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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.
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finding private respondent to be a common carrier and


holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as
damages and P 2,000.00 as attorney's fees.
On 10 December 1975, the trial court rendered a Decision

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him
a common carrier; in finding that he had habitually offered trucking services to the public; in not
exempting him from liability on the ground of force majeure; and in ordering him to pay damages and
attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this
Court by way of a Petition for Review assigning as errors the following conclusions of the Court of
Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts
earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as
"a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think that Article
1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with
the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended)
which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services. ...
(Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such
back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent'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. 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.
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Common carriers, "by the nature of their business and for reasons of public policy" are held to a very
high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care of goods transported by a common
carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and
7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt
the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list,
even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which
provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the
instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle
must be dealt with under the provisions of Article 1735, in other words, that the private respondent as
common carrier is presumed to have been at fault or to have acted negligently. This presumption,
however, may be overthrown by proof of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should
have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk.
We do not believe, however, that in the instant case, the standard of extraordinary diligence required
private respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at
the risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733,
given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5
and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of
robbers who 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
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not irresistible, threat, violence or force. Three (3) of the five (5) hold-uppers were armed with firearms.
The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The hijacked
truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the
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accused of robbery, though not of robbery in band.
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.

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
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Procedure, seeks to reverse and set aside the following: (a) the 30 January 1997 decision of the Court of Appeals in CA-G.R.
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CV No. 36401, which affirmed the decision of 4 October 1991 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
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paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November 1997,
denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed.1wphi1.nt
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.
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
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retained control over its crew.
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
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carrier.
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
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subrogated to the latter's rights as against the carrier, LOADSTAR.
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.
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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 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
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been negligent, and the burden of proving otherwise devolved upon MIC.
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
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Co. v. Macondray & Co., Inc., and National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen
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Phils., Inc.
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
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Steamship Agencies, Inc., 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 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
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and National Steel Corp. v. Court of Appeals, 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
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the effect that the M/V"Cherokee" was a "general cargo carrier." 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
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carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, the Court
juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that case, viz.:
The Civil Code defines "common carriers" in the following terms:
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. 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
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Article 1755 of the Civil Code."
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
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owner or agent. 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.,
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Inc., and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 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
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obviously null and void for being contrary to public policy." 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
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enforceable.
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
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prescriptive period also applies to the insurer of the goods. In this case, the period for filing the action
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for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void;
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.1wphi1.nt
SO ORDERED.

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.1wphi1.nt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc.
(TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner
entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semichemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's
warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured
by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on
board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody
of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner,
pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered
it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine
Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were
"wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placed at
P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner
in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995, rendered
judgment finding petitioner liable to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report
(Exh. "F") with entries appearing therein, classified as "TED" and "TSN", which the
claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at
the middle of the subject damaged cargoes respectively, coupled with the Marine Cargo

Survey Report (Exh. "H" - "H-4-A") confirms the fact of the damaged condition of the
subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular, which provides
among others that:
" . . . we opine that damages sustained by shipment is attributable to improper
handling in transit presumably whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that [she
is] are not liable. Defendant by reason of the nature of [her] business should have devised
ways and means in order to prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to the consignee. Defendant did not
present any evidence on what precaution [she] performed to prevent [the] said incident,
hence the presumption is that the moment the defendant accepts the cargo [she] shall
perform such extraordinary diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have
been lost, destroyed or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they have observed the extraordinary
diligence required by law. The burden of the plaintiff, therefore, is to prove merely that
the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden
is shifted to the carrier to prove that he has exercised the extraordinary diligence required
by law. Thus, it has been held that the mere proof of delivery of goods in good order to a
carrier, and of their arrival at the place of destination in bad order, makes out a prima
facie case against the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove
that the loss was due to accident or some other circumstances inconsistent with its
liability." (cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV,
1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the
extraordinary responsibility lasts from the time the goods are unconditionally placed in
the possession of and received by the carrier for transportation until the same are
delivered actually or constructively by the carrier to the consignee or to the person who
has the right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following amounts -1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;

3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on
certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR
[IN] DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE
SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR
IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS
PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.5
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a
common carrier, although both the trial court and the Court of Appeals held otherwise, then she
is indeed not liable beyond what ordinary diligence in the vigilance over the goods transported
by her, would require.6 Consequently, any damage to the cargo she agrees to transport cannot be
presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is
not a common carrier but a private carrier because, as a customs broker and warehouseman, she
does not indiscriminately hold her services out to the public but only offers the same to select
parties with whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a similar
contention and held the party to be a common carrier, thus The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public."
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity . . . Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on 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 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

