and (b) in dismissing the complaint on a
demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its
decision of 10 June 1999,4 discoursed, among other things, that -
"x x x in order for the presumption of negligence provided for under the law governing common carrier
(Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a common carrier.
Should the appellant fail to prove that the appellee is a common carrier, the presumption would not
arise; consequently, the appellant would have to prove that the carrier was negligent.
"x x x x x x x x x
"Because it is the appellant who insists that the appellees can still be considered as a common carrier,
despite its `limited clientele,’ (assuming it was really a common carrier), it follows that it (appellant) has
the burden of proving the same. It (plaintiff-appellant) `must establish his case by a preponderance of
evidence, which means that the evidence as a whole adduced by one side is superior to that of the
other.’ (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the
appellant failed to do -- hence, the dismissal of the plaintiff’s complaint by the trial court is justified.
"x x x x x x x x x
"Based on the foregoing disquisitions and considering the circumstances that the appellee trucking
corporation has been `its exclusive contractor, hauler since 1970, defendant has no choice but to
comply with the directive of its principal,’ the inevitable conclusion is that the appellee is a private
carrier.
"x x x x x x x x x
"x x x the lower court correctly ruled that 'the application of the law on common carriers is not
warranted and the presumption of fault or negligence on the part of a common carrier in case of loss,
damage or deterioration of good[s] during transport under [article] 1735 of the Civil Code is not
availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and valid reasons." 5
21
22
Petitioner's motion for reconsideration was likewise denied; 6 hence, the instant petition,7 raising the following
issues:
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED

UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER,

MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO
TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE
CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply
justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering
its services to no other individual or entity, cannot be considered a common carrier. Common carriers are
persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for hire or compensation, offering their services to the public,8 whether to
the public in general or to a limited clientele in particular, but never on an exclusive basis. 9 The true test of a
common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves
of its transportation service for a fee. 10 Given accepted standards, GPS scarcely falls within the term "common
carrier."
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries,
Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a
corresponding right of relief. 11 The law, recognizing the obligatory force of contracts, 12 will not permit a party to
be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of
the tenor thereof.13 A breach upon the contract confers upon the injured party a valid cause for recovering that
which may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may
include his "expectation interest," which is his interest in having the benefit of his bargain by being put in as
good a position as he would have been in had the contract been performed, or his "reliance interest," which is
his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position
as he would have been in had the contract not been made; or his "restitution interest," which is his interest in
having restored to him any benefit that he has conferred on the other party. 14 Indeed, agreements can
accomplish little, either for their makers or for society, unless they are made the basis for action. 15 The effect
of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by
the failure of another to observe his contractual obligation 16 unless he can show extenuating circumstances,
like proof of his exercise of due diligence (normally that of the diligence of a good father of a family or,
exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence)
or of the attendance of fortuitous event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioner’s
assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its
custody. In such a situation, a default on, or failure of compliance with, the obligation – in this case, the
delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care and
corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise.
GPS has failed to do so.
22
23
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be
ordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioner’s principal
and defendant, may not be held liable under the agreement. A contract can only bind the parties who have
entered into it or their successors who have assumed their personality or their juridical position. 17 Consonantly
with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a
third person. Petitioner’s civil action against the driver can only be based on culpa aquiliana, which,
unlike culpa contractual, would require the claimant for damages to prove negligence or fault on the part of
the defendant.18
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where
the thing which caused the injury complained of is shown to be under the latter’s management and the
accident is such that, in the ordinary course of things, cannot be expected to happen if those who have its
management or control use proper care. It affords reasonable evidence, in the absence of explanation by the
defendant, that the accident arose from want of care. 19 It is not a rule of substantive law and, as such, it does
not create an independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural
convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific
proof of negligence. The maxim simply places on the defendant the burden of going forward with the
proof.20 Resort to the doctrine, however, may be allowed only when (a) the event is of a kind which does not
ordinarily occur in the absence of negligence; (b) other responsible causes, including the conduct of the
plaintiff and third persons, are sufficiently eliminated by the evidence; and (c) the indicated negligence is
within the scope of the defendant's duty to the plaintiff. 21 Thus, it is not applicable when an unexplained
accident may be attributable to one of several causes, for some of which the defendant could not be
responsible.22
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the
plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of the
occurrence and not from the nature of the relation of the parties. 23 Nevertheless, the requirement that
responsible causes other than those due to defendant’s conduct must first be eliminated, for the doctrine to
apply, should be understood as being confined only to cases of pure (non-contractual) tort since obviously the
presumption of negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is predicated
on culpa acquiliana, while he admittedly can be said to have been in control and management of the vehicle
which figured in the accident, it is not equally shown, however, that the accident could have been exclusively
due to his negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be
deemed to have waived the right to present evidence. 24 Thus, respondent corporation may no longer offer
proof to establish that it has exercised due care in transporting the cargoes of the assured so as to still
warrant a remand of the case to the trial court. 1âwphi1.nêt
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the
decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M.
Eroles is concerned, but said assailed order of the trial court and decision of the appellate court
are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is hereby ordered to pay
FGU Insurance Corporation the value of the damaged and lost cargoes in the amount of P204,450.00. No
costs.
SO ORDERED.
Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
23
24

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 and renewed 1
by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to
the Local Government Code . The respondent City Treasurer assessed a business tax on the petitioner
3
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
24
25
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 for tax 6
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.
25
26
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. On November 29, 1995, the respondent court rendered a decision affirming the trial
10 11
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. Petitioner moved for a reconsideration which was granted by this Court in a Resolution of
13 14
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;
26
27
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 we ruled that:
16
The above article (Art. 1732, Civil Code) makes no distinction between
one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity (in
local idiom, as a "sideline"). Article 1732 . . . avoids making any
distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained from making
such distinctions.
So understood, the concept of "common carrier" under Article 1732 may

be seen to coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the
Civil Code. Under Section 13, paragraph (b) of the Public Service Act,
"public service" includes:
every person that now or hereafter may own, operate.

manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric
light heat and power, water supply and power
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. (Emphasis
Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through
moving vehicles or vessels either by land, sea or water, is erroneous.
27
28
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:
x x x x x x x x x
(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.
28
29
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. To tax petitioner again on its gross receipts in its transportation
19
of petroleum business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals
dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
Bellosillo, Puno and Mendoza, JJ., concur.
29
30

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.
BELLOSILLO, J.:
Does a charter-party between a shipowner and a charterer transform a common carrier into a private one as
1
to negate the civil law presumption of negligence in case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New
York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June
1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill
of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the
Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner,
2
in Tokyo, Japan. Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-
3
printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on
the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds were all presumably inspected by the
4
charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party
which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from National

Cargo Bureau inspector or substitute appointed by charterers for his account certifying the
vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned
and dried at the vessel's expense and the vessel to be presented clean for use in bulk to the
satisfaction of the inspector before daytime commences. (emphasis supplied)
30
31
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper,
the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with
steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the
use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an F.I.O.S. clause). The hatches remained open
6
throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to
the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the
trucks were made to pass through a weighing scale where they were individually weighed for the purpose of
ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally while the discharge was in
progress. The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at
8
the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI
sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and
18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI
10
to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after
discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a
11
shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated
18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and
about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and
dirt.
12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the
resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the
goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for payment because,
according to them, what they received was just a request for shortlanded certificate and not a formal claim,
and that this "request" was denied by them because they "had nothing to do with the discharge of the
shipment." Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of
14
Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to
them because they have become private carriers by reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or
damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed negligent in
case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a
suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery
by it of less than what it received. After that, the burden of proving that the loss or damage
was due to any of the causes which exempt him from liability is shipted to the carrier, common
or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid,
and the defendants considered private carriers, it was still incumbent upon them to prove that
the shortage or contamination sustained by the cargo is attributable to the fault or negligence
on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the
cargo. This they failed to do. By this omission, coupled with their failure to destroy the
presumption of negligence against them, the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the
value of the cargo that was lost or damaged. Relying on the 1968 case of Home Insurance Co. v. American
16
31
32
Steamship Agencies, Inc., the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private
17
respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-party.
Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not
find application in the case at bar. Thus —
. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to

adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its
complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of
proving his cause of action, fails to show in a satisfactory manner the facts upon which he
bases his claim, the defendant is under no obligation to prove his exception or defense
(Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil.
202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause
of action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was
under the impression that it did not have to establish defendant's negligence. Be that as it
may, contrary to the trial court's finding, the record of the instant case discloses ample
evidence showing that defendant carrier was not negligent in performing its
obligation . . . (emphasis supplied).
18
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals.
Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the
issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for
loss or damage to goods cause by want of due deligence on its part or that of its manager to make the vessel
seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code
applies only to common carriers and not to private carriers. Petitioner further argues that since the
19
possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the appellate court
in not applying the presumption of negligence against respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence on the part of the carrier, when he was not even at
hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason
of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had
exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it
fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship
20
or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight; Charter parties are of two types: (a) contract of
21
affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole,
to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole
vessel is let to the charterer with a transfer to him of its entire command and possession and consequent
control over its navigation, including the master and the crew, who are his servants. Contract of affreightment
may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire
22
of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to
supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The 23
definition extends to carriers either by land, air or water which hold themselves out as ready to engage in
carrying goods or transporting passengers or both for compensation as a public employment and not as a
32
33
casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies
in the character of the business, such that if the undertaking is a single transaction, not a part of the general
business or occupation, although involving the carriage of goods for a fee, the person or corporation offering
such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business,
should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private
25
carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the case
of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to
have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such
26
presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried
has the onus of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the
ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to
be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means
in doing so. This is evident in the present case considering that the steering of the ship, the manning of the
decks, the determination of the course of the voyage and other technical incidents of maritime navigation were
all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering
the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies,
supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in
the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not
the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our
29
jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers
and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly,
the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law — 30
As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is
used to convey the goods of one and of several persons. Where the ship herself is let to a
charterer, so that he takes over the charge and control of her, the case is different; the
shipowner is not then a carrier. But where her services only are let, the same grounds for
imposing a strict responsibility exist, whether he is employed by one or many. The master and
the crew are in each case his servants, the freighter in each case is usually without any
representative on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same was in
the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to
prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration
of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31
33
34
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the
Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the
fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing
the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron
lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches
remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it
impossible for a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of
spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When M/V "Sun Plum"
33
docked at its berthing place, representatives of the consignee boarded, and in the presence of a
representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome
by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This was
confirmed by respondent appellate court thus —
. . . Be that as it may, contrary to the trial court's finding, the record of the instant case
discloses ample evidence showing that defendant carrier was not negligent in performing its
obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly
show absence of negligence by the defendant carrier; that the hull of the vessel at the time of
the discharge of the cargo was sealed and nobody could open the same except in the
presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977,
p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins,
three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5
April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the
seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of it as a public
carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were
duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its
hull was reexamined by the consignee, but prior to unloading. This is clear from the limitation clause agreed
upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an
F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the
charterer, free from all risk and expense to the carrier. Moreover, a shipowner is liable for damage to the
35
cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and
therefore under his control and supervision, not when the same is done by the consignee or stevedores under
the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction
or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the
containers. The Code of Commerce also provides that all losses and deterioration which the goods may suffer
during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods,
shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the
carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes
37
if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take
the precautions which usage has established among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the
expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer,
described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds
34
35
which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during
storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the
temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added
that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause
of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away
some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high
temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water,
either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still
remains potent and usable although no longer saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made
greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the
elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the
vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were
tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she
was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while
the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse.
This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the
unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was
just an approximation or estimate made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained
from time to time at the harbor area while the cargo was being discharged according to the supply officer of
PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks
passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it
the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was
the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier
has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration;
as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof
was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to
minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the
trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now
Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
Davide, Jr. and Quiason, JJ., concur.
Cruz, J., took no part.
Griño-Aquino, J., is on leave.
35
36
THIRD DIVISION
G.R. No. 157481 January 24, 2006
LOADSTAR SHIPPING CO., INC., Petitioner,
vs.
PIONEER ASIA INSURANCE CORP., Respondent.
DECISION
QUISUMBING, J.:
For review on certiorari are (1) the Decision1 dated October 15, 2002 and (2) the Resolution2 dated February
27, 2003, of the Court of Appeals in CA-G.R. CV No. 40999, which affirmed with modification the
Decision3 dated February 15, 1993 of the Regional Trial Court of Manila, Branch 8 in Civil Case No. 86-37957.
The pertinent facts are as follows:
Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered owner and operator of the
vessel M/V Weasel. It holds office at 1294 Romualdez St., Paco, Manila.
On June 6, 1984, Loadstar entered into a voyage-charter with Northern Mindanao Transport Company, Inc.
for the carriage of 65,000 bags of cement from Iligan City to Manila. The shipper was Iligan Cement
Corporation, while the consignee in Manila was Market Developers, Inc.
On June 24, 1984, 67,500 bags of cement were loaded on board M/V Weasel and stowed in the cargo holds
for delivery to the consignee. The shipment was covered by petitioner’s Bill of Lading 4 dated June 23, 1984.
Prior to the voyage, the consignee insured the shipment of cement with respondent Pioneer Asia Insurance
Corporation for P1,400,000, for which respondent issued Marine Open Policy No. MOP-006 dated September
17, 1980, covering all shipments made on or after September 30, 1980. 5
At 12:50 in the afternoon of June 24, 1984, M/V Weasel left Iligan City for Manila in good weather. However,
at 4:31 in the morning of June 25, 1984, Captain Vicente C. Montera, master of M/V Weasel, ordered the
vessel to be forced aground. Consequently, the entire shipment of cement was good as gone due to exposure
to sea water. Petitioner thus failed to deliver the goods to the consignee in Manila.
36
37
The consignee demanded from petitioner full reimbursement of the cost of the lost shipment. Petitioner,
however, refused to reimburse the consignee despite repeated demands.
Nonetheless, on March 11, 1985, respondent insurance company paid the consignee P1,400,000 plus an
additional amount of P500,000, the value of the lost shipment of cement. In return, the consignee executed a
Loss and Subrogation Receipt in favor of respondent concerning the latter’s subrogation rights against
petitioner.
Hence, on October 15, 1986, respondent filed a complaint docketed as Civil Case No. 86-37957, against
petitioner with the Regional Trial Court of Manila, Branch 8. It alleged that: (1) the M/V Weasel was not
seaworthy at the commencement of the voyage; (2) the weather and sea conditions then prevailing were
usual and expected for that time of the year and as such, was an ordinary peril of the voyage for which
the M/V Weasel should have been normally able to cope with; and (3) petitioner was negligent in the selection
and supervision of its agents and employees then manning the M/V Weasel.
In its Answer, petitioner alleged that no fault nor negligence could be attributed to it because it exercised due
diligence to make the ship seaworthy, as well as properly manned and equipped. Petitioner insisted that the
failure to deliver the subject cargo to the consignee was due to force majeure. Petitioner claimed it could not
be held liable for an act or omission not directly attributable to it.
On February 15, 1993, the RTC rendered a Decision in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff and against
defendant Loadstar Shipping Co., Inc. ordering the latter to pay as follows:
1. To pay plaintiff the sum of P1,900,000.00 with legal rate of interest per annum from date of
complaint until fully paid;
2. To pay the sum equal to 25% of the claim as and for attorney’s fees and litigation expenses; and,
3. To pay the costs of suit.
IT IS SO ORDERED.6
The RTC reasoned that petitioner, as a common carrier, bears the burden of proving that it exercised
extraordinary diligence in its vigilance over the goods it transported. The trial court explained that in case of
loss or destruction of the goods, a statutory presumption arises that the common carrier was negligent unless
it could prove that it had observed extraordinary diligence.
Petitioner’s defense of force majeure was found bereft of factual basis. The RTC called attention to the PAG-
ASA report that at the time of the incident, tropical storm "Asiang" had moved away from the Philippines.
Further, records showed that the sea and weather conditions in the area of Hinubaan, Negros Occidental from
8:00 p.m. of June 24, 1984 to 8:00 a.m. the next day were slight and smooth. Thus, the trial court concluded
that the cause of the loss was not tropical storm "Asiang" or any other force majeure, but gross negligence of
petitioner.
Petitioner appealed to the Court of Appeals.
In its Decision dated October 15, 2002, the Court of Appeals affirmed the RTC Decision with modification that
Loadstar shall only pay the sum of 10% of the total claim for attorney’s fees and litigation expenses. It ruled,
WHEREFORE, premises considered, the Decision dated February 15, 1993, of the Regional Trial Court of
Manila, National Capital Judicial Region, Branch 8, in Civil Case No. 86-37957 is hereby AFFIRMED with the
37
38
MODIFICATION that the appellant shall only pay the sum of 10% of the total claim as and for attorney’s fees
and litigation expenses. Costs against the appellant.
SO ORDERED.7
Petitioner’s Motion for Reconsideration was denied. 8
The instant petition is anchored now on the following assignments of error:
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS A COMMON

