A. COMMON CARRIERS (Arts.
1731 to 1766 NCC)
1. Definitions of “domestic shipping” under R.A. No. 9295
and of “public service” under Commonwealth Act No. 146
2. Common Carriage
PEDRO DE GUZMAN vs.COURT OF APPEALS and ERNESTO
CENDANA
FACTS:
Ernesto Cendana, a junk dealer, was engaged in buying up used
bottles and scrap metal in Pangasinan, and bring such material to
Manila for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. He charged freight rates
which were commonly lower than regular commercial rates for the
cargo loaded in his vehicle.
Pedro de Guzman a merchant and authorized dealer of General
Milk Company contracted with Cendana for the hauling of 750
cartons of Liberty filled milk from a warehouse of General Milk in
Makati, Rizal. 150 cartons were loaded on a truck driven by
Cendana himself, while 600 cartons were placed on board the
other truck which was driven by Manuel Estrada, Cendana’s driver
and employee. The other 600 boxes never reached de Guzman,
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.
Having failed to exercise the extraordinary diligence required of
him by the law, he is held liable for the value of the undelivered
goods. Cendana 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.
ISSUE: Whether or not Ernesto Cendana may, under the facts
earlier set forth, be properly characterized as a common carrier?
Whether or not high jacking with robbery can be properly
regarded as a fortuitous event that can exempt the carrier?
HELD:
The trial court rendered a Decision finding private respondent to
be a common carrier and holding him liable for the value of the
undelivered goods as damages and as 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.
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.
Common carriers, "by the nature of their business and for reasons
of public policy" 2 are held to a very high degree of care and
diligence ("extraordinary diligence") in the carriage of goods as
well as of passengers. 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.
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)
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 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.
Cendana is not liable for the value of the undelivered merchandise
which was lost because of an event entirely beyond private
respondent's control. 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.
PLANTERS PRODUCTS, INC. VS. COURT OF APPEALS,
SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA
G.R. No. 101503 September 15, 1993
FACTS:
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.
Prior to its voyage, a time charter-party on the vessel M/V "Sun
Plum" pursuant to the Uniform General Charter was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner,
in Tokyo, Japan.
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 charter-party . After the Urea fertilizer was loaded
in bulk by stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron lids,
covered with three (3) layers of tarpaulin, then tied with steel
bonds. The hatches remained closed and tightly sealed throughout
the entire voyage.
Petitioner unloaded the cargo from the holds into its steelbodied
dump trucks which were parked alongside the berth, using metal
scoops attached to the ship, pursuant to the terms and conditions
of the charter-partly (which provided for an F.I.O.S. clause).
However, the hatches remained open throughout the duration of
the discharge. Each time a dump truck was filled up, its load of
Urea was covered with tarpaulin. The port area was windy, certain
portions of the route to the warehouse were sandy and the
weather was variable, raining occasionally while the discharge was
in progress.
It took eleven (11) days for PPI to unload the cargo. 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 and after
discharge. The survey report submitted by CSCI to the consignee
(PPI) 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, sand and rust and rendered unfit for
commerce.
Consequently, PPI sent a claim letter to Soriamont Steamship
Agencies (SSA), the resident agent of the carrier, KKKK,
representing the cost of the alleged shortage in the goods shipped
and the diminution in value of that portion said to have been
contaminated with dirt. Respondent SSA was not able to respond
to this consignee’s claim for payment because according to them,
they only received a request for shortlanded certificate and not a
formal claim.
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 Hence, 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 carrier for the value
of the goods lost or damaged.
On appeal, respondent Court of Appeals reversed the lower court
and absolved the carrier from liability for the value of the cargo
that was lost or damaged. Relying on the 1968 case of Home
Insurance Co.v. American 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.
ISSUE: Whether a common carrier becomes a private carrier by
reason of a charter-party.
HELD: The assailed decision of the Court of Appeals, which
reversed the trial court, is affirmed.
A "charter-party" is defined as a contract by which an entire ship,
or some principal part thereof, is let by the owner to another
person for a specified time or use; a contract of affreightment by
which the owner of a ship or other vessel lets the whole or a part
of her to a merchant or other person for the conveyance of goods,
on a particular voyage, in consideration of the payment of freight;
Charter parties are of two types: (a) contract of affreightment
which involves the use of shipping space on vessels leased by the
owner in part or as a whole, to carry goods for others; and, (b)
charter by demise or bareboat charter, by the terms of which the
whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its
navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time charter,
wherein the vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of
vessel only, either for a determinate period of time or for a single
or consecutive voyage, the shipowner to supply the ship's stores,
pay for the wages of the master and the crew, and defray the
expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is
defined in Art. 1732 of the Civil Code. The 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 corporation offering such
service is a private carrier.
It is not disputed that respondent carrier, in the ordinary course of
business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the
vessel M/V "Sun Plum", the ship captain, its officers and
compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and control.
Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the
charterer did not have any control of the means in doing so. This
is evident in the present case considering that the steering of the
ship, the manning of the decks, the determination of the course of
the voyage and other technical incidents of maritime navigation
were all consigned to the officers and crew who were screened,
chosen and hired by the shipowner.
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.
Respondent carrier's heavy reliance on the case of Home
Insurance Co. v. American Steamship Agencies, supra, is
misplaced for the reason that the meat of the controversy therein
was the validity of a stipulation in the charter-party exempting the
shipowners from liability for loss due to the negligence of its
agent, and not the effects of a special charter on common carriers.
At any rate, the rule in the United States that a ship chartered by a
single shipper to carry special cargo is not a common carrier, does
not find application in our 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.
In an action for recovery of damages against a common carrier on
the goods shipped, the shipper or consignee should first prove the
fact of shipment and its consequent loss or damage while the
same was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that
he has exercised extraordinary diligence required by law or that
the loss, damage or deterioration of the cargo was due to
fortuitous event, or some other circumstances inconsistent with its
liability. To our mind, respondent carrier has sufficiently
overcome, by clear and convincing proof, the prima facie
presumption of negligence. 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. 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.
Article 1734 of the New Civil Code provides that common carriers
are not responsible for the loss, destruction or deterioration of the
goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also
provides that all losses and deterioration which the goods may
suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be
for the account and risk of the shipper, and that proof of these
accidents is incumbent upon the carrier. The carrier, nonetheless,
shall be liable for the loss and damage resulting from the
preceding causes if it is proved, as against him, that they arose
through his negligence or by reason of his having failed to take the
precautions which usage has established among careful persons.
Thus, the petition is dismissed.
ESTRELLITA M. BASCOS vs. COURT OF APPEALS and
RODOLFO A. CIPRIANO G.R. No. 101089. April 7, 1993.
FACTS:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE) entered into a hauling contract with Jibfair Shipping
Agency Corp. 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 to transport and to
deliver 400 sacks of soya bean meal from the Manila Port Area to
Calamba, Laguna at the rate. But, Bascos failed to deliver the said
cargo. As a consequence, Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with the contract. Cipriano
demanded reimbursement from Bascos but the latter refused to
pay.
Eventually, Cipriano filed a complaint for a sum of money and
damages with writ of preliminary attachment for breach of a
contract of carriage. The trial court granted the writ of preliminary
attachment and rendered a decision, ordering Bascos to pay for
actual damages with legal interest, attorney’s fees and the costs of
the suit. The court further denied the “Urgent Motion To
Dissolve/Lift preliminary Attachment” filed by Bascos for being
moot and academic.
Bascos appealed to the CA but the appellate court affirmed the
trial court’s judgment. Hence, the petition for review on certiorari.
Petitioner, Bascos interposed the following defenses: that there
was no contract of carriage since CIPTRADE leased her cargo truck
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to load the cargo from Manila Port Area to Laguna; that CIPTRADE
was liable to petitioner for loading the cargo; that the truck
carrying the cargo was hijacked along Paco, Manila; that the
hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked
properties; and that hijacking, being a force majeure, exculpated
petitioner from any liability to CIPTRADE
ISSUE:
WON petitioner was a common carrier.
WON the hijacking referred to a force majeure.
HELD:
The Supreme Court dismissed the petition and affirmed the
decision of the Court of Appeals.
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." 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.
Moreover, in referring to Article 1732 of the Civil Code, it held in
De Guzman vs. Court of Appeals that “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.
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.
As to the second issue, 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. UArticle 1745 of the
Civil Code provides that 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. Affidavits were not enough to overcome the
presumption. (1) Bascos’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 Cipriano, the lower court had discretion in
assigning weight to such evidence. (2) The affidavit of Jesus
Bascos did not dwell on how the hijacking took place. (3) 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.
Mr. & Mrs. Engracio Fabre, Jr. vs. CA, et al.
259 SCRA 426
Facts:
Petitioners Fabre and his wife were owners of a minibus which
they used principally in connection with a bus service for school
children which they operated. The couple had a driver, Porfirio
Cabil, whom they hired after trying him out for two weeks. His job
was to take school children to and from the St. Scholastica’s
College.
On November 2, 1984, private respondent Word for the World
Christian Fellowship Inc. arranged with petitioners for the
transportation of 33 members from Manila to La Union and back in
consideration of which they paid P3,000 to petitioners.
The group left at 8:00 in the evening, petitioner Cabil drove the
minibus. The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under repair, so
that petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the
town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night,
petitioner Cabil came upon a sharp curve on the highway, running
on a south to east direction. The road was slippery because it was
raining, causing the bus, which was running at the speed of 50
kilometers per hour, to skid to the left road shoulder. The bus hit
the left traffic steel brace and sign along the road and rammed the
fence of one Jesus Escano, then turned over and landed on its left
side, coming to a full stop only after a series of impacts. The bus
came to rest off the road. A coconut tree which it had hit fell on it
and smashed its front portion.
Several passengers were injured. Private respondent Amyline
Antonio was thrown on the floor of the bus and pinned down by a
wooden seat which came off after being unscrewed. It took three
persons to safely remove her from this position. She was in great
pain and could not move.
A case was filed by the respondents against Fabre and Cabil.
Amyline Antonio was found to be suffering from paraplegia and is
permanently paralyzed from the waist down. The RTC ruled in
favor of respondents. Mr. & Mrs. Fabre and Cabil were ordered to
pay jointly and severally actual, moral and exemplary damages,
and as well as amount of loss of earning capacity of Antonio and
attorney’s fees. The Court of Appeals affirmed the decision of the
trial court with modification on the award of damages.
Issues:
1. Whether or not petitioners were negligent.
2. Whether or not petitioners were liable for the injuries
suffered by private respondents.
3. Whether or not damages can be awarded and in the
positive, up to what extent.
Held:
SC affirmed the decision of the CA but reverted the
amount of the award of damages to that ordered by the RTC.
1. The finding that Cabil drove his bus negligently, while his
employer, the Fabres, who owned the bus, failed to exercise
the diligence of a good father of the family in the selection
and supervision of their employee is fully supported by the
evidence on record. Indeed, it was admitted by Cabil that on
the night in question, it was raining, and, as a consequence,
the road was slippery, and it was dark. However, it is
undisputed that Cabil drove his bus at the speed of 50
kilometers per hour and only slowed down when he noticed
the curve some 15 to 30 meters ahead. Given the conditions
of the road and considering that the trip was Cabil’s first one
outside of Manila, Cabil should have driven his vehicle at a
moderate speed. There is testimony that the vehicles passing
on that portion of the road should only be running 20
kilometers per hour, so that at 50 kilometers per hour, Cabil
was running at a very high speed. Cabil was grossly negligent
and should be held liable for the injuries suffered by private
respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his
negligence gave rise to the presumption that his employers,
the Fabres, were themselves negligent in the selection and
supervision of their employee. Due diligence in selection of
employees is not satisfied by finding that the applicant
possessed a professional driver’s license. The employer
should also examine the applicant for his qualifications,
experience and record of service. In the case at bar, the
Fabres, in allowing Cabil to drive the bus to La Union,
apparently did not consider the fact that Cabil had been
driving for school children only, from their homes to the St.
Scholastica’s College in Metro Manila. They had hired him only
after a two-week apprenticeship.
2. This case involves a contract of carriage. Petitioners, the
Fabres, did not have to be engaged in the business of public
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 transportation for the provisions of the Civil Code on common
carriers to apply to them.
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 an ancillary
activity. 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.
As common carriers, the Fabres were bound to exercise
“extraordinary diligence” for the safe transportation of the
passengers to their destination. This duty of care is not
excused by proof that they exercised the diligence of a good
father of the family in the selection and supervision of their
employee.
As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to
passengers through the negligence or wilful acts of the
former’s employees, although such employees may have
acted beyond the scope of their authority or in violation of the
orders of the common carriers.
First Philippine Industrial Corporation vs. Court of Appeals
G.R. No. 125948 December 29, 1998
Facts:
Petitioner, First Phil. Industrial Corporation (FirstPhil for brevity) is
a grantee of a pipeline concession under Republic Act No. 387, as
amended, to contract, install and operate oil pipelines. FirstPhil
applied for a mayor's permit, but before the mayor's permit could
be issued, the respondent City Treasurer required petitioner to pay
a local tax pursuant to the Local Government Code. Petitioner filed
a letter-protest addressed to the respondent City Treasurer, but
the latter denied the same contending that petitioner cannot be
considered engaged in transportation business, thus it cannot
claim exemption under Section 133 (j) of the Local Government
Code.
FirstPhil filed with the RTC Batangas a complaint for tax refund
with prayer for writ of preliminary injunction against respondents,
contending that the imposition of tax upon them violates Sec 133
of the Local Government Code. On the other hand, respondents
assert that pipelines are not included in the term "common carrier"
which refers solely to ordinary carriers such as trucks, trains, ships
and the like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or manner by
which a product is delivered to its destination.
RTC dismissed the complaint, ruling that exemption granted under
Sec. 133 (j) encompasses only "common carriers" so as not to
overburden the riding public or commuters with taxes. And that
petitioner 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."
The case was elevated by the petitioner to the CA, but CA affirmed
the decision of the RTC. Hence this petition.
Issue:
WON the petitioner is a "common carrier" and, therefore, exempt
from the business taxc
Held: Petition was granted. CA decision was REVERSED and SET
ASIDE.
SC ruled in this case that petitioner is a common carrier and thus,
exempt from business tax.
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.
Based on the above definitions and requirements, there is no
doubt that petitioner is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry
for all persons indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does
not exclude it from the definition of a common carrier.
The definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land,
water or air. It does not provide that the transportation of the
passengers or goods should be by motor vehicle. In fact, in the
United States, oil pipe line operators are considered common
carriers.
Under the Petroleum Act of the Philippines (Republic Act 387),
petitioner is considered a "common carrier.", and at the same
time, said act also regards petroleum operation as a public utility.
BIR likewise considers the petitioner a "common carrier." In so
ruling, it held that, 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.
Section 133 (j), of the Local Government Code, provides:
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:
(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.
SC held that the legislative intent in excluding from the taxing
power of the local government unit the imposition of business tax
against common carriers is to prevent a duplication of the so-
called "common carrier's tax."
LOADSTAR SHIPPING CO., INC., vs.
COURT OF APPEALS
Facts:
On 19 November 1984, LOADSTAR received on board 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. 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. 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. LOADSTAR denied
any liability for the loss of the shipper's goods and claimed that
sinking of its vessel was due to force majeure. 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.