MAXU-201406-0
ICSU-412105-0

wood flooring we[t] and/or with signs of water soaked


-

with dent/crack on roof panel


rubber gasket on left side/door panel partly detached loosened.10

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has
no personal knowledge on whether the container vans were first stored in petitioner's warehouse
prior to their delivery to the consignee. She likewise claims that after withdrawing the container
vans from the arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to
SMC's warehouse in Ermita, Manila, which is a mere thirty-minute drive from the Port Area
where the cargo came from. Thus, the damage to the cargo could not have taken place while
these were in her custody.11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors
indicates that when the shipper transferred the cargo in question to the arrastre operator, these
were covered by clean Equipment Interchange Report (EIR) and, when petitioner's employees
withdrew the cargo from the arrastre operator, they did so without exception or protest either
with regard to the condition of container vans or their contents. The Survey Report pertinently
reads -Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to
dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30' x 20'
secure metal vans, covered by clean EIRs. Except for slight dents and paint scratches on
side and roof panels, these containers were deemed to have [been] received in good
condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn] by
Transorient Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignee's storage warehouse located at
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel
to the arrastre, Marina Port Services Inc., in good order and condition as evidenced by
clean Equipment Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the arrastre operator. The
cargoes were withdrawn by the defendant-appellant from the arrastre still in good order
and condition as the same were received by the former without exception, that is, without
any report of damage or loss. Surely, if the container vans were deformed, cracked,
distorted or dented, the defendant-appellant would report it immediately to the consignee
or make an exception on the delivery receipt or note the same in the Warehouse Entry
Slip (WES). None of these took place. To put it simply, the defendant-appellant received
the shipment in good order and condition and delivered the same to the consignee
damaged. We can only conclude that the damages to the cargo occurred while it was in
the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the
possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was
due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this
legal presumption and the presumption of negligence attached to a common carrier in
case of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not have been damaged while in her custody as
she immediately delivered the containers to SMC's compound, suffice it to say that to prove the
exercise of extraordinary diligence, petitioner must do more than merely show the possibility that
some other party could be responsible for the damage. It must prove that it used "all reasonable
means to ascertain the nature and characteristic of goods tendered for [transport] and that [it]
exercise[d] due care in the handling [thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides -Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in
the container, is/are known to the carrier or his employees or apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception notwithstanding
such condition, he is not relieved of liability for damage resulting therefrom.14 In this case,
petitioner accepted the cargo without exception despite the apparent defects in some of the

container vans. Hence, for failure of petitioner to prove that she exercised extraordinary
diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1wphi1.nt
SO ORDERED.

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


ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON
CARRIER. Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or transporting passengers
or goods or both, by land, water or air, for compensation, offering their services to the public."
The test to determine a common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." . . . The holding of the Court in De
Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held
thus: "The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguished between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED;
WHEN PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME;
WHEN PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe
extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they
are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption . . . The presumption of negligence was raised against petitioner. It
was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need
not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW
CARRIER ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court
held that hijacking, not being included in the provisions of Article 1734, must be dealt with

under the provisions of Article 1735 and thus, the common carrier is presumed to have been at
fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove
that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is
in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the
following or similar stipulations shall be considered unreasonable, unjust and contrary to public
policy . . . (6) That the common carrier's liability for acts committed by thieves, or of robbers
who do not act with grave or irresistible threat, violences or force, is dispensed with or
diminished"; In the same case, the Supreme Court also held that: "Under Article 1745 (6) above,
a common carrier is held responsible and will not be allowed to divest or to diminish such
responsibility even for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case,
petitioner herself has made the admission that she was in the trucking business, offering her
trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT.
Petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact
has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS
AVAILABLE AS WITNESSES. While the affidavit of Juanito Morden, the truck helper in
the hijacked truck, was presented as evidence in court, he himself was a witness as could be
gleaned from the contents of the petition. Affidavits are not considered the best evidence if the
affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW
DEFINES IT TO BE. Granting that the said evidence were not self-serving, the same were
not sufficient to prove that the contract was one of lease. It must be understood that a contract is
what the law defines it to be and not what it is called by the contracting parties.
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;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage
since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that
CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that the
truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October
21, 1988; that the hijacking was immediately reported to CIPTRADE and that petitioner and the
police exerted all efforts to locate the hijacked properties; that after preliminary investigation, an
information for robbery and carnapping were filed against Jose Opriano, et al.; and that
hijacking, being a force majeure, exculpated petitioner from any liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as
follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering
the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR
PESOS (P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per
annum to be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's
judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors;
to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT
COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS,
IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF
THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL
COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF
PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY
THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted
in her answer that she did business under the name A.M. Bascos Trucking and that said
admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs

that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's
decision that petitioner was a common carrier, Moreover, both courts appreciated the following
pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck
driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean
meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper,
Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier,
she alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the
contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9
She further averred that Jesus Bascos confirmed in his testimony his statement that the contract
was a lease contract. 10 She also stated that: she was not catering to the general public. Thus, in
her answer to the amended complaint, she said that she does business under the same style of
A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to the
general public but to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business transacted." 12 In this case, petitioner herself has made the admission that
she was in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services only
to a select group of people and because the private respondents, plaintiffs in the lower court, did
not object to the presentation of affidavits by petitioner where the transaction was referred to as a
lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is
instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts
have dismissed them as self-serving and petitioner contests the conclusion. We are bound by the
appellate court's factual conclusions. Yet, granting that the said evidence were not self-serving,
the same were not sufficient to prove that the contract was one of lease. It must be understood
that a contract is what the law defines it to be and not what it is called by the contracting parties.
15 Furthermore, petitioner presented no other proof of the existence of the contract of lease. He
who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to
force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances when
the presumption of negligence does not attach and these instances are enumerated in Article
1734. 19 In those cases where the presumption is applied, the common carrier must prove that it
exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held
that hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed
to divest or to diminish such responsibility even for acts of strangers like thieves or robbers
except where such thieves or robbers in fact acted with grave or irresistible threat, violence or
force. We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus
Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the
Court of Appeals have concluded that these affidavits were not enough to overcome the

presumption. Petitioner's affidavit about the hijacking was based on what had been told her by
Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of
objection on the part of private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for
review on certiorari, We are not to determine the probative value of evidence but to resolve
questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took
place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a witness as could be gleaned from the contents of
the petition. Affidavits are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and robbery against the
accused named in said affidavits did not necessarily mean that the contents of the affidavits were
true because they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence
to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence
made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find
no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.

G.R. No. 141910

August 6, 2002

FGU INSURANCE CORPORATION, petitioner,


vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES,
respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert
Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang,
Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing
the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the
cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the
subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim,
FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver
Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents further
claimed that the cause of damage was purely accidental.1wphi1.nt
The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting its
evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,1 granted the motion to dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must
prove his own affirmative allegation, xxx.
"In the instant case, plaintiff did not present any single evidence that would prove that
defendant is a common carrier.
"x x x

xxx

xxx

"Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss,
damage or deterioration of goods during transport under 1735 of the Civil Code is not
availing.

"Thus, the laws governing the contract between the owner of the cargo to whom the
plaintiff was subrogated and the owner of the vehicle which transports the cargo are the
laws on obligation and contract of the Civil Code as well as the law on quasi delicts.
"Under the law on obligation and contract, negligence or fault is not presumed. The law
on quasi delict provides for some presumption of negligence but only upon the
attendance of some circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person
driving a motor vehicle has been negligent if at the time of the mishap, he was
violating any traffic regulation.
"Evidence for the plaintiff shows no proof that defendant was violating any traffic
regulation. Hence, the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a common carrier
and defendants driver was the one negligent, defendant cannot be made liable for the
damages of the subject cargoes."2
The subsequent motion for reconsideration having been denied,3 plaintiff interposed an appeal to
the Court of Appeals, contending that the trial court had erred (a) in holding that the appellee
corporation was not a common carrier defined under the law and existing jurisprudence; and (b)
in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999,4 discoursed, among other things, that "x x x in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to prove that the appellee is a
common carrier, the presumption would not arise; consequently, the appellant would
have to prove that the carrier was negligent.
"x x x

xxx

xxx

"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its `limited clientele, (assuming it was really a common carrier),
it follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant)
`must establish his case by a preponderance of evidence, which means that the evidence
as a whole adduced by one side is superior to that of the other. (Summa Insurance
Corporation vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the appellant
failed to do -- hence, the dismissal of the plaintiffs complaint by the trial court is
justified.
"x x x

xxx

xxx

"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

xxx

xxx

"x x x the lower court correctly ruled that 'the application of the law on common carriers
is not warranted and the presumption of fault or negligence on the part of a common
carrier in case of loss, damage or deterioration of good[s] during transport under [article]
1735 of the Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a
trial court are entitled to great weight on appeal and should not be disturbed unless for
strong and valid reasons."5
Petitioner's motion for reconsideration was likewise denied;6 hence, the instant petition,7 raising
the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON
CARRIER AS DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A
PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN
THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE
SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND
POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE
INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a common
carrier. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for hire or
compensation, offering their services to the public,8 whether to the public in general or to a
limited clientele in particular, but never on an exclusive basis.9 The true test of a common carrier
is the carriage of passengers or goods, providing space for those who opt to avail themselves of