CARRIER UNDER ARTICLE 1732 OF THE CIVIL CODE.
II
ASSUMING ARGUENDO THAT PETITIONER IS A COMMON CARRIER, THE HONORABLE COURT OF

APPEALS ERRED IN HOLDING THAT THE PROXIMATE CAUSE OF THE LOSS OF CARGO WAS NOT A
FORTUITOUS EVENT BUT WAS ALLEGEDLY DUE TO THE FAILURE OF PETITIONER TO EXERCISE
EXTRAORDINARY DILIGENCE.
III
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD BY THE TRIAL COURT OF
ATTORNEY’S FEES AND LITIGATION EXPENSES IN FAVOR OF HEREIN RESPONDENT. 9
On the first and second issues, petitioner contends that at the time of the voyage the carrier’s voyage-charter
with the shipper converted it into a private carrier. Thus, the presumption of negligence against common
carriers could not apply. Petitioner further avers that the stipulation in the voyage-charter holding it free from
liability is valid and binds the respondent. In any event, petitioner insists that it had exercised extraordinary
diligence and that the proximate cause of the loss of the cargo was a fortuitous event.
With regard to the third issue, petitioner points out that the award of attorney’s fees and litigation expenses
appeared only in the dispositive portion of the RTC Decision with nary a justification. Petitioner maintains that
the Court of Appeals thus erred in affirming the award.
For its part, respondent dismisses as factual issues the inquiry on (1) whether the loss of the cargo was due
to force majeure or due to petitioner’s failure to exercise extraordinary diligence; and (2) whether respondent
is entitled to recover attorney’s fees and expenses of litigation.
Respondent further counters that the Court of Appeals was correct when it held that petitioner was a common
carrier despite the charter of the whole vessel, since the charter was limited to the ship only.
Prefatorily, we stress that the finding of fact by the trial court, when affirmed by the Court of Appeals, is not
reviewable by this Court in a petition for review on certiorari. However, the conclusions derived from such
factual finding are not necessarily pure issues of fact when they are inextricably intertwined with the
determination of a legal issue. In such instances, the conclusions made may be raised in a petition for review
before this Court.10
The threshold issues in this case are: (1) Given the circumstances of this case, is petitioner a common or a
private carrier? and (2) In either case, did petitioner exercise the required diligence i.e., the extraordinary
diligence of a common carrier or the ordinary diligence of a private carrier?
Article 1732 of the Civil Code defines a "common carrier" as follows:
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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.
Petitioner is a corporation engaged in the business of transporting cargo by water and for compensation,
offering its services indiscriminately to the public. Thus, without doubt, it is a common carrier. However,
petitioner entered into a voyage-charter with the Northern Mindanao Transport Company, Inc. Now, had the
voyage-charter converted petitioner into a private carrier?
We think not. The voyage-charter agreement between petitioner and Northern Mindanao Transport Company,
Inc. did not in any way convert the common carrier into a private carrier. We have already resolved this issue
with finality in Planters Products, Inc. v. Court of Appeals 11 where we ruled that:
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering
the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the charterer. 12
Conformably, petitioner remains a common carrier notwithstanding the existence of the charter agreement
with the Northern Mindanao Transport Company, Inc. since the said charter is limited to the ship only and
does not involve both the vessel and its crew. As elucidated in Planters Products, its charter is only a voyage-
charter, not a bareboat charter.
As a common carrier, petitioner is required to observe extraordinary diligence in the vigilance over the goods it
transports.13 When the goods placed in its care are lost, petitioner is presumed to have been at fault or to have
acted negligently. Petitioner therefore has the burden of proving that it observed extraordinary diligence in
order to avoid responsibility for the lost cargo.14
In Compania Maritima v. Court of Appeals,15 we said:
… it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to
accident or some other circumstances inconsistent with its liability.
...
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 safe carriage and delivery. It requires common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and characteristics of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods as their nature
requires."16
Article 1734 enumerates the instances when a carrier might be exempt from liability for the loss of the goods.
These are:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(4) The character of the goods or defects in the packing or in the containers; and
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(5) Order or act of competent public authority.17
Petitioner claims that the loss of the goods was due to a fortuitous event under paragraph 1. Yet, its claim is
not substantiated. On the contrary, we find supported by evidence on record the conclusion of the trial court
and the Court of Appeals that the loss of the entire shipment of cement was due to the gross negligence of
petitioner.
Records show that in the evening of June 24, 1984, the sea and weather conditions in the vicinity of Negros
Occidental were calm. The records reveal that petitioner took a shortcut route, instead of the usual route,
which exposed the voyage to unexpected hazard. Petitioner has only itself to blame for its misjudgment.
Petitioner heavily relies on Home Insurance Co. v. American Steamship Agencies, Inc.18 and Valenzuela
Hardwood and Industrial Supply, Inc. v. Court of Appeals.19 The said cases involved a private carrier, not a
common carrier. Moreover, the issue in both cases is not the effect of a voyage-charter on a common carrier,
but the validity of a stipulation absolving the private carrier from liability in case of loss of the cargo attributable
to the negligence of the private carrier.
Lastly, on the third issue, we find consistent with law and prevailing jurisprudence the Court of Appeals’ award
of attorney’s fees and expenses of litigation equivalent to ten percent (10%) of the total claim. The contract
between the parties in this case contained a stipulation that in case of suit, attorney’s fees and expenses of
litigation shall be limited to only ten percent (10%) of the total monetary award. Given the circumstances of
this case, we deem the said amount just and equitable.
WHEREFORE, the petition is DENIED. The assailed Decision dated October 15, 2002 and the Resolution
dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No. 40999, are AFFIRMED.
Costs against petitioner.
SO ORDERED.
LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Asscociate Justice
ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairman, Third Division
CERTIFICATION
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Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
ARTEMIO V. PANGANIBAN
Chief Justice

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 98275 November 13, 1992

BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, REGIONAL TRIAL COURT OF ANGELES CITY, BRANCH LVI, CARLOS OCAMPO,
INOCENCIO TURLA, SPOUSES MOISES AGAPITO and SOCORRO M. AGAPITO and NICOLAS CRUZ, respondents.
MELO, J.:
The question of petitioner's responsibility for damages when on March 6, 1983, an accident occurred involving
petitioner's Isuzu ten-wheeler truck then driven by an employee of Lino Castro is the thrust of the petition for
review on certiorari now before Us considering that neither the driver nor Lino Castro appears to be connected
with petitioner.
On October 13, 1988, the disputed decision in the suit below was rendered by the court of origin in this
manner:
1. Ordering Rock B.A. and Rogelio Villar y Amare jointly and severally to pay the plaintiffs as
follows:
a) To the plaintiff Carlos Ocampo — P121,650.00;
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42
b) To the plaintiff Moises Ocampo — P298,500.00
c) To the plaintiff Nicolas Cruz — P154,740.00
d) To the plaintiff Inocencio Turla, Sr. — 48,000.00
2. Dismissing the case against Lino Castro
3. Dismissing the third-party complaint against STRONGHOLD
4. Dismissing all the counterclaim of the defendants and third-party defendants.
5. Ordering ROCK to reimburse B.A. the total amount of P622,890.00 which the latter is
adjudged to pay to the plaintiffs. (p. 46, Rollo)
Respondent Court of Appeals affirmed the appealed disposition in toto through Justice Rasul, with Justices De
Pano, Jr. and Imperial concurring, on practically the same grounds arrived at by the court a quo (p. 28, Rollo).
Efforts exerted towards re-evaluation of the adverse were futile (p. 37, Rollo). Hence, the instant petition.
The lower court ascertained after due trial that Rogelio Villar y Amare, the driver of the Isuzu truck, was at
fault when the mishap occurred in as much as he was found guilty beyond reasonable doubt of reckless
imprudence resulting in triple homicide with multiple physical injuries with damage to property in a decision
rendered on February 16, 1984 by the Presiding Judge of Branch 6 of the Regional Trial Court stationed at
Malolos, Bulacan. Petitioner was adjudged liable for damages in as much as the truck was registered in its
name during the incident in question, following the doctrine laid down by this Court in Perez vs. Gutierrez (53
SCRA 149 [1973]) and Erezo, et al. vs. Jepte (102 Phil. 103 [1957]). In the same breadth, Rock Component
Philippines, Inc. was ordered to reimburse petitioner for any amount that the latter may be adjudged liable to
pay herein private respondents as expressly stipulated in the contract of lease between petitioner and Rock
Component Philippines, Inc. Moreover, the trial court applied Article 2194 of the new Civil Code on solidary
accountability of join tortfeasors insofar as the liability of the driver, herein petitioner and Rock Component
Philippines was concerned (pp. 6-7, Decision; pp. 44-45, Rollo).
To the question of whether petitioner can be held responsible to the victim albeit the truck was leased to Rock
Component Philippines when the incident occurred, the appellate court answered in the affirmative on the
basis of the jurisprudential dogmas which, as aforesaid, were relied upon by the trial court although
respondent court was quick to add the caveat embodied in the lease covenant between petitioner and Rock
Component Philippines relative to the latter's duty to reimburse any amount which may be adjudged against
petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have been haled to court and ordered to respond for the damage in
the manner arrived at by both the trial and appellate courts since paragraph 5 of the complaint lodged by the
plaintiffs below would indicate that petitioner was not the employer of the negligent driver who was under the
control an supervision of Lino Castro at the time of the accident, apart from the fact that the Isuzu truck was in
the physical possession of Rock Component Philippines by virtue of the lease agreement.
Aside from casting clouds of doubt on the propriety of invoking the Perez and Erezo doctrines, petitioner
continue to persist with the idea that the pronouncements of this Court in Duavit vs. Court of Appeals (173
SCRA 490 [1989]) and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the factual and legal scenario of
the case at hand. Furthermore, petitioner assumes, given the so-called hiatus on the basis for the award of
damages as decreed by the lower and appellate courts, that Article 2180 of the new Civil Code on vicarious
liability will divest petitioner of any responsibility absent as there is any employer-employee relationship
between petitioner and the driver.
Contrary to petitioner's expectations, the recourse instituted from the rebuffs it encountered may not constitute
a sufficient foundation for reversal of the impugned judgment of respondent court. Petitioner is of the
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43
impression that the Perez and Erezo cases are inapplicable due to the variance of the generative facts in said
cases as against those obtaining in the controversy at bar. A contrario, the lesson imparted by Justice
Labrador in Erezo is still good law, thus:
. . . In previous decisions, We already have held that the registered owner of a certificate of
public convenience is liable to the public for the injuries or damages suffered by passengers or
third persons caused by the operation of said vehicle, even though the same had been
transferred to a third person. (Montoya vs. Ignacio, 94 Phil., 182 50 Off. Gaz., 108; Roque vs.
Malibay Transit, Inc., G.R. No. L-8561, November 18, 1955; Vda. de Medina vs. Cresencia, 99
Phil., 506, 52 Off. Gaz., [10], 4606.) The principle upon which this doctrine is based is that in
dealing with vehicles registered under the Public Service Law, the public has the right to
assume or presumed that the registered owner is the actual owner thereof, for it would be
difficult with the public to enforce the actions that they may have for injuries caused to them by
the vehicles being negligently operated if the public should be required to prove who actual the
owner is. How would the public or third persons know against whom to enforce their rights in
case of subsequent transfer of the vehicles? We do not imply by this doctrine, however, that
the registered owner may not recover whatever amount he had paid by virtue of his liability to
third persons from the person to whom he had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a public
service, should primarily responsible to the public or to the third persons for injuries caused
the latter while the vehicle is being driven on the highways or streets. The members of the
Court are in agreement that the defendant-appellant should be held liable to plaintiff-appellee
for the injuries occasioned to the latter because of the negligence of the driver, even if the
defendant-appellant was no longer an owner of the vehicle at the time of the damage because
he had previously sold it to another. What is the legal basis for his (defendants-appellant's)
liability?
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is
the registered owner in the Motor Vehicle Office. Should he not be allowed to prove the truth,
that he had sold it to another and thus shift the responsibility for the injury to the real and the
actual owner? The defendants hold the affirmative of this proposition; the trial court hold the
negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that the vehicle may be
used or operated upon any public highway unless the same is properly registered. It has been
stated that the system of licensing and the requirement that each machine must carry a
registration number, conspicuously displayed, is one of the precautions taken to reduce the
danger of injury of pedestrians and other travelers from the careless management of
automobiles, and to furnish a means of ascertaining the identity of persons violating the laws
and ordinances, regulating the speed and operation of machines upon the highways (2 R. C.
L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or
operated without being properly registered from the current year, furnish the Motor Vehicle
Office a report showing the name and address of each purchaser of motor vehicle during the
previous month and the manufacturer's serial number and motor number. (Section 5[c], Act
No. 3992, as amended.)
Registration is required not to make said registration the operative act by which ownership in
vehicles is transferred, as in land registration cases, because the administrative proceeding of
registration does not bear any essential relation to the contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the
vehicle upon any public highway (section 5[a], Act No. 3992, as amended). the main aim of
motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefor can
be fixed on a definite individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or other vehicles
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44
without positive identification of the owner or drivers, or with very scant means of identification.
It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily obtained, in the interest of the determinations of persons
responsible for damages or injuries caused on public highways.
One of the principle purposes of motor vehicles legislation is identification of