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.
Held: Petition is dismissed:
4
SC 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. The bills of lading failed to show any special
arrangement, but only a general provision to the effect that the
M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare
fact that the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely coincidental, is not reason
enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel was
also carrying passengers. Under Article 1732 of the Civil Code 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.
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.
CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC.
Facts:
A contract was entered into between Calvo and San Miguel
Corporation (SMC) for the transfer of certain cargoes from the port
area in Manila to the warehouse of SMC. The cargo was insured by
UCPB General Insurance Co., Inc. When the shipment arrived and
unloaded from the vessel, Calvo withdrew the cargo from the
arrastre operator and delivered the same to SMC’s warehouse.
When it was inspected, it was found out that some of the goods
were torn. UCPB, being the insurer, paid for the amount of the
damages and as subrogee thereafter, filed a suit against Calvo.
Petitioner, on the other hand, contends that it is a private carrier
not required to observe such extraordinary diligence in the
vigilance over the goods.
As customs broker, she does not indiscriminately hold her services
out to the public but only to selected parties.
Issue:
Whether or not Calvo is a common carrier liable for the damages
for failure to observe extraordinary diligence in the vigilance over
the goods.
Held:
The contention has no merit. In De Guzman v. Court of Appeals,
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 law makes no distinction between a carrier offering its
services to the general community or solicits business only from a
narrow segment of the general population. Note that the
transportation of goods holds an integral part of Calvo’s business,
it cannot indeed be doubted that it is a common carrier.
Asia Lighterage and Shipping Inc. v. CA
Gr, No. 147246, August 19, 2003
FACTS:
Petitioner was contracted as carrier by a corporation from
Portland, Oregon to deliver a cargo to the consignee's warehouse
at Pasig City. The cargo, however, never reached the consignee as
the barge that carried the cargo sank completely, resulting in
damage to the cargo. Private respondent, as insurer, indemnified
the consignee for the lost cargo and thus, as subrogee, sought
recovery from petitioner. Both the trial court and the appellate
court ruled in favor of private respondent.
The Court ruled in favor of private respondent. Whether or not
petitioner is a common carrier, the Court ruled in the affirmative.
The principal business of petitioner is that of lighterage and
drayage, offering its barges to the public, although for limited
clientele, for carrying or transporting goods by water for
compensation. Whether or not petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee's
goods, the Court also ruled in the affirmative. The barge
completely sank after its towing bits broke, resulting in the loss of
the cargo. Petitioner failed to prove that the typhoon was the
proximate and only cause of the loss and that it has exercised due
diligence before, during and after the occurrence. HCISED
ISSUE:
Whether or Not the petitioner is a common carrier.
RULING: YES.
Petitioner is a common carrier whether its carrying of goods is
done on an irregular rather than scheduled manner, and with an
only limited clientele. A common carrier need not have fixed and
publicly known routes. Neither does it have to maintain terminals
or issue tickets. To be sure, petitioner fits the test of a common
carrier as laid down in Bascos vs. Court of Appeals. The test to
determine a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has held
out to the general public as his occupation rather than the quantity
or extent of the business transacted." In the case at bar, the
petitioner admitted that it is engaged in the business of shipping
and lighterage, offering its barges to the public, despite its limited
clientele for carrying or transporting goods by water for
compensation.
Article 1732 of the Civil Code defines common carriers as persons,
corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land,
water, or air, for compensation..offering their services to the
public. Petitioner contends that it is not a common carrier but a
private carrier. Allegedly, it has no fixed and publicly known route,
maintains no terminals, and issues no tickets. It points out that it
is not obliged to carry indiscriminately for any person. It is not
bound to carry goods unless it consents. In short, it does not hold
out its services to the general public. In De Guzman vs. Court of
Appeals, we held that the definition of common carriers in Article
1732 of the Civil Code makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity.
We also did not distinguish 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. Further, we ruled that Article 1732 does not
distinguish between a carrier offering its services to the general
public, and one who offers services or solicits business only from a
narrow segment of the general population.
Common carriers are bound to observe extraordinary diligence in
the vigilance over the goods transported by them. They are
presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. To overcome the
presumption of negligence in the case of loss, destruction or
deterioration of the goods, deterioration of the goods, the
common carrier must prove that it exercised extraordinary
diligence. There are, however, exceptions to this rule. Article 1734
of the Civil Code enumerates the instances when the presumption
of negligence does not attach: Art. 1734. Common carriers are
responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only: (1)
Flood, storm, earthquake, lightning, or other natural disaster or
calamity; (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; (5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits
broke, resulting in the total loss of its cargo. Petitioner claims that
this was caused by a typhoon, hence, it should not be held liable
for the loss of the cargo. However, petitioner failed to prove that
the typhoon is the proximate and only cause of the loss of the
goods, and that it has exercised due diligence before, during and
after the occurrence of the typhoon to prevent or minimize the
loss. The evidence show that, even before the towing bits of the
barge broke, it had already previously sustained damage when it
hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the
typhoon. The partly-submerged vessel was refloated but its hole
5
was patched with only clay and cement. The patch work was
merely a provisional remedy, not enough for the barge to sail
safely. Thus, when petitioner persisted to proceed with the
voyage, it recklessly exposed the cargo to further damage.
AF Sanchez Brokerage vs CA
(Dec 21, 2004)
Facts:
AF Sanchez is engaged in a broker business wherein its main job is
to calculate customs duty, fees and charges as well as storage
fees for the cargoes. Part also of the services being given by AF
Sanchez is the delivery of the shipment to the consignee upon the
instruction of the shipper.
Wyett engaged the services of AF Sanchez where the latter
delivered the shipment to Hizon Laboratories upon instruction of
Wyett. Upon inspection, it was found out that at least 44 cartons
containing contraceptives were in bad condition. Wyett claimed
insurance from FGU. FGU exercising its right of subrogation claims
damages against AF Sanchez who delivered the damaged goods.
AF Sanchez contended that it is not a common carrier but a
brokerage firm.
Issue: Is AF Sanchez a common carrier?
Held:
SC held that Art 1732 of the Civil Code in defining common carrier
does not distinguish whether the activity is undertaken as a
principal activity or merely as an ancillary activity. In this case,
while it is true that AF Sanchez is principally engaged as a broker,
it cannot be denied from the evidence presented that part of the
services it offers to its customers is the delivery of the goods to
their respective consignees.
Note:
AF Sanchez claimed that the proximate cause of the damage is
improper packing. Under the CC, improper packing of the goods is
an exonerating circumstance. But in this case, the SC held that
though the goods were improperly packed, since AF Sanchez knew
of the condition and yet it accepted the shipment without protest
or reservation, the defense is deemed waived.
Schmitz Transport and Brokerage Corp v Transort Venture Inc.,
GR 150255 April 22,2005
Facts:
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from
the port of Ilyichevsk, Russia on board M/V “Alexander Saveliev”
545 hot rolled steel sheets in coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in
favor of the consignee, Little Giant Steel Pipe Corporation (Little
Giant), were insured against all risks with Industrial Insurance
Company Ltd. (Industrial Insurance) under Marine Policy No. M-
91-3747-TIS. The vessel arrived at the port of Manila and the
Philippine Ports Authority (PPA) assigned it a place of berth at the
outside breakwater at the Manila South Harbor.
Schmitz Transport, whose services the consignee engaged to
secure the requisite clearances, to receive the cargoes from the
shipside, and to deliver them to its (the consignee’s) warehouse at
Cainta, Rizal, in turn engaged the services of TVI to send a barge
and tugboat at shipside. TVI’s tugboat “Lailani” towed the barge
“Erika V” to shipside. The tugboat, after positioning the barge
alongside the vessel, left and returned to the port terminal.
Arrastre operator Ocean Terminal Services Inc. commenced to
unload 37 of the 545 coils from the vessel unto the barge. By
12:30 a.m. of October 27, 1991 during which the weather
condition had become inclement due to an approaching storm, the
unloading unto the barge of the 37 coils was accomplished. No
tugboat pulled the barge back to the pier, however. At around
5:30 a.m. of October 27, 1991, due to strong waves, the crew of
the barge abandoned it and transferred to the vessel. The barge
pitched and rolled with the waves and eventually capsized,
washing the 37 coils into the sea.
Little Giant thus filed a formal claim against Industrial Insurance
which paid it the amount of P5,246,113.11. Little Giant thereupon
executed a subrogation receipt in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz
Transport, TVI, and Black Sea through its representative Inchcape
(the defendants) before the RTC of Manila, they faulted the
defendants for undertaking the unloading of the cargoes while
typhoon signal No. 1 was raised. The RTC held all the defendants
negligent. Defendants Schmitz Transport and TVI filed a joint
motion for reconsideration assailing the finding that they are
common carriers. RTC denied the motion for reconsideration. CA
affirmed the RTC decision in toto, finding that all the defendants
were common carriers — Black Sea and TVI for engaging in the
transport of goods and cargoes over the seas as a regular business
and not as an isolated transaction, and Schmitz Transport for
entering into a contract with Little Giant to transport the cargoes
from ship to port for a fee.
Issue:
Whether or not Black Sea and TVI are common carriers
Held :
Contrary to petitioner’s insistence, this Court, as did the appellate
court, finds that petitioner is a common carrier. For it undertook
to transport the cargoes from the shipside of “M/V Alexander
Saveliev” to the consignee’s warehouse at Cainta, Rizal. As the
appellate court put it, “as long as a person or corporation holds
[itself] to the public for the purpose of transporting goods as [a]
business, [it] is already considered a common carrier regardless if
[it] owns the vehicle to be used or has to hire one.” That petitioner
is a common carrier, the testimony of its own Vice-President and
General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes
reflects so.
It is settled that under a given set of facts, a customs broker may
be regarded as a common carrier. Thus, this Court, in A.F.
Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44]
held:
The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to
the public.
xxx
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court
held that as the transportation of goods is an integral part of a
customs broker, the customs broker is also a common carrier. For
to declare otherwise “would be to deprive those with whom [it]
contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for [its]
customers, is part and parcel of petitioner’s business.”
PHIL CHARTER vs. M/V "NATIONAL HONOR,"
[G.R. No. 161833. July 8, 2005.]
FACTS:
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded
a shipment of four units of parts and accessories on board the
vessel M/V "National Honor," represented in the Philippines by its
agent, National Shipping Corporation of the Philippines (NSCP).
The shipment was contained in two wooden crates, namely, Crate
No. 1 and Crate No. 2, complete and in good order condition.
Crate No. 1 contained the following articles: one (1) unit Lathe
Machine complete with parts and accessories; one (1) unit Surface
Grinder complete with parts and accessories; and one (1) unit
Milling Machine complete with parts and accessories. On the
flooring of the wooden crates were three wooden battens placed
side by side to support the weight of the cargo. It was insured for
P2,547,270.00 with the Philippine Charter Insurance Corporation
(PCIC).
6
The M/V "National Honor" arrived at the Manila International
Container Terminal (MICT). The International Container Terminal
Services, Incorporated (ICTSI) was the exclusive arrastre operator
of MICT and was charged with discharging the cargoes from the
vessel. Claudio Cansino, the stevedore of the ICTSI, placed two
sling cables on each end of Crate No. 1. No sling cable was
fastened on the mid-portion of the crate. As the crate was being
hoisted from the vessel's hatch, the mid-portion of the wooden
flooring suddenly snapped in the air, about five feet high from the
vessel's twin deck, sending all its contents crashing down hard,
resulting in extensive damage to the shipment.
Blue Mono International Company, Incorporated (BMICI)
subsequently filed separate claims against the NSCP, the ICTSI,
and its insurer, the PCIC, for US$61,500.00. When the other
companies denied liability, PCIC paid the claim and was issued a
Subrogation Receipt for P1,740,634.50. On March 22, 1995, PCIC,
as subrogee, filed with the RTC of Manila a Complaint for Damages
against the "Unknown owner of the vessel M/V National Honor,"
NSCP and ICTSI, as defendants. ICTSI, for its part, filed its Answer
with Counterclaim and Cross-claim against its co-defendant NSCP,
claiming that the loss/damage of the shipment was caused
exclusively by the defective material of the wooden battens of the
shipment, insufficient packing or acts of the shipper.
The trial court rendered judgment for PCIC and ordered the
complaint dismissed. According to the trial court, the loss of the
shipment contained in Crate No. 1 was due to the internal defect
and weakness of the materials used in the fabrication of the
crates. The CA affirmed in TOTO the decision of the RTC.
ISSUE:
WHETHER OR NOT THE COMMON CARRIER IS LIABLE FOR THE
DAMAGE SUSTAINED BY THE SHIPMENT IN THE HANDS OF THE
ARRASTRE OPERATOR.
HELD: THE RULING OF THE RTC AND CA WAS UPHELD.
The petitioner posits that the loss/damage was caused by the
mishandling of the shipment by therein respondent ICTSI, the
arrastre operator, and not by its negligence. The petition has no
merit.
We agree with the contention of the petitioner that common
carriers, from the nature of their business and for reasons of
public policy, are mandated to observe extraordinary diligence in
the vigilance over the goods according to all the circumstances of
each case. The extraordinary diligence in the vigilance over the
goods 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." When the goods
shipped are either lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence
to hold it liable. However, under Article 1734 of the New Civil
Code, the presumption of negligence does not apply to any of the
following causes:
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;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New
Civil Code which exempts the common carrier for the loss or
damage to the cargo is a closed list. Crate No. 1 was provided by
the shipper of the machineries in Seoul, Korea. There is nothing in
the record which would indicate that defendant ICTSI had any role
in the choice of the materials used in fabricating this crate. Said
defendant, therefore, cannot be held as blame worthy for the loss
of the machineries contained in Crate No. 1.
The CA affirmed the ruling of the RTC, thus:
“The case at bar falls under one of the exceptions mentioned in
Article 1734 of the Civil Code, particularly number (4) thereof, i.e.,
the character of the goods or defects in the packing or in the
containers. The trial court found that the breakage of the crate
was not due to the fault or negligence of ICTSI, but to the
inherent defect and weakness of the materials used in the
fabrication of the said crate.”
Upon examination of the records, We find no compelling reason to
depart from the factual findings of the trial court. It appears that
the wooden batten used as support for the flooring was not made
of good materials, which caused the middle portion thereof to give
way when it was lifted. The shipper also failed to indicate signs to
notify the stevedores that extra care should be employed in
handling the shipment. Appellant's allegation that since the cargo
arrived safely from the port of [P]usan, Korea without defect, the
fault should be attributed to the arrastre operator who mishandled
the cargo; is without merit. The cargo fell while it was being
carried only at about five (5) feet high above the ground. It would
not have so easily collapsed had the cargo been properly packed.
The shipper should have used materials of stronger quality to
support the heavy machines. Not only did the shipper fail to
properly pack the cargo, it also failed to indicate an arrow in the
middle portion of the cargo where additional slings should be
attached.