its transportation service for a fee.10 Given accepted standards, GPS scarcely falls within the term
"common carrier."
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.11 The law, recognizing the
obligatory force of contracts,12 will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof.13 A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee that
may include his "expectation interest," which is his interest in having the benefit of his bargain
by being put in as good a position as he would have been in had the contract been performed, or
his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the contract not been
made; or his "restitution interest," which is his interest in having restored to him any benefit that
he has conferred on the other party.14 Indeed, agreements can accomplish little, either for their
makers or for society, unless they are made the basis for action.15 The effect of every infraction
is to create a new duty, that is, to make recompense to the one who has been injured by the
failure of another to observe his contractual obligation16 unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that of the diligence of a
good father of a family or, exceptionally by stipulation or by law such as in the case of common
carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him
from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it
and petitioners assured, and admits that the cargoes it has assumed to deliver have been lost or
damaged while in its custody. In such a situation, a default on, or failure of compliance with, the
obligation in this case, the delivery of the goods in its custody to the place of destination gives rise to a presumption of lack of care and corresponding liability on the part of the
contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage
between petitioners principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their successors who have assumed
their personality or their juridical position.17 Consonantly with the axiom res inter alios acta aliis
neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioners
civil action against the driver can only be based on culpa aquiliana, which, unlike culpa
contractual, would require the claimant for damages to prove negligence or fault on the part of
the defendant.18
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant
liable where the thing which caused the injury complained of is shown to be under the latters
management and the accident is such that, in the ordinary course of things, cannot be expected to

happen if those who have its management or control use proper care. It affords reasonable
evidence, in the absence of explanation by the defendant, that the accident arose from want of
care.19 It is not a rule of substantive law and, as such, it does not create an independent ground of
liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it
furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of
negligence. The maxim simply places on the defendant the burden of going forward with the
proof.20 Resort to the doctrine, however, may be allowed only when (a) the event is of a kind
which does not ordinarily occur in the absence of negligence; (b) other responsible causes,
including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the
plaintiff.21 Thus, it is not applicable when an unexplained accident may be attributable to one of
several causes, for some of which the defendant could not be responsible.22
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties.23 Nevertheless, the requirement that responsible causes other than those due to
defendants conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant
shall be deemed to have waived the right to present evidence.24 Thus, respondent corporation
may no longer offer proof to establish that it has exercised due care in transporting the cargoes of
the assured so as to still warrant a remand of the case to the trial court.1wphi1.nt
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED
only insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial
court and decision of the appellate court are 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.

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
1
pipelines. The original pipeline concession was granted in 1967 and renewed by the Energy Regulatory Board

1992.

in

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

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
5
Section 133 (j) of the Local Government Code.
6

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint for
tax refund with prayer for writ of preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia,
that: (1) the imposition and collection of the business tax on its gross receipts violates Section
133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the
gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not
include the authority to collect such taxes on transportation contractors for, as defined under Sec.
131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer
illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund
7
of the tax paid.
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
8
mode or manner by which a product is delivered to its destination.
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this
wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes being
the lifeblood of the government. Exemption may therefore be granted only by clear
and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387.
(Exhibit A) whose concession was lately renewed by the Energy Regulatory Board
(Exhibit B). Yet neither said law nor the deed of concession grant any tax
exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under Sec.
137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j)
encompasses only common carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a special
carrier extending its services and facilities to a
single specific or "special customer" under a
"special contract."
2. The Local Tax Code of 1992 was basically enacted
to give more and effective local autonomy to local
governments than the previous enactments, to make

them economically and financially viable to serve


the people and discharge their functions with a
concomitant obligation to accept certain devolution
of powers, . . . So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143 (e) and
9
151 of the Code.
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
10
11
adjudication. On November 29, 1995, the respondent court rendered a decision affirming the
trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied
12
on July 18, 1996.
Hence, this petition. At first, the petition was denied due course in a Resolution dated November
13
11, 1996. Petitioner moved for a reconsideration which was granted by this Court in a
14
Resolution of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is
not a common carrier or a transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying
goods for others as a public employment, and must
hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to
which his business is confined;
3. He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
4. The transportation must be for hire.