the vehicle and of the operator, in case of accident; and another is that the
knowledge that means of detection are always available my act as a deterrent
from lax observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is subordinate
at the last to the primary purpose of rendering it certain that the violator of the
law or of the rules of safety shall not escape because of lack of means to
discover him. The purpose of the statute is thwarted, and the displayed number
becomes a "share and delusion," if courts would entertain such defenses as
that put forward by appellee in this case. No responsible person or corporation
could be held liable for the most outrageous acts of negligence, if they should
be allowed to pace a "middleman" between them and the public, and escape
liability by the manner in which they recompense their servants. (King vs.
Breham Automobile Co., Inc. 145 S. W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the
registered owner be allowed at the trial to prove who the actual and real owner is, and in
accordance with such proof escape or evade responsibility and lay the same on the person
actually owning the vehicle? We hold with the trial court that the law does not allow him to do
so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility
that the law fixes and places upon him as an incident or consequence of registration. Were a
registered owner allowed to evade responsibility by proving who the supposed transferee or
owner is, it would be easy for him, by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or to one who possesses no
property with which to respond financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means to discover or Identify the
person actually causing the injury or damage. He has no means other then by a recourse to
the registration in the Motor Vehicles Office to determine who is the owner. The protection that
the law aims to extend to him would become illusory were the registered owner given the
opportunity to escape liability by disproving his ownership. If the policy of the law is to be
enforced and carried out, the registered owner should not be allowed to prove the contrary to
the prejudice of the person injured, that is, to prove that a third person or another has become
the owner, so that he may thereby be relieved of the responsibility to the injured person.
The above policy and application of the law may appear quite harsh and would seem to
conflict with truth and justice. We do not think it is so. A registered owner who has already sold
or transferred a vehicle has the recourse to a third-party complaint, in the same action brought
against him to recover for the damage or injury done, against the vendee or transferee of the
vehicle. The inconvenience of the suit is no justification for relieving him of liability; said
inconvenience is the price he pays for failure to comply with the registration that the law
demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-
appellant) has a right to be indemnified by the real or actual owner of the amount that he may
be required to pay as damage for the injury caused to the plaintiff-appellant.
If the foregoing words of wisdom were applied in solving the circumstance whereof the vehicle had been
alienated or sold to another, there certainly can be no serious exception against utilizing the same rationale to
the antecedents of this case where the subject vehicle was merely leased by petitioner to Rock Component
Philippines, Inc., with petitioner retaining ownership over the vehicle.
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Petitioner's reliance on the ruling of this Court in Duavit vs. Court of Appeals and in Duquillo vs. Bayot (supra)
is legally unpalatable for the purpose of the present discourse. The vehicles adverted to in the two cases
shared a common thread, so to speak, in that the jeep and the truck were driven in reckless fashion without
the consent or knowledge of the respective owners. Cognizant of the inculpatory testimony spewed by
defendant Sabiniano when he admitted that he took the jeep from the garage of defendant Dauvit without the
consent or authority of the latter, Justice Gutierrez, Jr. in Duavit remarked;
. . . Herein petitioner does not deny ownership of the vehicle involved in the mishap but
completely denies having employed the driver Sabiniano or even having authorized the latter
to drive his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore,
the petitioner liable for the accident caused by the negligence of Sabiniano who was neither
his driver nor employee would be absurd as it would be like holding liable the owner of a stolen
vehicle for an accident caused by the person who stole such vehicle. In this regard, we cannot
ignore the many cases of vehicles forcibly taken from their owners at gunpoint or stolen from
garages and parking areas and the instances of service station attendants or mechanics of
auto repair shops using, without the owner's consent, vehicles entrusted to them for servicing
or repair.(at p. 496.)
In the Duquillo case, the defendant therein cannot, according to Justice Diaz, be held liable for anything
because of circumstances which indicated that the truck was driven without the consent or knowledge of the
owner thereof.
Consequently, there is no need for Us to discuss the matter of imputed negligence because petitioner merely
presumed, erroneously, however, that judgment was rendered against it on the basis of such doctrine
embodied under Article 2180 of the new Civil Code.
WHEREFORE, the petition is hereby DISMISSED and decision under review AFFIRMED without special
pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr., Romero and Melo, JJ. concur.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 119706 March 14, 1996

PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and GILDA C. MEJIA, respondents.
REGALADO, J.:p
This is definitely not a case of first impression. The incident which eventuated in the present controversy is a drama of common contentious occurrence
between passengers and carriers whenever loss is sustained by the former. Withal, the exposition of the factual ambience and the legal precepts in this
adjudication may hopefully channel the assertiveness of passengers and the intransigence of carriers into the realization that at times a bad extrajudicial
compromise could be better than a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals in CA-G.R. CV No.
42744 which affirmed the decision of the lower court finding petitioner Philippine Air Lines, Inc. (PAL) liable
1 2
as follows:
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46
ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines, Inc., to
pay plaintiff Gilda C. Mejia:
(1) P30,000.00 by way of actual damages of the microwave oven;
(2) P10,000.00 by way of moral damages;
(3) P20,000.00 by way of exemplary damages;
(4) P10,000.00 as attorney's fee;
all in addition to the costs of the suit.
Defendant's counterclaim is hereby dismissed for lack of merit. 3
The facts as found by respondent Court of Appeals are as follows:
On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one
(1) unit microwave oven, with a gross weight of 33 kilograms from San Francisco, U.S.A. to
Manila, Philippines. Upon arrival, however, of said article in Manila, Philippines, plaintiff
discovered that its front glass door was broken and the damage rendered it unserviceable.
Demands both oral and written were made by plaintiff against the defendant for the
reimbursement of the value of the damaged microwave oven, and transportation charges paid
by plaintiff to defendant company. But these demands fell on deaf ears.
On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against
defendant in the lower court.
In its answer, defendant Airlines alleged inter alia, by way of special and affirmative defenses,
that the court has no jurisdiction over the case; that plaintiff has no valid cause of action
against defendant since it acted only in good faith and in compliance with the requirements of
the law, regulations, conventions and contractual commitments; and that defendant had
always exercised the required diligence in the selection, hiring and supervision of its
employees. 4
What had theretofore transpired at the trial in the court a quo is narrated as follows:
Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took defendant's plane
from San Francisco, U.S.A. for Manila, Philippines (Exh. "F"). Amongst her baggages (sic) was
a slightly used microwave oven with the brand name "Sharp" under PAL Air Waybill No. 0-79-
1013008-3 (Exh. "A"). When shipped, defendant's office at San Francisco inspected it. It was
in good condition with its front glass intact. She did not declare its value upon the advice of
defendant's personnel at San Francisco.
When she arrived in Manila, she gave her sister Concepcion C. Diño authority to claim her
baggag(e) (Exh. "G") and took a connecting flight for Bacolod City.
When Concepcion C. Diño claimed the baggag(e) (Exh. "B") with defendant, then with the
Bureau of Customs, the front glass of the microwave oven was already broken and cannot be
repaired because of the danger of radiation. They demanded from defendant thru Atty. Paco
P30,000.00 for the damages although a brand new one costs P40,000.00, but defendant
refused to pay.
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47
Hence, plaintiff engaged the services of counsel. Despite demand (Exh. "E") by counsel,
defendant still refused to pay.
The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant
business. Hence, the necessity of the oven. Plaintiff suffered sleepless nights when defendant
refused to pay her (for) the broken oven and claims P10,000.00 moral damages, P20,000.00
exemplary damages, P10,000.00 attorney's fees plus P300.00 per court appearance and
P15,000.00 monthly loss of income in her business beginning February, 1990.
Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente Villaruz posited
that plaintiff's claim was not investigated until after the filing of the formal claim on August 13,
1990 (Exh. "6" also Exh. "E"). During the investigations, plaintiff failed to submit positive proof
of the value of the cargo. Hence her claim was denied.
Also plaintiff's claim was filed out of time under paragraph 12, a (1) of the Air Waybill (Exh. "A",
also Exh. "1") which provides: "(a) the person entitled to delivery must make a complaint to the
carrier in writing in case: (1) of visible damage to the goods, immediately after discovery of the
damage and at the latest within 14 days from the receipt of the goods. 5
As stated at the outset, respondent Court of Appeals similarly ruled in favor of private respondent by affirming
in full the trial court's judgment in Civil Case No. 6210, with costs against petitioner. Consequently, petitioner
6
now impugns respondent appellate court's ruling insofar as it agrees with (1) the conclusions of the trial court
that since the air waybill is a contract of adhesion, its provisions should be strictly construed against herein
petitioner; (2) the finding of the trial court that herein petitioner's liability is not limited by the provisions of the
air waybill; and (3) the award by the trial court to private respondent of moral and exemplary damages,
attorney's fees and litigation expenses.
The trial court relied on the ruling in the case of Fieldmen's Insurance Co., Inc. vs. Vda. De Songco, et al. in 7
finding that the provisions of the air waybill should be strictly construed against petitioner. More particularly,
the court below stated its findings thus:
In this case, it is seriously doubted whether plaintiff had read the printed conditions at the back
of the Air Waybill (Exh. "1"), or even if she had, if she was given a chance to negotiate on the
conditions for loading her microwave oven. Instead she was advised by defendant's employee
at San Francisco, U.S.A., that there is no need to declare the value of her oven since it is not
brand new. Further, plaintiff testified that she immediately submitted a formal claim for
P30,000.00 with defendant. But their claim was referred from one employee to another th(e)n
told to come back the next day, and the next day, until she was referred to a certain Atty.
Paco. When they got tired and frustrated of coming without a settlement of their claim in sight,
they consulted a lawyer who demanded from defendant on August 13, 1990 (Exh. "E", an[d]
Exh. "6").
The conclusion that inescapably emerges from the above findings of fact is to concede it with
credence. . . . .
8
Respondent appellate court approved said findings of the trial court in this manner:
We cannot agree with defendant-appellant's above contention. Under our jurisprudence, the
Air Waybill is a contract of adhesion considering that all the provisions thereof are prepared
and drafted only by the carrier (Sweet Lines v. Teves, 83 SCRA 361). The only participation
left of the other party is to affix his signature thereto (BPI Credit Corporation vs. Court of
Appeals, 204 SCRA 601; Saludo, Jr. vs. C.A., 207 SCRA 498; Maersk vs. Court of Appeals,
222 SCRA 108, among the recent cases). In the earlier case of Angeles v. Calasanz, 135
SCRA 323, the Supreme Court ruled that "the terms of a contract [of adhesion] must be
interpreted against the party who drafted the same." . . . . 9
47
48
Petitioner airlines argues that the legal principle enunciated in Fieldmen's Insurance does not apply to the
present case because the provisions of the contract involved here are neither ambiguous nor obscure. The
front portion of the air waybill contains a simple warning that the shipment is subject to the conditions of the
contract on the dorsal portion thereof regarding the limited liability of the carrier unless a higher valuation is
declared, as well as the reglementary period within which to submit a written claim to the carrier in case of
damage or loss to the cargo. Granting that the air waybill is a contract of adhesion, it has been ruled by the
Court that such contracts are not entirely prohibited and are in fact binding regardless of whether or not
respondent herein read the provisions thereof. Having contracted the services of petitioner carrier instead of
other airlines, private respondent in effect negotiated the terms of the contract and thus became bound
thereby. 10
Counsel for private respondent refutes these arguments by saying that due to her eagerness to ship the
microwave oven to Manila, private respondent assented to the terms and conditions of the contract without
any opportunity to question or change its terms which are practically on a "take-it-or-leave-it" basis, her only
participation therein being the affixation of her signature. Further, reliance on the Fieldmen's Insurance case is
misplaced since it is not the ambiguity or obscurity of the stipulation that renders necessary the strict
interpretation of a contract of adhesion against the drafter, but the peculiarity of the transaction wherein one
party, normally a corporation, drafts all the provisions of the contract without any participation whatsoever on
the part of the other party other than affixment of signature. 11
A review of jurisprudence on the matter reveals the consistent holding of the Court that contracts of adhesion
are not invalid per se and that it has on numerous occasions upheld the binding effect thereof. As explained
12
in Ong Yiu vs. Court of Appeals, et al., supra:
. . . . Such provisions have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter's lack of knowledge or assent to the
regulation. It is what is known as a contract of "adhesion," in regards which it has been said
that contracts of adhesion wherein one party imposes a ready-made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his
consent. . . , a contract limiting liability upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against his own negligence.
As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:
. . . , it should be borne in mind that a contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the weaker party is imposed
upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it
or leaving it, completely deprived of the opportunity to bargain on equal footing. . . . .
but subject to the caveat that —
. . . . Just because we have said that Condition No. 5 of the airway bill is binding upon the
parties to and fully operative in this transaction, it does not mean, and let this serve as fair
warning to respondent carriers, that they can at all times whimsical seek refuge from liability in
the exculpatory sanctuary of said Condition No. 5 . . . .
The peculiar nature of such contracts behooves the Court to closely scrutinize the factual milieu to which the
provisions are intended to apply. Thus, just as consistently and unhesitatingly, but without categorically
invalidating such contracts, the Court has construed obscurities and ambiguities in the restrictive provisions of
contracts of adhesion strictly albeit not unreasonably against the drafter thereof when justified in light of the
operative facts and surrounding circumstances. 13
We find nothing objectionable about the lower court's reliance upon the Fieldmen's Insurance case, the
principles wherein squarely apply to the present petition. The parallelism between the aforementioned case
48
49
and this one is readily apparent for, just as in the instant case, it is the binding effect of the provisions in a
contract of adhesion (an insurance policy in Fieldmen's Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the judgment of liability against petitioner
insurance company therein, and necessarily interpreting the provisions of the insurance policy as ineffective,
was the finding that the representations made by the agent of the insurance company rendered it impossible
to comply with the conditions of the contract in question, rather than the mere ambiguity of its terms. The
extended pronouncements regarding strict construction of ambiguous provisions in an adhesion contract
against its drafter, which although made by the Court as an aside but has perforce evolved into a judicial tenet
over time, was actually an incidental statement intended to emphasize the duty of the court to protect the
weaker, as against the more dominant, party to a contract, as well as to prevent the iniquitous situation
wherein the will of one party is imposed upon the other in the course of negotiation.
Thus, there can be no further question as to the validity of the terms of the air waybill, even if the same
constitutes a contract of adhesion. Whether or not the provisions thereof particularly on the limited liability of
the carrier are binding on private respondent in this instance must be determined from the facts and
circumstances involved vis-a-vis the nature of the provisions sought to be enforced, taking care that equity
and fair play should characterize the transaction under review.
On petitioner's insistence that its liability for the damage to private respondent's microwave oven, if any,
should be limited by the provisions of the air waybill, the lower court had this to say:
By and large, defendant's evidence is anchored principally on plaintiff's alleged failure to