While it is true that the crate contained machineries and spare
parts, it cannot thereby be concluded that the respondents knew
or should have known that the middle wooden batten had a hole,
or that it was not strong enough to bear the weight of the
shipment. The statement in the Bill of Lading, that the shipment
was in apparent good condition, is sufficient to sustain a finding of
absence of defects in the merchandise. Case law has it that such
statement will create a prima facie presumption only as to the
external condition and not to that not open to inspection.
LEA MER INDUSTRIES INC VS MALAYAN INSURANCE CO, INC.
GR No. 161745, SEPTEMBER 30, 2005
FACTS:
Ilian Silica Mining entered into a contract of carriage with the
petitioner, Lea Mer Industries Inc. for the shipment of 900 metric
tons of silica sand worth P565,000. The cargo was consigned to
Vulcan Industrial and Mining Corporation and was to be shipped
from Palawan to Manila. The silica sand was boarded to Judy VII,
the vessel leased by Lea Mer. However, during the course of its
voyage, the vessel sank which led to the loss of the cargo.
Consequently, the respondent, as the insurer, paid Vulcan the
value of the lost cargo. Malayan Insurance Co., Inc. then collected
from the petitioner the amount it paid to Vulcan as reimbursement
and as its exercise on the right of subrogation. Lea Mer refused to
pay which led Malayan to institute a complaint with the RTC. The
RTC dismissed the complaint stating that the loss was due to a
fortuitous event, Typhoon Trining. Petitioner did not know that a
typhoon was coming and that it has been cleared by the Philippine
Coast Guard to travel from Palawan to Manila. The CA reversed
the ruling of the trial court for the reason that said vessel was not
seaworthy when it sailed to Manila.
ISSUE:
Whether or not the petitioner is liable for the loss of the cargo.
HELD:
CA reversed. 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 — when this
service is offered to the public for compensation. Petitioner is
clearly a common carrier, because it offers to the public its
business of transporting goods through its vessels. Thus, the Court
corrects the trial court's finding that petitioner became a private
carrier when Vulcan chartered it. Charter parties are classified as
contracts of demise (or bareboat) and affreightment, which are
distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer
will generally be considered as owner for the voyage or service
stipulated. The charterer mans the vessel with his own people and
becomes, in effect, the owner pro hac vice, subject to liability to
others for damages caused by negligence. To create a demise, the
owner of a vessel must completely and exclusively relinquish
possession, command and navigation thereof to the charterer;
anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party
at all."
The distinction is significant, because a demise or bareboat charter
7
indicates a business undertaking that is private in character.
Consequently, the rights and obligations of the parties to a
contract of private carriage are governed principally by their
stipulations, not by the law on common carriers. The Contract in
the present case was one of affreightment, as shown by the fact
that it was petitioner's crew that manned the tugboat M/V Ayalit
and controlled the barge Judy VII.
Common carriers are bound to observe extraordinary diligence in
their vigilance over the goods and the safety of the passengers
they transport, as required by the nature of their business and for
reasons of public policy. Extraordinary diligence requires rendering
service with the greatest skill and foresight to avoid damage and
destruction to the goods entrusted for carriage and delivery.
Common carriers are presumed to have been at fault or to have
acted negligently for loss or damage to the goods that they have
transported. This presumption can be rebutted only by proof that
they observed extraordinary diligence, or that the loss or damage
was occasioned by any of the following causes:
"(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;
"(5) Order or act of competent public authority."
Jurisprudence defines the elements of a "fortuitous event" as
follows: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the
event that constituted the caso fortuito must have been impossible
to foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible for the
debtors to fulfill their obligation in a normal manner; and (d) the
obligor must have been free from any participation in the
aggravation of the resulting injury to the creditor. To excuse the
common carrier fully of any liability, the fortuitous event must
have been the proximate and only cause of the loss. Moreover, it
should have exercised due diligence to prevent or minimize the
loss before, during and after the occurrence of the fortuitous
event. As required by the pertinent law, it was not enough for the
common carrier to show that there was an unforeseen or
unexpected occurrence. It had to show that it was free from any
fault — a fact it miserably failed to prove.
LOADSTAR SHIPPING CO., INC., v. CA
Facts:
On 19 November 1984, LOADSTAR received on board 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. 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. 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. LOADSTAR denied
any liability for the loss of the shipper's goods and claimed that
sinking of its vessel was due to force majeure. 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.
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.
Held: Petition is dismissed:
SC 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. The bills of lading failed to show any special
arrangement, but only a general provision to the effect that the
M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare
fact that the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely coincidental, is not reason
enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel was
also carrying passengers. Under Article 1732 of the Civil Code 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.
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.
CEBU SALVAGE CORP. V. PHIL. HOME ASSURANCE CORP.
Facts: On November 12, 1984, petitioner Cebu Salvage
Corporation (as carrier) and Maria Cristina Chemicals Industries,
Inc. [MCCII] (as charterer) entered into a voyage
charter[6] wherein petitioner was to load 800 to 1,100 metric tons
of silica quartz on board the
M/T Espiritu Santo[7] at Ayungon, Negros Occidental for transport
to and discharge at Tagoloan, Misamis Oriental to consignee
Ferrochrome Phils., Inc.[8]
Pursuant to the contract, on December 23, 1984, petitioner
received and loaded 1,100 metric tons of silica quartz on board the
M/T Espiritu Santo which left Ayungon forTagoloan the next day.
[9] The shipment never reached its destination, however, because
the M/T Espiritu Santo sank in the afternoon of December 24,
1984 off the beach ofOpol, Misamis Oriental, resulting in the total
loss of the cargo.[10]
MCCII filed a claim for the loss of the shipment with its insurer,
respondent Philippine Home Assurance Corporation.
[11] Respondent paid the claim in the amount of P211,500and was
subrogated to the rights of MCCII.[12] Thereafter, it filed a case in
the RTC[13] against petitioner for reimbursement of the amount it
paid MCCII.
After trial, the RTC rendered judgment in favor of respondent. It
ordered petitioner to pay respondent P211,500 plus legal interest,
attorneys fees equivalent to 25% of the award and costs of suit.
On appeal, the CA affirmed the decision of the RTC.
Ruling: Based on the agreement signed by the parties and the
testimony of petitioners operations manager, it is clear that it was
a contract of carriage petitioner signed with MCCII.It actively
negotiated and solicited MCCIIs account, offered its services to
ship the silica quartz and proposed to utilize the M/T Espiritu Santo
in lieu of the M/T Seebees or the M/T Shirley (as previously agreed
upon in the voyage charter) since these vessels had broken down.
[20]
There is no dispute that petitioner was a common carrier. At the
time of the loss of the cargo, it was engaged in the business of
carrying and transporting goods by water, for compensation, and
offered its services to the public.[21]
From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence
over the goods they transport according to the circumstances of
each case.[22] In the event of loss of the goods, common carriers
are responsible, unless they can prove that this was brought about
by the causes specified in Article 1734 of the Civil Code.[23] In all
other cases, common carriers are presumed to be at fault or to
have acted negligently, unless they prove that they observed
extraordinary diligence.[24]
8
 Petitioner was the one which contracted with MCCII for the
transport of the cargo. It had control over what vessel it would
use. All throughout its dealings with MCCII, it represented itself as
a common carrier. The fact that it did not own the vessel it
decided to use to consummate the contract of carriage did not
negate its character and duties as a common carrier. The MCCII
(respondents subrogor) could not be reasonably expected to
inquire about the ownership of the vessels which petitioner carrier
offered to utilize. As a practical matter, it is very difficult and often
impossible for the general public to enforce its rights of action
under a contract of carriage if it should be required to know who
the actual owner of the vessel is.[25] In fact, in this case,
the voyage charter itself denominated petitioner as the
owner/operator of the vessel.
Petitioner next contends that if there was a contract of carriage,
then it was between MCCII and ALS as evidenced by the bill of
lading ALS issued.[27]
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence
the fact that the goods had been received for transportation. It
was not signed by MCCII, as in fact it was simply signed by the
supercargo of ALS.[28] This is consistent with the fact that MCCII
did not contract directly with ALS. While it is true that a bill of
lading may serve as the contract of carriage between the parties,
[29] it cannot prevail over the express provision of the voyage
charter that MCCII and petitioner executed
Finally, petitioner asserts that MCCII should be held liable for its
own loss since the voyage charter stipulated that cargo insurance
was for the charterers account.[31] This deserves scant
consideration. This simply meant that the charterer would take
care of having the goods insured. It could not exculpate the carrier
from liability for the breach of its contract of carriage. The law, in
fact, prohibits it and condemns it as unjust and contrary to public
policy.[32]
To summarize, a contract of carriage of goods was shown to
exist; the cargo was loaded on board the vessel; loss or non-
delivery of the cargo was proven; and petitioner failed to prove
that it exercised extraordinary diligence to prevent such loss or
that it was due to some casualty or force majeure. The voyage
charter here being a contract ofaffreightment, the carrier was
answerable for the loss of the goods received for transportation.[
SPS. CRUZ V. SUN HOLIDAYS
Facts: Spouses Dante and Leonora Cruz (petitioners) lodged a
Complaint on January 25, 2001[1] against Sun Holidays, Inc.
(respondent) with the Regional Trial Court (RTC) of Pasig City for
damages arising from the death of their son Ruelito C. Cruz
(Ruelito) who perished with his wife on September 11, 2000 on
board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the couple
had stayed at Coco Beach Island Resort (Resort) owned and
operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort
from September 9 to 11, 2000 was by virtue of a tour package-
contract with respondent that included transportation to and from
the Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),[2] a scuba diving instructor and one of
the survivors, gave his account of the incident that led to the filing
of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He
was originally scheduled to leave the Resort in the afternoon of
September 10, 2000, but was advised to stay for another night
because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other
Resort guests including petitioners son and his wife trekked to the
other side of the Coco Beach mountain that was sheltered from
the wind where they boarded M/B Coco Beach III, which was to
ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther
away from Puerto Galera and into the open seas, the rain and
wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one
of the crew members.
The waves got more unwieldy. After getting hit by two big waves
which came one after the other, M/B Coco Beach III capsized
putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get
out of the boat. Upon seeing the captain, Matute and the other
passengers who reached the surface asked him what they could
do to save the people who were still trapped under the boat. The
captain replied Iligtas niyo na lang ang sarili niyo (Just save
yourselves).
Help came after about 45 minutes when two boats owned by Asia
Divers in Sabang, Puerto Galera passed by the capsized M/B Coco
Beach III. Boarded on those two boats were 22 persons,
consisting of 18 passengers and four crew members, who were
brought to Pisa Island. Eight passengers, including petitioners son
and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed
as a contractual worker for Mitsui Engineering & Shipbuilding
Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.
[3]
Petitioners, by letter of October 26, 2000,[4] demanded
indemnification from respondent for the death of their son in the
amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,
[5] denied any responsibility for the incident which it considered to
be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their
signing of a waiver.
In its Answer,[7] respondent denied being a common carrier,
alleging that its boats are not available to the general public as
they only ferry Resort guests and crew members.Nonetheless, it
claimed that it exercised the utmost diligence in ensuring the
safety of its passengers; contrary to petitioners allegation, there
was no storm on September 11, 2000as the Coast Guard in fact
cleared the voyage; and M/B Coco Beach III was not filled to
capacity and had sufficient life jackets for its passengers. By way
of Counterclaim, respondent alleged that it is entitled to an award
for attorneys fees and litigation expenses amounting to not less
than P300,000.
By Decision of February 16, 2005,[11] Branch 267 of the Pasig
RTC dismissed petitioners Complaint and respondents
Counterclaim.
By Decision of August 19, 2008,[13] the appellate court denied
petitioners appeal, holding, among other things, that the trial court
correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact
observed extraordinary diligence in transporting its guests on
board M/B Coco Beach III; and that the proximate cause of the
incident was a squall, a fortuitous event.
Issues: WON respondent is a common carrier.
Ruling: Indeed, respondent is a common carrier. Its ferry services
are so intertwined with its main business as to be properly
considered ancillary thereto. The constancy of respondents ferry
services in its resort operations is underscored by its having its
9
own Coco Beach boats. And the tour packages it offers, which
include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the
public.
That respondent does not charge a separate fee or fare for its
ferry services is of no moment. It would be imprudent to suppose
that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor
the transportation fee in arriving at the tour package price. That
guests who opt not to avail of respondents ferry services pay the
same amount is likewise inconsequential. These guests may only
be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining
common carriers has deliberately refrained from making
distinctions on whether the carrying of persons or goods is the
carriers principal business, whether it is offered on a regular basis,
or whether it is offered to the general public. The intent of the law
is thus to not consider such distinctions. Otherwise, there is no
telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of persons or
goods in order to avoid the legal obligations and liabilities of
common carriers.
Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each
case.[19] They are bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence
of very cautious persons, with due regard for all the
circumstances.[20]
When a passenger dies or is injured in the discharge of a contract
of carriage, it is presumed that the common carrier is at fault or
negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary diligence.[21]
Respondent nevertheless harps on its strict compliance with the
earlier mentioned conditions of voyage before it allowed M/B Coco
Beach III to sail on September 11, 2000.Respondents position
does not impress.
The evidence shows that PAGASA issued 24-hour public weather
forecasts and tropical cyclone warnings for shipping on September
10 and 11, 2000 advising of tropical depressions in Northern Luzon
which would also affect the province of Mindoro.[22] By the
testimony of Dr. Frisco Nilo, supervising weather specialist of
PAGASA, squalls are to be expected under such weather condition.
[23]
A very cautious person exercising the utmost diligence would thus
not brave such stormy weather and put other peoples lives at
risk. The extraordinary diligence required of common carriers
demands that they take care of the goods or lives entrusted to
their hands as if they were their own. This respondent failed to do.
UNSWORTH TRANSPORT INTERNATIONAL V. CA
Facts: On August 31, 1992, the shipper Sylvex Purchasing
Corporation delivered to UTI a shipment of 27 drums of various
raw materials for pharmaceutical manufacturing, consisting of: 1)
3 drums (of) extracts, flavoring liquid, flammable liquid x x x
banana flavoring; 2) 2 drums (of) flammable liquids x x x
turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20
drums (of) Vitabs: Vitamin B Complex Extract.[4] UTI issued Bill of
Lading No. C320/C15991-2,[5] covering the aforesaid
shipment. The subject shipment was insured with private
respondent Pioneer Insurance and Surety Corporation in favor of
Unilab against all risks in the amount of P1,779,664.77 under and
by virtue of Marine Risk Note Number MC RM UL 0627 92[6] and
Open Cargo Policy No. HO-022-RIU.[7]
On the same day that the bill of lading was issued, the shipment
was loaded in a sealed 1x40 container van, with no. APLU-982012,
boarded on APLs vessel M/V Pres. Jackson, Voyage 42, and
transshipped to APLs M/V Pres. Taft[8] for delivery to petitioner in
favor of the consignee United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at
the port of Manila. On October 6, 1992, petitioner received the
said shipment in its warehouse after it stamped the Permit to
Deliver Imported Goods[9] procured by the Champs Customs
Brokerage.[10] Three days thereafter, or on October 9, 1992,
Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted
a stripping survey of the shipment located in petitioners
warehouse.