15

Based on the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products,
for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all
persons who choose to employ its services, and transports the goods by land and for

compensation. The fact that petitioner has a limited clientele does not exclude it from the
16
definition of a common carrier. In De Guzman vs. Court of Appeals we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . .
avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We
think that Article 1877 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
every person that now or hereafter may own,
operate. manage, or control in the Philippines, for
hire or compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business purposes,
any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power,
water supply and power petroleum, sewerage
system, wire or wireless communications systems,
wire or wireless broadcasting stations and other
similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes
no distinction as to the means of transporting, as long as it is by land, water or air. It does not
provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in
17
the United States, oil pipe line operators are considered common carriers.
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:

Art. 86. Pipe line concessionaire as common carrier. A pipe line


shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to utilize
the remaining transportation capacity pro rata for the transportation
of such other petroleum as may be offered by others for transport,
and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides:
that everything relating to the exploration for and exploitation of
petroleum . . . and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is
hereby declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged
only in transporting petroleum products, it is considered a common
carrier under Republic Act No. 387 . . . . Such being the case, it is
not subject to withholding tax prescribed by Revenue Regulations
No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of
transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common carriers
by air, land or water, except as
provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government Code of
1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the
Taxing Powers of Local Government Units." . . .

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


Still on page 95, subparagraph 5, on taxes on the business of
transportation. This appears to be one of those being deemed to be
exempted from the taxing powers of the local government units.
May we know the reason why the transportation business is being
excluded from the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in
Section 121 (now Sec. 131), line 16, paragraph 5. It states that local
government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of
Book II, one can see there that provinces have the power to impose
a tax on business enjoying a franchise at the rate of not more than
one-half of 1 percent of the gross annual receipts. So,
transportation contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition
of taxes by local government units on the carrier business. Local
government units may impose taxes on top of what is already being
imposed by the National Internal Revenue Code which is the socalled "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 socalled "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
19
under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals
dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.

G.R. No. 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.:
1

between a shipowner and a charterer transform a common carrier into a private one as
to negate the civil law presumption of negligence in case of loss or damage to its cargo?
Does a charter-party

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
2
Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as
3
shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party starting from par. 16 to 40 were
attached to the pre-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.
4

Before loading the fertilizer aboard the vessel, four (4) of her holds were all presumably inspected by the
charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charterparty 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)
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
5
tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage.
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
6
terms and conditions of the charter-partly (which provided for an F.I.O.S. clause). The hatches remained
7
open throughout the duration of the discharge.
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
8
discharge was in progress. The petitioner's warehouse was made of corrugated galvanized iron (GI)
sheets, with an opening at 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
9
spillages of the ferilizer.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th
10
and 18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was
hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to
11
and after discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974
revealed a 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
12
dirt.
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
13
the goods shipped and the diminution in value of that portion said to have been contaminated with dirt.
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
14
discharge of the shipment." Hence, on 18 July 1975, PPI filed an action for damages with the Court of
First Instance of 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
15
carrier for the value of the goods lost or damaged when it ruled thus:
. . . 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
16
for the value of the cargo that was lost or damaged. Relying on the 1968 case of Home Insurance Co.
17
v. American Steamship Agencies, Inc., the appellate court ruled that the cargo vessel M/V "Sun Plum"
owned by private 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
18
its obligation . . . (emphasis supplied).
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
19
under the Civil Code applies only to common carriers and not to private carriers. Petitioner further
argues that since the 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
20
the owner to another person for a specified time or use; a contract of affreightment by which the owner
of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance
21
of goods, on a particular voyage, in consideration of the payment of freight; Charter parties are of two
types: (a) contract of 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
22
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 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.
23

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The
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
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
24
corporation offering such service is a private carrier.
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
25
business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case
of private 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
26
have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On
the contrary, no such 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,
27
chosen and hired by the shipowner.
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
28
charterer.
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
29
States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not
find application in our 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
31
inconsistent with its liability.
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
32
the steel covers made it impossible for a person to open without the use of the ship's boom.
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
33
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When
M/V "Sun Plum" 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
34
operation on rotation basis.
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 charterparty which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the
35
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 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
36
same is done by the consignee or stevedores under the employ of the latter.
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
37
accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and
damage resulting from the preceding causes 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
38
careful persons.
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 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.

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 petitioners Bill of
Lading4 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.
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
latters 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 attorneys 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.
Petitioners 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 attorneys 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 MODIFICATION that the appellant shall only pay the sum of 10%
of the total claim as and for attorneys fees and litigation expenses. Costs against the appellant.
SO ORDERED.7
Petitioners Motion for Reconsideration was denied.8
The instant petition is anchored now on the following assignments of error:
I
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 ATTORNEYS 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 carriers
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 attorneys 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 petitioners failure to exercise extraordinary diligence;
and (2) whether respondent is entitled to recover attorneys 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:
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 Appeals11
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;
(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.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 attorneys 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, attorneys 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.

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;
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 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 defendantappellant 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 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.
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.

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