comply with paragraph 12, a(1) (Exh. "1-C-2") of the Air waybill (Exh. "A," also Exh. "1"), by
filing a formal claim immediately after discovery of the damage. Plaintiff filed her formal claim
only on August 13, 1990 (Exh. "6", also Exh. "E"). And, failed to present positive proof on the
value of the damaged microwave oven. Hence, the denial of her claim.
This Court has misgivings about these pretensions of defendant.
xxx xxx xxx
Finally, the Court finds no merit to defendant's contention that under the Warsaw Convention,
its liability if any, cannot exceed U.S. $20.00 based on weight as plaintiff did not declare the
contents of her baggage nor pay additional charges before the flight. 14
The appellate court declared correct the non-application by the trial court of the limited liability of therein
defendant-appellant under the "Conditions of the Contract" contained in the air waybill, based on the ruling
in Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., which substantially enunciates the rule that while
15
the Warsaw Convention has the force and effect of law in the Philippines, being a treaty commitment by the
government and as a signatory thereto, the same does not operate as an exclusive enumeration of the
instances when a carrier shall be liable for breach of contract or as an absolute limit of the extent of liability,
nor does it preclude the operation of the Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred in finding that petitioner's liability, if any, is
not limited by the provisions of the air waybill, for, as evidence of the contract of carriage between petitioner
and private respondent, it substantially states that the shipper certifies to the correctness of the entries
contained therein and accepts that the carrier's liability is limited to US $20 per kilogram of goods lost,
damaged or destroyed unless a value is declared and a supplementary charge paid. Inasmuch as no such
declaration was made by private respondent, as she admitted during cross-examination, the liability of
petitioner, if any, should be limited to 28 kilograms multiplied by US $20, or $560. Moreover, the validity of
these conditions has been upheld in the leading case of Ong Yiu vs. Court of Appeals, et al., supra, and
subsequent cases, for being a mere reiteration of the limitation of liability under the Warsaw Convention,
which treaty has the force and effect of law. 16
49
50
It is additionally averred that since private respondent was merely advised, not ordered, that she need not
declare a higher value for her cargo, the final decision of refraining from making such a declaration fell on
private respondent and should not put the petitioner in estoppel from invoking its limited liability. 7 1
In refutation, private respondent explains that the reason for the absence of a declaration of a higher value
was precisely because petitioner's personnel in San Francisco, U.S.A. advised her not to declare the value of
her cargo, which testimony has not at all been rebutted by petitioner. This being so, petitioner is estopped
from faulting private respondent for her failure to declare the value of the microwave oven. 18
The validity of provisions limiting the liability of carriers contained in bills of lading have been consistently
upheld for the following reason:
. . . . The stipulation in the bill of lading limiting the common carrier's liability to the value of
goods appearing in the bill, unless the shipper or owner declares a greater value, is valid and
binding. The limitation of the carrier's liability is sanctioned by the freedom of the contracting
parties to establish such stipulations, clauses, terms, or conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs and public
policy. . . . . 19
However, the Court has likewise cautioned against blind reliance on adhesion contracts where the
facts and circumstances warrant that they should be disregarded. 20
In the case at bar, it will be noted that private respondent signified an intention to declare the value of the
microwave oven prior to shipment, but was explicitly advised against doing so by PAL's personnel in San
Francisco, U.S.A., as borne out by her testimony in court:
x x x x x x x x x
Q Did you declare the value of the shipment?
A No. I was advised not to.
Q Who advised you?
A At the PAL Air Cargo. 21
It cannot be denied that the attention of PAL through its personnel in San Francisco was sufficiently called to
the fact that private respondent's cargo was highly susceptible to breakage as would necessitate the
declaration of its actual value. Petitioner had all the opportunity to check the condition and manner of packing
prior to acceptance for shipment, as well as during the preparation of the air waybill by PAL's Acceptance
22
Personnel based on information supplied by the shipper, and to reject the cargo if the contents or the
23
packing did not meet the company's required specifications. Certainly, PAL could not have been otherwise
prevailed upon to merely accept the cargo.
While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of incident, posited that there
may have been inadequate and improper packing of the cargo, which by itself could be a ground for refusing
24
carriage of the goods presented for shipment, he nonetheless admitted on cross-examination that private
respondent's cargo was accepted by PAL in its San Francisco office:
ATTY. VINCO
So that, be that as it may, my particular concern is that, it is the PAL personnel that accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
50
51
Also, if he comes from abroad like in this particular case, it is the PAL personnel who accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
And the PAL personnel may or may not accept the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
According to what is stated as in the acceptance of the cargo, it is to the best interest of the airlines, that is, he
want(s) also that the airlines would be free from any liability. Could that be one of the grounds for not admitting a
baggage?
WITNESS
Safety is number one (1)
x x x x x x x x x
ATTY. VINCO
So, this baggage was accepted and admitted in San Francisco?
WITNESS
Yes, sir.
ATTY. VINCO
And you could not show any document to the Court that would suggest that this baggage was denied admittance
by your office at San Francisco?
WITNESS
No, I cannot show.