On October 15, 1992, the arrastre Jardine Davies Transport
Services, Inc. (Jardine) issued Gate Pass No. 7614[12] which
stated that 22 drums[13] Raw Materials for Pharmaceutical Mfg.
were loaded on a truck with Plate No. PCK-434 facilitated by
Champs for delivery to Unilabs warehouse. The materials were
noted to be complete and in good order in the gate pass.[14] On
the same day, the shipment arrived in Unilabs warehouse and was
immediately surveyed by an independent surveyor.
On October 23 and 28, 1992, the same independent surveyor
conducted final inspection surveys which yielded the same results.
Consequently, Unilabs quality control representative rejected one
paper bag containing dried yeast and one steel drum containing
Vitamin B Complex as unfit for the intended purpose.[16]
On November 7, 1992, Unilab filed a formal claim[17] for the
damage against private respondent and UTI. On November 20,
1992, UTI denied liability on the basis of the gate pass issued by
Jardine that the goods were in complete and good condition; while
private respondent paid the claimed amount on March 23, 1993.
By virtue of the Loss and Subrogation Receipt[18] issued by Unilab
in favor of private respondent, the latter filed a complaint
for Damages against APL, UTI and petitioner with the RTC of
Makati.[19]The case was docketed as Civil Case No. 93-3473 and
was raffled to Branch 134.
The RTC decided in favor of private respondent and against APL,
UTI and petitioner. On appeal, the CA affirmed the RTC decision
on April 29, 2004. The CA rejected UTIs defense that it was merely
a forwarder, declaring instead that it was a common carrier.
Issues: WON petitioner is a common carrier.
Ruling: Admittedly, petitioner is a freight forwarder. The
term freight forwarder" refers to a firm holding itself out to the
general public (other than as a pipeline, rail, motor, or water
carrier) to provide transportation of property for compensation
and, in the ordinary course of its business, (1) to
assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for break-bulk
and distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of
receipt to the place of destination; and (3) to use for any part of
the transportation a carrier subject to the federal law pertaining to
common carriers.[23]
A freight forwarders liability is limited to damages arising from its
own negligence, including negligence in choosing the carrier;
however, where the forwarder contracts to deliver goods to their
destination instead of merely arranging for their transportation, it
becomes liable as a common carrier for loss or damage to goods.
A freight forwarder assumes the responsibility of a carrier, which
actually executes the transport, even though the forwarder does
not carry the merchandise itself.[24]
10
 It is undisputed that UTI issued a bill of lading in favor of Unilab.
Pursuant thereto, petitioner undertook to transport, ship, and
deliver the 27 drums of raw materials for pharmaceutical
manufacturing to the consignee.
A bill of lading is a written acknowledgement of the receipt of
goods and an agreement to transport and to deliver them at a
specified place to a person named or on his or her order.[25] It
operates both as a receipt and as a contract. It is a receipt for the
goods shipped and a contract to transport and
deliver the same as therein stipulated. As a receipt, it recites the
date and place of shipment, describes the goods as to quantity,
weight, dimensions, identification marks, condition, quality, and
value. As a contract, it names the contracting parties, which
include the consignee; fixes the route, destination, and freight rate
or charges; and stipulates the rights and obligations assumed by
the parties.[26]
Undoubtedly, UTI is liable as a common carrier. Common carriers,
as a general rule, are presumed to have been at fault or negligent
if the goods they transported deteriorated or got lost or destroyed.
That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid responsibility
for any loss or damage, therefore, they have the burden of
proving that they observed such diligence.[27] Mere proof of
delivery of the goods in good order to a common carrier and of
their arrival in bad order at their destination constitutes a prima
facie case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, loss, or
destruction of the goods happened, the transporter shall be held
responsible.
SPS. PERENA V. SPS. ZARATE
Facts: The Pereñas were engaged in the business of transporting
students from their respective residences in Parañaque City to Don
Bosco in Pasong Tamo, Makati City, and back. In their business,
the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896,
which had the capacity to transport 14 students at a time, two of
whom would be seated in the front beside the driver, and the
others in the rear, with six students on either side. They employed
Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport
Aaron to and from Don Bosco. On August 22, 1996, as on previous
school days, the van picked Aaron up around 6:00 a.m. from the
Zarates’ residence. Aaron took his place on the left side of the van
near the rear door. The van, with its air-conditioning unit turned
on and the stereo playing loudly, ultimately carried all the 14
student riders on their way to Don Bosco. Considering that the
students were due at Don Bosco by 7:15 a.m., and that they were
already running late because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route at
about 6:45 a.m. by traversing the narrow path underneath the
Magallanes Interchange that was then commonly used by Makati-
bound vehicles as a short cut into Makati. At the time, the narrow
path was marked by piles of construction materials and parked
passenger jeepneys, and the railroad crossing in the narrow path
had no railroad warning signs, or watchmen, or other responsible
persons manning the crossing. In fact, the bamboo barandilla was
up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing,
PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano),
was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove
the van eastward across the railroad tracks, closely tailing a large
passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train
blew its horn to warn motorists of its approach. When the train
was about 50 meters away from the passenger bus and the van,
Alano applied the ordinary brakes of the train. He applied the
emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad
tracks, but the van driven by Alfaro did not. The train hit the rear
end of the van, and the impact threw nine of the 12 students in
the rear, including Aaron, out of the van. Aaron landed in the path
of the train, which dragged his body and severed his head,
instantaneously killing him. Alano fled the scene on board the
train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the
Zarates commenced this action for damages against Alfaro, the
Pereñas, PNR and Alano. The Pereñas and PNR filed their
respective answers, with cross-claims against each other, but
Alfaro could not be served with summons.
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiff and against the defendants.
Issues: WON the petitioners are common carrier.
Ruling: We find no adequate cause to differ from the conclusions
of the lower courts that the Pereñas operated as a common
carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service
has been usually regarded as a private carrier,9primarily because
he only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use,
the exact nature of the operation of a school bus service has not
been finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or
convey goods or persons from one place to another, gratuitously
or for hire. The carrier is classified either as a private/special
carrier or as a common/public carrier.10 A private carrier is one
who, without making the activity a vocation, or without holding
himself or itself out to the public as ready to act for all who may
desire his or its services, undertakes, by special agreement in a
particular instance only, to transport goods or persons from one
place to another either gratuitously or for hire.11The provisions on
ordinary contracts of the Civil Code govern the contract of private
carriage.The diligence required of a private carrier is only ordinary,
that is, the diligence of a good father of the family. In contrast, a
common carrier is a 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
such services to the public.12Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code,
the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have
acted negligently in case of the loss of the effects of passengers,
or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the
following terms in United States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential
feature of the public use is not confined to privileged individuals,
but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In
determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the owners, or
the public benefit is merely incidental, it is not a public use,
authorizing the exercise of the jurisdiction of the public utility
commission. There must be, in general, a right which the law
compels the owner to give to the general public. It is not enough
that the general prosperity of the public is promoted. Public use is
not synonymous with public interest. The true criterion by which to
judge the character of the use is whether the public may enjoy it
by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article
1732 of the Civil Code avoided any distinction between a person or
11
an enterprise offering transportation on a regular or an isolated
basis; and has not distinguished a carrier offering his services to
the general public, that is, the general community or population,
from one offering his services only to a narrow segment of the
general population.
Nonetheless, the concept of a common carrier embodied in Article
1732 of the Civil Code coincides neatly with the notion of public
service under the Public Service Act, which supplements the law
on common carriers found in the Civil Code. Public service,
according to Section 13, paragraph (b) of the Public Service Act,
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 clientèle, whether permanent or occasional,
and done for the 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, 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.17
Given the breadth of the aforequoted characterization of a
common carrier, the Court has considered as common carriers
pipeline operators,18 custom brokers and warehousemen,19 and
barge operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is
not the quantity or extent of the business actually transacted, or
the number and character of the conveyances used in the activity,
but whether the undertaking is a part of the activity engaged in by
the carrier that he has held out to the general public as his
business or occupation. If the undertaking is a single transaction,
not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the
entity rendering such service is a private, not a common, carrier.
The question must be determined by the character of the business
actually carried on by the carrier, not by any secret intention or
mental reservation it may entertain or assert when charged with
the duties and obligations that the law imposes.21
Applying these considerations to the case before us, there is no
question that the Pereñas as the operators of a school bus service
were: (a) engaged in transporting passengers generally as a
business, not just as a casual occupation; (b) undertaking to carry
passengers over established roads by the method by which the
business was conducted; and (c) transporting students for a fee.
Despite catering to a limited clientèle, the Pereñas operated as a
common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular
school living within or near where they operated the service and
for a fee.
WESTWIND SHIPPING CORP. V. UCPB GENERAL INSURANCE CO.
Facts: On August 23, 1993, Kinsho-Mataichi Corporation shipped
from the port of Kobe, Japan, 197 metal containers/skids of tin-
free steel for delivery to the consignee, San Miguel Corporation
(SMC). The shipment, covered by Bill of Lading No. KBMA-1074,4
was loaded and received clean on board M/V Golden Harvest
Voyage No. 66, a vessel owned and operated by Westwind
Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General
Insurance Co., Inc. (UCPB) for US Dollars: One Hundred Eighty-
Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven
Centavos (US$184,798.97), which, at the time, was equivalent to
Philippine Pesos: Six Million Two Hundred Nine Thousand Two
Hundred Forty-Five and Twenty-Eight Centavos (P6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993
and was discharged in the custody of the arrastre operator, Asian
Terminals, Inc. (ATI), formerly Marina Port Services, Inc.5 During
the unloading operation, however, six containers/skids worth
Philippine Pesos: One Hundred Seventeen Thousand Ninety-Three
and Twelve Centavos (P117,093.12) sustained dents and
punctures from the forklift used by the stevedores of Ocean
Terminal Services, Inc. (OTSI) in centering and shuttling the
containers/skids. As a consequence, the local ship agent of the
vessel, Baliwag Shipping Agency, Inc., issued two Bad Order Cargo
Receipt dated September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII),
the customs broker of SMC, withdrew from ATI the 197
containers/skids, including the six in damaged condition, and
delivered the same at SMC’s warehouse in Calamba, Laguna
through J.B. Limcaoco Trucking (JBL). It was discovered upon
discharge that additional nine containers/skids valued at Philippine
Pesos: One Hundred Seventy-Five Thousand Six Hundred Thirty-
Nine and Sixty-Eight Centavos (P175,639.68) were also damaged
due to the forklift operations; thus, making the total number of 15
containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against
UCPB, Westwind, ATI, and OFII to recover the amount
corresponding to the damaged 15 containers/skids. When UCPB
paid the total sum of Philippine Pesos: Two Hundred Ninety-Two
Thousand Seven Hundred Thirty-Two and Eighty Centavos
(P292,732.80), SMC signed the subrogation receipt. Thereafter, in
the exercise of its right of subrogation, UCPB instituted on August
30, 1994 a complaint for damages against Westwind, ATI, and
OFII.
Ruling: The case of Philippines First Insurance Co., Inc. v. Wallem
Phils. Shipping, Inc.12 applies, as it settled the query on which
between a common carrier and an arrastre operator should be
responsible for damage or loss incurred by the shipment during its
unloading. We elucidated at length:
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 1734 of
the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the goods
are unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered, actually
or constructively, by the carrier to the consignee, or to the person
who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides
that the ship captain is liable for the cargo from the time it is
turned over to him at the dock or afloat alongside the vessel at the
port of loading, until he delivers it on the shore or on the
discharging wharf at the port of unloading, unless agreed
otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the
Court interpreted the ship captain’s liability as ultimately that of
the shipowner by regarding the captain as the representative of
the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract
of carriage of goods by sea, the carrier in relation to the loading,
handling, stowage, carriage, custody, care, and discharge of such
goods, shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the Act. Section 3
(2) thereof then states that among the carriers’ responsibilities are
to properly and carefully load, handle, stow, carry, keep, care for,
and discharge the goods carried.
xxxx
12
On the other hand, the functions of an arrastre operator involve
the handling of cargo deposited on the wharf or between the
establishment of the consignee or shipper and the ship's tackle.
Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so
its drivers/operators or employees should observe the standards
and measures necessary to prevent losses and damage to
shipments under its custody.
The legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman. The
relationship between the consignee and the common carrier is
similar to that of the consignee and the arrastre operator. Since it
is the duty of the ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the CARRIER.
Both the ARRASTRE and the CARRIER are therefore charged with
and obligated to deliver the goods in good condition to the
consignee. (Emphasis supplied) (Citations omitted)
To recapitulate, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence in vigilance over the goods and for the
safety of the passengers transported by them, according to all the
circumstances of each case. The mere proof of delivery of goods in
good order to the carrier, and their arrival in the place of
destination in bad order, make 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.18
The contention of OFII is likewise untenable. A customs broker has
been regarded as a common carrier because transportation of
goods is an integral part of its business.19 In Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc.,20 the Court
already reiterated: It is settled that under a given set of facts, a
customs broker may be regarded as a common carrier.
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held
that as the transportation of goods is an integral part of a customs
broker, the customs broker is also a common carrier. For to
declare otherwise "would be to deprive those with whom [it]
contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for [its]
customers, is part and parcel of petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of its
own witness, Mr. Loveric Panganiban Cueto, that part of the
services it offers to clients is cargo forwarding, which includes the
delivery of the shipment to the consignee.22 Thus, for undertaking
the transport of cargoes from ATI to SMC’s warehouse in Calamba,
Laguna, OFII is considered a common carrier. As long as a person
or corporation holds itself to the public for the purpose of
transporting goods as a business, it is already considered a
common carrier regardless of whether it owns the vehicle to be
used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article
1733 of the Civil Code,23 extraordinary diligence in the vigilance
over the goods24 it transports according to the peculiar
circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or
to have acted negligently unless it proves that it observed
extraordinary diligence.25 In the case at bar it was established
that except for the six containers/skids already damaged OFII
received the cargoes from ATI in good order and condition; and
that upon its delivery to SMC additional nine containers/skids were
found to be in bad order as noted in the Delivery Receipts issued
by OFII and as indicated in the Report of Cares Marine Cargo
Surveyors. Instead of merely excusing itself from liability by
putting the blame to ATI and SMC it is incumbent upon OFII to
prove that it actively took care of the goods by exercising
extraordinary diligence in the carriage thereof. It failed to do so.
Hence its presumed negligence under Article 1735 of the Civil
Code remains unrebutted.
FEDERAL PHOENIX ASSURANCE CO. LTD. V. FORTUNE SEA
CARRIER INC.
FACTS:
Fortune agreed to lease its vessel to Northern Mindanao Transport
(Northern Transport). The parties agreed (Time Charter Party
Agreement) that the vessel (M/V Ricky Rey) shall be leased to
Northern Transport for 90 days to carry cement bags to different
ports. Later on, the parties extended the period of lease for
another 90 days.
Thereafter, Northern Transport ordered 2,069 bales of abaca fibers
to be shipped on board M/V Ricky Rey by shipper Manila Hemp
Trading Corp, for delivery to Newtech, the consignee in Iligan. This
was covered by Bill of Lading No. 1, and was insured by Federal
Phoenix.
When M/V Ricky Rey arrived at Iligan, the stevedores started to
discharge the abaca shipment. However later that day, the
stevedores noticed smoke coming out of the cargo haul where the
bales of abaca were located. It was then discovered that the 60
bales of abaca were damaged.
