ECOND DIVISION

[G.R. No. 148496. March 19, 2002]

VIRGINES CALVO doing business under the name and style

TRANSORIENT CONTAINER TERMINAL SERVICES, INC.,
petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly
Allied Guarantee Ins. Co., Inc.) respondent.

DECISION
MENDOZA, J.:

This is a petition for review of the decision, [1] dated May 31, 2001, of the Court of
Appeals, affirming the decision [2] of the Regional Trial Court, Makati City, Branch
148, which ordered petitioner to pay respondent, as subrogee, the amount
of P93,112.00 with legal interest, representing the value of damaged cargo handled by
petitioner, 25% thereof as attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal
Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time material to
this case, petitioner entered into a contract with San Miguel Corporation (SMC) for
the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner
board from the Port Area in Manila to SMCs warehouse at the Tabacalera Compound,
Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General
Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in
Manila on board M/V Hayakawa Maru and, after 24 hours, were unloaded from the
vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23
to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo
from the arrastre operator and delivered it to SMCs warehouse in Ermita, Manila. On
July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that
15 reels of the semi-chemical fluting paper were wet/stained/torn and 3 reels of kraft
liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for
the aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit
against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on
December 20, 1995, rendered judgment finding petitioner liable to respondent for the
damage to the shipment.
The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody
of defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage
Report (Exh. F) with entries appearing therein, classified as TED and TSN, which the
claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and
tearrage at the middle of the subject damaged cargoes respectively, coupled with the
Marine Cargo Survey Report (Exh. H - H-4-A) confirms the fact of the damaged
condition of the subject cargoes. The surveyor[s] report (Exh. H-4-A) in particular,
which provides among others that:

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

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

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that
[she is] are not liable. Defendant by reason of the nature of [her] business should have
devised ways and means in order to prevent the damage to the cargoes which it is
under obligation to take custody of and to forthwith deliver to the consignee.
Defendant did not present any evidence on what precaution [she] performed to
prevent [the] said incident, hence the presumption is that the moment the defendant
accepts the cargo [she] shall perform such extraordinary diligence because of the
nature of the cargo.

. . . .

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to
have been lost, destroyed or deteriorated, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff, therefore, is to
prove merely that the goods he transported have been lost, destroyed or
deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has
exercised the extraordinary diligence required by law. Thus, it has been held that the
mere proof of delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred, the carrier must be held
responsible. It is incumbent upon the carrier to prove that the loss was due to accident
or some other circumstances inconsistent with its liability. (cited in Commercial Laws
of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence
the extraordinary responsibility lasts from the time the goods are unconditionally
placed in the possession of and received by the carrier for transportation until the
same are delivered actually or constructively by the carrier to the consignee or to the
person who has the right to receive the same. [3]

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

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;

3. Costs of suit.[4]

The decision was affirmed by the Court of Appeals on appeal. Hence this petition
for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE
SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
 II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS
PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.[5]

It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court of
Appeals held otherwise, then she is indeed not liable beyond what ordinary diligence
in the vigilance over the goods transported by her, would require. [6] Consequently, any
damage to the cargo she agrees to transport cannot be presumed to have been due to
her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs
broker and warehouseman, she does not indiscriminately hold her services out to the
public but only offers the same to select parties with whom she may contract in the
conduct of her business. 
The contention has no merit. In De Guzman v. Court of Appeals, [7] the Court
dismissed a similar contention and held the party to be a common carrier, thus

The Civil Code defines common carriers in the following terms:

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

engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.

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

is the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity . . . Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering
its services to the general public, i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such
distinctions.

So understood, the concept of common carrier under Article 1732 may be seen to
coincide neatly with the notion of public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the
law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, public service includes:

x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express service, steamboat,
or steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. x x x [8]
 There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioners
contention would be to deprive those with whom she contracts the protection which
the law affords them notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides: 

Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the circumstances of
each case. . . .

In Compania Maritima v. Court of Appeals, [9] the meaning of extraordinary

diligence in the vigilance over goods was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the greatest skill and
foresight and to use all reasonable means to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She
claims that the spoilage or wettage took place while the goods were in the custody of
either the carrying vessel M/V Hayakawa Maru, which transported the cargo to
Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly
kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the
fact that some of the containers were deformed, cracked, or otherwise damaged, as
noted in the Marine Survey Report (Exh. H), to wit:

MAXU-2062880 - rain gutter deformed/cracked

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

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

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

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

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

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino

testified that he has no personal knowledge on whether the container vans were first
stored in petitioners warehouse prior to their delivery to the consignee. She likewise
claims that after withdrawing the container vans from the arrastre operator, her driver,
Ricardo Nazarro, immediately delivered the cargo to SMCs warehouse in Ermita,
Manila, which is a mere thirty-minute drive from the Port Area where the cargo came
from. Thus, the damage to the cargo could not have taken place while these were in
her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo
Surveyors indicates that when the shipper transferred the cargo in question to the
arrastre operator, these were covered by clean Equipment Interchange Report (EIR)
and, when petitioners employees withdrew the cargo from the arrastre operator, they
did so without exception or protest either with regard to the condition of container
vans or their contents. The Survey Report pertinently reads

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex vessel to
dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20
secure metal vans, covered by clean EIRs. Except for slight dents and paint scratches
on side and roof panels, these containers were deemed to have [been] received in good
condition.

. . . .

Transfer/Delivery:

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

Transorient Container Services, Inc. . . .  without exception.

[The cargo] was finally delivered to the consignees storage warehouse located at

Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

As found by the Court of Appeals: 

From the [Survey Report], it [is] clear that the shipment was discharged from the
vessel to the arrastre, Marina Port Services Inc., in good order and condition as
evidenced by clean Equipment Interchange Reports (EIRs). Had there been any
damage to the shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-appellant from the
arrastre still in good order and condition as the same were received by the
former without exception, that is, without any report of damage or loss. Surely, if the
container vans were deformed, cracked, distorted or dented, the defendant-appellant
would report it immediately to the consignee or make an exception on the delivery
receipt or note the same in the Warehouse Entry Slip (WES). None of these took
place. To put it simply, the defendant-appellant received the shipment in good order
and condition and delivered the same to the consignee damaged. We can only
conclude that the damages to the cargo occurred while it was in the possession of the
defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the
debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault,
unless there is proof to the contrary. No proof was proffered to rebut this legal
presumption and the presumption of negligence attached to a common carrier in case
of loss or damage to the goods.[13]

Anent petitioners insistence that the cargo could not have been damaged while in
her custody as she immediately delivered the containers to SMCs compound, suffice it
to say that to prove the exercise of extraordinary diligence, petitioner must do more
than merely show the possibility that some other party could be responsible for the
damage. It must prove that it used all reasonable means to ascertain the nature and
characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the
handling [thereof]. Petitioner failed to do this. 
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which
provides
Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:

. . . .

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

. . . .

For this provision to apply, the rule is that if the improper packing or, in this case,
the defect/s in the container, is/are known to the carrier or his employees or apparent
upon ordinary observation, but he nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner accepted the cargo without exception
despite the apparent defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in the carriage of goods
in this case or that she is exempt from liability, the presumption of negligence as
provided under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.