ATTY. VINCO
Now, can you show any document that would suggest that there was insufficient pac(k)aging on this particular
baggage from abroad?
WITNESS
No, sir. 25
In response to the trial court's questions during the trial, he also stated that while the passenger's declaration
regarding the general or fragile character of the cargo is to a certain extent determinative of its classification,
PAL nevertheless has and exercises discretion as to the manner of handling required by the nature of the
cargo it accepts for carriage. He further opined that the microwave oven was only a general, not a fragile,
cargo which did not require any special handling. 26
There is no absolute obligation on the part of a carrier to accept a cargo. Where a common carrier accepts a
cargo for shipment for valuable consideration, it takes the risk of delivering it in good condition as when it was
loaded. And if the fact of improper packing is known to the carrier or its personnel, or apparent upon
observation but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or
injury resulting therefrom. 7
2
The acceptance in due course by PAL of private respondent's cargo as packed and its advice against the
need for declaration of its actual value operated as an assurance to private respondent that in fact there was
no need for such a declaration. Petitioner can hardly be faulted for relying on the representations of PAL's
own personnel.
In other words, private respondent Mejia could and would have complied with the conditions stated in the air
waybill, i.e., declaration of a higher value and payment of supplemental transportation charges, entitling her to
51
52
recovery of damages beyond the stipulated limit of US $20 per kilogram of cargo in the event of loss or
damage, had she not been effectively prevented from doing so upon the advice of PAL's personnel for
reasons best known to themselves.
As pointed out by private respondent, the aforestated facts were not denied by PAL in any of its pleadings nor
rebutted by way of evidence presented in the course of the trial, and thus in effect it judicially admitted that
such an advice was given by its personnel in San Francisco, U.S.A. Petitioner, therefore, is estopped from
blaming private respondent for not declaring the value of the cargo shipped and which would have otherwise
entitled her to recover a higher amount of damages. The Court's bidding in the Fieldmen's Insurance case
once again rings true:
. . . As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that
will befall an innocent party due to its injurious reliance, the failure to apply it in this case would
result in gross travesty of justice.
We likewise uphold the lower court's finding that private respondent complied with the requirement for the
immediate filing of a formal claim for damages as required in the air waybill or, at least, we find that there was
substantial compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Diño, to claim her cargo consisting of a
microwave oven since the former had to take a connecting flight to Bacolod City on the very same afternoon
of the day of her arrival. As instructed, Concepcion Diño promptly proceeded to PAL's Import Section the
28
next day to claim the oven. Upon discovering that the glass door was broken, she immediately filed a claim by
way of the baggage freight claim on which was duly annotated the damage sustained by the oven.
29 30
Her testimony relates what took place thereafter:
ATTY. VINCO
So, after that inspection, what did you do?
WITNESS
After that annotation placed by Mr. Villaruz, I went home and I followed it up the next day with the Clerk of PAL
cargo office.
ATTY. VINCO
What did the clerk tell you?
WITNESS
She told me that the claim was being processed and I made several phone calls after that. I started my follow-ups
February up to June 1990.
ATTY. VINCO
And what results did those follow-ups produce?
WITNESS
All they said (was) that the document was being processed, that they were waiting for Atty. Paco to report to the
office and they could refer the matter to Atty. Paco.
ATTY. VINCO
Who is this Atty. Paco?
WITNESS
He was the one in-charge of approving our claim.
ATTY. VINCO
Were you able to see Atty. Paco?
WITNESS
Yes, sir. I personally visited Atty. Paco together with my auntie who was a former PAL employee.
x x x x x x x x x
ATTY. VINCO
52
53
So, what did you do, did you make a report or did you tell Atty. Paco of your scouting around for a possible
replacement?
WITNESS
I did call him back at his office. I made a telephone call.
ATTY. VINCO
And what answer did Atty. Paco make after you have reported back to him?
WITNESS
They told me that they were going to process the claim based on the price that I gave them but there was no
definite result.
ATTY. VINCO
How many times did you go and see Atty. Paco regarding the claim of your sister?
WITNESS
I made one personal visit and several follow-up calls. With Atty. Paco, I made one phone call but I made several
phone calls with his secretary or the clerk at PAL cargo office and I was trying to locate him but unfortunately, he
was always out of his office. 31
PAL claims processor, Rodolfo Pandes, * confirmed having received the baggage freight claim on January 30,
1990 and the referral to and extended pendency of the private respondent's claim with the office of Atty. Paco,
32
to wit:
ATTY. VINCO:
Q And you did instruct the claimant to see the Claim Officer of the company, right?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And the Claim Officer happened to be Atty. Paco?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And you know that the plaintiff thru her authorized representative Concepcion Diño, who is her sister had many
times gone to Atty. Paco, in connection with this claim of her sister?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q As a matter of fact even when the complaint was already filed here in Court the claimant had continued to call
about the settlement of her claim with Atty. Paco, is that correct?
x x x x x x x x x
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q You know this fact because a personnel saw you in one of the pre-trial here when this case was heard before
the sala of Judge Moscardon, is that correct?
WITNESS:
A Yes.
ATTY. VINCO:
Q In other words, the plaintiff rather had never stop(ped) in her desire for your company to settle this claim, right?
WITNESS:
A Yes, sir.
33
Considering the abovementioned incidents and private respondent Mejia's own zealous efforts in following up
the claim, it was clearly not her fault that the letter of demand for damages could only be filed, after months
34
53
54
of exasperating follow-up of the claim, on August 13, 1990. If there was any failure at all to file the formal
35
claim within the prescriptive period contemplated in the air waybill, this was largely because of PAL's own
doing, the consequences of which cannot, in all fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal claim, under Article 1186 of the
Civil Code that condition was deemed fulfilled, considering that the collective action of PAL's personnel in
tossing around the claim and leaving it unresolved for an indefinite period of time was tantamount to
"voluntarily preventing its fulfillment." On grounds of equity, the filing of the baggage freight claim, which
sufficiently informed PAL of the damage sustained by private respondent's cargo, constituted substantial
compliance with the requirement in the contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err in ruling that the provision on limited liability is not
applicable in this case. We, however, note in passing that while the facts and circumstances of this case do
not call for the direct application of the provisions of the Warsaw Convention, it should be stressed that,
indeed, recognition of the Warsaw Convention does not preclude the operation of the Civil Code and other
pertinent laws in the determination of the extent of liability of the common carrier. 36
The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as much a part of Philippine
law as the Civil Code, Code of Commerce and other municipal special laws. 7 The provisions therein
3
contained, specifically on the limitation of carrier's liability, are operative in the Philippines but only in
appropriate situations.
Petitioner ascribes ultimate error in the award of moral and exemplary damages and attorney's fees in favor of
private respondent in that other than the statement of the trial court that petitioner acted in bad faith in denying
private respondent's claim, which was affirmed by the Court of Appeals, there is no evidence on record that
the same is true. The denial of private respondent's claim was supposedly in the honest belief that the same
had prescribed, there being no timely formal claim filed; and despite having been given an opportunity to
submit positive proof of the value of the damaged microwave oven, no such proof was submitted. Petitioner
insists that its failure to deliver the oven in the condition in which it was shipped could hardly be considered as
amounting to bad faith. 38
Private respondent counters that petitioner's failure to deliver the microwave oven in the condition in which it
was received can be described as gross negligence amounting to bad faith, on the further consideration that it
failed to prove that it exercised the extraordinary diligence required by law, and that no explanation
whatsoever was given as to why the front glass of the oven was broken. 39
The trial court justified its award of actual, moral and exemplary damages, and attorney's fees in favor of
private respondent in this wise:
Since the plaintiff's baggage destination was the Philippines, Philippine law governs the liability
of the defendant for damages for the microwave oven.
The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and 1753 .
...
xxx xxx xxx
In this case, defendant failed to overcome, not only the presumption but more importantly,
plaintiff's evidence that defendant's negligence was the proximate cause of the damages of the
microwave oven. Further plaintiff has established that defendant acted in bad faith when it
denied the former's claim on the ground that the formal claim was filed beyond the period as
provided in paragraph 12 (a-1) (Exh. "1-C-2") of the Air Waybill (Exh. "1", also Exh. "A"), when
actually, Concepcion Diño, sister of plaintiff has immediately filed the formal claim upon
discovery of the damage. 40
54
55
Respondent appellate court was in full agreement with the trial court's finding of bad faith on the part of
petitioner as a basis for the award of the aforestated damages, declaring that:
As to the last assigned error, a perusal of the facts and law of the case reveals that the lower
court's award of moral and exemplary damages, attorney's fees and costs of suit to plaintiff-
appellee is in accordance with current laws and jurisprudence on the matter. Indeed, aside
from the fact that defendant-appellant acted in bad faith in breaching the contract and in
denying plaintiff's valid claim for damages, plaintiff-appellee underwent profound distress,
sleepless nights, and anxiety upon knowledge of her damaged microwave oven in possession
of defendant-appellant, entitling her to the award of moral and exemplary damages (Cathay
Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New Civil Code), and certainly
plaintiff-appellant's unjust refusal to comply with her valid demand for payment, thereby also
entitling her to reasonable attorney's fees [Art. 2208 (2) and (11), id.]. 41
It will be noted that petitioner never denied that the damage to the microwave oven was sustained while the
same was in its custody. The possibility that said damage was due to causes beyond the control of PAL has
effectively been ruled out since the entire process in handling of the cargo — from the unloading thereof from
the plane, the towing and transfer to the PAL warehouse, the transfer to the Customs examination area, and
its release thereafter to the shipper — was done almost exclusively by, and with the intervention or, at the very
least, under the direct supervision of a responsible PAL personnel. 42
The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows:
ATTY. VINCO
So that, you now claim, Mr. Witness, that from the time the cargo was unloaded from the plane until the time it
reaches the Customs counter where it was inspected, all the way, it was the PAL personnel who did all these
things?
WITNESS
Yes, however, there is also what we call the Customs storekeeper and the Customs guard along with the cargo.
ATTY. VINCO
You made mention about a locator?
WITNESS
Yes, sir.
ATTY. VINCO
This locator, is he an employee of the PAL or the Customs?
WITNESS
He is a PAL employee. 43
lead to the inevitable conclusion that whatever damage may have been sustained by the cargo is due
to causes attributable to PAL's personnel or, at all events, under their responsibility.
Moreover, the trial court underscored the fact that petitioner was not able to overcome the statutory
presumption of negligence in Article 1735 which, as a common carrier, it was laboring under in case of loss,
destruction or deterioration of goods, through proper showing of the exercise of extraordinary diligence.
Neither did it prove that the damage to the microwave oven was because of any of the excepting causes
under Article 1734, all of the same Code. Inasmuch as the subject item was received in apparent good
condition, no contrary notation or exception having been made on the air waybill upon its acceptance for
shipment, the fact that it was delivered with a broken glass door raises the presumption that PAL's personnel
were negligent in the carriage and handling of the cargo. 44
Furthermore, there was glaringly no attempt whatsoever on the part of petitioner to explain the cause of the
damage to the oven. The unexplained cause of damage to private respondent's cargo constitutes gross
carelessness or negligence which by itself justifies the present award of damages. The equally unexplained
45
and inordinate delay in acting on the claim upon referral thereof to the claims officer, Atty. Paco, and the
55
56
noncommittal responses to private respondent's entreaties for settlement of her claim for damages belies
petitioner's pretension that there was no bad faith on its part. This unprofessional indifference of PAL's
personnel despite full and actual knowledge of the damage to private respondent's cargo, just to be
exculpated from liability on pure technicality and bureaucratic subterfuge, smacks of willful misconduct and
insensitivity to a passenger's plight tantamount to bad faith and renders unquestionable petitioner's liability
46
for damages. In sum, there is no reason to disturb the findings of the trial court in this case, especially with its
full affirmance by respondent Court of Appeals.
On this note, the case at bar goes into the annals of our jurisprudence after six years and recedes into the
memories of our legal experience as just another inexplicable inevitability. We will never know exactly how
many man-hours went into the preparation, litigation and adjudication of this simple dispute over an oven,
which the parties will no doubt insist they contested as a matter of principle. One thing, however, is certain. As
long as the first letter in "principle" is somehow outplaced by the peso sign, the courts will always have to
resolve similar controversies although mutual goodwill could have dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of Appeals is
AFFIRMED in toto.
SO ORDERED.
Romero, Puno and Mendoza, JJ., concur.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
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:
56
57
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in
the afternoon of September 10, 2000, but was advised to stay for another night because of strong winds and
heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners’ son
and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where
they boarded M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open
seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward
to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco
Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain,
Matute and the other passengers who reached the surface asked him what they could do to save the people
who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save
yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by
the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers
and four crew members, who were brought to Pisa Island. Eight passengers, including petitioners’ son and his
wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900. 3
Petitioners, by letter of October 26, 2000, 4 demanded indemnification from respondent for the death of their
son in the amount of at least ₱4,000,000.
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
₱10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail
notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000. 6
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to the
general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it exercised
the utmost diligence in ensuring the safety of its passengers; contrary to petitioners’ allegation, there was no
storm on September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not
filled to capacity and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged
that it is entitled to an award for attorney’s fees and litigation expenses amounting to not less than ₱300,000.
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 Resort’s 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
respondent’s Counterclaim.
57
58
Petitioners’ Motion for Reconsideration having been denied by Order dated September 2, 2005, 12 they
appealed to the Court of Appeals.
By Decision of August 19, 2008, 13 the appellate court denied petitioners’ appeal, holding, among other things,
that the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B
Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16, 2009, 14 they filed
the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier
since by its tour package, the transporting of its guests is an integral part of its resort business. They inform
that another division of the appellate court in fact held respondent liable for damages to the other survivors of
the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a
common carrier; that the Resort’s 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.
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
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
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power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar public services . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondent’s ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry
services, may be availed of by anyone who can afford to pay the same. These services are thus available to
the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be
imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach
resort operators offering tour packages to factor the transportation fee in arriving at the tour package price.
That guests who opt not to avail of respondent’s ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained
from making distinctions on whether the carrying of persons or goods is the carrier’s principal business,
whether it is offered on a regular basis, or whether it is offered to the general public. The intent of the law is
thus to not consider such distinctions. Otherwise, there is no telling how many other distinctions may be
concocted by unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the
legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence for the safety of the passengers transported by them, according to
all the circumstances of each case. 19 They are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common
carrier is at fault or negligent. In fact, there is even no need for the court to make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence. 21
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage before
it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent’s position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for
shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also
affect the province of Mindoro. 22 By the testimony of Dr. Frisco Nilo, supervising weather specialist of
PAGASA, squalls are to be expected under such weather condition. 23
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put
other people’s 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.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the
failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event
that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid;
(c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor. 24
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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 respondent’s evidence likewise fails to demonstrate that it exercised due
diligence to prevent or minimize the loss before, during and after the occurrence of the squall.
Article 176427 vis-à-vis Article 220628 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 ₱50,000. 29
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death] 30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at death]) adopted
in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. 31
The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the
total earnings less expenses necessary in the creation of such earnings or income and less living and other
incidental expenses.32 The loss is not equivalent to the entire earnings of the deceased, but only such portion
as he would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are
the necessary expenses supposed to be used by the deceased for his own needs. 33
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v.
Borja34 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 = ₱44 in 2000, 36 amounts to
₱39,600. Ruelito’s net earning capacity is thus computed as follows:
Net Earning = life expectancy x (gross annual income - reasonable and necessary living
Capacity expenses).
= 35 x (₱475,200 - ₱237,600)
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= 35 x (₱237,600)
Net Earning
= ₱8,316,000
Capacity
Respecting the award of moral damages, since respondent common carrier’s breach of contract of carriage
resulted in the death of petitioners’ son, following Article 1764 vis-à-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 ₱100,000 as moral damages and
₱100,000 as exemplary damages.38 1avvphi1
Pursuant to Article 2208 39 of the Civil Code, attorney's fees may also be awarded where exemplary damages
are awarded. The Court finds that 10% of the total amount adjudged against respondent is reasonable for the
purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory damages, subject to the following
rules, to wit —
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the present petition,
the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until
satisfaction, in accordance with paragraph number 3 of the immediately cited guideline in Easter Shipping
Lines, Inc.
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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) ₱50,000 as
indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of earning capacity; (3)
₱100,000 as moral damages; (4) ₱100,000 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.
CONCHITA CARPIO MORALES

Associate Justice
Chairperson
WE CONCUR:
ARTURO D. BRION LUCAS P. BERSAMIN

Associate Justice Associate Justice
ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had
been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
THIRD DIVISION
G.R. No. 220400, March 20, 2019
ANNIE TAN, PETITIONER, v. GREAT HARVEST ENTERPRISES, INC., RESPONDENT.
DECISION
LEONEN, J.:
Common carriers are obligated to exercise extraordinary diligence over the goods entrusted to
their care. This is due to the nature of their business, with the public policy behind it geared
toward achieving allocative efficiency and minimizing the inherently inequitable dynamics
between the parties to the transaction.
This resolves a Petition for Review on Certiorari 1 filed under Rule 45 of the Rules of Civil
Procedure by Annie Tan (Tan), assailing the Court of Appeals March 13, 2015 Decision 2 and
September 15, 2015 Resolution 3 in CA-G.R. CV No. 100412. The assailed judgments upheld the
Regional Trial Court January 3, 2012 Decision4 in Civil Case No. Q-94-20745, which granted
Great Harvest Enterprises, Inc.'s (Great Harvest) Complaint for sum of money against Tan.
On February 3, 1994, Great Harvest hired Tan to transport 430 bags of soya beans worth
P230,000.00 from Tacoma Integrated Port Services, Inc. (Tacoma) in Port Area, Manila to
Selecta Feeds in Camarin, Novaliches, Quezon City. 5
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That same day, the bags of soya beans were loaded into Tan's hauling truck. Her employee,
Rannie Sultan Cabugatan (Cabugatan), then delivered the goods to Selecta Feeds. 6
At Selecta Feeds, however, the shipment was rejected. Upon learning of the rejection, Great
Harvest instructed Cabugatan to deliver and unload the soya beans at its warehouse in
Malabon. Yet, the truck and its shipment never reached Great Harvest's warehouse. 7
On February 7, 1994, Great Harvest asked Tan about the missing delivery. At first, Tan assured
Great Harvest that she would verify the whereabouts of its shipment, but after a series of
follow-ups, she eventually admitted that she could not locate both her truck and Great Harvest's
goods.8 She reported her missing truck to the Western Police District Anti-Carnapping Unit and
the National Bureau of Investigation.9
On February 19, 1994, the National Bureau of Investigation informed Tan that her missing truck
had been found in Cavite. However, the truck had been cannibalized and had no cargo in
it.10 Tan spent over P200,000.00 to have it fixed.11
Tan filed a Complaint against Cabugatan and Rody Karamihan (Karamihan), whom she accused
of conspiring with each other to steal the shipment entrusted to her. 12 An Information13 for theft
was filed against Karamihan, while Cabugatan was charged with qualified theft. 14
On March 2, 1994, Great Harvest, through counsel, sent Tan a letter demanding full payment
for the missing bags of soya beans. On April 26, 1994, it sent her another demand letter. Still,
she refused to pay for the missing shipment or settle the matter with Great Harvest. 15 Thus, on
June 2, 1994, Great Harvest filed a Complaint for sum of money against Tan. 16
In her Answer, Tan denied that she entered into a hauling contract with Great Harvest, insisting
that she merely accommodated it. Tan also pointed out that since Great Harvest instructed her
driver to change the point of delivery without her consent, it should bear the loss brought about
by its deviation from the original unloading point. 17
In its August 4, 2000 Decision, 18 the Regional Trial Court of Manila found Karamihan guilty as an
accessory after the fact of theft, and sentenced him to serve a prison sentence between six (6)
months of arresto mayor maximum to one (1) year of prision correccional minimum. He was
also ordered to indemnify Tan P75,000.00, the amount he had paid Cabugatan for the 430 bags
of soya beans.19
In its January 3, 2012 Decision,20 the Regional Trial Court of Quezon City granted Great
Harvest's Complaint for sum of money. It found that Tan entered into a verbal contract of
hauling with Great Harvest, and held her responsible for her driver's failure to deliver the soya
beans to Great Harvest.21 The dispositive portion of the Decision read:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter:
1. To pay the sum of P230,000.00 with interest thereon at the rate of 12% per
annum starting from June 2, 1994 (when the case was filed) and until paid;
2. To pay the sum of P50,000.00 as Attorney's fees; and
3. Costs against the defendant.
SO ORDERED.22
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Tan moved for reconsideration of the January 3, 2012 Decision, but her Motion was denied by
the trial court in its November 21, 2012 Order. 23
Tan filed an Appeal, but the Court of Appeals dismissed it in its March 13, 2015 Decision. 24
In affirming the January 3, 2012 Decision, the Court of Appeals found that the parties' standard
business practice when the recipient would reject the cargo was to deliver it to Great Harvest's
warehouse. Thus, contrary to Tan's claim, there was no deviation from the original destination. 25
The Court of Appeals also held that the cargo loss was due to Tan's failure to exercise the
extraordinary level of diligence required of her as a common carrier, as she did not provide
security for the cargo or take out insurance on it.26
The dispositive portion of the Court of Appeals Decision read:
WHEREFORE, the premises considered, the instant appeal is hereby DISMISSED and the