As a result, Newtech filed an insurance claim with Federal Phoenix.
Thus, Federal Phoenix paid Newtech for the losses it incurred due
to the damaged and undelivered bales of abaca. Upon payment,
Federal Phoenix was subrogated to the rights of Newtech and
pursued its claim against Fortune Sea. Despite several demands to
the latter, Federal Phoenix’s claims were not settled. Thus, it filed
complaint for sum of money.
Fortune Sea argued that it was acting as a private sea carrier at
the time incident occurred. It alleged that the agreement executed
by the parties expressly provided that M/V Ricky Rey shall be
under the orders and complete control of Northern Transport.
RTC Ruling:
In favor of Federal Phoenix.
Ordered Fortune Sea to pay actual damages, attorney’s fees and
suit costs as well. Fortune Sea appealed to CA.
CA Ruling:
Reversed the RTC Decision, and dismissed the complaint for sum
of money filed by Federal Phoenix.
Ruled that although the agreement between Fortune Sea and
Northern Transport was denominated as Time Charter Party, it
found compelling reasons to hold that the contract was one of
bareboat or demise.
13
ISSUE: WON Fortune Sea was converted into a private carrier by
virtue of the charter party agreement it entered into Northern
Transport.
HELD: YES
RATIO:
Fortune Sea is a corporation engaged in the business of
transporting cargo by water, and for compensation, offering its
services to the public. Thus, no doubt it is a common carrier.
However, it entered into a time-chatter with Northern Transport.
Did this agreement convert Fortune Sea into a private carrier? Yes.
In determining the nature of the contract, courts are not bound by
the title or name given by the parties. The decisive factors are not
necessarily the terminology used in the contract, but by their
conduct, actions, and deeds prior to, during and immediately after
executing the agreement.
In this case the Time Charter Agreement executed by Fortune Sea
and Northern Transport clearly shows that the charter includes
both vessel and its crew, thus making the Northern Transport the
owner pro hac vice (for this occasion only) of M/V Ricky Rey
during the period of the voyage.
The contract stated:
o Upon delivery of the vessel(s) and during the
period of the charter, SECOND PARTY
(Northern Transport) assumes operational
control for the dispatch and direction of voyage
of the vessel(s).
o H. The Master to prosecute all voyages with the
utmost despatch and to render customary
assistance with the vessel(s) crew. The Master
to be under the orders of the SECOND PARTY
(Northern Transport) as regards employment of
the other arrangements.
o N. The SECOND PARTY (Northern Transport) to
furnish MASTER with all instructions and sailing
directions and the Master and Engineer to keep
full and correct logs accessible to the SECOND
PARTY (Northern Transport) or their
Supercargo.
It is clear then that the Time Charter Party agreement established
that Fortune Sea had completely and exclusively relinquished,
possession, command, and navigation of M/V Ricky Rey to
Northern Transport.
M/V Ricky Rey was converted into a private carrier notwithstanding
the existence of the Time Charter Party agreement, since the said
agreement was not limited to the ship but even extends to the
control of its crew.
Also, the testimony of Capt. Alfredo Canon of M/V Ricky Rey
confirmed that the whole vessel was leased to Northern Transport,
the entire command and control over its navigation was likewise
transferred to it.
The master, and all the crew of the ship were all made subject to
direct control and supervision of the charterer. The CA correctly
ruled that the nature of the vessel’s charter is one of bareboat or
demise charter.
Thus SC affirmed the decision of the CA, in dismissing the
complaint for sum of money filed by Federal Phoenix.
3. Private Carriage
Home Insurance Co. v. American Steamship Agencies
23 SCRA 24
FACTS:
"Consorcio Pesquero del Peru of South America" shipped freight
pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal
through SS Crowborough. The cargo, consigned to San Miguel
Brewery, Inc., now San Miguel Corporation, and insured by Home
Insurance Company for $202,505, arrived in Manila and was
discharged into the lighters of Luzon Stevedoring Company. When
the cargo was delivered to consignee San Miguel Brewery Inc.,
there were shortages amounting to P12,033.85, causing the latter
to lay claims against Luzon Stevedoring Corporation, Home
Insurance Company and the American Steamship Agencies, owner
and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid
the consignee P14,870.71. Having been refused reimbursement by
both the Luzon Stevedoring Corporation and American Steamship
Agencies, Home Insurance Company, as subrogee to the
consignee, filed against them before the Court of First Instance a
complaint for recovery of P14,870.71 with legal interest, plus
attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered
with due diligence the goods in the same quantity and quality that
it had received the same from the carrier. It also claimed that
plaintiff's claim had prescribed under Article 366 of the Code of
Commerce stating that the claim must be made within 24 hours
from receipt of the cargo.
American Steamship Agencies denied liability by alleging that
under the provisions of the Charter party referred to in the bills of
lading, the charterer, not the shipowner, was responsible for any
loss or damage of the cargo. Furthermore, it claimed to have
exercised due diligence in stowing the goods and that as a mere
forwarding agent, it was not responsible for losses or damages to
the cargo.
The Court of First Instance absolved the Luzon Stevedoring
Corporation from any liability and ordered the American Steamship
Agencies to pay the sum. Hence, this petition.
ISSUE:
Is the stipulation in the charter party of the owner's non-liability
valid so as to absolve the American Steamship Agencies from
liability for loss?
RULING:
Judgment was reversed and American Steamship Agencies was
absolved liability.
 The bills of lading provided at the back thereof that the bills
of lading shall be governed by and subject to the terms and
conditions of the charter party, if any, otherwise, the bills of
lading prevail over all the agreements.
o Section 2, paragraph 2 of the charter party, provides that
the owner is liable for loss or damage to the goods
caused by personal want of due diligence on its part or
its manager to make the vessel in all respects seaworthy
and to secure that she be properly manned, equipped
and supplied or by the personal act or default of the
owner or its manager. Said paragraph, however,
exempts the owner of the vessel from any loss or
damage or delay arising from any other source, even
from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for
whose acts the owner would ordinarily be liable except
for said paragraph..
 The Court of First Instance declared the contract as contrary
to Article 587 of the Code of Commerce making the ship
agent civilly liable for indemnities suffered by third persons
arising from acts or omissions of the captain in the care of the
goods and Article 1744 of the Civil Code under which a
stipulation between the common carrier and the shipper or
owner limiting the liability of the former for loss or destruction
of the goods to a degree less than extraordinary diligence is
valid provided it be reasonable, just and not contrary to public
policy. The release from liability in this case was held
unreasonable and contrary to the public policy on common
carriers.
14
 o Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier.8 As a
private carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not against
public policy, and is deemed valid
o he Civil Code provisions on common carriers should not
be applied where the carrier is not acting as such but as
a private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict
public policy governing common carriers is applied. Such
policy has no force where the public at large is not
involved, as in the case of a ship totally chartered for the
use of a single party.
 And furthermore, in a charter of the entire vessel, the bill of
lading issued by the master to the charterer, as shipper, is in
fact and legal contemplation merely a receipt and a document
of title not a contract, for the contract is the charter party.
The consignee may not claim ignorance of said charter party
because the bills of lading expressly referred to the same.
Accordingly, the consignees under the bills of lading must
likewise abide by the terms of the charter party. And as
stated, recovery cannot be had thereunder, for loss or
damage to the cargo, against the shipowners, unless the
same is due to personal acts or negligence of said owner or
its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence
has been proved.
NATIONAL STEEL CORPORATION vs. COURT OF APPEALS (1997)
Facts:
NSC hired MV Vlasons I, a private vessel owned by VSI. They
entered into a contract of voyage charter hire wherein the contract
states that NSC hired VSI's vessel to make one voyage to load
steel products at Iligan City and discharge them at North Harbor,
Manila. On arrival and upon opening the three hatches containing
the shipment, nearly all the skids of tinplates and hot rolled sheets
were allegedly found to be wet and rusty. NSC filed a complaint
for damages but RTC dismissed the complaint
Issues:
1. whether VSI contracted with NSC as a common carrier or
as a private carrier
2. Whether or not the provisions of the Civil Code of the
Philippines on common carriers pursuant to which there
exist[s] a presumption of negligence against the common
carrier in case of loss or damage to the cargo are
applicable to a private carrier.
Held:
1. VSI was not a common carrier but a private carrier. It is
undisputed that VSI did not offer its services to the
general public. The extent of VSI's responsibility and
liability over NSC's cargo are determined primarily by the
stipulations in the contract of carriage or charter party
and the Code of Commerce. The burden of proof lies on
the part of NSC and not the VSI.
Article 1732 of the Civil Code defines a common carrier
as "persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation,
offering their services to the public." It has been held
that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who
opt to avail themselves of its transportation service for a
fee. A carrier which does not qualify under the above
test is deemed a private carrier. "Generally, private
carriage is undertaken by special agreement and the
carrier does not hold himself out to carry goods for the
general public. . . ."
2. Because the MV Vlason I was a private carrier, the
shipowner's obligations are governed by the provisions of
the Code of Commerce and not by the Civil Code which,
as a general rule places the prima facie presumption of
negligence on a common carrier.
IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN
OF PROOF IN CASE OF ACCIDENT IS ON THE CARRIER
but the court exempts VSI due to force majeure.
NSC must prove that the damage to its shipment was
caused by VSI's willful negligence or failure to exercise
due diligence in making MV Vlason I seaworthy and fit
for holding, carrying and safekeeping the cargo. The
burden of proof was placed on NSC by the parties'
agreement.
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY v. CA
FACTS:
Plaintiff shipped at Maconcon Port, Isabela 940 round logs on
board M/V Seven Ambassador, a vessel owned by defendant
Seven Brothers Shipping Corporation. Plaintiff insured the logs
against loss and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2M and the latter issued its Marine Cargo
Insurance Policy on said date. In the meantime, the M/V Seven
Ambassador sank resulting in the loss of the plaintiff’s insured
logs.
Plaintiff demanded from defendant South Sea Surety and
Insurance Co., Inc. the payment of the proceeds of the policy but
the latter denied liability under the policy. Plaintiff likewise filed a
formal claim with defendant Seven Brothers Shipping Corporation
for the value of the lost logs but the latter denied the claim.
Court of Appeals affirmed in part the RTC judgment by sustaining
the liability of South Sea Surety and Insurance Company ("South
Sea"), but modified it by holding that Seven Brothers Shipping
Corporation ("Seven Brothers") was not liable for the lost cargo.
ISSUE:
Whether defendants shipping corporation and the surety company
are liable to the plaintiff for the latter's lost logs.
HELD:
The charter party between the petitioner and private respondent
stipulated that the "(o)wners shall not be responsible for loss, split,
short-landing, breakages and any kind of damages to the cargo" –
VALID
There is no dispute between the parties that the proximate cause
of the sinking of M/V Seven Ambassadors resulting in the loss of
its cargo was the "snapping of the iron chains and the subsequent
rolling of the logs to the portside due to the negligence of the
captain in stowing and securing the logs on board the vessel and
not due to fortuitous event." Likewise undisputed is the status of
Private Respondent Seven Brothers as a private carrier when it
contracted to transport the cargo of Petitioner Valenzuela. Even
the latter admits this in its petition.
Private respondent had acted as a private carrier in transporting
petitioner's lauan logs. Thus, Article 1745 and other Civil Code
provisions on common carriers which were cited by petitioner may
not be applied unless expressly stipulated by the parties in their
charter party.
In a contract of private carriage, the parties may validly stipulate
that responsibility for the cargo rests solely on the charterer,
exempting the shipowner from liability for loss of or damage to the
cargo caused even by the negligence of the ship captain. Pursuant
to Article 1306 of the Civil Code, such stipulation is valid because it
is freely entered into by the parties and the same is not contrary
to law, morals, good customs, public order, or public policy.
Indeed, their contract of private carriage is not even a contract of
adhesion. We stress that in a contract of private carriage, the
parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in contract involving a
common carrier, private carriage does not involve the general
public. Hence, the stringent provisions of the Civil Code on
common carriers protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or
remove the protection given by law in contracts involving common
carriers.
The provisions of our Civil Code on common carriers were taken
from Anglo-American law. Under American jurisprudence, a
15
common carrier undertaking to carry a special cargo or chartered
to a special person only, becomes a private carrier. As a private
carrier a stipulation exempting the owner from liability for the
negligence of its agent is not against public policy and is deemed
valid. Such doctrine We find reasonable. The Civil Code provisions
on common carriers should not be applied where the carrier is not
acting as such but as a private carrier. The stipulation in the
charter party absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict public policy
governing common carriers is applied. Such policy has no force
where the public at large is not involved as in this case of a ship
totally chartered for the use of a single party. (Home Insurance
Co. vs. American Steamship Agencies Inc., 23 SCRA 24, April 4,
1968)
FGU INSURANCE v. G.P. SARMIENTO
Facts: 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.
Issues: WON GPS was a common carrier.
Ruling: 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 petitioner’s assured, and
admits that the cargoes it has assumed to deliver have been lost
or damaged while in its custody. In such a situation, a default on,
or failure of compliance with, the obligation – in this case, the
delivery of the goods in its custody to the place of destination -
gives rise to a presumption of lack of care and corresponding
liability on the part of the contractual obligor the burden being on
him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of
his negligence or fault, may not himself be ordered to pay
petitioner. The driver, not being a party to the contract of carriage
between petitioner’s principal and defendant, may not be held
liable under the agreement. A contract can only bind the parties
who have entered into it or their successors who have assumed
their personality or their juridical position.17 Consonantly with the
axiom res inter alios acta aliis neque nocet prodest, such contract
can neither favor nor prejudice a third person. Petitioner’s civil
action against the driver can only be based on culpa aquiliana,
which, unlike culpa contractual, would require the claimant for
damages to prove negligence or fault on the part of the defendant.
4. Services
CRISOSTOMO V. CA
Facts: In May 1991, petitioner Estela L. Crisostomo contracted the
services of respondent Caravan Travel and Tours International,
Inc. to arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed Jewels of Europe. The package
tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount,
which included airfare, and the booking fee was also waived
because petitioners niece, Meriam Menor, was respondent
companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on
June 12, 1991 a Wednesday to deliver petitioners travel
documents and plane tickets. Petitioner, in turn, gave Menor the
full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two
hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA
on Saturday, June 15, 1991, to take the flight for the first leg of
her journey from Manila to Hongkong. To petitioners dismay, she
discovered that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was
for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another
tour the British Pageant which included England, Scotland and
Wales in its itinerary. For this tour package, petitioner was asked
anew to pay US$785.00 or P20,881.00 (at the then prevailing
exchange rate of P26.60). She gave respondent US$300 or
16
P7,980.00 as partial payment and commenced the trip in July
1991.
Upon petitioners return from Europe, she demanded from
respondent the reimbursement of P61,421.70, representing the
difference between the sum she paid for Jewels of Europe and the
amount she owed respondent for the British Pageant tour. Despite
several demands, respondent company refused to reimburse the
amount, contending that the same was non-refundable.[1]
Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages, which
was docketed as Civil Case No. 92-133 and raffled to Branch 59 of
the Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join
Jewels of Europe was due to respondents fault since it did not
clearly indicate the departure date on the plane ticket. Respondent
was also negligent in informing her of the wrong flight schedule
through its employee Menor. She insisted that the British Pageant
was merely a substitute for the Jewels of Europe tour, such that
the cost of the former should be properly set-off against the sum
paid for the latter.