assailed Decision dated January 3, 2012 [is] AFFIRMED in toto.
IT IS SO ORDERED.27 (Emphasis in the original)
Tan moved for reconsideration, but her Motion was denied by the Court of Appeals in its
September 15, 2015 Resolution.28
Thus, Tan filed her Petition for Review on Certiorari, 29 maintaining that her Petition falls under
the exceptions to a Rule 45 petition since the assailed Court of Appeals Decision was based on a
misapprehension of facts.30
Petitioner contends that she is not liable for the loss of the soya beans and points out that the
agreement with respondent Great Harvest was to deliver them to Selecta Feeds, an obligation
with which she complied. She claims that what happened after that was beyond her control.
When Selecta Feeds rejected the soya beans and respondent directed Cabugatan to deliver the
goods to its warehouse, respondent superseded her previous instruction to Cabugatan to return
the goods to Tacoma, the loading point. Hence, she was no longer required to exercise the
extraordinary diligence demanded of her as a common carrier. 31
Tan opines that she is not liable for the value of the lost soya beans since the truck hijacking
was a fortuitous event and because "the carrier is not an insurer against all risks of travel." 32
She prayed for: (1) P500,000.00 in actual damages to compensate for the expenses she
incurred in looking for and fixing her truck; (2) P500,000.00 in moral damages for the stress
and mental anguish she experienced in searching for her truck and the missing soya beans; (3)
P500,000.00 in exemplary damages to deter respondent from filing a similar baseless complaint
in the future; and (4) P200,000.00 as attorney's fees. On the other hand, if she is found liable
to respondent, petitioner concedes that her liability should only be pegged at P75,000.00, the
actual price Karamihan paid for respondent's shipment. 33
On January 25, 2016,34 respondent was directed to comment on the petition but it

manifested35 that it was waiving its right to file a comment.
The sole issue for this Court's resolution is whether or not petitioner Annie Tan should be held
liable for the value of the stolen soya beans.
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The Petition must fail.
The Rules of Court is categorical that only questions of law may be raised in petitions filed under
Rule 45, as this Court is not a trier of facts. Further, factual findings of appellate courts, when
supported by substantial evidence, are binding upon this Court. 36
However, these rules do admit of exceptions. 37 In particular, petitioner referred to the exception
"[w]hen the judgment is based on a misapprehension of facts" 38 to justify the questions of fact
in her Petition for Review on Certiorari.
A careful review of the records of this case convinces us that the assailed judgments of the
Court of Appeals are supported by substantial evidence.
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." The Civil Code
outlines the degree of diligence required of common carriers in Articles 1733, 1755, and 1756:
ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each case.
....
ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.
ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
Law and economics provide the policy justification of our existing jurisprudence. The
extraordinary diligence required by the law of common carriers is primarily due to the nature of
their business, with the public policy behind it geared toward achieving allocative efficiency
between the parties to the transaction.
Allocative efficiency is an economic term that describes an optimal market where customers are
willing to pay for the goods produced. 39 Thus, both consumers and producers benefit and
stability is achieved.
The notion of common carriers is synonymous with public service under Commonwealth Act No.
146 or the Public Service Act.40 Due to the public nature of their business, common carriers are
compelled to exercise extraordinary diligence since they will be burdened with the externalities
or the cost of the consequences of their contract of carriage if they fail to take the precautions
expected of them.
Common carriers are mandated to internalize or shoulder the costs under the contracts of
carriage. This is so because a contract of carriage is structured in such a way that passengers or
shippers surrender total control over their persons or goods to common carriers, fully trusting
that the latter will safely and timely deliver them to their destination. In light of this inherently
inequitable dynamics— and the potential harm that might befall passengers or shippers if
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common carriers exercise less than extraordinary diligence— the law is constrained to intervene
and impose sanctions on common carriers for the parties to achieve allocative efficiency. 41
Here, petitioner is a common carrier obligated to exercise extraordinary diligence 42 over the
goods entrusted to her. Her responsibility began from the time she received the soya beans
from respondent's broker and would only cease after she has delivered them to the consignee
or any person with the right to receive them.43
Petitioner's argument is that her contract of carriage with respondent was limited to delivering
the soya beans to Selecta Feeds. Thus, when Selecta Feeds refused to accept the delivery, she
directed her driver to return the shipment to the loading point. Respondent refutes petitioner's
claims and asserts that their standing agreement was to deliver the shipment to respondent's
nearest warehouse in case the consignee refused the delivery.
After listening to the testimonies of both parties, the trial court found that respondent was able
to prove its contract of carriage with petitioner. It also found the testimony of respondent's
witness, Cynthia Chua (Chua), to be more believable over that of petitioner when it came to the
details of their contract of carriage:
Defendant's assertion that the diversion of the goods was done without her consent and
knowledge is self-serving and is effectively belied by the positive testimony of witness Cynthia
Chua, Account Officer of plaintiff corporation (page 23, TSN, March 26, 1996). Equally self-
serving is defendant's claim that she is not liable for the loss of the soyabeans (sic) considering
that the plaintiff has no existing contract with her. Such a sweeping submission is also belied by
the testimony of plaintiff's witness Cynthia Chua who categorically confirmed the existing
business relationship of plaintiff and defendant for hauling and delivery of goods as well as the
arrangement to deliver the rejected goods to the plaintiff's nearest warehouse in the event that
goods are rejected by the consignee with prior approval of the consignor (page 11, TSN, March
26, 1996).44
The trial court's appreciation of Chua's testimony was upheld by the Court of Appeals:
Verily, the testimony alone of appellee's Account Officer, Cynthia Chua, dispels the contrary
allegations made by appellant in so far as the nature of their business relationship is concerned.
Consistently and without qualms, said witness narrated the details respecting the company's
relations with the appellant and the events that transpired before, during and after the
perfection of the contract and the subsequent loss of the subject cargo. Said testimony and the
documentary exhibits, i.e., the Tacoma waybill and the appellee's waybill, prove the perfection
and existence of the disputed verbal contract.
Emphatically, from the aforesaid waybills, it was duly established that while verbal, the parties
herein has (sic) agreed for the hauling and delivery of the soya beans from the company's
broker to the intended recipient. It was further proven by evidence that appellant had agreed
and consented to the delivery of the soya beans to the company's nearest warehouse in case
the cargo goods had been rejected by the recipient as it had been the practice between the
parties.45 (Citation omitted)
This Court accords the highest respect to the trial court's assessment of a witness' credibility, as
it was in a better position to observe the witness' demeanor while testifying. 46 We see no reason
to disturb the factual findings of the lower courts, especially since they were supported by
substantial evidence.
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Furthermore, Article 1734 of the Civil Code holds a common carrier fully responsible for the
goods entrusted to him or her, unless there is enough evidence to show that the loss,
destruction, or deterioration of the goods falls under any of the enumerated exceptions:
ARTICLE 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Nothing in the records shows that any of these exceptions caused the loss of the soya beans.
Petitioner failed to deliver the soya beans to respondent because her driver absconded with
them. She cannot shift the blame for the loss to respondent's supposed diversion of the soya
beans from the loading point to respondent's warehouse, as the evidence has conclusively
shown that she had agreed beforehand to deliver the cargo to respondent's warehouse if the
consignee refused to accept it.47
Finally, petitioner's reliance on De Guzman v. Court of Appeals48 is misplaced. There, the
common carrier was absolved of liability because the goods were stolen by robbers who used
"grave or irresistible threat, violence[,] or force" 49 to hijack the goods. De Guzman viewed the
armed hijack as a fortuitous event:
Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to
divest or to diminish such responsibility — even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or
force." We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence[,] or force." 50
In contrast to De Guzman, the loss of the soya beans here was not attended by grave or
irresistible threat, violence, or force. Instead, it was brought about by petitioner's failure to
exercise extraordinary diligence when she neglected vetting her driver or providing security for
the cargo and failing to take out insurance on the shipment's value. As the Court of Appeals
held:
Besides, as the records would show, appellant did not observe extra-ordinary (sic) diligence in
the conduct of her business as a common carrier. In breach of their agreement, appellant did
not provide security while the goods were in transit and she also did not pay for the insurance
coverage of said goods. These measures could have prevented the hijacking (sic) or could have
ensured the payment of the damages sustained by the appellee.51
WHEREFORE, the Petition is DENIED. Petitioner Annie Tan is directed to pay respondent Great
Harvest Enterprises, Inc. the sum of Two Hundred Thirty Thousand Pesos (P230,000.00) with
interest at the rate of twelve percent (12%) per annum from June 2, 1994 until June 30, 2013,
and at the rate of six percent (6%) per annum from July 1, 2013 until its full satisfaction. She is
further directed to pay Fifty Thousand Pesos (P50,000.00) as attorney's fees and the costs of
suit.
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SO ORDERED.
Peralta (Chairperson), A. Reyes, Jr., Hernando, and Carandang,* JJ., concur.
SECOND DIVISION
G.R. No. 242860, March 11, 2019
THE LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD (LTFRB) AND THE DEPARTMENT OF
TRANSPORTATION (DOTR), PETITIONERS, v. HON. CARLOS A. VALENZUELA, IN HIS CAPACITY AS PRESIDING
JUDGE OF THE REGIONAL TRIAL COURT OF MANDALUYONG CITY, BRANCH 213 AND DBDOYC, INC.,
RESPONDENTS.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 is the Order2 dated August 20, 2018 (Assailed Order)
rendered by public respondent Judge Carlos A. Valenzuela of the Regional Trial Court of
Mandaluyong City, Branch 213 (RTC) in R-MND-18-01453-SC which directed the issuance of a
writ of preliminary injunction in favor of private respondent DBDOYC, Inc. (DBDOYC) essentially
enjoining petitioners the Land Transportation Franchising and Regulatory Board (LTFRB) and the
Department of Transportation (DOTr; collectively, petitioners) from regulating DBDOYC's
business operations conducted through the Angkas mobile application.
The Facts
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On May 8, 2015, the Department of Transportation and Communications (DOTC), the

predecessor of DOTr, issued Department Order No. (DO) 2015-11, 3 amending DO 97-
1097,4 which set the standard classifications for public transport conveyances to be used as
basis for the issuance of a Certificate of Public Convenience (CPC) 5 for public utility vehicles
(PUVs). In recognition of technological innovations which allowed for the proliferation of new
ways of delivering and offering public transportation, the DOTC, through DO 2015-11, created
two (2) new classifications, namely, Transportation Network Companies (TNC) and
Transportation Network Vehicle Service (TNVS).6
Under DO 2015-11, a TNC is defined as an "organization whether a corporation,

partnership, sole proprietor, or other form, that provides pre-arranged transportation
services for compensation using an online-enabled application or platform technology
to connect passengers with drivers using their personal vehicles."7 Although DO 2015-
11 made mention of TNVS, the term was not clearly defined until June 19, 2017, when the DOTr
issued DO 2017-118 which set the rules and procedures on the issuance of franchises for public
transport routes and services,9 including TNCs and TNVS. Under DO 2017-11, TNVS is defined
as "a [PUV] accredited with a [TNC], which is granted authority or franchise by the
LTFRB to run a public transport service."10 DO 2017-11 further provided in Item 2.2 thereof
that "[m]otorcycles x x x are likewise not allowed as public transport conveyance."11
Consequently, the LTFRB issued various memorandum circulars 12 to govern the issuance of the
necessary CPC for a TNVS and the accreditation of a TNC. In its issuances, the LTFRB declared
that a TNC is treated as a transport provider.13 whose accountability commences from the
acceptance by its TNVS while online. 14 On the other hand, the accountability of the TNVS, as a
common carrier, attaches from the time the TNVS is online and offers its services to the riding
public.15
Meanwhile, on May 26, 2016, DBDOYC registered its business with the Securities and Exchange
Commission (SEC), and subsequently, in December 2016, launched "Angkas," an online and on-
demand motorcycle-hailing mobile application (Angkas or Angkas app) that pairs drivers of
motorcycles with potential passengers without, however, obtaining the mandatory certificate of
TNC accreditation from the LTFRB. In this regard, DBDOYC accredited Angkas drivers and
allowed them to offer their transport services to the public despite the absence of CPCs. 16
Cognizant of the foregoing, the LTFRB issued a press release on January 27, 2017 informing the
riding public that DBDOYC, which is considered as a TNC, cannot legally operate. 17 Despite such
warning, however, DBDOYC continued to operate and offer its services to the riding
public sans any effort to obtain a certificate of TNC accreditation. 18
In response, DBDOYC, on July 4, 2018, filed a Petition for Declaratory Relief with Application for
Temporary Restraining Order/Writ of Preliminary Injunction 19 against petitioners before the RTC
alleging that:
(a) it is not a public transportation provider since Angkas app is a mere tool that connects the
passenger and the motorcycle driver; (b) Angkas and its drivers are not engaged in the delivery
of a public service; (c) alternatively, should it be determined that it is performing a public
service that requires the issuance of a certificate of accreditation and/or CPC, then DO 2017-11
should be declared invalid because it violates Section 7 of Republic Act No. (RA) 4136 or the
"Land and Transportation Traffic Code,"20 which does not prohibit motorcycles from being used
as a PUV; and (d) neither the LTFRB nor the DOTr has jurisdiction to regulate motorcycles for
hire.21
The RTC Proceedings and The Assailed Order
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In an Order22 dated July 13, 2018, the RTC issued a Temporary Restraining Order (TRO) finding
DBDOYC's business not subject to any regulation nor prohibited under existing law. It added
that since the use of DBDOYC's internet-based mobile application is not contrary to law, morals,
good customs, public order, or public policy, 23 a clear and unmistakable right has been
established in favor of DBDOYC such that if petitioners prohibit the operation of Angkas, the
same would cause irreparable injury to the company. 24
Proceedings were thereafter conducted relative to the application for a writ of preliminary
injunction. Eventually, through the Assailed Order,25 the RTC issued the said writ to enjoin
petitioners and anyone acting on their behalf: (a) from interfering, whether directly or
indirectly, with DBDOYC's operations; (b) from apprehending Angkas bikers who are in lawful
pursuit of their trade or occupation based on Angkas mobile application; and (c) from
performing any act/acts that will impede, obstruct, frustrate, or defeat DBDOYC's pursuit of its
lawful business or trade as owner and operator of Angkas.26
In so ruling, the RTC found that DBDOYC has a clear and unmistakable right "to conduct its
business based on its constitutional right to liberty," which includes "the right of an individual to
x x x earn his livelihood by any lawful calling; [and] to pursue any [vocation] and essentially to
do and perform anything unless otherwise prohibited by law." 27 In this light, the RTC concluded
that DBDOYC has a right to enter into an independent contract with its Angkas riders as an
application provider, further reiterating that DBDOYC's business is not yet subject to any
regulation nor prohibited by any existing law, and that the Angkas biker's offer of transportation
services to a potential passenger is a purely private arrangement using DBDOYC's
application.28 Thus, should petitioners prohibit DBDOYC from operating Angkas, an irreparable
injury will result, thereby entitling it to the issuance of the injunctive relief prayed for. 29
Aggrieved, petitioners are now before the Court ascribing grave abuse of discretion on the part
of the RTC in issuing the writ of preliminary injunction through the Assailed Order. Notably, in
the present petition, petitioners sought the issuance of a TRO to enjoin the RTC from enforcing
its injunctive writ, which the Court granted in a Resolution 30 dated December 5, 2018.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the RTC committed grave abuse of
discretion amounting to lack or in excess of jurisdiction in issuing a writ of preliminary injunction
in favor of DBDOYC and against petitioners.
The Court's Ruling
Preliminarily, despite the absence of the required prior motion for reconsideration, 31 the Court
finds it proper to give due course to the petition in view of the public interest involved, and
further, the urgent necessity of resolving this case so as not to prejudice the interests of the
government.32
The petition is meritorious.
Case law states that "grave abuse of discretion arises when a lower court or tribunal patently
violates the Constitution, the law or existing jurisprudence." 33 According to its classic
formulation:
By grave abuse of discretion is meant capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave
abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason
of passion or personal hostility, and must be so patent and so gross as to amount to an evasion
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of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law.34
In ruling on whether or not the RTC gravely abused its discretion in this case, the Court turns to
the basic principles governing the issuance of preliminary injunctive writs.
The first and foremost requisite in the issuance of a writ of preliminary injunction is
the existence of a clear legal right. The rationale therefor hews with the nature of these
writs being mere provisional reliefs. In Department of Public Works and Highways v. City
Advertising Ventures Corporation,35 the Court explained that a writ of preliminary injunction is
issued to:
[P]revent threatened or continuous irremediable injury to some of the parties before their
claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo
until the merits of the case can be heard fully[.] Thus, it will be issued only upon a showing
of a clear and unmistakable right that is violated. Moreover, an urgent necessity for its
issuance must be shown by the applicant.36 (Emphasis and underscoring supplied)
In Spouses Nisce v. Equitable PCI Bank, Inc.,37 the Court held that "[t]he plaintiff praying for a
writ of preliminary injunction must x x x establish[, inter alia,] that he or she has a present
and unmistakable right to be protected; x x x [t]hus, where the plaintiffs right is
doubtful or disputed, a preliminary injunction is not proper. The possibility of irreparable
damage without proof of an actual existing right is not a ground for a preliminary injunction." 38
In this case, the RTC premised its issuance of the assailed injunctive writ on DBDOYC's
purported clear and unmistakable legal right "to conduct its business based on its constitutional
right to liberty."39 Prescinding therefrom, the RTC concludes that DBDOYC has "the right to
enter into an independent contract with its Angkas bikers as an [application] provider [without]
initially requiring it to secure [a CPC]." 40
As in all fundamental rights, the State has a legitimate interest in regulating these rights when
their exercise clearly affects the public. To recount, "[p]olice power is the inherent power of the
State to regulate or to restrain the use of liberty and property for public welfare." 41 Accordingly,
the State "may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare [as long as] the interference [is] reasonable and not arbitrary." 42
Here, it is petitioners' position that DBDOYC is a transportation provider and its accredited

drivers are common carriers engaged in rendering public service which is subject to their
regulation.43 The regulatory measures against DBDOYC, as mentioned above, pertain to DOs
2015-11 and 2017-11, which have created new classifications of transportation services,
namely TNC and TNVS, in light of modern innovations. These issuances may be traced to
Commonwealth Act No. 146,44 otherwise known as the "Public Service Act," as
amended.45 Under Section 13 (b) thereof, a "public service" is defined as follows:
(b) The term "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, sub-way
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 railway, 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 system, wire
or wireless broadcasting stations and other similar public services; Provided, however, That a
person engaged in agriculture, not otherwise a public service, who owns a motor vehicle and
uses it personally and/or enters into a special contract whereby said motor vehicle is offered for
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hire or compensation to a third party or third [parties] engaged in agriculture, not itself or
themselves a public service, for operation by the latter for a limited time and for a specific
purpose directly connected with the cultivation of his or their farm, the transportation,
processing, and marketing of agricultural products of such third party or third parties shall not
be considered as operating a public service for the purposes of this Act. (Emphases and
underscoring supplied).
Section 15 of the same law requires that, except for certain exemptions, no public service shall
operate in the Philippines without possessing a CPC. 46 In turn, the then DOTC (which had
supervision and control over the LTFRB that had assumed certain powers of the old Public
Service Commission47 ) issued DO 97-1097 providing for the standard classifications of all PUVs
before they can be issued a CPC. This department order was later amended by the above-stated
DOs 2015-11 and 2017-11 and thereafter, the LTFRB issued various memorandum circulars
governing the rules for TNC and TNVS accreditation, which rules DBDOYC purportedly failed to
comply.
As stated in the Public Service Act, the term "public service" covers any person who owns,
operates, manages, or controls 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.48 The Civil Code defines "common earners" 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. (Emphases supplied)
For its part, DBDOYC claims reprieve from the above-stated regulatory measures, claiming that
it and its accredited drivers are not common carriers or transportation providers. 49 It argues
that "[its] technology [only] allows a biker willing to give a ride and a passenger willing to pay
the set price to meet and contract with each other. Under this set-up, an Angkas biker does not
offer his/her service to an indefinite public."50 Since the application "merely pairs
an Angkas biker with a potential passenger under a fare scheme which [DBDOYC] fixes for both,
[DBDOYC] may not compel an Angkas driver to pick up a potential passenger even after the
latter confirms a booking because as between the biker and the passenger, there is but a purely
private contractual arrangement."51
However, it seems that DBDOYC's proffered operations is not enough to extricate its business
from the definition of common carriers, which, as mentioned, fall under the scope of the term
"public service." As the DBDOYC itself describes, Angkas is a mobile application which seeks to
"pair an available and willing Angkas biker with a potential passenger, who requested for a
motorcycle ride, relying on geo-location technology." 52 Accordingly, it appears that it is
practically functioning as a booking agent, or at the very least, acts as a third-party liaison for
its accredited bikers. Irrespective of the application's limited market scope, i.e., Angkas users, it
remains that, on the one hand, these bikers offer transportation services to wiling public
consumers, and on the other hand, these services may be readily accessed by anyone who
chooses to download the Angkas app.
In De Guzman v. Court of Appeals,53 the Court discussed the relation between Article 1732 of
the Civil Code and Section 13 (b) of the Public Service Act, explaining that Article 1732 of the
Civil Code does not distinguish between a carrier who offers its services to the general public
and one who offers services or solicits business only from a narrow segment of the general
population:
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
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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. x x x. 54 (Emphases and underscoring supplied)
In this relation, DBDOYC posits that its accredited bikers are private carriers as they do not hold
out their services generally to the public because they cannot just be hailed on the street as
they only contract via the Angkas online front. However, the Court is hard-pressed to rule - at
least at this point, and for the purpose of determining the validity of the writ of preliminary
injunction - that these bikers are only private carriers who may publicly ply their trade without
any regulation. As the Court observes, the genius behind the Angkas app is that it removes the
inconvenience of having to physically hail for public transportation by creating a virtual system
wherein practically the same activity may now be done at the tip of one's fingers. As it is the
trend of modern technology, previously cumbersome mundane activities, such as paying bills,
ordering food, or reserving accommodations, can now be accomplished through a variety of
online platforms. By DBDOYC's own description, 55 it seems to be that Angkas app is one of such
platforms. As such, the fact that its drivers are not physically hailed on the street does not
automatically render Angkas-accredited drivers as private carriers.
While DBDOYC further claims that another distinguishing factor of its business is that "[its]
drivers may refuse at any time any legitimate demand for service by simply not going online or
not logging in to the online platform,"56 still when they do so log-in, they make their services
publicly available. In other words, when they put themselves online, their services are bound
for indiscriminate public consumption. Again, as also-mentioned above, Article 1732 defining a
common carrier "[c]arefully 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."57 This doctrinal statement seems to be the apt
response to DBDOYC's assertion.
Moreover, based on the way the app works, it appears that there is really no contractual
discretion between the Angkas bikers and would-be passengers because the app
automatically pairs them up based on algorithmic procedures. Whether or not the parties once
paired with each other have the choice to freely accept, reject, or modify the terms of their
engagement based solely on their discretion is a matter which appears to have not yet been
traversed in the proceedings below. Verily, the absence of any true choice on these material
contractual points apparently contradicts the postulation that the Angkas app merely
facilitates a purely private arrangement between the biker and his passenger.
At any rate, even if it is assumed that Angkas-accredited bikers are not treated as common
carriers and hence, would not make DBDOYC fall under the "public service" definition, it does
not necessarily mean that the business of holding out private motorcycles for hire is a legitimate
commercial venture. Section 7 of RA 4136 states that:
Section 7. Registration Classification. - Every motor vehicle shall be registered under one of the
following described classifications:
(a) private passenger automobiles; (b) private trucks; and (c) private motorcycles, scooters,
or motor wheel attachments. Motor vehicles registered under these classifications shall not be
used for hire under any circumstances and shall not be used to solicit, accept, or be
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used to transport passengers or freight for pay.
x x x x (Emphases and underscoring supplied)