For its part, respondent company, through its Operations Manager,
Concepcion Chipeco, denied responsibility for petitioners failure to
join the first tour. Chipeco insisted that petitioner was informed of
the correct departure date, which was clearly and legibly printed
on the plane ticket. The travel documents were given to petitioner
two days ahead of the scheduled trip. Petitioner had only herself
to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount
paid for Jewels of Europe, considering that the same had already
been remitted to its principal in Singapore, Lotus Travel Ltd.,
which had already billed the same even if petitioner did not join
the tour. Lotus European tour organizer, Insight International
Tours Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this reason, it is
accepted industry practice to disallow refund for individuals who
failed to take a booked tour.[3]
Lastly, respondent maintained that the British Pageant was not a
substitute for the package tour that petitioner missed. This tour
was independently procured by petitioner after realizing that she
made a mistake in missing her flight for Jewels of Europe.
Petitioner was allowed to make a partial payment of only
US$300.00 for the second tour because her niece was then an
employee of the travel agency. Consequently, respondent prayed
that petitioner be ordered to pay the balance of P12,901.00 for the
British Pageant package tour.
Ruling: By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place
to another for a fixed price.[9] Such person or association of
persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.[10] A common
carrier is defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an
entity engaged in the business of transporting either passengers or
goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one
place to another since its covenant with its customers is simply to
make travel arrangements in their behalf. Respondents services as
a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the
efforts of respondent company, this does not mean that the latter
ipso facto is a common carrier. At most, respondent acted merely
as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondents obligation to
petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time.
Her transport to the place of destination, meanwhile, pertained
directly to the airline.
The object of petitioners contractual relation with respondent is
the latters service of arranging and facilitating petitioners booking,
ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers
or goods. It is in this sense that the contract between the parties
in this case was an ordinary one for services and not one of
carriage. Petitioners submission is premised on a wrong
assumption.
The nature of the contractual relation between petitioner and
respondent is determinative of the degree of care required in the
performance of the latters obligation under the contract. For
reasons of public policy, a common carrier in a contract of carriage
is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious
persons and with due regard for all the circumstances.[11] As
earlier stated, however, respondent is not a common carrier but a
travel agency. It is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation, as
petitioner claims.
Since the contract between the parties is an ordinary one for
services, the standard of care required of respondent is that of a
good father of a family under Article 1173 of the Civil Code.[12]
This connotes reasonable care consistent with that which an
ordinarily prudent person would have observed when confronted
with a similar situation. The test to determine whether negligence
attended the performance of an obligation is: did the defendant in
doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the
same situation? If not, then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when
she allegedly informed petitioner of the wrong day of departure.
Petitioners testimony was accepted as indubitable evidence of
Menors alleged negligent act since respondent did not call Menor
to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e)[14] of the
Rules of Court that evidence willfully suppressed would be adverse
if produced and thus considered petitioners uncontradicted
testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor
was negligent and maintains that petitioners assertion is belied by
the evidence on record. The date and time of departure was
legibly written on the plane ticket and the travel papers were
delivered two days in advance precisely so that petitioner could
prepare for the trip. It performed all its obligations to enable
petitioner to join the tour and exercised due diligence in its
dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut
petitioners testimony could not give rise to an inference
unfavorable to the former. Menor was already working in France at
the time of the filing of the complaint,[15] thereby making it
physically impossible for respondent to present her as a witness.
Then too, even if it were possible for respondent to secure Menors
testimony, the presumption under Rule 131, Section 3(e) would
still not apply. The opportunity and possibility for obtaining Menors
testimony belonged to both parties, considering that Menor was
not just respondents employee, but also petitioners niece. It was
thus error for the lower court to invoke the presumption that
respondent willfully suppressed evidence under Rule 131, Section
3(e). Said presumption would logically be inoperative if the
17
evidence is not intentionally omitted but is simply unavailable, or
when the same could have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that
Menors negligence concurred with the negligence of petitioner and
resultantly caused damage to the latter. Menors negligence was
not sufficiently proved, considering that the only evidence
presented on this score was petitioners uncorroborated narration
of the events. It is well-settled that the party alleging a fact has
the burden of proving it and a mere allegation cannot take the
place of evidence.[17] If the plaintiff, upon whom rests the burden
of proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the defendant is
under no obligation to prove his exception or defense.
5. Distinction from towage, arrastre, stevedoring
MARINA PORT SERVICES INC. V. AMERICAN HOME ASSURANCE
CORP.
FACTS:
On September 21, 1989, Countercorp Trading PTE., Ltd. shipped
from Singapore to the Philippines 10 container vans of soft wheat
flour with seals intact on board the vessel M/V Uni Fortune. The
shipment was insured against all risks by AHAC and consigned to
MSC Distributor (MSC).
Upon arrival at the Manila South Harbor on September 25, 1989,
the shipment was discharged in good and complete order
condition and with safety seals in place to the custody of the
arrastre operator, MPSI. After unloading and prior to hauling,
agents of the Bureau of Customs officially broke the seals, opened
the container vans, and examined the shipment for tax evaluation
in the presence of MSC's broker and checker. Thereafter, the
customs inspector closed the container vans and refastened them
with safety wire seals while MSC's broker padlocked the same.
MPSI then placed the said container vans in a back-to-back
arrangement at the delivery area of the harbor's container yard
where they were watched over by the security guards of MPSI and
of the Philippine Ports Authority.
On October 10, 1989, MSC's representative, AD's Customs Services
(ACS), took out five container vans for delivery to MSC. At the
compound's exit, MPSI issued to ACS the corresponding gate
passes for the vans indicating its turnover of the subject shipment
to MSC. However, upon receipt of the container vans at its
warehouse, MSC discovered substantial shortages in the number
of bags of flour delivered. Hence, it filed a formal claim for loss
with MPSI.
From October 12 to 14, 1989 and pursuant to the gate passes
issued by MPSI, ACS took out the remaining five container vans
from the container yard and delivered them to MSC. Upon receipt,
MSC once more discovered substantial shortages. Thus, MSC filed
another claim with MPSI.
Per MSC, the total number of the missing bags of flour was 1,650
with a value of £257,083.00.
MPSI denied both claims of MSC. As a result, MSC sought
insurance indemnity for the lost cargoes from AHAC. AHAC paid
MSC the value of the missing bags of flour after finding the tetter's
claim in order. In turn, MSC issued a subrogation receipt in favor
of AHAC.
Thereafter, AHAC filed a Complaint for damages against MPSI
before the RTC.
RTC ruled in favor of MPSI saying that AHAC's evidence failed to
clearly show that the loss happened while the subject shipment
was still under MPSI's responsibility.
Aggrieved, AHAC appealed to the CA. CA reversed the ruling in
RTC saying that in a claim for loss filed by a consignee, the burden
of proof to show due compliance with the obligation to deliver the
goods to the appropriate party devolves upon the arrastre
operator. In this case, the CA found that MPSI failed to discharge
such burden and to rebut the aforementioned presumption.
MPSI moved for reconsideration but the CA denied the same.
Hence, the present recourse.
ISSUE:
The core issue to be resolved in this case is whether MPSI is liable
for the loss of the bags of flour.
HELD:
NO! MPSI is not liable for the loss.
The relationship between an arrastre operator and a consignee is
similar to that between a warehouseman and a depositor, or to
that between a common carrier and the consignee and/or the
owner of the shipped goods. Thus, an arrastre operator should
adhere to the same degree of diligence as that legally expected of
a warehouseman or a common carrieras set forth in Section 3[b]
of the Warehouse Receipts [Act] and Article 1733 of the Civil Code.
As custodian of the shipment discharged from the vessel, the
arrastre operator must take good care of the same and turn it over
to the party entitled to its possession.
In case of claim for loss filed by a consignee or the insurer as
subrogee, it is the arrastre operator that carries the burden of
proving compliance with the obligation to deliver the goods to the
appropriate party. It must show that the losses were not due to its
negligence or that of its employees. It must establish that it
observed the required diligence in handling the shipment.
Otherwise, it shall be presumed that the loss was due to its fault.
In the same manner, an arrastre operator shall be liable for
damages if the seal and lock of the goods deposited and delivered
to it as closed and sealed, be broken through its fault. Such fault
on the part of the arrastre operator is likewise presumed unless
there is proof to the contrary.
MPSI was able to prove delivery of the shipment to MSC in good
and complete condition and with locks and seals intact. It is
significant to note that MPSI, in order to prove that it properly
delivered the subject shipment consigned to MSC, presented 10
gate passes. Each of these gate passes bore the duly identified
signature of MSC's representative which serves, among others, as
an acknowledgement that:
Issuance of [the] Gate Pass constitutes delivery to and receipt by
consignee of the goods as described above in good order and
condition, unless an accompanying B.O. certificate duly issued and
noted on the face of [the] Gate Pass appears.
The signature of the consignee's representative on the gate pass is
evidence of receipt of the shipment in good order and condition.
Also, that MPSI delivered the subject shipment to MSC's
representative in good and complete condition and with lock and
seals intact is established by the testimonies of MPSFs employees
who were directly involved in the processing of the subject
shipment. The testimonies of the aforementioned employees of
MPSI confirm that the container vans, together with their padlocks
and wirings, were in order at the time the gate passes were issued
up to the time the said container vans were turned over to ACS.
Even in the light of Article 1981, no presumption of fault on the
part of MPSI arises since it was not sufficiently shown that the
container vans were re-opened or that their locks and seals were
broken for the second time. Indeed, Article 1981 of the Civil Code
also mandates a presumption of fault on the part of the arrastre
operator as follows:
Article 1981. When the thing deposited is delivered closed and
sealed, the depositary must return it in the same condition, and he
shall be liable for damages should the seal or lock be broken
through his fault.
Fault on the part of the depositary is presumed, unless there is
proof to the contrary.
As regards the value of the thing deposited, the statement of the
depositor shall be accepted, when the forcible opening is
imputable to the depositary, should there be no proof to the
contrary. However, the courts may pass upon the credibility of the
depositor with respect to the value claimed by him.
When the seal or lock is broken, with or without the depositary's
fault, he shall keep the secret of the deposit. However, no such
presumption arises in this case considering that it was not
sufficiently shown that the container vans were re-opened or that
their locks and seals were broken for the second time. As may be
18
recalled, the container vans were opened by a customs official for
examination of the subject shipment and were thereafter resealed
with safety wires. While this fact is not disputed by both parties,
AHAC alleges that the container vans were re-opened and this
gave way to the alleged pilferage. There being no other competent
evidence that the container vans were reopened or that their locks
and seals were broken for the second time, MPSI cannot be held
liable for damages due to the alleged loss of the bags of flour
pursuant to Article 1981 of the Civil Code.
At any rate, the goods were shipped under "Shipper's Load and
Count" arrangement. Thus, protection against pilferage of the
subject shipment was the consignees lookout.
At any rate, MPSI cannot just the same be held liable for the
missing bags of flour since the consigned goods were shipped
under "Shipper's Load and Count" arrangement. "This means that
the shipper was solely responsible for the loading of the container,
while the carrier was oblivious to the contents of the shipment.
Protection against pilferage of the shipment was the consignee's
lookout. The arrastre operator was, like any ordinary depositary,
duty-bound to take good care of the goods received from the
vessel and to turn the same over to the party entitled to their
possession, subject to such qualifications as may have validly been
imposed in the contract between the parties. The arrastre operator
was not required to verify the contents of the container received
and to compare them with those declared by the shipper because,
as earlier stated, the cargo was at the shipper's load and count.
The arrastre operator was expected to deliver to the consignee
only the container received from the carrier.
ASIAN TERMINALS, INC. V. ALLIED GUARANTEE INSURANCE CO.,
INC.
G.R. No. 182208, October 14, 2015
ASIAN TERMINALS, INC., Petitioner, v. ALLIED GUARANTEE
INSURANCE, CO., INC., Respondent.
FACTS:
Marina Port Services, Inc. (Marina), the predecessor of herein
petitioner Asian Terminals, Inc. (petitioner ATP), is an arrastre
operator based in the South Harbor, Port Area, Manila. 3 On
February 5, 1989, a shipment was made of 72,322 lbs. of kraft
linear board (a type of paperboard) loaded and received from the
ports of Lake Charles, LA, and Mobile, AL, U.S.A., for transport and
delivery to San Miguel Corporation (San Miguel) in Manila,
Philippines. The vessel used was the M/V Nicole, operated by
Transocean Marine, Inc. (Transocean), a foreign corporation,
whose Philippine representative is Philippine Transmarine Carrier,
Inc. (Philippine Transmarine).
The M/V Nicole arrived in Manila on April 8, 1989 and, shortly
thereafter, the subject shipment was offloaded from the vessel to
the arrastre Marina until April 13, 1989. 6 Thereafter, it was
assessed that a total of 158 rolls of the goods were "damaged"
during shipping. Further, upon the goods' withdrawal from the
arrastre and their delivery, first, to San Miguel's customs broker,
Dynamic Brokerage Co. Inc. (Dynamic), and, eventually, to the
consignee San Miguel, another 54 rolls were found to have been
damaged, for a total of 212 rolls of damaged shipment worth
P755,666.84.
Herein respondent Allied Guarantee Insurance, Co., Inc.,
(respondent Allied), was the insurer of the shipment. Thus, it paid
San Miguel P755,666.84 and was subrogated in the latter's rights.
On March 8, 1990, Allied filed a Complaint (and later, an Amended
Complaint) for maritime damages against Transocean, Philippine
Transmarine, Dynamic and Marina seeking to be indemnified for
the P755,666.84 it lost in paying the consignee San Miguel.
The RTC found the defendant shipping company Transocean liable
for the 158 rolls of damaged goods due to the latter's failure to
observe the necessary precautions and extraordinary diligence as
common carrier to prevent such damage.20
Then, the additional 54 rolls of the goods that were lost were
found to have been damaged while in the possession of Marina,
the arrastre operator and Dynamic, the broker. 21 It found Marina
and Dynamic solidarity liable for the said damaged goods. 22
Thus, the trial court found all the defendants liable for portions of
the cargo that were damaged in their respective custody. It
dismissed the parties' counterclaims and crossclaims.
ISSUE: W/N ATI is liable for the additional damages sustained by
the subject shipment
Petitioner’s contention:
Petitioner ATI argues that the appellate court erroneously failed to
note the so-called Turn Over Survey of Bad Order Cargoes and the
Requests for Bad Order Survey which supposedly could absolve it
from liability for the damaged shipment. The reports were
allegedly made prior to the shipment's turnover from ATI to
Dynamic and they purportedly show that no additional loss or
damage happened while the shipment was in ATI's custody as the
reports only mention the 158 rolls that were damaged during
shipping or prior to ATI's possession. ATI also assails the award of
attorney's fees, stating that no findings of fact or law mas made to
justify the grant of such an award.