That being said, the Court therefore concludes that no clear and unmistakable right exists in
DBDOYC's favor; hence, the RTC gravely abused its discretion in issuing the assailed injunctive
writ. In the final analysis, the business of holding one's self out as a transportation service
provider, whether done through online platforms or not, appears to be one which is imbued with
public interest and thus, deserves appropriate regulations. With the safety of the public further
in mind, and given that, at any rate, the above-said administrative issuances are presumed to
be valid until and unless they are set aside, 58 the nullification of the assailed injunctive writ on
the ground of grave abuse of discretion is in order.
Lest it be misunderstood, the pronounced grave abuse of discretion of the RTC exists only with
respect to its issuance of the assailed injunctive writ. It is fundamental that preliminary
injunction proceedings are separate and distinct from the main case. In Buyco v. Baraquia,59 the
Court discussed the ancillary and provisional nature of these writs:
A writ of preliminary injunction is an order granted at any stage of an action or proceeding prior
to the judgment or final order, requiring a party or a court, agency or a person to refrain from a
particular act or acts. It is merely a provisional remedy, adjunct to the main case subject to the
latter's outcome. It is not a cause of action in itself. Being an ancillary or auxiliary remedy, it is
available during the pendency of the action which may be resorted to by a litigant to preserve
and protect certain rights and interests therein pending rendition, and for purposes of the
ultimate effects, of a final judgment in the case.
The writ is provisional because it constitutes a temporary measure availed of during the
pendency of the action and it is ancillary because it is a mere incident in and is dependent upon
the result of the main action.60
Under this limited scope, it is thus beyond the power of the Court to determine the ultimate
rights and obligations of the parties, else it unduly prejudges the main case for declaratory relief
which is still pending before the court a quo. While the Court acknowledges the contemporary
relevance of the topic at hand, it remains self-aware of this case's procedural and jurisdictional
parameters. Accordingly, the definitive resolution of the issue of regulating ride-booking or ride-
sharing applications must await the proper case therefor.
As a final word, "[e]very court should remember that an injunction should not be granted lightly
or precipitately because it is a limitation upon the freedom of the defendant's action. It should
be granted only when the court is fully satisfied that the law permits it and the emergency
demands it, for no power exists whose exercise is more delicate, which requires greater caution
and deliberation, or is more dangerous in a doubtful case, than the issuance of an injunction." 61
WHEREFORE, the petition is GRANTED. The Order dated August 20, 2018 issued by the
Regional Trial Court of Mandaluyong City, Branch 213 (RTC) directing the issuance of a writ of
preliminary injunction in R-MND-18-01453-SC is ANNULLED and SET ASIDE. The RTC is
hereby ORDERED to conduct further proceedings, and thereafter, resolve R-MND-18-01453-SC
with utmost dispatch.
SO ORDERED.
Carpio, Senior Associate Justice, (Chairperson), Caguioa, J. Reyes, Jr., and Lazaro-Javier, JJ.,
concur.
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SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 179446 January 10, 2011
LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,
vs.
GLODEL BROKERAGE CORPORATION and R&B INSURANCE CORPORATION, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the August 24,
2007 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 82822, entitled "R&B Insurance Corporation
v. Glodel Brokerage Corporation and Loadmasters Customs Services, Inc.," which held petitioner
Loadmasters Customs Services, Inc. (Loadmasters) liable to respondent Glodel Brokerage
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Corporation (Glodel) in the amount of ₱1,896,789.62 representing the insurance indemnity which R&B
Insurance Corporation (R&B Insurance) paid to the insured-consignee, Columbia Wire and Cable
Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to insure
the shipment of 132 bundles of electric copper cathodes against All Risks. On August 28, 2001, the cargoes
were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila. They
arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the
subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for the
use of its delivery trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and Valenzuela
City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed drivers
and accompanied by its employed truck helpers. Six (6) truckloads of copper cathodes were to be delivered to
Balagtas, Bulacan, while the other six (6) truckloads were destined for Lawang Bato, Valenzuela City. The
cargoes in six truckloads for Lawang Bato were duly delivered in Columbia’s warehouses there. Of the six (6)
trucks en route to Balagtas, Bulacan, however, only five (5) reached the destination. One (1) truck, loaded
with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the copper cathodes.
Because of this incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount of
₱1,903,335.39. After the requisite investigation and adjustment, R&B Insurance paid Columbia the amount of
₱1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the
Regional Trial Court, Branch 14, Manila (RTC), docketed as Civil Case No. 02-103040. It sought
reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had
been subrogated "to the right of the consignee to recover from the party/parties who may be held legally liable
for the loss."2
On November 19, 2003, the RTC rendered a decision 3 holding Glodel liable for damages for the loss of the
subject cargo and dismissing Loadmasters’ counterclaim for damages and attorney’s fees against R&B
Insurance. The dispositive portion of the decision reads:
WHEREFORE, all premises considered, the plaintiff having established by preponderance of evidence its
claims against defendant Glodel Brokerage Corporation, judgment is hereby rendered ordering the latter:
1. To pay plaintiff R&B Insurance Corporation the sum of ₱1,896,789.62 as actual and compensatory
damages, with interest from the date of complaint until fully paid;
2. To pay plaintiff R&B Insurance Corporation the amount equivalent to 10% of the principal amount
recovered as and for attorney’s fees plus ₱1,500.00 per appearance in Court;
3. To pay plaintiff R&B Insurance Corporation the sum of ₱22,427.18 as litigation expenses.
WHEREAS, the defendant Loadmasters Customs Services, Inc.’s counterclaim for damages and attorney’s
fees against plaintiff are hereby dismissed.
With costs against defendant Glodel Brokerage Corporation.
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SO ORDERED.4
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered the assailed decision which reads in part:
Considering that appellee is an agent of appellant Glodel, whatever liability the latter owes to appellant R&B
Insurance Corporation as insurance indemnity must likewise be the amount it shall be paid by appellee
Loadmasters.
WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED in that the appellee Loadmasters
is likewise held liable to appellant Glodel in the amount of ₱1,896,789.62 representing the insurance
indemnity appellant Glodel has been held liable to appellant R&B Insurance Corporation.
Appellant Glodel’s appeal to absolve it from any liability is herein DISMISSED.
SO ORDERED.5
Hence, Loadmasters filed the present petition for review on certiorari before this Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to Respondent Glodel in spite of the fact that the
latter respondent Glodel did not file a cross-claim against it (Loadmasters)?
2. Under the set of facts established and undisputed in the case, can petitioner Loadmasters
be legally considered as an Agent of respondent Glodel?6
To totally exculpate itself from responsibility for the lost goods, Loadmasters argues that it cannot be
considered an agent of Glodel because it never represented the latter in its dealings with the consignee. At
any rate, it further contends that Glodel has no recourse against it for its (Glodel’s) failure to file a cross-claim
pursuant to Section 2, Rule 9 of the 1997 Rules of Civil Procedure.
Glodel, in its Comment,7 counters that Loadmasters is liable to it under its cross-claim because the latter was
grossly negligent in the transportation of the subject cargo. With respect to Loadmasters’ claim that it is
already estopped from filing a cross-claim, Glodel insists that it can still do so even for the first time on appeal
because there is no rule that provides otherwise. Finally, Glodel argues that its relationship with Loadmasters
is that of Charter wherein the transporter (Loadmasters) is only hired for the specific job of delivering the
merchandise. Thus, the diligence required in this case is merely ordinary diligence or that of a good father of
the family, not the extraordinary diligence required of common carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have interposed a cross-claim against
Loadmasters because it was not prevented from presenting evidence to prove its position even without
amending its Answer. As to the relationship between Loadmasters and Glodel, it contends that a contract of
agency existed between the two corporations.8
Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right,
so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its
remedies or securities.9 Doubtless, R&B Insurance is subrogated to the rights of the insured to the extent of
the amount it paid the consignee under the marine insurance, as provided under Article 2207 of the Civil
Code, which reads:
ART. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
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company shall be subrogated to the rights of the insured against the wrong-doer or the person who has
violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.
As subrogee of the rights and interest of the consignee, R&B Insurance has the right to seek reimbursement
from either Loadmasters or Glodel or both for breach of contract and/or tort.
The issue now is who, between Glodel and Loadmasters, is liable to pay R&B Insurance for the amount of the
indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject cargo. Under Article 1732 of the Civil Code, common carriers
are persons, corporations, firms, or associations engaged in the business of carrying or transporting
passenger or goods, or both by land, water or air for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier because it is engaged in the business of
transporting goods by land, through its trucking service. It is a common carrier as distinguished from a private
carrier wherein the carriage is generally undertaken by special agreement and it does not hold itself out to
carry goods for the general public.10 The distinction is significant in the sense that "the rights and obligations of
the parties to a contract of private carriage are governed principally by their stipulations, not by the law on
common carriers."11
In the present case, there is no indication that the undertaking in the contract between Loadmasters and
Glodel was private in character. There is no showing that Loadmasters solely and exclusively rendered
services to Glodel.
In fact, Loadmasters admitted that it is a common carrier.12
In the same vein, Glodel is also considered a common carrier within the context of Article 1732. In its
Memorandum,13 it states that it "is a corporation duly organized and existing under the laws of the Republic of
the Philippines and is engaged in the business of customs brokering." It cannot be considered otherwise
because as held by this Court in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., 14 a
customs broker is also regarded as a common carrier, the transportation of goods being an integral part of its
business.
Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for
reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that extreme measure of care and caution which persons of
unusual prudence and circumspection observe for securing and preserving their own property or rights. 15 This
exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales
in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for
shipment.16 Thus, in case of loss of the goods, the common carrier is presumed to have been at fault or to
have acted negligently. 17 This presumption of fault or negligence, however, may be rebutted by proof that the
common carrier has observed extraordinary diligence over the goods.
With respect to the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of
extraordinary diligence 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. 18
Premises considered, the Court is of the view that both Loadmasters and Glodel are jointly and severally liable
to R & B Insurance for the loss of the subject cargo. Under Article 2194 of the New Civil Code, "the
responsibility of two or more persons who are liable for a quasi-delict is solidary."
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Loadmasters’ claim that it was never privy to the contract entered into by Glodel with the consignee Columbia
or R&B Insurance as subrogee, is not a valid defense. It may not have a direct contractual relation with
Columbia, but it is liable for tort under the provisions of Article 2176 of the Civil Code on quasi-delicts which
expressly provide:
ART. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage Service, Inc. v. Phoenix
Assurance Company of New York,/McGee & Co., Inc. 19 where this Court held that a tort may arise despite the
absence of a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against Mindanao
Terminal, from which the present case has arisen, states a cause of action. The present action is based
on quasi-delict, arising from the negligent and careless loading and stowing of the cargoes belonging to Del
Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the rights of Del
Monte Produce, who is not a party to the contract of service between Mindanao Terminal and Del Monte, still
the insurance carriers may have a cause of action in light of the Court’s consistent ruling that the act that
breaks the contract may be also a tort. In fine, a liability for tort may arise even under a contract, where tort is
that which breaches the contract. In the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the alleged negligent manner by
which Mindanao Terminal handled the cargoes belonging to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte Produce and Mindanao Terminal, the allegation of negligence on
the part of the defendant should be sufficient to establish a cause of action arising from quasi-delict.
[Emphases supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions,
but also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees (truck
driver and helper) were instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters
should be made answerable for the damages caused by its employees who acted within the scope of their
assigned task of delivering the goods safely to the warehouse.
Whenever an employee’s negligence causes damage or injury to another, there instantly arises a presumption
juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa in
eligiendo) or supervision (culpa in vigilando) of its employees. 20 To avoid liability for a quasi-delict committed
by its employee, an employer must overcome the presumption by presenting convincing proof that he
exercised the care and diligence of a good father of a family in the selection and supervision of his
employee.21 In this regard, Loadmasters failed.
Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated
destination. It should have been more prudent in entrusting the goods to Loadmasters by taking precautionary
measures, such as providing escorts to accompany the trucks in delivering the cargoes. Glodel should,
therefore, be held liable with Loadmasters. Its defense of force majeure is unavailing.
79
80
At this juncture, the Court clarifies that there exists no principal-agent relationship between Glodel and
Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code provides: "By the contract of
agency a person binds himself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter." The elements of a contract of agency are: (1) consent,
express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within
the scope of his authority.22
Accordingly, there can be no contract of agency between the parties. Loadmasters never represented Glodel.
Neither was it ever authorized to make such representation. It is a settled rule that the basis for agency is
representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed by the principal. On the
part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his
words or actions, while on the part of the agent, there must be an intention to accept the appointment and act
on it.23 Such mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of Loadmasters and Glodel? Each wrongdoer is liable for
the total damage suffered by R&B Insurance. Where there are several causes for the resulting damages, a
party is not relieved from liability, even partially. It is sufficient that the negligence of a party is an efficient
cause without which the damage would not have resulted. It is no defense to one of the concurrent tortfeasors
that the damage would not have resulted from his negligence alone, without the negligence or wrongful acts of
the other concurrent tortfeasor. As stated in the case of Far Eastern Shipping v. Court of Appeals,24
X x x. Where several causes producing an injury are concurrent and each is an efficient cause without which
the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may
be had against any or all of the responsible persons although under the circumstances of the case, it may
appear that one of them was more culpable, and that the duty owed by them to the injured person was not the
same. No actor's negligence ceases to be a proximate cause merely because it does not exceed the
negligence of other actors. Each wrongdoer is responsible for the entire result and is liable as though his acts
were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is solidary since both of them are liable for the
total damage. Where the concurrent or successive negligent acts or omissions of two or more persons,
although acting independently, are in combination the direct and proximate cause of a single injury to a third
person, it is impossible to determine in what proportion each contributed to the injury and either of them is
responsible for the whole injury. Where their concurring negligence resulted in injury or damage to a third
party, they become joint tortfeasors and are solidarily liable for the resulting damage under Article 2194 of the
Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can collect from Loadmasters, it having failed to file a
cross-claim against the latter. 1avvphi1
Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach of contract of service as
the latter is primarily liable for the loss of the subject cargo. In this case, however, it cannot succeed in
seeking judicial sanction against Loadmasters because the records disclose that it did not properly interpose a
cross-claim against the latter. Glodel did not even pray that Loadmasters be liable for any and all claims that it
may be adjudged liable in favor of R&B Insurance. Under the Rules, a compulsory counterclaim, or a cross-
claim, not set up shall be barred.25 Thus, a cross-claim cannot be set up for the first time on appeal.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable
grounds. "Equity, which has been aptly described as ‘a justice outside legality,’ is applied only in the absence
of, and never against, statutory law or judicial rules of procedure." 26 The Court cannot be a lawyer and take the
cudgels for a party who has been at fault or negligent.
80
81
WHEREFORE, the petition is PARTIALLY GRANTED. The August 24, 2007 Decision of the Court of Appeals
is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs Services, Inc. and
respondent Glodel Brokerage Corporation jointly and severally liable to respondent R&B Insurance
Corporation for the insurance indemnity it paid to consignee Columbia Wire & Cable Corporation and ordering
both parties to pay, jointly and severally, R&B Insurance Corporation a] the amount of ₱1,896,789.62
representing the insurance indemnity; b] the amount equivalent to ten (10%) percent thereof for attorney’s
fees; and c] the amount of ₱22,427.18 for litigation expenses.
The cross-claim belatedly prayed for by respondent Glodel Brokerage Corporation against petitioner
Loadmasters Customs Services, Inc. is DENIED.
SO ORDERED.
JOSE CATRAL MENDOZA

Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ANTONIO EDUARDO B. NACHURA DIOSDADO M. PERALTA

ROBERTO A. ABAD
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
RENATO C. CORONA
Chief Justice
81

A. Common Carrier in General (Cases)

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1

Republic of the Philippines

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

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

We turn then to the liability of private respondent as a common carrier.

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

xxx xxx xxx

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Republic of the Philippines

G.R. No. 131621 September 28, 1999

The facts are undisputed. 1âwphi1.nêt

a) 705 bales of lawanit hardwood;

b) 27 boxes and crates of tilewood assemblies and the others ;and

c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.

1) LOADSTAR cannot be considered a private carrier on the sole ground that

(1) Is the M/V "Cherokee" a private or a common carrier?

We find no merit in this petition.

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

Art. 1732. Common carriers are persons, corporations, firms or associations

xxx xxx xxx

Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.

G.R. No. 148496 March 19, 2002

The facts are as follows:

The trial court held:

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

is a finding which cannot be traversed and overturned.

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyer's fee;

Petitioner contends that:

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

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

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

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

As found by the Court of Appeals:

Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Republic of the Philippines

G.R. No. 101089. April 7, 1993.

The facts, as gathered by this Court, are as follows:

3. The costs of the suit.

xxx xxx xxx

In the same case, 21 the Supreme Court also held that:

Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER,

The above conclusion nothwithstanding, GPS cannot escape from liability.

Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.

Republic of the Philippines

G.R. No. 125948 December 29, 1998

by the Energy Regulatory Board in 1992. 2

Moreover, Transportation contractors are not included in the enumeration of

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

1. That the exemption granted under Sec. 133 (j)

2. The Local Tax Code of 1992 was basically enacted to

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