Held:
The court denies the petition with respect to the additional 54 rolls
of damaged goods, as petitioner's liability thereon was duly proven
and well established during trial. The rulings of both the trial and
appellate courts in this respect are upheld.
"In general, the nature of the work of an arrastre operator covers
the handling of cargoes at piers and wharves," which was what
exactly defendant Marina's function entails in this case. "To carry
out its duties, the arrastre is required to provide cargo handling
equipment which includes, among others, trailer, chassis for
containers."
On the other hand, defendant Dynamic (which) in its capacity as
broker, withdrew the 357 rolls of kraft linear board from the
custody of defendant Marina and delivered the same to the
consignee, San Miguel Corporation's warehouse in Tabacalera at
United Nations, Manila, is considered a common carrier.
Hence, the "legal relationship between the consignee and the
arrastre operator is akin to that of a depositor and the
warehouseman.
The relationship between the consignee and the common carrier
is similar to that of the consignee and the arrastre operator. Since
it is the duty of the arrastre to take good care of the goods that
are in its custody and to deliver them in good condition to the
consignee, such responsibility also develops upon the carrier. Both
the arrastre and the carrier are, therefore, charged with and
obligated to deliver the goods in good condition to the
consignee."41chanrobleslaw
The trial court correctly held that the broker, Dynamic, cannot
alone be held liable for the additional 54 rolls of damaged goods
since such damage occurred during the following instances: (1)
while the goods were in the custody of the arrastre ATI; (2) when
they were in transition from ATI's custody to that of Dynamic (i.e.,
during loading to Dynamic's trucks); and (3) during Dynamic's
custody.
While the trial court could not determine with pinpoint accuracy
who among the two caused which particular damage and in what
proportion or quantity, it was clear that both ATI and Dynamic
failed to discharge the burden of proving that damage on the 54
rolls did not occur during their custody. As for petitioner ATI, in
particular, what worked against it was the testimony, as cited
above, that its employees' use of the wrong lifting equipment
while loading the goods onto Dynamic's trucks had a role in
19
causing the damage. Such is a finding of fact made by the trial
court which this Court, without a justifiable ground, will not
disturb,
As previously held by this Court, the arrastre operator's principal
work is that of handling cargo, so that its drivers/operators or
employees should observe the standards and measures necessary
to prevent losses and damage to shipments under its custody. 42
In the performance of its obligations, an arrastre operator should
observe the same degree of diligence as that required of a
common carrier and a warehouseman. 43
Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession. With such
a responsibility, the arrastre operator must prove that the losses
were not due to its negligence or to that of its employees. 45 And to
prove the exercise of diligence in handling the subject cargoes,
petitioner must do more than merely show the possibility that
some other party could be responsible for the loss or the
damage.46 It must prove that it exercised due care in the handling
thereof.47
But ATI submits that the Turn Over Survey of Bad Order Cargoes
and the Requests for Bad Order Survey help establish that damage
to the additional 54 rolls of goods did not happen in its custody.
In particular, the Requests for Bad Order Survey was allegedly
signed by Dynamic's representative stating that only 158 rolls were
damaged as of the goods' transfer from ATI to Dynamic. However,
this Court has already held that a mere sign-off from the customs
broker's representative that he had received the subject shipment
"in good order and condition without exception" would not absolve
the arrastre from liability, simply because the representative's
signature merely signifies that said person thereby frees the
arrastre from any liability for loss or damage to the cargo so
withdrawn while the same was in the custody of such
representative to whom the cargo was released, but it does not
foreclose the remedy or right of the consignee (or its subrogee) to
prove that any loss or damage to the subject shipment occurred
while the same was under the custody, control and possession of
the arrastre operator.48 Additionally, the finding of the trial court,
as stated above, that at least some of the damage occurred during
ATI's custody cannot be ignored.
Certainly, ATI's reliance on the Turn Over Survey of Bad Order
Cargoes as well as the Requests for Bad Order Survey is
misplaced. An examination of the documents would even reveal
that the first set of documents, the Turn Over Survey of Bad Order
Cargoes, pertain to the 158 rolls of damaged goods which
occurred during shipment and prior to ATI's custody. 49 But
responsibility for the 158 rolls was already established to be that of
the common carrier and is no longer disputed by the parties. Thus,
this fact has little or no more relevance to the issue of liability over
the additional 54 rolls of damaged goods. Anent the second set of
documents, the Requests for Bad Order Survey, which mention
only 158 rolls of damaged goods and do not mention any
additional damage, the same do not result in an automatic
exculpation of ATI from liability. As previously stated,
jurisprudence states that the signature by a-customs broker's
representative of "receipt in good order" does not foreclose the
consignee's or its subrogee's right or remedy to prove that
additional loss or damage to the subject shipment occurred while
the same was under the custody, control and possession of the
arrastre operator.50 Further, it is unclear whether these Requests
for Bad Order Survey were executed prior to or after loading was
done onto Dynamic's trucks. As earlier indicated, there is
testimony that it was during the loading to the trucks that some or
all of the damage was incurred.
Since the relationship of an arrastre operator and a consignee is
akin to that between a warehouseman and a depositor, then, in
instances when the consignee claims any loss, the burden of proof
is on the arrastre operator to show that it complied with the
obligation to deliver the goods and that the losses were not due to
its negligence or that of its employees. ATI failed to dislodge this
burden.
6. Governing Laws
LIM ET.AL. V. CA
Facts: Sometime in 1982 private respondent Donato Gonzales
purchased an Isuzu passenger jeepney from Gomercino Vallarta,
holder of a certificate of public convenience for the operation of
public utility vehicles plying the Monumento-Bulacan route. While
private respondent Gonzales continued offering the jeepney for
public transport services he did not have the registration of the
vehicle transferred in his name nor did he secure for himself a
certificate of public convenience for its operation. Thus Vallarta
remained on record as its registered owner and operator.
On 22 July 1990, while the jeepney was running northbound along
the North Diversion Road somewhere in Meycauayan, Bulacan, it
collided with a ten-wheeler-truck owned by petitioner Abelardo Lim
and driven by his co-petitioner Esmadito Gunnaban. Gunnaban
owned responsibility for the accident, explaining that while he was
traveling towards Manila the truck suddenly lost its brakes. To
avoid colliding with another vehicle, he swerved to the left until he
reached the center island. However, as the center island
eventually came to an end, he veered farther to the left until he
smashed into a Ferroza automobile, and later, into private
respondent's passenger jeepney driven by one Virgilio Gonzales.
The impact caused severe damage to both the Ferroza and the
passenger jeepney and left one (1) passenger dead and many
others wounded.
Petitioner Lim shouldered the costs for hospitalization of the
wounded, compensated the heirs of the deceased passenger, and
had the Ferroza restored to good condition. He also negotiated
with private respondent and offered to have the passenger
jeepney repaired at his shop. Private respondent however did not
accept the offer so Lim offered him P20,000.00, the assessment of
the damage as estimated by his chief mechanic. Again, petitioner
Lim's proposition was rejected; instead, private respondent
demanded a brand-new jeep or the amount of P236,000.00. Lim
increased his bid to P40,000.00 but private respondent was
unyielding. Under the circumstances, negotiations had to be
abandoned; hence, the filing of the complaint for damages by
private respondent against petitioners.
In his answer Lim denied liability by contending that he exercised
due diligence in the selection and supervision of his employees. He
further asserted that as the jeepney was registered in Vallarta’s
name, it was Vallarta and not private respondent who was the real
party in interest.1 For his part, petitioner Gunnaban averred that
the accident was a fortuitous event which was beyond his
control.2
Meanwhile, the damaged passenger jeepney was left by the
roadside to corrode and decay. Private respondent explained that
although he wanted to take his jeepney home he had no
capability, financial or otherwise, to tow the damaged vehicle
Ruling: The kabit system is an arrangement whereby a person who
has been granted a certificate of public convenience allows other
persons who own motor vehicles to operate them under his
license, sometimes for a fee or percentage of the earnings.9
Although the parties to such an agreement are not outrightly
penalized by law, the kabit system is invariably recognized as
being contrary to public policy and therefore void and inexistent
under Art. 1409 of the Civil Code.
It would seem then that the thrust of the law in enjoining the kabit
system is not so much as to penalize the parties but to identify the
person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The
20
policy therefore loses its force if the public at large is not deceived,
much less involved.
In the present case it is at once apparent that the evil sought to
be prevented in enjoining the kabit system does not exist. First,
neither of the parties to the pernicious kabit system is being held
liable for damages. Second, the case arose from the negligence of
another vehicle in using the public road to whom no
representation, or misrepresentation, as regards the ownership
and operation of the passenger jeepney was made and to whom
no such representation, or misrepresentation, was necessary. Thus
it cannot be said that private respondent Gonzales and the
registered owner of the jeepney were in estoppel for leading the
public to believe that the jeepney belonged to the registered
owner. Third, the riding public was not bothered nor
inconvenienced at the very least by the illegal arrangement. On
the contrary, it was private respondent himself who had been
wronged and was seeking compensation for the damage done to
him. Certainly, it would be the height of inequity to deny him his
right.
In light of the foregoing, it is evident that private respondent has
the right to proceed against petitioners for the damage caused on
his passenger jeepney as well as on his business. Any effort then
to frustrate his claim of damages by the ingenuity with which
petitioners framed the issue should be discouraged, if not repelled.
FEB LEASING V. SPS. BAYLON
Facts: On 2 September 2000, an Isuzu oil tanker running along Del
Monte Avenue in Quezon City and bearing plate number TDY 712
hit Loretta V. Baylon (Loretta), daughter of respondent spouses
Sergio P. Baylon and Maritess Villena-Baylon (spouses Baylon). At
the time of the accident, the oil tanker was registered5 in the
name of petitioner FEB Leasing and Finance Corporation6
(petitioner). The oil tanker was leased7 to BG Hauler, Inc. (BG
Hauler) and was being driven by the latters driver, Manuel Y.
Estilloso. The oil tanker was insured8 by FGU Insurance Corp.
(FGU Insurance).
Petitioner claimed that the spouses Baylon had no cause of action
against it because under its lease contract with BG Hauler,
petitioner was not liable for any loss, damage, or injury that the
leased oil tanker might cause. Petitioner claimed that no employer-
employee relationship existed between petitioner and the driver.
BG Hauler alleged that neither do the spouses Baylon have a cause
of action against it since the oil tanker was not registered in its
name. BG Hauler contended that the victim was guilty of
contributory negligence in crossing the street. BG Hauler claimed
that even if its driver was at fault, BG Hauler exercised the
diligence of a good father of a family in the selection and
supervision of its driver. BG Hauler also contended that FGU
Insurance is obliged to assume all liabilities arising from the use of
the insured oil tanker.
Issues: whether the registered owner of a financially leased
vehicle remains liable for loss, damage, or injury caused by the
vehicle notwithstanding an exemption provision in the financial
lease contract.
Ruling: Petitioner contends that the lease contract between BG
Hauler and petitioner specifically provides that BG Hauler shall be
liable for any loss, damage, or injury the leased oil tanker may
cause even if petitioner is the registered owner of the said oil
tanker. Petitioner claims that the Court of Appeals erred in holding
petitioner solidarily liable with BG Hauler despite having found the
latter liable under the lease contract.
For their part, the spouses Baylon counter that the lease contract
between petitioner and BG Hauler cannot bind third parties like
them. The spouses Baylon maintain that the existence of the lease
contract does not relieve petitioner of direct responsibility as the
registered owner of the oil tanker that caused the death of their
daughter.
On the other hand, BG Hauler and the driver argue that at the
time petitioner and BG Hauler entered into the lease contract,
Republic Act No. 598014 was still in effect. They point out that the
amendatory law, Republic Act No. 8556,15 which exempts from
liability in case of any loss, damage, or injury to third persons the
registered owners of vehicles financially leased to another, was not
yet enacted at that time.
In the instant case, Section 5.1 of the lease contract between
petitioner and BG Hauler provides:
Sec. 5.1. It is the principle of this Lease that while the title or
ownership of the EQUIPMENT, with all the rights consequent
thereof, are retained by the LESSOR, the risk of loss or damage of
the EQUIPMENT from whatever source arising, as well as any
liability resulting from the ownership, operation and/or possession
thereof, over and above those actually compensated by insurance,
are hereby transferred to and assumed by the LESSEE hereunder
which shall continue in full force and effect.17 (Emphasis supplied)
If it so wishes, petitioner may proceed against BG Hauler to seek
enforcement of the latters contractual obligation under Section 5.1
of the lease contract. In the present case, petitioner did not file a
cross-claim against BG Hauler. Hence, this Court cannot require
BG Hauler to reimburse petitioner for the latters liability to the
spouses Baylon. However, as the registered owner of the oil
tanker, petitioner may not escape its liability to third persons.
Under Section 5 of Republic Act No. 4136,18 as amended, all
motor vehicles used or operated on or upon any highway of the
Philippines must be registered with the Bureau of Land
Transportation (now Land Transportation Office) for the current
year.19 Furthermore, any encumbrances of motor vehicles must
be recorded with the Land Transportation Office in order to be
valid against third parties.
In accordance with the law on compulsory motor vehicle
registration, this Court has consistently ruled that, with respect to
the public and third persons, the registered owner of a motor
vehicle is directly and primarily responsible for the consequences
of its operation regardless of who the actual vehicle owner might
be.21 Well-settled is the rule that the registered owner of the
vehicle is liable for quasi-delicts resulting from its use. Thus, even
if the vehicle has already been sold, leased, or transferred to
another person at the time the vehicle figured in an accident, the
registered vehicle owner would still be liable for damages caused
by the accident. The sale, transfer or lease of the vehicle, which is
not registered with the Land Transportation Office, will not bind
third persons aggrieved in an accident involving the vehicle. The
compulsory motor vehicle registration underscores the importance
of registering the vehicle in the name of the actual owner.
The policy behind the rule is to enable the victim to find redress by
the expedient recourse of identifying the registered vehicle owner
in the records of the Land Transportation Office. The registered
owner can be reimbursed by the actual owner, lessee or transferee
who is known to him. Unlike the registered owner, the innocent
victim is not privy to the lease, sale, transfer or encumbrance of
the vehicle. Hence, the victim should not be prejudiced by the
failure to register such transaction or encumbrance.
The policy behind the rule is to enable the victim to find redress by
the expedient recourse of identifying the registered vehicle owner
in the records of the Land Transportation Office. The registered
owner can be reimbursed by the actual owner, lessee or transferee
who is known to him. Unlike the registered owner, the innocent
victim is not privy to the lease, sale, transfer or encumbrance of
the vehicle. Hence, the victim should not be prejudiced by the
failure to register such transaction or encumbrance.
FILCAR TRANSPORT V. ESPINAS
Facts: On November 22, 1998, at around 6:30 p.m., respondent
Jose A. Espinas was driving his car along Leon Guinto Street in
Manila. Upon reaching the intersection of Leon Guinto and
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President Quirino Streets, Espinas stopped his car. When the signal
light turned green, he proceeded to cross the intersection. He was
already in the middle of the intersection when another car,
traversing President Quirino Street and going to Roxas Boulevard,
suddenly hit and bumped his car. As a result of the impact,
Espinas car turned clockwise. The other car escaped from the
scene of the incident, but Espinas was able to get its plate
number.
After verifying with the Land Transportation Office, Espinas
learned that the owner of the other car, with plate number UCF-
545, is Filcar.
Espinas sent several letters to Filcar and to its President and
General Manager Carmen Flor, demanding payment for the
damages sustained by his car. On May 31, 2001, Espinas filed a
complaint for damages against Filcar and Carmen Flor before the
Metropolitan Trial Court (MeTC) of Manila, and the case was
raffled to Branch 13. In the complaint, Espinas demanded that
Filcar and Carmen Flor pay the amount of P97,910.00,
representing actual damages sustained by his car.
Filcar argued that while it is the registered owner of the car that
hit and bumped Espinas car, the car was assigned to its Corporate
Secretary Atty. Candido Flor, the husband of Carmen Flor. Filcar
further stated that when the incident happened, the car was being
driven by Atty. Flors personal driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident occurred, he
was attending a birthday celebration at a nearby hotel, and it was
only later that night when he noticed a small dent on and the
cracked signal light of the car. On seeing the dent and the crack,
Atty. Flor allegedly asked Floresca what happened, and the driver
replied that it was a result of a hit and run while the car was
parked in front of Bogota on Pedro Gil Avenue, Manila.
Filcar denied any liability to Espinas and claimed that the incident
was not due to its fault or negligence since Floresca was not its
employee but that of Atty. Flor. Filcar and Carmen Flor both said
that they always exercised the due diligence required of a good
father of a family in leasing or assigning their vehicles to third
parties
Issues: whether Filcar, as registered owner of the motor vehicle
which figured in an accident, may be held liable for the damages
caused to Espinas.
Ruling: It is undisputed that Filcar is the registered owner of the
motor vehicle which hit and caused damage to Espinas car; and it
is on the basis of this fact that we hold Filcar primarily and directly
liable to Espinas for damages.
As a general rule, one is only responsible for his own act or
omission.[9] Thus, a person will generally be held liable only for
the torts committed by himself and not by another. This general
rule is laid down in Article 2176 of the Civil Code, which provides
to wit:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
Based on the above-cited article, the obligation to indemnify
another for damage caused by ones act or omission is imposed
upon the tortfeasor himself, i.e., the person who committed the
negligent act or omission. The law, however, provides for
exceptions when it makes certain persons liable for the act or
omission of another.
One exception is an employer who is made vicariously liable for
the tort committed by his employee. Article 2180 of the Civil Code
states:
Article 2180. The obligation imposed by Article 2176 is
demandable not only for ones own acts or omissions, but also for
those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
xxxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
Under Article 2176, in relation with Article 2180, of the Civil Code,
an action predicated on an employees act or omission may be
instituted against the employer who is held liable for the negligent
act or omission committed by his employee.
Although the employer is not the actual tortfeasor, the law makes
him vicariously liable on the basis of the civil law principle of pater
familias for failure to exercise due care and vigilance over the acts
of ones subordinates to prevent damage to another.[10] In the
last paragraph of Article 2180 of the Civil Code, the employer may
invoke the defense that he observed all the diligence of a good
father of a family to prevent damage.
As its core defense, Filcar contends that Article 2176, in relation
with Article 2180, of the Civil Code is inapplicable because it
presupposes the existence of an employer-employee relationship.
According to Filcar, it cannot be held liable under the subject
provisions because the driver of its vehicle at the time of the
accident, Floresca, is not its employee but that of its Corporate
Secretary, Atty. Flor.
We cannot agree. It is well settled that in case of motor vehicle
mishaps, the registered owner of the motor vehicle is considered
as the employer of the tortfeasor-driver, and is made primarily
liable for the tort committed by the latter under Article 2176, in
relation with Article 2180, of the Civil Code.
The rationale for the rule that a registered owner is vicariously
liable for damages caused by the operation of his motor vehicle is
explained by the principle behind motor vehicle registration, which
has been discussed by this Court in Erezo, and cited by the CA in
its decision:
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 ordained, in the interest of
the determination of persons responsible for damages or injuries
caused on public highways. [emphasis ours]
Thus, whether there is an employer-employee relationship
between the registered owner and the driver is irrelevant in
determining the liability of the registered owner who the law holds
primarily and directly responsible for any accident, injury or death
caused by the operation of the vehicle in the streets and
highways.
As explained by this Court in Erezo, the general public policy
involved in motor vehicle registration is the protection of innocent
third persons who may have no means of identifying public road
malefactors and, therefore, would find it difficult if not impossible
to seek redress for damages they may sustain in accidents
22
resulting in deaths, injuries and other damages; by fixing the
person held primarily and directly liable for the damages sustained
by victims of road mishaps, the law ensures that relief will always
be available to them.
To identify the person primarily and directly responsible for the
damages would also prevent a situation where a registered owner
of a motor vehicle can easily escape liability by passing on the
blame to another who may have no means to answer for the
damages caused, thereby defeating the claims of victims of road
accidents. We take note that some motor vehicles running on our
roads are driven not by their registered owners, but by employed
drivers who, in most instances, do not have the financial means to
pay for the damages caused in case of accidents.
These same principles apply by analogy to the case at bar. Filcar
should not be permitted to evade its liability for damages by
conveniently passing on the blame to another party; in this case,
its Corporate Secretary, Atty. Flor and his alleged driver, Floresca.
Following our reasoning in Equitable, the agreement between
Filcar and Atty. Flor to assign the motor vehicle to the latter does
not bind Espinas who was not a party to and has no knowledge of
the agreement, and whose only recourse is to the motor vehicle
registration.
Neither can Filcar use the defenses available under Article 2180 of
the Civil Code - that the employee acts beyond the scope of his
assigned task or that it exercised the due diligence of a good
father of a family to prevent damage - because the motor vehicle
registration law, to a certain extent, modified Article 2180 of the
Civil Code by making these defenses unavailable to the registered
owner of the motor vehicle. Thus, for as long as Filcar is the
registered owner of the car involved in the vehicular accident, it
could not escape primary liability for the damages caused to
Espinas.
The public interest involved in this case must not be
underestimated. Road safety is one of the most common problems
that must be addressed in this country. We are not unaware of
news of road accidents involving reckless drivers victimizing our
citizens. Just recently, such pervasive recklessness among most
drivers took the life of a professor of our state university.[14]
What is most disturbing is that our existing laws do not seem to
deter these road malefactors from committing acts of recklessness.
METRO MANILA TRANSIT CORP V. CUEVAS
G.R. No. 167797 June 15, 2015
METRO MANILA TRANSIT CORPORATION vs. REYNALDO CUEVAS
and JUNNEL CUEVAS, represented by REYNALDO CUEVAS
One liner: The registered owner of a motor vehicle whose
operation causes injury to another is legally liable to the latter but
the registered owner may recover reimbursement from the actual
and present owner by way of its cross-claim.
FACTS
Metro Manila Transit Corporation (MMTC) and Mina's Transit
Corporation (Mina's Transit) entered into an agreement to sell
dated August 31, 1990. They agreed that MMTC would retain the
ownership of the buses but in the meantime Mina's Transit could
operate the buses within Metro Manila.
On October 14, 1994, one of the buses subject of the agreement
to sell, hit and damaged a Honda Motorcycle owned by Reynaldo
and driven by Junnel. Reynaldo and Junnel sued MMTC and Mina’s
Transit for damages in the Regional Trial Court (RTC) in Cavite and
prayed for actual damages for actual medical damages, cost of
repair of motorcycle, moral, exemplary, and nominal damages,
litigations expenses, attorney’s fees and cost of the suit and
alleged that:
On October 14, 1994, … the defendants’ driver Jessie Rillera Y
Gaceta, driving the MMTC/Mina’s Transit Passenger bus with Plate
No. NXM-449-TB-pil 94, heading in the same direction and
following Plaintiff’s motorcycle, recklessly and carelessly attempted
to overtake Plaintiff’s Motorcycle on the right side of the lane, in
the course of which the said Jessie Rillera side swiped the Plaintiff
as the said Jessie Rillera accelerated speed.
Plaintiff Junnel Cuevas and his companion were thrown to the road
and Plaintiff’s right leg was severely fractured, and the Honda
Motorcycle owned by plaintiff Reynaldo Cuevas was extensively
damaged; plaintiff had to undergo several operations on his right
leg; but in spite of the several operations which he had
undergone, Plaintiff Junnel Cuevas, even up to now, is unable to
walk on his own without the aid of crutches and is still scheduled
for more operations;
MMTC denied liability
In its answer with compulsory counterclaim and cross-claim,
MMTC denied liability, and averred that although it retained the
ownership of the bus, the actual operator and employer of the bus
driver was Mina’s Transit; and that, in support of its cross-claim
against Mina’s Transit, a provision in the agreement to sell
mandated Mina ’s Transport to hold it free from liability arising
from the use and operation of the bus units.
Mina’s Transit denied liability and filed a third-party complaint
against insurer
On its part, Mina’s Transit contended that it was not liable
because: (a) it exercised due diligence in the selection and
supervision of its employees; (b) its bus driver exercised due
diligence; and (c) Junnel’s negligence was the cause of the
accident.
Meanwhile, Mina’s Transit filed a third-party complaint against its
insurer, Perla Compania de Seguros, Inc. (Perla), seeking
reimbursement should it be adjudged liable, pursuant to its
insurance policy issued by Perla with the following coverage: (a)
third-party liability of P50,000.00 as the maximum amount; and
(b) third-party damage to property of P20,000.00 as the maximum
amount.
Perla’s denial of liability
In its answer to the third-party complaint, Perla denied liability as
insurer because Mina’s Transit had waived its recourse by failing to
notify Perla of the incident within one year from its occurrence, as
required by Section 384 of the Insurance Code. It submitted that
even assuming that the claim had not yet prescribed, its liability
should be limited to the maximum of P50,000.00 for third-party
liability and P20,000.00 for third-party damage.
RTC Ruling, affirmed by CA
After trial, the RTC rendered judgment in favor of the respondents
on September 17, 19999 ordering petitioner Metro Manila Transit
Corporation (MMTC) and its co-defendant Mina’s Transit
Corporation (Mina’s Transit) to pay damages in favor of
respondents Reynaldo Cuevas and Junnel Cuevas to wit:
The RTC concluded that the proximate cause of the mishap was
the negligence of the bus driver; that following Article 2180 of the
Civil Code, his employers should be solidarily liable; that MMTC
and Mina’s Transit, being the joint owners of the bus, were liable;
and that the third-party complaint was dismissed because no
evidence was presented to prove it. The RTC, however, did not
rule on the propriety of the cross-claim.
ISSUE: Whether or not MMTC was liable for the injuries sustained
by the respondents despite the provision in the agreement to sell
that shielded it from liability.
RULING
The appeal is partly meritorious.
23
MMTC urges the revisit of the registered-owner rule in order to
gain absolution from liability. It contends that although it retained
ownership of the bus at the time of the vehicular accident, the
actual operation was transferred to Mina’s Transit; that for it to be
held liable for the acts of the bus driver, the existence of an
employer-employee relationship between them must be
established; and that because the bus driver was not its employee,
it was not liable for his negligent act.
The contentions of MMTC cannot persuade.
In view of MMTC’s admission in its pleadings that it had remained
the registered owner of the bus at the time of the incident, it could
not escape liability for the personal injuries and property damage
suffered by the Cuevases. This is because of the registered-owner
rule, whereby the registered owner of the motor vehicle involved
in a vehicular accident could be held liable for the consequences.
The registered-owner rule has remained good law in this
jurisdiction considering its impeccable and timeless rationale, as
enunciated in the 1957 ruling in Erezo, et al. v. Jepte,12 where the
Court pronounced:
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
therefore 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 ordained, in the interest of
the determination of persons responsible for damages or injuries
caused on public highways.
"‘One of the principal 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 may 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 ‘snare 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 place a
‘middleman’ between them and the public, and escape liability by
the manner in which they recompense their servants." (King vs.
Brenham Automobile Co., 145 S.W. 278, 279.)
The Court has reiterated the registered-owner rule in other rulings,
like in Filcar Transport Services v. Espinas ,13 to wit:
It is well settled that in case of motor vehicle mishaps, the
registered owner of the motor vehicle is considered as the
employer of the tortfeasor-driver , and is made primarily liable for
the tort committed by the latter under Article 2176, in relation with
Article 2180, of the Civil Code.
In Equitable Leasing Corporation v. Suyom, we ruled that in so far
as third persons are concerned, the registered owner of the motor
vehicle is the employer of the negligent driver, and the actual
employer is considered merely as an agent of such owner .
Thus, it is clear that for the purpose of holding the registered
owner of the motor vehicle primarily and directly liable for
damages under Article 2176, in relation with Article 2180, of the
Civil Code, the existence of an employer-employee relationship, as
it is understood in labor relations law, is not required
Indeed, MMTC could not evade liability by passing the buck to
Mina’s Transit. The stipulation in the agreement to sell did not bind
third parties like the Cuevases, who were expected to simply rely
on the data contained in the registration certificate of the erring
bus.
MMTC’s recourse
Although the registered-owner rule might seem to be unjust
towards MMTC, the law did not leave it without any remedy or
recourse. According to Filcar Transport Services v. Espinas, MMTC
could recover from Mina’s Transit, the actual employer of the
negligent driver, under the principle of unjust enrichment, by
means of a cross-claim seeking reimbursement of all the amounts
that it could be required to pay as damages arising from the
driver’s negligence. A cross-claim is a claim by one party against a
co-party arising out of the transaction or occurrence that is the
subject matter either of the original action or of a counterclaim
therein, and may include a claim that the party against whom it is
asserted is or may be liable to the cross-claimant for all or part of
a claim asserted in the action against the cross-claimant.
MMTC set up its cross-claim against Mina's Transit precisely to
ensure that Mina's Transit would reimburse whatever liability
would be adjudged against MMTC. Yet, it is a cause of concern for
the Court that the RTC ignored to rule on the propriety of MMTC's
cross-claim. Such omission was unwarranted, inasmuch as Mina's
Transit did not dispute the cross-claim, or did not specifically deny
the agreement to sell with MMTC, the actionable document on
which the cross-claim was based. Even more telling was the fact
that Mina's Transit did not present controverting evidence to
disprove the cross-claim as a matter of course if it was warranted
for it to do so.
Under the circumstances, the RTC should have granted the cross-
claim to prevent the possibility of a multiplicity of suits, and to
spare not only the MMTC but also the other parties in the case
from further expense and bother. Compounding the RTC's
uncharacteristic omission was the CA's oversight in similarly
ignoring the cross-claim. The trial and the appellate courts should
not forget that a cross-claim is like the complaint and the
counterclaim that the court must rule upon.
WHEREFORE, the Court AFFIRMS the decision promulgated on
June 28, 2004 subject to the MODIFICATION that the cross-claim
of Metro Manila Transit Corporation against Mina's Transit
Corporation is GRANTED, and, ACCORDINGLY, Mina's Transit
Corporation is
ORDERED to reimburse to Metro Manila Transit Corporation
whatever amounts the latter shall pay to the respondents pursuant
to the judgment of the Regional Trial Court in Civil Case No. N-
6127. No pronouncement on costs of suit. SO ORDERED.
24